title: Opinion of the European Central Bank of 29 August 2014 on authenticity and fitness checking and recirculation of euro banknotes and coins (CON/2014/65)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 29 August 2014 on authenticity and fitness checking and recirculation of euro banknotes and coins (

text: ) Introduction and legal basis

text: On 5 August 2014, the European Central Bank (ECB) received a request from Lietuvos bankas for an opinion on a draft resolution setting out procedures for authenticity and fitness checking and recirculation of euro banknotes and coins (hereinafter the ‘draft resolution’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the first, second and third indents of

text: , as the draft resolution relates to currency matters, means of payment and Lietuvos bankas. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft resolution

text: 1.1 The main objective of the draft resolution is to implement the requirements of Regulation (EC) 2 3 4 No 1338/2001 ,

text: Regulation (EU) No 1210/2010

text: , and Decision ECB/2010/14 . 1.2 The draft resolution lays down an authorisation regime whereby the cash services department of Lietuvos bankas (hereinafter the ‘Cash Service’) will have administrative discretion to grant or deny cash handling service providers (hereinafter ‘cash handlers’) the right to verify the authenticity and fitness of euro banknotes and coins prior to their recirculation. If a cash handler is granted such a right, it will be included in the public register of cash handlers which is published on Lietuvos bankas’s website. 1.3 The draft resolution also sets out requirements for cash handlers permitted to check the authenticity and fitness of euro banknotes and coins and establishes procedures for monitoring the activities of cash handlers. Cash handlers will be obliged to report data concerning: (a) the machines used in cash handling activities; and (b) the volume of euro banknotes and coins processed, sorted as unfit,

text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: Council Regulation (EC) No 1338/2001 of 28 June 2001

text: laying down measures necessary for the protection of the euro against counterfeiting (OJ L 181, 4.7.2001, p. 6).

text: Regulation (EU) No 1210/2010

text: of the European Parliament and of the Council of 15 December 2010 concerning authentication of euro coins and handling of euro coins unfit for circulation (OJ L 339, 22.12.2010, p. 1).

text: 4 Decision ECB/2010/14 of 16 September 2010 on the authenticity and fitness checking and recirculation of euro banknotes (OJ L 267, 9.10.2010, p. 1). handed over as suspected counterfeit, recirculated and distributed via customer operated machines or cash dispensers.

text: 2. General observations

text: 2.1 The draft resolution imposes obligations on cash handlers and seeks to safeguard the integrity of euro banknotes and coins as a means of payment. The ECB generally welcomes the draft resolution and is confident that its provisions will support the protection of euro banknotes and coins in circulation and thereby maintain the general public’s confidence in euro banknotes and coins. 2.2 The ECB considers it essential that any draft legislation should uphold the principle of the primacy and direct application of Union law on the authentication of euro banknotes and coins and the handling of euro banknotes and coins unfit for circulation. For consistency’s sake, the ECB favours the use in national legislation of direct references to

text: Regulation (EC) No 1338/2001

text: Regulation (EU) No 1210/2010

text: and Decision ECB/2010/14 or, alternatively, reproduction of their provisions without any alterations or additions . 2.3 Finally, national authorities are not formally obliged to consult the ECB on the implementation of the Member States’ obligation to take the necessary measures to ensure that breaches of

text: Article 6(1) of Regulation (EC) No 1338/2001

text: are subject to effective, proportionate and deterrent sanctions. Notwithstanding this, the ECB believes it is beneficial to harmonise the national measures implementing that obligation throughout the Union to the greatest extent possible, subject to specific national requirements .

text: 3. Concepts and definitions used in the draft resolution

text: 3.1 The concepts and definitions used in the draft resolution should be fully consistent with existing Union legislation. The definition of ‘legal persons’ set out in the Lithuanian language version of

text: Article 4(7)

text: (3) of the draft resolution is narrower than the definition of ‘economic agents’ in

text: and therefore is not in line with that Regulation. The draft resolution should be amended accordingly. 3.2 The description of entities eligible to be included in the public register of cash handlers further limits the scope of

text: by providing that only legal persons whose core business activity is related to authenticity and fitness checking and recirculation of euro banknotes and coins are eligible to be included in the public register of cash handlers. The ECB notes that the processing and distribution to the public of banknotes via automated teller machines (cash dispensers) may be a secondary activity – and not core business –

text: 5 See paragraph 2.2 of Opinion

text: . All ECB opinions are published on the ECB’s website at www.ecb.europa.eu.

text: 6 See paragraph 2.4 of Opinion

text: and paragraph 2.3 of Opinion

text: 8 Contained in the application form for inclusion in the public register of cash handlers (Annex 1 to the draft resolution). of some entities falling within the definition of ‘economic agents’ in

text: ; the draft resolution should therefore be amended accordingly.

text: 4. Authorisation, the public register of cash handlers and powers of the Cash Service

text: 4.1 Only cash handlers that are included in the public register have to carry out authenticity and fitness checking of euro banknotes and coins. The ECB understands that this public register may facilitate the monitoring and control of cash handlers’ activities in this area in Lithuania, foster transparency and increase consumer awareness of the rights and obligations of cash handlers. The authorisation regime under the draft resolution limits the scope of the obligation on cash handlers to carry out authenticity and fitness checking to those that have submitted an application to Lietuvos bankas, have been authorised by it for this purpose and have been included in the public register. The ECB notes that the authorisation regime deviates from

text: Regulation (EC) No 1338/2001

text: , which requires all cash handlers, irrespective of the need for registration, to perform authenticity and fitness checking of euro banknotes and coins prior to recirculation, and the draft resolution should be amended accordingly. 4.2 The draft resolution also exempts certain cash handlers from the authorisation regime and the 9 10 reporting requirements . Under certain conditions set out in Decision ECB/2010/14 , an NCB may exclude certain cash handlers from some reporting requirements. However, as noted above, Union acts, including ECB legal acts, require all cash handlers to perform authenticity and fitness checking of euro banknotes and coins prior to their recirculation. The exemption of certain entities from the authorisation regime ‘due to the specific character of their activities’ and the ‘limited cash handling operations they carry out’ is therefore not in line with

text: Regulation (EC) No 1338/2001

text: and Decision ECB/2010/14 to the extent that the cash handlers will not be subject to the obligation to carry out authenticity and fitness checking of euro banknotes and coins. The draft resolution should be amended accordingly. 4.3. The ECB also notes that the power of the Cash Service to decide which cash handlers should be included in the public register is of a discretionary nature. It should be ensured that the Cash Service has the full range of necessary discretionary powers under Lithuanian law.

text: 5. Handover and delivery of euro banknotes and coins

text: 5.1 The draft resolution provides that cash handlers shall hand over to the national competent authorities immediately, but in any event within a maximum of 20 working days, not only euro banknotes and coins suspected to be counterfeit, but also euro banknotes and coins unfit for circulation . The ECB recommends that the consulting authority assess the proportionality of such

text: 9 Article 44 of the draft resolution.

text: 10 Paragraphs 3.8 and 3.13 of Annex IV to Decision ECB/2010/14.

text: 11 Article 44 of the draft resolution. a short period for handover to Lietuvos bankas of euro banknotes and coins unfit for circulation, as it may unnecessarily increase the administrative burden and costs for cash handlers affected. 5.2 Article 27 of the draft resolution provides that euro banknotes delivered directly to a cash handler by Lietuvos bankas do not require authenticity and fitness checks prior to recirculation. Article 3(4) of Decision ECB/2010/14 extends this exemption to euro banknotes that any national central bank has delivered directly to a cash handler. The draft provision thus limits the scope of the equivalent provisions of Decision ECB/2010/14 and the draft resolution should be amended accordingly .

text: 6. Sanctions and reporting

text: 6.1 The ECB reiterates the importance of effective, proportionate and deterrent sanctions for breaches of the rules on the authenticity and fitness checking and recirculation of euro banknotes and coins. 6.2 Under the draft resolution, when non-compliance by a cash handler with relevant Union acts, including ECB legal acts, or the provisions of the draft resolution is detected, the Cash Service may, among other things, prohibit a cash handler from recirculating euro banknote denominations of the series concerned until such non-compliance is rectified . The ECB highlights that when the Cash Service prohibits recirculation in such a situation, it does so on behalf of the ECB . 6.3 The ECB understands that Lithuanian legislation provides for administrative penalties (fines) for failing to withdraw counterfeit euro banknotes and coins from circulation and for failing to take measures to detect counterfeit euro banknotes and coins . Authorised employees and managers of cash handlers are personally liable for these penalties (fines). This regime does not fully reflect

text: Regulation (EC) No 1338/2001

text: and Decision ECB/2010/14 as regards the range of sanctions that may be imposed for failing to carry out authenticity and fitness checking of euro banknotes and coins prior to recirculation. In addition, the ECB notes that national legislation does not provide for the imposition of administrative penalties (fines) on legal entities.

text: 13 Paragraph 3.3 of Opinion

text: . 6.4 As regards the data reporting deadlines set by Article 36 of the draft resolution, which are 31 July and 31 January of each year, the ECB recommends extending the reporting deadlines to end- August and end-February in line with Article 3.9 of Annex IV to Decision ECB/2010/14. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 29 August 2014. [signed] The President of the ECB Mario DRAGHI


text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: Regulation (EU) No 575/2013

text: of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending

text: Regulation (EU) No 648/2012

text: (OJ L 176, 27.6.2013, p. 1).

text: See ‘Basel III: A global regulatory framework for more resilient banks and banking systems’, Basel Committee on Banking Supervision, December 2010, revised version June 2011.

text: The scope of this Opinion is restricted to the aspects of the draft decree-law that relate to credit institutions.

text: Article 1 of the Annex to the draft law.

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 3 September 2014 on deferred tax assets (CON/2014/66)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 3 September 2014 on deferred tax assets (

text: ) Introduction and legal basis

type: rubrik

text: On 9 June 2014, the European Central Bank (ECB) received a request from the Portuguese Minister of State and Finance for an opinion on a draft law establishing a special legal framework for the treatment of deferred tax assets (DTAs) of companies and State-owned enterprises, including credit institutions, that are liable for corporation tax (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and on the sixth indent of

text: Article 2(1) of Council Decision 98/415/EC

text: , as the draft law relates to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

type: stycke

text: 1. Background and purpose of the draft law

text: 1.1 In line with

text: Regulation (EU) No 575/2013

text: (hereinafter the ‘CRR’), since 1 January 2014 DTAs that rely on the future profitability of credit institutions to be realised are to be progressively deducted from the calculation of their Common Equity Tier 1 (CET1) capital, because such DTAs are not considered as fully ensuring loss absorbency in all scenarios, as required by Basel III standards . Article 39(2) of the CRR provides that under certain conditions DTAs arising from temporary differences are not considered to rely on future profitability. Such DTAs do not require to be deducted from a credit institution’s regulatory capital in accordance with Article 38 of the CRR. 1.2 The draft law aims at addressing the negative effects on the level of regulatory capital of credit institutions and other companies arising from the deduction of DTAs from that capital; for this

text: purpose the draft law establishes a special scheme that permits certain types of DTAs to be converted into tax credits in line with Article 39(2) of the CRR. This special scheme is applicable to DTAs that result from the non-deductibility for corporation tax purposes of expenses and negative equity changes arising from losses from credit impairments and from post-employment and long-term employee benefits . 1.3 According to the draft law, a credit institution may decide within a given time to opt into the schemes . If a credit institution decides to take part in the scheme, the credit institution must create a special reserve in the amount of 110% of the tax credit whenever one is granted which will be subject to the same legal framework as mandatory legal reserves . The establishment of the special reserve also involves the simultaneous creation of rights to equity, which are allocated to the State for no consideration . These rights to equity are negotiable securities that grant their holder the right to require the credit institution to convert the special reserve into share capital, and where applicable, the share premium account, by issuing ordinary shares. The State can exercise the conversion right attaching to the securities at its discretion . As the shareholders of the credit institution have a call option on the rights to equity, the State can sell the securities back to those shareholders and subsequently sell any securities not bought by the shareholders to third parties. These third parties can exercise the conversion right and become shareholders of the institution. 1.4 Furthermore, the draft law aims to ensure that Portuguese credit institutions can operate on a level playing field in Europe, in view of the fact that several other Member States have also introduced similar schemes concerning DTAs.

text: 2. General observations

text: 2.1 The draft law makes use of the possibility opened up by Article 39(2) of the CRR to provide for the non-deduction of certain kinds of DTAs from regulatory capital. The ECB understands that the DTA/tax credit scheme set out in the draft law is of a voluntary nature and applies only to credit institutions that decide to join the scheme. 2.2 As noted in paragraph 1.2 above, the draft law seeks to address the potential negative implications for the regulatory capital of credit institutions arising from the deduction of DTAs from that capital. The ECB takes note of the expected positive impact of the draft law on the regulatory capital of the Portuguese banking sector. 2.3 The ECB recommends that the Portuguese authorities carefully assess the implications of the draft law from the perspective of fiscal debt and sovereign debt sustainability, and that they also take into account the need to break the link between the banking sector and sovereign debt. The

text: conversion of DTAs into tax credits might reduce the incentive and/or the regulatory need for shareholders to inject fresh capital into credit institutions. Furthermore, compared with the recapitalisation of the banking sector with cash provided by private investors, the DTA/tax credit scheme might create an additional debt burden for the State, irrespective of the statistical treatment of the scheme; it might strengthen the adverse link between the sovereign debt and participating credit institutions and be less favourable in comparative terms from a bank liquidity perspective. These potential risks may be exacerbated in countries with a high level of sovereign debt, and thus may contribute to financial fragmentation within the euro area.

text: 3. Special reserve

text: 3.1 The draft law introduces new provisions in addition to the application of Article 39(2) of the CRR, namely requirements that institutions participating in the scheme: (1) establish a special reserve in the amount of the tax credit granted plus 10 per cent; and (2) provide for the simultaneous creation of rights to equity to be allocated to the Portuguese State. The ECB understands that these additional requirements are designed to protect the State against the fiscal risks associated with the conversion of DTAs into tax credits described in paragraph 2.3. 3.2 The structure of the scheme is a matter for the Portuguese authorities to determine. The negative impact on the debt sustainability of the sovereign may well be mitigated if the State receives an equity stake in a participating credit institution in exchange for granting tax credits. Nevertheless, such a capital increase subscribed by the State will remain less preferable compared to a capital increase subscribed by private investors. The scheme may result in significant involvement by the State in the ownership of a credit institution if the tax credits granted are large relative to the total common equity of the credit institution, although the ECB understands that such risks might be mitigated by the State being able to sell the securities not only to shareholders but also to third parties, as noted in paragraph 1.3 above. Extensive state involvement in bank ownership is not advisable, not least because of the need to break the link between sovereigns and banks. In addition, potential significant involvement by the State in the ownership of a credit institution may run counter to the principle of ensuring recapitalisation via private investment into credit institutions.

text: 4. Statistical treatment

text: The ECB understands that Eurostat will provide its views on the statistical treatment of the conversion of DTAs into tax credits under the scheme in due course. This opinion will be published on the ECB’s website.

text: Done at Frankfurt am Main, 3 September 2014. [signed]

text: The President of the ECB

text: Mario DRAGHI

type: vagledning

utgivare: ecb


text: Directive 2014/59/of the European Parliament and the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending

text: Council Directive 82/891/EC

text: , and Directives

text: and

text: , and Regulations

text: (EU) No 1093/2010

text: and

text: (EU) No 648/2012

text: , of the European Parliament and the Council (OJ L 173, 12.6.2014, p. 190). 2

text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: Act on a Restructuring Fund of 9 December 2010 (Bundesgesetzblatt I p. 1900, 1921) as amended by Article 3 of the Law of 20 December 2012 (Bundesgesetzblatt I S. 2777). 4 Banking Act of 9 September 1998 (Bundesgesetzblatt I p. 2776) as amended by Article 1 of the Law of 15 July 2014 (Bundesgesetzblatt I p. 934). 5 Act on a Financial Market Stabilisation Fund of 17 October 2008 (Bundesgesetzblatt I p. 1982) as amended by Article 6(7) of the Law of 28 August 2013 (Bundesgesetzblatt I p. 3395). 6

text: Council Regulation (EU) No 1024/2013 of 15 October 2013

text: conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63).

text: See Article 8 of the draft law and Part 4 Chapter 2 Section 1 of the proposed Restructuring and Resolution Act.

text: See Article 3(3) of the BRRD. 9 See Section 6(1) of the proposed Restructuring and Resolution Act. 10 See Section 30(2) of the proposed Restructuring and Resolution Act.

text: See paragraph 3.2 of Opinion

text: . All ECB opinions are available on the ECB website at www.ecb.europa.eu. 12 See Section 62(2) of the proposed Restructuring and Resolution Act. 13 See Article 2 (2) of the draft law. 14 See the explanatory memorandum to the draft law relating to the new Section 7(1a) of the Banking Act.

text: Regulation (EU) No 468/2014

text: of the European Central Bank of 16 April 2014 establishing the framework for cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities (SSM Framework Regulation) (OJ L 141, 14.05.2014, p. 1). 16 Articles

text: and

text: of Regulation (EU) No. 648/2014.

title: Opinion of the European Central Bank of 12 September 2014 on the implementation of the European Bank Recovery and Resolution Directive (CON/2014/67)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 12 September 2014 on the implementation of the European Bank Recovery and Resolution Directive (

text: ) Introduction and legal basis

text: On 25 July 2014, the European Central Bank (ECB) received a request from the German Federal Ministry of Finance (hereinafter the ‘Ministry of Finance’) for an opinion on the draft European Bank Recovery and Resolution Directive Implementation Act (hereinafter the ‘draft law’) which transposes Directive

text: of the European Parliament and the Council (hereinafter the ‘BRRD’) into German law. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and on the third and sixth indents of

text: , as the draft law relates to the Deutsche Bundesbank and to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. For elements of the draft law the exclusive purpose of which is the transposition of Union law, the ECB’s competence to deliver an opinion is based on Article 25.1 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: The overall objective of the draft law is to create a framework for recovery and resolution planning of credit institutions and investment firms (hereinafter jointly referred to as ‘institutions’), and to provide an effective mechanism for their resolution, minimising risks to financial stability and costs for public budgets. To this end, the draft law implements the BRRD by putting in place a new Restructuring and Resolution Act covering the restructuring and resolution of institutions and financial groups and by

text: providing for amendments to several legal acts, including the Act on a Restructuring Fund , the Banking 4 5 Act and the Act on a Financial Market Stabilisation Fund . In addition, the draft law aims at reflecting changes in the distribution of competences in banking supervision due to the entry into force of

text: Council Regulation (EU) No 1024/2013

text: and makes adjustments to existing legislation in this field. In accordance with Article 25.1 of the Statute of the ESCB, the ECB may be consulted by the competent authorities of the Member States on the scope and implementation of Union legislation relating to the prudential supervision of credit institutions and to the stability of the financial system. The key provisions of the draft law are set out below. (a) It designates the Federal Agency for Financial Market Stabilisation (FMSA) as the national resolution authority, while the Federal Financial Supervisory Authority (BaFin) retains its supervisory tasks as the national supervisory authority. It also facilitates the unobstructed flow of information between the FMSA and BaFin in the context of their cooperation, mutual assistance and consultation. (b) It requires institutions to draw up recovery plans. However, the supervisory authority may, with the agreement of the Deutsche Bundesbank, decide to subject institutions to simplified requirements or to exempt them from the obligation to draw up recovery plans altogether, subject to certain conditions relating to the institution’s systemic relevance. (c) It empowers the supervisory authority to order early intervention measures in respect of institutions in breach or suspected breach of certain prudential requirements. Such measures should be appropriate and necessary in order to improve the institution’s financial situation where this has been subject to rapid deterioration, and are not limited to those specifically listed in the draft law. (d) It provides that the resolution authority shall, in consultation with the supervisory authority, draw up resolution plans for all institutions, but may draw up simplified resolution plans for certain institutions taking into account their systemic relevance. (e) It lays down requirements and conditions under which institutions may enter into agreements to provide financial support to other group entities that meet the conditions for early intervention. (f) It sets out the conditions for the resolution of institutions, allowing both the supervisory and the resolution authority, following mutual consultation, to determine whether an institution is failing or likely to fail.

text: (g) It confers wide-ranging resolution powers on the resolution authority and provides for resolution tools; in particular the sale of business tool, the bridge institution tool, the asset separation tool and the bail-in tool. However, the resolution authority may also take all other measures necessary to achieve the resolution objectives. (h) It extends the application deadline for new measures under the German Financial Market Stabilisation Fund (SoFFin) to the end of 2015 in order to cover the transitional period until the establishment of the Single Resolution Fund in 2016. Since the proposed Restructuring and Resolution Act is planned to enter into force on 1 January 2015, the bail-in tool will already apply during this transitional period and therefore provide for the possibility of shareholders and creditors being subject to bail-in before state aid is granted through SoFFin. (i) It adapts the national provisions on the definition of a competent authority and the distribution of supervisory competences in the light of

text: Council Regulation (EU) No 1024/2013

text: . However, the explanatory memorandum to the draft law states that it makes no change to the existing distribution of competences between BaFin and the Deutsche Bundesbank. The draft law is planned to enter into force on 1 January 2015, with the exception of a number of provisions planned to enter into force on the day following its publication.

text: 2. General observations

text: 2.1 The ECB welcomes the draft law, as it strengthens the tools and procedures available to the national authorities for effective preventive measures, early intervention in institutions and, if necessary, effective resolution of institutions, in line with the common framework of intervention powers and rules laid down in the BRRD. 2.2 The resolution tools and procedures will, in particular, help resolve failing banks while preserving financial stability, and help shield the public budget from resolution costs. The Ministry of Finance envisages that the provisions relating to the bail-in tool will enter into force on 1 January 2015 , and thus prior to the BRRD’s transposition deadline of 1 January 2016. The Ministry of Finance thus seeks to ensure, in a timely fashion, that shareholders and creditors instead of public budgets will bear losses resulting from resolution. 2.3 The ECB notes that the draft law provides for cooperation between the competent authority and the FMSA in performing their respective tasks, each keeping in mind the impact of its performance on that of the other.

text: 3. Specific observations

text: 3.1 Separation between supervision and resolution functions

text: The explanatory memorandum to the draft law states that the FMSA as resolution authority will be incorporated into BaFin as supervisory authority as an ‘agency-within-an-agency’ at a later stage. The

text: draft law does not cover the detailed arrangements relating to this process, which will be decided on separately. The BRRD ‘exceptionally’ allows one authority to carry out both resolution and supervisory functions on the condition that adequate structural arrangements are put in place in order to ensure operational independence and to avoid conflicts of interest between that authority’s resolution function and its other functions. For example, the BRRD envisages structural separation being achieved by keeping the reporting lines for staff involved in carrying out resolution tasks separate from those used by staff involved in supervision activities . Since it is important to ensure the operational independence of the resolution function and to avoid conflicts of interests between the resolution function and other functions, the ECB would appreciate being consulted on any future draft legal act that sets out detailed arrangements regarding the relationship between the FMSA and BaFin following the FMSA’s integration into the latter authority. The draft law allows for the unobstructed flow of information between the two authorities in the framework of their cooperation, mutual assistance and consultation . Such exchange of information is also possible between the two authorities and the Deutsche Bundesbank, insofar as the latter is involved in the supervision of institutions. The ECB welcomes that this provision ensures that under a future regime ensuring the separation of resolution and supervision functions within the framework of one authority, the resolution function will have equal access to any necessary information available to the supervisory function, and vice versa. 3.2 Early intervention, intra-group financial support and recovery plans Section 36(4) of the proposed Restructuring and Resolution Act grants the Ministry of Finance the power to further specify, by way of a regulation, certain conditions that could trigger the use of early intervention measures and to sub-delegate this power to the resolution authority. Such sub-delegation to the resolution authority in the field of early intervention powers seems inappropriate given that the early intervention powers lie with the supervisory authority, which would therefore appear best placed to specify the relevant trigger conditions. The explanatory memorandum to the draft law states that the purpose of this provision is to provide for the ability to implement guidelines issued by the European Banking Authority (EBA) into German law. The EBA’s power to issue such guidelines in order to promote the consistent application of the trigger for early intervention measures is provided for in Article 27(4) of the BRRD. The ECB suggests that the question of which authority should be responsible for the implementation of these EBA guidelines should be reconsidered, and that a provision setting out the purpose of implementing them should be included in the legislative text itself and not only in the explanatory memorandum. The same concerns regarding an inappropriate empowerment of the resolution authority in areas where the supervisory authority is primarily competent arise with respect to the conditions on which intra-group financial support may be authorised .

text: In addition, the ECB would like to emphasise that the competence to issue regulations delegated to the Ministry of Finance or another authority regarding early intervention and recovery plans is without prejudice to the ECB’s powers under

text: Article 4(1)

text: (i) and

text: Article 4(3) of Council Regulation (EU) No 1024/2013

text: to implement EBA guidelines and potentially issue further provisions concerning significant institutions in these areas.

text: 3.3 Resolution planning

text: Section 40(2) and (3) of the proposed Restructuring and Resolution Act provide that resolution plans may not assume any access to or receipt of extraordinary public financial support that goes beyond the provision of funds as provided for in the Act on the Restructuring Fund, nor any emergency liquidity assistance provided by a central bank or any liquidity assistance provided by a central bank that is based on non-standardised collateral, maturities or interest rates, but shall include an analysis of how and when a distressed institution may apply for the use of central bank facilities. While acknowledging that these provisions are in line with the requirements of the BRRD, the ECB emphasises that they do not in any way affect the competence of central banks to decide independently and at their full discretion on the provision of central bank liquidity to solvent institutions, both through standard monetary policy operations and in emergency liquidity assistance, within the limits imposed by the monetary financing prohibition under the Treaty .

text: 3.4 Conditions for resolution

text: The ECB notes that the Ministry of Finance has made use of the possibility provided for in the BRRD to allow both the supervisory authority or the resolution authority, following mutual consultation, to determine whether an institution is failing or likely to fail .

text: 3.5 Amendments to the Banking Act

text: 3.5.1 Definition of competent authority

text: By inserting a new Section 1(5) into the Banking Act, the draft law introduces a new definition of ‘competent authority’ in the light of

text: Council Regulation (EU) No 1024/2013

text: . However, subparagraph 1 of the new Section 1(5), which outlines the scope of the ECB’s competence, only includes the ECB’s tasks under

text: Article 4(1) of Council Regulation (EU) No 1024/2013

text: and omits those conferred on it under

text: Article 4(2)

text: . This provision therefore requires amendment in order to fully reflect the tasks conferred on the ECB by

text: Council Regulation (EU) No 1024/2013

text: . 3.5.2 Distribution of national competences within the Single Supervisory Mechanism The ECB understands that the existing distribution of competences and tasks between BaFin and the Deutsche Bundesbank provided for in Section 7(1) of the Banking Act will continue to apply within the framework of the Single Supervisory Mechanism (SSM) where the national authorities will cooperate with and assist the ECB under

text: Council Regulation (EU) No 1024/2013

text: . The ECB notes, however, that

text: the proposed wording of the new Section 7(1a) of the Banking Act is ambiguous in this respect, as it only refers to BaFin’s direct support of the ECB within the framework of the SSM, without reflecting the Deutsche Bundesbank’s competence in relation to the ongoing monitoring of institutions. In accordance with

text: Article 2(9) of Regulation (EU) No 468/2014

text: of the European Central Bank , the ECB will interact and cooperate directly with the Deutsche Bundesbank in its field of supervisory responsibility. For the sake of legal certainty and since the close involvement of national central banks in prudential supervision is a condition for the Eurosystem to contribute effectively to monitoring the risks to financial stability in the euro area, the ECB therefore suggests that the proposed Section 7(1a) of the Banking Act should clarify that the competences laid down in Section 7(1) of the Banking Act also apply with regard to significant credit institutions subject to the ECB’s direct supervision pursuant to

text: Council Regulation (EU) No 1024/2013

text: . Cooperation and the distribution of tasks within the SSM need to be clearly regulated to ensure efficient cooperation and timely exchange of relevant information among the authorities involved in banking supervision. This will support the effective performance of their tasks and thereby contribute to the smooth functioning of the SSM.

text: 3.5.3 Notifications by significant institutions

text: The draft law amends Sections 24 and 24a of the Banking Act and requires institutions under the ECB’s direct supervision to submit notifications directly to the ECB and provide copies of such notifications to the Deutsche Bundesbank and BaFin at the same time. The explanatory memorandum to the draft law justifies this amendment on the basis of the need to bring the provisions in line with

text: Article 95(1) of Regulation (EU) No 468/2014

text: . While it is correct that

text: Article 95(1)

text: requires, as a general rule, that significant institutions should address notifications directly to the ECB, the Regulation also contains exceptions to this rule. For example, notifications relating to the suitability of members of the management bodies of significant institutions must be made to national supervisory authority and not to the ECB . Moreover, it should also be noted that the provisions of

text: Regulation (EU) No 468/2014

text: generally also oblige the receiving authority to inform the other relevant authority. The ECB therefore sees a need for the national law to accurately reflect the provisions laid down in

text: Regulation (EU) No 468/2014

text: for the sake of legal clarity and to avoid any duplication or additional burden on institutions.

text: This opinion will be published on the ECB’s website.

text: Done at Frankfurt am Main, 12 September 2014. [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 2

text: Council Decision 2014/509/EU of 23 July 2014

text: on the adoption by Lithuania of the euro on 1 January 2015 (OJ L 228, 31.7.2014, p. 29). 3

text: Regulation (EC) No 1745/2003

text: of the European Central Bank of 12 September 2003 on the application of minimum reserves (ECB/2003/9) (OJ L 250, 2.10.2003, p.10).

text: Resolution No 38 of the Board of Lietuvos bankas of 14 March 2002 on the approval of rules on reserve requirements for credit institutions (Valstybės žinios, 27.03.2002, No 31-1201). 5 See new paragraph 44 of the rules on reserve requirements, to be introduced by the draft amending resolution. 6 Press release of 17 July 2014, available on the ECB’s website at: http://www.ecb.europa.eu/press/pr/date/2014/html/pr140717_1.en.html 7 These maintenance periods are set out in paragraph 20 of the rules on reserve requirements, to be amended by the draft amending resolution.

title: Opinion of the European Central Bank of 12 September 2014 on reserve requirements in connection with the introduction of the euro (CON/2014/68)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 12 September 2014 on reserve requirements in connection with the introduction of the euro (

text: ) Introduction and legal basis

text: On 29 August 2014, the European Central Bank (ECB) received a request from Lietuvos bankas for an opinion on (a) a draft resolution amending the rules on reserve requirements for credit institutions (hereinafter the ‘draft amending resolution’), and (b) a draft resolution on the approval of rules on the calculation of the reserve base and reserve requirements for credit institutions (hereinafter the ‘draft resolution’) (hereinafter collectively referred to as the ‘draft resolutions’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and

text: Article 2(2) of Council Decision 98/415/EC

text: , as the draft resolutions relate to instruments of monetary policy of a non-euro area Member State. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft resolutions

text: 1.1 The draft resolutions follow the Council of the European Union’s decision, pursuant to Article 140(2) of the Treaty, to abrogate Lithuania’s derogation with effect from 1 January 2015 . 1.2 The draft amending resolution aims to ensure a smooth transition to the Eurosystem’s minimum reserves framework. More specifically, it extends the last reserve maintenance period prior to the introduction of the euro in Lithuania until 31 December 2014, and introduces a new method of calculation of reserve requirements for the first two reserve maintenance periods in 2015 pursuant to

text: Regulation (EC) No 1745/2003

text: of the European Central Bank (ECB/2003/9) (hereinafter the ‘Regulation’). 1.3 The draft resolution will apply from the date of Lithuania’s introduction of the euro. It provides that reserve requirements will be calculated and notified in line with the Regulation. It also repeals

text: the current rules on reserve requirements for credit institutions , including the draft amending resolution.

text: 2. General observations

text: The ECB welcomes the changes to Lithuanian law to be effected under the draft resolutions as part of the preparations for the introduction of the euro in Lithuania. In terms of monetary policy, which remains a competence of Lietuvos bankas until the introduction of the euro, the draft resolutions should help Lithuanian credit institutions to familiarise themselves with the Eurosystem’s requirements and ensure a smooth transition to compliance with the Eurosystem’s minimum reserve framework starting from 1 January 2015.

text: 3. Reserve maintenance periods in 2015

text: The ECB understands that the first two reserve maintenance periods in 2015 provided for in the draft 5 6 amending resolution refer to the maintenance periods set by the Governing Council of the ECB on the basis of Article 7 of the Regulation. The ECB recommends specifying this fact in the draft amending resolution in order to distinguish these maintenance periods from the reserve maintenance periods set by the Board of Lietuvos bankas under the Lithuanian reserve requirements framework , since both types of maintenance periods are referred to in the same legal act.

text: Done at Frankfurt am Main, 12 September 2014.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 2 See section 28 of the Central Bank Act 1997. 3 Defined, with certain exceptions, as ‘natural persons within the State’. 4

text: Regulation (EU) No 575/2013

text: of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending

text: Regulation (EU) No 648/2012

text: (OJ L 176, 27.6.2013, p. 1).

text: See Opinion

text: , paragraph 2.1. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 6 See the ECB’s Convergence Report 2014, p. 31.

title: Opinion of the European Central Bank of 12 September 2014 on the regulation of the business of owning credit (CON/2014/69)

text: Introduction and legal basis On 11 August 2014, the European Central Bank (ECB) received a request from the Irish Department of Finance for an opinion on the Consumer Protection on the Sale of Loan Books Bill 2014 (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of

text: Article 2(1) of Council Decision 98/415/EC

text: , as the draft law relates to the Central Bank of Ireland (CBI) and to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: According to the public consultation paper, the draft law seeks to ensure that borrowers whose loans are sold by a regulated entity to a currently unregulated entity continue to have the benefit of the same regulatory protections as they had prior to sale, including those protections in various CBI codes, e.g. the Code of Conduct on Mortgage Arrears. The ownership of credit, defined in the Central Bank Act 1997 as a ‘cash loan’ , is to be a newly regulated financial activity requiring authorisation by the CBI. This is to be implemented by extending the definition of ‘retail credit firm’ in section 28 of the Act to cover, inter alia, both the business of providing credit directly to ‘relevant persons’ and the business of owning such credit. An entity that is a ‘Securitisation Special Purpose Vehicle’ (SSPV) will be excluded from the effect of this expanded definition of ‘retail credit firm’. As proposed, the definition of the term ‘SSPV’ appears to be based on the definition of Securitisation Special Purpose Entity in

text: Article 4(66) of Regulation (EU) No 575/2013

text: of the European Parliament and of the Council . However, if the entity carries out ‘loan

text: book servicing activities’, such as communicating with borrowers to notify the borrower of changes in interest rates or payments due under a loan contract, making decisions in relation to contracts including enforcement and changes to interest rates, taking any necessary steps for the purposes of collecting or recovering payments due under a contract from the borrower, or taking any necessary steps for the purposes of enforcing the security on a loan, it will not fall within the definition of the term ‘SSPV’ and therefore will not benefit from this particular exclusion. Furthermore, the existing exclusion of ‘regulated financial service providers’ from the definition of retail credit firm will be narrowed. Under the draft law, such providers are only excluded if they are authorised by the CBI or another European Economic Area regulator ‘to provide or own credit otherwise than under this Part [of the Central Bank Act 1997]’. Transitional provisions will apply to relevant entities that are currently unregulated while the CBI assesses their application for authorisation.

text: 2. Observations

text: The ECB welcomes the measures to be introduced by the draft law, as they aim to strengthen consumer protection and thereby contribute to preserving confidence in the marketplace . The ECB understands that this newly regulated financial activity, requiring authorisation from the CBI, will not affect the principle of central bank independence, which requires Member States to ensure that national central banks have sufficient financial resources to perform Eurosystem-related tasks as well as their national tasks .

text: This opinion will be published on the ECB’s website.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: Law No 2013-672 of 26 July 2013.

text: Decree No 2014-785 of 8 July 2014.

text: ibid.

text: ECB Opinion

text: , paragraph 2. All ECB opinions are available on the ECB’s website at www.ecb.europa.eu.

text: COM(2014) 43 final.

text: Article 4(3) of Regulation (EU) No 1024/2013 of 15 October 2013

text: conferring specific tasks on the European Central Bank concerning policies relating to prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63).

text: Regulation (EU) No 575/2013

text: Regulation (EU) No 648/2012

text: (OJ L 176, 27.6.2013, p. 1).

title: Opinion of the European Central Bank of 19 September 2014 on the separation and regulation of banking activities (CON/2014/70)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 19 September 2014 on the separation and regulation of banking activities (

text: ) Introduction and legal basis

text: On 15 June 2014, the European Central Bank (ECB) received a request from the French Minister for Finance and Public Accounts for an opinion on a draft ministerial order implementing the Law on the separation and regulation of banking activities of 2013 (hereinafter the ‘draft ministerial order’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the sixth indent of

text: , as the draft ministerial order relates to the rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft ministerial order

text: 1.1 The draft ministerial order implements the first Title of the Law on the separation and regulation of banking activities . This law applies to credit institutions, financial holding companies and mixed financial holding companies (hereinafter ‘designated financial institutions’). Its purpose is to separate banking activities that finance the economy from speculative operations. Although the latter must be ring-fenced in dedicated subsidiaries, credit institutions can continue proprietary trading relating to financial instruments within certain limits and subject to certain conditions. The draft ministerial order reinforces requirements relating to internal controls, requires the provision of market activity indicators, lays down conditions for authorised operations with hedge funds and sets up procedures for the oversight of such operations. 1.2 First, in respect of activities that may be carried out other than through a dedicated subsidiary, designated financial institutions that exceed the threshold set by Article R. 511-16 of the Monetary and Financial Code (MFC) shall identify internal units tasked with conducting transactions relating to financial instruments and classify those units into one of the categories set out in paragraph 1 of

text: Article L. 511-47 of the MFC in order to ensure that these units conduct financial operations within the limits of their mandates. At least once a year, designated financial institutions shall provide to the Autorité de Contrôle Prudentiel et de Résolution (ACPR, Prudential Control and Resolution Authority) and, if relevant, the Autorité des Marchés Financiers (AMF, Financial Markets Authority), a variety of market activity indicators, an organisational chart of the internal units, and an explanation of the way in which these internal units’ mandates have been established and monitored. The ACPR shall verify that risk limits consistent with such mandates are defined for each internal unit. 1.3 Second, the draft ministerial order provides exceptions to the general prohibition contained in Article L. 511-47 of the MFC on the execution by credit institutions of operations with hedge funds. These exceptions permit credit institutions to conduct such operations when guaranteed by securities considered as adequate under the criteria laid down in the draft ministerial order. 1.4 Finally, with regard to large exposure risk, the draft ministerial order imposes an exposure limit equivalent to 10 % of the own funds of the dedicated subsidiary on the rest of the financial group.

text: 2. Observations

text: 2.1 In line with its previous opinion on the Law on the separation and regulation of banking activities , the ECB reiterates that since these measures primarily address internationally active credit institutions, coordination and consistency in the authorities’ regulatory approach are of the utmost importance in order to avoid regulatory arbitrage. This is particularly true in view of the ongoing preparatory work in respect of the proposal for a regulation on structural measures improving the resilience of EU credit institutions . Consequently, the consulting authority should closely monitor the development of Union legislation and consider whether it is appropriate to seek alignment with the forthcoming rules to be adopted at Union level. 2.2 The impact of the forthcoming allocation of supervisory tasks within the Single Supervisory Mechanism between the national authorities and the ECB should be taken into account. Some of the activities provided for in the draft ministerial order will fall within the ECB’s competence in respect of significant credit institutions after 4 November 2014. These include, for instance, the monitoring of remuneration paid to individuals of the internal units. 2.3 More generally, the ECB’s interpretations of criteria set out in relevant Union law should be taken into account by the ACPR when assessing such criteria pursuant to the draft ministerial order. For instance, the securities and guarantees criteria defined in

text: Regulation (EU) No 575/2013

text: of the

text: European Parliament and of the Council should be taken into account when assessing the criteria for securities to be considered to provide adequate guarantees for credit institutions when entering into transactions with hedge funds (Article 7 of the draft ministerial order).

text: Done at Frankfurt am Main, 19 September 2014.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 2 Point 25 of the Supreme Court Ruling 3-2-1-186-13, published on the Supreme Court’s webpage at www.riigikohus.ee.

title: Opinion of the European Central Bank of 2 October 2014 on the publication of the annual percentage rate of charge for consumer credit agreements (CON/2014/71)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 2 October 2014 on the publication of the annual percentage rate of charge for consumer credit agreements (

text: ) Introduction and legal basis

text: On 27 August 2014, the European Central Bank (ECB) received a request from the Ministry of Justice of Estonia for an opinion on the law amending the Code of Civil Procedure, the Law on obligations and the General Part of the Civil Code (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of

text: Article 2(1) of Council Decision 98/415/EC

text: , as the draft law relates to Eesti Pank. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: The draft law relates to Eesti Pank’s obligation to publish the annual percentage rate of charge (APRC) of consumer credit biannually. The primary aim of the draft law is consumer protection. The draft law also eliminates arbitration as a mechanism for dispute resolution for consumer credit agreements and sets the statutory upper limit for the APRC. The Supreme Court of Estonia has also pointed out the need for this 2. amendment

text: 2. General observations

text: Eesti Pank is currently calculating and publishing the APRC on its website on a monthly basis. The ECB has no concerns with regard to the proposed amendment to publish the APRC biannually and has no

text: comments on the other changes introduced by the draft law. This opinion will be published on the ECB’s website.

text: Done at Frankfurt am Main, 2 October 2014. [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Law XL of 2014, Published in Magyar Közlöny No 137/2014.

text: See amendments Nos T/1272/4 and T/1272/6, available on the Hungarian Parliament’s website at www.parlament.hu.

text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: Opinion

text: on new general measures stemming from the Supreme Court’s decision on consumer loan contracts. All ECB opinions are available on the ECB’s website at www.ecb.europa.eu.

text: Uniform Decision 2/2014 of the Supreme Court of 16 June 2014. See also Decision 6/2013 of the Supreme Court of 16 December 2013.

text: Magyar Közlöny 98/2014, 18.07.2014.

text: See amendments Nos T/1272/4 and T/1272/6.

title: Opinion of the European Central Bank of 10 October 2014 on further rules applicable to specific consumer loan contracts (CON/2014/72)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 10 October 2014 on further rules applicable to specific consumer loan contracts (

text: ) Introduction and legal basis

text: On 12 September 2014 the European Central Bank (ECB) received a request from the Hungarian Ministry of the National Economy for an opinion on a draft law on the rules applicable to specific consumer loan contracts (hereinafter the ‘draft law’). The draft law was adopted by the Hungarian Parliament on 24 September 2014 following amendments . The ECB has adopted its opinion based on the draft law submitted for consultation. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of

text: , as the draft law relates to the Magyar Nemzeti Bank (MNB) and to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1 Purpose of the draft law

text: 1.1 As referred to in Opinion

text: , the Hungarian Supreme Court delivered a uniform decision outlining the basic parameters of certain standard terms that could be prescribed by Parliament for inclusion in consumer loan contracts entered into by natural persons and denominated in forint or in foreign currency.

text: 1.2 The Hungarian Parliament subsequently adopted Law XXXVIII of 2014 on measures to address the Supreme Court’s decision on consumer loan contracts . This legislation regulates loans issued in forint and foreign currency, as well as financial leases, entered into by natural persons. Amongst other things, the legislation: (a) declares that it is illegal for financial institutions to profit from exchange rate margins and requires financial institutions to calculate the amounts to be repaid to affected consumers using the official exchange rate published by the MNB; and (b) states that unilateral amendment of the general terms and conditions of a loan contract or a financial lease fails to satisfy the principles outlined in the Supreme Court’s ruling and is therefore unfair, and thus void, unless proven otherwise by a financial institution in court proceedings. The adoption of Law XXXVIII of 2014 and the further detailed rules set out in the draft law are the beginning of a series of legislative measures aiming to address the Supreme Court’s decision. 1.3 The draft law prescribes the procedures implementing the new legal measures introduced by Law XXXVIII of 2014, including the applicable timelines. The draft law specifies the rules applicable to write-offs or repayments, which depend on the status of the contract (i.e. whether or not obligations under the contract remain to be performed) and, in particular cases, the rules for determining the applicable exchange rate and the interest rate. Where the consumer has benefited from a discount or reduction of their payment obligations (e.g. as a result of the early repayment scheme or the exchange rate cap scheme), the draft law provides that a deduction will be made by the financial institution from the write-off or repayment, corresponding to the discount or reduction previously granted. Specific procedural rules are set out to govern adjourned legal proceedings, also temporarily prohibiting any unilateral increase in the interest rate, costs and fees applicable to consumer loan contracts until 30 April 2016. The draft law states that the financial institutions will ultimately bear the costs of implementing the draft law. Further provision is made for a formal dispute resolution procedure which will be available before the Pénzügyi Békéltető Testület (Financial Reconciliation Board), with support from the MNB. Additional tasks are given to the MNB in its supervisory capacity and the draft law also ensures consistency with other relevant legal acts. Finally, amendments are made to certain accounting and taxation rules to facilitate the performance of existing and future payment obligations by the financial institutions under the new rules. 1.4 In addition to determining the basic rules of procedure implementing the new legal measures introduced by Law XXXVIII of 2014, the draft law authorises the Governor of the MNB to adopt a decree prescribing certain relevant details to be provided by financial institutions. This includes details on the implementation of the new obligations, the date on which such obligations should be performed and, in certain limited cases, the date of the applicable

text: exchange rate to be used, as well as the date on which any financial obligations should be fully performed, the content and formalities involved, and the applicable rules of publication.

text: 2 General observations

text: The appropriate time to consult the ECB

text: The draft law was adopted by Parliament on 24 September 2014, shortly after the ECB was consulted, and before the ECB could adopt its opinion. As a consequence, Parliament could not take the ECB’s views into account before adopting the draft law. Moreover, the draft law, as adopted, differs substantially from the draft law on which the ECB has been consulted due to the amendments adopted by Parliament during the legislative process. This opinion is based on the draft law sent for consultation to the ECB. The Hungarian authorities have again failed to comply properly with their duty to consult the ECB. The adoption of the draft law, as amended, does not relieve the authorities of their duty to consider this opinion, in particular with regard to the application and interpretation of the draft law, as adopted, and any future amendments thereto. The ECB would like to emphasise that, even in cases of particular urgency or where the legislative process has reached an advanced stage, the national authorities are not relieved of their duty to consult the ECB at an appropriate stage in the legislative process that allows sufficient time for: (a) the ECB to examine the draft legislative provisions and adopt its opinion in all required language versions; and (b) the national authorities to take into account the ECB’s views in accordance with Decision

text: . The ECB would therefore appreciate the consulting authority honouring its obligation to consult the ECB, in accordance with Decision

text: , in the future.

text: 3. Specific observations

text: 3.1 The ECB would like to stress that all observations made in paragraph 3 of Opinion

text: remain applicable. Of particular importance are the comments made in paragraphs 3.3 and 3.4 concerning the potential of the measures to: (a) place significant strain on the banking sector, potentially adversely affecting the stability of the Hungarian financial sector as a whole and the situation of individual financial institutions; and (b) create crossborder spill-over effects on banking groups’ profits and capital positions, possibly resulting in adverse spill-over effects on the economy. These paragraphs in Opinion

text: also comment on the need for a meaningful dialogue between the Hungarian authorities and all relevant stakeholders, as well as the need for due consideration of the interests of the general

text: public, including financial institutions and borrowers, as well as the interests of the authorities responsible for ensuring the stability of the financial system in Hungary. 3.2 On the issue of financial stability, the ECB welcomes the fact that the draft law empowers the Governor of the MNB to require certain relevant details relating to the new legal measures introduced by Law XXXVIII of 2014, since the MNB is both the national competent authority responsible for micro-prudential supervision and the macro-prudential supervisory authority in Hungary. The MNB is best placed to assess the terms and conditions of loan contracts entered into by consumers and the impact of the new legal measures on financial institutions. Within the scope of its tasks, the MNB can contribute to the prevention and mitigation of systemic risks to financial stability. As regards the legislative powers proposed to be granted to the Governor of the MNB under the draft law, which are more than technical in nature, the ECB expects to be consulted in a timely manner on any draft legislative provisions proposed by the Governor within the ECB’s scope of competence in accordance with Decision

text: . 3.3 In view of the high proportion of financial institutions owned by foreign banking groups operating in the Hungarian banking sector, and in order to prevent contagion and threats to financial stability within the European Union, the MNB should also inform the ECB, the European Systemic Risk Board and other relevant stakeholders of any proposed implementing measures in the future. 3.4 In addition to its new supervisory tasks involving the verification of compliance with the new legal measures applicable to consumer loan contracts, the MNB will be tasked with the mediation of complaints and the initiation of legal proceedings in the public interest. In line with the principle of central bank independence, the MNB should be able to carry out these new tasks while having sufficient financial resources to carry out its tasks within the European System of Central Banks (ESCB). The principle of financial independence requires that a national central bank has sufficient financial resources to perform both its ESCB and national tasks, which in this case includes the new tasks given to the MNB.

text: This opinion will be published on the ECB’s website.

text: Done at Frankfurt am Main, 10 October 2014.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Gazzetta Ufficiale della Repubblica Italiana No 190, 18.8.2014.

text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 3 Gazzetta Ufficiale della Repubblica Italiana No 95, 24.4.2014. 4 Gazzetta Ufficiale della Repubblica Italiana No 301, 28.12.2005.

text: See Title IV, Section I of the Guide to consultation of the European Central Bank by national authorities regarding draft legislative provisions. 6 Available at http://www.bancaditalia.it/.

text: Council Regulation (EU) No 1024/2013 of 15 October 2013

text: conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63). 8 See Opinion

text: . All ECB opinions are published on the ECB’s website at www.ecb.europa.eu.

text: See, by analogy, the ECB’s Convergence Report 2014, p. 35, and Opinions

text: and

title: Opinion of the European Central Bank of 13 October 2014 on conflict of interest rules for members of the governing bodies and executives of the Banca d’Italia (CON/2014/73)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 13 October 2014 on conflict of interest rules for members of the governing bodies and executives of the Banca d’Italia (

text: ) Introduction and legal basis

text: On 5 September 2014 the European Central Bank (ECB) received a request from the Minister responsible for Simplification and Public Administration for an opinion on a draft decree implementing Article 22(2) of Law No 114 of 7 August 2014 (hereinafter the ‘draft decree’). Article 22(2) concerns conflict of interest rules for members of the governing bodies and executives of the Banca d’Italia. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of

text: Article 2(1) of Council Decision 98/415/EC

text: , as the draft decree relates to the Banca d’Italia. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft decree

text: 1.1 Article 22(2) of Decree-Law No 90 of 24 June 2014 (hereinafter the ‘Decree-Law’) amended Law No 262 of 28 December 2005 by the addition of

text: Article 29

text: bis, which provides that members of the governing bodies and executives of the Commissione Nazionale per le Società e la Borsa (Consob, Italian Companies and Stock Exchange Commission) may not engage, directly or indirectly, in any business, consultancy or employment relationship with entities regulated by Consob, or the subsidiaries of such entities, for a period of two years after cessation of employment or ceasing to hold office. Any contracts entered into in breach of this provision will be void.

text: Article 29

text: bis does not apply to executives who were, in their last two years of employment, in charge of offices providing support services. 1.2 The Decree-Law was subsequently submitted to the Parliament for conversion into law. Law No 114 of 7 August 2014 (hereinafter ‘the Law’), as adopted, extended the abovementioned restrictions to members of the governing bodies and executives of the Banca d’Italia and provided

text: that a decree of the President of the Council of Ministers could set a period of restriction of up to two years. 1.3 The draft decree of the President of the Council of Ministers, on which the ECB has now been consulted, sets the period of restriction at the maximum limit of two years.

text: 2. The appropriate time to consult the ECB

text: 2.1 The ECB was consulted on the draft decree before its enactment, but no request was made for an opinion on the Law, which extended the scope of the relevant conflict of interest rules to the members of governing bodies and executives of the Banca d’Italia. It is well-established doctrine that the ECB must be consulted at an appropriate stage in the legislative process, that this should take place at a time that enables the ECB to adopt its opinion in all required language versions and that this should enable the authority initiating the legislative provisions to take the ECB’s opinion into account before it decides on the substance . 2.2 In the Italian legal system, a decree-law adopted by the Government enters into force on publication in the Official Journal and must be submitted to the Parliament for conversion into law on the date of its adoption. Amendments may be made by the Parliament in the process of conversion into law, which was the case in the present matter. 2.3 In this situation, as the restrictions imposed by the Decree-Law were extended to members of the governing bodies and executives of the Banca d’Italia by the Parliament in the process of conversion into law, a consultation request should have been sent to the ECB by the Parliament before the Decree-Law was converted into the Law. The ECB would like to draw the Parliament’s attention to this aspect of the procedure for consultations of the ECB.

text: 3. General observations

text: 3.1 Article 7 of the Banca d’Italia’s Code of Conduct for Staff Members and Article 8 of the Banca d’Italia’s Code of Conduct for Members of the Governing Board currently provide for restrictions on engaging in private business activities after cessation of employment or ceasing to hold office. In particular, during the first year after the end of their employment relationship with the Banca d’Italia or after ceasing to hold office, former employees and members of the Governing Board must avoid any conflict of interest, arising from their former duties with the Banca d’Italia, when undertaking new private or professional activities. Article 22(2) of the Law tightens this restriction by extending the period of restriction to two years for members of all governing bodies and executives, under the terms and conditions referred to in paragraph 1.1 of this Opinion. The ECB understands that the codes of conduct will remain in force and that the further restrictions introduced by

text: Article 22(2)

text: will only apply to the categories of persons and to the situations

text: referred to therein. However, the application of the legal restrictions may vary depending on the meaning of the terms ‘governing bodies’, ‘executives’ and ‘offices providing support services’. It is therefore advisable to provide clear definitions of such terms in order to clarify the precise application of the restrictions to the various categories of persons and situations. 3.2 Without prejudice to the need for clarification of the application of the restrictions, the ECB welcomes the aim of the Law to contribute to ensuring the effectiveness and independence of the supervisory tasks carried out by the Banca d’Italia. In accordance with

text: Article 31(3) of Council Regulation (EU) No 1024/2013

text: , the ECB is in the process of establishing comprehensive and formal procedures, including ethics procedures and proportionate periods, to assess in advance and prevent possible conflicts of interest where members of the Supervisory Board of the ECB and ECB staff members who are engaged in supervisory activities are employed elsewhere, within a period of two years after cessation of employment or ceasing to hold office. Pursuant to subparagraph 2 of

text: Article 31(3)

text: , such procedures will be without prejudice to the application of stricter national rules. Significant differences between the post-employment conflict of interest rules and restrictions applicable to the members of the joint supervisory teams appointed by the ECB and those appointed by the Banca d’Italia for the performance of the ECB’s supervisory tasks should be avoided. It would therefore be advisable to provide for the possibility to review the Italian rules, as appropriate, to take into account ethical rules at the European level, including rules on post-employment business activities, which may be adopted in the context of the Single Supervisory Mechanism . 3.3 In line with the principle of financial independence, which is an element of the principle of central bank independence referred to in Article 130 of the Treaty, Member States may not interfere with the ability of a national central bank (NCB) to employ and retain the qualified staff necessary for the NCB to perform independently the tasks conferred on it by the Treaty and the Statute of the European System of Central Banks and of the European Central Bank. Accordingly, the proposal in the draft decree to fix the period of restriction on former members of the governing bodies and executives of the Banca d’Italia at two years should be decided after close and effective cooperation with the Banca d’Italia, to ensure that any concerns as regards its ability to employ and

text: retain qualified staff are sufficiently and appropriately addressed . This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 13 October 2014. [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: See Section 3 of the draft law.

text: See

text: Article 1(4) of Directive 2009/110/EC

text: of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives

text: and

text: and repealing Directive

text: (OJ L 267, 10.10.2009, p. 7).

text: For example, services based on payment instruments that can only be used to acquire goods or services on the premises used by the issuer or under a commercial agreement with the issuer, either within a limited network of service providers or for a limited range of goods or services. See

text: Article 3

text: (k) of Directive

text: of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives

text: and

text: and repealing Directive

text: (OJ L 319, 5.12.2007, p. 1).

text: This possibility is available where: (a) the total business activities generate an average amount of outstanding electronic money that does not exceed a limit set by the Member State but that amounts to no more than EUR 5 000 000; and (b) none of the natural persons responsible for the management or operation of the business has been convicted of offences relating to money laundering or terrorist financing or other financial crimes. See

text: Article 9(1) of Directive 2009/110/EC

text: Please see 'Final recommendations for the security of payment account access services following the consultation', available on the ECB’s website at www.ecb.europa.eu.

title: Opinion of the European Central Bank of 14 October 2014 on financial transparency, payment services and electronic money (CON/2014/74)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 14 October 2014 on financial transparency, payment services and electronic money (

text: ) Introduction and legal basis

text: On 2 September 2014, the European Central Bank (ECB) received a request from the Danish Financial Supervisory Authority (FSA) for an opinion on a draft law amending the Law on financial business, the Law on securities trading, the Law on payment services and electronic money and various other laws (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the second and sixth indents of

text: , as the draft law relates to means of payment and rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: The draft law introduces a number of changes to the financial legislation. Among these, the draft law aims to increase openness with regard to the FSA's assessment of undertakings under supervision, e.g. all such undertakings shall have the obligation to publish the FSA's inspection reports . Furthermore, the draft law introduces changes to the Law on payment services and electronic money in order to cut down on administrative burden . 1.1 Publication of the FSA's inspection reports The draft law proposes extending the scope of financial undertakings’ obligation to publish the FSA’s assessment of the undertaking in question, with the result that all types of financial undertakings under supervision pursuant to the Law on financial business are covered, i.e. the obligation is extended to savings firms, investment advisors, joint data centres, and carbon emissions traders.

text: 1.2 Amendments to the Law on payment services and electronic money In order to ease the administrative burden for electronic money issuers, the draft law contains an exemption with regard to the issuance of electronic money in amounts of less than DKK 3 000 (approximately 400 euro) from the Law on payment services and electronic money, if such electronic money cannot be automatically reloaded. At the same time, this electronic money must have a limited scope of application, e.g. it can only be used in one particular shopping centre or in establishments forming a particular association of retailers. The draft law also removes payment substitutes that are free of charge and payment substitutes in amounts of less than DKK 3 000 from the draft law’s scope of application if automatic reloading is not possible. Additionally, the draft law provides an option to payers where they will have additional information on where they have used their payment instrument (credit cards, mobile payments etc.) in order to provide them with an overview of the payments made (i.e. diagrams). This information would only be made available to the payer, who will have the option of declining this option.

text: 2. General observations

text: 2.1 The ECB notes that the obligation to publish FSA’s inspection reports (or information included in the FSA inspection reports) is proposed to be extended to cover all financial undertakings supervised by the FSA. While transparency is an important aspect in prudential supervision, publication of inspection reports may influence the way these reports are written, and the speed with which they are written, which could be detrimental to effective supervision. The ECB recalls that the obligation to disclose inspection reports will not apply to credit institutions supervised by the Single Supervisory Mechanism. In addition, it should be observed whether these reports contain information which, if published, could have an impact on financial stability. 2.2 The amendments to the Law on payment services and electronic money provide for an exemption from the application of the law for the issuance of electronic money in amounts of less than DKK 3 000, as well as payment substitutes that are free of charge and payment substitutes in amounts of less than DKK 3 000. Directive

text: of the European Parliament and of the 4 5 Council makes a distinction between services to which the directive does not apply and areas where the Member States have the possibility to waive the application of the directive for legal

text: persons fulfilling certain requirements . The ECB suggests that the Danish legislator should clarify the exemption or waiver of the directive under which the issuance of electronic money and the payment substitutes fall. In addition, the ECB suggests that the Danish legislator should make clear that ‘payment substitutes’ correspond to services specified in

text: Article 3

text: (k) of Directive

text: and therefore do not fall within the scope of either Directive

text: or Directive

text: . 2.3 Finally, the ECB would like to mention the recommendations from the European Forum on the Security of Retail Payments, SecuRe Pay, with regard to the proposed additional possibilities to provide collected payment information, which might provide some guidance in the area of user security .

text: This opinion will be published on the ECB’s website.

text: Done at Frankfurt am Main, 14 October 2014.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Council Decision 98/415/EC of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).

text: Recommendation ECB/2013/8 of 17 April 2013 to the Council of the European Union on the external auditors of the Oesterreichische Nationalbank (OJ C 115, 23.4.2013, p. 1).

title: Opinion of the European Central Bank of 23 October 2014 on the determination of weighted average yields for federal loans and the appointment of external auditors (CON/2014/75)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 23 October 2014 on the determination of weighted average yields for federal loans and the appointment of external auditors (

text: ) Introduction and legal basis

text: On 22 September 2014, the European Central Bank (ECB) received a request from the Austrian Ministry of Finance for an opinion on the draft law on the determination of weighted average yields for federal loans and amending the Law on the Oesterreichische Nationalbank (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and on the third indent of

text: Article 2(1) of Council Decision 98/415/EC

text: , as the draft law relates to the Oesterreichische Nationalbank (OeNB). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 The draft law replaces Austria’s current indicator for federal loans, the secondary market yields for government bonds (hereinafter ‘SMR’), with a new indicator, the circulation weighted average yields of government bonds (hereinafter ‘UDRB’). This is necessary because by the end of 2014 the Oesterreichische Kontrollbank AG will cease to provide the SMR indicator and starting from 1 January 2015 the OeNB will take over the task and provide the new UDRB indicator. The SMR indicator is particularly relevant for life insurance undertakings. Pursuant to the draft law, the UDRB calculation is based on Austrian federal loans issued with a fixed interest rate and a remaining term of more than one year. This is based on the transaction data obtained by the Austrian Financial Market Authority by virtue of its official duties, which is provided to the OeNB on a weekly basis. This transaction data must not be published by the OeNB. The OeNB will calculate the UDRB for each of the bank’s working days and publish it retrospectively, once a week, on its website. In addition, the OeNB must also publish the details

text: concerning the framework conditions of the UDRB, particularly the method of calculation and the description of the data on which the UDRB is based. 1.2 The draft law updates the OeNB’s appointment procedure for external auditors. Under the draft law, an auditor and alternate auditor is elected to audit OeNB’s annual financial statements for a period of no longer than five years. Auditors that have already signed a certificate on five occasions cannot be appointed. In cases in which the audit is not carried out by a natural person in the capacity of auditor, this restriction also applies to a lead auditor and any persons who have signed an auditor’s certificate. The rotation provisions do not apply after an interruption of audit activities for at least two consecutive financial years.

text: 2. Specific observations

text: 2.1 The ECB has no comments as regards the replacement of the indicator for federal loans with a new indicator. 2.2 The ECB welcomes the changes regarding the appointment procedure of OeNB’s external auditors. This change reflects the ECB’s good practices for the selection and mandate of external auditors as laid down in Article 27.1 of the Statute of the European System of Central Banks and of the European Central Bank. As recommended by the ECB’s good practices, the draft law introduces a multi-year mandate for the appointment of the external auditors. The ECB understands that the draft law will enter into force before the end of 2014. Thus, the ECB expects that from the financial year 2015, the external auditor and the alternate external auditor are appointed for a multi-year mandate. Taking into account Recommendation ECB/2013/82, the ECB understands that in 2015 the OeNB will appoint the external auditor and alternate external auditor for a three-year term until the end of financial year 2017. The ECB also understands that from the financial year 2017 the

text: OeNB will appoint an external auditor and an alternate external auditor for a period of three or more years. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 23 October 2014. [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Uniform Decision 2/2014 of the Supreme Court of 16 June 2014. 3 Published in Magyar Közlöny 98/2014 on 18 July 2014. 4 Published in Magyar Közlöny 137/2014 on 6 October 2014. 5 All ECB opinions are available on the ECB’s website at www.ecb.europa.eu.

text: Opinions

text: and

title: Opinion of the European Central Bank of 28 October 2014 on specific settlement rules for consumer loan agreements (CON/2014/76)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 28 October 2014 on specific settlement rules for consumer loan agreements (

text: ) Introduction and legal basis

text: On 10 October 2014, the European Central Bank (ECB) received a request from the Magyar Nemzeti Bank (MNB) for an urgent opinion on a draft decree laying down specific rules on the methodology to be used for the settlement of certain consumer loan agreements, stemming from a decision of the Supreme Court (hereinafter the ‘draft decree’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the sixth indent of

text: , as the draft decree relates to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1 Background and purpose of the draft decree

text: 1.1 In 2014, the Hungarian Supreme Court delivered a uniform decision outlining the basic parameters of certain standard terms that could be prescribed by Parliament for inclusion in consumer loan contracts entered into by natural persons and denominated in forint or in foreign currency. 1.2 The Hungarian Parliament subsequently adopted Law XXXVIII of 2014 on measures to address the Supreme Court’s decision on consumer loan contracts and Law XL of 2014 on the rules of settlement related to such contracts . The ECB delivered opinions

text: and

text: on these laws . Law XL of 2014 authorised the Governor of the MNB to adopt a decree prescribing relevant details related to the settlement of certain consumer loan contracts. The draft decree has been prepared to this end by the MNB. 1.3 The provisions of the draft decree include detailed rules on the implementation of the new obligations, the date on which such obligations should be performed and, in certain limited cases,

text: the dates of the applicable exchange rates to be used for the recalculation of the consumer loan contracts, as well as the date by which any financial obligations should be performed in full. 1.4 The draft decree applies to those consumer loan contracts which have not been affected by delayed payment, and to consumers who have not participated in any relief schemes offered to them. It does not cover consumer loan contracts declared void by a final and binding court order prior to the draft decree taking effect. 1.5 The draft decree offers three methods for the calculation of the amount either payable to each consumer or to be deducted from their overall liability under the consumer loan contract to which they are party. The financial institutions may exercise their discretion as to which of the calculation method detailed in the annexes to the draft decree they use, so that they may choose the method that is compatible with their internal accounting system. The explanatory memorandum attached to the draft decree indicates that these methods are mathematically equivalent to each other in the sense that each produces the same result from the same set of figures.

text: 2. Observations

text: 2.1 As mentioned in the explanatory memorandum, the draft decree does not lay down rules for the implementation of

text: Article 46

text: (b), (c) and (f) to (h) of Law XL of 2014. The detailed rules relating to the following main issues will therefore be laid down in a separate MNB decree: (a) the methods available to determine both the calculation of benefits granted by financial institutions to consumers that are deductible from a consumer claim, and the formula to be used; (b) the detailed requirements for the content and format of the settlement of each claim; (c) in respect of financial institutions subject to dissolution or liquidation proceedings, the assessment method to be used to achieve settlement of a claim; and (d) the detailed requirements for the content and format for publication of details of settlements of claims. The ECB expects to be consulted in a timely manner on future draft legislative provisions relating to these issues proposed by the Governor of the MNB, provided that they fall within the ECB’s scope of competence in accordance with Decision

text: . 2.2 On 29 July 2014, the MNB published guidance on the best practice to be followed by affected institutions as to the methodology to be used when recalculating a consumer’s payment obligations under a consumer loan contract. As this guidance was not legally binding on the affected institutions, the adoption of a decree on the subject matter provides for more legal certainty. 2.3 In Opinion

text: , the ECB welcomed that Law XL authorised the Governor of the MNB to prescribe detailed rules pursuant to the new legal measures introduced by Law XXXVIII of 2014, since the MNB is both the national competent authority responsible for micro-prudential supervision and the macro-prudential supervisory authority in Hungary. It is the responsibility of the MNB to establish the methods to be used for recalculation, write-off and repayment following a thorough assessment of the terms and conditions on which consumers entered into loan contracts, and the impact of the new legal measures on financial institutions, including an assessment of the

text: benchmarks with regard to the methods that could be used to determine the fairness of conditions set by credit institutions. This would ensure that the suggested methods of calculation would meaningfully contribute to the effective performance of the settlement obligation to which the financial institutions are subject. 2.4 In previous opinions , the ECB has stressed that the measures taken following the decision of the Supreme Court will place a significant strain on the banking sector. It has also commented, inter alia, on the need for meaningful dialogue between the Hungarian authorities and all relevant stakeholders, as well as the need for due consideration of the public interest. The explanatory memorandum attached to the draft decree does not contain any information about whether the MNB, when laying down the calculation methods, has carried out a thorough impact assessment with the involvement of the affected financial institutions. The ECB recommends that such an assessment is performed before the adoption of the draft decree in order to contribute to the prevention and mitigation of systemic risks to financial stability.

text: Done at Frankfurt am Main, 28 October 2014.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI