text: Laki arvo-osuustileistä 17.5.1991/827.

text: Laki finanssivalvonnasta 19.12.2008/878.

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

text: Report by the Working Group on Reform of the securities markets legislation, Ministry of Finance Publications 12/2011, p. 63.

text: The remaining part of the reform includes, inter alia, a structural reform whereby indirect holding of securities would be made available alongside the direct holding system in Finland and whereby the nominee registration of securities issued in Finland would be permitted also for Finnish investors.

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

title: Opinion of the European Central Bank of 7 December 2011 on securities markets legislation (CON/2011/101)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 7 December 2011 on securities markets legislation (

text: ) Introduction and legal basis

text: On 28 October 2011, the European Central Bank (ECB) received a request from the Finnish Ministry of Finance for an opinion on the following draft government proposals: (a) the draft law on the book-entry system and clearing and settlement, (b) the draft law on investment services; (c) the draft law on trading in financial instruments; (d) the draft law amending the Law on book-entry accounts ; (e) the draft law amending the Law on the financial supervisory authority (hereinafter collectively referred to as the ‘draft laws’). The ECB’s competence to deliver an opinion is based on Article 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and fifth indent of

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

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to Suomen Pankki and payment and settlement systems. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft laws

text: 1.1 The ECB notes that the draft laws are aimed primarily at improving the technical quality of the legislation without making substantive changes and at implementing Union directives. The draft laws are part of a comprehensive reform of securities markets legislation, the main objectives of which are to improve the clarity and comprehensibility of securities markets legislation, to foster the competitiveness of securities markets legislation, to make custody and settlement operation more effective and more competitive, and to ease the administrative burden of listed companies . The remaining part of the reform, which includes the main substantive legislative changes , is expected to be carried out in the near future.

text: 1.2 As regards the draft law on the book-entry system and clearing and settlement, the main substantive amendments relate to the book-entry system and in particular to protection of investors’ rights as well as ensuring that authorities have access to information on the ultimate holder of securities. In addition, the draft law on the book-entry system and clearing and settlement introduces amendments aimed at ensuring that the central securities depository (CSD) can act as a custodian. It also specifies under which circumstances a CSD may take a security off the book-entry system and further specifies the framework for the outsourcing of activities significant to CSD operations. 1.3 As regards the draft law on investment services, the main substantive amendments relate to the custody and management of financial instruments, which are defined as an investment service that cannot be provided without prior authorisation. In addition, for investment firms offering custodian services, it introduces a duty of emergency preparedness planning as well as a duty to provide nonprofessional clients with sufficient information on the custody of client funds and risks associated with such custody. 1.4 The main substantive amendment introduced by the draft law amending the Law on the financial supervisory authority relates to clarifying the system of administrative sanctions available to the Financial Supervisory Authority and making the sanctions significantly more stringent. The maximum amount of administrative sanctions that the Financial Supervisory Authority can impose is being raised to EUR 10 000 000 for legal persons and EUR 100 000 for natural persons. Under the current law, the maximum amounts are EUR 200 000 and EUR 1 000, respectively. 1.5 The draft law on trading in financial instruments introduces a duty for the Ministry of Finance to request a statement from Suomen Pankki before making a decision to grant a license to operate a stock exchange, to revoke such a license or to interrupt the operation of a stock exchange. 1.6 As for the draft law amending the Law on book-entry accounts, the ECB notes that it does not contain relevant amendments beyond editorial changes and implementation of Union directives.

text: 2. General observations

text: The ECB welcomes the general objectives of the draft laws and notes that the new and substantive amendments do not raise general concerns for the ECB.

text: 3. Specific observations

text: 3.1 Provision of clearing services by foreign clearing organisations Relating to the provision of clearing services by foreign clearing organisations offering services in Finland, the ECB reiterates its comments in paragraph 3 in its Opinion

text: , as these comments have not been taken into account in the law of 15 January 2010 and in the current draft laws.

text: 3.2 Outsourcing of operational activities The ECB recognises that the ability of CSDs to outsource certain operational activities is an important element for the development of an efficient securities settlement infrastructure across CSDs in Europe. 3.3 Account-holding structures The ECB notes that the Finnish securities holding system, which is also a book-entry based system, builds on the principle of direct holding, where the rights pertaining to the book entries are registered directly in each account holder’s book-entry account. Book-entry securities owned by a foreign individual, corporation or foundation may be entered in a custodial nominee account administered by a custodial account holder on behalf of a beneficial owner on the basis of an authorisation. The ECB understands that the draft laws are not intended to amend these securitiesholding structures and that it is planned that the possibilities to develop the indirect holding model will be examined in phase two of the comprehensive reform of Finnish securities markets legislation, which will follow in 2012.

text: Done at Frankfurt am Main, 7 December 2011.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Published in Monitorul Oficial al României, Part One, No 582, 30.6.2004. 3 Published in Monitorul Oficial al României, Part One, No 186, 12.8.1996.

text: Banca Naţională a României shall be authorised under the terms established by it and subject to its periodical amendments to purchase, sell and perform other transactions with foreign currencies. 5 See the most recent opinions:

text: and

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

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 9 December 2011 on the payment of an increase in Romania’s International Monetary Fund quota (CON/2011/102)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 9 December 2011 on the payment of an increase in Romania’s International Monetary Fund quota (

text: ) Introduction and legal basis

type: rubrik

text: On 30 November 2011, the European Central Bank (ECB) received a request from Banca Naţională a României (BNR) for an opinion on a draft Government emergency ordinance on accepting the increase of Romania’s International Monetary Fund (IMF) quota (hereinafter the ‘draft ordinance’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and on the third indent of

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft ordinance relates to Banca Naţională a României. 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 ordinance

text: On 15 December 2010, the IMF’s Board of Governors adopted Resolution No 66-2 to, inter alia, increase the quotas of all IMF members. The IMF must receive the required notices of consent to the increases by 31 December 2011. Hence, BNR requests the ECB’s opinion to be issued by 12 December 2011. Under the draft ordinance, BNR is authorised to pay the increase of Romania’s quota from special drawing rights (SDR) 1 030,2 million to SDR 1 811,4 million. As stated in the explanatory memorandum to the consultation letter, 25% of the proposed quota increase will be paid by using the reserve tranche facility and the remainder by Romanian lei. Article 4(4) of Law No 312/2004 on the Statute of BNR states that BNR exercises rights and fulfils obligations incumbent on Romania in its capacity as an IMF member and

text: Article 30(1)

text: (c) states that BNR sets and maintains foreign reserves that are made up of, inter alia, ‘any other worldwide acknowledged reserve assets, including the right to purchase from the IMF within the reserve tranche, as well as the special drawing rights holdings’. According to Article 2 of Government Ordinance No 30/1996 regulating Romania’s participation in the IMF , ‘starting from July 1996 all rights and obligations of Romania

text: resulting from transactions with the IMF shall be reflected in BNR’s balance sheet’. Thus, it is incumbent on the BNR to make the payments to the IMF in relation to the increase of Romania’s IMF quota.

text: 2. General observations

text: 2.1 Central bank independence The ECB notes that BNR is responsible for paying any increases in Romania’s IMF quota and that it exercises the rights and obligations incumbent on Romania in its capacity as an IMF member. The SDRs are part of the foreign reserves managed by BNR pursuant to

text: Article 31

text: (b) of the Statute of BNR . Thus, BNR is entrusted with the task of exercising the rights and obligations resulting from the membership of its Member State in the IMF. The ECB understands that in this context and in line with the principle of central bank independence enshrined in Article 130 of the Treaty and Article 7 of the Statute of the European System of Central Banks and of the European Central Bank, BNR takes decisions in a fully independent manner regarding the management of the SDRs. 2.2 The monetary financing prohibition Several ECB opinions have noted that the tasks performed by a national central bank (NCB) must comply with the monetary financing prohibition under Article 123 of the Treaty and

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

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

text: Article 104

text: and

text: Article 104

text: b(1) . Pursuant to

text: Article 7 of Regulation (EC) No 3603/93

text: , the financing by NCBs of obligations falling upon the public sector vis-à-vis the IMF is not regarded as a credit facility within the meaning of Article 123 of the Treaty. Therefore, the ECB notes that the payment by BNR of the proposed increase in Romania’s quota in the IMF does not infringe the monetary financing prohibition.

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

text: Done at Frankfurt am Main, 9 December 2011.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI

type: vagledning

utgivare: ecb


text: Draft law establishing a financial stability contribution and amending the Royal Decree of 14 November 2008 implementing the Law of 15 October 2008 on measures to promote financial stability and, in particular, to set up a State guarantee for loans granted and other transactions in the context of financial stability, as regards the protection of deposits, life insurance and the capital of authorised cooperative societies, and amending the Law of 2 August 2002 on the supervision of the financial sector and on financial services. 2 Draft Royal Decree on the organisation and functioning of the Resolution Fund and defining the terms for payment of the contributions. 3 Draft royal decree implementing

text: Article 8

text: , § 1, 1° bis, of the Royal Decree of 14 November 2008 implementing the Law of 15 October 2008 on measures to promote financial stability and, in particular, to set up a State guarantee for loans granted and other transactions in the context of financial stability, as regards the protection of deposits, life insurance and the capital of authorised cooperative societies, and amending the Law of 2 August 2002 on the supervision of the financial sector and on financial services. 4 OJ L 189, 3.7.1998, p. 42.

text: Article 2 of the draft law. 6 Explanatory Memorandum to the draft Royal Decree on the Resolution Fund, comment on

text: Article 1

text: , p. 2. 7 Explanatory Memorandum to the draft Royal Decree on the Resolution Fund, comment on

text: Article 2

text: , p. 2. 8 Second paragraph of Article 2 of the draft law. 9 Third paragraph of

text: Article 2

text: and Article 3 of the draft law. 10 Second paragraph of Article 3 of the draft law. 11 Explanatory Memorandum to the draft law, pp. 2 and 3. 12 Article 7 of the draft law; Explanatory Memorandum to the draft law, comment on

text: Article 7

text: , p. 10. 13 Articles 3 and 4 of the draft Royal Decree on the Resolution Fund. 14 Article 3 of the draft law. These amounts will thus be integrated in the resources of the Belgian State (Explanatory Memorandum to the draft law, comment on

text: Article 3

text: , p. 10). 15 Article 458 of the Criminal Code.

text: Special Fund for Protection of Deposit and Life Insurances organised by the Royal Decree of 14 November 2008 and amended by the Law of 23 December 2009. 17 Constitutional Court, 23 June 2011, N°115/2011; Explanatory Memorandum of the draft law, pp. 4 and following. 18 Article 8 of the draft law. An additional 0.13% contribution to the DGS will be collected in 2012. 19 Article 8 of the draft law; Explanatory Memorandum to the draft law, comments on

text: Article 8

text: , pp. 11 to 15. 20 See Opinions

text: and

text: . 21 These initiatives are (i) the proposal for a directive…./…../EU of the European Parliament and of the Council on Deposit Guarantee Schemes [recast], COM(2010) 368, and (ii) the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the European Central Bank, Bank Resolution Funds, 26.05.2010, COM(2010) 254 final.

text: , paragraph 2.1, and the reference to the European Council’s call for ‘further coordination between the different levy schemes in order to avoid double-charging’ (conclusions of the European Council of 28-29 October 2010, available on the Council’s website at www.consilium.europa.eu). 23 Third paragraph of Article 2 of the draft law and Article 2 of the draft royal decree on the Resolution Fund. Explanatory Memorandum to the draft law, p. 3. 24

text: , paragraph 3.2;

text: , paragraph 3.2.2. 25 Article 2 of the Draft Royal Decree on the Resolution Fund. Explanatory Memorandum to the draft law, pp. 4 and 7. 26

text: , paragraphs 6.2 and 6.3;

text: , paragraphs 3.2 and particularly 3.4;

text: , paragraph 5.2. 27 Article 2 of the draft law. 28 Explanatory Memorandum to the draft royal decree on the Resolution Fund, comment on

text: Article 2

text: , p. 2. 29 See in particular the latest Communication from the Commission on the application, from 1 January 2012, of State aid rules to support measures in favour of banks in the context of the financial crisis, (OJ C 356, 6.12.2011, p. 7). 30 Explanatory Memorandum to the draft royal decree on the Resolution Fund, comment on

text: Article 2

text: , p. 2.

text: , paragraph 6.3. 32

text: , paragraph 3.2,

text: , paragraph 3.6, and

text: , paragraph 4.3.

title: Opinion of the European Central Bank of 12 December 2011 on the establishment and financing of a resolution fund and on the amended calculation of contributions to the deposit guarantee scheme (CON/2011/103)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 12 December 2011 on the establishment and financing of a resolution fund and on the amended calculation of contributions to the deposit guarantee scheme (

text: ) Introduction and legal basis

text: On 30 November 2011, the European Central Bank (ECB) received a request from the Nationale Bank van België/Banque Nationale de Belgique (NBB), on behalf of the Belgian Ministry for Finance, for an opinion on a draft law establishing a financial stability contribution and creating a resolution fund, on the one hand, and amending the calculation of contributions to the Belgian deposit guarantee scheme, on the other hand (hereinafter the ‘draft law’), and on two draft royal decrees implementing these two chapters of the draft law (hereinafter respectively the ‘draft Royal Decree on the Resolution Fund’ and the ‘draft Royal Decree on the calculation of contributions to the DGS’ and, together, the ‘draft royal decrees’). The ECB was requested to deliver an opinion under extreme urgency. 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 , as the draft law and the draft royal decrees relate to NBB and to rules applicable to financial institutions, insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law and the draft Royal Decrees

text: 1.1 The draft law establishes a Resolution Fund destined to ensure the financing of measures reducing the impact of a credit institution’s default on the financial system and economic and social wellbeing in Belgium . The Resolution Fund does not aim at preventing the failure of a credit institution but rather at resolving ailing entities at the lowest economic and social cost. For this purpose, the Resolution Fund will finance resolution measures such as, according to the nonexhaustive list in the Explanatory Memorandum to the draft Royal Decree on the Resolution Fund : (i) a bridge bank, with the resolution authority taking over the bank, to allow an insolvent institution’s operations to continue, (ii) a total or partial transfer of assets and/or liability from the ailing entity to a third party, (iii) a good bank/bad bank split, or (iv) administrative, legal and advisory expenses and the need to preserve certain vital functions of the banks, such as payment systems. The King will adopt a royal decree deliberated in the Council of Ministers, after consulting the NBB , to activate the Resolution Fund, i.e. to finance a resolution measure. Belgian credit institutions will pay an annual financial stability contribution to finance the Resolution Fund . It will amount to 0.022 % of the credit institution’s total liabilities at 31 December of the preceding year, after deduction of (i) the deposits eligible for reimbursement by the Belgian deposit guarantee scheme (hereinafter the ‘eligible deposits’), and (ii) its regulatory capital . The ECB understands that the basis for calculating the financial stability contribution, which excludes eligible deposits, is conceived as an incentive to limit systemic risk related to the financing structure of credit institutions . The amount used to calculate the credit institution’s annual financial stability contribution is communicated to the Resolution Fund by the NBB on request . The Resolution Fund will be established within the Deposit and Consignment Office (Deposito- en Consignatiekas/Caisse des dépôts et consignations), a government department without legal personality under the Minister for Finance. The Resolution Fund will book the financial stability contributions in a resolution reserve, whose amount will be disclosed in the annual report on the Resolution Fund . The Resolution Fund will transfer the annual financial stability contributions to 14 15 the Belgian Treasury . The draft law imposes a sanctioned duty of confidentiality for the Deposit

text: and Consignment Office agents who may not disclose the confidential information obtained when cooperating with the Resolution Fund. 1.2 The draft law also amends the method for calculating the annual contribution to the Belgian deposit guarantee scheme (hereinafter the ‘contribution to the DGS’); that contribution was annulled by the Belgian Constitutional Court with effect from 1 January 2012 . The Constitutional Court’s decision is based notably on the consideration that: (i) the amount of deposits collected from the public is not, as such, an indicator of difficulties likely to trigger the DGS’ intervention, and (ii) the uniform calculation of the contribution to the DGS, notably the absence of weighting according to the risk profiles of the credit institutions, created a disproportionate prejudice for institutions that mainly finance themselves through deposit-taking activities, compared to those that have recourse to wholesale financing. The draft law replaces the currently applicable flat fee with an annual contribution to the DGS amounting to 0.10 % of the credit institution’s stock of eligible deposits at 31 December of the preceding year and will be risk-weighted based on three types of risk factors: capital adequacy, quality of assets and liquidity . The draft Royal Decree on the calculation of contributions to the DGS further defines the risk indicators, as well as the scores that will be applied to each of them.

text: 2. General observations

text: 2.1 The ECB welcomes the establishment in Belgium of a resolution fund financed by contributions from Belgian credit institutions and the amendment of the calculation of the contribution to the DGS, as part of a broader range of initiatives strengthening financial stability. The Fund regime entails the further disengagement of the State in favour of restructuring primarily financed by the banking sector . 2.2 The ECB understands that the provisions submitted by the Belgian authorities concerning the Resolution Fund (paragraph 1.1) and the amended contribution to the DGS (paragraph 1.2) were drafted in the light of the corresponding Union legislative initiatives , in accordance with the general principle of sincere cooperation and loyalty pursuant to the Treaty on European Union. This approach reduces the risk of significant divergences in national legal frameworks and the corresponding counterproductive effects. It is crucial to strive for consistency and a level playing field across the Union and to minimise market distortions by national approaches to resolution funds. Therefore, it is important to ensure that the national regime fits well into the evolving Union

text: framework and to provide for the possibility to adapt it to future Union and international developments. 2.3 In addition, the ECB welcomes that the draft law and the draft royal decrees accommodate several recommendations in previous ECB opinions on resolutions funds. First, the risk of double charging is avoided since only credit institutions incorporated in Belgium are subject to the payment of the financial stability contribution, which does not apply to branches of foreign credit institutions in Belgium . Second, there is no automatic relationship between the financial stability contributions and pay-out by the Resolution Fund . The draft royal decree on the Resolution Fund provides that the financial stability contribution creates neither an entitlement by the paying credit institution to intervention by the Resolution Fund, nor a duty for the Resolution Fund to intervene .

text: 3. Resolution measures that may be financed by the Resolution Fund

text: The ECB welcomes the Resolution Fund’s objective of financing resolution measures to reduce the impact of a credit institution’s default on the financial system and on economic and social well-being in Belgium . The draft law does not specify the resolution measures that may be financed by the Resolution Fund. Only the Explanatory Memorandum to the draft royal decree on the Resolution Fund contains a nonexhaustive list of potential measures, such as financing of a bridge bank, a total or partial asset transfer or a good bank/bad bank split . The ECB recommends setting out, either in the draft law or in the draft Royal Decree on the Resolution Fund, the different types of resolution measures that may be financed by the Resolution Fund. This would enhance legal certainty and hence also benefit financial stability. The necessary flexibility can be maintained if the list of potentially eligible resolution measures is nonexhaustive. The financing of resolution measures through the Resolution Fund is subject to strict conditions under the Union State aid framework , which applies to the Resolution Fund’s interventions. In particular, while it might be useful to have recourse to the Resolution Fund for the management of bad assets , this is

text: subject to strict conditions under the framework, especially regarding the pricing of the assets, in order to avoid a bailout of shareholders or creditors of the ailing bank.

text: 4. Funding and replenishment of the Resolution Fund

text: The ECB welcomes an ex ante levy on the financial industry, as this protects public funds and reduces moral hazard, and is in line with the countercyclical approach of building up funds before a crisis. However, funds provided ex ante may be insufficient in a crisis situation and public funds may also become necessary. In such a case, the banking sector should be called on to reimburse the State. The principle of ex post recovery from the banking sector should promote additional market discipline and address moral hazard risk . The same principles apply to any full or partial replenishment of the Resolution Fund by the national authorities. The ECB stresses that the central bank may not finance the Resolution Fund, in line with the prohibition of monetary financing .

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

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: OJ L 189, 3.7.1998, p. 42. 2 Except for the Governor’s power to adopt decrees which he may delegate to a Deputy Governor of his choice.

text: See for comparison Article 27.2 of the Statute of the ESCB.

text: See

text: and

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

text: See

text: and

text: . 6 See also ECB Convergence Report May 2010, p. 249.

text: ECB Opinions

text: and

text: . All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 10 See for example paragraph 4.3 of ECB Opinion

text: and Opinion

text: . 11 See

text: and

text: See Article 15 of the draft law. 13 See e.g. the ECB’s Convergence Report of May 2010, pp. 249-250. 14 See the ECB’s Convergence Report of May 2010, p. 24. 15 See in particular Articles 17 and 18 of the draft law.

text: Law LXXV of 2008 on cost-efficient State management and fiscal responsibility.

title: Opinion of the European Central Bank of 14 December 2011 on the Magyar Nemzeti Bank (CON/2011/104)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 14 December 2011 on the Magyar Nemzeti Bank (

text: ) Introduction and legal basis

text: On 2 November 2011, the European Central Bank (ECB) received a request from the Hungarian Ministry for the National Economy for an opinion on a draft law replacing the Law on the Magyar Nemzeti Bank (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: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to the Magyar Nemzeti Bank (MNB). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Subject of the draft law

text: The draft law will recast Law LVIII of 2001 on the Magyar Nemzeti Bank (MNB) (hereinafter the ‘MNB Law’). The draft law maintains several provisions of the MNB Law, as well as introducing new provisions into the current legal framework. Under the new Constitution effective on 1 January 2012, this subject matter will be regulated in a law adopted with a qualified majority, referred to as an organic law. The draft law will introduce several changes into the MNB’s legislative framework. 1.1 Decision-making bodies The draft law modifies the appointment procedure for the Monetary Council adopted in January 2011. The Prime Minister rather than the Governor may give recommendations to Hungary’s President on deputy governors. The possible number of deputy governors will increase to three and the Deputy Chair of the Monetary Council will act for the Governor in the event of his absence .

text: The Monetary Council will have five to nine members chaired by the Governor. Its members will comprise the Deputy Governors and other members, nominated by Hungary’s President, for six years. The draft law reinstates the Executive Board, with the Governor as Chair, and the Deputy Governors to take over the Governor’s implementing responsibilities for Monetary Council decisions. Its further tasks include in particular financial management, internal organisation, operational management of the MNB and auditing. The Monetary Council will become the supreme decision-maker for all MNB tasks. 1.2 Monetary policy The MNB may set different levels of reserve ratios for different types of liabilities, individual assets and non-balance sheet items of financial institutions and investment companies. Furthermore, it may remunerate the minimum reserves deposited by the institutions. Remuneration depends on the different reserve ratio components. 1.3 Macroprudential supervision The MNB’s task is identifying business and economic risks threatening the financial system as a whole and facilitating the prevention and mitigation of systemic risks. On the basis of the Monetary Council’s decision, the Governor may issue decrees on this matter. Also, the MNB will track the operations of major financial institutions and assess their liquidity positions. 1.4 Changes in the salary structure The draft law proposes three alternative salary structure scenarios linking the remuneration of the Governor, Deputy Governors, other Monetary Council members and the Chair and members of the Supervisory Board to a certain baseline, such as average monthly gross income or the financial sector’s average monthly gross income, with the proviso that no MNB employee monthly salary may exceed the salary of the MNB’s Deputy Governors. 1.5 Relations with the Government, the ministries and the public The Governor will be subject to a comprehensive reporting scheme to the Parliament on request and to the Parliament’s Committee for Economic Affairs every six months. In addition, the MNB will be required to draw up a prior annual operating and investment cost plan. The Parliamentary Committee for Economic Affairs and the State Audit Office, on the basis of the MNB’s subsequent internal performance review, will monitor its adherence. Article 31(4) of the draft law sets out the competence of the Parliamentary Committee for Economic Affairs and the State Audit Office to examine the operational efficiency of the management of the MNB . The MNB will submit its opinion on the budget proposal to the Minister responsible for budgetary matters. However, the MNB will no longer have an opportunity to submit this opinion to the

text: Parliament’s relevant committee. Furthermore, the Governor will present the MNB’s opinion to the Budgetary Council. 1.6 Relations with the general budget The forint and the exchange rate equalisation reserves may be offset against each other. The rules for recapitalisation will change as follows. Recapitalisation will only be available to the Government if the balance of the respective equalisation reserves is negative and this negative balance exceeds the sum of the accumulated profit reserve and the balance sheet. The shareholder may provide capital injections in cash to the accumulated profit reserve any time throughout the year, regardless of the balance of the MNB’s accumulated profit reserve. 1.7 Relations with the Hungarian Financial Supervisory Authority The MNB will cooperate with the Financial Supervisory Authority, including, inter alia, exchanging information and sharing the results of its on-site checks in matters falling under the Financial Supervisory Authority’s powers. 1.8 Balance sheet and dividend payments In the future, the Executive Board rather than the shareholder will adopt the MNB’s balance sheet, financial statement, profit and loss statement, as well as decisions on dividend payments, subject to an affirmative resolution by the shareholder.

text: 2. Need for a stable institutional framework

text: 2.1 Previous ECB Opinions repeatedly highlighted the key role of credible monetary policy in controlling inflationary expectations and promoting sustainable convergence towards price stability. A credible monetary policy is rooted in an independent central bank with a stable institutional environment. The Treaty’s requirement of central bank independence reflects the view that the primary objective of price stability is best served by a fully independent institution with a precisely defined mandate. It is of utmost importance to design an institutional structure that separates monetary policy from the influence of short-term political interests. 2.2 The ECB reiterates its previous observations regarding frequent amendments to the MNB Law. In the context of central bank independence, the central bank legal framework needs to provide a stable basis for the central bank’s functioning. The appointment procedure for Monetary Council members, as well as the MNB’s decision-making bodies’ salary structure, was subject to several recent amendments without consulting these bodies or taking the MNB’s functional needs or the prevailing economic environment into account. These frequent changes to the MNB Law are incompatible with the principle of legal certainty. They have already significantly impacted the

text: MNB’s organisational and governance stability , as will the planned increase in the number of members of decision-making bodies. 2.3 The ECB understands that the new Constitutional framework justifies a recast of the MNB Law, and would welcome a recast that results in a long-term stable basis for central banking in Hungary. 2.4 Some central bank and monetary financing prohibition issues in the ECB’s December 2006 and May 2010 Convergence Reports are still not addressed. 2.5 The ECB has learned that the version of the draft law submitted to the Government contains substantive amendments compared to the version submitted to the ECB, in particular as regards macroprudential and remuneration policy matters. The ECB reiterates its position that it should be re-consulted if there are substantive amendments proposed to the draft law at a stage when the ECB has not yet adopted its opinion. In such situations, 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. The ECB would appreciate the Ministry for the National Economy giving due consideration to honouring its obligation to consult the ECB in the future.

text: 3. Subscription to the ECB’s capital

text: Article 63 of the draft law prohibits the MNB from holding shares in any domestic or international organisation apart from shares in organisations set up in relation to its activity. The ECB seeks clarification that this provision will not impede the MNB’s ability to pay its contribution to the ECB’s capital.

text: 4. Establishment of the balance sheet and the decision on the payment of dividends

text: The ECB notes the transfer of these functions from the shareholder to the Executive Board. The affirmative decision by the shareholder in Article 43(2) of the draft law leaves room for doubts over whether profit distribution decision will continue to be subject to the shareholder’s resolution . Hence, this provision in conjunction with

text: Article 49(4)

text: and Article 64 of the draft law should be clarified.

text: 5. The number of Monetary Council members and decision-making

text: 5.1 Against the backdrop of constant changes in the composition of the MNB’s decision-making bodies, the increase in the number of Monetary Council members, together with the possibility of increasing the number of deputy governors - without due justification for the need to amend the MNB’s institutional framework - gives rise to concerns whether this could be used to influence the decision-making process to the detriment of central bank independence.

text: 5.2 Apart from the prohibited employment relationships specified under the conflict of interest rules in the draft law, members of the Monetary Council may also have employment relationships other than their membership in the Monetary Council. The draft law provides that, following 1 January 2012, all decisions in connection with MNB tasks previously not taken by the Monetary Council will have to be discussed and decided by the Monetary Council. To provide for a smooth transition in the decision-making process, and to ensure the MNB’s operational continuity, the ECB would welcome implementation of the changes in the decision-making process to ensure a smooth handover of decision-making to the Monetary Council. A transitional period would appropriately address this.

text: 6. Governor’s reporting obligations

text: The Governor will be subject to an exceptional reporting obligation at the request of the Speaker of the Hungarian Parliament or the Chair of the Parliamentary Committee for Economic Affairs. The dialogue between national central banks (NCBs) and third parties, even when based on statutory obligations to provide information and exchange views, is compatible with central bank independence provided that: (i) it does not result in interference with the independence of the members of the NCB’s decisionmaking bodies; (ii) the special status of Governors in their capacity as members of the ECB’s General Council is fully respected; and (iii) confidentiality requirements resulting from the Statute of the European System of Central Banks and of the European Central Bank (hereinafter ‘Statute of the ESCB’) are observed . The ECB understands that such reporting respects the limits of central bank independence set out in the Convergence Report and that it will concern the MNB’s activities and monetary policy. The ECB recommends clarifying in this sense the scope of the reporting. The purpose of the obligation to forward the agenda of the meetings of the Executive Board to the Government is unclear. The representative of the Government participates without voting rights in Monetary Council and not in Executive Board meetings. This obligation should be clarified to avoid the impression that the Government actively takes part in Executive Board decision-making.

text: 7. MNB role in macroprudential supervision

text: 7.1 The ECB welcomes the MNB’s new macroprudential mandate to identify, monitor and assess risks to financial stability and take on macroprudential policy in Hungary. Central banks are natural candidates to be assigned a formal macroprudential mandate, given the potential synergies with

text: traditional central bank functions relating to promoting financial stability. Furthermore, independence - which is an essential element in central banking - is also a necessary precondition for macroprudential supervision. However, the draft law should ensure that the MNB’s macroprudential mandate does not interfere with the orderly fulfilment of its monetary policy mandate, in particular with its primary objective of maintaining price stability, and that it does not restrict the Eurosystem’s contribution to the stability of the financial system under Article 127(5) of the Treaty. 7.2 The MNB needs to be equipped with tools and powers to efficiently fulfil the tasks attributed to it. In this respect, the ECB notes that the only tool mentioned in the draft law is the adoption of a decree by the Governor ‘to prevent the build-up of system risks or reduce such risks in areas not regulated in law or government decrees’. 7.3 The ECB also notes that, as the general rules allow the MNB to collect data in the central banking information system, these provisions of the draft law would enable the MNB to collect data specifically in respect of its macroprudential mandate. In this respect, it is of crucial importance, if the MNB is to effectively fulfil its new macroprudential mandate, that it receives in a timely manner all necessary data and information, including information specific to supervised institutions, and that it may designate – in cooperation with the micro-prudential supervisor – systemically relevant financial structures and institutions.

text: 8. Changes in the salary structure - financial and personal independence

text: The ECB’s Convergence Reports in 2008 and 2010, and several ECB opinions on autonomy in staff matters, stressed that Member States may not impair an NCB’s ability to recruit and retain the qualified staff necessary for the NCB to perform independently the tasks conferred on it by the Treaty, the Statute of the ESCB and national legislation. Furthermore, an NCB may not be put into a position where it has limited or no control over its staff, or where a Member State’s government is in a position to influence the NCB’s policy on staff matters. To protect the MNB’s autonomy in staff matters, in accordance with the principle of central bank independence under Article 130 of the Treaty, the Hungarian authorities must ensure that any amendment to the legislation on the remuneration of the MNB’s staff is decided in close cooperation with the MNB, taking due account of the MNB’s views regarding the impact of such legislative amendments on its ongoing ability to carry out its tasks. The ECB notes that the recent amendments to the legislation on salaries of the members of the MNB’s decision-making have been implemented without taking into account the above aspects of the MNB’s financial independence addressed in previous opinions .

text: Against this background, the MNB should be effectively involved in drawing up the relevant parts of the draft law so as to safeguard the principle of central bank independence.

text: 9. Prohibition on monetary financing

text: 9.1 The draft law aims to mirror Union provisions on the prohibition of monetary financing. It provides that Article 123 of the Treaty – having regard to

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 - is authoritative in MNB’s financing of the public sector . The ECB understands that this general provision seeks to state that Article 123 of the Treaty and

text: Regulation (EC) No 3603/93

text: are applicable to the MNB, addressing some of the defects highlighted in the ECB’s Convergence Report in relation to the prohibition on monetary financing . The ECB welcomes these changes. However, in general, it is unnecessary to refer to Article 123 of the Treaty or

text: Regulation (EC) No 3603/93

text: in national legislation as they are both directly applicable. If, nevertheless, national legislative provisions refer to them, they may not change the scope of application of the monetary financing prohibition . Hence, the wording of Article 15 of the draft law must ensure that financing of the public sector is, as a rule, prohibited pursuant to

text: Article 123

text: Treaty and Regulation No 3603/93. 9.2 The draft law refers to activities to be carried out as an agent of the State. Article 21.2 of the Statute of the ESCB provides that the national central banks may act as fiscal agents. However, they should comply with the monetary financing prohibition, so that such services may not constitute central bank financing of public sector obligations vis-à-vis third parties or credit to the public sector, outside the narrowly defined exceptions specified in

text: Regulation (EC) No 3603/93

text: . Against this background, the ECB believes that the tasks assigned to the MNB under the draft law will be performed in compliance with the prohibition on monetary financing in Article 123 of the Treaty and

text: Regulation (EC) No 3603/93

text: . 9.3 The ECB understands that the draft law also refers to possible financing by the MNB of the national deposit guarantee scheme. The only compatible forms of central bank financing of deposit guarantee schemes 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 NCB’s discretion. These conditions need to be listed in national law in the cases where emergency liquidity financing of the deposit guarantee system is foreseen by the national legal system. Article 13 of the draft law refers to the possibility for MNB to provide a loan to the National Deposit Insurance Fund, subject to the

text: prohibition on monetary financing, in urgent and exceptional cases that threaten the stability of the financial system as a whole, and the smooth completion of cash transactions, the due date of which loan may not be greater than three months. It is understood that these conditions are intended to ensure compliance with the monetary financing prohibition. In this respect, the condition that loans are granted at the full discretion of the MNB would in particular need to be included in the draft law. When exercising its discretion to grant a loan, the MNB has to ensure that by doing so it is de facto not taking over a State task. The ECB also notes that the issue of monetary financing compliance may require closer scrutiny in circumstances where the facilities are extended for more than one-a-half months. Moreover, it may be useful to specify that such loans are extended against adequate collateral, thus introducing an additional safeguard which should minimise the possibility of the MNB suffering any loss.

text: 10. Central banking information system

text: The draft law indicates that even without a request by the Hungarian Central Statistics Office (CSO) MNB is automatically obliged to hand over regularly all individual data available in its statistical information system to the CSO. This rule should be formulated more precisely to clarify that the MNB is only obliged to hand over individual data to the CSO on request. The ECB understands that the good practice of the exchange of data between the two institutions has been working well for several years and is already covered by the MNB Law currently in force. The rules on code generation used for anonymised data need clarification.

text: Article 21(6)

text: and (13) of the draft law contains contradictory provisions on the deadline for the destruction of the linking codes used in handling anonymised data.

text: 11. Compatibility with the Treaties and the Statute of the ESCB

text: 11.1 Personal independence - right of judicial review Pursuant to Article 46(12) of the draft law, an action may be brought before the Labour Court by a dismissed Monetary Council member in accordance with the Labour Code. Article 47(5) of the draft provides the same for the Governor. The ECB would welcome clarification that the Labour Court’s jurisdiction under the draft law is without prejudice to that of the Court of Justice of the European Union under Article 14.2 of the Statute of the ESCB. 11.2 Institutional independence Article 1 of the draft law specifies that the MNB, and members of its bodies, when executing their duties and fulfilling their obligations, should be independent, and may neither request nor take instructions from the Government, the Union institutions, bodies or offices, with the exception of

text: the ECB, nor from other Member States’ governments or any other organisation or political party. Full respect of central bank independence in Article 130 of the Treaty and Article 7 of the Statute of the ESCB requires a prohibition on government instructions to the central bank or any member of its decision-making bodies, as well as on seeking to influence the members of the MNB’s decision-making bodies in the performance of their tasks. This should be clarified in the draft law.

text: 12. The Governor’s role as a member of the Budgetary Council

text: The ECB considers that the provisions of the draft law governing the role of the MNB’s Governor as a member of the Budgetary Council conflict with the provisions governing the operations of the Budgetary Council . According to the draft law, the MNB’s Governor represents the MNB for the budget proposal in the Budgetary Council, while the provisions governing the operations of the Budgetary Council require a distinction between the tasks fulfilled by the MNB’s Governor acting as Governor and as a member of the Budgetary Council. Therefore, the draft law needs to be amended to avoid any conflict with the provisions of the law governing the operations of the Budgetary Council.

text: 13. Legal integration of the MNB into the Eurosystem

text: Hungary is a Member State with a derogation and must therefore comply with all adaptation requirements under the Treaty. The Hungarian authorities should take this opportunity offered by the recast to make the necessary adjustments to ensure the MNB’s full integration into the Eurosystem when Hungary adopts the euro. The draft law should be adapted to comply with Article 127(1) of the Treaty by reflecting the central bank’s secondary objective of supporting the general economic policies of the Union and its obligation to comply with the Eurosystem’s regime on financial reporting of NCB operations. Similarly, express recognition of the ECB’s powers in the fields of monetary policy and monetary policy instruments, collecting statistics, managing foreign reserves, payment systems, issuing banknotes, cooperating with international money institutions under Article 6 of the Statute of the ESCB, imposing sanctions, setting an exchange rate policy and appointing the MNB’s auditors, including the powers of the . Council of the European in this respect, would be necessary

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

text: Done at Frankfurt am Main, 14 December 2011. [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Cap. 204 of the Laws of Malta.

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

text: OJ L 339, 22.12.2010, p. 1.

text: CBM Directive No 10 was the subject of

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

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).

text: Central Bank of Malta (Penalties for Offences and Infringements) Regulations, Legal Notice 75 of 2003.

text: By virtue of

text: Article 50

text: A of the CBM Act.

title: Opinion of the European Central Bank of 9 December 2011 on the authentication of euro coins and handling of euro coins unfit for circulation and the imposition of administrative measures and penalties (CON/2011/105)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 9 December 2011 on the authentication of euro coins and handling of euro coins unfit for circulation and the imposition of administrative measures and penalties (

text: ) Introduction and legal basis

text: On 16 November 2011, the European Central Bank (ECB) received a request from the Central Bank of Malta (CBM) for an opinion on its draft Directive No 11 on the authentication of euro coins and the handling of euro coins unfit for circulation (hereinafter the ‘draft Coins Directive’) and Directive No 12 on the administrative measures and penalties for offences and infringements under the Central Bank of Malta Act (hereinafter the ‘draft Administrative Penalties Directive’; the draft Coins Directive and the draft Administrative Penalties Directive are hereinafter collectively referred to as the ‘draft CBM directives’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the first, second and third indents of

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

text: on the consultation of the ECB by national authorities regarding draft legislative provisions as the draft amendments concern currency matters, means of payment and the CBM. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the ECB, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft CBM directives

text: 1.1 Article 5(3) of the Central Bank of Malta Act (hereinafter the ‘CBM Act) empowers the CBM to issue directives to implement the CBM Act. The draft CBM directives will be published before the end of 2011 and are expected to enter into force on 1 January 2012. 1.2 The draft Coins Directive aligns national law with

text: Regulation (EU) No 1210/2010

text: of the European Parliament and of the Council of 15 December 2010 concerning authentication of euro coins and handling of euro coins unfit for circulation . It introduces specific obligations for the CBM with regard to the authentication procedures and controls. Furthermore, it contains provisions on the

text: handling of coins which are unfit for circulation as a result of use, accident or damage. The new procedures relating to euro coins are complementary to those in CBM Directive No 10 on the authenticity, fitness checking and recirculation of euro banknotes . 1.3 The draft Administrative Penalties Directive introduces specific penalties for breaches of the CBM Act, the draft CBM directives and

text: Regulation (EC) No 924/2009

text: on cross-border payments . Annex I sets out the administrative penalties which may be imposed by the CBM without recourse to a court hearing. Annex II lays down the administrative measures and penalties for failure to comply with CBM Directive No 10. Administrative measures and penalties applicable for failure to comply with the draft Coins Directive are listed separately in Annex III.

text: 2. General observations

text: 2.1 The draft Coins Directive establishes obligations on cash handlers and seeks to safeguard the integrity of euro coins as a means of payment. The ECB generally welcomes the draft Coins Directive and is confident that its provisions will ensure the preservation of euro coins in circulation and will therefore maintain the general public’s confidence in euro coins. 2.2 The ECB considers it essential that any draft legislation should clarify the primacy and direct application of Union law on the authentication of euro coins and the handling of euro coins unfit for circulation. For consistency reasons, the ECB favours the use of direct references to

text: Regulation (EU) No 1210/2010

text: or, alternatively, reproduction of its provisions without any alterations or additions. 2.3 With regard to the draft Administrative Penalties Directive, the ECB notes that most of the offences provided for are already set out in Subsidiary Legislation 204.05 . 2.4 In addition, although national authorities are not formally obliged to consult the ECB on the implementation of the Member States’ obligation to take the necessary measures to ensure that breaches of

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

text: are subject to effective, proportionate and deterrent sanctions, the ECB believes it is beneficial to harmonise throughout the Union the national measures implementing the abovementioned obligation to the extent possible, subject to national peculiarities .

text: 3. The draft Coins Directive

text: 3.1 The definition of ‘euro coins unfit for circulation’ in paragraph 3 of the draft Coins Directive should be amended to reflect the definition in

text: Regulation (EU) No 1210/2010

text: which refers to euro coins that have been rejected during the authentication process or euro coins the appearance of which has been significantly altered. The definition should cover both euro coins unfit for circulation on the basis of their visual appearance and those unfit for circulation on the basis of their technical appearance. 3.2 With regard to the delivery to the CBM of counterfeits following detection, the ECB notes that paragraph 4 of the draft Coins Directive only requires immediate delivery to the CBM (as the designated national authority) in the case of counterfeits, thereby appearing to limit the scope of

text: Article 3(2) of Regulation (EU) No 1210/2010

text: , which also refers to suspected counterfeit coins and euro coins unfit for circulation. Paragraph 4 should be amended accordingly. 3.3 When dealing with the withdrawal and reimbursement of euro coins unfit for circulation, the draft Coins Directive does not include a provision ensuring that after withdrawal euro coins unfit for circulation are destroyed by physical and permanent deformation, thereby reflecting the obligation set out in

text: Article 8(3) of Regulation (EU) No 1210/2010

text: . A paragraph to this effect should be included in the draft Coins Directive. 3.4 The ECB notes that paragraph 5 of the draft Coins Directive is not fully consistent with

text: Article 6(3) of Regulation (EU) No 1210/2010

text: . In particular, it should provide that the number of coinprocessing machines checked on an annual basis, represent, in terms of the volume of euro coins processed by those machines during a particular year, at least 25% of the total cumulated net volume of coins issued by Malta from the introduction of euro coins in 2008 until the end of the previous year. The current wording of paragraph 5 limits that period to the end of 2010, thereby excluding any developments in the euro coin issuance volume of Malta after 2010. Therefore, the ECB recommends aligning paragraph 5 of the draft Coins Directive with

text: . 3.5 As regards the composition of the standardised bags or boxes for the packing of euro coins unfit for circulation, the ECB notes that paragraph 18(a) of the draft Coins Directive is not consistent with

text: Article 10(1)

text: (a) of

text: Regulation (EU) No 1210/2010

text: for any denominations except EUR 2 and 0,01. The draft Coins Directive should be aligned accordingly. 3.6 The CBM is the competent authority to supervise compliance with

text: Regulation (EC) No 1210/2010

text: and to take decisions regarding offences under the draft Coins Directive. In view of the human and financial resources required for the performance of these tasks, the ECB has consistently expressed its concern that, when allocating additional tasks to national central banks, it must be ensured that they have sufficient human and financial resources, both in terms of quantity and quality, for all of their tasks, and in particular that their capacity to perform their European System of Central Banks or Eurosystem-related tasks is not affected.

text: 4 The draft Administrative Penalties Directive

text: 4.1 By virtue of recent amendments to Article 56 of the CBM Act, the power to issue regulations providing for administrative penalties, formerly vested in the Minister for Finance, has been transferred to the CBM. Furthermore, the CBM has been empowered to issue directives in order to impose administrative measures for breach of the rules on the authenticity, fitness checking and recirculation of euro banknotes and coins. 4.2 The ECB reiterates the importance of effective, proportionate and deterrent sanctions. To ensure the deterrent effect of administrative fines, the maximum amount should allow setting the fine at an amount which effectively deters cash handlers from breaching their obligations. While defining the particular amounts of the administrative fines is a national competence, the national legislator should aim at achieving a certain degree of harmonisation across the Member States to contribute to the establishment of a level playing field among cash handlers within the euro area without prejudice to: (a) the particularities of the cash cycle and the organisation of cash handlers at a national level; and (b) the consistency of the levels of financial sanctions available in their legal orders .In this context, the ECB welcomes the introduction of the separate draft Administrative Penalties Directive dealing specifically with administrative measures and penalties in a structured manner.

text: Done at Frankfurt am Main, 9 December 2011.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Draft law T/5248 on the Magyar Nemzeti Bank, together with the following proposed amendments: 5248/4, 5248/5 2 5005/54 – proposed amendment to draft law T/5005 on the Transitional Measures to the Basic Law of Hungary. 3 OJ L 189, 3.7.1998, p. 42.

text: See ECB’s Convergence Report, May 2010, p. 25. 5 See paragraph 5.2 of Opinion

text: . All ECB Opinions are available on the ECB’s website at www.ecb.europa.eu. 6 See Article 34(1) of the revised draft law.

text: ECB Opinions

text: and

text: . 8 See for example paragraph 4.3 of ECB Opinion

text: and Opinion

text: . 9 See

text: and

text: See also ECB Convergence Report May 2010, p. 249. 11 See paragraph 9.3 of Opinion

text: . 12 See paragraph 10 of Opinion

text: . 13 For more detail, see paragraph 13 of Opinion

title: Opinion of the European Central Bank of 22 December 2011 on the Magyar Nemzeti Bank’s independence (CON/2011/106)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 22 December 2011 on the Magyar Nemzeti Bank’s independence (

text: ) Introduction and legal basis

text: On 2 November 2011, the European Central Bank (ECB) received a request from the Hungarian Ministry for the National Economy for an opinion on a draft law replacing the Law on the Magyar Nemzeti Bank and, on 14 December 2011, the ECB adopted Opinion

text: . On 21 December 2011, the ECB received a request, dated 13 December 2011, from the Hungarian Ministry for the National Economy for an opinion on a revised draft law. This version of the draft law, which was submitted to the Parliament on 13 December 2011, contained substantive amendments compared to the version of 2 November 2011. However, the ECB is aware that also other changes have been tabled in the meantime, which it has not yet received. This opinion is based on the latest version of this law (hereinafter the ‘revised draft law’). Furthermore, the ECB has also learned that new draft amendments to the Hungarian Constitution have been tabled, which relate to the Magyar Nemzeti Bank (MNB) and would allow for a merger of the central bank with the Financial Supervisory Authority (FSA) into a separate new body (hereinafter the ‘draft constitutional law’) . The draft constitutional law has not been submitted to the ECB for consultation. This breaches the obligation to consult the ECB. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of

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

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the revised draft law and the draft constitutional law relate to the MNB. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion, which is as regards the draft constitutional law an own-initiative opinion.

text: 1. Purpose of the draft laws

text: The revised draft law will recast Law LVIII of 2001 on the Magyar Nemzeti Bank (MNB) (hereinafter the ‘MNB Law’). The revised draft law submitted to Parliament contains substantive amendments compared to the version submitted to the ECB on 2 November 2011, in particular as regards macroprudential and

text: remuneration policy. It introduces a general delegation of implementing powers from the Monetary Council to the Executive Board and changes the MNB’s sanctioning rules. The macroprudential supervision provisions were missing from the revised draft law, but the tabled amendments reinstated them. A deletion of the general cap on the remuneration of employees below management level is tabled; however, no amendments are proposed to the remuneration of the Governor, the Deputy Governors and the Supervisory Board members. The draft constitutional law enables a merger between the MNB and the FSA and allows their respective powers to be transferred to a newly created legal successor of both institutions. At the same time, the MNB’s Governor and the FSA’s President will become Vice-Presidents, under the authority of a new president to be appointed by the President of Hungary. The draft constitutional law does not specify the nature of this new institution.

text: 2. The appropriate time to consult the ECB

text: The consulting authority submitted the revised draft law to the ECB without requesting an urgent procedure or setting a time limit for the ECB’s opinion. On 13 December 2011, the revised draft law was submitted to the Hungarian Parliament under an urgent procedure to enable the new MNB Law to enter into force by 1 January 2012. The ECB reiterates its position that even cases of particular urgency do not relieve national authorities from their duty to consult the ECB and to allow sufficient time to take into account its views in accordance with Decision

text: . Any substantive amendments to a draft law have to be submitted to the ECB to allow it to adopt an opinion on the most recent legislative text and the process of adoption of the draft law should be suspended. The ECB’s observations on provisions on which it was consulted do not eliminate a breach of the consultation obligation with regard to subsequent substantial amendments. The ECB would appreciate the Ministry for the National Economy giving due consideration to honouring its obligation to consult the ECB in the future

text: 3. Draft constitutional law - proposed merger of the MNB with the FSA

text: The draft constitutional law amends the Constitution and allows the MNB to be merged with the FSA into a new institution. The ECB understands that the new institution will have legal personality and would qualify as the central bank of Hungary and as a member of the European System of Central Banks (ESCB). It appears that the President of the new institution will be a member of the ECB’s General Council and thus replace the current MNB’s President in that role. From the perspective of compatibility with the Treaties and the Statute of the European System of Central Banks (hereinafter the ‘Statute of the ESCB’), the manner in which this merger is implemented is crucial, and this is not clear from the draft constitutional law. In particular, the new institution should be fully independent with a precise definition of its mandate in compliance with the central bank independence principle, including functional, institutional, financial and personal independence, and with the role of the central bank as part of the ESCB. The new institution’s

text: primary objective must be price stability and any other tasks with which it is entrusted must not interfere with ESCB-related tasks. The financing and management of the new institution’s financial and human resources must comply with central bank financial independence. Moreover, in order to comply with the monetary financing prohibition, the national central bank (NCB) must be insulated from financial obligations resulting from the FSA’s prior activities . The draft constitutional law also raises concerns as regards the personal independence of the MNB’s Governor in office. By appointing a new president with authority over the two institutions, once they are merged, and over the current MNB’s Governor, once he becomes Vice-President of the new institution, the personal independence of the MNB’s Governor would be impaired and Article 14.2 of the Statute of the ESCB concerning the possible reasons for dismissing an NCB governor would be breached. It is important that the ECB is consulted on the law establishing the new institution in good time to allow the Hungarian authorities to take the ECB’s opinion into account in the legislative process in accordance with Decision

text: 4. Revised draft law

text: 4.1 The number of Monetary Council members and decision-making The ECB reiterates its observations in Opinion

text: on the composition of the MNB’s decision-making bodies, as well as the observations in connection with the adverse effect of the frequent changes to the institutional framework. Against the backdrop of the constant changes in the composition of the MNB’s decision-making bodies, the increase in the number of Monetary Council members, together with the possibility of increasing the number of deputy governors – without due consideration of the MNB’s needs – gives rise to concerns whether this could be used to influence the decision-making process to the detriment of central bank independence. Moreover, the revised draft law needs to provide for a smooth transition in the decision-making process and to ensure the MNB’s operational continuity . 4.2 Governor’s reporting obligations The ECB reiterates its observations in Opinion

text: that the purpose of the obligation to forward the agenda of the meetings of the Executive Board to the Government is unclear. The Government representative participates without voting rights in the Monetary Council and not in Executive Board meetings. This obligation should be clarified to avoid the impression that the Government actively takes part in Executive Board decision-making.

text: 4.3 Changes in the salary structure - financial and personal independence The ECB’s Convergence Reports in 2008 and 2010, and several ECB opinions on autonomy in staff matters, stressed that Member States may not impair an NCB’s ability to recruit and retain the qualified staff necessary for the NCB to perform independently the tasks conferred on it by the Treaty, the Statute of the ESCB and national legislation. Furthermore, an NCB may not be put into a position where it has limited or no control over its staff, or where a Member State’s government is in a position to influence the NCB’s policy on staff matters. To protect the MNB’s autonomy in staff matters, in accordance with the principle of central bank independence under Article 130 of the Treaty, the Hungarian authorities must ensure that any amendment to the legislation on the remuneration of the MNB’s staff is decided in close cooperation with the MNB, taking due account of the MNB’s views regarding the impact of such legislative amendments on its ongoing ability to carry out its tasks. The concern remains that the repeated amendments to the legislation during the last 18 months on salaries of the members of the MNB’s decision-making have been implemented without taking into account the above aspects of the MNB’s financial independence addressed in previous opinions . Therefore, the observations in

text: are still valid. 4.4 MNB role in macroprudential supervision The ECB understands that the MNB’s new macroprudential mandate to identify, monitor and assess risks to financial stability and take on macroprudential policy in Hungary had been deleted in one of the amendments re-submitted for consultation, but has since been reinserted in the revised draft law. Central banks are natural candidates to be assigned a formal macroprudential mandate, given the potential synergies with traditional central bank functions relating to promoting financial stability. Furthermore, independence – which is an essential element in central banking – is also a necessary precondition for macroprudential supervision. Moreover, the revised draft law should ensure that the MNB’s macroprudential mandate does not interfere with the effective fulfilment of its monetary policy mandate, in particular with its primary objective of maintaining price stability, and that it does not restrict the Eurosystem’s contribution to the stability of the financial system under Article 127(5) of the Treaty. The MNB needs to be equipped with tools and powers to efficiently fulfil all the tasks attributed to it. In this respect, the ECB notes that the only tool mentioned in the revised draft law is the adoption of a decree by the Governor to prevent the build-up of system risks or to reduce such risks in areas not regulated in law or government decrees. The ECB also notes that, as the general rules allow the MNB to collect data in the central banking information system, these provisions of the revised draft law would enable the MNB to collect data specifically in respect of its macroprudential mandate. In this respect, it is of crucial importance, if

text: the MNB is to effectively fulfil its new macroprudential mandate, that it receives in a timely manner all necessary data and information, including information specific to supervised institutions, and that it may designate – in cooperation with the micro-prudential supervisor – systemically relevant financial structures and institutions. 4.5 Establishment of the balance sheet and the decision on the payment of dividends The ECB reiterates its observations in Opinion

text: on the transfer of these functions from the shareholder to the Executive Board. The affirmative decision by the shareholder in Article 43(2) of the revised draft law leaves room for doubts over whether profit distribution decisions will continue to be subject to the shareholder’s resolutions . Hence, this provision, in conjunction with

text: Article 49(4)

text: and Article 64 of the revised draft law, should be clarified so as to comply with the financial independence of the MNB. 4.6 Prohibition on monetary financing The ECB reiterates its observations in Opinion

text: on the monetary financing prohibition. In particular, the ECB notes that Article 13 of the revised draft law still needs to expressly include also the condition that loans to the National Deposit Insurance Fund are granted at the full discretion of the MNB . 4.7 Central banking information system The ECB notes that the revised draft law still lacks clarity and leaves the rules on code generation used for anonymised data unchanged .

text: Article 21(6)

text: and (13) of the revised draft law still contains contradictory provisions on the deadline for the destruction of the linking codes used in handling anonymised data. 4.8 Legal integration of the MNB into the Eurosystem The ECB reiterates its observations in Opinion

text: on Hungary being a Member State with a derogation and therefore obliged to comply with all adaptation requirements under the Treaties. The Hungarian authorities should take this opportunity offered by the recast to make the necessary adjustments to ensure the MNB’s full integration into the Eurosystem when Hungary adopts the euro .

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

text: Done at Frankfurt am Main, 22 December 2011. [signed]

text: The President of the ECB

text: Mario DRAGHI


text: FEK A 178/1.8.2007.

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

text: If the offers submitted are considered unattractive, the BoG will transfer assets to a transitional credit institution to be established for this purpose under

text: Article 63

text: E or put the credit institution under special liquidation in accordance with

text: Article 68

text: See the second sentence of

text: Article 63

text: ECB Opinion

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

text: See the Economic Adjustment Programme for Greece – Fourth Review available on the European Commission’s website at: http://ec.europa.eu/economy_finance/publications/occasional_paper/2011/op82_en.htm. In particular, paragraph 12 of annexed Memorandum of Economic and Financial Policies iterates the need, in the context of ongoing initiatives at the EU level, to strengthen the resolution framework for problem banks and to allow timely and effective intervention and resolution consistent with EU Treaty rules and international sound practices. In this context, a broad set of tools will be prepared to ensure that a resolution regime for financial institutions is put into place to safeguard financial stability and ensure effective depositor protection.

text: See also ECB Opinion

title: Opinion of the European Central Bank of 22 December 2011 on amendments to the resolution regime for credit institutions (CON/2011/107)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 22 December 2011 on amendments to the resolution regime for credit institutions (

text: ) Introduction and legal basis

text: On 15 December 2011, the European Central Bank (ECB) received a request from the Greek Ministry of Finance for an opinion on a draft provision amending Law 3601/2007 (hereinafter the ‘draft provision’). 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 ECB by national authorities regarding draft legislative provisions , as the draft provision relates to the Bank of Greece (BoG) and to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the ECB, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft provision

text: The draft provision will accelerate the procedure for transferring assets from a credit institution to another under

text: Article 63

text: D(4) of Law 3601/2007 in urgent cases. It provides that in urgent cases the procedure for submitting offers, the determination of the remuneration to be paid to the transferee credit institution and the transfer will be based on a temporary assessment by the BoG. Immediately thereafter, the BoG will entrust external auditors with the preparation of assessment reports. Within two months from the transfer of assets under

text: Article 63

text: D(1), the BoG will determine the remuneration to be paid, taking into account the assessment reports, the current market conditions and the need to ensure the smooth operation of the financial system . Any discrepancies between the two valuations will be funded by the Resolution Branch of the Hellenic Deposit and Investment Guarantee Fund, in accordance with

text: Article 63

text: 2. General observations

text: 2.1 The draft provision will take the form of a legislation adopted under Article 44 of the Greek Constitution by Greece’s President, on a proposal by the Cabinet. Under this urgent procedure, the draft provision would need to be submitted to Parliament for ratification within 40 days and ratified within three months of submission. The draft provision enters into force immediately after publication and has the same effect as a law. Thus, the ECB should be consulted in due time prior to entry into force. More generally, internal administrative procedures should be in place to ensure the timely consultation of the ECB, and the ECB should be consulted at an appropriate point in time in the event of amendments during the legislative procedure . 2.2 The draft provision amends

text: Article 63

text: D(4) of the Law on banking, introduced by Law 4021/2011. Law 4021/2011 established a comprehensive bank resolution framework as a structural benchmark under the EU/IMF support programme . In addition to safely resolving ailing institutions, the bank resolution framework aims at averting severe systemic disruption and undue taxpayer exposure to loss. The ECB understands that the objective of the draft provision is to facilitate the exercise by the BoG, in urgent cases only, of its resolution powers relevant to the transfer of the assets of an ailing institution, in accordance with

text: Article 63

text: D.

text: 3. Specific observations

text: 3.1 The ECB acknowledges the importance of enhancing the BoG’s role, as a resolution authority, under Law 4021/2011, and the significance of safeguarding its ability to take, in a timely manner and without undue delay, the necessary resolution measures in relation to ailing credit institutions. While understanding the need for the BoG to have the necessary flexibility to efficiently exercise its resolution powers under

text: Article 63

text: D(4), the ECB notes that neither the draft provision nor its explanatory memorandum specify the conditions or criteria for activating the procedure laid down in the draft provision. 3.2 Concerning the proposed modification of the external auditors’ role in the valuation procedure under

text: Article 63

text: D of Law 3601/2007, for the purposes of the current valuation procedure, ‘the Bank of Greece will take into account, but should not be bound by, the auditors’ reports as part of the external valuation process’ . If the BoG activates the emergency procedure under the draft provision, thus dispensing with the external auditors’ ex ante valuation, a risk of discrepancies could arise between its own valuation and the ex post external auditors’ valuation. This risk could

text: inter alia affect the funding gaps to be financed by the Resolution Branch of the Hellenic Deposit and Investment Guarantee Fund, according to

text: Article 63

text: D(13) of Law 3601/2007. 3.3 Therefore, the BoG should carefully consider the criteria it would propose for its preliminary valuation, to mitigate the risk of any discrepancies between the preliminary and final valuations, as such discrepancies may, inter alia, lead to outflows of taxpayers’ money. In this regard, the ECB understands that the procedure provided for in the draft provision will only be activated as a measure of last recourse in emergency situations only.

text: Done at Frankfurt am Main, 22 December 2011.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: OJ L 189, 3.7.1998, p. 42. 2 Dz. U. of 2009 No 39, Item 308. 3 See Opinion

text: ; all ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 4 Six categories of financial institutions established in Poland were eligible for the support scheme: banks, credit unions, investment funds, brokerage houses, insurance companies and pension funds (see Article 2 of the Law on State support).

text: See the explanatory memorandum to the draft law, p. 1. 8 The Law on credit unions of 4 January 1996, Dz. U. of 1996 No 1, Item 2.

title: Opinion of the European Central Bank of 16 February 2011 on including credit unions in the State Treasury support to financial institutions (CON/2011/11)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 16 February 2011 on including credit unions in the State Treasury support to financial institutions (

text: ) Introduction and legal basis

text: On 21 January 2011, the European Central Bank (ECB) received a request from the Polish Minister for Finance for an opinion on a draft law amending the Law on the provision of State Treasury support to financial 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 and the third and sixth indents of

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

text: 1. Purpose of the draft law

text: 1.1 The draft law amends the Law of 12 February 2009 on the provision of State Treasury support to financial institutions (hereinafter the ‘Law on State support’), on which the ECB was consulted in November 2008 . The Law on State support introduced a scheme whereby various support measures were offered to eligible financial institutions . The ECB was subsequently consulted in 5 6 October 2009 and December 2010 with a view to extending the deadline by which eligible financial institutions may apply for support.

text: 1.2 The draft law extends the list of institutions eligible for support in the form of State guarantees to: (i) credit unions active in Poland (spółdzielcze kasy oszczędnościowo-kredytowe, hereinafter the ‘SKOK credit unions’); and (ii) the National Savings and Credit Union, a statutory central association of individual credit unions (hereinafter the ‘National SKOK’). This extension is proposed because the credit unions: (i) provide services similar to banks, and may be exposed to similar liquidity risks; and (ii) they currently manage significant assets and provide services to a large number of mostly retail customers . The draft law does not change the conditions of support or the criteria by which the eligibility of financial institutions is assessed under the Law on State support. 1.3 Under the current Law on credit unions , they operate under their own supervisory framework and are not supervised by the Financial Supervision Commission (FSC), the Polish financial supervisory authority. In 2009 the ECB was consulted on a draft law introducing substantial changes regarding the regulation and supervision of SKOK credit unions, including the imposition on them of the FSC supervision and the obligation to hold minimum reserves with Narodowy Bank Polski. The ECB understands that this law was adopted by the Parliament but did not yet enter into force, pending its review by the Constitutional Court.

text: 2. General observation

text: 2.1 The ECB reiterates its observations in Opinion

text: , as well as in its previous opinions on the Law on State support. Without precluding the outcome of the constitutional review, the ECB considers it essential for the legal reform of the regulation and supervision of SKOK credit unions to enter into force as soon as possible. Key elements are the imposition of a supervisory regime equivalent to that applying to credit institutions, the obligation to hold minimum reserves and enhanced legal certainty and transparency of credit union operations. These measures should accompany the proposed inclusion of the SKOK credit unions in the list of institutions eligible for support in the form of State guarantees.

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

text: Done at Frankfurt am Main, 16 February 2011. [signed]

text: The President of the ECB

text: Jean-Claude TRICHET