title: Opinion of the European Central Bank of 6 December 2019 on a guarantee scheme for securitisations of loans originated by credit institutions (CON/2019/42)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 6 December 2019 on a guarantee scheme for securitisations of loans originated by credit institutions (

text: ) Introduction and legal basis

text: On 20 November 2019 the European Central Bank (ECB) received a request from the Greek Ministry of Finance for an opinion on a draft law on a guarantee scheme for securitisations of loans originated by credit institutions (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 sixth indent of

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

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

text: 1. Purpose of the draft law

text: 1.1 Objective and scope of the draft law The draft law provides for the introduction of a State guarantee scheme for securitisations, setting out the terms and conditions under which the Greek State may guarantee the senior tranche of asset-backed securities (ABS) backed by receivables (the ‘Receivables’) originated by Greek credit institutions, or subsidiaries of foreign credit institutions established in Greece, and sold and transferred by such institutions (the ‘Originator’ or ‘Seller’) to a special purpose vehicle (SPV) (the ‘Issuer’ or ‘Acquirer’) under Articles 10 and 14 of Law No 3156/2003 on bond loans, securitisation of claims and other provisions . The Receivables are claims of the Originator arising from loans and other forms of credit provision, including receivables that are in temporary or permanent arrears or that have been restructured. 1.2 Structure of eligible securitisation transactions In order for a transaction to benefit from the State guarantee envisaged in the draft law, it must be structured as follows: (i) the Issuer must finance the purchase of the Receivables by issuing ABS notes comprising at least two tranches (senior and junior), it being possible for the securitisation transaction also to provide for the issuance of a mezzanine tranche; (ii) the capital of the junior

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: 2 Law No 3156/2003 on bond loans, securitisation of claims and other provisions, Government Gazette A 157/25.6.2003), as amended and in force. tranche may only be repaid after the repayment in full of the senior tranche and, if issued, the mezzanine tranche; (iii) the consideration received by the Seller for the sale and transfer of the Receivables may not exceed the net book value of the transferred Receivables, which is defined in the draft law as the nominal value of the Receivables minus the provisions taken by the Originator and recorded in the Originator’s accounting books and records on the date of the sale and transfer of the Receivables; (iv) the interest rate on the ABS notes is to be floating or fixed and the interest period is to be a 3-, 6- or 12-month period; and (v) the ABS notes must be freely transferable and capable of being listed for trading on a regulated market or a multilateral trading facility. 1.3 Subscription restrictions The draft law provides that the junior tranche and, if issued, the mezzanine tranche may not be subscribed by the State, public law bodies or general government entities, including companies that are directly or indirectly controlled by the State. 1.4 Waterfall of payments The contractual documentation for the securitisation transaction must stipulate that the proceeds received by the Issuer from repayments made under, and from the servicing of, the Receivables, as well as from any loan or credit agreements, hedging and security agreements, including financial derivatives agreements, entered into by the Issuer for the purposes of financing the securitisation transaction will be used for payments in the following order: securitisation transaction costs; taxes; servicer’s fees (if not deferred); interest on loans or other liquidity or credit lines which the Issuer may enter into for the purposes of the securitisation transaction; claims of the State for the guarantee premium payable by the credit institutions participating in the scheme; claims of hedging counterparties for hedging transactions entered into by the Issuer for the purposes of the securitisation transaction; interest on the senior notes; claims other than interest under loans or other liquidity or credit lines which the Issuer may enter into for the purposes of the securitisation transaction; interest on the mezzanine notes (if not deferred); capital on the senior notes; capital on the mezzanine notes (provided that the capital on the senior notes has been fully repaid); capital on the junior notes (provided that the capital on the senior and the mezzanine notes has been fully repaid). 1.5 Servicing The servicing of the transferred Receivables must be assigned to a servicer which must be independent (as per IFRS 10) from the Originator. 1.6 Deferral of payment of interest on the mezzanine and of servicer’s fee The contractual documentation for the securitisation transaction must stipulate that the payment of (i) interest on the mezzanine notes and (ii) part of the servicer’s fee will be mandatorily deferred if the aggregate net proceeds received from the servicing of the transferred Receivables since the beginning of the servicing are at least 20% less than the net proceeds forecast in the servicer’s business plan which was taken into account when the senior notes were assigned a credit rating.

text: 3 The contractual documentation for the securitisation transaction may provide for additional cases of deferral where deviations from the forecasted net proceeds are lower than 20%. Net proceeds are defined in the draft law as the aggregate collections made under the transferred Receivables minus the securitisation transaction costs. This deferral is triggered 12 months after the entry into force of the State guarantee. 1.7 Amount, conditions and pricing of the State guarantee The maximum amount of the State guarantee for the entire scheme is capped at EUR 12 billion, but may be increased in the future by decision of the Minister for Finance following a decision of the European Commission. The State guarantee is an undertaking by the State, subject to the conditions described below, to meet all obligations of the Issuer in connection with the full repayment of senior ABS notes, including claims for the repayment of capital thereof and the payment of interest thereon throughout the life of said notes. The State guarantee enters into effect if the following conditions are met: (i) at least 50% of the junior notes plus one must have been transferred against a positive value; (ii) a sufficient number of the junior notes (and of the mezzanine notes, if issued) must have been transferred at a positive price such that the transferred Receivables have been derecognised, accounting-wise, from the financial statements of the Originator and the Originator’s group on a consolidated basis in accordance with the applicable IFRS; (iii) the senior notes must have been assigned at a minimum a rating of ΒΒ-, Ba3, ΒΒ-, BBL by at least one external credit assessment institution (ECAI) which is accepted by the ECB at the time the guarantee enters into effect; and (iv) the servicing of the transferred Receivables must have been assigned to an independent servicer. In addition, in order for the guarantee to be granted, the contractual documentation for the securitisation transaction must provide, among other things, that (i) a delay on the part of the Issuer in paying interest on the senior notes and the call on the State guarantee to cover the relevant amounts will not cause the Issuer’s debt obligations to fall due prematurely; and (ii) certain terms of the transaction may not be amended without the prior explicit consent of the Minister for Finance . The State guarantee is explicit, irrevocable, unconditional and payable on first demand, in accordance with Articles

text: and

text: of Regulation (EU) No 575/2013 of the European Parliament and of the Council , as if the State were the primary obligor. Furthermore, it is governed by Greek law and is to be interpreted in accordance with the Commission decision of 10 October 2019 granting State aid clearance to the scheme (the ‘Commission State aid decision’) and the State aid rules laid down in primary and secondary EU legislation. Lastly, the State guarantee is granted until maturity of the senior notes. The State guarantee is granted against a premium payable at the beginning of the interest period from the entry into force of the State guarantee and for its entire duration. This premium is

text: Regulation (EU) No 575/2013

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

text: Regulation (EU) No 648/2012

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

text: 6 See Commission Decision C(2019) 7309 final of 10 October 2019 (Case SA.53519 – Greece – Hellenic Asset Protection Scheme (‘Hercules’), which concluded that the guarantee scheme contained in the draft law does not constitute aid within the meaning of

text: Article 107(1)

text: TFEU. calculated on the basis of Annex B to the draft law which reflects Section 3.2 of the Commission State aid decision. 1.8 Applications for a State guarantee Applications for a State guarantee under the scheme may be submitted within 18 months from the date of the Commission state aid decision, namely until 10 April 2021. By decision of the Greek Minister for Finance following a decision by the Commission, this period may be extended, and the terms and conditions of the guarantee may be amended for the future. Applications for a State guarantee under the scheme will be granted on a first-come first-served basis. If the State guarantee does not enter into effect within 12 months from the publication of the relevant ministerial decision, that decision will be revoked ipso jure and the relevant amount of the guarantee will be released and become available again. In that situation no new application for a guarantee for the same securitisation may be submitted within 6 months from the revocation of the ministerial decision. 1.9 Calls on the state guarantee The senior noteholders (acting through their representative) may call on the guarantee within a window of 9 months beginning 60 days after non-payment of any of the Issuer’s liabilities related to the senior notes. The State must pay the guarantee within 30 days from receipt of the call notification, whereupon it will be subrogated to the claims of the senior noteholders against the Issuer. 1.10 Information requirements and monitoring of the scheme The servicer is required to submit to the Ministry of Finance servicing reports based on the ESMA template reports for securitisation transactions. An adapted report must also be submitted on a regular basis to the Bank of Greece and to a special ministerial committee established for the purposes of monitoring the State guarantees applied for or granted under the draft law . This committee will also receive certain information related to payments made under the securitisation transaction. The scheme, its implementation and the various specificities in its setup, in particular the rating requirements and their application, will be subject to regular monitoring by a monitoring trustee, to be appointed by the Minister for Finance with the consent of the Commission. 1.11 Termination of the State guarantee The State guarantee will cease to be effective if the terms and conditions of the securitisation are amended in a way that breaches the Commission State aid decision. The senior noteholders may at any time apply to have the guarantee terminated. If the senior noteholders are the Originator, the consent of the competent supervisory authority will also be required. 1.12 Replacement of the servicer Article 11(1) of the draft law provides that if a State guarantee is called on, the servicer servicing the transferred loans may be replaced provided that, for two successive interest periods, the net

text: 7 The committee is made up of representatives from the Public Debt Management Agency, the Bank of Greece, the Ministry of Finance and the Greek Court of Auditors. proceeds from the servicing of the transferred Receivables has deviated, due to negligence by the servicer, by at least 30% from the cumulative net proceeds forecast for the relevant periods in the servicer’s business plan which was taken into account by the ECAI that assigned the rating to the senior notes. 1.13 Exemption of the guarantee from the guarantee ceiling State guarantees granted under the scheme do not count towards the calculation of the maximum guarantee ceiling that the Greek State may provide on an annual basis .

text: 2. General observations

text: 2.1 Effects on the banking sector The ECB notes that, for a number of reasons, addressing high levels of non-performing loans (NPLs) has been one of the ECB’s supervisory priorities since the inception of the Single Supervisory Mechanism (SSM) . First, NPLs weigh on the balance sheets of credit institutions, curbing their profits. Second, NPLs are distracting for credit institutions, and represent a drain on their resources. Third, NPLs undermine investors’ confidence in credit institutions. In addition, internal analysis conducted by the ECB shows that, over recent years, credit underwriting by credit institutions with a high amount of NPLs has consistently been lower than that of credit institutions with loans of better credit quality, thereby providing less support to firms and households and the economy in general . Further, high stocks of NPLs are a macroprudential issue and can affect entire economies . From a financial stability point of view, the presence of significant volumes of NPLs on credit institutions’ balance sheets reduces their ability to fulfil their function as providers of credit to the real economy and hampers operational flexibility and overall profitability which are essential to a well-functioning banking sector. 2.2 It is therefore important that NPLs are dealt with in an efficient and effective manner. Risk transfer through asset sales, securitisation and other measures is an important part of the toolkit available to credit institutions to reduce NPLs in an effective manner, in addition to other tools such as the originating credit institutions’ internal procedures for handling the work-out of NPLs. In addition, the ECB has been a strong proponent for the development of secondary markets for credit institution assets, particularly for NPLs, as reflected in the action plan of the Council of the European Union to

text: 8 That ceiling is determined by a decision of the Greek Minister for Finance under Article 104 of Law No 4549/2018 on provisions for the completion of the Agreement on Fiscal Targets and Structural Reforms – Medium-term Fiscal Strategy Framework 2019-2022 and other provisions, (Government Gazette A 105/14.06.2018) and cannot account for more than 1.5% of the primary expenditure of the national budget in the relevant year.

text: 9 See e.g. the speech by Danièle Nouy, former Chair of the Supervisory Board of the ECB, and Sharon Donnery, Chair of the ECB’s High Level Group on non-performing loans, ‘Introductory remarks to the public hearing on the draft addendum to the ECB guidance to banks on non-performing loans’, Frankfurt am Main, 30 November 2017, available on the ECB’s Banking Supervision website at www.bankingsupervision.europa.eu.

text: 10 See ‘European banking supervision three years on,’ Welcome remarks by Mario Draghi, President of the ECB, at the second ECB Forum on Banking Supervision, Frankfurt am Main, 7 November 2017, available on the ECB’s website at www.ecb.europa.eu.

text: 11 See paragraph 1 of Opinion

text: and paragraph 3.3.3 of Opinion

text: . All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. tackle NPLs in Europe . In the context of the large stocks of NPLs that remain on the balance sheets of some European credit institutions, and as part of a comprehensive solution to NPL resolution , the development of secondary markets may contribute to reducing NPLs. Therefore, a carefully designed scheme resulting in incentivising the transfer of the risks of NPLs off credit institutions’ balance sheets would generally have a positive effect on financial stability and the reduction of NPL levels. 2.3 The elevated level of NPLs in Greece has been one of the key areas of focus in recent years and is being closely monitored from a supervisory perspective. The four significant Greek credit institutions directly supervised by the ECB have committed to achieve certain NPL reduction targets by 2021. The Greek authorities have also committed to ‘implement reforms aimed at restoring the health of the banking system, including NPL resolution efforts by ensuring the continued effectiveness of the relevant legal framework’ . 2.4 The ECB understands that the scheme envisaged by the draft law for banks to use in the context of NPL securitisations is voluntary. The ECB notes that this Opinion does not assess the regulatory treatment of the state guarantee foreseen by the draft law. The ECB suggests that the consulting authority engage in meaningful and timely consultations with all relevant stakeholders, including with the supervisory authorities, as such consultations might shed light on aspects of the draft law which may otherwise not be immediately apparent.

text: 3. Specific observations

text: 3.1 Legal certainty Clear drafting of the draft law is required in order to ensure legal certainty. The ECB notes that achieving legal certainty is necessary to ensure that: (i) the scheme attracts significant third-party investor interest, especially for the junior tranche and, if issued, the mezzanine tranche, the placement of which would contribute to the banks achieving a significant risk transfer with accounting deconsolidation; and (ii) disputes and/or litigation arising out of the validity, amount, duration or other features of the State guarantee are avoided. Some provisions in the draft law might give rise to legal uncertainty and could be helpfully redrafted to enhance clarity and reduce risks .

text: 12 See the Council of the European Union’s press release of 11 July 2017 on the ‘Council conclusions on Action plan to tackle non-performing loans in Europe’, available at: http://www.consilium.europa.eu/en/press/pressreleases/2017/07/11/conclusions-non-performing-loans/. See also Opinion

text: 13 See, for example, Special features, Section B of the ECB’s November 2016 Financial Stability Review, available at: https://www.ecb.europa.eu/pub/pdf/other/sfbfinancialstabilityreview201611.en.pdf.

text: 14 See Annex to the Eurogroup Statement on Greece of 22 June 2018, available on the Council’s website at https://www.consilium.europa.eu.

text: 15 For example,

text: Article 2(13)

text: defining securitisation costs which in turn affects the definition of net proceeds;

text: Article 3(4)

text: determining the conditions for the deferral of payment of interest on the mezzanine tranche and of the servicer’s fee;

text: Article 6(1)

text: on increasing the maximum amount of State guarantee that can be granted under the draft law following a decision by the Commission; and

text: Article 9(1)

text: (f) read together with Article 14 of Law No 3156/2003 and paragraphs 2(8) and 3 of Annex C2 to the draft law determining the taxes, fees or charges, if any, payable in respect of the State guarantee and the party liable to pay them. Most importantly, the following aspects of the draft law must be sufficiently clarified in the draft law, or in secondary legislation to be enacted pursuant to that law, since they all have a bearing on the enforceability of the State guarantee and, therefore, an impact on the effectiveness of the scheme as a whole: (i) the date of entry into effect and the date of termination of the State guarantee; and (ii) the detailed rules for the submission of applications for a State guarantee under the draft law . It is also crucial that the exact procedure from a call on a guarantee to the payment of said guarantee is clearly drafted in the draft law or in secondary legislation enacted pursuant to that law, in a way that safeguards the concept of the first demand guarantee as stated in the draft law. Lastly, it is suggested that the detailed rules applying to the monitoring of securitisation transactions entered into under the draft law would benefit from further clarification in the draft law, or in secondary legislation to be enacted pursuant to the draft law, as would the associated documentary requirements and frequency of the monitoring . A qualified independent entity is recommended as it would be well positioned to monitor the compliance of the issued guarantee with stated conditions, servicer performance and events that would trigger a call on the guarantee . 3.2 Clearer wording when allowing full repayment of the senior tranche prior to any payment of interest on the mezzanine tranche in the waterfall structure Article 3(3) of the draft law seems to regulate the waterfall in a strict, pre-defined way. It is suggested that the draft law should present in a clearer way the ranking of the payment of interest on the mezzanine tranche in the waterfall structure, in a way that does not preclude that full repayment of the senior tranche (including principal) may occur prior to any payment of interest on the mezzanine tranche. From a prudential point of view, this will ensure faster repayment of the senior tranche and could therefore reduce the term of the guarantee. 3.3 Credit assessment of senior notes Article 7(1) of the draft law requires the senior notes to be rated by an ECAI ‘approved by the ECB at the time the State guarantee enters into effect’. The ECB notes that it does not approve ECAIs. The Eurosystem accepts certain ECAIs whose ratings are considered suitable for the specific purpose of its monetary policy operations. Such ECAIs must comply with the general acceptance criteria for ECAIs, one of which is that they be registered by the European Securities and Markets Authority in accordance with

text: Regulation (EC) No 1060/2009

text: of the European Parliament and of the Council .

text: 16 See also paragraph 3.2.2 of Opinion

text: . For example, the date of entry into effect of the State guarantee should be uniformly applied in the draft law and be clearly distinguished from the date the guarantee was granted. In addition, the date of termination of the State guarantee would be more clearly defined if it were linked to breaches of the draft law, as opposed to breaches of the Commission State aid decision.

text: 17 For example, the competences of the monitoring committee established by Article 16 of the draft law could be drafted more clearly.

text: 18 See also paragraph 3.2.4 of Opinion

text: Regulation (EC) No 1060/2009

text: of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (OJ L 302, 17.11.2009, p. 1). See Article 120(1) of Guideline

text: (EU) 2015/510

text: of the European Central Bank of 19 December 2014 on the implementation of the Eurosystem monetary policy framework (General Documentation Guideline) (ECB/2014/60) (recast) (OJ L 91, 2.4.2015, p. 3). The list of ECAIs accepted by the Eurosystem can be found on the ECB’s website at https://www.ecb.europa.eu/paym/coll/risk/ecaf/html/index.en.html. 3.4 Term of the State guarantee Article 6(7) of the draft law provides that the State guarantee will remain in place until the set maturity date of the senior notes. It is suggested that the term of the guarantee should endure until repayment has been made in full of all amounts owed in respect of the senior notes. 3.5 Regular reviews Finally, it would be advisable to provide for an independent qualified entity to regularly review and assess the effectiveness of the scheme envisaged in the draft law by reference to its objectives and its impact on the credit institutions covered in the short and medium term. One year following its introduction might be a reasonable point at which to review the overall operation of the new scheme . 3.6 Compliance with state aid rules It is for the Commission to assess the draft law’s compliance with Union State aid rules. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 6 December 2019. [signed] The President of the ECB Christine LAGARDE

text: 20 See paragraph 3.3 of Opinion

text: and paragraph 3.9 of Opinion


text: EUT C 385, 13.11.2019, s. 1.

publisher: Europeiska centralbanken

sprak: sv

title: ECB-rådets yttrande av den 11 december 2019 om en rekommendation från rådet om utnämning av en ledamot I Europeiska centralbankens direktion (CON/2019/43)2019/C 425/02

serie: con

text: Inledning och rättslig grund

type: rubrik

text: Den 15 november 2019 mottog Europeiska centralbanken (ECB) en begäran från Europeiska rådets ordförande om ett yttrande över ett förslag till rådets rekommendation av den 8 november 2019 om utnämning av en ledamot i Europeiska centralbankens direktion.

type: stycke

text: ECB-rådets behörighet att avge ett yttrande grundar sig på

text: artikel 283.2 i fördraget om Europeiska unionens funktionssätt

text: Allmänna kommentarer

text: 1. I rådets rekommendation, som överlämnats till Europeiska rådet och som Europaparlamentet och ECB-rådet nu ska yttra sig över, föreslås att Isabel Schnabel utnämns till direktionsledamot i Europeiska centralbanken för en tid av åtta år från och med den 1 januari 2020.

text: 2. ECB-rådet anser att den förslagna kandidaten är en person som besitter den allmänt erkända auktoritet och yrkeserfarenhet inom den finansiella sektorn som krävs enligt artikel 283.2 i fördraget.

text: 3. ECB-rådet har ingen invändning mot rådets rekommendation att utnämna Isabel Schnabel till ledamot i Europeiska centralbankens direktion.

text: Utfärdat i Frankfurt am Main den 11 december 2019.

text: ECB:s ordförande

text: Christine Lagarde

type: vagledning

utgivare: ecb


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 paragraph 2.1 of Opinion

text: , paragraph 2.1 of Opinion

text: , paragraph 3.1.1 of Opinion

text: , 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. 3 See paragraph 2.1 of Opinion

text: , paragraph 3.1.1 of Opinion

text: . 4 See paragraph 2.1 of Opinion

text: , paragraph 3.2.1 of Opinion

text: . 5 See paragraph 2.1 of Opinion

text: , paragraph 3.1.1 of Opinion

text: , paragraph 2.1 of Opinion

text: and paragraph 3.2.2 of Opinion

text: . 6 See paragraph 3.2 of Opinion

text: , paragraph 2.4 of Opinion

text: , paragraph 2.4 of Opinion

text: , paragraph 2.2 of Opinion

text: , paragraph 2.2 of Opinion

text: and paragraph 3.2.2 of Opinion

sprak: en

title: Opinion of the European Central Bank of 16 December 2019 on taxes on assets of certain financial market participants and additional corporate income taxes on certain credit institutions (CON/2019/44)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 16 December 2019 on taxes on assets of certain financial market participants and additional corporate income taxes on certain credit institutions (

text: ) Introduction and legal basis

text: On 11 October 2019, a draft legislative proposal on taxes on assets of certain financial market participants was introduced into the Lithuanian Parliament (the ‘draft law on financial market participants’ asset tax’). On 6 December 2019, a draft legislative proposal amending the Law on corporate income tax imposing an additional tax on profits of banks and credit unions was introduced into the Lithuanian Parliament (the ‘draft law on credit institutions’ income tax’). The draft law on financial market participants’ asset tax and the draft law on credit institutions’ income tax are collectively referred to as the ‘draft laws’. The ECB has decided to deliver an own initiative opinion on the draft laws, since it has not been formally consulted on the draft laws by the Lithuanian authorities. The ECB’s competence to deliver an opinion is based on the second subparagraph of Article 127(4) of the Treaty on the Functioning of the European Union in conjunction with the sixth indent of

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

text: , as the draft laws concern 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 laws

text: Draft law on financial market participants’ asset tax

text: 1.1. The draft law on financial market participants’ asset tax would impose an obligation on certain financial market participants to pay a monthly tax of 0.03 % of the value of financial market participants’ assets, subject to certain exemptions, deductions and exceeding a certain threshold. 1.2. Under the draft law, the tax applies to banks, branches of foreign banks licensed in Member States of the European Union (EU) and the European Economic Area (EEA) that are established

text: in Lithuania, branches of foreign banks licensed in non-EU/EEA countries that are established in Lithuania, credit unions, central credit unions, consumer credit lenders and credit lenders. 1.3. According to the draft law, the tax base for banks, branches of foreign banks, central credit unions and credit unions will be the average annual assets excluding funds at the Lietuvos bankas, funds lent to the State, cash, tangible and intangible assets, own funds calculated as the simple average of the value of assets at the end of four quarters of the preceding calendar year, in excess of EUR 300 million. 1.4. The tax base of the consumer credit lenders and credit lenders will be the average annual amount of disbursed consumer credit or credit related to real estate, which remains to be repaid, calculated as the simple average of the annual amount of disbursed consumer credit or credit related to real estate, as the case may be, which remains to be repaid at the end of four quarters of the preceding calendar year, in excess of EUR 300 million. 1.5. The draft law provides a series of exemptions from the tax, as follows: (1) for a one-year period following the application to banks (including banks licenced in EU/EEA Member States, which have established branches in Lithuania) or central credit unions of measures provided for in a recovery plan, or adoption of a decision to reorganise such banks or central credit unions, (2) during the period of a moratorium declared with respect to a bank (including a branch of a bank licenced in a country other than an EU/EEA Member State), central credit union, credit union, or a bank licenced in an EU/EEA Member State, which has established a branch in Lithuania, and (3) if a taxpayer is subject to bankruptcy or restructuring, or bankruptcy proceedings are initiated against a foreign bank, which has established a branch in Lithuania. 1.6. As noted in the explanatory memorandum to the draft law, the purpose of this draft law is to enable the financial market participants referred to in the draft law to increase their contribution to the State budget revenue, needed to finance public services and meet public obligations.

text: Draft law on credit institutions’ income tax

text: 1.7. The draft law on credit institutions’ income tax would impose an obligation on certain credit institutions, namely, commercial banks, branches of foreign commercial banks, credit unions and central credit unions (collectively referred to as ‘credit institutions’), to pay an additional profit tax at the rate of 5 % of the taxable profits of the credit institution. 1.8. The base for the additional profit tax shall be the taxable profit of the credit institutions, calculated by deducting from the taxable income of the credit institution the allowable deductions, nontaxable income, deferred tax assets and other amounts prescribed by the draft law, in excess of 2 million euros. 1.9. Credit institutions’ annual profits of up to 2 million euros shall not be subject to additional profit tax. 1.10. The additional profit tax shall apply as of 1 January 2020 and be in effect for a three year period. 1.11. As explained in the draft law, the main purpose of the draft law is to ensure that the financial sector contributes to a greater extent to the fulfilment of social and other public obligations, whereas currently credit institutions are subject to a favourable tax treatment compared to other corporates in Lithuania.

text: 2. General observations

text: 2.1. 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 the financial institutions’ potential failure between taxpayers and the financial sector; and (b) addressing the risks that the failure of financial institutions would 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 . The proceeds from taxes on financial institutions should be ring-fenced to avoid using them for general fiscal consolidation purposes . 2.2. In addition, imposing any ad hoc taxes on banks for general budgetary purposes should be preceded by a thorough analysis of potential negative consequences for the banking sector to ensure that such taxes do not pose risks to financial stability and the provision of credit, which could eventually adversely affect growth in the real economy. This might in turn result in banks offering less favourable terms to their customers when providing loans and other services 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 these banks . 2.3. The introduction of the tax should be carefully considered with regard to its impact on the profitability of affected financial institutions, and thereby on their internal capital generation capacity which in turn affects both their resilience to adverse shocks and the ability to extend credit and support the real economy. In this context, the differences in the situation of individual banks must be taken into account, as must the potential impact of other relevant regulations that are being introduced in Lithuania and in the Union. In particular, the situation of weaker banks and banks that may be disproportionally affected and record losses as a result of the proposed tax should be fully analysed. 2.4. In the light of the foregoing, and in line with its previous opinions , the ECB has concerns that the draft law on financial market participants’ asset tax could have a material adverse effect on the Lithuanian financial system and trigger potential undesired distortions with respect to bank business models. The ECB urges the Lithuanian authorities to assess the impact that the introduction of this tax would have on the stability of the Lithuanian financial system.

text: 2.5. Regarding the draft law on credit institutions’ income tax, it is recommended that the draft law is accompanied by a comprehensive impact assessment regarding the introduction of this tax. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 16 December 2019. [signed]

text: The President of the ECB

text: Christine LAGARDE


text: Закон за изменение и допълнение на Закона за платежните услуги и платежните системи

text: Directive (EU) 2015/2366

text: of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives

text: and

text: and

text: Regulation (EU) No 1093/2010

text: , and repealing Directive

text: (OJ L 337, 23.12.2015, p. 35).

text: Regulation (EU) 2019/518

text: of the European Parliament and of the Council of 19 March 2019 amending

text: Regulation (EC) No 924/2009

text: as regards certain charges on cross-border payments in the Union and currency conversion charges (OJ L 91, 29.3.2019, p. 36).

text: Proposed revised Article 68(6) of the Law on payment services and payment systems. 7 Proposed new

text: Article 148

text: a of the Law on payment services and payment systems. 8 Commission Delegated

text: Regulation (EU) 2018/389 of 27 November 2017

text: supplementing

text: Directive (EU) 2015/2366

text: of the European Parliament and of the Council with regard to regulatory technical standards for strong customer authentication and common and secure open standards of communication (OJ L 69, 13.3.2018, p. 23). 9 See, for example,

text: Article 35 of Directive (EU) 2015/2366

text: and Article 16 of Regulation of the European Central Bank

text: (EU) No 795/2014

text: of 3 July 2014 on oversight requirements for systemically important payment systems (ECB/2014/28) (OJ L 217, 23.7.2014, p. 16). 10 See Principles for Financial Market Infrastructures (PFMIs) available at https://www.bis.org/cpmi/info_pfmi.htm. The PFMIs were transposed in Bulgarian law by Article 141 of the Law on payment services and payment systems and Ordinance No. 16 of the BNB of 29 March 2018.

text: Articles

text: and

text: of Directive (EU) 2015/2366. 12 Articles 50 and 51 of the Law on payment services and payment systems. 13 See Article 3(1) of the Law on payment services and payment systems, which distinguishes between different payment services providers for the purposes of the law, namely (i) banks within the meaning of the Law on Credit Institutions; (ii) electronic money institutions within the meaning of that law; (iii) payment institutions within the meaning of this Law; (iv) account information service providers within the meaning of that law; (v) the European Central Bank and the national central banks of Member States, when not acting in their capacity as monetary authorities or other public authorities. 15 Article 32 of the Law on credit institutions. 16

text: Regulation (EC) No 924/2009

text: of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the Community and repealing

text: Regulation (EC) No 2560/2001

text: (OJ L 266, 9.10.2009, p. 11).

title: Opinion of the European Central Bank of 17 December 2019 on payment services and payment systems (CON/2019/45)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 17 December 2019 on payment services and payment systems (

text: ) Introduction and legal basis

text: On 11 November 2019 the European Central Bank (ECB) received a request from the Bulgarian Minister for Finance for an opinion on a draft law amending the Law on payment services and payment systems and other laws (hereinafter the ‘draft law’) . The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the fifth indent of

text: , 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. Purpose of the draft law

text: 1.1 The consulting authority explains that the draft law aims to transpose into national law the Corrigendum to

text: Directive (EU) 2015/2366

text: of the European Parliament and of the Council , and to implement certain measures of other Union legal acts adopted in connection to

text: Directive (EU) 2015/2366

text: , notably

text: Regulation (EU) 2019/518

text: of the European Parliament and of the Council . 1.2 According to the consulting authority, the draft law also includes measures to extend and strengthen the supervision of payment services and payment systems. 1.3 Thus, the draft law provides that any person acquiring a minimum of three percent of the shares of or voting rights in a payment institution or an electronic money institution authorised by Българска народна банка (BNB, Bulgarian National Bank) shall notify BNB within seven days thereof and submit the required information. In the event of an incomplete submission of information, or if BNB considers the influence exercised by a shareholder is likely to be detrimental to the soundness and

text: security of that institution or the payment services provided by it, BNB is empowered to temporarily suspend the voting rights of that person and/or to order them to divest those shares within 30 days. 1.4 The draft law further provides that payment service providers must charge payment service users equal fees for cross-border payments in euro within the Union and for payments in Bulgarian lev within Bulgaria which are of equal value and have identical characteristics in terms of initiating, executing and settling the payment. 1.5 The draft law provides that (i) the clearing and settlement of payment transactions in Bulgarian lev related to card payments shall take place in settlement finality systems that process card-based payment transactions and (ii) the net settlement of the same payment transactions shall take place in the real-time gross settlement system (RTGS) operated by BNB (RINGS) when both of the following conditions are met: (a) the payment card issuers are payment services providers authorised by BNB or are branches of payment services providers within the territory of Bulgaria and (b) the point of sale or the automated teller machine (ATM) is within the territory of Bulgaria. 1.6 The draft law also provides for a number of other miscellaneous amendments, including periodic reporting by payment service providers that benefit from a licence exemption; more detailed rules regarding the exemptions from strong customer authentication, as laid down in Commission Delegated

text: Regulation (EU) 2018/389

text: ; and an extended statute of limitations for the investigation of breaches of the Law on payment services and payment systems and increased administrative penalties for such breaches.

text: 2. Specific observations

text: 2.1 The ECB notes that when the two conditions mentioned in paragraph 1.5 are fulfilled, the clearing and settlement of such payment transactions will always be done by an operator of a settlement finality system with access to RINGS. The ECB understands that this restriction regarding cardbased payment transactions in Bulgarian lev is aimed at ensuring that such retail payments, which are deemed to be closely linked to the territory of Bulgaria, are cleared and settled in central bank money through RINGS. This restriction should be considered in the light of the principle of open and non-discriminatory access to payment systems, as enshrined in Union legislation and in international standards . In this regard the ECB understands that the restriction would not hamper cross-border acquiring of card-based payment transactions denominated in Bulgarian lev. To this end and for the purpose of cross-border acquiring of card-based payment transactions, the participation of payment service providers that (a) are authorised in other Member States and (b)

text: provide payment services in Bulgaria without a branch into settlement finality systems that process card-based payment transactions and perform net settlement in RINGS should not be prohibited and non-discrimination of the payment system participants should be ensured. 2.2 The ECB moreover understands that the same restriction aims to support the transposition of

text: Directive (EU) 2015/2366

text: into national law with a view to reinforcing the protection of consumers from potential additional charges stemming from unexpected currency conversions related to the processing of card-based payment transactions mentioned in paragraph 1.5. In this regard, the ECB notes that

text: Directive (EU) 2015/2366

text: already contains rules on currency conversion and information on charges , which the ECB understands were already transposed by the Law on payment services and payment systems . 2.2 Although credit institutions (alongside payment institutions and electronic money institutions) are considered payment services providers for the purposes of the Law on payment services and payment systems , the ECB understands that acquisitions of shares or voting rights in credit institutions by any person will fall outside the scope of the notification requirement as laid down in the draft law regarding the acquisition of a certain shareholding in payment institutions and electronic money institutions . Such acquisitions of shares or voting rights in credit institutions are already regulated in the Bulgarian Law on credit institutions . 2.3 Finally, the ECB understands that the proposed amendment regarding the charges for cross-border payments in euro within the Union is intended to avoid any possible conflicts between the existing Law on payment services and payment systems and

text: Regulation (EC) No 924/2009

text: as amended by

text: Regulation (EU) 2019/518

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

text: Done at Frankfurt am Main, 17 December 2019.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE


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

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

text: Commission Recommendation 2010/191/EU of 22 March 2010

text: on the scope and effects of legal tender of euro banknotes and coins (OJ L 83, 30.3.2010, p. 70).

text: See paragraph 2.1 of Opinion

text: , paragraph 3.1 of Opinion

text: , paragraph 2.3 of Opinion

text: , paragraph 2.2 of Opinion

text: and paragraph 2.2 of Opinion

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

text: Council Regulation (EC) No 974/98 of 3 May 1998

text: on the introduction of the euro (OJ L 139, 11.5.1998, p. 1). 5 See, for example, Opinions

text: and

text: . 6 See, for example, paragraph 3.3 of Opinion

text: , paragraph 2.7 of Opinion

text: , paragraph 2.6 of Opinion

text: and paragraph 2.5 of Opinion

text: . 7 See, for example, paragraph 2.5 of Opinion

text: . 8 See paragraph 2.6 of Opinion

text: , paragraph 3.4 of Opinion

text: , paragraph 2.8 of Opinion

text: , paragraph 2.7 of Opinion

text: and paragraph 2.6 of Opinion

text: See, Opinion

text: , Opinion

text: , Opinion

text: , and paragraph 2.1 of Opinion

text: . 10 See paragraphs 2.1 and 2.3 of Opinion

title: Opinion of the European Central Bank of 30 December 2019 on limitations to cash payments (CON/2019/46)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 30 December 2019 on limitations to cash payments (

text: ) Introduction and legal basis

text: On 3 December 2019 the European Central Bank (ECB) received a request from the Minister for Finance of the Netherlands for an opinion on a draft law on an anti-money laundering action plan containing limitations to cash payments (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the second indent of

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

text: , as the draft law relates to means of payment. 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 intends to reinforce the measures taken to prevent money laundering by limiting the use of large amounts of cash. 1.2 The draft law prohibits natural or legal persons trading in goods, in the course of their business or professional activities, from receiving or making a payment in cash in an amount equal to or greater than EUR 3 000, regardless of whether the transaction is carried out in a single operation or in several operations which appear to be linked. The ECB understands that the draft law is addressed to professional parties and will only affect consumers if they buy or sell goods from such a professional party. Transactions between consumers are not covered by the draft law.

text: 2. Observations

text: Commission Recommendation 2010/191/EU

text: states that the acceptance of payments in cash should be the rule, but acknowledges that cash may be refused for reasons related to the ‘good faith principle’, without this constituting a breach of the legal tender status of cash. Neither Union law nor Recommendation

text: explicitly addresses whether, or to what extent, it may be permissible to introduce a more general limitation to the obligation to accept euro cash payments. Therefore, Union law must be interpreted in order to ascertain the conditions that a limitation on payments in euro banknotes and coins should fulfil, including the conditions that should be fulfilled

text: to comply with the legal tender status of euro banknotes and coins when general limitations to the obligation to accept cash payments are introduced . 2.2

text: Recital 19

text: of

text: Council Regulation (EC) No 974/98

text: states that ‘limitations on payments in notes and coins, established by Member States for public reasons, are not incompatible with the status of legal tender of euro banknotes and coins, provided that other lawful means for the settlement of monetary debts are available . Additionally, these limitations should also be effective and proportionate to the objectives pursued and not go beyond what is necessary to achieve such objectives in order to comply with the legal tender status of euro banknotes. Any limitation should not otherwise affect in principle the legal tender status of euro banknotes. Any negative impact of the proposed limitations should therefore be carefully weighed against the anticipated public benefits. When considering whether a limitation is proportionate, the adverse impact of the limitation in question should always be considered, as well as whether any alternative measures could be adopted that would fulfil the relevant objective and have less adverse impact . 2.3 The ECB acknowledges that the draft law’s objective of reinforcing measures taken to prevent money laundering may, in general, constitute a ‘public reason’ justifying the establishment of limitations on cash payments . 2.4 Furthermore, the ability to pay in cash remains particularly important for certain groups in society that, for various legitimate reasons, prefer to use cash rather than other payment methods. Cash is generally also appreciated as a payment instrument because it is widely accepted, fast, and facilitates control over the payer’s spending. Moreover, it is the only means of payment that allows citizens to instantly settle a transaction in central bank money and at face value, without the legal possibility to impose a fee for the use of this means of payment . 2.5 Other lawful means for the settlement of monetary debts with similar benefits as cash are generally available in the Netherlands for the purchase of goods, also above the foreseen threshold of EUR 3 000. Taking this into consideration, in addition to the above general observations, the limitations on cash payments set out in the draft provisions could be deemed proportionate to the objectives pursued. They could also be deemed to not go beyond what is necessary to achieve such objectives. However, the ECB cannot elaborate on the effectiveness of the draft law since no substantiation thereof has been provided together with the draft law. 2.6 The ECB takes particular note of the approach adopted in the draft law, whereby the prohibition on the receipt or payment of cash in an amount equal to or greater than EUR 3 000 is limited to transactions whereby at least one of the parties is trading in goods in the course of their business or professional activities. The ECB welcomes the approach taken by the Netherlands authorities not to restrict cash payments between private users or consumers.

text: 2.7 The ECB understands that electronic payment instruments are increasingly used as the method of payment in the Netherlands, while the use of cash is declining. Nevertheless, as indicated above, cash is a well-established means of payment providing for immediate settlement of debts and direct control over the payer’s spending, and also facilitates the inclusion of the entire population in the economy by allowing it to settle any kind of financial transaction in this way . The ECB notes that cash could play an important role in the event of a disturbance in the payment systems, even though cash machines and other service points may also be affected as these are dependent on interaction with the account holding institutions. The ECB considers it important that all Member States take appropriate measures to ensure that credit institutions and branches operating within their territories provide adequate access to cash services, in order to facilitate the continued use of cash .

text: Done at Frankfurt am Main, 30 December 2019.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE


title: Opinion of the European Central Bank of 8 January 2020 on measures limiting macroprudential risks in residential property loans (CON/2020/1)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 8 January 2020 on measures limiting macroprudential risks in residential property loans (

text: ) Introduction and legal basis

text: On 27 November 2019 the European Central Bank (ECB) received a request from the German Ministry of Finance for an opinion on a draft regulation on the implementation of measures to limit macroprudential risks in the residential property construction and acquisition loan sector (hereinafter the ‘draft regulation’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of

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

text: 1. Purpose of the draft regulation

text: 1.1 According to its explanatory memorandum, the draft regulation sets out detailed rules specifying new measures available to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin, Federal Financial Supervisory Authority) to impose certain minimum standards upon lenders to limit macroprudential risks from residential property construction or acquisition loans, including provisions on cooperation between BaFin and the Deutsche Bundesbank in the adoption of these measures. The draft regulation aims to provide commercial lenders with legal certainty in relation to these new measures and the opportunity to prepare for their application, irrespective of which instruments are applied in the future. 1.2 As regards cooperation between BaFin and the Deutsche Bundesbank, the draft regulation provides that the Deutsche Bundesbank must notify BaFin immediately if it concludes on the basis of its financial stability analyses that due to a systemic risk in the residential property construction or acquisition loan sector, the functioning of the financial system may be disrupted or financial stability jeopardised. In light of this notification and/or its own observations, BaFin may decide to draft a general administrative order (Allgemeinverfuegung) containing specific measures. Any

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). imposition of restrictions requires close collaboration between BaFin and the Deutsche Bundesbank, and restrictions must be calibrated in agreement with the Deutsche Bundesbank. The Deutsche Bundesbank also is required to assist BaFin with the review which BaFin has to conduct at least every six months where restrictions are in place in order to determine if, and to what extent, systemic risks still exist and if the related measures are still required. 2 3 1.3 Section 48u of the Law on banking , Section 308b of the Law on insurance supervision and Section 5(8a) of the Investment Code authorise BaFin to impose certain minimum standards upon lenders in connection with the granting of new loans for the construction or acquisition of residential property, including an upper limit regarding the ratio between the amount of the loan and the value of the immovable property (the loan-to-value (LTV) ratio) and the specification of a period of time within which a specific proportion of the loan must be repaid, or, in the case of loans due for repayment on a due date at the end of the term, a maximum term (amortisation requirement). The draft regulation provides definitions that influence the scope of application of any measures to be taken. The draft regulation also provides detailed instructions on how to apply the loan-to-value ratio and the amortisation requirement. 1.4 Section 48u of the Law on banking provides that, if measures are applied, BaFin must specify in its general administrative order which proportion of a credit institution’s new lending business for residential property within a specific period is not subject to the restrictions established (‘the free quota’). For this purpose the draft regulation clarifies that this is a uniform free quota applicable to all lenders, and specifies further details regarding its application. 1.5 The Law on banking provides that, if measures are applied, BaFin must specify in its general administrative order the loan amount up to which one or more restrictions do not apply (‘the de minimis threshold’), with an upper limit for the share of the loan volume that may be issued under the de minimis threshold in relation to the total amount of new residential immovable property lending business of a single lender during a specific period. The de minimis threshold specified by BaFin must be at least EUR 50 000, but may be higher. Therefore the possibility to grant loans without restrictions by reference to the de minimis threshold is capped both in terms of the absolute amount and by the upper limit on the maximum possible percentage of such loans in relation to all new residential property loans granted by a single lender. The draft regulation further specifies that the de minimis limit applies to the total sum of loans advanced to a single borrower to finance residential property. 1.6 The Law on banking provides that, if measures are applied, BaFin must specify in its general administrative order the value of the property up to which a loan is exempt from the restrictions provided that the loan claims of the lender are secured by a mortgage or land charge on the residential property not exceeding 80 percent of the value of the property (‘the lower threshold’) or not exceeding 60 percent of the value of the property (‘the higher threshold’). The lower threshold must be at least EUR 200 000 and the higher threshold must be at least EUR 400 000. In order to

text: 2 Kreditwesengesetz.

text: 3 Versicherungsaufsichtsgesetz.

text: 4 Kapitalanlagegesetzbuch. prevent circumvention of this threshold, the draft regulation further specifies that the total sum of loans granted must be taken into account. In addition, the draft regulation clarifies that, for this purpose, the mortgage lending value, which is the current value of the residential property determined in accordance with the requirements of Section 22 of the Solvency Regulation , has to be taken into account. The explanatory memorandum further clarifies that the purpose of the exceptions for these loans is to establish legal certainty that well-secured property loans are not subject to restrictions.

text: 2. General observations

text: 2.1 The ECB welcomes the fact that legal certainty is increased with respect to possible restrictions imposed upon lenders in connection with the granting of new loans for the construction or acquisition of residential property. 2.2 The ECB recalls that, in its opinion on the amendment of German financial supervisory law , it welcomed the creation of macroprudential tools regarding the granting of new loans for the construction or purchase of residential property. Imbalances in the residential immovable property sector that could result from overvaluation of residential property accompanied by excessive credit provision can have significant negative implications for financial stability and the real economy. Against this background, the core objectives of the draft regulation seem appropriate, namely to further specify instruments that enable BaFin to impose certain minimum standards upon lenders in connection with the issuance of new residential mortgage loans, with a view to strengthening the resilience of the financial system and to counteracting the cyclical build-up of systemic risks, when deemed necessary. These objectives are also in line with the principles set out in the European Systemic Risk Board’s Recommendation on intermediate objectives and instruments of macroprudential policy , in particular with regard to the objective to mitigate and prevent excessive credit growth and leverage. 2.3 From a financial stability perspective, the ECB welcomes the implementation of a legislative framework for borrower-based measures in all euro area countries. The measures contained in the draft regulation enabling BaFin to create macroprudential tools to counteract potential risks to the stability of the national financial system seem appropriate to the extent that they aim at promoting responsible borrowing and lending, enforcing market discipline, reducing credit risk and increasing the transparency of credit institutions’ activities. A thorough quantitative impact assessment is, however, important to verify the effect and appropriateness of the draft law, as well as a regular review of the LTV ratio to take into account the implications of changes in macroeconomic and financial conditions. The scale of exemptions from the scope or specific provisions should be

text: 5 Solvabilitätsverordnung.

text: 6 See paragraph 2.2 of Opinion

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

text: 7 Recommendation of the European Systemic Risk Board of 4 April 2013 on intermediate objectives and instruments of macro-prudential policy (

text: ) (OJ C 170, 15.6.2013, p. 1). proportionate to the overall objective to be achieved, which is to curb excessive lending for the construction and purchase of residential property and prevent over-indebtedness . 2.4 The draft amendment to the Law on banking on which the ECB was consulted in 2017 included (1) the LTV, (2) the amortisation requirement, (3) an upper limit upon the total servicing of all debts in proportion to the borrower’s income (debt-service-to-income – DSTI) or, where the borrower is not a natural person (e.g. a company), a lower limit upon the proportion of the borrower’s inflows of funds to the borrower’s debt servicing obligation within a specific time frame (debt-service coverage ratio – DSCR) and (4) an upper limit for the ratio of overall indebtedness to the borrower’s income (debt-to-income ratio – DTI). Of these four measures only two, the LTV and the amortisation requirement, were finally adopted. As previously noted by the ECB, the four different instruments originally envisaged would allow BaFin to either activate only one or a combination of or all these instruments, depending on the circumstances jeopardising financial stability. The availability of a comprehensive set of borrower-based measures, including the income-based measures, would enable BaFin to respond in a flexible and proportionate way in relation to potential risks to financial stability . 2.5 As previously noted, there is still a need to ensure the availability of harmonised data on all types of relevant commercial lenders whose lending for the construction or purchase of residential property is subject to the instruments when activated, e.g. for the regular monitoring of financial stability risks and impact assessment purposes . 2.6 As previously noted, the general administrative order should be simple, easily applicable by both commercial lenders and borrowers and easy to understand . 2.7 The ECB welcomes the role that is assigned to the Deutsche Bundesbank under the draft regulation. The Deutsche Bundesbank is well positioned to provide data and expertise in the sector of residential property loans. Both

text: Recital 24

text: of

text: Regulation (EU) No 1092/2010

text: of the European Parliament and of the Council and the Recommendation of the European System Risk Board on the macroprudential mandate of national authorities refer to the fact that the ECB and the national central banks should play a leading role in macroprudential oversight, given their expertise and existing responsibilities in the area of financial stability. 2.8 As a national macroprudential authority, the Deutsche Bundesbank is already responsible for macroprudential tasks in order to maintain the stability of the banking system . The draft law does not confer genuinely new tasks on the Deutsche Bundesbank, but rather specifies certain new macroprudential tools that the Deutsche Bundesbank may use when discharging its

text: 8 See paragraph 2.3 of Opinion

text: 9 See paragraph 2.3 of Opinion

text: 10 See paragraph 2.5 of Opinion

text: 11 See paragraph 2.6 of Opinion

text: Regulation (EU) No 1092/2010

text: of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board (OJ L 331, 15.12.2010, p. 1).

text: 13 Recommendation of the European Systemic Risk Board of 22 December 2011 on the macro-prudential mandate of national authorities (

text: ) (OJ C 41, 14.2.2012, p. 1).

text: 14 See Section 1 of the Law on the monitoring of financial stability of 28 November 2012 (Bundesgesetzblatt I p. 2369). macroprudential responsibilities. Consequently, there is no conferral of new tasks on the Deutsche Bundesbank which must be assessed for compliance with the prohibition of monetary financing. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 8 January 2020. [signed] The President of the ECB Christine LAGARDE