title: Opinion of the European Central Bank of 3 February 2017 on liquidity support measures, a precautionary recapitalisation and other urgent provisions for the banking sector (CON/2017/1)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 3 February 2017 on liquidity support measures, a precautionary recapitalisation and other urgent provisions for the banking sector (

text: ) Introduction and legal basis

text: On 27 December 2016 the European Central Bank (ECB) received a request from the Italian Minister of Economy and Finance (hereinafter the ‘Minister’) for an opinion on a Decree law on urgent measures for the protection of savings in the banking sector (hereinafter the ‘Decree law’). The Decree law was adopted by the Italian Government on 23 December 2016 and has already entered into force. The Decree law must be converted into law by the Parliament within 60 days of publication in the Gazzetta Ufficiale, and amendments may be introduced during this conversion process. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of

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

text: , as the Decree law relates to (1) the European System of Central Banks’ (ESCB’s) basic task of implementing the Union’s monetary policy pursuant to

text: Article 127(2)

text: , first indent, of the Treaty, (2) the specific tasks conferred upon the ECB pursuant to Article 127(6) of the Treaty concerning policies relating to the prudential supervision of credit institutions, (3) the Banca d’Italia and (4) 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 Decree law

text: 1.1 The Decree law envisages a number of urgent measures affecting the banking sector. The most significant measures aim to establish a legal framework to provide extraordinary public financial support to Italian banks under the conditions and within the limits set by

text: Regulation (EU) No 806/2014

text: of the European Parliament and of the Council (hereinafter the ‘SRM Regulation’) and

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: Regulation (EU) No 806/2014

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

text: Regulation (EU) No 1093/2010

text: (OJ L 255, 30.7.2014, p. 1). the Italian transposition of the Bank Recovery and Resolution Directive (hereinafter the ‘BRRD’) , according to which, in order to remedy a serious disturbance in the economy of a Member State and preserve financial stability, the provision of such public financial support does not imply that the receiving bank is failing or likely to fail for the purposes of triggering a resolution action. While the extraordinary public support is available to all Italian credit institutions fulfilling the relevant criteria under the Decree law, the first beneficiary under the framework is intended to be Banca Monte dei Paschi di Siena (hereinafter ‘MPS’), and the Decree law contains specific provisions for the application of the measures to MPS. The Decree law provides for three categories of extraordinary public intervention, which reflect the three forms envisaged in

text: Article 18(4)

text: (d) of the SRM Regulation and

text: Article 32(4)

text: (d) of the BRRD: liquidity support provided by (1) a State guarantee of banks’ newly issued liabilities or (2) a State guarantee of emergency liquidity assistance (ELA) 6 7 operations conducted by the Banca d’Italia , or (3) a precautionary recapitalisation , whereby the State injects capital into a bank by subscribing to and purchasing its ordinary shares. 1.2 Liquidity support measures The Decree law establishes the conditions and the procedure for the Ministry of Economy and Finance (hereinafter the ‘Ministry’) to guarantee the liabilities of Italian banks until 30 June 2017 . Such a State guarantee may only be issued for debt instruments which meet the criteria defined by the Decree law and which also have a residual maturity of no less than three months and no more than five years (or seven years in the case of covered bonds) , and will never be provided for liabilities that may qualify as regulatory own funds . The amount of any such guarantee is limited to what is strictly necessary to restore the bank’s medium- to long-term funding capacity and, in general, must not exceed regulatory own funds . The criteria and limitations set out in the Decree law are largely derived from the Commission’s Communication on applying State aid rules in the context of the financial crisis (hereinafter the ‘2013 Banking Communication’) . 1.3 Further to the 2013 Banking Communication, the procedure for requesting a State guarantee is subject to different requirements, depending on the bank’s situation . Support may be provided through a guarantee scheme authorised ex ante by the Commission to banks which (1) meet own

text: 4 Directive

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

text: Council Directive 82/891/EEC

text: , and Directives

text: and

text: , and Regulations

text: (EU) No 1093/2010

text: and

text: (EU) No 648/2012

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

text: 8 This date may be further extended by a maximum of six months by a decree issued by the Ministry, subject to prior approval of the European Commission. See Article 1(4) of the Decree law.

text: 9 See Article 2 of the Decree law.

text: 10 See Article 5 of the Decree law.

text: 11 See Article 3 of the Decree law.

text: 12 See the European Commission’s Communication from the Commission on the application, from 1 August 2013, of State aid rules to support measures in favour of banks in the context of the financial crisis (‘Banking Communication’) (OJ C 216, 30.7.2013, p. 1), in particular paragraphs 59 and 60.

text: 13 See Article 4 of the Decree law, which reflects paragraph 57 et seq. of the 2013 Banking Communication. funds requirements under Article 92 of the Capital Requirements Regulation (CRR) and (2) do not have a ‘capital shortfall’ (which means a current or potential inadequacy of own funds with respect to the requirements of Article 92 of the CRR in combination with any other specific mandatory requirements established by the competent authority) according to a national, Union or Single Supervisory Mechanism-wide stress test or asset quality review. Access to the State guarantee for banks which do not meet either of these two criteria, but which nevertheless have positive equity and are in urgent need of liquidity support, is subject to an individual notification and approval by the Commission . The relevant competent authority, namely the ECB or the Banca d’Italia, depending on the significance of the requesting credit institution for purposes of

text: Council Regulation (EU) No 1024/2013

text: (hereinafter the ‘Single Supervisory Mechanism (SSM) Regulation’), assesses the fulfilment of these criteria. All other aspects of the bank’s application, both for significant and less significant institutions, are managed by the Banca d’Italia. Where the application is subject to individual notification, or in any situations where the nominal amount of the instruments for which the guarantee is requested exceeds EUR 500 million and 5 % of the total liabilities of the bank, a restructuring plan must be submitted by the bank within two months of the guarantee being issued, confirming the bank’s profitability and funding capacity in the long term without public support . The restructuring plan must be assessed by the Commission. A restructuring plan is also required whenever the Ministry is notified of a request to activate the guarantee, and in such situations the plan must be provided within two months of the activation request . 1.4 Under the Decree law, the Minister is also authorised to issue a guarantee to supplement the collateral, or its realisation value, mobilised by Italian banks to guarantee ELA operations conducted by the Banca d’Italia, in compliance with the systems established by the ECB. A bank benefitting from the guarantee on ELA is required to submit a restructuring plan confirming its profitability and funding capacity in the long term without public support, in order, in particular, to limit reliance on temporary liquidity assistance provided by the Banca d’Italia. 1.5 Precautionary recapitalisation Under the Decree law, the Ministry is authorised, until 31 December 2017, to intervene by means of a precautionary recapitalisation of a bank, by subscribing to or purchasing shares issued by Italian banks or parent undertakings of banking groups . Such intervention may only be requested

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: 16 See

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

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

text: 19 See Articles 10 and 11 of the Decree law. by a bank which, based on an adverse scenario under a national, Union or SSM-wide stress test exercise, needs to strengthen its capital . 1.6 Prior to the request for State support, a bank is required to submit a capital raising plan to the competent authority, namely the ECB for significant credit institutions and the Banca d’Italia for less significant institutions. The adequacy of the plan is assessed by the competent authority, which must inform the bank and the Ministry of its assessment. If the plan is assessed as being insufficient, the bank may directly request State intervention. If the plan is assessed as being sufficient, the bank must implement the plan and update the competent authority regarding the results of the measures adopted; the Ministry is informed of the outcome by the competent authority. If the measures prove to be insufficient to achieve the plan’s objectives, even before they are fully completed, the bank may submit a request for State intervention. 1.7 The request for State intervention must be submitted to the Ministry and to the competent authority, including the ECB in the case of significant credit institutions (and to the Banca d’Italia in such cases, where it is not the competent authority), and must include, inter alia : (1) a list of the bank’s instruments and loans which would be subject to burden-sharing measures, indicating their economic value; (2) an estimate of the actual value of the bank’s assets and liabilities, for the purposes of assessing compliance with the ‘no-creditor-worse-off-than-in-insolvency’ principle; and (3) a restructuring plan, drawn up in accordance with the Union’s State aid framework. Within 60 days of receiving the request for State intervention, the competent authority must communicate to the bank and to the Ministry the bank’s regulatory capital need . 1.8 The precautionary recapitalisation is conditional on the Commission’s approval of the restructuring plan pursuant to the Union’s State aid framework, and is executed via two decrees issued by the Minister. The precautionary recapitalisation may only be implemented if the bank is not deemed to be failing or likely to fail and there are no grounds for write-down or conversion under the Italian transposition of the BRRD or the SRM Regulation. Banks will be regarded as not being in either of these situations in the absence of any statement to that effect by the competent authority . 1.9 While in principle only newly issued shares may be subscribed by the Ministry , the Decree law authorises the Ministry to purchase shares resulting from the conversion of subordinated instruments in the implementation of the burden-sharing measures . 1.10 Collateralisation of the Banca d’Italia’s liquidity operations The Decree law amends the Italian transposition of Directive

text: of the European Parliament and of the Council , by introducing, for operations conducted by the Banca d’Italia to

text: 22 See Article 14 of the Decree law.

text: 23 See Article 15 of the Decree law.

text: 27 See Article 19(2) of the Decree law. Such purchases are allowed in the context of a settlement mechanism envisaged by the Decree Law in order to end or prevent disputes between the bank and the retail holders of its subordinated instruments which have been converted into shares.

text: 28 Legislative Decree no. 170/2004 (Gazzetta Ufficiale No 164, 15.7.2004). address liquidity needs and secured by the pledge of a credit claim or a loan assignment, a special regime for the Banca d’Italia, on: (i) the effects vis-à-vis third parties of the pledge or the loan assignment, which is more favourable than the ordinary regime laid down in the Italian Civil Code, and (ii) the inapplicability of bankruptcy provisions on clawback actions. Moreover, the Decree law introduces a new provision that excludes the exercise of set-off rights against the Banca d’Italia for claims vis-à-vis the assignor or the pledgor of collateral . 1.11 Assessments of contributions due to the national resolution fund Finally, the Decree law confers on the Banca d‘Italia the power to determine additional contributions to be paid to the national resolution fund to cover any obligations, losses, costs or any other liabilities borne by the fund in relation to the resolution actions .

text: 2. General observations

text: 2.1 Proper timing to consult the ECB The ECB only received the consultation request on 27 December 2016, despite the fact that the Decree law entered into force on 23 December 2016. As underlined in several ECB opinions , the ECB must be consulted at an appropriate stage in the legislative process. Consultation should take place at a time that enables the relevant national authority to take the ECB’s opinion into account before the provisions in question are adopted . In the Italian legal system, a decree law, adopted by the Government, enters into force following publication in the Gazzetta Ufficiale and must be submitted on the same day of adoption to Parliament for conversion into law. If not converted within 60 days of publication, the decree law is rendered invalid ab initio. Amendments may be introduced during the conversion process. In the light of the foregoing, the ECB should be consulted before the adoption of a decree law by the Government. 2.2 Compliance with the Union’s legal framework National legislative provisions aimed at providing public support to the banking sector need to fully comply with Union law, including the criteria governing the provision of extraordinary public financial support to credit institutions under the SRM Regulation and the BRRD and the related communications of the Commission on the application of State aid rules to support measures for banks. 2.3 The role of the ECB as competent supervisory authority The Decree law envisages a role for the ECB, as the competent supervisory authority for significant

text: 29 Directive

text: of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements (OJ L 168, 27.6.2002, p. 43).

text: 30 This regime was already in force on the basis of temporary provisions.

text: 32 See Article 25 of the Decree law.

text: 33 See, for example, ECB Opinion

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

text: 34 See the second sentence of

text: Article 4 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 (OJ L 189, 3.7.1998, p. 42); see also paragraph 4.1 of the Guide to consultation of the European Central Bank by national authorities regarding draft legislative provisions, which is available on the ECB’s website at www.ecb.europa.eu . banks within the Single Supervisory Mechanism, in the procedures leading to the provision of public support by the State, including the assessment of the fulfilment of the own funds requirements, the determination of the size of the capital shortfall in the light of the results of the relevant stress test exercise and the review of the adequacy of banks’ capital raising plans submitted prior to the application for precautionary recapitalisation. The ECB emphasises that its role in this respect is derived from Union rather than national law, in particular the SSM Regulation. In principle, national law cannot on its own, without proper support in EU law, transfer responsibilities to a Union institution such as the ECB. The attribution of the role envisaged for the ECB under the Decree law is broadly consistent with the specific prudential supervisory tasks conferred on the ECB under the Union legal framework governing banking supervision. The ECB understands the provisions of the Decree law conferring certain obligations on the competent authority as, in the case of the ECB, requests that the ECB may choose to comply with at its discretion, in accordance with the principle of sincere cooperation under Article 4(3) of the Treaty on European Union, whereby the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties. The ECB stresses the importance of ensuring cooperation and the exchange of information between the Italian authorities and the competent supervisory authority, in accordance with this framework. 2.4 Consultation of the ECB on future implementing rules under the Decree law The ECB understands that the Minister may adopt implementing rules on the provisions of the Decree law . In this respect, the ECB expects to be consulted on significant proposed implementing rules to be adopted on matters falling within the ECB’s fields of competence .

text: 3. Specific observations on the liquidity support measures

text: 3.1 Interaction of the State guarantee with the monetary policy of the euro area As stated in previous opinions on guarantee schemes for the liabilities of banks , the ECB reminds the consulting authority that government guarantees for bank debt should, when implemented: (i) address the funding problems of liquidity-constrained solvent banks by improving the functioning of the market for bank debt of longer-term maturities; (ii) preserve the level playing field among financial institutions and avoid market distortions; and (iii) ensure consistency in the management of Eurosystem liquidity. In this regard, it is stressed that it is of the utmost importance that support operations conducted by national authorities do not in any way affect the conduct and the implementation of monetary policy in the euro area .

text: 37 See paragraph 3 of Opinion

text: . 38 In particular, the ECB reiterates its view, already stated in various opinions, that the extension of a State guarantee to cover interbank deposits should be avoided, as this could entail distortions in national segments of the euro area money market (see, for example, paragraph 3.1 of Opinion

text: ). 3.2 Minimum maturity of debt instruments benefiting from a State guarantee While the ECB understands that a State guarantee would only be available for debt instruments with a residual maturity of at least three months, the ECB notes that a separate provision of the Decree law envisages the provision of guarantees that are limited to financial instruments with a maturity not exceeding two months . The ECB suggests that the Decree law be clarified in order to remove any legal uncertainty which may arise in this respect. 3.3 Emergency liquidity assistance operations collateralised by a State guarantee and the prohibition of monetary financing Regarding the provisions of the Decree law authorising the Minister to provide a State guarantee on ELA loans provided by the Banca d’Italia, the ECB notes that ELA, granted by a Eurosystem national central bank (NCB) independently and at its full discretion to a solvent financial institution on the basis of collateral security in the form of a State guarantee, is in principle possible, provided that a number of conditions are met in order to ensure the NCB’s compliance with the monetary financing prohibition under Article 123 of the Treaty . The relevant conditions are the following: (i) it must be ensured that the credit provided is as short term as possible; (ii) there must be systemic stability aspects at stake; (iii) there must be no doubts as to the legal validity and enforceability of the State guarantee under the applicable national law; and (iv) there must be no doubts as to the economic adequacy of the State guarantee, which should cover both principal and interest on the loans, thus fully preserving the NCB’s financial independence . These elements are reflected in the Decree law, including the State guarantee’s aim of preserving financial stability, and that the guarantee must be irrevocable and cover the principal amount of the loan and any interest. It is noted that the guarantee is not a first demand guarantee, but rather benefits from the prior execution, by the Banca d’Italia, of the collateral mobilised by the bank in order to access ELA funding. 3.4 The definition of capital shortfall in the context of a request for a State guarantee Regarding the definition of ‘capital shortfall’ in the context of a request for a State guarantee, the ECB understands that this definition encompasses, in line with pre-existing supervisory decisions and practice, the threshold used in the relevant national, Union or SSM-wide stress test or asset quality review which combines own funds requirements under Article 92 of the CRR with the additional benchmarks established by the competent authority.

text: 4. Specific observations on the precautionary recapitalisation

text: 4.1 The need to inform the Ministry of the outcome of the assessment of a capital raising plan The ECB understands that the requirement, under Article 14 of the Decree law, to inform the Ministry of the outcome of the assessment of the capital raising plan and of the measures adopted

text: 39 See Article 7(7) of the Decree law. 40 The financing by an NCB of an insolvent credit institution would be incompatible with the monetary financing prohibition since the NCB would be assuming a government task. 41 See paragraph 2.2 of Opinion

text: , paragraph 4.11 of Opinion

text: , paragraph 3.9 and footnote 34 of Opinion

text: , and paragraph 4.3 and in particular footnote 20 referring to Opinion

text: , which refers to paragraph 4.3 of Opinion

text: . will apply only in connection with the request for precautionary recapitalisation from the bank itself. Indeed, when the capital raising plan to remedy the shortfall is drafted and assessed by the competent authority there may be no evidence of any need for and/or no intention on the part of the bank to apply for a precautionary recapitalisation. 4.2 Assessment by the competent authority of the bank’s regulatory capital need The ECB understands that the reference in Article 16 of the Decree law to the ‘regulatory capital need’ of a bank, regarding which the competent authority is required to inform the Ministry and the bank, is to be read, in line with

text: Articles 32(4)

text: (d) of the BRRD and 18(4)(d) of the SRM Regulation, as referring to the capital shortfall established in the national, Union or SSM-wide stress tests, asset quality reviews or equivalent exercises conducted by the ECB, the European Banking Authority or national authorities.

text: 5. The exclusion of set-off rights with respect to claims mobilised as collateral

text: 5.1 The ECB considers the Decree law’s provision aimed at excluding set-off risks associated with credit claims accepted by the Banca d’Italia as collateral, which would also apply to Eurosystem credit operations, to be in line with the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). Protecting the European System of Central Banks (ESCB) against potential losses arising from the acceptance of such collateral is in line with the requirement laid down in the second indent of Article 18.1 of the Statute of the ESCB, pursuant to which lending by the ESCB central banks must be based on adequate collateral. The ECB notes that in recent years other euro area Member States have also enacted statutory provisions which exclude set-off risks related to credit claims mobilised as collateral for central bank operations. While in certain Member States the relevant statutory provisions, similar to the Decree law, only exclude set-off rights for credit claims mobilised as collateral for operations with that particular Member State’s central bank, some Member States also have statutory provisions that, apart from their own NCBs, also provide protection for the ECB and other ESCB NCBs.

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

text: Done at Frankfurt am Main, 3 February 2017.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI

text: 42 See Opinion

text: , paragraphs 1.1, 1.3, 2.3 and 2.4.


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: Directive

text: of the European Parliament and of the Council of 23 July 2014 on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features (OJ L 257, 28.8.2014, p. 214).

text: Directive

text: aims to improve the transparency and comparability of fee information for payment accounts, facilitate consumers switching payment accounts, and ensure that every EU resident has access to a payment account with basic features.

text: In exercising this power the CBC acts as the overseer of the enforcement of the draft law for the benefit of consumers.

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

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

text: and

text: b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1).

text: See paragraph 3.1.4 of Opinion

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

text: See paragraph 3.1.3 of Opinion

text: See, e.g., paragraph 3.1.4 of Opinion

text: See section 80 of the Law on payment services of 2009 (128(I)/2009).

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 15 February 2017 on payment accounts (CON/2017/2)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 15 February 2017 on payment accounts (

text: ) Introduction and legal basis

type: rubrik

text: On 23 January 2017 the European Central Bank (ECB) received a request from the Cypriot Ministry of Finance for an opinion on a draft law on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features (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 and third indents of

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

text: , as the draft law relates to means of payment and the Central Bank of Cyprus (CBC). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

type: stycke

text: 1. Purpose of the draft law

text: 1.1. The purpose of the draft law is to implement Directive

text: of the European Parliament and of the Council in Cypriot law. Directive

text: requires Member States to designate a national competent authority to oversee the application and enforcement of its provisions . Such competent authorities must be either public authorities or bodies recognised by national law or by public authorities expressly empowered for that purpose by national law. While such competent authorities may not be payment service providers, an exception is made for national central banks. 1.2. The draft law designates the CBC as the competent authority responsible for the application and enforcement of the rules implementing Directive

text: . As the competent authority, the CBC is required to cooperate and exchange information with the competent authorities of other Member States. In addition, the draft law confers a number of tasks on the CBC related to the protection of consumers. In particular, the CBC is entrusted with the responsibility of carrying out supervisory controls over payment service providers and credit institutions, and any of their representatives or third parties to whom they have delegated any of the tasks conferred by the draft law. Such persons are obliged to make available to the CBC or surrender any books, documents or records

text: the CBC requests . The CBC is also granted powers to impose sanctions for infringements of the draft law and to require consumers wishing to open a payment account with basic features to show a genuine interest in doing so . The draft law also provides that consumers wishing to complain about credit institutions’ refusal to offer payment accounts with basic features or their unilateral termination of framework contracts have the right to contact the CBC and the Consumer Protection Service, which is designated as the alternative dispute resolution body. 1.3. Other responsibilities conferred upon the CBC include the establishment of a list of the most representative services linked to a payment account and subject to a fee, the definition of the responsibilities of payment service providers concerning the information they need to provide to the Ministry of Finance for the operation of the website on which the fees charged by payment service providers will be compared, and ensuring that payment accounts with basic features are offered by credit institutions for a reasonable fee. 1.4. Finally, the draft law grants the CBC the power (i) to establish an alternative procedure in relation to account switching; (ii) to restrict, after consultation with the Consumer Protection Service and the Commission for the Protection of Competition , the number of credit institutions offering payment accounts with basic features to consumers, provided that access to such accounts by all consumers throughout Cyprus is guaranteed; (iii) to identify limited and specific additional cases in which credit institutions may be required or may choose to refuse an application for a payment account with basic features; and (iv) to identify limited and specific additional cases in which a framework contract for a payment account with basic features may be unilaterally terminated by a credit institution.

text: 2. Conferral of new tasks on the CBC

text: 2.1. This opinion does not address whether the draft law effectively implements Directive

text: into Cypriot law. The ECB will only assess those provisions of the draft law that may impact on the role and tasks of the CBC as a central bank, national supervisory authority and member of the Eurosystem and the European System of Central Banks (ESCB). 2.2. As noted in paragraphs 1.2, 1.3 and 1.4, the draft law confers a number of new tasks on the CBC. In the context of a proposed conferral of new tasks on a national central bank (NCB) in the ESCB, it is necessary to assess such conferral against the prohibition on monetary financing under Article 123 of the Treaty. For the purposes of that prohibition,

text: Article 1(1)

text: (b)(ii) of

text: Council Regulation (EC) No 3603/93

text: defines ‘other type of credit facility’, inter alia, as ‘any financing of the public sector’s obligations vis-à-vis third parties’. As the objective of the monetary financing prohibition of maintaining a sound budgetary policy of Member States may not be circumvented, the task of financing measures which are normally the responsibility of the Member States, and financed from their budgetary sources and not by the

text: NCBs, must not be entrusted to NCBs by law. In order to decide what constitutes a form of financing of the public sector’s obligations vis-à-vis third parties – which can be translated as the provision of central bank financing outside the scope of central bank tasks – an assessment of whether the task to be undertaken by an NCB is a central bank task or a government task, i.e. a task within the responsibility of the Member States, needs to be carried out on a case-by-case basis. In other words, sufficient safeguards must be in place to ensure that circumventions of the objective of the monetary financing prohibition of maintaining a sound budgetary policy of Member States do not take place. 2.3. As part of its discretion in the exercise of its duty, on the basis of

text: Article 271

text: (d) of the Treaty and Article 35.6 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), to ensure that NCBs honour the obligations laid down by the Treaty, the Governing Council has endorsed safeguards of that kind in the form of criteria for determining what may be seen as falling within the scope of a public sector’s obligation within the meaning of

text: Article 1(1)

text: (b)(ii) of

text: Regulation (EC) No 3603/93

text: or, in other words, constitute a government task as follows: First, central bank tasks are in particular those tasks that are related to the tasks that have been conferred upon the ECB and the NCBs by the Treaty and the Statute of the ESCB. These tasks are mainly defined in

text: Article 127(2)

text: , (5) and (6) and Article 128(1) of the Treaty, as well as

text: Article 22

text: and Article 25.1 of the Statute of the ESCB. Second, as Article 14.4 of the Statute of the ESCB allows NCBs to perform ‘other functions’, new tasks, i.e. tasks that are not related to tasks that have been conferred upon the ECB and the NCBs, are not precluded per se. However, new tasks that are undertaken by an NCB and which are atypical of NCB tasks or which are clearly discharged on behalf of and in the exclusive interest of the government or of other public sector entities should be considered government tasks. Third, an important criterion for qualifying a new task as atypical of an NCB task or as being clearly discharged on behalf of and in the exclusive interest of the government or other public sector entities is the impact of the task on the institutional, financial and personal independence of that NCB. In particular, the following aspects should be taken into account: (a) Whether the performance of the new task creates conflicts of interest with existing central bank tasks which are not adequately addressed and does not necessarily complement those existing central bank tasks. If a conflict of interest arises between existing and new tasks, sufficient safeguards to mitigate that conflict should be in place. The complementarity between a new task and the existing central bank tasks should not be interpreted broadly, so as to lead to the creation of an indefinite chain of ancillary tasks. Such complementarity should be examined also in relation to the financing of those tasks. (b) Whether without new financial resources the performance of the new task is disproportionate to the NCB’s financial or organisational capacity and may negatively impact on the capacity to perform properly the existing central bank tasks.

text: (c) Whether the performance of the new task fits into the institutional set-up of the NCB in light of central bank independence and accountability considerations. (d) Whether the performance of the new task harbours substantial financial risks. (e) Whether the performance of the new task exposes the members of the NCB decision-making bodies to political risks which are disproportionate and may also impact on their personal independence and, in particular, on the guarantee of term of office set out in Article 14.2 of the Statute of the ESCB. 2.4. On the basis of the criteria set out above, the following paragraphs assess whether the CBC’s new tasks are in line with the monetary financing prohibition. 2.4.1. New tasks related to the tasks conferred upon the ECB and the NCBs by the Treaty and the

text: Statute of the ESCB

text: The application and enforcement of the rules implementing Directive

text: is a new task for national authorities in the Union and is related to the task conferred in the fourth indent of Article 127(2) of the Treaty, as this task is ancillary to the promotion of the smooth operation of payment systems .

text: 2.4.2. Tasks which are atypical of NCB tasks

text: is a new task for national authorities in the Union. Directive

text: permits Member States to designate their central banks as competent authorities, and a number of Member States have done so .

text: 2.4.3. Impact of the tasks on the independence of the CBC

text: Consideration should be given to the impact of the new tasks to be conferred on the CBC on the institutional, financial and personal independence of the CBC. 2.4.3.1. Extent to which performance of the new task creates conflicts of interest with existing central

text: bank tasks

text: The new rules in the draft law apply to payment service providers, among them credit institutions. The CBC is already the competent authority responsible for the authorisation and prudential supervision of payment institutions pursuant to the Law on payment services . The CBC’s new task of being the competent authority for the implementation and enforcement of the draft law therefore seems to complement its existing tasks. 2.4.3.2. Extent to which performance of the new task is disproportionate to the CBC’s financial or

text: organisational capacity

text: The principle of financial independence requires that the Member States may not put their NCBs in a position where they have insufficient financial resources to carry out not only their ESCB-related tasks, but also their national tasks, both from an operational and financial perspective. Furthermore, when allocating specific new tasks to NCBs, each NCB concerned

text: should be able to avail itself of additional financial resources so that these tasks may be carried out in a manner that will not affect the NCB’s operational or financial capacity (including sufficient human resources) to perform their ESCB tasks. In this regard, the ECB notes that Directive

text: requires Member States to ensure that the national authorities in charge of the application and enforcement of its rules are granted adequate resources for the efficient and effective performance of their duties . The draft law entrusts CBC with the potentially resource and personnel-intensive task of applying and enforcing the new rules under Directive

text: , including the tasks and responsibilities listed in paragraphs 1.2 to 1.4 above. The Cypriot authorities must ensure that the CBC can avail itself of sufficient resources, including personnel, for the performance of the new duties relating to the protection of consumers conferred under the draft law, so that the CBC’s capacity to perform its ESCB-related tasks is not affected. The draft law contains a provision permitting the CBC to determine all the costs it bears in relation to the carrying out of the tasks conferred on the CBC under the draft law and to demand the repayment of these costs from payment service providers. The draft law therefore provides for the reimbursement of the CBC of the costs incurred in relation to the performance of its new tasks. 2.4.3.3. Extent to which performance of the new task fits into the CBC’s institutional set-up, in light of

text: The performance of the new tasks appears to be aligned with the institutional set-up of the CBC. As mentioned in paragraph 2.4.3.1, the CBC is already responsible for the application of provisions regarding payment services and systems, in the context of which the new tasks under the draft law are conferred. 2.4.3.4. Extent to which the performance of tasks harbours substantial financial risks The draft law provides that the CBC and its advisors, officers and employees shall not be subject to any liability in case of any legal action, application or other legal proceeding for damages in relation to any act or omission in the performance of their duties related to the tasks conferred by the draft law, unless it is proven that such act or omission was done in bad faith or is a result of gross negligence. 2.4.3.5. Extent to which performance of the new task exposes members of the CBC’s decision-making bodies to disproportionate political risks and impacts on their personal independence The performance of the tasks conferred under the draft law does not appear to expose the CBC’s decision-making bodies to any disproportionate political risk or impact on their personal independence. As mentioned in paragraph 2.4.3.1, the CBC is already responsible for the application of provisions regarding payment services and systems.

text: 3. Conclusion

text: The ECB considers that, given their link to the ESCB task of promoting the smooth operation of payment systems, the tasks conferred on the CBC under the draft law can be considered as central banking tasks.

text: Their financing by the CBC is in principle in compliance with the prohibition of monetary financing under Article 123 of the Treaty. In line with the requirement of Directive

text: that the national competent authorities must be granted adequate resources necessary for the efficient and effective performance of their duties, the Cypriot authorities must ensure that, in addition to the reimbursement of the CBC for the costs that it incurs as a result of the draft law, the CBC can avail itself of sufficient resources, including personnel, for the performance of the new duties relating to the protection of consumers conferred under the draft law, so that the CBC’s capacity to perform its ESCB-related tasks is not affected.

text: Done at Frankfurt am Main, 15 February 2017.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI

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: Directive

text: of the European Parliament and the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives

text: and

text: and

text: Regulation (EU) No 1093/2010

text: (OJ L 60, 28.2.2014, p. 34).

text: See paragraph 2 of Opinion

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

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

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

text: and

text: b(1) of the Treaty (OJ L332, 31.12.1993, p. 1).

text: See paragraph 4.3 of Opinion

text: See parapraph 3.3 of Opinion

text: and paragraph 3.1.2 of Opinion

text: See the Law on the regulation of companies acquiring credit and related matters of 2015 (169(Ι)/2015) and Opinion

text: See the Law on the regulation of financial leasing of 2016 (72(I)/2016) and Opinion

text: See paragraph 3.4 of Opinion

text: See paragraph 2.3 of Opinion

text: See in this regard paragraph 4.4 of Opinion

text: , paragraph 2.2.2 of Opinion

text: , paragraphs 2.1 and 2.2 of Opinion

text: , paragraph 2.3 of Opinion

text: , and paragraph 2 of Opinion

text: See paragraph 4.8 of Opinion

text: and paragraph 2.2.2 of Opinion

text: See paragraph 3.1.6 of Opinion

text: See paragraph 4.2 of Opinion

text: See paragraph 3.1.6 of Opinion

text: and paragraph 3.4 of Opinion

text: See paragraph 2.3.1 above.

title: Opinion of the European Central Bank of 17 February 2017 on conferring new mortgage credit-related tasks on the Central Bank of Cyprus (CON/2017/3)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 17 February 2017 on conferring new mortgage credit-related tasks on the Central Bank of Cyprus (

text: ) Introduction and legal basis

text: On 27 January 2017 the European Central Bank (ECB) received a request from the Cypriot Ministry of Finance for an opinion on a draft law on credit agreements for consumers relating to residential immovable property (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of

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

text: , as the draft law relates to the Central Bank of Cyprus (CBC). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1. The purpose of the draft law is to transpose Directive

text: of the European Parliament and of the Council into Cypriot law, with a view to enhancing consumer protection in respect of consumer loans for the acquisition of real estate or which are secured by residential immovable property. Under the Directive, Member States must designate a national competent authority to ensure the application and enforcement of its provisions. Such competent authorities must either be public authorities or entities recognised by national law or by public authorities expressly empowered for that purpose by national law. Such competent authorities may not be creditors, credit intermediaries or appointed representatives . 1.2. In the draft law, the CBC is designated as a competent authority, together with the Consumer Protection Service of the Republic of Cyprus (hereinafter the ‘Service’), responsible for the application and enforcement of certain of the rules that implement Directive

text: into national legislation. More specifically, the CBC and the Service are jointly responsible for: (a) the adoption of criteria determining a representative example in relation to certain information to be

text: included in advertising concerning credit agreements; (b) the provision of general information, including warnings, and adequate explanations to consumers on credit agreements; (c) the use of the terms ‘independent advice’ and ‘independent advisor’ in the course of the provision of advisory services by creditors; (d) the use by the parties to a credit agreement of clear, accessible, objective and verifiable indexes or reference rates to calculate the borrowing rate; and (e) cooperation with the competent authorities of other Member States. While the Service is designated as the competent authority for certain matters (i.e. the financial education of consumers, the requirements to be met in advertising and marketing communications, pre-contractual information, the requirement to inform consumers of the procedure for internal registration of complaints about credit intermediaries and the means of recourse to out-of-court complaint and redress procedures, certain matters related to foreign currency loans, and early repayment), all remaining requirements not specifically attributed to the Service or jointly to the Service and the CBC fall within the exclusive competence of the CBC. These include the monitoring of conduct of business obligations by creditors and credit intermediaries when providing credit to consumers, as well as the knowledge and competence requirements for their staff, ensuring that relevant information is provided free of charge to consumers, the calculation of the annual percentage rate of charge, the assessment of consumers’ creditworthiness, ensuring access for all creditors of all Member States to the databases used in Cyprus, the provision of advisory services by creditors and credit intermediaries, certain matters related to foreign currency loans, and certain requirements on the sound execution of credit agreements and related rights including matters related to arrears and foreclosure. 1.3. Furthermore, the draft law designates the CBC as the competent authority for the licensing and supervision of credit intermediaries and of non-credit institutions which intend to provide credit under the draft law. In particular, the CBC will be responsible for: (a) licensing credit intermediaries and non-credit institutions; (b) ensuring that all licensed credit intermediaries and non-credit institutions comply with the professional requirements set out in the draft law; (c) refusing or withdrawing the license of credit intermediaries and non-credit institutions; (d) imposing sanctions in case of infringements; (e) carrying out supervisory controls; and (f) carrying out notification procedures which allow licensed credit intermediaries to operate throughout the Union.

text: 2. Observations

text: 2.1. General observations

text: 2.1.1. This opinion does not address whether the draft law effectively implements Directive

text: into Cypriot law. The ECB will only assess those provisions of the draft law that may impact on the role and tasks of the CBC as a central bank, national supervisory authority and member of the Eurosystem and the European System of Central Banks (ESCB). 2.1.2. The draft law broadens the CBC’s current supervisory functions by assigning to it responsibility for the supervision and regulation of the market for credit agreements relating to residential immovable property. To this end, the draft law expands the categories of entities over which the CBC exercises prudential supervision to include credit intermediaries which in the course of their trade,

text: business or profession present or offer credit agreements to consumers, assist consumers by undertaking preparatory work in respect of credit agreements or conclude such agreements on behalf of creditors, as well as non-credit institutions which intend to grant credit pursuant to the draft law. 2.1.3. With respect to the competences entrusted to the Service by the draft law, it is noted that they result in certain powers that parallel those of the CBC. In this regard, the ECB understands that national authorities shall closely cooperate in exercising their powers without adversely affecting their respective supervisory responsibilities .

text: 2.2. Conferral of new tasks on the CBC

text: 2.2.1 The ECB underlines that, in the context of a proposed conferral of tasks on a national central bank (NCB) in the ESCB, it is necessary to assess such conferral against the prohibition on monetary financing under Article 123 of the Treaty. For the purposes of that prohibition,

text: Article 1(1)

text: (b)(ii) of

text: Council Regulation (EC) No 3603/93

text: defines ‘other type of credit facility’, inter alia, as ‘any financing of the public sector’s obligations vis-à-vis third parties’. As the objective of the monetary financing prohibition of maintaining a sound budgetary policy of Member States may not be circumvented, the task of financing measures which are normally the responsibility of the Member States, and financed from their budgetary sources rather than by the NCBs, must not be entrusted to NCBs by law. In order to decide what constitutes a form of financing of the public sector’s obligations vis-à-vis third parties – which can be translated as the provision of central bank financing outside the scope of the central bank tasks – an assessment of whether the task to be undertaken by an NCB is a central bank task or a government task, i.e. a task within the responsibility of the Member States, needs to be carried out on a case-by-case basis. In other words, sufficient safeguards must be in place to ensure that circumventions of the objective of the monetary financing prohibition of maintaining a sound budgetary policy of Member States do not take place. 2.2.2 As part of its discretion in the exercise of its duty, on the basis of

text: Article 271

text: (d) of the Treaty and Article 35.6 of the Statute of the European System of Central Banks and of the European Central Bank (Statute of the ESCB), to ensure that NCBs honour the obligations laid down by the Treaty, the Governing Council has endorsed safeguards of that kind in the form of criteria for determining what may be seen as falling within the scope of a public sector’s obligation within the meaning of

text: Article 1(1)

text: (b)(ii) of

text: Regulation (EC) No 3603/93

text: or, in other words, constitute a government task as follows: First, central bank tasks are in particular those tasks that are related to the tasks that have been conferred upon the ECB and the NCBs by the Treaty and the Statute of the ESCB. These tasks are

text: mainly defined in

text: Article 127(2)

text: , (5) and (6) and Article 128(1) of the Treaty, as well as

text: Article 22

text: and Article 25.1 of the Statute of the ESCB. Second, as Article 14.4 of the Statute of the ESCB allows NCBs to perform ‘other functions’, new tasks, i.e. tasks that are not related to tasks that have been conferred upon the ECB and the NCBs, are not precluded per se. However, new tasks that are undertaken by an NCB and which are atypical of NCB tasks or which are clearly discharged on behalf of and in the exclusive interest of the government or of other public sector entities should be considered government tasks. Third, an important criterion for qualifying a new task as atypical of an NCB task or as being clearly discharged on behalf of and in the exclusive interest of the government or other public sector entities is the impact of the task on the institutional, financial and personal independence of that NCB. In particular, the following aspects should be taken into account: (a) Whether the performance of the new task creates conflicts of interest with existing central bank tasks which are not adequately addressed and does not necessarily complement those existing central bank tasks. If a conflict of interest arises between existing and new tasks, sufficient safeguards to mitigate that conflict should be in place. The complementarity between a new task and the existing central bank tasks should not be interpreted broadly, so as to lead to the creation of an indefinite chain of ancillary tasks. Such complementarity should be examined also in relation to the financing of those tasks. (b) Whether without new financial resources the performance of the new task is disproportionate to the NCB’s financial or organisational capacity and may negatively impact on the capacity to perform properly the existing central bank tasks. (c) Whether the performance of the new task fits into the institutional set-up of the NCB in light of central bank independence and accountability considerations. (d) Whether the performance of the new task harbours substantial financial risks. (e) Whether the performance of the new task exposes the members of the NCB decisionmaking bodies to political risks which are disproportionate and may also impact on their personal independence and, in particular, on the guarantee of term of office set out in Article 14.2 of the Statute of the ESCB.

text: 2.3 Specific observations On the basis of the criteria set out above, the following paragraphs assess whether the CBC’s new tasks are in line with the monetary financing prohibition. 2.3.1 Tasks related to the tasks conferred upon the ECB and the NCBs by the Treaty and the Statute of

text: the ESCB

text: The authorisation and supervision of credit intermediaries and non-credit institutions, as well as the oversight and regulation of the market for credit agreements relating to residential immovable

text: property, can be considered as tasks related to those referred to in Article 127(5) of the Treaty, to the extent that these complement the supervisory tasks exercised by an NCB , particularly where that NCB already exercises tasks of a similar nature . In this respect, it is noted that the CBC already supervises credit institutions and other financing institutions, such as credit acquiring 8 9 companies and financial leasing companies . 2.3.2 Tasks which are atypical of NCB tasks A number of Member States have conferred on their NCBs supervisory tasks related to the provision of consumer credit . In addition, without prejudice to Article 14.4 of the Statute of the ESCB, the ECB has generally accepted the allocation of consumer protection-related tasks to NCBs based on the understanding that such tasks complement existing supervisory powers (and might be linked to the NCB’s overall responsibility for supervision of the financial market ) and thus contribute to the soundness of the financial market and the preservation of confidence in the marketplace . It follows that, as regards their nature, the new tasks conferred upon the CBC by the draft law cannot be regarded as atypical of a central bank, nor as being discharged in the exclusive interest of the government. 2.3.3 Extent to which performance of the new task creates conflicts of interest with existing central bank

text: tasks

text: The ECB notes that under the draft law the CBC will be responsible for supervising the conduct of creditors and credit intermediaries towards consumers, including their policies in respect of arrears and foreclosure. While these tasks seem to be broadly of the same nature as the supervisory tasks already performed by the CBC, the ECB notes that conflicts of interest may arise. As the national authority responsible for supervising the financial markets, the CBC will be required to mitigate any potential conflict of interest between its new consumer protection tasks and its supervision and financial stability mandates. The ECB recommends that sufficient mitigation measures are put in place in this respect . 2.3.4 Extent to which performance of the new task is disproportionate to the CBC’s financial or

text: organisational capacity

text: The principle of financial independence requires that the Member States may not put their NCBs in a position where they have insufficient financial resources to carry out not only their ESCB-related tasks, but also their national tasks, both from an operational and financial perspective.

text: Furthermore, when allocating specific non-ESCB-related tasks to the NCBs, additional personnel and financial resources must also be allocated so that these tasks may be carried out in a manner that will not affect the NCBs’ operational or financial capacity to perform their ESCB-related tasks . In this regard, notwithstanding a provision that the administrative fines imposed by the CBC in case of infringements of the draft law will be added to its revenue, it is noted that the draft law does not specify how the costs related to the supervision of credit intermediaries and non-credit institutions by the CBC are to be financed. The ECB therefore invites the consulting authority to consider establishing a cost recovery regime, e.g. requiring credit intermediaries and non-credit institutions to pay to the CBC an authorisation fee or an annual fee to cover the actual costs incurred by the CBC in the performance of its new supervisory tasks . Once a cost recovery regime is established, the CBC would then need to arrange for the additional necessary staff with the appropriate skills that are considered essential for the supervision of these entities and institutions, in view of the need to ensure that its capacity to perform its ESCB-related tasks and existing supervisory functions would not be affected by the assumption of these new tasks . 2.3.5 Extent to which performance of the new task fits into the CBC’s institutional set-up, in light of

text: Given the complementarity of the new tasks with the CBC’s existing supervisory powers, in particular in the field of supervision of credit institutions and other financial institutions, the new tasks would fit into the CBC’s institutional set-up. 2.3.6 Extent to which the performance of tasks harbours substantial financial risks The draft law does not contain any specific provisions on liability for the performance of supervisory tasks. The CBC’s liability with regard to the supervision of credit institutions, and of any director or officer of the CBC, is excluded, unless it is proven that any act or omission in the discharge of their relevant functions and responsibilities was done in bad faith or was the result of gross negligence . Given that liability issues could give rise to substantial financial risks for the CBC, the ECB invites the consulting authority to consider aligning the CBC’s liability under the draft law with its liability concerning the supervision of credit institutions. 2.3.7 Extent to which performance of the new task exposes members of the CBC’s decision-making bodies to disproportionate political risks and impacts on their personal independence The performance of the tasks conferred under the draft law does not appear to be exposing the CBC’s decision-making bodies to any disproportionate political risk or to impact their personal independence. In this respect, it is noted that the supervisory functions exercised by the CBC already include the supervision of credit institutions and other financing institutions, such as credit acquiring companies and financial leasing companies .

text: 2.3.8 Conclusion

text: Considering their nature, the CBC’s new tasks of supervising and regulating the market for consumer credit agreements, as well as authorising and supervising credit intermediaries and noncredit institutions, can in principle be regarded as central bank tasks, in the sense that they would complement the CBC’s existing supervisory functions. However, in addition to the foregoing, it is essential that the new role assigned to the CBC by the draft law does not have a negative impact on the institutional and financial independence of the CBC and that it does not adversely affect its capacity to carry out its ESCB- or Eurosystem-related tasks or to perform its other functions. To this end, it must be ensured that the supervisory costs incurred by the CBC in relation to its new tasks are adequately covered and that the CBC can avail itself of sufficient resources, including personnel, for the performance of its new tasks. Furthermore, it should be considered to align the CBC’s liability under the draft law with its liability concerning its supervision of credit institutions, given that liability issues could give rise to substantial financial risks for the CBC. Finally, it is important to ensure that sufficient mitigation measures are in place to adequately address any potential conflict of interest between the CBC’s new consumer protection tasks and its existing supervision and financial stability mandates. Consequently, the ECB invites the Cypriot authorities to consider in more depth the abovementioned aspects before the draft law is adopted.

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

text: Done at Frankfurt am Main, 17 February 2017.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Amendments to Draft Law n. 2630 of 5 January 2017.

text: Decree law No 244 of 30 December 2016, Gazzetta Ufficiale della Repubblica Italiana, Serie generale No 304, 30.12.2016.

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 the IMF’s press release No. 16/502 https://www.imf.org/en/News/Articles/2016/11/11/PR16502-IMF-Executive- Board-Approves-Renewal-of-New-Arrangements-to-Borrow. 5 Currently, the relations between Italy and the IMF are regulated by

text: Article 2(13)

text: and (15) of the Decree Law on the extension of deadlines and on urgent measures in the field of taxation, of 29 December 2010, n. 225, later converted by Law of 26 February 2011, n. 10. According to the Decree Law, (i) Italy’s contribution to the NAB amounted to EUR 13.58 billion, which was funded from the Banca d’Italia’s resources though a loan expiring on 17 November 2017; and (ii) the Banca d’Italia was authorised to conclude an interim bilateral loan to the IMF up to EUR 8.11 billion on Italy’s behalf. See ECB Opinion

text: , all ECB opinions are available on the ECB’s website at www.ecb.europa.eu . 6 Currently, Italy’s participation in the PRGT is regulated by

text: Article 2(14)

text: and (15) of the Decree Law on the extension of deadlines and on urgent measures in the field of taxation, of 29 December 2010, n. 225, later converted by Law of 26 February 2011, n. 10. According to the decree law, the Banca d’Italia is authorised to provide loans at market rates of up to SDR 800 million. See ECB Opinion

text: . 7 See the IMF’s Public Information Notice No. 09/94 https://www.imf.org/en/News/Articles/2015/09/28/04/53/pn0994. 8 As defined in paragraph 1(a) of the draft loan agreement annexed to the draft amendments. 9 Article 25(2) of the Decree Law of 29 December 2011, n. 216, converted into Law of 24 February 2012, n. 14, establishes a legal basis for the BdI to negotiate a bilateral loan agreement with the IMF. See ECB Opinion

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

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

text: and

text: b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1). 11 Consistent with this interpretation, see Opinions

text: and

text: . With regard to the issue of NCBs’ financing of IMF quota increases, see Opinions

text: and

text: . 12 See International Monetary Fund, Balance of Payments and International Investment Position Manual (Sixth ed., 2009), pages 111-18. 13 Annex IV, Asset 2.1 of Guideline

text: (EU) 2016/2249

text: of the European Central Bank of 3 November 2016 on the legal framework for accounting and financial reporting in the European System of Central Banks (ECB/2016/34) (OJ L 347, 20.12.2016, p. 37) lists ‘general arrangements to borrow, loans under special borrowing arrangements, deposits made to trusts under the management of the IMF’ as ‘Receivables from the IMF’. This includes the BdI’s transfer of Italy’s contribution to the IMF’s PRGT, as the latter is described by the IMF as a ‘financing package [seeking] new loan resources from members of SDR 10.8 billion (including SDR 1.8 billion for a voluntary encashment regime under which the participating lenders may ask for a ready repayment of loans in case of balance of payments needs)’. See http://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/16/04/Financing-the-IMFs- Concessional-Lending-to-Low-Income-Countries.

text: See also ECB Opinions

text: and

text: . All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 15 ECB Convergence Report 2016, p. 25.

title: Opinion of the European Central Bank of 22 February 2017 on Italy’s participation in a number of International Monetary Fund programmes: the extension of the New Arrangements to Borrow, the contribution to the Poverty Reduction and Growth Trust, and a new bilateral loan agreement (CON/2017/4)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 22 February 2017 on Italy’s participation in a number of International Monetary Fund programmes: the extension of the New Arrangements to Borrow, the contribution to the Poverty Reduction and Growth Trust, and a new bilateral loan agreement (

text: ) Introduction and legal basis

text: On 20 February 2017, the European Central Bank (ECB) received a request from the Italian Ministry of Economic Affairs and Finance for an opinion on amendments (hereinafter the ‘draft amendments’) to a decree law on the extension of deadlines (hereinafter the ‘Decree Law’). The relevant amendments concern Italy’s participation in a number of International Monetary Fund (IMF), or IMF-related, programmes. The Decree Law must be converted into law within 60 days of publication (i.e., by 28 February 2017), failing which the Decree Law will be invalid with retroactive application. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of

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

text: , as the draft amendments to the Decree Law relate to a national central bank (NCB). 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 amendments to the Decree Law

text: 1.1 Extension of the Banca d’Italia’s participation in the New Arrangements to Borrow The draft amendments to the Decree Law authorise the Banca d’Italia (BdI) to extend the IMF’s New Arrangements to Borrow (NAB) scheme until 16 November 2022 and to make available a credit line of up to 6 898.52 million special drawing rights (SDR) (currently equivalent to approximately EUR 8.7 billion). This facility will be funded from the BdI’s resources. The State budget will guarantee the reimbursement of principal and interest and will cover any exchange rate risk on the facility provided by the BdI under the Decree Law. The NAB was created in 1998 to enhance the IMF’s lending capacity. Italy was among the first participating States. When it entered into the scheme the Italian State did not provide the BdI with any guarantees. On 4 November 2016, the IMF’s Executive Board adopted a decision on the

text: renewal of the NAB scheme for an additional five years . The renewal decision does not require the participating States to confirm their renewed participation in the scheme. Continued participation is assumed if the concerned State fails to communicate its withdrawal at least six months before the entry into force of the renewal decision, i.e. by April 2017 . 1.2 New contribution to the Poverty Reduction and Growth Trust 1.2.1 The draft amendments to the Decree Law also authorise the BdI to provide additional loans at market rates of up to SDR 400 million to the IMF’s Poverty Reduction and Growth Trust (PRGT). The loan will be funded from the BdI’s resources and the State budget will guarantee the reimbursement of principal and interest . 1.2.2 On 23 July 2009, the IMF’s Executive Board approved wide-ranging modifications to upgrade its concessional financial facilities for low-income countries . The decision adopted by the IMF’s Executive Board established the PRGT, which replaced and expanded the former Poverty Reduction and Growth Facility-Exogenous Shocks Facility. The PRGT includes new financially improved credit lines that are considered to be more adapted to low-income countries’ needs. In view of the growing number of requests from low-income countries, additional contributions are being requested from donor countries. 1.3 Authorisation for the BdI to grant bilateral loans to the IMF on behalf of Italy The draft amendments to the Decree Law also authorise the BdI to conclude a new bilateral loan agreement with the IMF to implement Italy’s commitment to contribute to strengthening the tools available to the IMF to deal with the financial crisis. As the bilateral loan agreement concluded between Italy and the IMF expired in October 2016, the draft amendments to the Decree Law authorise the BdI to conclude a new bilateral loan agreement with the IMF denominated in SDR and up to a maximum amount equivalent to EUR 23 480 million . The bilateral loan agreement is intended to expire on 31 December 2019, unless it is extended to 31 December 2020. The State budget will guarantee the reimbursement of principal and interest and will cover any exchange rate risk on the loans provided by the BdI under the Decree Law .

text: 2. General observation

text: The ECB supports an adequately resourced IMF at the centre of the international monetary system, where it makes an important contribution to global economic and financial stability. With the backing of Union Member States, the IMF has, in response to the financial crisis, considerably increased its resources – both in terms of quotas and borrowed resources, such as the NAB and bilateral loans.

text: 3. Monetary financing prohibition

text: 3.1 The draft amendments to the Decree Law must comply with the prohibition of monetary financing under Article 123 of the Treaty, which is subject to certain exemptions contained in Article 123(2) of the Treaty, Article 21.2 of the Statute of the European System of Central Banks and of the European Central Bank and

text: Council Regulation (EC) No 3603/93

text: . In particular,

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

text: provides that 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.

text: Recital 14

text: of

text: Regulation (EC) No 3603/93

text: clarifies the rationale behind this exemption, stating that it is appropriate to authorise the financing by the NCBs of obligations falling upon the public sector vis-à-vis the IMF because such financing ‘results in foreign claims which have all the characteristics of reserve assets’. Therefore, the exemption in

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

text: must be interpreted in line with this rationale . 3.2 Reserve assets have been defined as those external assets that are readily available to and controlled by monetary authorities for meeting balance of payments financing needs, for interventions in exchange markets to affect the currency exchange rate, and for other related purposes, such as maintaining confidence in the currency and the economy, and serving as a basis for foreign borrowing. Under this definition reserve assets must be foreign currency assets and, other than gold bullion, must be claims on non-residents . The BdI’s transfer of Italy’s contribution to the IMF’s PRGT, its granting of loans under the NAB and its bilateral agreements with the IMF on behalf of Italy, as set out in the draft amendments to the Decree Law, fall within the exemption of

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

text: because this financing results in foreign currency (SDR)-denominated claims of the BdI against non-resident persons (the IMF and an IMFadministered trust) that have all the characteristics of reserve assets .

text: 3.3 Based on the foregoing, the ECB considers that the BdI’s transfer of Italy’s contribution to the IMF’s PRGT and grant of loans under the NAB and bilateral agreements with the IMF on behalf of Italy should not be regarded as a form of monetary financing prohibited under the Treaty .

text: 4. Financial independence

text: 4.1 From the perspective of the financial independence required of an NCB in the European System of Central Banks under Article 130 of the Treaty, pursuant to which Member States may not put their NCBs in a position where they have insufficient financial resources to carry out their ESCB or Eurosystem-related tasks , the ECB welcomes the guarantee under the draft amendments to the Decree-Law to be provided by the State with respect to the reimbursement of principal and interest on BdI’s loans, which in the case of the extension of participation in the NAB and the new bilateral loan agreement with the IMF will also cover any exchange rate risk on the loans provided by BdI.

text: Done at Frankfurt am Main, 22 February 2017.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


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

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

text: Regulation (EU) 2015/751

text: of the European Parliament and of the Council of 29 April 2015 on interchange fees for card-based payment transactions (OJ L 123, 19.5.2015, p. 1).

text: See Eurosystem Oversight Policy Framework, July 2016, available on the ECB’s website at www.ecb.europa.eu

text: As previously stated in paragraph 3.4 of Opinion

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

text: Regulation (EU) No 909/2014

text: of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives

text: and

text: and

text: Regulation (EU) No 236/2012

text: (OJ L 257, 28.8.2014, p. 1).

text: See the regulatory and implementing technical standards on CSD requirements and the draft regulatory technical standards on settlement discipline under

text: Regulation (EU) No 909/2014

text: developed by the European and Securities Markets Authority (ESMA), available on ESMA’s website at www.esma.europa.eu

text: See CPMI-IOSCO Public quantitative disclosure standards for central counterparties, February 2015, available on the website of the Bank for International Settlements at www.bis.org

title: Opinion of the European Central Bank of 1 March 2017 on provision of information and data by payment systems, payment schemes, securities depositories and clearing and settlement systems (CON/2017/5)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 1 March 2017 on provision of information and data by payment systems, payment schemes, securities depositories and clearing and settlement systems (

text: ) Introduction and legal basis

text: On 1 February 2017 the European Central Bank (ECB) received a request from the Polish Ministry of Economic Development and Finance for an opinion on three draft executive decrees to be adopted by the Minister of Economic Development and Finance: (1) a decree on the functioning of payment systems; (2) a decree on the functioning of payment schemes; and (3) a decree on data and information to be provided by operators of securities depositories, systems for registering financial instruments other than securities and settlement systems (together ‘the draft decrees’). 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, fourth and fifth indents of

text: , as the draft decrees relate to (1) Narodowy Bank Polski (NBP), (2) the collection, compilation and distribution of monetary, financial, banking, payment systems and balance of payments statistics and (3) 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 decrees

text: 1.1 According to the Law of 24 August 2001 on the finality of settlement in payment systems and securities settlement systems and rules governing the oversight of such systems, the President of NBP is responsible for the oversight of payment systems. In particular, the operation of a payment system requires the consent of the President of NBP who is also entitled to revoke such consent and receive information on the functioning of the payment system. Against this backdrop, the decree on the functioning of payment systems sets out (1) the criteria for the President of NBP to assess the functioning of the payment system; (2) the detailed scope of information and types of documents to be provided with the application for consent to operate a payment system; (3) the detailed scope of information to be provided to the President of NBP (a) by a payment system operator which intends to enter into an arrangement with another operator relating to cross-system execution of transfer orders; (b) generally by payment system operators on a monthly basis; and

text: (c) in respect of an incident which may have a negative impact on the functioning of the payment system. 1.2 According to the Law of 19 September 2011 on payment services, the President of NBP is responsible for the oversight of payment schemes. In particular, the operation of a payment scheme requires the consent of the President of NBP who is also entitled to revoke such consent and receive information on the functioning of the payment scheme. Against this backdrop, the decree on the functioning of payment schemes sets out (1) the criteria for the President of NBP to assess the functioning of the payment scheme; (2) the detailed scope of documents and information to be provided by the payment organisation i.e. the payment scheme governance authority, when applying for consent to operate the payment scheme; (3) the detailed scope of documents and information to be provided in cases where no consent by the President of NBP is required for the operation of the payment scheme because the payment scheme’s rules have been assessed by the appropriate oversight authority of a Member State or the Union (see paragraph 1.3); (4) the detailed scope of quarterly information to be provided by the payment organisation to NBP on the total number and value of domestic payment transactions processed and cleared, including information about unauthorised payment transactions; and (5) the detailed scope of quarterly information to be provided by a card organisation to NBP concerning compliance with the level of interchange fees prescribed by

text: Regulation (EU) 2015/751

text: of the European Parliament and of the Council . 1.3 With respect to payment schemes whose rules have been assessed by the appropriate oversight authority of a Member State or the Union, and whose operation therefore does not require the consent of the President of NBP, the decree on the functioning of payment schemes provides that the documents and information that must be submitted to the President of NBP comprise: (1) confirmation of the completion of an assessment of the rules governing the operation of the payment scheme by the appropriate oversight authority of a Member State or the Union; (2) documentation that was subject to assessment by the appropriate oversight authority of a Member State or the Union. In addition, the following information that is also required from payment schemes directly overseen by the President of NBP must be submitted: (3) the name and registered office of the payment organisation; (4) the name of the payment scheme; (5) the types of payment instruments issued with an indication of the currencies in which payment transactions initiated using the payment instruments issued within the context of the payment scheme will be processed and settled; (6) conditions for accessing and participation in the payment scheme; (7) the procedure for making the rules governing the operation of the payment scheme available to participants; (8) the name and registered office of every entity that is responsible for carrying out specific outsourced operations of the payment scheme and the functions for which the entity is responsible, and the scope of its responsibility; (9) details of the infrastructure, payment systems, and payment schemes with which the operation of the scheme is linked, and also regarding the processing entity if the payment scheme is a four party payment card scheme as defined in

text: Regulation (EU) 2015/751

text: ; (10) the rules associated with the complaints procedure within the context of the payment scheme; and (11) the procedure governing the protection of professional secrecy, including the protection of sensitive payment data. If the payment scheme is a payment card scheme, the following also must be provided: (a) information on the established interchange fee rate for an individual payment transaction and the rules governing the calculation of this fee; (b) information whether, within the context of the payment scheme, different interchange fee rates are applied, and an indication of the range for the rates applied; (c) the manner in which the fee is calculated on net refunds, taking into account the level of rates established for each type of instrument, split by currency; (d) the manner in which the system fee is calculated; and (e) the manner in which the payment card system and the processors are separated, as referred to in

text: Article 7 of Regulation (EU) 2015/751

text: . 1.4 According to the Law of 29 July 2005 on trading in financial instruments, the President of NBP participates in the oversight of operators of securities settlement systems. In particular, the President of NBP performs cyclical assessments and monitors the functioning of such infrastructures. Against this backdrop, the decree on data and information to be provided by operators of securities depositories, systems for registering financial instruments other than securities and settlement systems sets out (1) the detailed scope of information to be submitted to NBP by the operator of a securities depository or a system for registering financial instruments other than securities and the deadline for such transmission; (2) the detailed scope of information to be submitted to NBP by the operator of a settlement system in respect of settlement and clearing activities, and the deadline for such transmission; and (3) the detailed scope of information to be submitted to NBP by all of the above operators on incidents that have or could have a negative impact on the smooth or secure operation of the system.

text: 2. General comments

text: 2.1 The ECB welcomes the draft decrees as the scope of information and documents required from the relevant entities follows the principles and general requirements set out in the Eurosystem oversight policy framework and aims at strengthening the oversight function of NBP. 2.2 With respect to the obligation to provide statistical data, the ECB suggests that more detailed requirements on the scope of data requested are aligned with future ECB statistical data requirements applicable to payment system providers and payment schemes. 2.3 In addition, the ECB suggests that specific incident reporting requirements be aligned with future Eurosystem requirements.

text: 3. Specific comments

text: Decree on the functioning of payment schemes

text: 3.1 The ECB welcomes the fact that the criteria for the assessment of a payment scheme follow the same guiding principles as the criteria established under the Eurosystem oversight policy framework for payment instruments. 3.2 The ECB understands that more detailed information requirements relating to payment schemes will be set out in NBP’s assessment guides. In that respect the ECB suggests that these assessment guides be aligned with the applicable Eurosystem oversight instruments. 3.3 The ECB also suggests that, in the exercise of its oversight powers over payment schemes in respect of which a leading oversight role has already been assigned to the ECB and/or one or more Eurosystem national central banks (NCBs), NBP could essentially rely on cooperative oversight arrangements with the ECB and other competent NCBs . NBP is entitled to participate in the Eurosystem assessment groups on the basis of the contractual arrangements in place with the Eurosystem oversight authorities for international card payment schemes. In order to promote increased pan-European harmonisation and efficiency in the provision of card payments, the ECB suggests that NBP could, in the first instance, usefully rely on the Eurosystem cooperative arrangements in order to seek information required from the international payment schemes in question, instead of requesting the same information directly from the payment organisation, i.e. the scheme governance authority. Decree on the data and information to be provided by operators of securities depositories, systems for registering financial instruments other than securities and settlement systems 3.4 The ECB notes that

text: Regulation (EU) No 909/2014

text: of the European Parliament and of the Council and the regulatory and implementing technical standards thereunder establish requirements on the information and data to be provided by central securities depositories (CSDs) to competent authorities and relevant authorities, including NCBs in their capacity as overseers of CSDs. Therefore, whilst the ECB welcomes the draft decree on the data and information to be provided by securities depositories and clearing and settlement systems, which facilitates the effective conduct of oversight activities by NBP by making available data and information, it invites NBP to ensure that the draft decree does not duplicate, but merely complements, the requirements stemming from

text: Regulation (EU) No 909/2014

text: and the regulatory and implementing technical standards, for example in terms of granularity or frequency of reporting. 3.5 The ECB supports the initiative to gather information and data on the business activities of local central counterparties (CCPs) for the oversight activities NBP conducts. NBP may wish to keep in mind that local CCPs may already report some data in line with the quantitative disclosure

text: standards established by the Committee on Payments and Market Infrastructures (CMPI) and the International Organization of Securities Commissions (IOSCO) , and NBP should strive to avoid duplication, which would lead to a higher regulatory burden for CCPs. However, direct reporting to NBP of some of the published data could be justified by the need to have more granular and/or relatively frequent data reporting.

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

text: Done at Frankfurt am Main, 1 March 2017.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI