text: OJ L 189, 3.7.1998, p. 42. 2 Lietuvos bankas decided to set the euro as the anchor currency and to set the official litas exchange rate as 3.4528 litas to 1 euro from 2 February 2002 (Resolution No 15 of the Board of Lietuvos bankas of 1 February 2002 ‘On the anchor currency and the official litas exchange rate’ (Valstybės žinios, 2002, No 12-453)). This decision was taken upon coordination with the Government (Resolution No 157 of the Government of 1 February 2002 ‘On the endorsement of the proposal of Lietuvos bankas concerning the anchor currency and the official litas exchange rate and the repeal of resolutions of the Government’ (Valstybės žinios, 2002, No 12-417)).

text: See, for example, the Ecofin conclusions of 7 November 2000, which provide that ‘The ERM II could accommodate the main features of a number of exchange rates regimes, provided their commitments and objectives are credible and in line with those of the ERM II. The only clear incompatibilities vis-à-vis the ERM II that can be identified already at this stage are … pegs against anchors other than the euro’. 4 OJ C 73, 25.3.2006, p. 21.

text: OJ C 236, 2.8.1997, p. 5. 6 Valstybės žinios, 1994, No 24-378. 7 Law No I-566 on the amendment of Article 3 of the Law on the credibility of the litas (Valstybės žinios, 1994, No 59- 1157).

title: Opinion of the European Central Bank of 20 July 2009 on the procedure to change the official litas exchange rate (CON/2009/61)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 20 July 2009 on the procedure to change the official litas exchange rate (

text: ) Introduction and legal basis

text: On 23 June 2009 the European Central Bank (ECB) received a request from the Speaker of the Seimas (Parliament) of the Republic of Lithuania for an opinion on a draft law amending Article 3 of the Law on the credibility of the litas (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the first and third 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 relates to currency matters and Lietuvos bankas. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 The main purpose of the draft law is to amend the Law on the credibility of the litas in order to include the Parliament in the procedure for changing the anchor currency and/or official litas exchange rate. 1.2 According to Article 3(3) of the Law on the credibility of the litas, Lietuvos bankas, upon coordination with the Government, has been delegated the power to change the anchor currency, currently the euro , and/or the official litas exchange rate. This power may only be exercised under extraordinary circumstances, where maintaining the established exchange rate of the litas would have a destructive effect on the stability of the national economy. 1.3 According to the draft law, Parliament becomes responsible for deciding if such extraordinary circumstances exist. Parliament, which previously played no role in this process, takes on an

text: important role in the procedure to be followed when the anchor currency and/or the official litas exchange rate is to be changed.

text: 2. General observations

text: 2.1 According to Article 124(2) of the Treaty, each Member State with a derogation as referred to in Article 122(1) of the Treaty will treat its exchange-rate policy as a matter of common interest. 2.2 On 27 June 2004, at the request of the Lithuanian authorities, the ministers of the euro area Member States, the President of the ECB and the ministers and the central bank governors of Denmark and Lithuania decided, by mutual agreement, following a common procedure involving the European Commission and after consulting the Economic and Financial Committee, to include Lithuanian litas in the Exchange Rate Mechanism II (ERM II). The central rate of the Lithuanian litas was set at 1 euro = 3.45280 litas with a standard fluctuation band of ± 15 %.

text: 2.3 The draft law will amend the procedure for changing: (i) the anchor currency; and/or (ii) the official litas exchange rate. As regards the possibility to change the anchor currency (the euro), the ECB notes that although Member States with a derogation do not yet participate in economic and monetary union, they have a legal duty to start preparatory work for the adoption of the euro and to ensure the compatibility of their legislation with the Treaty and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’) with respect to Eurosystem-related tasks. In this context, the ECB is of the opinion that the provisions on a possible change from the anchor currency (the euro) to any other anchor currency are not compatible with Lithuania’s membership in ERM II, its obligations under the Treaty and Lithuania’s goal of introducing the euro and becoming part of the euro area .

text: 3. Establishing and changing the exchange rate

text: 3.1 According to Article 1.1 of the Agreement of 16 March 2006 between the European Central Bank and the national central banks of the Member States outside the euro area laying down the operating procedures for an exchange rate mechanism in stage three of Economic and Monetary Union (hereinafter the ‘ERM II Agreement’), the parties participate in a joint notification to the market of the bilateral central rates, and any changes to them, between the participating non-euro area currencies and the euro as agreed following the common procedure specified in paragraph 2.3 of the Resolution of the European Council of 16 June 1997 on the establishment of an exchange-

text: rate mechanism in the third stage of economic and monetary union (hereinafter the ‘Resolution’). Lietuvos bankas, as party to the ERM II Agreement, is bound by these conditions. 3.2 Paragraph 2.3 of the Resolution provides that decisions on central rates and the standard fluctuation band are taken by mutual agreement of the ministers of the euro area Member States, the ECB and the ministers and central bank governors of the non-euro area Member States participating in the mechanism, following a common procedure involving the European Commission, and after consulting the Economic and Financial Committee. It also provides that all parties to the mutual agreement, including the ECB, will have the right to initiate a confidential procedure aimed at reconsidering central rates. 3.3 The Law on the credibility of the litas was adopted on 17 March 1994 . Article 3 of this Law, on the procedure for establishing and changing the official litas exchange rate, was last amended on 20 July 1994 , well before Lithuania’s entry into the European Union. It has no direct references to Community legal acts and/or instruments in the field of exchange rate mechanisms. 3.4 Despite this shortcoming in the Law on the credibility of the litas, the ECB understands that Lietuvos bankas would follow the procedures described in the ERM II Agreement and the Resolution when reconsidering the central rate, under which confidentiality is of utmost importance.

text: 4. Final observations

text: In the ECB’s view, there is an inconsistency between the provisions of the draft law on the amendment to the procedure to change the official litas exchange rate, which provide for the involvement of the Parliament in this procedure, and the provisions of the Law on Lietuvos bankas, in particular

text: Article 3(2)

text: and

text: Article 8(1)

text: (3), which delegate to Lietuvos bankas the function of determining the litas exchange rate regulation system in an independent manner; such inconsistency would create uncertainty for Lietuvos bankas in fulfilling the tasks conferred upon it. The ECB notes that the national legislation must ensure that Lietuvos bankas’s primary goal of preserving price stability is maintained.

text: This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 20 July 2009. [signed]

text: The Vice-President of the ECB

text: Lucas D. PAPADEMOS


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

text: See the seventh final provision of the Royal Decree-Law. 3 See the definition of ‘draft legislative provisions’ under

text: Article 1(1)

text: and also the sixth indent of

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

text: . 4 All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 5 See ‘Immediate Responses to Financial Turmoil’, Ecofin Council Conclusions of 7 October 2008, available on the former French Presidency’s website at www.ue2008.fr. The Ecofin Council recommended that: (i) interventions should be timely and the support should in principle be temporary; (ii) the interests of taxpayers should be protected; (iii) existing shareholders should bear the due consequences of the intervention; (iv) the Government should be in a position to bring about a change of management; (v) management should not retain undue benefits; (vi) governments may have, inter alia, the power to intervene in remuneration; (vii) legitimate interests of competitors must be protected, in particular through the State aid rules; and (viii) negative spill-over effects should be avoided. 6 The text of the Declaration is available on the former French Presidency’s website at www.ue2008.fr. The Member States agreed to: (i) ensure appropriate liquidity conditions for financial institutions; (ii) facilitate the funding of banks; (iii) provide financial institutions with additional capital resources to continue to ensure the proper financing of the economy; (iv) allow for an efficient recapitalisation of distressed banks; (v) ensure sufficient flexibility in the implementation of accounting rules; and (vi) enhance cooperation procedures among European countries.

text: See Opinion

text: . 8 See Brussels European Council of 15 to 16 October 2008, paragraph 3 of the Presidency Conclusions. 9 Communication from the Commission — The application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis (OJ C 270, 25.10.2008, p. 8); Communication from the Commission — The recapitalisation of financial institutions in the current financial crisis: limitation of aid to the minimum necessary and safeguards against undue distortions of competition (OJ C 10, 15.1.2009, p. 2); Recommendations of the Governing Council of the European Central Bank on government guarantees for bank debt and Recommendations of the Governing Council of the European Central Bank on the pricing of recapitalisations, both latter documents are available on the ECB’s website at www.ecb.europa.eu. 10 See paragraph 3.1.2 of Opinion

text: Recommendations of the Governing Council of the European Central Bank on the pricing of recapitalisations, issued on 20 November 2008 and available on the ECB’s website at www.ecb.europa.eu. 12 See paragraph 3.5 of Opinion

text: or paragraph 3.2 of Opinion

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 22 July 2009 on bank restructuring and reinforcement of credit institutions’ own funds (CON/2009/62)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 22 July 2009 on bank restructuring and reinforcement of credit institutions’ own funds (

text: ) Introduction and legal basis

type: rubrik

text: On 3 July 2009 the European Central Bank (ECB) received a request from the Spanish State Secretary for Economic Affairs for an opinion on Royal Decree-Law 9/2009 of 26 June 2009 on bank restructuring and reinforcement of credit institution’s own funds (hereinafter ‘the Royal Decree-Law’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community 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 Royal Decree-Law relates to the Banco de España 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 Royal Decree-Law

text: The Royal Decree-Law is motivated by the ongoing financial market crisis and by the need for an ordered restructuring of the Spanish banking system to avoid potential systemic risks, thus maintaining confidence in the national financial system and enhancing its strength and solvency. This ensures that the institutions that remain are solid and can provide credit as usual. The restructuring model is based on the three existing deposit guarantee schemes and on the use of a new ad hoc institution: the Fund for Ordered Bank Restructuring (hereinafter the ‘FROB’). In a first phase, an action plan will be adopted in the context of the deposit guarantee schemes. If such action plan fails, a second phase will start with intervention by the FROB. The FROB will temporarily replace the directors of the affected institution and will submit a restructuring plan to the Banco de España aimed at a merger with another institution or at an overall or partial transfer of assets and liabilities to another institution. The FROB may grant funding to the affected institution or acquire its assets or shares. It may also support inter-institutional integration processes by acquiring securities, subject to buy back, issued by two or

text: more credit institutions in the context of an integration plan submitted to the Banco de España. The FROB may secure additional funding on the securities markets by issuing fixed-rate securities with a State guarantee. Finally, it may also support restructuring plans by granting funding to the deposit guarantee schemes.

text: 2. General observations

text: 2.1 The Spanish Government has already adopted and published the Royal-Decree Law on an urgent basis, thus giving it normative effects, and the Spanish Parliament has already validated it. Therefore, this opinion relates to any further legislative amendments to the Royal-Decree Law and to its subsequent implementation. 2.2 The ECB reminds the Spanish authorities of their obligation under

text: Article 4 of Decision 98/415/EC

text: to ensure the effective compliance with their duty to consult the ECB, in particular by consulting it at an appropriate stage in the law-making process. 2.3 The ECB understands that implementing rules will complete the details of the Royal Decree-Law . Consequently, the ECB expects to be consulted on any proposed implementing legislation to be adopted under the Royal Decree-Law that materially influences the stability of financial institutions and markets . 2.4 The ECB has issued a number of opinions at the request of the Spanish authorities and also other Member State authorities on national measures adopted in response to the global financial crisis . The ECB invites the Spanish State Secretary for Economic Affairs to take into account observations made in its recent opinions on similar draft legislative provisions in other Member States. In particular, the ECB refers to the importance of the guidance provided by the Ecofin Council to the Member States in the conclusions of its Meeting of 7 October 2008 as well as the Declaration issued by the Heads of State of the euro area on 12 October 2008 (hereinafter the ‘Declaration’) . In particular, the ECB emphasises that any initiatives put in place by the competent national authorities to restore confidence in the financial markets should be coordinated and should aim to

text: implement the common principles in question, in a spirit of close cooperation with other Member States and the Community institutions . The principles contained in the Declaration, as well as the conclusions raised by the Ecofin Council, were endorsed by the European Council of 15 and 16 October 2008 . Moreover, measures taken by competent national authorities in relation to financial institutions in the context of the current global financial crisis have been subject to further coordination at European Union level . As a general remark in this context, the ECB, in line with its previous opinions , notes the importance of putting a transparent and predictable framework in place by defining the terms and conditions for financial institutions to have recourse to it and the parameters of and limitations to the exercise by the authorities of their powers when deciding whether to apply such aid measures.

text: 3. Specific comments

text: 3.1 The Banco de España’s financial role From Article 2(6) of the Royal Decree-Law the ECB understands that the Banco de España would be solely responsible for the FROB’s cash service subject to a specific agreement. The ECB expects that the Banco de España’s financial involvement will not go beyond the agent function and, in particular, that it will fully comply with the prohibition on monetary financing laid down in the Treaty. 3.2 Recapitalisation scheme In line with the abovementioned general observations, the ECB recalls that recapitalisation measures in the Member States should be aimed at strengthening the capital position of fundamentally sound financial institutions to improve the functioning and stability of the banking system and to ensure the proper financing of the economy. In particular, there should be a consistent approach to defining the conditions for recapitalisations and the pricing of the instruments intended to provide Tier 1 capital to financial institutions. The ECB underlines the importance of appropriate pricing for recapitalisations with a view to enhancing the stability of the financial system, facilitating a return to normal market conditions, ensuring a level playing-field and the proper financing of the economy.

text: Against this background, the recommendations of the ECB’s Governing Council on the pricing of recapitalisations have been published. The ECB highlights that the pricing conditions for capital support should be risk-based and market-oriented, determined on the basis of the costs of a corresponding guarantee in the market by taking into consideration the specific risk of both the specific instrument chosen for injecting capital and the institution concerned. Specific features of the instruments for capital injections, such as preference shares, should be appropriately chosen so that, while encouraging an early end to the State’s capital support of banks, they should not result in an excessive increase in the cost of capital. 3.3 Temporary nature of the scheme In line with the previous general considerations, harmonisation of the expiry of national financial support schemes throughout the EU, and in particular within the euro area, is of crucial importance, including in relation to State capital investments in financial institutions. In the same vein, the Declaration clearly draws attention to the need for any national support scheme to be temporary in nature, even if it may be extended or renewed. In this respect, specific provisions on time limits in relation to bank restructuring and reinforcement of credit institutions’ own funds under the Royal Decree-Law should be adopted and clearly specified .

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

text: Done at Frankfurt am Main, 22 July 2009.

text: [signed]

text: The Vice-President of the ECB

text: Lucas D. PAPADEMOS

type: vagledning

utgivare: ecb


text: Gazzetta Ufficiale della Repubblica Italiana No 150, 1.7.2009, p. 1.

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

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

text: See paragraph 3.2 of Opinion

text: . It is noted that the amended draft article seems to confuse the concepts of financial independence and institutional independence, since it erroneously assumes that institutional independence could be safeguarded by means of quantitative thresholds. About the principle of financial independence, see, e.g., Opinion

text: ; Opinion

text: ; ECB’s Convergence Report May 2008, pp. 20-22. About the principle of institutional independence, see, e.g., Opinion

text: ; Opinion

text: ; ECB’s Convergence Report May 2008, pp. 18-19. 10 It is understood that the effects of the special taxation regime provided for by paragraph 3 of the amended draft article would be as follows: (i) in case a total or partial transfer of gold stocks is made within three fiscal years following the fiscal year in the course of which the draft law enters into force, the realised capital gain, which is subject to the income tax (IRES) and the regional tax on productive activities (IRAP), would be increased by the amount of the capital gains –

text: corresponding to the transferred stocks – subject to the substitute tax under paragraph 1, and the substitute tax paid with reference to the same stocks would be deducted by income taxes; (ii) on the contrary, in the event that such a transfer is made after the abovementioned deadline, the realised capital gains subject to IRES and IRAP would no longer be increased by the said amount, and the substitute tax paid would no longer be deductible. 11 See paragraph 3.3 of Opinion

text: . 12 See paragraphs 1, 2 and 4 of the amended draft article. 14 OJ L 348, 11.12.2006, p. 1. 15 It is recalled that under the basic assumption of prudence, unrealised capital gains are not recognised as income in the profit and loss account, but are recorded directly in a revaluation account and are thus excluded from the profit

text: distribution scheme. These principles, laid down by the ECB’s Governing Council pursuant to Article 26.4 of the Statute of the ESCB, are currently relevant also for the Banca d’Italia’s taxation, according to Article 8(1) of Legislative Decree No 43 of 10 March 1998 (Gazzetta Ufficiale della Repubblica Italiana No 61, 14.3.1998) and Article 114 of the Consolidated Law on taxation (Decree of the President of the Republic No 917/1986, in Gazzetta Ufficiale della Repubblica Italiana, S.O., No 302, 31.12.1986, as amended). 17 The explanatory memorandum is now available on the Italian Parliament’s website at www.camera.it. 18 It is noted that the maximum tax amount set at EUR 300 million does not exclude the retroactive effects described above.

title: Opinion of the European Central Bank of 24 July 2009 on an amended draft legislative provision on the taxation of the Banca d’Italia’s gold reserves (CON/2009/63)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 24 July 2009 on an amended draft legislative provision on the taxation of the Banca d’Italia’s gold reserves (

text: ) Introduction and legal basis

text: On 21 July 2009 the European Central Bank (ECB) received a request from the Italian Minister for Economic Affairs and Finance for an opinion on a draft amendment to Article 14 of Decree-Law No 78 of 1 July 2009 containing measures on the crisis and prorogation terms and on the Italian participation in international missions (hereinafter the ‘Decree-Law’). The Decree-Law is currently being discussed by the Italian Parliament for conversion into law (hereinafter the ‘draft law’) within 60 days following publication in the Gazzetta Ufficiale della Repubblica Italiana. Article 14 of the Decree-Law provides for a capital gains tax on non-industrial gold of firms and entities and relates to the Banca d’Italia. The subject of this opinion is an amended draft version of Article 14 (hereinafter the ‘amended draft article’), in the text attached to the request from the Minister. The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community 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 amended draft article relates to the Banca d’Italia. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the amended draft article

text: The amended draft article is a new version of Article 14 of the Decree-Law, on which the ECB recently delivered Opinion

text: . According to the consultation letter from the Minister for Economic Affairs and Finance, in order to address the issues raised in Opinion

text: , the amended draft article would replace the original text of

text: Article 14

text: . The amended draft article is divided into five paragraphs. Paragraph 1 provides that for the fiscal year in the course of which the draft law enters into force, a substitute tax of 6 %, up to a maximum amount of EUR 300 million, will be levied on capital gains registered in the balance sheet generated from the fiscal year-end price evaluation of stocks of precious metals for non-industrial use. Paragraph 2 provides for the timing of the taxation payments.

text: Paragraph 3 provides for a special tax regime applicable to realised capital gains generated by a total or partial transfer of stocks of precious metals if such a transfer takes place within three fiscal years following the fiscal year in the course of which the draft law enters into force. Paragraph 4 contains other provisions relating to the substitute tax on notional gains and provides for special conditions for the application of the amended draft article in respect of the Banca d’Italia’s gold stocks. Finally, paragraph 5 provides for financial measures to be adopted if, following recourse to the procedures laid down in paragraph 4 for the taxation of the Banca d’Italia’s gold stocks, the increased budgeted revenue provided for by the amended draft article is lower than the estimated amount of EUR 300 million for 2009.

text: 2. General observations

text: 2.1 As already stated above, the original text of Article 14 of the Decree-Law was the subject of the recent ECB Opinion

text: , in which the ECB made several comments on the draft legislative provision on the taxation of the Banca d’Italia’s gold reserves, with particular reference to its compliance with

text: Article 108

text: and Article 101(1) of the Treaty , as well as Article 26.4 of the Statute of the ESCB. The comments specifically addressed the following issues: (i) central bank financial independence; (ii) central bank institutional independence; (iii) the prohibition on monetary financing; (iv) compliance with the Eurosystem accounting principles; (v) retroactive application of the new tax; (vi) the timing of the taxation payments; and (vii) the set-off right under Article 65 of Law No 289 of 27 December 2002, as amended . 2.2 The observations made in Opinion

text: also apply to the amended draft article.

text: 3. Specific comments

text: 3.1 Central bank financial independence In Opinion

text: , the ECB expressed its concern that the new tax on unrealised capital gains, generated from the price evaluation of gold stocks on the assets side of the Banca d’Italia’s 6 7 balance sheet would weaken the Banca d’Italia’s financial independence , since the Banca d’Italia may potentially: (i) never realise such notional gains, as a result either of its management strategy not to sell any of its gold reserves, of subsequent negative price developments, or other limitations by which it is bound ; or (ii) realise profits that are lower than the notional gains constituting the tax base. Thus, the Banca d’Italia may need to decrease its resources to make the required tax payments. The ECB notes that an attempt to address the financial independence issue is made in 4 As also reflected respectively in

text: Article 7

text: and Article 21.1 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). 5 Gazzetta Ufficiale della Repubblica Italiana, S.O., No 305, 31.12.2002. 6 The notional gains, pursuant the prudence principle laid down in Guideline ECB/2006/16 of 10 November 2006 on the legal framework for accounting and financial reporting in the European System of Central Banks (see paragraph 3.4 below), are balanced by equal amounts booked in a dedicated revaluation account on the liabilities side of the Banca d’Italia’s balance sheet. This circumstance is not taken into account by the draft article. 7 See paragraphs 2.2(a) and 3.2 of Opinion

text: . 8 See in particular the Central Bank Gold Agreement referred to in the ‘Joint Statement on Gold’ of 8 March 2004, available on the ECB’s website.

text: the amended draft article under which: (i) the new tax applies only for the fiscal year in the course of which the draft law enters into force, i.e. it is a ‘one-off’ tax; (ii) a maximum amount of the payable tax is set at EUR 300 million; and (iii) the new tax applies to the Banca d’Italia’s gold stocks ‘to the extent appropriate to guarantee the institutional and financial independence of the central bank’, and this extent is to be determined by means of a ‘decree not having a regulatory nature’ by the Minister of Economic Affairs and Finance, after having obtained the Banca d’Italia’s assent (parere conforme). Although the limitations referred to under (i) to (iii) aim at mitigating the negative impact of the amended draft article on the Banca d’Italia’s financial independence, paragraphs 1, 2 and 4 of the amended draft article still provide for a tax on unrealised, and thus uncertain capital gains. Therefore, the tax essentially results in a withdrawal of central bank assets. In addition, the amended draft article raises concerns as regards the difficulty in making an advance estimate of a national central bank’s (NCB) financial needs: in this regard, the ECB stresses that future financial and economic developments, especially in the current crisis context, cannot be foreseen with any degree of certainty. For the above reasons, the ECB is of the view that the amended draft article would impair the principle of central bank financial independence.

text: 3.2 Central bank institutional independence 3.2.1 In Opinion

text: the ECB noted that the previous version of the draft article, by providing for the taxation of theoretical and unrealised capital gains, would also constrain the Banca d’Italia’s capacity to implement appropriate management strategies in relation to its gold reserves, since, instead of targeting optimal realisation of its central bank tasks, it would need to mitigate the financial risks of the arising tax liabilities. Since holding and managing the foreign reserves of the Member States is a Eurosystem task pursuant to the third indent of Article 105(2) of the Treaty, the Banca d’Italia’s institutional independence safeguarded under the Treaty would thus be infringed . The amended draft article, as seen above, still provides for the taxation of merely theoretical and unrealised capital gains on gold reserves. Therefore, the ECB has to reassert the incompatibility of the amended draft article with the principle of central bank institutional independence pursuant to Article 108 of the Treaty. 3.2.2 In addition, the new paragraph 3 of the amended draft article provides for a special taxation regime that would apply to realised capital gains arising from a transfer of precious metals stocks for nonindustrial use, provided that such transfer takes place within three fiscal years following the fiscal year in the course of which the draft law enters into force . The ECB notes that this special

text: taxation regime: (i) would essentially apply to the Banca d’Italia, as does the substitute tax provided for in paragraph 1 of the amended draft article, to which it is linked; and (ii) given its temporary nature, would place pressure on the Banca d’Italia in terms of the timing of possible gold sales, and could thus interfere with its foreign reserve management decisions. The ECB therefore concludes that paragraph 3 of the amended draft article constitutes a more serious impairment of the institutional independence of the Banca d’Italia established under Article 108 of the Treaty than the one the ECB already addressed in Opinion

text: 3.3 Prohibition on monetary financing In Opinion

text: the ECB noted that, since the substitute tax provided for by the previous version of the draft article is levied on unrealised capital gains, i.e. theoretical gains arising out of changes in the accounting valuation of the NCB’s gold reserves, the related tax payments by the NCB would result: (i) to the extent that they are not to be covered by future realised profits, in an increase of the monetary volume through provision of central bank money to the public sector; and (ii) to the extent that they are to be covered by future realised profits, in a form of central bank credit to the public sector, through the distribution in advance of future and uncertain profits . The ECB found that in both cases the previous version of the draft article was incompatible with the prohibition on monetary financing under Article 101(1) of the Treaty. The amended draft article does not address this fundamental issue, since, as already noted, it still provides for the taxation of unrealised capital gains . Therefore, the ECB reasserts that the amended draft article is incompatible with the prohibition on monetary financing under Article 101(1) of the Treaty. In addition, such incompatibility cannot be remedied by any form of agreement between a Member State and an NCB, nor by any form of ‘assent’ issued by the latter, as seems to be implied by paragraph 4 of the amended draft article.

text: 3.4 Eurosystem accounting principles In Opinion

text: the ECB stated that the previous version of the draft article was not in line with basic accounting assumptions laid down in Guideline ECB/2006/16 of 10 November 2006 on the legal framework for accounting and financial reporting in the European System of Central Banks and, in particular, with the basic accounting assumption of prudence, which allows the achievement and maintenance of the financial independence of Eurosystem central banks .

text: The ECB notes that this issue is not addressed by the amendment under consideration. Furthermore, the amended draft article still provides for a derogation from all other legal provisions, which, as already stated in Opinion

text: , weakens the prudence principle and appears to be incompatible with the primacy of Community law.

text: 3.5 Retroactivity of the new tax 3.5.1 In Opinion

text: , the ECB noted that the previous version of the draft article did not clearly exclude a retroactive application of the new tax, i.e. its application to the entire amount of unrealised capital gains currently registered in the dedicated revaluation account, instead of the mere amount of notional gains accrued in the first fiscal year from its entry into force. The ECB also noted that any retroactive application of new taxes to NCBs, retroactive application being understood as application of the taxation obligations to reporting periods earlier than the first full reporting period after entry into force of the tax, would be detrimental to central bank financial independence, since it would impair the NCBs’ ability to efficiently plan the use of their financial resources . 3.5.2 In the light of the amended draft article and of the explanatory memorandum to the draft law , which has now become available, the ECB understands that the new tax is indeed retroactive in two different ways: (i) it would apply to the current reporting period, which started before its entry into force; and (ii) it would apply to the entire amount of unrealised capital gains currently registered in the dedicated revaluation account, without prejudice to the maximum tax amount set pursuant to paragraphs 1 and 4 of the amended draft article . The ECB remarks that such retroactive effects of the new tax aggravate its non-compliance with the principle of central bank independence.

text: 3.6 Timing of the taxation payments 3.6.1 In Opinion

text: the ECB stated that, without prejudice to the preceding observations, the taxation payments mechanism provided for by the previous version of the draft article could represent per se a further breach of Article 101(1) of the Treaty . 3.6.2 The ECB confirms this statement and furthermore notes that this breach is now aggravated by the amended draft article, which deleted the taxpayer’s option, originally provided for by paragraph 2 of the previous version of the draft article, of paying 50 % of the instalment on the tax in two instalments of equal amounts within the deadline for annual settlement of income tax.

text: 3.7 Set-off right under Law No 289/2002 The last statement made in Opinion

text: concerns the exclusion, with reference to the new tax, of the set-off right granted to the Banca d’Italia by Article 65 of Law No 289 of 27 December 2002 , as amended. Also this issue is not addressed by the amended draft article; therefore the ECB entirely refers to and reasserts its statement, which relates to a further issue of non-compliance with Article 101(1) of the Treaty.

text: 4. Conclusions

text: In view of the above, the ECB concludes as follows. First, the amended draft article impairs the Banca d’Italia’s financial independence, by allowing for a decrease in the Banca d’Italia’s resources which has no relationship with the amount of the Banca d’Italia’s realised profits. Second, the amended draft article impairs the Banca d’Italia’s institutional independence, since it potentially forces the Banca d’Italia, with particular reference to its Eurosystem task of holding and managing foreign reserves, to deploy asset management strategies targeting financial risks created by the proposed new tax provisions. Third, the amended draft article is incompatible with the prohibition on central bank monetary financing of the public sector, to the extent that it provides for profit distributions in the expectation of uncertain central bank income potentially realised in the future and, in addition, it excludes set-off rights applicable under earlier legislation. Fourth, the amended draft article is not in line with the rules established by the ECB pursuant to Article 26.4 of the Statute of the ESCB. The ECB trusts that it will be consulted on any future or revised draft legislative provisions in this matter.

text: Done at Frankfurt am Main, 24 July 2009.

text: [signed]

text: The Vice-President of the ECB

text: Lucas D. PAPADEMOS


text: OJ L 189, 3.7.1998, p. 42. 2 All ECB opinions are available on the ECB website at www.ecb.europa.eu.

text: See Article 4 of the draft law.

text: See Article 6 of the draft law.

text: See Article 7 of the draft law.

title: Opinion of the European Central Bank of 27 July 2009 on public access to information on officials’ wealth (CON/2009/64)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 27 July 2009 on public access to information on officials’ wealth (

text: ) Introduction and legal basis

text: On 1 July 2009 the European Central Bank (ECB) received a request from the President of the Slovenian Parliament for an opinion on a draft law on public access to information on officials’ wealth (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community 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 Banka Slovenije. 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 falls within the regulatory framework for the prevention of corruption in Slovenia and regulates the duty of officials to declare information on their wealth and public access to such information. 1.2 The purpose of the draft law, as stated in its explanatory memorandum, is to ensure transparency in the conduct of public officials and take precautionary measures in the field of corruption.

text: 2. General observations

text: 2.1 The ECB welcomes this consultation by the Slovenian Parliament. As the term ‘officials’, which is defined in Article 2 of the draft law, explicitly includes the Governor of Banka Slovenije and other high-ranking officials of Banka Slovenije, the draft law should be assessed from the perspective of compatibility with the principle of personal independence of the Governor and of other members of the Governing Board of Banka Slovenije. 2.2 The ECB has previously considered a similar draft law in Opinion

text: 3. Declaration of wealth

text: 3.1 Under the draft law, all officials, including the President of the Republic, Prime Minister, members of Parliament, ministers and judges are obliged to periodically provide the Slovenian Court of Audit with information on their personal wealth, e.g. income, real estate, securities and cash holdings . In addition, they have to explain any increase in their wealth that exceeds the net salary payments they received since their previous declaration . Such information will be made publicly available on the Court of Audit’s website notwithstanding any restrictions as regards personal data protection and tax secrets . 3.2 If an official fails to provide information on their wealth and income, the Court of Audit has the power to impose a fine under Article 13 of the draft law and order, under Article 8 of the draft law, that such official’s salary is gradually reduced every month by one tenth, to the level of the minimum salary, until the official provides the requested information. Such Court of Audit’s decision will be executed by the respective official’s employer. Pursuant to Article 13(4) of the draft law, a fine will be imposed on an official in the amount of the value of undeclared wealth or of the wealth from unexplained sources, respectively, in addition to any fine imposed in accordance with Article 13(1) of the draft law. 3.3 The ECB understands that the possibility to reduce the salaries of members of Banka Slovenije’s Governing Board will apply as a general sanction, equivalent to a fine, under the Slovenian legal system and will not interfere with the legal relationship between the central bank and its independent decision-making officials. Under this assumption, the sanction of salary reduction would not jeopardise the personal independence of Banka Slovenije officials as provided for in Article 108 of the Treaty and Article 7 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), despite the fact that the sanction is linked to the salary of the Governor and the members of Banka Slovenije’s Governing Board, provided that the ECB’s understanding as follows is correct. The sanction of salary reduction is understood to be used to speed up the provision of information requested by the Court of Audit and it applies to all relevant officials in Slovenia, including the President of the Republic, the Prime Minister and members of the Slovenian parliament. Moreover, the sanction will be imposed by the Court of Audit, which is an independent body, and the conditions for the decision on the salary reduction (i.e. the grounds, amount and duration) as well as the legal remedy against such decision are clearly provided for in the draft law. Pursuant to Article 6(2) of the draft law, the Court of Audit shall communicate findings on unjustified increases of wealth to the body competent for electing or appointing the relevant official. In this respect, the ECB recalls that the dismissal of central bank Governors and other members of central bank decision-making bodies who are involved in the performance of ESCB-related tasks is subject to the provisions of Article 14.2 of the Statute of the ESCB. On the basis of the above assumptions and understanding,

text: the ECB is of the opinion that the provisions of the draft law on wealth declarations and the related sanctions would not be incompatible with the principle of personal independence. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 27 July 2009. [signed]

text: The Vice-President of the ECB

text: Lucas D. PAPADEMOS


text: OJ L 189, 3.7.1998, p. 42. 2 See paragraph 3.2 of Opinion

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

text: See paragraphs 3.5 and 3.6 of ECB Opinion

title: Opinion of the European Central Bank of 10 August 2009 on strengthening bank resolution techniques (CON/2009/65)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 10 August 2009 on strengthening bank resolution techniques (

text: ) Introduction and legal basis

text: On 30 July 2009 the European Central Bank (ECB) received a request from the Latvian Financial and Capital Market Commission (FCMC) for an opinion on draft amendments to the Law on credit institutions (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the sixth indent of

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

text: 1. Purpose of the draft law

text: The main objective of the draft law is to strengthen bank resolution techniques in Latvia by: (i) allowing set-off under certain conditions for banks facing difficulties, and (ii) by empowering administrators to terminate contracts that reduce a credit institution’s assets and are not concluded to provide financial services. The draft law also amends the definition of set-off bringing it in line with international practice and clarifies the rights of FCMC authorised representatives appointed to banks facing difficulties.

text: 2. General observations

text: As noted in its previous opinion on amendments to the Law on credit institutions , the ECB welcomes the draft law to the extent that it will strengthen the FCMC’s powers to intervene when the stability of either individual credit institutions or the financial system as a whole is jeopardised. The ECB also welcomes

text: the clarification of set-off procedures and the strengthening of administrator rights in insolvency proceedings insofar as they do not undermine Latvijas Banka’s fulfilment of its tasks.

text: 3. Specific observations

text: Regarding amendments to

text: Article 117(4)

text: (3) of the Law on credit institutions, the ECB has already commented on the transfer of credit institution’s assets and liabilities with the aim of ensuring the payment of guaranteed deposits . To the extent relevant, the observations made in Opinion

text: also apply to the amendments proposed by the draft law. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 10 August 2009. [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


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

text: Under the Ministry of Finance’s decision of 2 February 2009 on the appointment of the working group, the working group’s term of office is from 3 February 2009 to 31 December 2010. The purpose of the comprehensive reform is to ensure, inter alia, that legislation on securities markets is effective, clear and comprehensible and that it promotes the competitiveness of the Finnish market, thereby permitting international structures and operating models that increase the efficiency of cross-border operations. The working group has the task of drafting necessary legislative proposals in the form of a government draft law.

text: See ‘Policy statement on euro payment and settlement systems located outside the euro area’, available on the ECB’s website at www.ecb.europa.eu.

text: See ‘The Eurosystem’s policy line with regard to consolidation in central counterparty clearing’, available on the ECB’s website.

text: A domestic system is defined in the policy statement as a system ‘which handles mainly or exclusively assets denominated in one currency’.

text: See paragraphs 2 and 3 of ‘The Eurosystem policy principles on the location and operation of infrastructures settling euro-denominated payment transactions’, published on 19 July 2007 and available on the ECB’s website.

text: See ‘Decisions taken by the Governing Council of the ECB (in addition to decisions setting interest rates)’ for December 2008 and July 2009, available on the ECB’s website.

text: Available on the ECB’s website.

text: As provided for in the Law on the book-entry system (826/1991) and the Law on book-entry accounts (827/1991), the book-entry system consists of book-entry accounts and lists of the owners of book entries registered in the accounts. ‘Book entry’ means a dematerialised and transferable security that is issued or intended to be issued to the public, together with several other securities with similar rights.

title: Opinion of the European Central Bank of 7 August 2009 on amending the legal framework for clearing operations (CON/2009/66)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 7 August 2009 on amending the legal framework for clearing operations (

text: ) Introduction and legal basis

text: On 3 July 2009 the European Central Bank (ECB) received a request from the Finnish Ministry of Finance for an opinion on a draft government proposal for a law amending the Law on securities markets and certain other related laws (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community 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 law 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. Existing legislation and purpose of the draft law

text: 1.1 The draft law relates to securities clearing, in particular to the operation, licensing and supervision of foreign clearing organisations; it proposes amendments to the Law on securities markets, the Law on the Financial Supervisory Authority and the Law on the supervision fees of the Financial Supervisory Authority. It is part of a more comprehensive reform of securities markets legislation, and it is planned that the remaining part of the reform will be carried out in the near future . 1.2 Under the existing Law on securities markets, ‘clearing organisation’ is defined as a limited liability company that professionally and on a regular basis carries out clearing operations on behalf of organisations authorised to lodge securities transactions and other transfers for clearing. ‘Clearing operations’ are defined as the determination and realisation of obligations resulting from public trading in securities on behalf of the parties to the transaction. The operation of a clearing organisation is subject to a licence, which may be granted to a Finnish limited liability company by the Ministry of Finance. The law further provides that the stock exchange must arrange the clearing

text: of securities trades concluded in public trading in an appropriate manner. If the stock exchange uses a securities clearing and deposit institution other than a licensed clearing organisation in the clearing of securities trades, the stock exchange, the clearing organisation and the clearing and custody institution must arrange their cooperation so that the reliability of public trading is not endangered. 1.3 According to the current Finnish legislation, a clearing organisation undertakes both clearing and settlement. At present, the Finnish central securities depository, Euroclear Finland Ltd, is the sole licensed clearing organisation in the Finnish securities market. Foreign organisations whose business consists of both clearing and settlement are allowed to operate in Finnish markets through a licensed Finnish subsidiary. Currently, foreign organisations undertaking clearing but not settlement, such as central counterparties, have not been considered as clearing organisations and no licence has been required from them to operate in Finland. 1.4 The draft law proposes new provisions that would apply to foreign clearing organisations that are being used for clearing purposes by the stock exchange or an organiser of multilateral trading, allowing such entities to conduct clearing operations in Finland upon authorisation granted by the Ministry of Finance. Foreign clearing organisations domiciled within the European Economic Area (EEA) will be able to operate on a cross-border basis or through a branch, while entities domiciled outside the EEA will, in principle, only be able to operate through a branch. The draft law further provides that foreign clearing organisations and other foreign entities will be under an obligation to apply for clearing party status in a Finnish clearing organisation when they undertake the clearing of obligations arising from trading in securities that are regularly settled by a Finnish clearing organisation. 1.5 Under the draft law, foreign clearing organisations will be supervised by the Financial Supervisory Authority. According to the explanatory memorandum, the draft law aims to ensure that foreign clearing organisations chosen by the stock exchange or an organiser of multilateral trading are reliable and solvent, that adequate risk management measures are put in place, that the supervisory authorities receive necessary and adequate information from the foreign clearing organisation and from the competent supervisory authority of its home country, and that the authorities are, if necessary, able to restrict or prevent clearing operations conducted cross-border or through a branch in Finland. 1.6 The draft law proposes to amend the definition of the term ‘clearing operations’ so that it refers to the clearing ‘or’ settlement (formerly the reference was to ‘clearing and settlement’) of obligations resulting from public or multilateral trading in securities or from a trade or transfer concluded elsewhere than in public or multilateral trading of a security incorporated in the book-entry system or in a security subject to public or multilateral trading, on behalf of the parties to the transaction.

text: 2. General observations

text: The ECB understands that the purposes of the draft law are to establish a consistent legal framework for entities providing clearing or settlement services in the Finnish securities market, in particular for foreign clearing-service providers, to ensure the reliability and stability of the market and to establish a level playing field between market participants. With a view to implementing the core tasks of the European System of Central Banks (ESCB) 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’), the ECB has serious concerns relating to the proposed requirements for location/establishment of foreign central counterparties. In the ECB’s view, the provision of clearing services by foreign clearing organisations offering services in Finland is in line with the internal market freedoms, as laid down in the Treaty and addressed in further detail below. However, such provision of services may adversely affect the location policy of the Governing Council for infrastructures offering services in euro.

text: 3. Location of infrastructures

text: 3.1 The Governing Council’s location policy 3.1.1 The location policy has been publicly expressed on a number of occasions since the ECB’s establishment. Already in November 1998, the first policy statement was made in which it was stressed, inter alia, that ‘As is the case with every central bank, the ECB has a direct interest in the prudent design and management of any payment and settlement system processing its own currency, the euro. Indeed, the smooth functioning of payment and settlement systems is a crucial aspect of a sound currency and essential to the conduct of monetary policy. These systems also have a significant bearing on the functioning of financial markets. Changes in payment systems may cause unpredictable shifts in the demand for, or supply of, base money. Moreover, safe and efficient payment systems are critical to the maintenance of banking and financial stability. Against this background, … the Governing Council of the ECB wishes to underline that, as in any other monetary system, central bank money in euro can only be provided by the central banks that belong to the euro area.’ 3.1.2 The November 1998 statement was followed up by another policy statement in September 2001 relating to central counterparty clearing . Section 2(b) of this statement stated, inter alia, that the ‘logical geographical scope of a market infrastructure is in practice the currency area’, and that domestic infrastructures for the euro ‘should logically be located in the euro area, as is the case with core infrastructures in other monetary areas. This would be preferable from a regulatory perspective and would help the Eurosystem, as the “central bank” of the euro, to ensure the smooth

text: functioning of payment systems, efficient monetary policy implementation and financial stability.’ It also stated that the ‘location of central counterparties in the euro area would facilitate the provision, when deemed necessary and appropriate, of central bank money in euro.’ In this regard, point b) of the conclusions stresses that ‘The natural geographical scope for any “domestic” market infrastructure (including central counterparty clearing) for securities and derivatives denominated in euro is the euro area. Given the potential systemic importance of securities clearing and settlement systems, this infrastructure should be located within the euro area.’ 3.1.3 The Governing Council’s location policy is expressly based on the premise that ‘the ECB and the national central banks of the Eurosystem (the central banks of issue) need to retain, in any event, ultimate control over their currency, the euro. Therefore, from both a general policy and systemic risk perspective, the Eurosystem cannot, as a matter of principle, accept that payment infrastructures for euro transactions which are located outside the euro area (the home currency area) have the potential to develop into major euro payment infrastructures, particularly if this were to put at stake the Eurosystem’s control over the euro. … Payment infrastructures settling eurodenominated payment-versus-payment (PvP) and/or non-PvP payment transactions (gross, hybrid, net, net with high underlying gross amounts) that have the potential to reach systemic relevance for the euro area should, as a matter of principle, settle these payment transactions in central bank money and be incorporated in the euro area with full operational responsibility for euro transactions’ . 3.1.4 Finally, the Governing Council confirmed its location policy more recently in relation to central counterparties for over-the-counter derivatives in December 2008 and July 2009 . 3.2 Location policy and Treaty freedoms 3.2.1 As to whether the Governing Council’s location policy could be seen to pose any regulatory or legal issues related to the concept of the internal market, it is recalled that Article 14(2) of the Treaty states that the internal market comprises ‘an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty’. These freedoms are further regulated in particular in Title III of the Treaty (Articles

text: ) and also apply to the Eurosystem (because Article 1.1 of the Statute of the ESCB provides that the ESCB and the ECB must perform their tasks and carry out their activities ‘in accordance with the provisions of [the] Treaty and [the] Statute’). Furthermore,

text: Article 3(1)

text: (c) of the Treaty provides that the establishment of an internal market characterised by the abolition, as between Member States, of obstacles to the free movement of, inter alia, services and capital is one of the activities of the Community. Moreover, under Article 4(1) of the Treaty, the activities of the Member States and the Community include the adoption of an economic policy which is based,

text: inter alia, on the internal market. From the foregoing it is evident that the establishment and functioning of the internal market is one of the core activities of the Community itself. 3.2.2 The Treaty freedoms underlying the internal market must be seen in the context of the Treaty as a whole. In this respect, the ECB emphasises that the tasks of the Community are identified under Article 2 of the Treaty as being achieved ‘by establishing a common market and an economic and monetary union’. Moreover, Article 4(2) of the Treaty states that ‘concurrently with the foregoing’ (i.e. with the adoption of an economic policy based, inter alia, on the internal market), the activities of the Member States and the Community include, inter alia, the introduction of a single currency and the definition and conduct of a single monetary policy the primary objective of which is ‘to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Community, in accordance with the principle of an open market economy with free competition’. 3.2.3 The Eurosystem’s tasks relating to monetary policy, payment systems and financial stability are inextricably linked to the Governing Council’s abovementioned express statement in July 2007 that the Eurosystem central banks ‘need to retain, in any event, ultimate control over their currency, the euro’. While the Eurosystem generally has to comply with the Treaty freedoms, and in particular has to consider their implications if it wishes to make use of its regulatory power to ensure efficient and sound clearing and payment systems, this does not mean that the ECB may not impose measures that would have an impact on the Treaty freedoms, if such measures are strictly warranted in order to perform the Eurosystem’s basic tasks. In this respect, the ECB considers that it is highly significant that, under the Treaty, the Eurosystem’s monetary policy, financial stability and oversight tasks only apply to those Member States that have adopted the euro. In view of the above, the ECB is of the clear view that, in order for the Eurosystem to be able to perform its core central banking tasks, in particular the provision of central bank liquidity to infrastructures offering services in euro, such infrastructures need to be established and located within the euro area. 3.3 Location policy and oversight of settlement systems 3.3.1 In order to perform its core tasks, the Eurosystem needs to ensure the safety and efficiency of systems processing the euro. In the case of an infrastructure located outside the euro area, the Eurosystem’s ability to oversee these systems and to detect risks that could jeopardise the performance of its abovementioned core tasks at an early stage is undermined due to a mismatch between public responsibilities and public powers. Thus for instance, as highlighted by the ‘Eurosystem Oversight Policy Framework’ of February 2009 , cooperative oversight arrangements at international level can mitigate the loss of direct influence to some extent but cannot ensure the same level of influence of the issuing central bank as direct oversight, especially in a crisis situation, where access to timely information by the issuing central bank may not be possible. 3.3.2 Consequently, if such risks are not identified at an early stage, the malfunctioning of infrastructures located outside the euro area processing the euro could lead to spillover effects to infrastructures

text: within the euro area. Direct Eurosystem oversight, which is possible provided that infrastructures are located in the euro area, is key to ensuring the safety and efficiency of infrastructures processing the euro and thus to maintaining ultimate control over the euro. 3.3.3 It is in this broader context that the draft Finnish government proposal opening up the possibility for foreign clearing organisations to provide services in Finland is being considered by the ECB. 3.3.4 It is appreciated that the examination of an application by a foreign clearing organisation includes measures to ensure that that clearing organisation does not constitute a risk to the interests of investors and of financial stability in general. In this regard, it is noted that Suomen Pankki and the Financial Supervisory Authority’s opinion will, inter alia, be sought in relation to applications by foreign clearing organisations from another EEA/non-EEA Member State for authorisation by the Ministry of Finance. It is understood that there are plans to establish cooperative oversight arrangements between Suomen Pankki and the relevant competent authorities. Such prior process and cooperative oversight arrangements cannot, however, take the place of the Eurosystem’s ongoing need for the same regular performance of direct oversight on the foreign clearing system that would be conducted in the case of a Finnish organisation in order to ensure the safety and efficiency of the systems in question. 3.3.5 Furthermore, it is noted that while an EEA clearing organisation will be able to offer services on a cross-border basis, non-EEA clearing organisations seeking to provide services in Finland will, in principle, be obliged to establish a branch in Finland. However, in the ECB’s view infrastructures processing the euro should be incorporated in the euro area by way of establishment of a legal entity that has full responsibility for all critical functions of the infrastructure. This would ensure that the Eurosystem has regulatory power over and direct access to the decision-making body of the relevant infrastructure in order to bring about any necessary changes in relation to the infrastructure’s compliance with the applicable Eurosystem oversight policies and standards. A branch, unlike a subsidiary, does not constitute a separate legal entity in the relevant jurisdiction. 3.3.6 Moreover, given that central counterparty clearing has a specific role in managing counterparty risk, but also given the aim that central counterparty clearing should expand in view of the recent market turmoil, it is of the utmost importance that the Eurosystem has direct oversight over infrastructures processing the euro. The need for this is even more pronounced due to the fact that crisis management is only vaguely addressed in the draft law. 3.3.7 Consequently, the ECB is of the view that enabling the use of foreign clearing organisations located outside the euro area in Finland without requiring that the Eurosystem should have sufficient means to ensure the safety of such non-Eurosystem clearing organisations has the potential ultimately to undermine the Eurosystem’s control over the euro and the proper performance of its core tasks.

text: 4. Other specific observations

text: 4.1 Account-holding structures The ECB notes that the Finnish securities holding system (which is also a book-entry based system) is based on the principle of direct holding , where the rights pertaining to the book entries are registered directly in each account holder’s book-entry account. Book-entry securities owned by a foreign individual, corporation or foundation may be entered in a custodial nominee account administered by a custodial account holder on behalf of a beneficial owner on the basis of an authorisation. The ECB understands that the draft law does not intend to amend these securitiesholding structures and that it is planned that the more comprehensive reform of Finnish securities markets legislation will follow in 2010. In this context, the ECB nevertheless would like to refer to the explanatory memorandum to the draft law, which provides that ‘in the foreign central counterparty model, the objective of the legislation to ensure cost efficiency cannot be fully achieved unless the direct holding system will be developed towards a multi-tier holding structure, making indirect holding possible also to Finnish investors’. 4.2 Supervision The ECB notes that, under the draft law, the Financial Supervisory Authority will, in addition to Finnish clearing organisations, also supervise foreign clearing organisations and the provision of services by foreign clearing organisations without the establishment of a Finnish branch. Such foreign entities would be subject to Chapter 6 of the Law on the Financial Supervisory Authority, which contains general provisions on the supervision of foreign EEA/non-EEA entities as well as on cooperation and the exchange of information between Finnish and foreign authorities.

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

text: Done at Frankfurt am Main, 7 August 2009.

text: [signed]

text: The Vice-President of the ECB

text: Lucas D. PAPADEMOS


text: 3 The National Road Fund , operated by Bank Gospodarstwa Krajowego (BGK) , supports the financing of road and motorway construction in Poland. The draft law: (a) adds loans extended by the State budget to the list of available financing sources; and (b) regulates the procedure under which Treasury-guaranteed bonds are issued by BGK for the benefit of the National Road Fund . One of the distribution channels of such bonds may be auctions organised, inter alia, by NBP, under an agreement entered into with BGK . To enable NBP to organise such auctions, Article 2 of the draft law amends Article 48(3) of the Law on Narodowy Bank Polski by extending the NBP’s entitlement to organise trading in securities to cover, in addition to securities issued by the Treasury, securities bearing the Treasury’s guarantees or sureties.

text: As regulated under the Law of 27 October 1994 on motorways and the National Road Fund, consolidated text: Dziennik Ustaw (Dz. U.) of 2004 No 256, Item 2571. 3 BGK is the only Polish credit institution established by legislation as a State bank. 4 See explanatory memorandum to the draft law, p. 1. 5 New

text: Article 39

text: r added in the Law on motorways and the National Road Fund by Article 1(2) of the draft law. 6 Law of 29 August 1997 on Narodowy Bank Polski, consolidated text: Dz. U. of 2005 No 1, Item 2.

text: OJ L 332, 31.12.1993, p. 1. 8 See ECB Opinion

text: , paragraph 2.2; all ECB opinions are available on the ECB’s website at www.ecb.europa.eu. See also the ECB’s Convergence Report of May 2008, p. 24, stating that ‘The purpose of Article 21.2 of the Statute was to enable NCBs, following transfer of the monetary policy competence to the Eurosystem, to continue to conduct the fiscal agent service traditionally provided by central banks to governments and other public entities without automatically breaching the monetary financing prohibition.’ 9 See

text: Article 4

text: (non-extendable intra-day credits),

text: Article 5

text: (crediting, under specified conditions, the public sector’s account with cheques issued by third parties) and

text: Article 6

text: (holding, within specified limits, coins issued by and credited to the public sector). 10 See the ECB’s Convergence Report of May 2008, p. 233, which states that provision by Česká národní banka of administrative support to the Financial Arbitrator, an administrative body entirely independent from the central bank, ‘constitutes a form of central bank financing of the public sector’s obligations’. 11 See ECB Opinion

text: , paragraph 9 and ECB Opinion

text: , paragraph 2.2(b).

title: Opinion of the European Central Bank of 20 August 2009 on an extension to Narodowy Bank Polski’s entitlement to trade in securities (CON/2009/67)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 20 August 2009 on an extension to Narodowy Bank Polski’s entitlement to trade in securities (

text: ) Introduction and legal basis

text: On 27 July 2009 the European Central Bank (ECB) received a request from the Polish Minister for Finance for an opinion on a draft law amending the Law on motorways and the National Road Fund and the Law on Narodowy Bank Polski (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the third indent of

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to Narodowy Bank Polski (NBP). 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 2. Timing of the consultation

text: The ECB received the consultation request after adoption of the draft law by the Sejm and only a few days before consideration by the Senat.

text: Article 4 of Decision 98/415/EC

text: requires Member States to ensure that the ECB is consulted at an appropriate stage enabling the authority initiating the draft legislative provision to take into consideration the ECB’s opinion before deciding on the substance.

text: 3. Role of NBP and the monetary financing prohibition

text: The ECB understands that the draft law foresees provision by NBP of the fiscal agent services related to the organisation of auctions of Treasury-guaranteed bonds issued by a public undertaking (BGK) on the basis of the agreement between NBP and BGK providing for NBP’s remuneration at market rates. Provision of such services by an ESCB central bank needs to be assessed as regards its compliance with the monetary financing prohibition set out in Article 101 of the Treaty and forbidding public undertakings or other public sector entities of the Member States from obtaining overdraft facilities or any other type of credit facility with the national central bank. Furthermore, under

text: Article 1(1)

text: (b)(ii) of

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

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

text: Articles 104

text: [101] and 104b(1) [103(1)] of the Treaty , the monetary financing prohibition relates inter alia to central bank financing of the public sector’s obligations vis-à-vis third parties. Taking into account the express recognition in Article 21.2 of the Statute of the European System of Central Banks and of the European Central Bank of the provision of fiscal agency services as a legitimate function traditionally performed by central banks, the ECB notes that provision by central banks of fiscal agency services should comply with the prohibition on monetary financing, provided that such services remain within the field of the fiscal agency function and do not constitute central bank crediting of the public sector outside the narrowly defined exceptions specified in

text: Regulation (EC) No 3603/93

text: or central bank financing of public sector obligations vis-à-vis third parties . Moreover, following previous ECB opinions, even if

text: Article 101(1)

text: refers literally to ‘credit facilities’, i.e. facilities extended with the obligation to repay, this prohibition may also apply a fortiori to other forms of funding, i.e. without the obligation to repay, since Article 101 of the Treaty has the overall aim of public finance discipline and of prohibiting national central banks from financing the public sector. This implies that both the ultimate objective and the spirit of these provisions must be taken into account in their interpretation . The ECB

text: considers in this context that provision by NBP of the fiscal agent services foreseen by the draft law does not raise concerns as regards its compliance with the monetary financing prohibition.

text: Conclusion

text: The ECB has no objections to the draft law. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 20 August 2009. [signed]

text: The President of the ECB

text: Jean-Claude TRICHET