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

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

text: MNB Decree 13/2010 (IX.6.) on the reserve ratio, published in Magyar Közlöny 2010/141.

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

text: Regulation (EC) No 1745/2003

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

text: Regulation (EC) No 1052/2008

text: of the European Central Bank of 22 October 2008 (ECB/2008/10)

text: Regulation (EU) No 1358/2011

text: of the European Central Bank of 14 December 2011 (ECB/2011/26)

text: See also

text: recital 10

text: and

text: Article 3(2) of Council Regulation (EC) No 3604/93

text: No 3604/93 of 13 December 1993 specifying definitions for the application of the prohibition of privileged access referred to in

text: Article 104

text: a of the Treaty

title: Opinion of the European Central Bank of 28 October 2015 on reserve ratios (CON/2015/39)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 28 October 2015 on reserve ratios (

text: ) Introduction and legal basis

text: On 6 October 2015 the European Central Bank (ECB) received a request from the Magyar Nemzeti Bank (MNB) for an opinion on the MNB’s draft decree on the reserve ratio (hereinafter the ‘draft decree’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and

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

text: , as the draft decree relates to instruments of monetary policy of a Member State whose currency is not the euro. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Background and purpose of the draft decree

text: 1.1 In 2010 the Governor of the MNB adopted Decree 13/2010 on the reserve ratio, in relation to which the ECB adopted Opinion

text: . In respect of certain liability categories, MNB Decree 13/2010 introduced a variable reserve ratio requirement, allowing credit institutions subject to reserve requirements to choose from multiple reserve ratios, in order to enable them to cope with larger fluctuations in their liquidity needs. The draft decree ends this practice by defining that a reserve ratio of 0% will apply to: (a) deposits and loans received with a remaining maturity of over two years at the time they are entered into the balance sheet of the credit institution; (b) debt securities issued with an agreed maturity over two years; and (c) repos. A generic reserve ratio of 2% will apply to all other liabilities included in the reserve base of a credit institution subject to reserve requirements. 1.2 According to the MNB’s calculations, up to October 2015 the effective weighted average reserve ratio amounts to 2.98% for the affected credit institutions. Based on the background information provided by the MNB, the measure introduced by the draft decree is expected to release HUF 160 billion (0.5% of Hungary’s GDP; EUR 520 million) of additional liquidity that would become available to the banking sector. 1.3 In the explanatory memorandum attached to the draft decree, the MNB notes that the suggested legislative change has been brought forward due to a contradiction between the currently

text: applicable reserve requirements and the MNB’s so-called ‘self-financing programme’. According to the explanatory memorandum, ‘with the development of the programme, the MNB aims to further stimulate credit institutions’ purchases of government securities by channelling their surplus liquidity to the government securities market’, thereby strengthening financial stability by reducing the external vulnerability of the Hungarian economy. The MNB considers the currently applicable reserve ratios to be in contradiction with these objectives. The explanatory memorandum notes that the provisions of the draft decree aim to introduce reserve ratio requirements similar to those applied by the ECB. The MNB also mentioned that the draft decree reflects the fact that by 2015, Hungarian credit institutions’ liquidity environment had improved significantly in comparison to 2010, when the variable reserve ratios were introduced as a means of crisis management.

text: 2. General observations

text: 2.1 In Opinion

text: , the ECB noted that Member States whose currency is not the euro retain their powers in the field of monetary policy, which gives them greater flexibility to address liquidity shocks and market inefficiencies that hinder the implementation of national monetary policy. In that opinion, the ECB noted that once the euro is introduced, Hungary’s monetary policy will need to be consistent with the Eurosystem’s operational framework, and that credit institutions should therefore be familiar with the requirements that will apply to them once the single monetary policy is implemented in Hungary. Against the above backdrop, the ECB takes note of that the draft decree repeals the previously applicable variable reserve requirements by defining reserve ratio requirements comparable to those set out in Regulation (ECB) No 1745/2003 of the European Central Bank and its amendments introduced by

text: Article 1(3) of Regulation (EC) No 1052/2008

text: of the European Central Bank (ECB/2008/10) and

text: Article 1 of Regulation (EU) No 1358/2011

text: of the European Central Bank (ECB/2011/26) . 2.2 Credit institutions that previously chose a reserve ratio above 2% will, as a result of the draft decree, be required to reduce their minimum reserves, which will create a liquidity surplus. The ECB takes note that the draft decree does not define any requirements regarding investment of the surplus liquidity in particular assets, nor does it contain any legally binding provisions requiring credit institutions to invest in government securities. The declared aim of the draft decree referred to under point 1.3, read in conjunction with the recent changes in the MNB’s monetary policy framework, could raise questions regarding its compatibility with the principles underlying the prohibition of privileged access, as enshrined in Article 124 of the Treaty, in terms of the MNB’s communication and in terms of its possible effects. Although the prohibition on privileged access is addressed to the Member States, it also concerns national central banks since they are also bound by Union law and cannot take measures granting privileged access by the public sector to financial institutions if such measures are not based on

text: prudential considerations .

text: Recital 4

text: of

text: Council Regulation (EC) No 3604/93

text: clearly indicates that Article 124 of the Treaty forms an essential element of the submission of the public sector in its financing operations to the discipline of the market mechanism and so makes a contribution to the strengthening of budgetary discipline. In the light of the above, the MNB is invited to give due consideration to the principles underlying the prohibition of privileged access when communicating the reasons for adopting the draft decree.

text: Done at Frankfurt am Main, 28 October 2015.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Finance (Miscellaneous Provisions) Bill 2015. 2 Directive

text: of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (OJ L 173, 12.6.2014, p. 149). 3

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

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

text: See most recently

text: . See also ECB Opinion

text: , ECB Opinion

text: , and ECB Opinion

text: . All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 5

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 (OJ L 332, 31.12.1993, p. 1). 6 See e.g. paragraph 3.4 of ECB Opinion

text: and paragraph 3.4 of ECB Opinion

text: . 7

text: Article 4 of Regulation (EC) No 3603/93

text: . 8 See e.g. paragraph 2.2 of ECB Opinion

text: . 9 See e.g. paragraphs 2.2 to 2.8 of ECB Opinion

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 29 October 2015 on the deposit guarantee scheme (CON/2015/40)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 29 October 2015 on the deposit guarantee scheme (

text: ) Introduction and legal basis

type: rubrik

text: On 9 October 2015 the European Central Bank (ECB) received a request from the Irish Minister for Finance (hereinafter, the ‘Minister’) for an opinion on a draft law amending the Financial Services (Deposit Guarantee Scheme) Act 2009 (hereinafter the ‘draft law’), and draft regulations transposing certain provisions of Directive

text: (hereinafter the ‘draft regulations’, and together with the draft law, the ‘draft laws’) into Irish law. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of

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

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

type: stycke

text: 1. Purpose of the draft law

text: 1.1 The draft regulations provide that the CBI may, where it considers it appropriate and necessary having regard to the objectives of the draft regulations, provide finance to the deposit guarantee contributory fund on a short-term and urgent basis in order to meet the financing requirements of that fund under the draft regulations. The draft law provides that, where the CBI uses its own funds in respect of a payment from the contributory fund due to: (a) the available financial means of the contributory fund not being sufficient in respect of the costs to the fund of a particular compensation event in Ireland; (b) there being no funds standing to the credit of the credit institutions in the legacy fund; and (c) the extraordinary ex-post contributions referred to in the draft regulations not being immediately accessible, including for reasons relating to the financial position of the credit institution or credit institutions concerned, the amount of the payment is, with the approval of the Minister, to be repaid out of the State’s Central Fund or the growing produce thereof within two weeks.

text: 1.2 The draft law also provides for a transitional funding arrangement for the new deposit guarantee scheme for the period during which the new contributory fund is being built up, and for the return of money recovered by the deposit protection account to credit institutions for compensation events occurring on or before 1 November 2015.

text: 2. General observations

text: 2.1 The ECB welcomes the draft laws. 2.2 The ECB stresses that it does not opine on whether the draft laws effectively discharge Ireland’s obligations to implement Directive

text: . Rather, the ECB focuses on those provisions which may affect the CBI’s role as a member of the European System of Central Banks.

text: 3. Monetary financing prohibition

text: 3.1 In line with its previous opinions, including ECB Opinion

text: , addressed to the Irish authorities and concerning the Financial Services (Deposit Guarantee Scheme) Bill 2008 , the ECB reiterates its view that activities performed by the CBI need to comply with the monetary financing prohibition laid down in Article 123(1) of the Treaty and

text: Council Regulation (EC) No 3603/93

text: . This prohibits central banks from providing overdraft facilities or any other type of credit facility to the public sector, including any financing of the public sector’s obligations vis-à-vis third parties. In the same vein, the ECB expects that functions to be performed by the CBI for the benefit of the deposit guarantee scheme will be conducted in a manner fully compatible with the CBI’s institutional and financial independence, as a safeguard for the proper performance of the CBI’s tasks under the Treaty and the Statute of the European System of Central Banks and of the European Central Bank . 3.2 In this context, the ECB has consistently emphasised that the only forms of central bank financing of a national deposit guarantee scheme for credit institutions compatible with the monetary financing prohibition are: (a) intraday credit in line with the general rules on provision of such credit by the central bank ; and (b) short-term emergency liquidity financing under strict conditions established in the ECB’s convergence reports, i.e. if such funding is short term, addresses urgent situations, systemic stability aspects are at stake and decisions are at the central bank’s discretion . Provisions to this effect need to be inserted into the draft law . Taking these criteria into account, the following points are made. 3.3 The ECB welcomes the fact that the CBI is to be repaid the monies advanced to the contribution fund within two weeks. However, it is of utmost importance in satisfying the ‘short term’ financing

text: aspect of the convergence criteria that the role of the CBI is clearly defined, and that the process by which it can recover monies paid to the deposit guarantee contribution fund in the circumstances described in the draft regulations is clear and unambiguous. In this respect, the inclusion of an obligation to seek ministerial approval for repayment of the monies advanced to the contributory fund by the CBI implies that there is discretion as to whether or not the money should be repaid. In order to satisfy the criteria it is clear that the monies must be repaid. Therefore, to eliminate ambiguity on this point, the ECB suggests that the reference to seeking ministerial approval is deleted. Also, in the interests of legal certainty, it should be made clear in the draft law that the ‘contributory fund’ referred to therein is one and the same as the ‘deposit guarantee contributory fund’ referred to in the draft regulations. 3.4 In addition, the draft law provides that the CBI is to be repaid where it has used own funds in respect of a payment from the contributory fund money where the payment of own funds was made due to the reasons set out in (a) to (c) in paragraph 1.1. For the sake of clarity, it would be helpful if the draft regulations are amended so as to refer explicitly to the circumstances set out in the draft law and in (a) to (c) in paragraph 1.1. 3.5 In respect of the ‘urgency’ requirement of the criteria, the draft regulations are clear that the CBI may provide finance to the deposit guarantee contributory fund where required on an ‘urgent basis’ to meet the funding requirements of that fund under the regulations. 3.6 In respect of the requirement that an NCB has discretion as to whether or not to advance finance, the draft regulations provide the CBI with a broad discretion to advance monies where it considers it ‘appropriate and necessary’ having regard to the objectives of Part 6 of the draft regulations. These objectives are not clearly identified in the draft regulations. In order to more fully align the text of the draft regulations with the convergence criteria, the ECB suggests that the general reference to the objectives of Part 6 of the regulations should be replaced with an express reference to the objective of safeguarding systemic stability. 3.7 Finally, the ECB invites the consulting authority to consider whether it may be useful to insert a reference to Article 123(1) of the Treaty into the text of the draft laws.

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

text: Done at Frankfurt am Main, 29 October 2015.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI

type: vagledning

utgivare: ecb


title: Opinion of the European Central Bank of 30 October 2015 on amendments to the Statute of the Banca d’Italia (CON/2015/41)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 30 October 2015 on amendments to the Statute of the Banca d’Italia (

text: ) Introduction and legal basis

text: On 7 October 2015 the European Central Bank (ECB) received a request from the Banca d’Italia for an opinion on proposed amendments to the Statute of the Banca d’Italia (hereinafter, collectively, the ‘draft amendments’). The ECB’s competence to deliver an opinion is based on the second indent of Article 127(4) and Article 282(5) of the Treaty on the Functioning of the European Union as the draft amendments relate to the statutes of a national central bank. 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 amendments incorporate into the Statute of the Banca d’Italia provisions laid down in Law No 5 of 29 January 2014 which converted (with amendments) Decree Law No 133 of 30 November 2013. A previous ECB opinion issued on 21 February 2014 already took into account the amendments made by the Italian Parliament in the process of conversion. 1.2 In particular, the draft amendments specify, in accordance with Law No 5 of 2014: (a) the number 3 4 and value of the shares of the Banca d’Italia ; (b) the range of eligible shareholders ; (c) the maximum amount of shares which can be held by a single shareholder, and the methods used for the assessment of indirect shareholdings by reference to specific regulations applicable to 5 6 shareholders ; and (d) the dematerialisation of shares and their transfer by a book-entry system . 1.3 Other amendments have been introduced by the Banca d’Italia on its own initiative. In particular, the minimum period of shareholding required for shareholders to request the Board of Directors to convene the meeting of shareholders, to set its agenda, to exercise voting rights in the meeting and to benefit from the distribution of profits is shortened from three months to 40 days, in partial derogation from the rules laid down in the Consolidated Law on Finance .

text: 1 Published in the Gazzetta ufficiale della Repubblica Italiana No 23, 23.1.2014.

text: 2 Opinion

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

text: 6 Article 4 of the Statute of the Banca d’Italia, in relation to Article 6(6-bis) of Law No 5 of 2014.

text: 7 Legislative Decree No 58 of 24 February 1998. 1.4 Prohibitions on joint shareholding and the registration of encumbrances on shares other than for guarantee purposes, already provided for in the General Regulation of the Banca d’Italia , have now been included in the Statute of the Banca d’Italia. 1.5 Further changes are envisaged as far the functioning of the meeting of shareholders is concerned. Regulations governing the meetings shall be approved by shareholders with the agenda of the meeting announced to shareholders in a notice published in the Gazzetta Ufficiale della Repubblica Italiana at least 45 days before the date of the meeting. Moreover, the annual ordinary general meeting of shareholders for approval of the Banca d’Italia’s annual accounts and the allocation of the net profits shall be held no later than 31 March (instead of 31 May). 1.6 Regarding the holding of shares, the Statute of the Banca d’Italia specifies that the Board of Directors shall also be vested with the power to assess whether the top executives and shareholders of the entities purchasing shares meet the legal and statutory integrity requirements. If such requirements are not met, the Board of Directors may void the transfer of shares . 1.7 Other amendments provide for minor changes to the governance of the branches, impose upon the Banca d’Italia additional reporting obligations, repeal provisions on clawback actions and rights or titles guaranteed by liens or pledges over assets, goods and securities.

text: 2. General observations

text: 2.1 The draft amendments mainly aim at incorporating into the Statute of the Banca d’Italia the provisions laid down in Law No 5 of 2014 amending Decree Law No 133 of 2013. It is noted that the ECB has already expressed its views on some of the draft amendments, as well as related provisions of the Statute of the Banca d’Italia in previous ECB opinions. Therefore, as regards the value of shares, the cap on shareholding, buy-back operations that may be carried out by the Banca d’Italia in order to enable shareholders to comply with the limit imposed on shareholdings, the nationality requirement for eligible shareholders and financial provisions and buffers, reference is made to the views expressed in those opinions . 2.2 The ECB understands that the draft amendments regarding the rules governing the meeting of shareholders and the minimum period of shareholding required for shareholders to exercise certain shareholders’ rights have been introduced by the Banca d’Italia taking into consideration a higher dispersion of shares and an expected higher turnover of shareholders. 2.3 The ECB also understands that the provision excluding clawback actions for advances granted by the Banca d’Italia, which mirrors the wording of Article 67(4) of the Bankruptcy Law , has been repealed to avoid unnecessary duplication, whereas provisions regarding rights, title or claims guaranteed by pledges or liens have been repealed since they are not generally applicable but only

text: 8 See Article 1 of Regolamento Generale della Banca d’Italia published on the Banca d’Italia’s website at www.bancaditalia.it.

text: 10 See in particular paragraphs 1, 3.1, 3.3, 3.5 and 6 of Opinion

text: and paragraphs 3.2, 3.3, 3.4, 4.2 of Opinion

text: . enforceable by means of specific contractual arrangements. 2.4 The ECB welcomes that the annual ordinary general meeting of shareholders for approval of the annual accounts and the allocation of the net profits shall be held no later than 31 March each year with a view to providing information in a more timely manner. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 30 October 2015. [signed] The President of the ECB Mario DRAGHI


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

text: Opinion

text: Directive

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

text: Council Directive 82/891/EEC

text: , and Directives

text: and

text: , and Regulations

text: (EU) No 1093/2010

text: and

text: (EU) No 648/2012

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

text: Regulation (EU) No 806/2014

text: of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending

text: Regulation (EU) No 1093/2010

text: (OJ L 225, 30.7.2014, p. 1).

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

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

text: Opinion

text: See Article 8.4 of the Code of Conduct for the members of the Supervisory Board of the European Central Bank. Available on the ECB’s website at www.ecb.europa.eu.

title: Opinion of the European Central Bank of 4 November 2015 on the institutional framework for resolution of institutions (CON/2015/42)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 4 November 2015 on the institutional framework for resolution of institutions (

text: ) Introduction and legal basis

text: On 24 September 2015, the European Central Bank (ECB) received a request from the Governor of the Nationale Bank van België/Banque Nationale de Belgique (NBB), on behalf of the Minister for Finance, for an opinion on a draft law relating to various financial provisions, creating an administrative service with an autonomous accounting ‘social activities’ and containing a provision with regard to equality between women and men (hereinafter the ‘draft law’). The ECB has been asked to deliver an opinion within one month in order to enable the Belgian government to take the ECB opinion into consideration before submitting the draft law to the parliament. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of

text: Article 2(1) of Council Decision 98/415/EC of 29 June 1998

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

text: 1. Purpose of the draft law

text: 1.1 The Law of 24 April 2014 relating to the status and supervision of credit institutions (hereinafter the ‘Law on banking’), which was the subject of a previous ECB opinion , anticipated the adoption of Directive

text: of the European Parliament and of the Council , in designating NBB as the national resolution authority and introducing resolution mechanisms for institutions that are under resolution under Directive

text: 1.2 The draft law aims first to adapt the Law on banking to Directive

text: (the final text of which slightly differs from the draft on the basis of which the Law on banking was drafted) as well as to

text: Regulation (EU) No 806/2014

text: of the European Parliament and of the Council . In particular, the draft law reflects the delineation of the respective resolution powers of the Single Resolution Board and the NBB, the former being competent for credit institutions incorporated under Belgian law that are considered to be significant in accordance with

text: Article 6(4) of Council Regulation (EU) No 1024/2013

text: or in relation to which the ECB has decided in accordance with

text: Article 6(5)

text: (b) of the same Regulation to exercise directly all of the relevant supervisory powers. 1.3 The draft law also allows the NBB to waive the obligation to draft a resolution plan for an institution subject to the NBB’s competence which participates in an institutional protection scheme or for a credit institution which participates in a federation of credit institutions. The resolution authority may also deviate from the specific obligations stipulated in Directive

text: as regards the resolution plan, taking into account the nature of the institution’s or group’s business, its shareholding structure, its legal form, its risk profile, size and legal status, interconnectedness to other institutions or to the financial system in general. 1.4 Furthermore, the draft law stipulates that the reduction or conversion into equity of a liability to which the bail-in tool has been applied does not benefit co-debtors or third parties that have provided a personal guarantee or collateral security in respect of the bailed-in liability. In the same vein, the reduction or conversion into equity of the liability of a credit institution governed by the laws of another Member State to which a bail-in tool has been applied does not benefit co-debtors or third parties that have provided a personal guarantee or collateral security governed by Belgian law. The explanatory memorandum to the draft law explains that these clarifications are needed now in the Law on banking; the royal decree providing for the technical specifications of the bail-in tool will only enter into force on 1 January 2016. In the meantime, a guarantee issued under Belgian law to a credit institution located in a country that has already adopted legislation regarding bail-ins may already trigger questions as regards the impact of such bail-in on the obligations of third party guarantors. As clarified in the explanatory memorandum, this situation applies, in particular, as regards the guarantee granted by France, Belgium and Luxembourg in connection with certain debts of Dexia Crédit Local SA. Following the example of German insolvency law and German legislation implementing Directive

text: , which is referred to in the explanatory memorandum, the draft law would therefore provide that the bail-in of liabilities of an institution under resolution does not entail a corresponding benefit in respect of the obligations of third-party guarantors. The parties may however opt out of this principle set down in the draft law by expressly agreeing that a guarantee or financial collateral would not be protected against a bail-in. As a consequence of the approach chosen by the Belgian authorities, subsequent claims brought by

text: third parties against the failing credit institution, whether by means of subrogation or in some other manner, would be governed by the effects of the bail-in under Belgian law and would no longer be capable of being exercised, to the extent that the debt had been written off, or might need to be assigned against the securities into which the debt had been converted. To achieve a similar result when the bail-in is governed by a foreign law, such bail-in would be considered, under the draft law, as an exception inherent to the debtor (as opposed to an exception inherent to the debt itself) within the meaning of Article 2036 of the Belgian Civil Code, such that the effects of the guarantee or collateral provided by third parties would be lasting, irrespective of the potential extinction of the bailed-in liability (or part of it) under the applicable foreign law. 1.5 The draft law amends the Organic Statute of the NBB in order to: (a) adapt the composition of the Resolution College, which was the subject of a previous ECB opinion , so that the chair of the Financial Services and Markets Authority now has a merely consultative role; and (b) fine-tune the conflict of interest and incompatibility rules of the NBB decision-making bodies. In particular, so far as concerns restrictions on taking up employment with private entities, the draft law stipulates that the cooling-off period of one year for the NBB’s governor, deputy governor and board members applies to all institutions ‘subject to the supervisory power of the NBB as well as any other institutions incorporated under Belgian or foreign law established in Belgium, or subsidiaries of such institutions and which are subject to the ECB’s supervisory power’. Reference is made to the same set of institutions in order to define the incompatibility rules applicable to the regents and the majority of the censors of the NBB. 1.6 Finally, the draft law abolishes the task previously entrusted to the NBB to manage the deposit guarantee scheme, which will now be discharged by the Treasury.

text: 2. General observations

text: The ECB welcomes the draft law, as it strengthens the tools and procedures available to the national authorities for effective preventive measures, early intervention in institutions and, if necessary, the effective resolution of institutions, in line with the common framework of intervention powers and rules laid down in the BRRD.

text: 3. Conflict of interest and incompatibility rules

text: 3.1 As regards the restrictions on taking up employment with private entities, the ECB notes in particular the expansion of the list of institutions for which cooling-off periods must be observed, to include credit institutions now supervised by the ECB. The ECB welcomes this provision, which takes into account the role the NBB plays as a national competent authority (NCA) in assisting the ECB in the tasks conferred upon the ECB pursuant to

text: Council Regulation (EU) No 1024/2013

text: . This should be interpreted without prejudice to the Code of Conduct of the members of the Supervisory

text: Board of the ECB, which includes in its scope any credit institution supervised by the ECB and provides for the possibility of extending the cooling-off periods up to a maximum of two years for Supervisory Board members. Concerning the intention to extend the incompatibility provisions as regards mandates in a financial institution subject to NBB/ECB supervision to a majority of the censors, the ECB would see merit in examining whether a uniform regime for all censors would not be preferable. 3.2 Resolution procedures The ECB notes the specific provisions introduced in the Law on banking, in order to ensure that codebtors and third parties that have provided personal guarantees or collateral security in respect of bailed-in liabilities are not discharged of their respective obligations towards the creditors of the bailed-in liabilities. It would be appropriate to make clear in the draft law that the parties may opt out of this arrangement, as explained in the explanatory memorandum. In the same vein and in line with

text: Article 53 of Directive 2014/59/EU

text: , it would also be advisable to specify clearly in the draft law or the royal decree implementing the Law on banking that no subsequent claims may be brought by third parties by way of recourse against the institution under resolution (for example, by way of exercising a guarantor’s subrogation rights), except in respect of the securities into which the debt has been converted, if any.

text: Done at Frankfurt am Main, 4 November 2015.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


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

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 2 These other laws include Law No 233/1995 on judicial executors and execution activities, Law No 566/2001 on Securities and Investment Services, Law No 186/2009 on financial intermediation and financial counselling and Law No 39/2015 on insurance. 3 Directive

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

text: Council Directive 82/891/EEC

text: , and Directives

text: and

text: , and Regulations

text: (EU) No 1093/2010

text: and

text: (EU) No 648/2012

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

text: Directive

text: of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive

text: and repealing Directives

text: and

text: Communication from the Commission on the application, from 1 August 2013, of State aid rules to support measures in favour of banks in the context of the financial crisis (‘Banking Communication’ ) (OJ C 216, 30.7.2013, p. 1). 6 Law No 87/2015 which amends Law No513/1991 Commercial Code and on amendments of certain laws. 7 See

text: Article 56(4)

text: (b) of Directive

text: . 8 The ECB understands that this matter is being clarified in amendments to the draft law under discussion in the National Council of the Slovak Republic. See http://www.nrsr.sk/web/Dynamic/Download.aspx?DocID=421528..

text: See paragraph 2.1 of Opinion

text: paragraph 2.1 of Opinion

text: , and paragraph 3.2.1 of Opinion

text: . All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 10 See paragraph 2.1 of Opinion

text: and paragraph 3.2.2 of Opinion

text: . 11 See paragraph 3.1 of Opinion

text: and paragraph 2.1 of Opinion

text: . 12 See paragraph 2.1 of Opinion CON/2012/53and paragraphs 3.2.1 and 2 of Opinion

text: . 13 See paragraph 2.3 of Opinion

text: . 14 Decision of the Government of the Slovak Republic No 165/2015 of 8 July 2015 executing section 4(5) of Law No 384/2011 on a special levy on selected financial institutions.

text: See paragraph 4.1 of Opinion

text: . 16 See paragraph 3.4 of Opinion

text: . 17 See paragraph 3 of Opinion

text: . 18 See paragraph 6 of Opinion

title: Opinion of the European Central Bank of 6 November 2015 on resolving crisis situations in the financial market and on a special levy for selected financial institutions (CON/2015/43)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 6 November 2015 on resolving crisis situations in the financial market and on a special levy for selected financial institutions (

text: ) Introduction and legal basis

text: On 28 September 2015, the European Central Bank (ECB) received a request from the Slovak Ministry of Finance for an opinion on a draft law that amends Law No 371/2014 on resolution in the financial market and on amendments to certain laws (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of

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

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

text: 1. Purpose of the draft law

text: The draft law is intended to introduce several technical and substantive changes to a number of laws, including Law No 371/2014 on resolving crisis situations in financial markets, Law No 483/2001 on banks, Law No 276/2009 on measures to mitigate the effects of the global financial crisis on the banking sector and Law No 384/2011 on a special levy on selected financial institutions .

text: Amendments to Law No 371/2014

text: Most of the amendments made by the draft law consist of legislative and technical changes to the provisions implementing Directive

text: of the European Parliament and of the Council . The draft law introduces substantial changes to the way that the government financial stabilisation tool is implemented in cases of systemic crisis. The draft law reinforces the government’s and the Ministry of Finance’s role in the use of the government stabilisation tool, due to the budgetary implications

text: associated with that use. The government financial stabilisation tool may only be used in the context of resolution proceedings and provided that the conditions of Law No 371/2014 for the government stabilisation tool, which in turn implements the conditions set out in Directive

text: , are fulfilled. The draft law is not clear on whether the conditions for providing the government stabilisation tool must always include a requirement that resolution measures are insufficient to protect the public interest and emergency liquidity assistance has already been provided. Law No 371/2014 established a resolution authority called the Resolution Council. A new organisational unit was established within Národná banka Slovenska (NBS) to provide expertise to and support the Resolution Council. This new unit must ensure that the Resolution Council’s tasks are carried out independently from the other tasks of NBS. NBS staff members that perform these tasks may not be involved in any supervision over institutions in matters that do not fall under the Resolution Council’s jurisdiction. The draft law introduces amendments to further clarify that NBS employees performing these tasks must be authorised to carry out supervision under Law No 371/2014 or to perform tasks in matters entrusted to the Resolution Council where they have been designated to do this under Law No 371/2014 by the Resolution Council or by a competent Resolution Council member. The draft law also clarifies that the NBS board member who is responsible for supervision in the financial markets does not have a voting right on the Resolution Board. The draft law provides that any reasonable expenses incurred by the Resolution Council in connection with the use of resolution tools or powers, which may be recovered from institutions undergoing resolution, are to be reimbursed from state financial assets that are held in an extra-budgetary account containing the proceeds of the bank levy collected pursuant to Law No 384/2011. These reasonable expenses include those incurred in connection with the institution’s special management, the valuation of its assets, rights and liabilities or the application of government financial stabilisation tools. The draft law amends the provisions on the national resolution fund. Client assets are no longer subtracted in order to calculate the yearly contribution to the national resolution fund. The Deposit Protection Fund, which administers the national resolution fund, may delegate parts of this administration to third parties. The draft law no longer includes the possibility of NBS granting credit to the national resolution fund.

text: Amendments to Law No 483/2001

text: The draft law introduces several changes implementing or related to the implementation of Directive

text: including provisions that further clarify already existing provisions on fit and proper assessments, remuneration and recovery plans. Various technical changes have been introduced to Law No 483/2001, on provisions implementing Directive

text: with respect to intra-group financial support and the appointment of a temporary administrator. The sanctioning powers of NBS have been amended to reflect

text: Article 111 of Directive 2014/59/EU

text: The draft law also extends the deadlines by one month for NBS to give prior approval to individuals being appointed or reappointed as members of a credit institution’s statutory body or supervisory body, as an authorised agent (prokurista), managerial staff, or head of internal control and audit. With regard to significant institutions, the ECB has the supervisory role in the pre-approval procedure for these individuals.

text: Amendments to Law No 276/2009

text: The amendments to the Law No 276/2009 have two fundamental goals: (a) to align Law No 276/2009 with the provisions of Law No 371/2014, in particular with regard to the provisions on the government stabilisation tool; and (b) to reflect the Commission Banking Communication’s requirements in the process of granting state aid.

text: Amendments to Law No 384/2011

text: The draft law substantively invalidates, from 1 July 2016, the provisions introduced by Law No 87/2015 into Law No 384/2011, which allowed state financial assets from the bank levy proceeds to be used to strengthen the own funds of legal persons fully owned by the state. In addition, the draft law introduces an obligation on these legal persons to transfer any income from the use of the received proceeds back to the special extra-budgetary account in which the proceeds of the state levy are held.

text: 2. Government stabilisation tool and emergency liquidity assistance

text: Article 56(4)

text: (a) to (c) of Directive

text: requires that when applying the government financial stabilisation tools, Member States must ensure that their competent ministries or governments and the resolution authority apply these tools only if: (a) all the conditions for resolution are present; and (b) one of three specific additional conditions are met. One of these three specific additional conditions is that the competent ministry or government and the resolution authority determine that the application of the resolution tools would not suffice to protect the public interest, where extraordinary liquidity assistance from the central bank has previously been given to the institution . 2.2 The draft law is unclear on whether only one of these three conditions, or all three, must be met. This lack of clarity could lead to a possible interpretation that NBS would have to provide emergency liquidity assistance in order to enable the use of the government stabilisation tool. 2.3 Since the use of emergency liquidity assistance cannot be a pre-condition to the use of the government stabilisation tool, the text of the draft law should be clarified to ensure that only one of these three conditions must be met, and that any temporary liquidity support that NBS provides cannot be viewed as a pre-condition to the use of the government stabilisation tool.

text: 3. The use of bank levy proceeds

text: 3.1 Limited purpose of use of proceeds of bank levies or taxes 3.1.1 The ECB has consistently advised that taxes on financial institutions should be considered in relation to the dual objective of: (a) ensuring a more equitable distribution of the costs arising from their potential failure between taxpayers and the financial sector; and (b) addressing the risks that they pose . Using the proceeds of any ad hoc taxes imposed on banks for general budgetary purposes would be undesirable, to the extent that such taxes would place undue burdens on banks, hampering the provision of credit, with a knock-on effect on growth in the real economy. This might result in extra charges for their customers, and may also induce certain banks to cut back on their activities, leading to a reduction in the availability of credit and creating uncertainty for banks . 3.1.2 Consistently with the above, the ECB has in the past opined on draft legislation introducing a bank levy in Slovakia, the proceeds of which are held in an extra-budgetary account and intended to cover costs related to the resolution of financial crises in the banking sector and to protect the financial stability of the Slovakian banking sector . In particular, the ECB has reiterated in its previous opinions the necessity of introducing: (a) a clear separation between the extra-budgetary account created out of the levy proceeds and the general budgetary resources; and (b) detailed rules on the application of the resolution fund to finance bank resolution measures . The ECB has further opined that the extra-budgetary account used for the collection of the regular bank levy should not be used for other purposes . 3.1.3 The ECB recalls that Law No 384/2011 was amended by Law No 87/2015, which substantially extended the possible use of the bank levy proceeds by allowing the extra-budgetary account to be used to strengthen the own funds of legal persons that are fully owned by the state. Under these amended provisions, the Slovakian government was given the power to designate a legal person as a beneficiary of the bank levy proceeds, the amount by which such a legal person should be recapitalised, as well as the aim and manner in which that legal person could use the recapitalised own funds. The Slovakian government established these specifications in Decision No 165/2015 . Notwithstanding the ECB’s previous opinions on the subject matter, the ECB was not consulted on either of these legal acts. 3.1.4 In the light of the above, the ECB welcomes the provisions of the draft law which, from 1 July 2016, will prohibit the use of the bank levy to strengthen the own funds of legal persons that are fully owned by the state and that obliges such legal persons to transfer any income from the use of

text: already strengthened own funds to the extra-budgetary account. Nevertheless, the ECB reiterates that until 1 July 2016, a potential beneficiary legal person should only use own funds that have been strengthened in accordance with Law No 371/2014 to address concerns relating to the stability of the Slovakian financial sector. 3.2 The use of bank levy proceeds to pre-fund the resolution costs 3.2.1 Following the introduction of the resolution fund by Law No 371/2014, the ECB has recommended making clear in which part of the resolution financing process the income from the bank levy is to be employed and how the bank levy proceeds will interact with the resolution fund in order to avoid duplication of instruments . The ECB currently understands that the use of the resolution fund is limited to the use under Article 92 of Law No 371/2014, whereas the bank levy proceeds would serve as a funding backstop that is not covered by the resolution fund and for refinancing the deposit guarantee fund. 3.2.2 In the light of the above, the ECB welcomes the specification for the use of the bank levy proceeds to pre-fund reasonable expenses incurred by the Resolution Council in connection with the use of resolution tools or powers that are recoverable from institutions undergoing resolution. The ECB understands that such expenses are to be put back into the extra-budgetary account once the Resolution Council recovers these expenses: by (a) deducting any amounts paid in the course of the resolution; (b) from any proceeds generated as a result of a bridge institution’s operation being terminated; or (c) via an asset management vehicle, where the Resolution Council would be a preferred creditor.

text: 4. Funding of the resolution fund

text: The ECB has advised in the past that, in line with the monetary financing prohibition, NCBs may not fund financing arrangements that fund resolution costs . Therefore the ECB considered the provisions of Law No 371/2014, which allowed the Resolution Council to ask NBS to provide credit to the resolution fund, to interfere with the monetary financing prohibition, and advised that this provision should be deleted . In view of the above, the ECB welcomes the amendment made by the draft law, which no longer includes the possibility of NBS granting credit to the national resolution fund.

text: 5. Voting of an NBS Board member on the Resolution Council

text: The ECB has, in its previous opinion, recommended that Law No 371/2014 should make clear whether the NBS Board member appointed as a member of the Resolution Council is the NBS Board member responsible for supervision in the financial market, since this would have an impact on the voting rights of the member in question in the Resolution Council . In this regard, the ECB welcomes the clarification in

text: the draft law that the NBS Board member responsible for supervision in the financial market will not vote at a plenary session of the Resolution Council. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 6 November 2015. [signed]

text: The President of the ECB

text: Mario DRAGHI


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

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

text: See Opinions

text: and

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

text: See, for example, the ECB’s Convergence Report 2014, p. 26, and paragraph 6 of Opinion

text: See the ECB’s Convergence Report June 2014, p. 27 and the reference to ECB opinions made there.

text: See section 6D of the Central Bank of Ireland Act 1942, as inserted by section 7 of the Central Bank and Financial Services Authority of Ireland Act 2003 and as amended.

text: See also Opinion

text: and paragraph 2.6 of Opinion

text: See the ECB’s Convergence Report June 2014, p. 23.

text: See also paragraph 3.2.10 of Opinion

title: Opinion of the European Central Bank of 11 November 2015 on pay and pension provisions (CON/2015/44)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 11 November 2015 on pay and pension provisions (

text: ) Introduction and legal basis

text: On 23 October 2015 the European Central Bank (ECB) received a request from the Irish Minister for Public Expenditure and Reform for an opinion on the Financial Emergency Measures in the Public Interest Bill 2015 (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of

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

text: , as the draft law relates to the Central Bank of Ireland (CBI). 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 the five Financial Emergency Measures in the Public Interest (FEMPI) Acts that were adopted between 2009 and 2013 and reduced the remuneration of public servants and pensions payable to former public servants. The draft law amends the previous FEMPI Acts with effect from 1 January 2016 in order to begin a partial and phased reversal of the remuneration reductions made under those Acts and to make provision for the partial reversal of pension reductions imposed on public servants. 1.2 For that purpose, Part 2 of the draft law (Remuneration – Public Servants Generally) amends the Financial Emergency Measures in the Public Interest Act 2009 (hereinafter the ‘2009 Act’), which was introduced as part of the Government’s programme of measures to urgently address the serious position of the public finances, and which provided for deductions to be made from the remuneration of public servants. The draft law provides for the restoration in part or in whole of the basic salary of a public servant, where that reduced basic salary does not exceed EUR 24 000, EUR 31 000 or EUR 65 000 (as further detailed in the draft law). In addition, the draft law provides for the phased restoration of the annual remuneration of a public servant where their reduced annual remuneration is above EUR 65 000 or EUR 110 000. Finally, the draft law provides the Minister with powers to correct anomalies relating to points on the pay scale of the public service that may result from the draft law, by increasing the basic salary applicable. A public servant is defined in the 2009 Act as a person who is employed by, or who holds any office or other position

text: in, a public service body. The CBI is explicitly defined as coming within the meaning of ‘public service body’. It follows, therefore, that the 2009 Act and the draft law apply to both employees and office holders of the CBI. 1.3 Part 3 of the draft law (Pension-related deductions and Pensions) amends the 2009 Act to effect a reduction in the amount deducted from the salaries of persons in the public service who are members of an occupational pension scheme or pension arrangement. The draft law also amends the Financial Emergency Measures in the Public Interest Act 2010 (hereinafter the ‘2010 Act’) to increase the amount of pension and other benefits payable to or in respect of persons that were in the public service under an occupational pension scheme or pension arrangement. To this end, the draft law commences a partial and phased reversal of the reductions applied to public service pensions over the next three years. Public service pensions are defined as including pensions payable to or in respect of a public servant or former public servant under a public service pension scheme. Public servants are defined as persons who are employed by, or who hold any office or other position in a public service body, including the CBI, and include an office holder. Both current and former employees and office holders of the CBI come within the scope of application of the 2010 Act, and thus also the draft law. The Financial Emergency Measures in the Public Interest (Amendment) Act 2011 (hereinafter the ‘2011 Act’) amended the 2010 Act by introducing a provision pursuant to which the 2010 Act applies in respect of employees and office holders of the CBI only with its consent, given in writing to the Minister for Finance by the CBI’s Governor, and with the consent of the Minister for Finance. 1.4 Part 4 of the draft law (Miscellaneous) amends the 2009 Act so that the pay of public servants may be adjusted to reflect the terms of a collective agreement (the Haddington Road Agreement). 1.5 Currently, the CBI enjoys statutory autonomy in determining its staff policy, including remuneration, with the CBI’s officers and employees subject to individual employment contracts and to collective bargaining agreements entered into between the CBI and staff representative groups. The measures provided for in the draft law, as is the case with the 2009 Act and the 2010 Act, represent a departure from that regime in so far as the provisions proposed are to be imposed unilaterally.

text: 2. Central bank independence

text: 2.1 As the draft law applies to and directly affects the CBI’s decision-making bodies and its employees, it should be examined from the perspective of central bank independence, in particular institutional and financial independence, as well as that of the personal independence of the members of the CBI’s decision-making bodies. It is worth noting that the draft law commences a partial and phased reversal of the provisions of the five FEMPI Acts introduced between 2009 and 2013, on which the ECB has already issued its opinion , by partially reversing the remuneration and pension reductions to public servants. Nevertheless, it is worth restating the principles outlined in the ECB’s previous opinions.

text: 2.2 The principle of central bank independence as enshrined in Article 130 of the Treaty prohibits third parties, including the governments of the Member States, from issuing instructions to the national central banks (NCBs). In addition, the principle of central bank independence means that third parties may not influence, directly or indirectly, an NCB in the performance of its tasks or as regards its ability to fulfil its mandate: both operationally in terms of manpower, and in terms of appropriate financial resources .

text: Financial independence

text: 2.3 Member States may not impair an NCB’s ability to employ and retain the qualified staff necessary for the NCB to perform independently the tasks conferred on it by the Treaty and the Statute of the European System of Central Banks and of the European Central Bank. Furthermore, an NCB may not be put into a position where it has limited control or no control over its staff, or where the government of a Member State can influence its policy on staff matters. To protect autonomy in staff matters, the ECB has consistently recommended in previous opinions and in its convergence reports that any amendment to legislation on remuneration for members of an NCB’s decisionmaking bodies and its employees should be decided in close and effective cooperation with the NCB, taking due account of its views, to ensure the ongoing ability of the NCB to independently carry out its tasks. Autonomy in staff matters extends to issues relating to staff pensions . 2.4 Given that the CBI’s employees are employed under the conditions (including conditions as to remuneration and allowances) set by the Central Bank Commission , in order to protect the CBI’s autonomy in staff matters legislative provisions affecting the remuneration of members of the CBI’s decision-making bodies and employees should be drafted in close and effective cooperation with the CBI . 2.5 As regards the provisions on pension-related deductions and pensions applicable to the CBI’s officers and employees, the ECB notes that Section 1A of the 2010 Act, as inserted by the 2011 Act, required the Minister to obtain the written consent of the CBI’s Governor in respect of reductions to pensions of former CBI employees and office holders, and that this consent was granted. Personal independence of members of the CBI’s decision-making bodies 2.6 Furthermore, Member States may not seek to influence the members of an NCB’s decision-making bodies by amending national legislation affecting their remuneration. Such legislation, as a matter of principle, should apply only in respect of future appointments . The draft law applies not only to the CBI’s decision-making bodies but also more generally to all public servants in Ireland who come within its scope and, as such, does not seek directly or indirectly to influence the CBI’s decision-making bodies in the performance of their tasks. The provisions will therefore be considered compatible with the principle of personal independence, as long as the

text: abovementioned requirements in respect of the principle of financial independence are taken into account . This opinion will be published on the ECB’s website Done at Frankfurt am Main, 11 November 2015. [signed]

text: The President of the ECB

text: Mario DRAGHI


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

text: In other words, a branch of a credit institution authorised and supervised in accordance with the law of a Union or European Economic Area (EEA) Member State.

text: See Article 3(2) of the draft law. However, certain provisions under the draft law, e.g. those relating to obligations of selling institutions towards borrowers will apply to credit facilities exceeding those limits.

text: See

text: Articles 10

text: to 15 and 20 to 23 of the draft law.

text: See Article 16 of the draft law. 12 See Articles 18, 19 and 24 of the draft law. 13 See paragraph 3.3 of Opinion

text: . All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 14 See, for example, paragraph 3 of Opinion

text: . 15 It is noted that the draft law would be applicable to both performing and non-performing loans.

text: See Opinion

text: See the ECB’s 2014 Convergence Report, p. 25. 18 See Article 16 of the draft law.

text: In accordance with

text: Article 6(2)

text: (d) of the Laws of 2002 to 2007 on the Central Bank of Cyprus, the CBC exercises supervision of banks. Banks are allowed to provide asset management services by virtue of item 11 in Annex IV to the Laws of 1997 to 2015 on the business of credit institutions. 20

text: Article 6(2)

text: (e) of the Laws of 2002 to 2007 on the Central Bank of Cyprus. 21 Directive

text: of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive

text: and repealing Directives

text: and

text: (OJ L 176, 27.6.2013, p. 338). 22 See Opinion

text: . 23 See

text: Article 6(2)

text: (d) and (e) of the Central Bank of Cyprus Laws of 2002 to 2007.

text: Article 32(1) of the Laws of 1997 to 2015 on business institutions. See also Principle 2 of the principles established by the Bank for International Settlements, setting out that the supervisor and its staff should be protected against lawsuits for actions taken and/or omissions made while discharging their duties in good faith.

text: See

text: Article 4(1)

text: (a) of the draft law. 26 Articles 63-65 of the Treaty 27

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

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

title: Opinion of the European Central Bank of 12 November 2015 on the regulation of companies acquiring credit (CON/2015/45)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 12 November 2015 on the regulation of companies acquiring credit (

text: ) Introduction and legal basis

text: On 5 November 2015 the European Central Bank (ECB) received a request from the Cypriot Minister for Finance for an opinion on a draft law regulating the activities of companies acquiring credit (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 (the ‘Treaty’) and the third and sixth indents of

text: , as the draft law relates to the Central Bank of Cyprus (CBC) and to the rules applicable to financial institutions insofar as they materially influence the financial 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 purpose of the draft law is to give the CBC the power to authorise, regulate and supervise the business activity of acquiring credit facilities that have been granted by a credit institution either: (1) incorporated in Cyprus and authorised under Cypriot law; or (2) operating through a branch in Cyprus . These powers will allow the CBC to ensure that the activity of acquiring and managing credit facilities is carried out properly, and will also safeguard financial stability in Cyprus . For this purpose, the draft law includes, in the definition of credit facilities, those that have been granted either to: (a) natural persons where the total balance of the credit facilities, at the time of the transfer, does not exceed one million euro; or (b) micro and small enterprises as defined under Union law where the total balance of the credit facilities to that enterprise or group of connected enterprises, at the time of the transfer, does not exceed one million euro . Loans that do not meet these criteria can be sold to any legal entity without the CBC’s approval. 1.2 The draft law provides that only certain specified legal entities are permitted to acquire credit facilities: (a) a credit-acquiring company incorporated in Cyprus and authorised by the CBC under

text: the draft law; (b) a credit institution incorporated in Cyprus and authorised under Cypriot law; (c) a credit institution authorised and supervised by the competent authority of another Union/EEA Member State that has the right to provide services or establish a branch in Cyprus; and (d) a financial institution that is a subsidiary of a credit institution incorporated in a Union/EEA Member State and that provides its services in Cyprus or operates in Cyprus through a branch, under the .5 relevant provisions of Cypriot law . The draft law further stipulates that these legal entities may subsequently sell the acquired credit facilities to either other legal entities referred to above or to other entities that obtain the CBC’s prior written approval. 1.3 The draft law sets out the application procedure that a company must go through in order to obtain authorisation from a credit-acquiring company incorporated in Cyprus, including the documentation that the applicant company must submit to the CBC, and stipulates that the CBC shall only grant an authorisation if a number of conditions are met. The CBC must be satisfied that the company: (a) is in a position to fully comply with the draft law; (b) has shareholders and directors of good repute and with sufficient expertise to carry out their responsibilities; (c) has the organisational structure to enable it to provide its services in accordance with the draft law; (d) operates in such a manner that there are no concerns as to whether its activities may adversely impact financial stability in Cyprus; and (e) has no close links through professional or other relationships with any other entity or individual that, in the CBC‘s opinion, may prevent the CBC from carrying out effective supervision . There are also provisions requiring persons to notify the CBC of changes to their qualifying holdings in a credit-acquiring company . 1.4 The draft law also sets out the CBC’s supervisory powers over credit-acquiring companies under the draft law, and other supervisory requirements relating to minimum capital requirements, the assessment of the company’s management body and key function holders, reporting to the CBC, the CBC’s access to the company’s books and records, the CBC’s confidentiality duties and the imposition of supervisory measures and sanctions . 1.5 Without prejudice to the CBC’s duty to keep information obtained under the draft law confidential, the draft law authorises the CBC to use any of the information provided to it under the draft law for the publication of anonymous, aggregated statistical data, which the CBC may publish . 1.6 The draft law empowers the CBC, pursuant to its own directives or guidelines, to regulate, inter alia: (a) the procedures for granting, suspending and revoking authorisation; (b) the criteria for the fitness and probity of shareholders, directors and key function holders; (c) the internal organisation and governance of the credit-acquiring company; (d) outsourcing; and (e) the process for reviewing, managing and restructuring non-performing loans .

text: 1.7 The draft law provides that credit-acquiring companies must pay an annual fee of three thousand euro to cover the costs that the CBC incurs while carrying out its supervisory functions . 1.8 Finally, the draft law requires a credit or financial institution or a credit-acquiring company that decides to sell or dispose its portfolio of credit facilities to inform the borrower concerned. All the transferor’s rights and obligations, including with respect to collateral underpinning the credit facility, are automatically transferred to the acquirer .

text: 2. General observations

text: 2.1 As stressed in previous urgent ECB opinions, given the very short timeframe within which the ECB has been consulted on this legislation, it has not been possible to thoroughly assess all legal, policy and regulatory issues that the draft law raises . This opinion is based on the text of the draft law that was formally sent to the ECB by the consulting authority and does not address substantive amendments introduced in the draft law during the legislative process. If, prior to the ECB adopting its opinion, amendments were made that fundamentally change the draft law in areas in which the ECB has a specific interest, the ECB expects the consulting authority to submit the amended draft legislative provision to it as soon as possible, so that the opinion can be based on the most recent text . 2.2 The ECB understands that the adoption of the draft law is essential as it will enable credit institutions to dispose of non-performing loans, of which there are currently a high number in Cyprus with the understanding that the loans are transferred at an appropriate price. Allowing these loans to be disposed of would be beneficial in preserving financial stability in Cyprus, on the understanding that the loans are transferred at an appropriate price . 2.3 The ECB understands that by giving the CBC specific regulatory and supervisory authority over the activity of acquiring and managing credit facilities, the draft law intends to ensure that this activity is properly carried out, and more generally that the stability of the financial system in Cyprus is safeguarded. 2.4 The draft law extends the CBC’s powers to the regulation and supervision of credit-acquiring companies, thus complementing the CBC’s current responsibilities for supervising the activities of authorised credit institutions and the macro prudential supervision of the financial system to safeguard financial stability. The ECB underlines that, in the context of a proposed conferral of tasks on a central bank within the European System of Central Banks (ESCB), it is necessary to assess such a conferral against the prohibition of monetary financing under Article 123 of the Treaty. The ECB has developed the guidance set out in paragraphs 2.4.1 to 2.4.3 of this opinion, in the form of general and specific considerations, on the basis of which it may decide whether a new

text: task conferred on an ESCB national central bank (NCB) is to be considered a central banking task or a government task for the purposes of assessing such a conferral against the prohibition of monetary financing under Article 123 of the Treaty . The concrete assessment of whether the CBC’s task of supervising credit acquiring companies is to be considered a central banking task or a government task is then undertaken in paragraph 3.1 of this opinion. 2.4.1 General considerations First, genuinely new tasks or those tasks that did not form an integral part of the central banking tasks already assigned to the NCB in the past must be systematically categorised as central banking or government tasks. In recognition of the different Member States’ legal frameworks, central banking traditions and national set-ups, the tasks that an NCB currently carries out as central banking tasks are not reviewed and re-categorised, but may be reassessed if they are subject to substantial legislative amendments. Second, the principle of financial independence requires that the Member States may not put their NCBs in a position where they have insufficient financial resources to carry out their ESCB- or Eurosystem-related tasks. Third, central banking tasks comprise in particular those tasks that are related to the tasks listed in

text: Article 127(2)

text: , (5) and (6) of the Treaty. Fourth, new tasks conferred on an NCB that are atypical of an NCB’s tasks, or which are clearly discharged on behalf of and in the exclusive interest of the government or of other public entities, should be considered as government tasks. In that context, a distinction should be drawn between the liquidity- and solvency-related tasks of NCBs. Whereas for the purposes of the prohibition of monetary financing, solvency support is a government task, liquidity-related tasks that have the ultimate objective of financing the economy are central banking tasks. 2.4.2 Specific considerations Banking supervision and macro-prudential tasks are central bank tasks when carried out by an NCB, provided they do not undermine its independence in accordance with Article 130 of the Treaty. An important criterion for qualifying a new task as a government task is the impact of the task on an NCB’s institutional, financial and personal independence. In particular, the following should be taken into account. First, it should be assessed whether the performance of the new task will create conflicts of interests with existing central banking tasks, and whether the new task actually complements those existing central banking tasks. If a conflict of interest arises between existing and new tasks, there should be sufficient mitigation measures in place to adequately address that conflict. Complementarity between the new task and existing central banking tasks should not, however, be interpreted extensively, so as to lead to an indefinite chain of ancillary tasks being created. Complementarity should also be examined in terms of how those tasks are financed.

text: Second, it should be assessed whether the NCB’s financial and organisation capacity is disproportionate to the amount of time and resources it will need to perform the new task without additional financial resources and whether this could have a negative impact on the NCB’s capacity to properly perform its existing central banking tasks. Third, it should be assessed whether the performance of the new task fits into the NCB’s institutional set-up when considering central bank independence and accountability. Fourth, it should be assessed whether there are substantial financial risks inherent in the performance of the new task. Fifth, it should be assessed whether the performance of the new task exposes the members of the NCB’s decision-making bodies to political risks that: (a) are disproportionate, (b) could also have an impact on their personal independence; and in particular, (c) could possibly jeopardise the guarantee of their term of office under Article 14.2 of the Statute of the European System of Central Banks and of the European Central Bank. 2.4.3 Any final assessment on the qualification of a task given to an NCB as either falling within the scope of a central banking task or a government task should be guided by the objective of ensuring that the prohibition of monetary financing within the Eurosystem and the ESCB is consistently applied, to the extent that it applies to its members.

text: 3. Specific observations

text: 3.1 Conferral on the CBC of the task of supervising credit acquiring companies The draft law designates the CBC as the supervisory authority for credit-acquiring companies, thus broadening its current functions and activities. In the light of the guidance set out in paragraphs 2.4.1 to 2.4.3, it must be assessed whether the CBC’s new tasks constitute a breach of the prohibition of monetary financing. 3.1.1 Principle of financial independence The principle of financial independence requires NCBs to have sufficient means to carry out not only their ESCB-related tasks from an operational and financial point of view, but also their national tasks . In this regard the draft law provides that credit-acquiring companies must pay an annual fee, which is fixed at a level specified in the law, in order to cover the CBC’s costs incurred in carrying out its supervisory functions . As the impact of these new tasks on the financial position of the CBC is not clear at this stage, a more flexible mechanism for the determining the fee level would be more appropriate, with a view to safeguarding CBC’s financial independence. 3.1.2 Links to tasks listed in Article 127(5) of the Treaty Supervision over credit-acquiring companies can be considered a task related to those referred to in Article 127(5) of the Treaty, based on the understanding that it is complementary to the supervisory tasks exercised by the NCB, particularly where, as in this case, the CBC already

text: carries out supervision of credit institutions, including asset management activities , and has the task of ensuring the stability of the financial system . The purchase of problematic loan portfolios by entities specialised in asset management can be a useful and effective tool that financial institutions can use to deal with non-performing loans on their balance sheets. Member States are not required to have a legal framework for supervising credit-acquiring activities under Directive

text: . However, point 11 of Annex 1 to Directive

text: lists portfolio management as an activity that is subject to mutual recognition. To the extent that portfolio management covers credit acquisition and management activities, credit institutions authorised and supervised by the competent authorities of another Member State may carry these out in other Member States, provided that the appropriate credit institution has given the relevant authorisation for such activities. 3.1.3 Atypical tasks The purchase and sale of assets such as loan portfolios typically forms a significant part of the business of an authorised credit institution or other specialised financial institutions, including, e.g., an asset management company. Generally, the ECB has accepted the fact that NCBs are allocated financial supervisory tasks related to specific areas, provided they do not interfere with the performance of the NCB’s ESCB-related tasks . An NCB’s tasks with regard to the supervision of credit-acquiring companies can therefore be regarded as typical tasks of a central bank, particularly if, as in the CBC’s case, it has a statutory responsibility for bank supervision and financial stability . Moreover, the complementarity between the supervisory tasks already carried out by the CBC and the new task of supervising such companies is reflected in the common system of financing the CBC’s supervisory tasks through contributions from the supervised entities. 3.1.4 Discharge of tasks on behalf of and in the exclusive interest of the Government or of other public

text: entities

text: The CBC is designated as the sole supervisory authority for credit-acquiring companies in its own name and not on behalf of any other authority. There is no indication that, in carrying out its supervisory function, the CBC acts exclusively in the interests of another public entity. 3.1.5 Extent to which conflicts of interests with existing CBC tasks are addressed and the performance of tasks fits into the CBC’s institutional set-up in the light of central bank independence and

text: accountability

text: The conferral of these tasks on the CBC does not, at first glance, raise any issues with regard to conflict of interest. The performance of these tasks fits into the CBC’s institutional set-up, and does not raise any issues as regards central bank independence and accountability.

text: 3.1.6 Extent to which the performance of tasks is proportionate to the CBC’s financial and operational

text: capacity and its ability to perform its ESCB-related tasks

text: As noted above, in order to remain financially independent, NCBs must have sufficient means to carry out not only their ESCB-related tasks from an operational and financial point of view, but also their national tasks. In this regard the ECB welcomes the fact that the draft law provides that the CBC’s costs for supervising credit-acquiring companies will be covered by such companies. However, as mentioned above, the ECB considers a more flexible mechanism for the determination of the fee level to be more appropriate in order to safeguard the CBC’s financial independence. For example, it may be useful to include a provision in the draft law that will allow the fees to be increased, if needed. 3.1.7 Extent to which the performance of tasks harbours substantial financial risks The draft law is silent on the issue of the CBC’s liability with regard to its supervision of creditacquiring companies. The draft law does not contain any provisions excluding or limiting the liability of the CBC as the authority responsible for the supervision of credit acquiring companies. In contrast, the CBC’s liability with regard to its supervision over credit institutions is excluded, unless it is shown that the act or omission was not done in good faith or was the result of gross negligence . The ECB considers that it would be useful to align the CBC’s liability under the draft law with its liability concerning its supervision of credit institutions, given that potential liability issues could represent financial risks for the CBC. 3.1.8 Conclusion and summary regarding conferral on the CBC of the task of supervising credit acquiring

text: companies

text: The ECB considers that there are grounds for regarding the CBC’s task of supervising creditacquiring companies as a central banking task in the sense that it complements the CBC’s existing bank supervisory functions. The fact that the performance of the new supervisory function will be financed by supervised entities has a positive impact on the CBC’s financial capacity to assume those tasks. However, the ECB considers that the draft law potentially creates financial risks for the CBC because it does not limit the CBC’s liability as a public authority, for damages caused in the course of the exercise of its new supervisory powers, in ways similar to the CBC’s liability in connection with its bank supervisory tasks. It would be useful to align the CBC’s liability under the draft law with its liability when conducting its supervisory powers over credit institutions. Additionally, the ECB considers that a more flexible mechanism for determining the fee level would be more appropriate with a view to safeguarding CBC’s financial independence. For example, it may be useful to include a provision in the draft law that allows an increase in the level of fees, if needed. 3.2 Free movement of capital In the case of credit-acquiring companies that are not credit or financial institutions as defined in the draft law, the acquiring company would be required not only to obtain CBC authorisation for

text: such activity but also to be incorporated in Cyprus . To the extent that a credit acquiring company incorporated in a Member State other than Cyprus seeks to carry on credit acquiring activities in Cyprus, the consulting authority is invited to consider, subject to the competences of the European Commission, whether this additional requirement is in line with the provisions on the free movement of capital under the Treaty. 3.3 Concerns over a level playing field and opportunities for regulatory arbitrage The draft law subjects credit-acquiring companies to notional minimum capital requirements, as well as other regulatory requirements. The ECB understands that the Cypriot authorities opted not to impose express limits on leverage and liquidity requirements at this stage, in order to offer wider opportunities for new companies entering the market for such services, with a view to facilitating private debt restructuring. 3.4 Credit institutions directly supervised by the ECB With regard to credit institutions directly supervised by the ECB, the powers given to the CBC should be in line with the ECB’s competence under

text: Council Regulation (EU) No 1024/2013

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

text: Done at Frankfurt am Main, 12 November 2015.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI