text: OJ L 189, 3.7.1998, p. 42. 2

text: Article 41

text: According to the second amending proposal, the current appointment procedure also remains overall unchanged: Hungary’s President appoints the Governor and the Deputy Governors for six years, except that the Constitution will no longer provide for the Prime Minister’s right to recommend a candidate. 4 A qualified or ’organic’ legal act could be adopted or amended only by a two-thirds majoriry vote. 5 Amending proposal T/2627/55. 6 Amending proposal T/2627/129. 7 Convergence Report May 2010, Section 2.2.2.2 p. 17.

text: , paragraph 2.2. All ECB documents referred to are available on the ECB’s website at www.ecb.europa.eu.

title: Opinion of the European Central Bank of 12 April 2011 on the draft Constitution with regard to the Magyar Nemzeti Bank (CON/2011/33)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 12 April 2011 on the draft Constitution with regard to the Magyar Nemzeti Bank (

text: ) Introduction and legal basis

text: On 16 March and 23 March 2011 the European Central Bank (ECB) received a request from the Hungarian Ministry of Public Administration and Justice and the Hungarian Ministry of the National Economy respectively for an opinion on the draft Constitution (hereinafter the ‘draft Constitution’). On 4 April 2011, the Hungarian Ministry of Public Administration requested the ECB’s opinion also on two amending proposals that had been submitted to the Parliament for adoption before 11 April 2011. 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 of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft Constitution relates to the Magyar Nemzeti Bank (MNB). 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 Constitution

text: The purpose of the draft Constitution is to replace Law XX of 1949 on the Constitution of the Republic of Hungary (‘Law XX of 1949’). According to the explanatory memorandum, Law XX of 1949 needed to be replaced mainly due to its structure and wording that has become obsolete. This is also confirmed by the large number of Constitutional Court decisions and the 34 amendments introduced since 1989. The draft Constitution retains the provision that the MNB is the central bank of Hungary and is responsible for monetary policy in the manner specified by law. It also overall retains the appointment procedure for the MNB’s Governor, except that the term is extended from six to nine years and the

text: MNB’s Deputy Governors will be appointed by the MNB’s Governor . The Governor will also be a Fiscal Council member. The MNB’s reporting obligations and its Governor’s legislative powers will remain unchanged. The two amending proposals foresee that (i) the Law on the Magyar Nemzeti Bank will be a qualified 4 5 legal act (hereinafter the ‘first amending proposal’) and (ii) the appointment and term of office of the MNB’s Governor and the Deputy Governors will be amended in the draft Constitution, and the Law on the MNB and the Law on the supervision of the financial intermediary system will be qualified legal acts (hereinafter the ‘second amending proposal’) .

text: 2. Compatibility of the Constitution with the Treaties and the Statute of the European System of Central Banks and of the European Central Bank

text: 2.1 The ECB has assessed the compatibility of Hungarian legislation with the requirements of Union law relating to central bank independence, monetary financing and also the MNB’s participation in the ESCB and, prospectively, in the Eurosystem in its Convergence Reports since 2004, including Law XX of 1949. In the latest 2010 Convergence Report, the ECB found that

text: Article 32

text: /D of Law XX of 1949, which establishes the MNB’s powers in the field of monetary policy, does not recognise the ECB’s powers in this field. The ECB notes that the relevant provision in the draft Constitution remains the same as in Law XX of 1949. Hungary is a Member State with a derogation and must therefore comply with all adaptation requirements under the Treaty. The Hungarian authorities should, therefore, take this opportunity to make the necessary adjustments to ensure the MNB’s full integration into the Eurosystem which must enter into force on Hungary’s adoption of the euro. 2.2. The ECB would like to refer to its previous stance observing that Union law does not prescribe the manner in which national legislation should be adapted to achieve compatibility with the relevant requirements under the Treaty and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). This may be achieved by referring to the Treaty and the Statute of the ESCB, by incorporating provisions thereof and referring to their source, by deleting any incompatibility, or by using a combination of these methods . Depending on the national legislator’s choice, and in line with the hierarchy of national legislation, such changes may be introduced in constitutional provisions, ordinary legislation, or both.

text: 3. Relationship between the draft Constitution and the Law on the Magyar Nemzeti Bank

text: According to the draft Constitution, the MNB’s Governor may appoint the Deputy Governors, while according to Article 51(1) of the Law on the Magyar Nemzeti Bank, Hungary’s President may appoint and dismiss the Deputy Governors on the basis of the Governor’s recommendation and the Prime Minister’s consent. The ECB understands that due to its position in the legislative hierarchy, the draft Constitution will prevail. Adopting the second amending proposal would overall maintain the current appointment procedure. On the other hand, the draft Constitution no longer provides that Hungary’s President dismisses the Deputy Governors but does not reassign this right. Therefore, the ECB understands that Hungary’s President remains entitled to dismiss the Deputy Governors on the basis of the Law on the Magyar Nemzeti Bank.

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

text: Done at Frankfurt am Main, 12 April 2011.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: OJ L 189, 3.7.1998, p. 42. 2 The LCF, established by Law 1608/1919, is a legal entity governed by public law and supervised by the Ministry of Finance. 3 See Article 2 of the draft law, which also sets out terms and conditions for loans to local authorities and enables the LCF to enter into agreements with credit institutions in order for them to take delivery of consignment deposits to be further rendered to the LCF.

text: See Article 1 of the draft law. 5 See explanatory note to the draft law. 6 See Article 3 of the draft law. The terms, the conditions and the procedure for the spin-off, as well as any other related detail, will be set out by decision of the Minister for Finance. 7 See Article 4 of the draft law. 8 Law on the enhancement of liquidity of the economy in response to the impact of the international financial crisis, FEK A 250/9.12.2008. 9 Third Review - winter 2011. Available on the European Commission’s website at: http://ec.europa.eu. 10 See Section 1 (iii) thereof, under ‘Financial Sector Regulation and Supervision’, which provides for the unbundling of the LCF’s core consignment activity from deposit-taking and loan distribution as part of the actions to be completed by the end of Q1 2011. 11 See paragraph 15 thereof, which states that ‘Initiatives underway should help preserve sufficient system liquidity. As a temporary measure, the government will put forward for legislative adoption a new tranche of government guarantees for uncovered bank bonds (proposed as a structural benchmark for end-March). The tranche will be in an amount of €30 billion, and the guarantee scheme will be subject to approval by decision of the European Commission. This additional

text: liquidity should provide an adequate buffer to address liquidity issue potentially arising from continued market volatility. The tranche will be made available on a bank-by-bank basis, conditioned on the adoption and implementation of medium term funding plans by banks.’ 12 Under Article 3 of the draft law, by virtue of a resolution of the LCF’s Board of Directors, the latter’s commercial branch may be separated and transferred to an existing or newly incorporated company.

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 13 April 2011 on the legal framework for the Loan and Consignment Fund and on amendments to the enhancement scheme for the Greek economy’s liquidity following the international financial crisis (CON/2011/34)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 13 April 2011 on the legal framework for the Loan and Consignment Fund and on amendments to the enhancement scheme for the Greek economy’s liquidity following the international financial crisis (

text: ) Introduction and legal basis

type: rubrik

text: On 23 March 2011, the European Central Bank (ECB) received a request from the Greek Ministry of Finance for an opinion on two sets of draft legislative provisions in relation to: (a) the Loan and Consignment Fund (LCF) (hereinafter the ‘first set of draft provisions’); and (b) the enhancement of the economy’s liquidity following the international financial crisis (hereinafter the ‘second set of draft provisions’). Both sets of draft provisions are included in the draft law entitled ‘Reform of the operational framework of the Loan and Consignment Fund, the Public Debt Management Agency, public enterprises and bodies, establishment of a secretariat general for public property and other provisions’ (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: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft provisions relate to the Bank of Greece (BoG) 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.

type: stycke

text: 1. Purpose of the draft provisions

text: 1.1 The first set of draft provisions reform the LCF’s operational framework . In line with Union law, they introduce a prohibition on cross-subsidisation within the LCF, in particular subsidisation of the services provided by the LCF in the open market, e.g. the granting of loans to private individuals, deposit-taking etc., by activities related to the LCF’s reserved operations established under public law, such as consignment deposits, compulsory deposits etc. . This is to be achieved

text: by: (a) an operational division of the LCF’s reserved sector from its commercial activities sector; and (b) the establishment of a separate branch for the latter, subject to separate accounting monitoring in line with the International Financial Reporting Standards . Furthermore, while the LCF’s single legal personality is preserved, the first set of draft provisions provides for the possibility, where necessary , for the commercial activities branch to be spun-off into an existing LCF subsidiary or a new LCF subsidiary to be established for that purpose . Finally, the Minister for Finance is authorised to adopt the LCF’s operational rules to ensure the LCF’s functioning and activities comply with Union law . 1.2 The purpose of the second set of draft provisions, contained in Article 19 of the draft law, is to provide further financial support in the context of the guarantee scheme adopted under Article 2 of Law 3723/2008 through an additional amount of EUR 30 billion. This is subject to the requirement set out in Article 19(2) of the draft law, which provides that each credit institution will prepare and implement a plan for medium-term financing needs to be approved by the BoG and the ECB, in cooperation with the European Commission and the International Monetary Fund (IMF). Furthermore, Article 19(3) of the draft law extends the competences of the representative of the Greek State originally provided for in Law 3723/2008, with a view to ensuring the efficient monitoring of the implementation of the measures for enhancing the relevant credit institutions’ liquidity. Finally, Article 19(4) of the draft law extends to the fiscal year 2011 the restriction imposed by Article 1(3) of Law 3723/2008 on dividend distribution by credit institutions participating in the liquidity enhancement scheme. Distribution of dividends in this case is restricted to shares only.

text: 2. Specific observations

text: The ECB understands that both sets of draft provisions aim to reflect the contents of the updated Economic Adjustment Programme for Greece , in particular the Memorandum of Understanding on Specific Economic Policy Conditionality and the Memorandum of Economic and Financial Policies (MEFP) ). Under the Programme mentioned above, these sets of provisions are subject to a specific timeframe for their implementation.

text: 2.1 In relation to the first set of draft provisions, the ECB welcomes in principle the operational segregation of the LCF’s reserved sector from its commercial activities sector. Such segregation of the core consignment activity from deposit-taking and loan distribution activities should address the lack of a level playing field that could arise from cross-subsidisation of the LCF’s commercial activities by resources from its reserved sector. In this respect, however, the ECB notes that the first set of draft provisions only provides for the spin-off of the commercial activities branch as an option . The ECB takes the view that a segregation could best serve its purpose if followed, in the short-term, by an actual spin-off, as a second step completing the procedure. This would, inter alia, enhance legal certainty in terms of the structure, governance and operation of the entity that is to take up the commercial branch of the LCF’s activities, including its compliance with the regulatory and supervisory requirements applicable under national and Union legislation to credit institutions. 2.2 In relation to the second set of draft provisions, Article 19(2) of the draft law provides that access by domestic credit institutions to the liquidity enhancement provided for in draft

text: Article 19(1)

text: is to be conditional on the submission, by each domestic credit institution, of a medium-term funding plan, for the approval of the BoG and the ECB, in cooperation with the European Commission and the IMF.

text: Article 19(2)

text: might be seen to establish an automatic outcome between the submission of funding plans and the transformation into Eurosystem collateral of the additional guarantees provided for in

text: Article 19(1)

text: ; however, this does not reflect the need for the Eurosystem to assess, on a case-by-case basis, the actual liquidity needs of individual banks. In fact, regardless of the funding plans submitted for approval, such assessment is needed to ascertain the extent to which the submission of new collateral in the form of State-guaranteed uncovered bank bonds is warranted. 2.3 Finally, the ECB considers that the wording of Article 19(2) of the draft law, in particular the reference to ‘plan for medium-term financial needs’, should be further clarified. The February 2011 update of the MEFP introduced the concept of ‘medium-term funding plans’. These plans will aim at reducing excesses in banks’ recourse to Eurosystem borrowing and will in particular show how banks will adjust their balance sheets to achieve that goal. The current wording in the draft law could be misleading as to the real nature of the envisaged plans.

text: This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 13 April 2011. [signed]

text: The President of the ECB

text: Jean-Claude TRICHET

type: vagledning

utgivare: ecb


text: OJ L 189, 3.7.1998, p. 42.

text: According to BNR Order No 34/2008 on the systems falling under Law No 253/2004 on settlement finality in payment and securities settlement systems (Monitorul Oficial al României Part One, No 61, 25.1.2008), ReGIS is a national realtime gross settlement payment system in Romanian leu owned and operated by BNR.

text: According to BNR Order No 34/2008 and the system rules, SaFIR is a depository and settlement system for financial instruments owned and operated by BNR.

text: Committee on Payment and Settlement Systems. Core Principles for Systemically Important Payment Systems, 2001. Available on the Bank for International Settlement’s website at www.bis.org.

text: Available on the ECB’s website at www.ecb.europa.eu.

title: Opinion of the European Central Bank of 13 April 2011 on the settlement risk management procedure for net settlement systems (CON/2011/35)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 13 April 2011 on the settlement risk management procedure for net settlement systems (

text: ) Introduction and legal basis

text: On 21 February 2011, the European Central Bank (ECB) received a request from Banca Naţională a României (BNR) for an opinion on a draft regulation on the procedure for settlement risk management for net settlement systems and the facilities granted by BNR for smooth settlement in ReGIS (hereinafter the ‘draft regulation’). 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 fifth indent of

text: Article 2(1) of 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 , as the draft regulation relates to payment and settlement systems. 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 regulation

text: 1.1 According to

text: Article 1

text: , the draft regulation has two main objectives. First, it establishes a procedure for settlement risk management applicable to net settlement systems which settle in ReGIS , unless they are governed by their own procedures for the management of settlement risk in ReGIS. Second, it provides facilities granted by BNR to the credit institutions participating in ReGIS for smooth settlement. 1.2 The ECB understands that the draft regulation is intended to modify the national regulatory framework for the settlement risk management procedure in ReGIS in connection with the closure of the paper-based clearing house operated by BNR. 1.3 The draft regulation lays down various provisions under which eligible credit institutions may benefit from the facilities granted by BNR. These facilities include: (i) the intraday liquidity facility

text: provided via repurchase transactions with settlement on the same day, against assets eligible for collateralisation; (ii) the Lombard credit lending facility, into which the intraday facility can be converted at the request of the credit institution in the event of a failure to repurchase the assets used for the purposes of that facility; and (iii) the lending facility for the settlement of net positions calculated in the card payment schemes. To be eligible to access the intraday liquidity facility, or the lending facility for the settlement of net positions, the respective credit institutions must be participants in ReGIS and SaFIR , must not be suspended from these systems, and should have concluded with BNR the framework contract for intraday repo transactions using the draft template annexed to the draft regulation.

text: 2. General observations

text: 2.1 The ECB notes the update of the national regulatory framework by the draft regulation. The safety and efficiency of payment systems are key to maintaining and promoting financial stability. Therefore, the ECB attaches great importance to reinforcing a consistent legal framework for smooth settlement within ReGIS. 2.2 The ECB notes that the legislation in this area needs to take into account the internationally accepted standards that govern the design and operation of payment systems, notably the ‘Core Principles for Systemically Important Payment Systems’ and the ‘Business Continuity Oversight Expectations for Systemically Important Payment Systems’ , while also making it possible for entities providing settlement services to include additional provisions in their settlement risk management procedures and to introduce further or stricter measures to ensure the safety of their operations. Moreover, the ECB assumes that the operators of net settlement systems are expected to comply with international standards.

text: 3. Specific observations

text: 3.1 The draft regulation does not define ‘card payment schemes’, a term used extensively throughout the draft regulation. To increase the transparency of the draft regulation, as well as to enable the relevant participants to have a clear understanding of settlement risks for card payment systems, it would be appropriate to explicitly define ‘card payment scheme’ or to refer to its definition in national law. 3.2 Furthermore, to become eligible for credit to manage the settlement risk, the clearing participant in a card payment scheme should enter into the framework contract with BNR in accordance with the

text: templates for framework contracts in Annexes 2a and 2b of the draft regulation. Against this background, the ECB notes that the draft regulation appears to restrict the eligibility of credit institutions for settling net positions calculated in the card payment schemes to clearing participants in card payment systems operated by VISA Europe (Annex 2a) or by MasterCard International (Annex 2b). This limitation of the draft regulation may disadvantage disproportionately and without objective justification credit institutions administered by other card payment schemes, whether existing competitors or new market entrants.

text: Done at Frankfurt am Main, 13 April 2011.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: FEK 128 Α/3.8.2010.

text: Law on the new social security system and related provisions, FEK 115A/15.7.2010.

text: According to the first sentence of Article 64(1) of Law 3863/2010, as of 1 January 2011 the BoG will undertake and arrange social insurance for its staff in the main and supplementary pension sectors; Article 64 of Law 3863/2010 reestablished the pensions regime which was applicable to the BoG staff prior to the adoption of Law 3655/2008 (FEK 58 Α/3.4.2008).

text: See paragraph 3 of

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

text: Third Review - winter 2011. See in particular the updated Memorandum of Understanding on Specific Economic Policy Conditionality and the Memorandum of Economic and Financial Policies, available on the European Commission’s website at: http://ec.europa.eu.

text: The Government Commissioner will have the right to veto decisions of the Board purely on grounds of legality. 11 See Convergence Report 2010, p. 23.

title: Opinion of the European Central Bank of 14 April 2011 on amendments to the Statute of the Bank of Greece (CON/2011/36)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 14 April 2011 on amendments to the Statute of the Bank of Greece (

text: ) Introduction and legal basis

text: On 16 March 2011 the European Central Bank (ECB) received a request from the Bank of Greece (BoG) for an opinion on draft legislative provisions introducing amendments to the Statute of the Bank of Greece (hereinafter the ‘draft provisions’). 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: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft provisions relate to the BoG 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 provisions

text: The draft provisions serve the following main objectives. 1.1 In accordance with Law 3867/2010 on private insurance supervision, the establishment of a private life insurance fund and other provisions , the BoG was entrusted with the task of supervising private insurance companies. As a result, the Statue of the BoG is amended to add to the main tasks of the BoG the supervision of insurance companies. In addition, under the draft provisions, the categories of entities over which the BoG exercises prudential supervision are extended to expressly include insurance companies and payment institutions. The BoG is required to submit an annual report to the Greek Parliament on the fulfilment of its supervisory tasks. 1.2 The draft provisions amend certain conditions relating to shareholder rights. Τhe record date, i.e. the date establishing a shareholder’s right to participate in the General Meeting and to vote on the basis of the number of shares they hold, is set at the beginning of the fifth day before the general

text: meeting. The deadline for submitting the documents for the appointment of a proxy is reduced to three days prior to the general meeting. Furthermore, shareholder rights may not only be exercised by Greek citizens, but also by citizens of other Member States and European Economic Area countries. 1.3 The draft provisions extend the BoG’s collective bodies to include the Social Security Board (hereinafter the ‘Board’). The Board was originally established pursuant to Article 64 of Law 3863/2010 in the context of the reassignment to the BoG of the task to provide pensions to its staff . The Board’s appointment, composition and tasks under the draft provisions reflect, to some extent,

text: Article 64(2)

text: and (3) of Law 3863/201. Pursuant to the draft provisions, the Board will be composed of the BoG’s Governor, an employee of the General Secretariat of Social Security, an employee of the Ministry of Finance, a high-ranking BoG official, two representatives of the BoG’s insured staff members and a representative of the BoG’s pensioners. Furthermore, a Government Commissioner will participate in the Board’s meetings, but will not have the right to vote. The Board will be responsible for defining the BoG’s general policy guidelines concerning its provision of pensions to its staff. The Board will also decide on general issues relating to the application of relevant legislation by the BoG’s competent bodies and officials. Moreover, the Board will decide on appeals against negative decisions of the BoG relating to pensions, and approve the exercise of all relevant legal remedies and actions available to the BoG before all courts of law. 1.4 Where a legal entity supervised by the BoG enters into liquidation following withdrawal of its authorisation, the draft provisions allow the BoG to pay the liquidator’s remuneration and the liquidation costs. In turn, the BoG will acquire a claim against the legal entity in liquidation for the reimbursement of any amounts paid to the liquidator with priority over any other claim in respect of the proceeds of liquidation.

text: 2. General observations

text: The ECB understands that the general aim of the draft provisions is to amend the Statute of the BoG to: (a) take into account recent national legislative developments that affect the BoG’s tasks; (b) adequately reflect the BoG’s role in ensuring the efficient conduct of the liquidation process of the entities it supervises; (c) ensure compliance with Union law in force. In this respect, the ECB generally welcomes the draft provisions as a means to address important aspects related to the operation of the BoG and the performance of its tasks. The proposed amendments to the Statute of the BoG would also enhance the consistency of the relevant legal framework, thereby ensuring legal certainty.

text: 3. Specific observations

text: 3.1 Supervisory role 3.1.1 The ECB notes that the draft provisions on the extension of the BoG’s supervisory tasks are limited to the insertion in the BoG’s Statute of a reference to the new categories of entities subject to the BoG’s supervision. 3.1.2 As the transfer of insurance sector supervisory competences to the BoG was addressed in Opinion

text: , the ECB would like to reiterate that the BoG’s new functions should be performed in line with the relevant specific observations expressed in that Opinion. In particular, the ECB notes that the expanded supervisory tasks of the BoG will require increased resources, as also acknowledged in the updated Economic Adjustment Programme for Greece . 3.1.3 As regards the supervision of financial institutions other than credit institutions by the BoG, the ECB welcomes the reference to payment institutions. Moreover, the ECB notes that Directive

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: , which is to be implemented by the Member States by 30 April 2011, amends the definition of credit institutions as provided for in

text: Article 4 of Directive 2006/48/EC

text: of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) . As a result, electronic money institutions will appear as a separate category of financial institutions. Thus, the legal framework relating to the supervision of such institutions by the national central banks will have to be readjusted accordingly. 3.2 Shareholder rights The proposed amendments relating to shareholder rights are in line with Directive

text: of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies . Nevertheless, the exact point in time before the general meeting by which shareholders should register in the BoG’s books in order to be able to exercise their rights should be clarified, as the formulation proposed for the amendment to Article 13 of the Statute of the BoG, referring to ‘the beginning of the fifth day’ prior to the general meeting, is not sufficiently clear.

text: 3.3 Central bank independence 3.3.1 As regards proposed

text: Article 37

text: A, the envisaged appointment of the Board by a decision of a government authority and its composition, combined with its tasks, raise concerns with regard to central bank independence. 3.3.2 In particular, proposed

text: Article 37

text: A provides for the appointment of the Board by means of a decision of the Ministry of Labour and Social Security for a term of office of three years. Moreover, regarding the Board’s composition, two of its members will be appointed by the Minister of Finance and the Minister of Labour and Social Security, respectively. Furthermore, a Government Commissioner will be invited, under penalty of nullity of the meeting, to participate in all the meetings of the Board, but will not have the right to vote . The draft provisions on both the appointing authority and the composition of the Board imply that the Board will perform its tasks without any involvement whatsoever of the BoG’s General Council, which according to the Statute of the BoG is, in that respect, the competent collective decision-making body. 3.3.3 As regards its tasks, the ECB understands that according to the draft provisions, the Board does not have an advisory role with respect to the BoG, but is empowered, inter alia, to make decisions on the BoG’s policy on issues relating to the provision of pensions to its staff and on all legal remedies and actions available to the BoG in pension matters. In addition, according to Article 64(1) of Law 3863/2010, the Board may amend statutory provisions of the BoG relating to the provision of pensions to its staff by a decision approved by the BoG’s General Council. 3.3.4 Taking into account the above, the tasks entrusted to the Board under proposed

text: Article 37

text: A, combined with its appointment and composition as envisaged therein, raise a compatibility issue with Article 38 of the Statute of the BoG according to which the BoG’s staff will receive their pensions based on terms laid down by the BoG’s General Council (without prejudice to the applicable general legislation). Furthermore, the scheme introduced by the draft provisions could result in the Government influencing the autonomous formulation of the BoG’s policies on pension matters and ultimately on the BoG’s finances. The BoG’s autonomy in relation to staff pensions, which is an aspect of the financial independence of a central bank , would, therefore, be potentially compromised. 3.3.5 These concerns should be adequately taken into account in the proposed appointment, composition and delimitation of the tasks of the Board, which to some extent attempt to accommodate the provisions of Article 64 of Law 3863/2010. To this end, the Board could be appointed by a decision of the BoG’s General Council and the participation of members appointed by the government could be limited to the Government Commissioner as provided for in proposed

text: Article 37

text: A. Alternatively, the Board could have only advisory functions to the BoG’s General Council on relevant matters. Such solutions would also ensure the operation of the Board as a

text: specialised and flexible body and would be in line with the structure of the BoG and the requirements of its Statute, and in particular its independence. Finally, the ECB considers that the term of office of the Board members could be further specified in the draft provisions. 3.4 Financial aspect of the liquidation process and the monetary financing prohibition It is important to safeguard compliance with the prohibition of monetary financing pursuant to Article 123 of the Treaty supplemented by the

text: Council Regulation (EC) No 3603/93 of 13 December 1993

text: specifying definitions for the application of the prohibitions referred to in Articles

text: and

text: b(1) of the Treaty . This is designed to prevent central bank financing of the public sector. The proposed eighth amendment to the BoG Statute aims to ensure the payment of the liquidator (remuneration and liquidation costs) in case of liquidation of an entity supervised by the BoG after the BoG withdraws its authorisation. The ECB understands that the BoG would have the right to recover any payment it made to the liquidator, on the basis of a priority claim against the entity in liquidation. In the specific case of the BoG and in its competence as the supervisor of these entities, the whole liquidation process is already controlled by the BoG, i.e. opening of the liquidation process, appointment of the liquidator, control of the liquidator’s activities. Accordingly, the BoG would not be financing a public sector obligation and therefore, the draft provisions do not breach the monetary financing prohibition.

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

text: Done at Frankfurt am Main, 14 April 2011.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: OJ L 189, 3.7.1998, p. 42.

text: See the draft law’s explanatory memorandum, p. 8.

text: See the draft law’s explanatory memorandum, p. 11.

text: ECB’s Convergence Report May 2010, p. 22.

text: See the draft law's explanatory memorandum.

title: Opinion of the European Central Bank of 18 April 2011 on strengthening the governance of De Nederlandsche Bank and the Authority for the Financial Markets (CON/2011/37)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 18 April 2011 on strengthening the governance of De Nederlandsche Bank and the Authority for the Financial Markets (

text: ) Introduction and legal basis

text: On 28 February 2011, the European Central Bank (ECB) received a request from the Dutch Minister for Finance for an opinion on the draft law on strengthening the governance of De Nederlandsche Bank and the Authority for the Financial Markets (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 of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to De Nederlandsche Bank (DNB). 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 will amend the 1998 Law on the Bank and the Law on financial supervision with a view to strengthening the governance of the financial markets supervisory authorities, i.e. DNB and the Authority for the Financial Markets (hereinafter collectively referred to as the ‘supervisory authorities’). The main issues addressed by the draft law are: (a) the expansion of the tasks of the supervisory boards of the supervisory authorities; (b) the limitation on the number of reappointments of the Governing Board members of the supervisory authorities; (c) the introduction of general profiles, job profiles and fit and proper tests. The draft law aims to enhance DNB’s governance by further improving internal ‘checks and balances’ to ensure sufficient safeguards within DNB to allow for conscientious decision-making. For this reason, the draft law amends the 1998 Law on the Bank and the Law on financial supervision, in a way which takes account of DNB’s independence, based on the requirements of the Treaty and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’).

text: 2. Amendments under the draft law

text: 2.1 The role of DNB’s Supervisory Board 2.1.1 The ECB considers the provisions relating to the enhanced role of DNB’s Supervisory Board to be positive and in line with governance-related developments in general. The provisions ensure that the relevant requirements follow current governance standards. 2.1.2 One of the Supervisory Board’s new tasks is to draw up Governing Board profiles. There are two kinds of profiles. The first is a general profile or profile sketch to be drawn up under

text: Article 1

text: :27a (4) of the Law on financial supervision, which requires the Minister’s approval. This profile will rely, to the extent deemed appropriate, on the general fit and proper criteria used for financial entities. The Supervisory Board will further refine these criteria, but will not go into detail as regards specific functions within the Governing Board. The second profile is the job profile referred to in Article 12(3) of the draft law. This profile will be based on the general profile and specify the suitability requirements and nature of the activities to be carried out for a specific function within the Governing Board. In this regard, the draft law’s explanatory memorandum states that the job profile may set out the particular expertise, experience and skills needed for the relevant function . In drawing up such profiles, care should be taken to ensure that the job profiles establish objective and clearly defined criteria related to the performance of duties in order to guarantee a level playing field for all qualified candidates. 2.1.3 It is also important that any profiles to be drawn up will only apply to future Governing Board members, and not to current ones. 2.1.4 The ECB understands that in supervising DNB’s general affairs, the Supervisory Board will not interfere with policy implementation, i.e. decisions on individual cases. The ECB understands from the draft law’s explanatory memorandum that DNB’s monetary policy and payment transactions, in implementation of its central bank tasks regulated under Article 3 of the 1998 Law on the Bank, fall outside the scope of the Supervisory Board’s internal supervision. Consequently, such supervision will not interfere with the performance of Eurosystem-related tasks. Indeed, supervision should never interfere with the performance of any Eurosystem-related tasks provided for by the Treaty. 2.1.5 Furthermore, Article C of the draft law, which amends Article 13 of the 1998 Law on the Bank, requires the Supervisory Board to perform its internal supervision role with due regard to the provisions of the Treaty and the Statute of the ESCB. Hence, this provision covers the requirement for Eurosystem-related tasks to be performed independently. In this respect, the ECB also notes that the Supervisory Board is bound by the confidentiality clause of Article 20 of the 1998 Law on the Bank, so that confidentiality is guaranteed.

text: 2.2 DNB’s Governing Board 2.2.1 Article 12(4) of the 1998 Law on the Bank addresses the dismissal of DNB’s President and Executive Directors who are all members of DNB’s Governing Board. The ECB understands that job profiles are relevant for the appointments and potential re-appointments of board members. Article 12(4) of the draft law now provides for the grounds of dismissal of the President and the Executive Directors in accordance with Article 14.2 of the Statute of the ESCB. While the ECB reiterates its support for objective profiles, any changes to a profile on the basis of which a member of the Governing Board was appointed would not qualify as a legally valid justification for the dismissal of that Governing Board member insofar as she/he does not comply with the terms of an amended profile. Hence, the ECB welcomes the fact that this is expressly stated in the draft law’s explanatory memorandum. 2.2.2 Finally, the ECB notes that

text: Article 12(4)

text: provides for both the possibility of removal from office and suspension of DNB’s President and Executive Directors. In this respect, the wording of

text: Article 12(4)

text: is different to the wording of Article 14.2 of the Statute of the ESCB and equivalent provisions in the statutes of other national central banks. The ECB understands that the grounds for the suspension of DNB’s President and Executive Directors are the same as those for their removal, and these are in line with Article 14.2 of the Statute of the ESCB. Consequently, to avoid any misunderstanding, the ECB advises the consulting authority to use this opportunity to fully align the wording of

text: Article 12(4)

text: with that of Article 14.2 of the Statute of the ESCB. 2.2.3 The ECB understands that the allocation of tasks among one or more Governing Board members as proposed under

text: Article 12

text: a(1) of the draft law aims to make DNB more efficient. The ECB expects to be consulted with respect to the implementation of

text: Article 12

text: a(1) pursuant to DNB’s Articles of Association. It is important that the allocation of tasks among the members of the Governing Board must not result in a situation where decisions affecting the financial resources of the central bank necessary for the performance of Eurosystem-related tasks will be taken independently from the control of the Governing Board as a collective decision-making body.

text: 3. Amendments to the Law on financial supervision

text: 3.1 Sound governance of supervision It is important that the provisions set out in

text: Article 1

text: :25b of the proposed amendment to the Law on financial supervision are implemented while fully taking into account the internationally agreed principles of operational independence and sound governance of supervision. 3.2 Budget approval 3.2.1 Article II(E) of the draft law adds new paragraph 5 into

text: Article 1

text: :30 of the Law on financial supervision under which the Minister for Finance may withhold budget approval if the budget is contrary to law or public interest. The ECB understands that the budget within the framework of the

text: Law on financial supervision only concerns the supervisory tasks of the supervisory authorities . However, the concepts ‘contrary to law’ and ‘public interest’ are very broad and might indirectly also impact DNB’s financial independence as regards its Eurosystem-related tasks. To safeguard DNB’s financial independence, the law should provide a safeguard clause so that the power of the Minister for Finance to withhold the approval of the budget and to set further criteria for the exercise of such powers is without prejudice to the financial means necessary for carrying out DNB’s Eurosystem-related tasks . It is important that the provisions set out in

text: Article 1

text: :30(5) of the proposed amendment to the Law on financial supervision are implemented while fully taking into account the internationally agreed principles of operational independence and sound governance of supervision. 3.2.2 In addition, the draft law’s explanatory memorandum only refers to international principles which require that supervisors always have sufficient means to carry out their supervisory tasks. The ECB would like to see explicitly stated that in further elaborating the criteria referred to in the first sentence of

text: Article 1

text: :30(5), the Minister will, in particular, take into account the fact that DNB will always need to have sufficient means to carry out its tasks.

text: Done at Frankfurt am Main, 18 April 2011.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: OJ L 189, 3.7.1998, p. 42. 2 See draft amendments to Articles 22 and 23 of the Law on the OeNB.

text: See draft amendments to Article 33 of the Law on the OeNB. 4 See draft

text: Article 68

text: a of the Law on the OeNB.

text: See, for example, paragraph 3.2.1 of Opinion

text: . 6 See the ECB’s Convergence Reports 2008 and 2010 under the heading Central Bank Independence.

text: See paragraph 2.3.2 of Opinion

title: Opinion of the European Central Bank of 20 April 2011 on amendments to the governance structure of the Oesterreichische Nationalbank (CON/2011/38)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 20 April 2011 on amendments to the governance structure of the Oesterreichische Nationalbank (

text: ) Introduction and legal basis

text: On 15 March 2011, the European Central Bank (ECB) received a request from the Austrian Ministry of Finance for an opinion on a draft law amending the Law on the Oesterreichische Nationalbank and the Law on the Financial Market Supervisory Authority (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 of 29 June 1998

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , 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 Recently, the Austrian Federation became the OeNB’s sole shareholder. The draft law therefore amends the Law on the OeNB to reflect its actual ownership structure. The shareholder rights will be exercisable by the Federal Minister for Finance. 1.2 As a consequence of the changes to the shareholder structure, the draft law amends the composition and organisation of the OeNB’s General Council (hereinafter the ‘General Council’). The General Council is charged with the supervision of all business falling outside the remit of the European System of Central Banks. It will advise the OeNB’s Governing Board on the conduct of the OeNB’s business and in matters of monetary policy. The draft law reduces the number of members of the General Council from 14 to 10. In future, all members of the General Council shall be appointed by the Federal Government. At the present time, only the President, the Vice President and six other members of the General Council have been appointed. The remaining six members of the General Council are elected by the General Assembly. Under the draft law, the General Council is not required to include representatives from credit institutions, trade and industry, small businesses, agriculture or salaried employees and wage-earners. The requirement that members

text: should be persons well-known in a certain business sector, lawyers or economists remains unchanged. Furthermore, the draft law reduces from two to one the number of OeNB employee representatives participating in General Council meetings on personnel, social and welfare matters. 1.3 The grounds for dismissal of the members of the General Council remain unchanged. Under Article 23 of the Law of the OeNB, a member may only be removed from office by the Federal Government if he/she no longer fulfils the conditions for holding office or if he/she is guilty of serious misconduct. 1.4 The draft law will increase the terms of office of the members of the Governing Board from five to six years . The Governing Board is responsible for the overall operation and conduct of the OeNB’s business. 1.5 Furthermore, the draft law reduces from two to one the required number of external auditors and alternate auditors of the OeNB. The draft law also introduces the principle of external rotation of the external auditors. No auditors or firm of auditors, which have certified the audit of the OeNB’s annual accounts during the previous five financial years can be re-elected as an auditor or alternate auditor. These rotation rules do not apply following an audit break of at least two consecutive financial years. 1.6 The draft law enhances transparency as regards the OeNB’s direct and indirect shareholdings in undertakings. Under Article 68(4) of the Law on the OeNB, the annual report must include a separate disclosure of any such shareholding of the OeNB, in particular stating the proportion of capital and voting rights held as well as the nominal capital. Transparency of the OeNB will also be increased by introducing the obligation for the Governing Board to draw up a standard cost account and an investment plan before the start of each financial year which has to be approved by the General Council. After the end of each financial year, the Governing Board is also required to produce a comparative analysis of the budgeted figures and the actual costs and investments. The comparative analysis has to be communicated to the General Council, together with the auditor’s report . 1.7 The draft law adjusts the references in the Law of the OeNB to the Treaty where necessary. These adjustments are editorial rather than substantive changes. 1.8 The draft amendments to Articles 18 and 19 of the Law on the Financial Market Supervisory Authority increase the annual amount reimbursed by the Financial Market Supervisory Authority for on-site inspections and microeconomic analysis of banks carried out by the OeNB as part of its banking supervisory tasks from EUR 4 million to EUR 8 million.

text: 2. Specific Observations

text: 2.1 The draft law proposes changes to Article 33 of the Law on the OeNB. However, no changes are proposed to

text: Article 33(4)

text: , which contains the grounds for dismissal of the members of the Governing Board. Over the past few years, the analysis of the different aspects of central bank 5 6 independence has been further refined in the ECB’s opinions and Convergence Reports , inter alia, in relation to personal independence and the grounds for dismissal of Governors. Accordingly, the ECB advises the consulting authority to use this opportunity to fully align the wording of Article 33(4) of the Law on OeNB with that of Article 14.2 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). This should be done without setting out national criteria for dismissal, including references to the appointment conditions and conflict of interest rules. 2.2 The ECB welcomes the stability in the Governing Board of the OeNB that will result from increasing its members’ term of office from five to six years. 2.3 Article 27.1 of the Statute of the ESCB provides that, ‘The accounts of the ECB and national central banks shall be audited by independent external auditors recommended by the Governing Council and approved by the Council.’. The ECB has established ‘Good Practices for the selection and mandate of External Auditors according to Article 27.1 of the ESCB/ECB Statute’, which was approved by the ECB’s Governing Council on 23 October 2008. Although the Good Practices are not binding, the ECB expects that each Eurosystem central bank, when selecting an external auditor pursuant to

text: Article 27.1

text: , and when determining that auditor’s mandate thereafter, will apply the Good Practices and/or explain any divergence. Information on the application and/or any divergence from the Good Practices should be provided to the ECB when requesting a Governing Council recommendation for the appointment of a Eurosystem central bank’s external auditors to the EU Council. 2.4 Good Practice No 3 recommends that the Eurosystem central banks should establish a defined multi-year mandate for the appointment of external auditors or an audit firm. The draft law does not provide for a defined multi-year mandate. Under the draft law, an auditor and an alternate auditor are elected each year. The consulting authority may use this opportunity to change the one-year mandate in the draft law to a multi-year mandate. This will help to enhance overall effectiveness, efficiency and independence of the OeNB’s external auditors. The draft law would also benefit from stating explicitly that the auditors are ‘external’. 2.5 Further, pursuant to Good Practice No 3, the auditors or the key audit partner should be rotated from the external audit engagement at least every seven years. The draft amendments regarding the rotation of the external auditors and alternate auditor every five years comply with the Good Practices. However, the ECB draws attention to the currently on-going approval procedure contained within Article 27.1 of Statute of the ESCB for the upcoming external auditors of the OeNB. In order not to prejudice this procedure, the ECB suggests that the draft law should include

text: appropriate transitional provisions as regards the proposed reduction in the number of auditors or alternate auditors. 2.6 With reference to the view previously expressed by the ECB in respect of the OeNB bearing any costs for on-site inspections and microeconomic analysis of banks that exceed the cap mentioned in Articles 18 and 19 of the Law on the Financial Market Supervisory Authority, the ECB welcomes the increase of the cap for reimbursement of costs from EUR 4 million to EUR 8 million.

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

text: Done at Frankfurt am Main, 20 April 2011.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: OJ L 189, 3.7.1998, p. 42. 2 See the Memorandum of Understanding on specific economic policy conditionality of 3 December 2010, page 4, available on the Commission’s website at www.ec.europa.eu. 3 Opinion

text: . All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 4 Section 2(1) of the draft law.

text: Section 69(1) of the 2010 Act provides that it ceases to have effect on 31 December 2012 unless extended; Section 69(2) and (3) clarify, however, that any order or requirement made continues to have effect and that the provisions of the Act remain effective with respect to such orders and requirements. At the current time, ‘relevant institutions’ under the 2010 Act comprise: (i) all of the main Irish credit institutions, namely: Allied Irish Banks, p.l.c., Anglo Irish Bank Corporation Limited, Bank of Ireland, , EBS Building Society, Irish Nationwide Building Society and Irish Life and Permanent plc; (ii) any subsidiaries/holding companies of those institutions; and (iii) all credit unions (of which there are more than 400). If the draft law is enacted as currently drafted, credit unions will no longer be ‘relevant institutions’ under the 2010 Act (as Part 3 of Schedule 1 of the draft law will amend the definition of ‘relevant institution’ by deleting the reference therein to credit unions) and the 2010 Act will no longer apply to credit unions except to the extent that any orders or requirements have been made in regard to them under the 2010 Act. 6 It would be helpful if it was made clear that this exclusion does not stop the relevant institution from being authorised to carry on banking business.

text: See, e.g., Section 23(1) concerning transfer orders and Section 41(1) concerning special management orders. 8 Concluded on 1 June 2008. Available on the ECB’s website at www.ecb.europa.eu. 9 Paragraph 3.3 of Opinion

text: ; see also similar observations in paragraph 3.1.6 of Opinion

text: The draft law defines ‘subsidiary’ and ‘holding company’ with reference to section 155 of the Irish Companies Act 1963 and to the Irish European Communities (Companies: Group Accounts) Regulations 1992.

text: See in particular the DG Internal Market and Services Working Document, Part 4 G3, referred to in footnote 8; the ‘Report and Recommendations of the Cross-border Bank Resolution Group’, March 2010, available on the Bank for International Settlement’s website at www.bis.org; and the ‘Practice Guide on Cross-Border Insolvency Cooperation’ adopted by UNCITRAL on 1 July 2009, available on UNCITRAL’s website at www.uncitral.org. 12

text: Council Regulation (EC) No 3603/93 of 13 December 1993

text: specifying definitions for the application of the prohibitions in Article

text: and

text: b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1). 13 See http://ec.europa.eu/internal_market/consultations/docs/2011/crisis_management/consultation_paper_en.pdf.

title: Opinion of the European Central Bank of 26 April 2011 on recovery and resolution measures for credit institutions (CON/2011/39)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 26 April 2011 on recovery and resolution measures for credit institutions (

text: ) Introduction and legal basis

text: On 28 February 2011, the European Central Bank (ECB) received a request from the Irish Minister for Finance (hereinafter the ‘Minister’) for an opinion on the Central Bank and Credit Institutions (Resolution) Bill 2011 (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: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to the Central Bank of Ireland (hereinafter the ‘Central Bank’) and contains 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 The draft law was foreseen as one of the actions implementing the financial assistance programme agreed between the Minister, the European Commission, the ECB and the International Monetary Fund to restore confidence in the banking sector and achieve financial stability in the Irish economy , alongside the Credit Institutions (Stabilisation) Act 2010 on which the ECB issued its opinion on 17 December 2010 (the ‘2010 Act’). The draft law will apply to banks, building societies and credit unions licensed in Ireland (collectively referred to as ‘authorised credit institutions’) . However, the draft law will not apply to ‘relevant institutions’ to which the 2010 Act applies (which includes Irish licensed banks to which financial support has been given by the

text: Minister) until they cease to be relevant institutions for the purposes of the 2010 Act . The ECB notes that the draft law would, therefore, create a permanent crisis management and resolution regime for ‘authorised credit institutions’ only; the temporary regime created by the 2010 Act will expire on 31 December 2012, unless extended. Given the exclusion of ‘relevant institutions’ under the 2010 Act from being ‘authorised credit institutions’ under the draft law, an Irish credit institution will be subject to one stabilisation and resolution regime only, at any given time. 1.2 The draft law grants the Central Bank a set of resolution powers over the authorised credit institutions. It provides that, amongst other things, the Central Bank: (i) may, if specified ‘intervention conditions’ are satisfied, propose special management orders to appoint a special manager to an authorised credit institution or propose transfer orders relating to all or any part of an authorised credit institution’s assets and/or liabilities; (ii) shall administer a fund to be applied to the resolution of financial instability in, or an imminent serious threat to the financial stability of, authorised credit institutions; (iii) may establish a bridge bank which could on a temporary basis hold the assets and liabilities of an authorised credit institution and carry on a banking business; (iv) may petition for the winding up of an authorised credit institution under a new liquidation regime for such institutions, and may nominate two members to the liquidation committee; (v) may direct an authorised credit institution to prepare and, when necessary or desirable, implement, a ‘recovery plan’, and may itself prepare a ‘resolution plan’ in respect of any such institution. The draft law also foresees that the Minister: (i) has certain regulatory powers in relation to the abovementioned fund, bridge banks and the transfer of assets and liabilities; (ii) is to be consulted before certain decisions in relation to an authorised credit institution are taken; and (iii) has the right to nominate one member to the liquidation committee.

text: 2. General observations

text: 2.1 In line with its previous opinions, the ECB emphasises that, when adopting resolution measures for financial institutions, Member States should act in a coordinated manner in order to avoid significant differences in national implementation having a counterproductive effect, which may involve distortions in global banking markets. Against this background, any national measure should ensure a sufficiently level playing field within the euro area, which is of key importance to maintaining the integrity of the euro area banking system.

text: 2.2 The ECB welcomes the wider powers under the draft law that will be available to the Central Bank, to manage and resolve financial institutions which are financially distressed and whose demise would threaten the stability of the financial system. They will include, for instance, the appointment of special managers with the intent of preserving or restoring a credit institution’s financial position. As in the case of the 2010 Act, the resolution powers foreseen under the draft law, which are exercised by ex parte application to a court without a full hearing on the merits , have the potential to raise legal issues with respect to the exercise of the property rights of institutions’ shareholders and creditors. Thus, it is important for any regime to properly balance these fundamental rights with the general interest in the financial system’s stability. In this regard, the ECB would welcome if the draft law would include some elaboration of the rights of transferors, creditors and other third parties as regards compensation and certain other rights and remedies, if any, in respect of the resolution orders. 2.3 Measures that are intended to safeguard financial stability should involve cooperation with the relevant Member State authorities, in line with Union legislation and the arrangements in place, such as the Memorandum of Understanding on cooperation between the financial supervisory authorities, central banks and finance ministries of the European Union on cross-border financial stability .

text: 3. Specific observations

text: Central Bank independence

text: 3.1 The draft law specifies in Section 6 that nothing in its provisions prevents the performance by the Governor or the Central Bank of their functions in relation to any credit institution authorised or regulated in the State, or affects any obligation arising under the Treaties governing the European Union or the European Communities or the ESCB Statute. The ECB notes that Section 6 does not expressly refer to the Treaty principle of central bank independence nor state that it prevails over any incompatible draft law provision. However, the ECB understands that it confirms the obligations arising under the Treaties, including the protection of central bank independence. 3.2 In its opinion on the 2010 Act, the ECB recommended that any ‘relationship framework’ prepared under that measure should recognise the Central Bank’s institutional and financial independence and the Governor’s personal independence . The ECB notes that Section 89 of the draft law expressly limits the extent of any intervention by the Minister in the performance of the Central Bank’s functions in the context of any relationship framework which may be prepared under the draft law. In this respect, an explicit reference should be made to the principle of central bank independence.

text: 3.3 The ECB notes that Section 82(1) of the draft law states that the Minister may in certain circumstances make orders mitigating any unfairness or undue hardship caused by the operation of Section 81 of the Act which impacts on the rights of counterparties dealing with authorised credit institutions under relevant agreements. The ECB recommends that Section 82 be amended to require the Minister to consult with the Central Bank prior to making any such order.

text: Extra-territorial effect

text: 3.4 As set out above, the draft law will apply to banks, building societies and credit unions licensed in Ireland (‘authorised credit institutions’). However, the ECB notes that the draft law provides that a transfer order and a special management order may be made in relation to a ‘subsidiary’ or ‘holding company’ of an authorised credit institution, as well as in relation to the authorised credit institution itself (Sections 20 and 38 of the draft law). The ECB understands that the definitions of ‘subsidiary’ and ‘holding company’ under the draft law may include foreign corporations . The ECB assumes therefore that the Irish legislator intends the resolution measures contained in the draft law to also apply to foreign incorporated holding companies and subsidiaries of authorised credit institutions. The ECB notes that these measures may only be enforceable against such foreign legal entities to the extent permitted under the foreign law applicable to them.

text: Bank levy

text: 3.5 Section 12 of the draft law provides that authorised credit institutions shall contribute to the Credit Institutions Resolution Fund (the 'Fund') in accordance with regulations. While the ECB notes that such regulations are to be made by the Minister and that these regulations are to provide for the rate of contribution, or method of calculation of such rate (Section 14(1) of the draft law), the method of calculation is not sufficiently clear from the draft law. In particular, it is not clear to what extent foreign assets and liabilities of authorised credit institutions, or indeed foreign assets and liabilities of foreign subsidiaries of authorised credit institutions, would be included in the calculation. The ECB would welcome more explicit clarification in the draft law as to which assets and liabilities of authorised credit institutions come within the scope of the Fund contribution calculations, and that assets and liabilities of foreign subsidiaries of such authorised credit institutions are excluded from the calculation of the contribution.

text: Establishment of ‘bridge banks’

text: 3.6 Under Section 16 of the draft law, the Central Bank may form private companies as bridge banks to which the assets and liabilities of an authorised credit institution may be transferred on a temporary basis pursuant to a transfer order. Sections 9(2) and 16(4) provide that any such bridge banks shall be capitalised from the fund with the consent of the Minister. The ECB welcomes the introduction in the draft law of the option of addressing a possible crisis situation through the transfer of a distressed institution’s assets and liabilities to a bridge bank. The availability of a bridge bank is

text: recognised as part of an enhanced convergence of national legal schemes for crisis management and resolution which are developing at both international and European level . The ECB welcomes in particular that Section 16(4) of the draft law prohibits the Central Bank from providing capital to any bridge bank from its own resources. In this respect, the ECB would welcome an explicit mention in the draft law that the Central Bank as a shareholder in a bridge bank will in no event assume or finance any obligation of a bridge bank, and that this role will remain, under any circumstances, consistent with the prohibition of monetary financing under Article 123 of the Treaty, as supplemented by

text: Council Regulation (EC) No 3603/93

text: , which prohibits, inter alia, any financing by a central bank of the obligations of the public sector vis-à-vis third parties, and further that Sections 9(2)(c), 16 and 18 shall be without prejudice to the independence of the Central Bank, in particular its financial and institutional independence.

text: Recovery planning

text: 3.7 Section 73 of the draft law entitles the Central Bank to direct an authorised credit institution to prepare and submit to the Central Bank, for review, a recovery plan to facilitate, without recourse to State aid, the continuation or securing of the business of such an authorised credit institution. The Central Bank may direct the relevant authorised credit institution to make such changes to its recovery plan as the Central Bank considers appropriate. The ECB notes that this provision is broadly in line with the recommendations of the Commission’s DG Internal Market and Services latest working document on a possible EU framework for bank recovery and resolution . The ECB would welcome the incorporation of the detailed provisions of the working document into any code of practice issued pursuant to Section 73(3) of the draft law.

text: Valuation mechanism

text: 3.8 The ECB notes that Sections 22(4) and 31 do not set out any specific approach to valuation of the assets transferred. The reliance on a competitive process (Section 22(4)), and the appointment of an independent valuer only if the valuation is disputed (Section 31(1)), do not seem sufficient to allow for a transparent and legally certain valuation. Although a detailed methodology may not be necessary at the level of the law, it should minimally set out the principles that will be used to determine the value of the assets. This is a precondition for a fair treatment of creditors and other third parties, as their right of compensation may only be duly assessed against this information. It is important that market participants are informed in advance what rights they will have to claim compensation and on what valuation basis.

text: Collateral and netting

text: 3.9 The ECB notes that Section 81 of the draft law would have the effect of ‘switching off’ the rights of counterparties to the authorised credit institutions under ‘relevant agreements’ in certain events. Those events include the adoption of the draft law and any order made under powers thereunder. Section 81(4) sets out a list of consequences that are to be ‘switched off’. Those consequences include ‘any event of default or breach of any right arising’ under a relevant agreement. At the same time Section 85 states that nothing in the draft law shall affect the operation of, inter alia, the Irish regulations implementing the Settlement Finality Directive and the Financial Collateral Arrangements Directive (FCAD), in relation to any agreement to which the authorised credit institution or its subsidiary is a party. Moreover, the draft law also amends the 2004 and 2010 Regulations implementing the FCAD in Ireland. For instance, Schedule 2, Part 2 of the draft law provides for an amendment to the effect that ‘for the avoidance of doubt, nothing in Regulation 6, 7, 10 and 11 or 12 [of the 2010 Regulations] shall affect the operation … of Section 81 of the draft law.’ 3.10 The ECB understands that the intention behind Section 81 is to ensure that a measure adopted ’16 under the draft law is not deemed to be an ‘enforcement event for the purposes of the FCAD as implemented in Ireland, but that it does not aim to interfere with the close-out netting rights per se of the counterparty under a relevant agreement. Also, Section 85 expressly leaves undisturbed Regulation 30 of the 2011 Regulations , which states that the netting agreement is governed solely by the law of the contract that governs the agreement. Moreover, by denying to counterparties the consequences which normally would occur under their agreement in the event of the adoption of a measure under the draft law, it could be argued that these provisions prevent the close-out netting provisions from ‘[taking] effect in accordance with their terms’ as required by the FCAD. The ECB recommends that the interaction of these provisions with the FCAD is clarified, if necessary in an explanatory note to the draft law.

text: This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 26 April 2011. [signed]

text: The President of the ECB

text: Jean-Claude TRICHET 14 Directive

text: of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and security settlement systems (OJ L 166, 11.6.1998, p. 45); and Directive

text: of the European Parliament and the Council of 6 June 2002 on financial collateral arrangements (OJ L 168, 27.6.2002, p. 43). 15 Schedule 2, Part 2 of the draft law amends the European Communities (Financial Collateral Arrangements) Regulations 2010. 16 As defined in

text: Article 2(1)

text: (l) of the FCAD. 17 European Communities (Reorganisation and Winding-Up of Credit Institutions) Regulations 2011.


text: Zakon o Banki Slovenije, the official consolidated version published in Uradni list RS No 72/06.

text: 4 claims . In line with the requirement of Directive

text: , the draft law amends the current rules pursuant to which financial collateral over registered financial assets is created by means of an entry on the register. However, in future the register is only planned to serve as a record of financial collateral established over registered financial assets. 1.3 In addition, the draft law broadens the tasks of Banka Slovenije related to the administration of the register of financial assets. Banka Slovenije should: (a) provide interested persons, upon request, with information as to whether financial collateral in favour of the relevant central banks has been established over assets that can be used as collateral for liabilities to the said entities; and (b) receive notifications of the establishment of collateral over such assets from third party collateral takers.

title: Opinion of the European Central Bank of 27 April 2011 on amendments to the rules on the register of financial assets (CON/2011/40)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 27 April 2011 on amendments to the rules on the register of financial assets (

text: ) Introduction and legal basis

text: On 4 April 2011, the European Central Bank (ECB) received a request from the Slovenian Ministry of Finance for an opinion on a draft law amending the Law on Banka Slovenije (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 fifth indents of

text: Article 2(1) of 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 , as the draft law contains provisions referring to Banka Slovenije and payment and settlement systems. 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 amends Chapter 4.2.a of the Law on Banka Slovenije which governs the register of financial assets. Banka Slovenije maintains the register of credit claims and other financial assets which can be used as collateral for liabilities to Banka Slovenije, the ECB and the national central banks of the European System of Central Banks (hereinafter collectively referred to as the ‘relevant central banks’). The register contains details on financial assets and financial collateral rights on these assets of the relevant central banks. The information which the register contains as to (a) the unique identifier allocated to particular financial assets; and (b) whether financial collateral is registered, is publicly available. Entering financial assets onto the register gives notice of any registered financial collateral rights over such assets. If a creditor has acquired financial collateral rights in good faith as regards third-party rights over financial assets and these rights have been entered on the register, such creditor will have priority ranking in any repayment from the collateral proceeds, irrespective of any prior third-party rights in existence. 1.2 The main objective of the draft law is to align the abovementioned rules on the register of financial assets with Directive

text: of the European Parliament and of the Council of 6 May 2009 amending Directive

text: on settlement finality in payment and securities settlement systems and Directive

text: on financial collateral arrangements as regards linked systems and credit

text: 2. General observations

text: The ECB welcomes the intention of the draft law to remove the formal condition for the creation of financial collateral over financial assets that can be used for securing liabilities to relevant central banks. It is anticipated that the provision of the draft law under which Banka Slovenije provides other potential collateral takers with information on financial collateral established in favour of the relevant central banks as well as receiving information on collateral established on registered financial assets will increase legal certainty where financial assets are used for collateral purposes.

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

text: Done at Frankfurt am Main, 27 April 2011.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: Draft law transposing Directive

text: of the European Parliament and the Council of 6 May 2009 amending Directive

text: on financial collateral arrangements as regards linked systems and credit claims.

text: OJ L 189, 3.7.1998, p. 42.

text: Directive

text: on financial collateral arrangements as regards linked systems and credit claims (OJ L 146, 10.6.2009, p. 37). The ECB commented on an early draft of Directive

text: in Opinion

text: of 7 August 2008 (OJ C 216, 23.8.2008, p. 1).

text: The Law of 28 April 1999 transposing Directive

text: of 19 May 1998 on settlement finality in payment and securities settlement systems.

text: The Law of 15 December 2004 on financial collateral and on various tax provisions in relation to in rem collateral arrangements and loans for financial instruments. The ECB commented on an early draft of this Law in Opinion

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

text: Article

text: ° and 5° of the draft law, introducing

text: Article 4

text: § 3 and § 4 in the Law of 15 December 2004.

text: The simplified realisation procedure for pledges of banking claims provides that in case of default, the pledgee may realise the pledged banking claim without the need for a prior notice or a Court authorisation and notwithstanding the existence of an insolvency procedure, an attachment, or any other situation of concourse between the creditors of the debtor or of the third party who provided the collateral (Article 9(1) of the Law of 15 December 2004, introduced by Article 17 of the draft law).

text: See ECB Opinion

text: , in particular paragraphs 4, 7 and 11.

text: Under general Belgian law, the concept of ‘payment’ refers to the execution of a counterparty’s obligations. Hence, a ‘payment default’ covers all cases of non-execution of an obligation, including notably an obligation to deliver securities.

text: The public or financial legal persons are: (a) credit institutions, (b) investment undertakings, (c) insurance firms, (d) management companies of collective investment undertakings, (e) undertakings for collective investments, (f) central counterparties, settlement agents and clearing houses, (g) financial institutions, (h) Belgian or foreign legal persons acting in their own name but on behalf of the beneficiaries of securities, (i) public authorities except companies covered by a State guarantee, (k) the NBB, the ECB, the Bank for International Settlements, multilateral development banks, the International Monetary Fund, the European Investment Bank, (l) any other foreign legal person which belongs in its home country to one of the categories referred to in

text: Article 1(2)

text: (a) to (d) of Directive

text: (Article

text: ° of the draft law, introducing an Article

text: ° in the Law of 14 December 2004). The ‘financial institutions’ are undertakings that are not credit institutions and whose principal activity consists in the acquisition of shares or which carry out one or more of the activities for which credit institutions benefit from mutual recognition, e.g.: (a) mortgage companies, (b) consumer credit companies, (c) leasing companies, (d) payment institutions or electronic money institutions.

text: i.e. the transfer, sale or contributions of such institutions’ assets, liabilities or activities, or of the securities or shares they issue. These measures may be adopted by the King where the fact that such institution is not operated according to the applicable law presents a risk for financial stability. See ECB Opinion

text: Articles 14 and 15 of the Law of 15 December 2004, respectively.

text: Articles 19 and 20 of the draft law.

text: Explanatory memorandum, pages 1, 20 and 21.

text: See ECB Opinion

text: , in particular paragraph 4.

text: Explanatory memorandum, p. 14.

text: Explanatory memorandum, p. 16, and the reference to the use by the French authorities of their opt out possibility.

text: Also where a participant is assimilated to an institution for reasons of systemic risk (Article

text: ° of the draft law). See paragraph 3.

text: See also Article

text: ° and 2° and Article 11 of the draft law.

text: See the Royal Decree of 3 June 2007, inserting a last subparagraph in

text: Article 2

text: §2 of the Law of 28 April 1999. The ECB commented on an early draft of this provision in Opinion

text: The categories of institutions listed in Directive

text: are: credit institutions, investment firms, public authorities and third country undertakings performing similar functions.

text: Article

text: °, penultimate subparagraph of the draft law, introducing a definition of ‘institution’ in the Law of 28 April 1999. See also Article

text: ° of the draft law, replacing

text: Article 2

text: §2 of the Law of 28 April 1999.

text: Explanatory memorandum, p. 3. Where under the draft law, it is the parties who trigger the assimilation, the NBB could nevertheless issue a recommendation to that end in the context of its oversight tasks.

text: Article

text: °, second subparagraph of the draft law, introducing a definition of ‘ participant’ in the Law of 28 April 1999.

text: Article

text: °, penultimate indent of the draft law, introducing a definition of ‘institution’ in the Law of 28 April 1999.

text: See

text: , in particular paragraph 2.1.

text: Article

text: ° of the draft law, introducing an

text: Article 4

text: §1 3° in the Law of 15 December 2004.

text: Article

text: ° in the Law of 15 December 2004.

text: Directive

text: of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) (OJ L 177, 30.6.2006, p. 1).

text: Explanatory memorandum, p. 8.

text: See the explanatory memorandum, p. 16.

text: To be eligible as collateral for Eurosystem credit operations, a credit claim must be a debt obligation of a debtor vis-à-vis a Eurosystem counterparty; the eligible debtors are non-financial corporations, public sector entities and international or supranational institutions (Section 6.2.2 of Annex I to Guideline ECB/2000/7of the ECB of 31 August 2000 on monetary policy instruments and procedures of the Eurosystem (OJ L 310, 11.12.2000, p. 1)).

text: As defined in the ESA 95 (see Section 6.2.2 of Annex I to Guideline ECB/2000/7). Under

text: Council Regulation (EC) No 2223/96 of 25 June 1996

text: on the European system of national and regional accounts in the Community (OJ L 310, 30.11.1996, p. 1), the sector non-financial corporations (S.11) consists of institutional units whose distributive and financial transactions are distinct from those of their owners and which are market producers …, whose principal activity is the production of goods and non-financial services.

title: Opinion of the European Central Bank of 29 April 2011 on amendments to the legislation on settlement finality and financial collateral arrangements (CON/2011/41)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 29 April 2011 on amendments to the legislation on settlement finality and financial collateral arrangements (

text: ) Introduction and legal basis

text: On 4 April 2011, the European Central Bank (ECB) received a request from the Nationale Bank van België/Banque Nationale de Belgique (NBB), acting on behalf of the Belgian Ministry of Finance, for an opinion on a draft law amending the law on settlement finality and the law concerning financial collateral arrangements (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, fifth and sixth indents of

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law contains provisions on means of payment, payment and settlement systems, as well as 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 The main objective of the draft law is the transposition into Belgian law of Directive

text: . To this end, the draft law amends the Law on settlement finality in payment and securities 4 5 settlement systems and the law concerning financial collateral arrangements .

text: 1.2 In addition to transposing Directive

text: , the draft law will set aside the rules providing for

text: a simplified realisation of certain financial collateral (i.e. pledges of cash and of banking claims) in

text: the event of judicial reorganisation proceedings of the debtor. This exemption to the regime

text: currently in force in Belgium will not apply where the default consists in the non execution of an

text: obligation, i.e. where it is a ‘payment default’. Under the amended regime all creditors will be

text: prevented from invoking the rules on the simplified realisation of pledges of cash and of banking

text: claims, as well as those ensuring the validity and enforceability of ‘netting arrangements’, in the

text: event of judicial reorganisation proceedings concerning a debtor who is not a ‘public or financial

text: legal person’ . In the event of judicial reorganisation proceedings concerning a public or financial

text: legal person, creditors who are not public or financial legal persons will be prevented from

text: invoking the abovementioned rules on realisation and netting arrangements. Similarly, where the

text: King adopts an act disposing of property with regard to an insurance undertaking, a credit

text: institution or a settlement institution , the creditors of such institution who are not public or

text: financial legal persons will be prevented from invoking the abovementioned rules on realisation

text: and netting arrangements. However, the draft law will not affect the rules governing the realisation

text: of pledges of financial instruments in the Law of 15 December 2004.

text: 1.3 Furthermore, the provisions ensuring the validity and enforceability of netting arrangements,

text: (including close-out netting clauses ) in case of insolvency, will be set aside where one of the

text: parties is a non-merchant natural person . This amendment in the draft law became necessary

text: following a decision of the Belgian Constitutional Court, which held that these provisions breach

text: the principles of non-discrimination and equal treatment enshrined in the Belgian Constitution, insofar as they apply to non-commercial natural persons .

text: 2. General observations

text: 2.1 The ECB notes that when transposing Directive

text: , the Belgian legislator had first opted for a broader scope than required by the Directive . The explanatory memorandum to the draft law underlines that the proposed amendment to this regime seeks to balance, on the one hand, the protection of the collateral obtained by financial institutions and, on the other hand, the safeguard of the economic activity of non-financial companies when they encounter temporary difficulties . The rationale of these amendments lies in the willingness to preserve some substance in the Belgian judicial reorganisation procedure for natural or legal persons who are not public or financial legal persons in respect of transactions that do not concern financial instruments . 2.2 The ECB understands that the exemption introduced by the draft law does not prejudice the protection of settlement finality in payment and securities settlement systems (SSS) under the Law of 28 April 1999. Hence, when an entity is a participant in such system , its operations will continue to be covered by the settlement finality protection under the Law of 28 April 1999 , regardless of whether that entity is a public or financial legal person within the meaning of the amended Law of 15 December 2004.

text: 3. Provisions relating to settlement finality in payment and securities settlement systems

text: Definition of institutions and participants

text: The Belgian legislator had already availed, in previous legislation , of the possibility in the second subparagraph of

text: Article 2

text: (b) of Directive

text: of considering as ‘institutions’ certain undertakings participating in an SSS that do not fall within the categories of institutions listed in the Directive , provided that such assimilation is warranted on grounds of systemic risk and that at least three other participants in this SSS do fall within one of these categories. Under the draft law , the NBB will determine the existence of systemic risk grounds, in the context of its oversight

text: competence , and will establish and publish the criteria it uses. The NBB will also be competent to determine the existence of systemic risk warranting considering an indirect participant as a participant . The ECB notes that the requirement related to the existence of systemic risks grounds is now explicitly mentioned in the draft law . For the remainder, all comments and recommendations made in ECB Opinion

text: remain applicable to the draft law .

text: 4. Provisions relating to financial collateral arrangements

text: The introduction of credit claims as eligible collateral in financial collateral arrangements 4.1 The application of the Law of 15 December 2004 on financial collateral is extended to agreements creating a security over banking claims pledged or transferred by contract . The draft law defines ‘banking claims’ as pecuniary claims arising out of an agreement whereby a loan or a credit is granted by (i) a credit institution, (ii) a mortgage company, (iii) a consumer credit company, or (iv) any other foreign legal person which, in its home country, belongs to one of the preceding categories . 4.2 The ECB in general welcomes the proposed amendment, which will facilitate the use of credit claims as collateral for Eurosystem credit operations. The ECB notes that the Belgian definition of ‘banking claims’ is wider than the definition of credit claims in

text: Article 2 (5)

text: (a)(ii) of Directive

text: , which only covers credit claims granted by credit institutions defined in

text: Article 4(1) of Directive 2006/48/EC

text: , including the institutions listed in

text: Article 2 of Directive 2006/48/EC

text: . By contrast, the ‘banking claims’ in the draft law cover, in addition, pecuniary claims arising out of an agreement whereby a loan or a credit is granted by a mortgage company or a consumer credit company. The ECB understands that this difference aims at avoiding any discriminatory treatment between these different categories of lending institutions . The restriction on the realisation of pledges on credit claims and on the rules ensuring the

text: enforceability and validity of netting arrangements

text: 4.3 As already mentioned, the draft law will set aside (i) the rules providing for a simplified realisation of pledges on cash and of banking claims, and (ii) the rules ensuring the enforceability and validity of netting arrangements, in the event of judicial reorganisation proceedings of a debtor that is not a ‘public or financial legal person’, unless there is a payment default. The ECB notes that by

text: introducing this provision, the Belgian legislator, similarly to other Member States , will use the exemption provided for in

text: Article 1(3) of Directive 2002/47/EC

text: , under which Member States may exclude arrangements where one of the parties is a person other than a natural person, including unincorporated firms and partnerships, provided that the other party is an institution as defined in points (a) to (d), which includes a central bank and the ECB. This exemption might, in certain cases, be an obstacle to the swift realisation of the collateral provided for Eurosystem credit operations. This might notably be the case where the NBB accepts as collateral from a Eurosystem counterparty, a credit claim which is a debt obligation of a nonfinancial corporation that is not a ‘public or financial legal person’ and where both the Eurosystem counterparty and the non-financial corporation default in their respective obligations. The ECB emphasises that in order to ensure that a valid security is created over credit claims, and that the credit claim can be swiftly realised in the event of a counterparty default, in general, there should be no restrictions regarding the realisation of the credit claim used as collateral. However, the ECB notes that the exemption provided by the draft law does not seem to represent major risks for the Eurosystem, as: (i) the exemption does not apply in case of a payment default; and (ii) the probability is low that a double default would occur where all the specific conditions for the exemption to apply are fulfilled.

text: Done at Frankfurt am Main, 29 April 2011.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET