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

text: These task comprise the definition and implementation of monetary policy and certain related tasks such as: issuing banknotes and coins; holding and managing official reserves in foreign exchange and gold; conducting foreign exchange operations in relation to the management of foreign exchange reserves and the implementation of exchange rate policy; developing the payment and settlement systems; collecting and publishing the statistical information required for carrying

text: out its tasks; and supporting the efficient development and conduct of policies relating to the prudential supervision of credit institutions and the stability of the financial intermediary system.

text: According to Article 49(11) of the Law on the MNB, the Governor of the MNB submits a proposal to the President on the appointment or dismissal of two members, in consultation with the Prime Minister. The Prime Minister submits a proposal to the President on the appointment and dismissal of two further members, in consultation with the Governor of the MNB.

text: According to the Law on the MNB, nomination for membership of the Supervisory Board shall be open to Hungarian citizens who possess excellent professional knowledge on matters relating to credit institutions, financial and accounting disciplines and who are eligible to vote in Hungarian parliamentary elections. The mandate of the members of the Supervisory Board shall be for the duration of the mandate of Parliament and shall last until the expiry of the mandate of Parliament. The Supervisory Board remains in office until a new Parliament elects the new Supervisory Board members within three months from the Parliament’s first convening. Members of the Supervisory Board shall be obliged to report to the Parliament responsible for their election or to the Minister responsible for their appointment.

text: See

text: and

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

text: See

text: See

text: See for example the ECB’s Convergence Report 2010, p. 15.

text: See

text: Monetary Council members shall be Hungarian citizens with outstanding theoretical knowledge and/or experience related to monetary, financial and/or credit institution activities.

text: Similarly, see

text: , paragraph 2.1.

text: Law XC of 2010 on the adoption and amendment of certain economic and financial legal acts.

text: The Governor’s remuneration before the cut amounted to approximately HUF 8 000 000 (approximately EUR 29 100). The Chairman’s and the other members of the Supervisory Board remuneration was set out as 15 % and 10 % of the Governor’s remuneration, amounting to approximately HUF 1 200 000 (approximately EUR 4 300) and 800 000 (approximately EUR 2 900), respectively.

title: Opinion of the European Central Bank of 13 December 2010 on the appointment and dismissal of Monetary Council members and the remuneration of the members of the Magyar Nemzeti Bank's Supervisory Board (CON/2010/91)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 13 December 2010 on the appointment and dismissal of Monetary Council members and the remuneration of the members of the Magyar Nemzeti Bank's Supervisory Board (

text: ) Introduction and legal basis

text: On 22 November 2010, the European Central Bank (ECB) received a request from the Hungarian Ministry of the National Economy for an opinion on a draft law amending the Law on the Magyar Nemzeti Bank (hereinafter the ‘Law on the MNB’) with regards to the appointment and dismissal of Monetary Council members of the Magyar Nemzeti Bank (MNB) (hereinafter the ‘draft law concerning the Monetary Council’). On 29 November 2010, the ECB received another request from the Ministry for an opinion on a draft law amending the Law on the MNB with regard to the remuneration of the MNB’s Supervisory Board members (hereinafter the ‘draft law concerning the Supervisory Board’) (hereinafter collectively referred to as the ‘draft laws’). The ECB has merged the two consultations as suggested by the consulting authority. 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 laws 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.

text: 1. Purpose of the draft laws

text: 1.1 The draft law concerning the Monetary Council The draft law concerning the Monetary Council will amend the applicable appointment and dismissal procedure of some of its members. In addition, it contains provisions on the oath taken by Monetary Council members and the appeal procedure in the event of their dismissal. According to the Law on the MNB, the Monetary Council is the MNB’s ultimate decision-making body in respect of certain tasks described in the Law on the MNB . The Monetary Council consists of five

text: to seven members, i.e. the MNB’s Governor, as the Chairman, and Deputy Governors, and up to four other members elected by the President of the Hungarian Republic for a term of six years. The President is empowered to appoint and dismiss the Governor and the Deputy Governors. Under the current regime the Governor and the Prime Minister have equal powers to make proposals for the appointment and dismissal of the other members of the Monetary Council. However, under the draft law concerning the Monetary Council, the members other than the Governor and Deputy Governors would be elected and dismissed by the Parliament on the basis of a proposal from the Parliamentary Committee on the Economy and Information Technology. According to the explanatory memorandum, the draft law concerning the Monetary Council would end the involvement of the Governor and the Prime Minister in this procedure. 1.2 The draft law concerning the Supervisory Board 1.2.1 According to

text: Article 52

text: /A of the Law on the MNB, the MNB’s Supervisory Board is responsible for the continuous supervision of the MNB on behalf of the State . The Supervisory Board’s competence does not extend to the supervision of tasks related to the European System of Central Banks (ESCB) and the impact of such tasks on the MNB’s profit and loss. The Supervisory Board prepares its reports in accordance with such restrictions. The Supervisory Board members are the Chairman, members elected by Parliament, a Ministry representative and a consultant commissioned by the Minister for the National Economy. The remuneration of the Chairman and the other members of the Supervisory Board amounts to 15 % and 10 %, respectively, of the Governor’s remuneration received from the MNB. According to Article 53 of the Law on the MNB, the Governor’s monthly remuneration for the period from 1 March of a reference year to the end of February of the following year is ten times the national gross monthly average remuneration officially published by the Central Statistical Office for the year preceding the reference year. 1.2.2 The draft law concerning the Supervisory Board changes the rules on the remuneration of Supervisory Board members and will no longer tie their remuneration to the Governor’s remuneration. The Chairman will receive HUF 1 200 000 (approximately EUR 4 300) and the other members will receive HUF 800 000 (approximately EUR 2 900). According to the explanatory memorandum, this increase ensures that the remuneration of the Supervisory Board members will be proportionate to the quantity and quality of their work.

text: 2. General observations

text: 2.1 As mentioned in previous ECB Opinions , a credible monetary policy is a key condition for controlling inflationary expectations and promoting sustainable convergence towards price stability. An independent central bank in a stable institutional environment forms the basis for this monetary policy credibility. The Treaty’s requirement of central bank independence reflects the generally held view that the primary objective of price stability is best served by a fully independent institution with a precisely defined mandate. It is therefore 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 and would like to emphasise its previous comments regarding the frequent amendments to the Law on the MNB. One consideration in the context of central bank independence is the need for a central bank legal framework that provides a stable basis for the central bank’s functioning. The ECB notes that the appointment procedure applicable to Monetary Council members has been often amended in the past and that the Law on the MNB has been amended several times this year (with further amendments envisaged), and finds that the introduction of such frequent changes adversely affect MNB’s organisational and governance stability . 2.3 The ECB is closely following the recent legislative developments in Hungary. The combination of the changes to the remuneration of the members of the decision-making body of the MNB and to the competences of the Governor, i.e. the power to propose the appointment and dismissal of two members of the Monetary Council, under the draft laws or under recently adopted legislation , with the repeated criticism expressed in the recent past by the Government concerning interest rate decisions taken by the MNB raises concerns, as this could be seen as the Government trying to influence the Governor in the performance of his tasks. As the ECB has consistently noted in its Convergence Reports, any such influence would be contrary to Article 130 of the Treaty which requires governments of the Members States to respect the principle of central bank independence and not to seek to influence the members of the decision-making bodies of the national central banks (NCBs) in the performance of their tasks . 2.4 The MNB’s financial independence and the personal independence of the members of the MNB’s decision-making body are still matters of concern. The ECB notes the disregard by the Hungarian Parliament of the ECB’s stance on the provisions of the Law on the MNB regarding the remuneration of the members of MNB’s governing body . It further notes that the present draft laws still do not address all the issues highlighted in the ECB’s Convergence Reports from

text: December 2006 and May 2010 and, in particular, the deficiencies with regard to the independence of the central bank and the prohibition of monetary financing. 2.5 The ECB would also like to remind the Hungarian authorities that according to the Law on the MNB, the MNB is to be consulted on draft decisions and legislative provisions related to the tasks of the MNB. According to the ECB’s information, the Hungarian authorities failed to comply with this obligation not only with regard to the draft law concerning the Supervisory Board, but also with regard to other legislative provisions (including the budget proposal for 2011).

text: 3. Specific observations regarding the draft law concerning the Monetary Council

text: 3.1 The ECB limits its observations to the compatibility of the draft law concerning the Monetary Council with the requirements for personal independence of the members of an NCBs’ decisionmaking bodies under Article 14.2 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). Under the draft law concerning the Monetary Council, the criteria for the appointment of Monetary Council members remain unchanged as do the rules guaranteeing member’s personal independence as regards the security of tenure of office, grounds for dismissal and conflicts of interest. The term of office of Monetary Council members is six years and their mandate terminates upon: expiration of their term of office; resignation; dismissal; or death. The President may dismiss the Governor and Deputy Governors, while Parliament, on the basis of a proposal from the Parliamentary Committee on the Economy and Information Technology, may dismiss other Monetary Council members. A Monetary Council member’s mandate may only be terminated by dismissal if the member no longer fulfils the conditions required for the performance of their duties or has been found guilty of serious misconduct. 3.2 The ECB understands that the mandate of the current members of the Monetary Council (other than the Governor and Deputy Governors) will expire on 28 February 2011 and that the appointment of new Monetary Council members is necessary to ensure the smooth functioning of the Monetary Council. In order to safeguard the institutional independence of the MNB, the Law on the MNB should clearly provide for the procedures to replace the Governor in the event of the Governor’s termination due to expiration of the term of office, resignation, dismissal or death so as to avoid any external ad-hoc interference and, at the same time, ensure the smooth and continuous functioning of the Monetary Council. Any person who takes over the duties of the Governor should benefit from the same safeguards of personal independence, i.e. the same rules applying to the current Governor on security of tenure of office, grounds for dismissal and conflicts of interest. 3.3 As regards the draft provisions on the oath to be taken by Monetary Council members, the oath is taken in front of the President by the Governor and Deputy Governors and in front of the

text: Parliament by the other members. As noted in the ECB’s Convergence Report of 2010, the Law on the MNB refers to a separate law that specifies the wording of the oath. The wording of the oath should be adapted in order not to hinder the Governor and the other members of the Monetary Council from performing ESCB-related tasks.

text: 4. Specific observations regarding the draft law concerning the Supervisory Board

text: 4.1 The ECB would like to remind the consulting authority that on 1 July 2010, the ECB received a request for an opinion on a draft law that intended to introduce a HUF 2 000 000 (approximately EUR 7 300) cap on the Governor’s remuneration. According to the explanatory memorandum, the proposed measure was aimed at allowing a more performance-based and equitable income distribution in the public sector and at strengthening the public administration’s efficiency. The proposed cap represented a reduction of approximately 75% in the Governor’s remuneration and indirectly in the remuneration of the Deputy Governors, members of the Monetary Council and of the Supervisory Board as their remuneration was based on the Governor’s remuneration. The Law was adopted on 22 July 2010 and published on 13 August 2010 (hereinafter the ‘Law limiting the Governor’s remuneration’). The relevant provision of the Law limiting the Governor’s remuneration disregarded the ECB’s legal position and did not comply with the ECB’s Opinion, which required involving the MNB in the legislative process and ensuring that the security of tenure of the current Monetary Council members was not affected. The salary cap became effective in September 2010. 4.2 The new members of the Supervisory Board were appointed in the second half of November 2010. Under the draft law concerning the Supervisory Board, remuneration of Supervisory Board members is no longer tied to the Governor’s remuneration. On the basis of the available information , the ECB understands that pursuant to this provision, the Government intends to raise the new Supervisory Board members’ remuneration to the level existing prior to the introduction of the Law limiting the Governor’s remuneration and that the new Supervisory Board members will fall under the Law limiting the Governor’s remuneration for only a short period of time. 4.3 Formally, the proposed provisions regarding the Supervisory Board members’ remuneration comply with the Treaty and the Statute of the ESCB. Practically, if the draft law concerning the Supervisory Board is adopted in its current form, the MNB will face a situation where the increased remuneration of the Supervisory Board members will exceed the remuneration of certain Monetary Council members, which was recently reduced. The explanatory memorandum to the draft law concerning the Supervisory Board explains that the salary increase is based on proportionality between the quantity and quality of work. Against this background (see paragraphs 4.1, 4.2 and this

text: paragraph), the recent amendment to the Law on MNB with regard to the remuneration of the Governor and members the Monetary Council and Supervisory Board - compared to the proposed increase of the remuneration of only the Supervisory Board members - raises concerns that pressure is being placed on the current Governor and the members of the MNB’s decision making body who are involved in the performance of ESCB-related tasks which would be inconsistent with central bank independence (see also paragraph 2.3). 4.4 In the same spirit, the current economic situation and the announced intention of the Government to reduce remuneration in the public sector, such as in case of the Governor and the other members of the Monetary Council, raises doubts as to whether the increase in the remuneration of the new Supervisory Board members has been timed properly.

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

text: Done at Frankfurt am Main, 13 December 2010.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


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

text: See, for example, Opinion

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

text: Guiding principles for bank asset support schemes, 25 February 2009, available on the ECB’s website at www.ecb.europa.eu. 4 See, for example, paragraph 8 of ECB Opinion

text: and paragraph 4.1 of ECB Opinion

text: . 5 See, for example, paragraph 4 of ECB Opinion

text: and paragraph 4.1 of ECB Opinion

text: . 6 Section 7(2), Section 13(2), Section 28(1)(a) and Section 33(2) of the draft law. 7 See, for example, paragraph 3.3, last sentence, of ECB Opinion

text: and paragraph 4.2 of ECB Opinion

text: . 8 See for example paragraph 8, second sentence, of ECB Opinion

text: and paragraph 4.2 of ECB Opinion

text: . 9 See, for example, paragraph 3.3, last sentence, of ECB Opinion

text: and paragraph 4.2 of ECB Opinion

text: As published on the ECB website, www.ecb.europa.eu. 11 See also similar observations in paragraph 3.1.4 of

text: . 12 Section 5 of the draft law.

text: The monetary financing prohibition in Article 123 of the Treaty is further clarified in

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

text: specifying definitions for the application of prohibitions in Article

text: and

text: b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1) according to which overdraft facilities or any other type of credit facility with the ECB or the national central banks (NCBs) of Member States in favour of Community institutions or bodies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States are prohibited, as is any purchase directly from these public sector entities by the ECB or NCBs of debt instruments. 14 See also similar observations in paragraph 3.1.6 of Opinion

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 17 December 2010 on emergency stabilisation of credit institutions (CON/2010/92)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 17 December 2010 on emergency stabilisation of credit institutions (

text: ) Introduction and legal basis

type: rubrik

text: On 10 December 2010, the European Central Bank (ECB) received a request from the Irish Minister for Finance for an opinion on the Credit Institutions (Stabilisation) Bill 2010 (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 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 the Central Bank of Ireland (hereinafter the ‘Central Bank’) and contains rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

type: stycke

text: 1. Purpose of the draft law

text: The draft law, amongst other things, intends to facilitate and implement the programme agreed between the Minister for Finance, the European Commission, the ECB and the International Monetary Fund (IMF), protect the State’s interest in respect of the guarantees issued by the State, restore confidence in the banking sector and achieve financial stability in the Irish economy. The draft law grants far-reaching powers to the Minister and provides that, amongst other things, the Minister may (i) make direction orders with the intention of preserving or restoring the financial position of a credit institution, (ii) propose special management orders to appoint a special manager to an institution, (iii) propose subordinated liabilities orders on matters, such as the payment of interest, the repayment of principal, events of default and the timing of obligations, (iv) propose transfer orders relating to all or any part of a relevant institution’s assets and/or liabilities, (v) apply general powers to matters relating to companies, when an institution is formed as such, including the removal of directors and/or officers and the appointment of directors and/or officers. It also contains various other

text: miscellaneous provisions including, but not limited to, a provision overriding inconsistent provisions in any agreement by which an institution or any of its subsidiaries are bound.

text: 2. General observations

text: 2.1 The Minister for Finance has requested the ECB to deliver an opinion by 17 December 2010. The ECB notes that, in cases of particular urgency which do not allow for the normal consultation period, the consulting authority may indicate such urgency in its consultation request and ask for a shorter deadline for the adoption of the ECB’s opinion. However, even though the ECB welcomes this consultation request and understands the need for an accelerated legislative procedure, it would have appreciated being consulted by the authority preparing the draft legislation at an earlier stage. 2.2

text: Article 4 of Decision 98/415/EC

text: requires Member States to ensure that the ECB is consulted at an appropriate point in time to allow the consulting authority to take its opinion into consideration before deciding on the substance of the draft legislative provisions. The ECB therefore expects that the consulting authority will take any additional measures necessary to reflect the ECB’s opinion to the extent appropriate. It also encourages further consultation on any new amendments to the adopted Act or any related implementing measures which fall within its field of competence, provided that such measures do not merely constitute the implementation of the ECB’s recommendations. More generally, internal administrative procedures should be in place to ensure that timely consultation of the ECB is taken into account whenever such consultation is mandatory. 2.3 The ECB would like to stress that, given the very short time in which it has been consulted on this important legislation, it has not been possible to assess all the many constitutional, other legal and regulatory issues which this draft law undoubtedly raises. In particular, the ECB has serious concerns that the draft law is insufficiently legally certain on a number of critical issues for the Eurosystem. For example, problems of legal uncertainty relate to the impact of, inter alia,

text: Article 61

text: (effects of orders on certain other obligations) of the draft law on the rights of the Central Bank, the ECB and possibly other central banks within the ESCB, the scope of collateral rights of central banks given as security against ELA, as well as other issues. The ECB would expect that nothing in this Act would affect operations, rights or entitlements of the Central Bank or the European Central Bank, or any other central banks within the ESCB. 2.4 In line with its previous opinions, the ECB emphasises that, when adopting measures to deal with the financial crisis, Member States should act in a coordinated manner in order to avoid significant differences in national implementation having a counter-productive effect, which may involve distortions in global banking markets. Moreover, it is crucial to ensure consistency with the Eurosystem’s management of liquidity and its operational framework . Against this background, any national measure should ensure a sufficiently level playing field within the euro area, which is of key importance to maintain the integrity of the euro area banking system.

text: The ECB welcomes the wider powers under the draft law that will be available to the Irish authorities to manage and solve a financial institution crisis. They will include, for instance, the appointment of special managers with the intent of preserving or restoring a credit institution’s financial position. This is in line with the consensus emerging at EU level. At the same time these emergency powers interfere significantly with the property rights of institutions’ shareholders and creditors. Thus it is important for any regime to properly balance these fundamental rights with the general interest in the financial system’s stability. The Irish framework may have to be adapted in the light of the forthcoming Commission’s legislative proposals on a Union crisis management and bank resolution regime. Second, the draft law is a temporary emergency measure which will cease to have effect, unless prolonged, by the end of 2012. In view of the expected introduction in Ireland of legislation on bank resolution by the first quarter of 2011, the draft law needs to clarify how it will interact with the powers and tools under the future bank resolution regime. 2.5 Regarding the features and implementation modalities of asset support schemes, the Eurosystem has developed a number of guiding principles to: (i) safeguard financial stability and restore the provision of credit to the private sector while limiting moral hazard, (ii) ensure a level playing field within the single market to the extent possible, and (iii) contain the impact of possible asset support measures on public finances. 2.6 Previous ECB Opinions noted that it is appropriate to maintain a clear distinction between procedures leading to antitrust and banking supervision decisions and that draft national laws should reflect in these circumstances the principle of allocating powers to authorities in accordance with their respective objectives . In the present case, the dual competence of the Minister in banking mergers and the consultative or advisory role conferred on the Governor could conflict with these principles. 2.7 Moreover, previous ECB Opinions pointed out the need to balance the potentially conflicting objectives of market competition and financial stability by introducing safeguards similar to those which apply under Union law . While acknowledging that cases might occur in which a merger in the form of a balance sheet merger would be necessary on stability grounds, although it raises concerns for its effects on competition , the ECB stressed that these cases should remain exceptional and should not unduly restrain competition . The ECB recommends applying the

text: Minister’s prerogatives under the draft law in accordance with the principle of proportionality and with appropriate safeguards. 2.8 The measures intended to safeguard financial stability should involve cooperation with the relevant Member State authorities, in line with Union legislation and the arrangements in place, such as the Memorandum of Understanding on cooperation between the financial supervisory authorities, central banks and finance ministries of the European Union on cross-border financial stability . 2.9 The ECB recommends referring to the Eurosystem’s ‘operations’ rather than to its ‘functions’, in line with ECB Opinion

text: . In particular, references to the Eurosystem should include all actions, rights, arrangements and agreements relating to it by all participants. 2.10 The draft law does not contain any general provision protecting the rights of the Central Bank and the ECB under any relevant agreements from the effects of

text: Article 61

text: and other provisions of the draft law, such as regarding transfer orders, which potentially may impact on the Eurosystem’s operations and the functions and interests of its members. Article 5 of the draft law recognises that the draft law has no effect on the performance of the Central Bank Governor’s or the Central Bank’s ‘functions’ in relation to any credit institution authorised or regulated in Ireland. However, this appears to refer only to the supervisory functions of the Central Bank and its Governor and does not include the potential impact of the draft law provisions on the Central Bank, the ECB or any other central bank within the ESCB when appearing as counterparty in a monetary policy or emergency liquidity operation concluded with a relevant institution. It is essential that such a general carve out provision is contained in the draft law to protect Eurosystem operations and the rights of the Central Bank, the ECB and any other central bank within the ESCB.

text: 3. Specific observations

text: Role of the Central Bank of Ireland

text: 3.1 Any involvement of the Central Bank and its Governor in the application of the measures to strengthen financial stability must be compatible with the Treaty and consequently with the Central Bank’s institutional and financial independence, as well as with the Governor’s personal independence to safeguard the proper performance of their tasks under the Treaty and the Statute of the European System of Central Banks and of the European Central Bank . The draft law specifies in Section 5 that nothing in its provisions prevents the performance by the Governor or the Central Bank of their functions in relation to any credit institution authorised or regulated in the State, or affects any obligation arising under the Treaties or the ESCB Statute . Section 5 of the draft law should make clear that the Treaty principle of central bank independence prevails over any incompatible draft law provision.

text: This provision should also specify that nothing in the draft law will prejudice the compliance by the Central Bank with the prohibition on monetary financing under Article 123 of the Treaty . Furthermore, the ECB suggests further clarification that the rights of the Central Bank and the ECB, as creditors of any relevant institution, will not be affected. The ECB also recommends reinserting the general provision with respect to the preservation of the operations, rights or entitlement of the Central Bank, the ECB or any other central banks within the ESCB regarding the provisions of the draft law which was included in a previous version of the draft law, on which the ECB was consulted. 3.2 Section 61 of the draft law details the effect of the various orders that the Minister may make under the draft law on certain other obligations. This should not impair the ability of the Central Bank or the ECB to maintain the Eurosystem’s operations and, in particular, to enforce their rights including, without limitation, the enforcement of security over any eligible collateral posted by any relevant institution, any of its subsidiaries, its holding company or any subsidiaries of its holding company. The Section needs to clarify this, in particular since the published Bill does not contain an

text: Article 60

text: which appeared in a previous version of the draft law and which usefully stated that ‘nothing in this Act affects any function, right, or entitlement of the [Central] Bank or the European Central Bank’. 3.3 The draft law should also be consistent with the overall tasks and functions of the Central Bank and of the Governor under the existing Irish legal framework. Further, the ECB recommends drafting any ‘relationship framework’ under Section 6 of the draft law in agreement with the Governor to ensure that it does not go beyond the overall task and functions of the Central Bank and Governor and that it is consistent with the Central Bank’s institutional and financial independence and the Governor’s personal independence . 3.4 Section 22 of the draft law provides for the appointment of a special manager. It is important to ensure that this would not impair the ability of the Central Bank or the ECB to maintain the Eurosystem’s operations and, in particular, to enforce their rights including, without limitation, the enforcement of security over any eligible collateral posted by an institution. In this regard, Section 22(2) excludes certain paragraphs of Section 22(1) from its application to the Central Bank, the ECB or any other central banks within the ESCB. The ECB would, moreover, welcome clarification with respect to the remainder of sub-section (1) of Section 22 in the event that actions not currently excluded were taken by such entities as a result of action taken in the normal course of Eurosystem operations.

text: Direction orders

text: 3.5 In respect of direction, special management, subordinated liabilities and transfer orders, the Minster may, in exceptional circumstances, waive the requirement to notify in writing the relevant institution, allowing the relevant institution time to make written submissions to the Minister. Under the current draft, exceptional circumstances will exist where: (a) there is an imminent threat to the stability of the institution concerned, (b) there is an imminent threat to the stability of the national financial system, or (c) the Minister has reasonable grounds for believing that the confidentiality of the proposed order or the possibility of making such an order would not be maintained and that the breach of such confidentiality would have significant adverse consequences. The draft law should clarify whether the exceptional circumstances justifying a waiver of the written notice requirement are established when any of either (a), (b) or (c) are satisfied or whether (a) and (b) must both be satisfied, with (c) being an exceptional circumstance on its own . In the ECB’s view, waiver of the basic notice requirement for measures interfering with creditors’ property rights would only be justified by the additional risk to the stability of the financial system.

text: Reorganisation of credit institutions

text: 3.6 Section 4(1)(c) provides that a further purpose of the draft law is to continue the process of reorganisation, preservation and restoration of the financial position of Anglo Irish Bank Corporation Limited (Anglo) and, due to the reference in Section 4(1)(d) to the financial position of building societies, potentially also of Irish Nationwide Building Society (INBS). This appears to go beyond the position agreed with the IMF and the European Commission in liaison with the ECB, which envisaged a specific resolution plan for these two non viable banks. The ECB would welcome an amendment to the recital and confirmation that any action taken by the Minister under the draft law with respect to Anglo and INBS will be conditional on agreement by the IMF and the European Commission, in consultation with the ECB, and will relate to the State’s commitments under the agreement reached with the IMF and the European Commission, in liaison with the ECB.

text: Netting agreements

text: 3.7 The ECB welcomes Section 65 of the draft law which provides that nothing in the draft law affects the operation of, among other things: (a) the netting of the Financial Contracts Act 1995, (b) the European Communities (Settlement Finality) Regulations, and (c) the European Communities (Financial Collateral Arrangements) Regulations. In relation to an agreement to which a relevant institution or any of its subsidiaries is a party, Section 65 should ensure that its effect is to exclude the provisions of the draft law, in particular Sections 21 and 61, from the operation of contracts which fall within the scope of the identified excluded legislation.

text: This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 17 December 2010. [signed]

text: The President of the ECB

text: Jean-Claude TRICHET

type: vagledning

utgivare: ecb


text: EGT L 189, 3.7.1998, s. 42. 2 Alla ECB:s yttranden finns på ECB:s webbplats http://www.ecb.europa.eu.

text: Se Communication from the Commission on the application, from 1 January 2011, of State aid rules to support measures in favour of banks in the context of the financial crisis, SEK(2010) 1466 av den 1 december 2010 (finns ännu ej på svenska). 4 Se ECB:s yttranden

text: och

text: . 5 Se ECB:s yttranden

text: och

sprak: sv

title: Europeiska centralbankens yttrande av den 20 december 2010 om en förlängning av de statliga garantierna till banker m.fl. och en förlängning av de statliga kapitaltillskotten till solventa banker (CON/2010/93)

text: EUROPEISKA CENTRALBANKENS YTTRANDE av den 20 december 2010 om en förlängning av de statliga garantierna till banker m.fl. och en förlängning av de statliga kapitaltillskotten till solventa banker (

text: ) Inledning och rättslig grund

text: Den 23 november 2010 mottog Europeiska centralbanken (ECB) en begäran från Finansdepartementet om ett yttrande över ett utkast till förordning om ändring i förordningen (2008:819) om statliga garantier till banker m.fl. (nedan kallat förslaget till förordning om statliga garantier) samt ett förslag till förordning om ändring av förordning (2009:46) om kapitaltillskott till solventa banker m.fl. (nedan kallat förslaget till förordning om kapitaltillskott). ECB:s behörighet att avge ett yttrande grundas på artiklarna

text: och

text: i fördraget om Europeiska unionens funktionssätt och artikel 2.1 sjätte strecksatsen i

text: rådets beslut 98/415/EG av den 29 juni 1998

text: om nationella myndigheters samråd med Europeiska centralbanken rörande förslag till rättsregler , eftersom förslagen till förordningar innehåller regler som gäller finansiella institut som har en påtaglig inverkan på de finansiella institutens och marknadernas stabilitet. I enlighet med

text: artikel 17.5

text: första meningen i arbetsordningen för Europeiska centralbanken har detta yttrande antagits av ECB-rådet.

text: 1. Bakgrund

text: 1.1 Förordning 2008:819 om statliga garantier till banker m.fl. antogs av regeringen den 29 oktober 2008. ECB konsulterades om ett utkast till förordning 2008:819 och antog sitt yttrande

text: den 29 oktober 2008 Därefter har ECB antagit följande yttranden om förslag till ändringar av förordning 2008:819:

text: och

text: . 1.2 Finansdepartementet föreslår nu vissa ändringar av förordning 2008:819 samt att förordningens giltighet förlängs med sex månader, d.v.s. att garantier får ställas ut fram till den 30 juni 2011. Förslaget till förordning om statliga garantier innehåller en ändring av § 7 i förordning 2008:819, enligt vilken gränsen för statens maximala åtaganden för garantier sänks. Fram till och med den

text: 31 december 2010 är denna övre gräns satt till 1 500 miljarder kronor. Från den 1 januari 2011 är den övre gränsen för de statliga garantierna satt till 750 miljarder kronor. 1.3 Förordning 2009:46 om kapitaltillskott till solventa banker m.fl. trädde i kraft den 17 februari 2009. ECB har antagit följande yttranden om förslag till ändringar av förordning 2009:46:

text: och

text: . Finansdepartementet förslår nu några ändringar av förordning 2009:46 samt att dess giltighetstid förlängs till den 17 augusti 2011.

text: 2. Syftet med förslagen till förordningar

text: Finansdepartementet konstaterar att statliga garantier för närvarande inte efterfrågas och att bankerna är väl kapitaliserade. Finansdepartementet anser att stödprogrammen av beredskapsskäl behövs ytterligare en tid eftersom de kan ge bankerna tillgång till finansiering på medellång sikt om marknadsförhållandena skulle försämras. Genom att sänka gränsen för statens maximala åtaganden för garantiprogrammet påbörjar Finansdepartementet en gradvis utfasning av stödprogrammen.

text: 3. Allmänna kommentarer

text: ECB välkomnar den gradvisa utfasningen av de svenska stödprogrammen. ECB noterar att de svenska förslagen överensstämmer med EU-kommissionens riktlinjer för förlängning av stödåtgärder efter den 1 januari 2011 . ECB upprepar sin ståndpunkt att det är viktigt att giltighetstiden för de nationella stödåtgärderna som vidtas i unionen samordnas så att konkurrens på lika villkor kan säkerställas . Därutöver understryker ECB också att nationella stödåtgärder bör vara tidsbegränsade .

text: Detta yttrande kommer att offentliggöras på ECB:s webbplats.

text: Utfärdat i Frankfurt am Main den 20 december 2010. [Namnteckning] Jean-Claude TRICHET

text: ECB:s ordförande


text: OJ L 189, 3.7.1998, p. 42. 2 Decision 121/2009 (XII.17.)

text: Opinion

text: . All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 4

text: Article 40

text: /D(1) of the draft Constitution. 5

text: Articles 30

text: /A(1) and 40/D(2) of the draft Constitution. 6

text: Article 7

text: /A(2) of the draft Constitution. 7

text: Article 40

text: /D(4) draft Constitution. 8 Article 1 of the draft law on the PSZÁF. 9 ‘comply or explain’. 10 See Section 33 of the new draft law on the FSA.

text: Section 1(1) of Law CXXXV 2007. 12 Section 1(3) of Law CXXXV 2007. 13 Section 11 of Law CXXXV 2007. 14 Section 14 to 16 of the Law CXXXV 2007. 15 The need for independence is also reflected in Principle 1(2) of the Core Principles Methodology, Basel Committee on Banking Supervision, October 2006 available on the BIS’ website at www.bis.org.

text: See paragraphs 3.2.3 and 3.2.4 of Opinion

text: . 17 See footnote 7. 18 Article 25 of the draft law on the PSZÁF.

title: Opinion of the European Central Bank of 21 December 2010 on the Hungarian Financial Supervisory Authority and on its President’s legislative powers (CON/2010/94)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 21 December 2010 on the Hungarian Financial Supervisory Authority and on its President’s legislative powers (

text: ) Introduction and legal basis

text: On 9 November 2010, the European Central Bank (ECB) received a request from the Hungarian Ministry of Public Administration and Justice for an opinion on (i) a draft law on legislation and (ii) a draft law amending Law XX of 1949 on the Constitution of the Hungarian Republic (hereinafter the ‘draft law amending the Constitution’) with regard to the legislative powers of the President of the Pénzügyi Szervezetek Állami Felügyelete (the Financial Supervisory Authority, hereinafter the ‘PSZÁF’). On 17 November 2010, the ECB received a request from the Ministry of the National Economy on a draft law on the PSZÁF (the draft law on legislation, the draft law amending the Constitution and the draft law on the PSZÁF, hereinafter collectively referred to as ‘the draft laws’). Since the subject matter of the draft laws is closely related, the ECB has merged these consultations. 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, fifth 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 laws contain provisions concerning the Magyar Nemzeti Bank (MNB), the collection of statistical data, payment and settlement systems and rules applicable to financial institutions that may materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft laws

text: 1.1 Amendments to the Constitution and to the draft law on legislation conferring legislative powers on

text: the PSZÁF’s President

text: The draft law on legislation will replace the Law on legislation annulled by the Hungarian Constitutional Court , and will thus re-establish the legislative framework in Hungary. The reason

text: for the annulment was that most provisions of the Law on legislation did not comply with constitutional developments that had taken place since its adoption. Since the remaining provisions were insufficient to constitute a legal act, the Constitutional Court annulled the Law on legislation in its entirety with effect for the future. The Constitutional Court requested the legislator to adopt a new law on the same subject matter by 31 December 2010 and obliged the legislator to regulate certain issues in the Constitution rather than in the Law on legislation. In reaction to this judgment, the Hungarian legislator had already drawn up a draft law amending the Constitution and a draft law on legislation on which the ECB had been consulted with regard to the legislative powers of the MNB . The legal provisions concerning the legislative powers of the PSZÁF’s President now submitted for consultation will be inserted in these draft laws. According to the new amendments, the Constitution lays down the PSZÁF’s main tasks and provides that its President is appointed by Hungary’s President for a term of six years . Furthermore, the draft Constitution sets out that decrees issued by the PSZÁF’s President qualify as 6 7 legislation and that they may not contradict laws, or government or MNB Governor decrees . The legislator explains that these changes are intended to ensure the PSZÁF’s independence. 1.2 The draft law on the PSZÁF The draft law on the PSZÁF will repeal and replace Law CXXXV of 2007 on the Financial Supervisory Authority and is expected to enter into force on 1 January 2011. In general, the draft law on the PSZÁF maintains the current legislative framework currently applicable to it. According to the explanatory memorandum, the PSZÁF’s status is strengthened as it will be subordinated only to laws . The draft law on the PSZÁF will establish a financial arbitration board to protect consumers, modify its organisation mainly on labour law related issues, provide for new sources of income and modify its supervisory procedures. In addition, the draft law on the PSZÁF restricts the rights of the Pénzügyi Stabilitási Tanács (the Financial Stability Council, hereinafter the ‘PST’). The PST consists of the Minister for Finance, the PSZÁF’s President and the MNB’s Governor and has the mandate to assist the FSA and, inter alia, to assess the stability of the financial markets. It can also submit legislative proposals to the Government or to one of its members or to the PST’s Chair and has the right to be informed about how the addressee is going to proceed with this proposal . The new draft no longer provides for this duty to ‘comply or explain’ in reaction to legislative proposals by the PST .

text: 2. General observations

text: 2.1 The appropriate time to consult the ECB The draft law amending the Constitution and the Law on legislation were adopted on 22 November 2010 while the Law on the PSZÁF was adopted on 13 December 2010 shortly after the ECB had been consulted and before it could adopt the present opinion. As a consequence, there was no possibility for the Hungarian legislator to take the ECB’s views into account before adopting the draft laws. The ECB reiterates that even cases of particular urgency do not relieve national authorities from their duty under Articles 127(4) and 282(5) of the Treaty to consult the ECB and to allow sufficient time to take into account its views, in accordance with Decision

text: . Any substantive amendments to the draft law – as in the case of the provisions subject to this consultation – have to be submitted to the ECB in order to allow it to issue its opinion based on the most recent text. In cases of particular urgency which do not allow for a normal consultation period, the consulting authority may indicate urgency in the consultation request and ask for a shorter deadline for the ECB’s opinion to be adopted, thereby indicating the estimated course of the legislative process. The second sentence of

text: Article 4 of Decision 98/415/EC

text: provides that the ECB must be consulted ‘at an appropriate stage’ in the legislative process. This implies that the consultation should take place at a point in the legislative process which affords the ECB sufficient time to examine the draft legislative provisions and to adopt its opinion in all required language versions, and which also enables the relevant national authorities to take the ECB’s opinion into consideration before the provisions are adopted.

text: Article 3(4) of Decision 98/415/EC

text: also obliges Member States to suspend the adoption process for draft legislative provisions, pending receipt of the ECB’s opinion. With respect to this ongoing consultation, this duty to consult the ECB has not been respected by the Hungarian authorities. This present Opinion in no way eliminates this breach of duty, as it is important for the application and interpretation of the enacted laws and any future amendments. The ECB would appreciate it if the Hungarian authorities would honour their obligation under the Treaty to consult the ECB, in accordance with Decision

text: . 2.2 Legal certainty The ECB stresses the importance of legal certainty. The Law governing the tasks and the operational structure of the PSZÁF has been amended several times in recent years, and it is essential for the basic legislation regulating the PSZÁF’s structure to serve as clear and consistent guidance. Frequent changes to the PSZÁF’s structure would compromise this function. 2.3 Observations made in ECB Opinion

text: With regard to the latest amendment to Law CXXXV of 2007, the Hungarian Ministry of Finance consulted the ECB at a very late stage in the legislative process. The observations made in Opinion

text: could not be taken into account, as the Law was enacted before the ECB adopted its

text: opinion. Opinion

text: is of particular relevance to the present consultation and the ECB invites the Hungarian authorities to take note of it. Already this earlier amendment changed the PSZÁF’s legal status from government agency into a 11 12 ‘self-regulatory administrative body , ‘operated and managed independently’ . Furthermore the PSZÁF’s organisational framework has been changed by abolishing the Board as a decisionmaking body and transferring these powers to its Chair . A Financial Stability Council (PST) was also created .

text: 3. Specific observations

text: 3.1 Competence of the PSZÁF’s President to adopt legislative decrees According to the draft Constitution, the PSZÁF oversees, monitors and regulates Hungary’s financial intermediation system. The PSZÁF is responsible for the smooth operation of the financial intermediation system in the manners specified by law. The PSZÁF’s President may adopt decrees within the scope of the PSZÁF’s authority concerning a wide range of financial matters, including on the collection of statistical data, payment and settlement systems, and rules applicable to financial institutions that may materially influence the stability of financial institutions and markets.

text: Article 40

text: /D(4) of the draft Constitution provides that decrees issued by the PSZÁF’s President may not contradict laws, or government or MNB Governor decrees. In this respect, it should be made clear how this rule will be applied in order to be compatible with the PSZÁF’s independence which is indispensable for the exercise of its supervisory function . 3.2 The obligation to consult the ECB The ECB welcomes the stress in Article 20 of the Law on legislation specifically on the duty to comply with notification and consultation obligations in the legislative process, as foreseen in Union legislation and that the draft law on legislation includes new decrees drafted by the PSZÁF’s President. The duty to consult the ECB applies to generally applicable acts of supervisory authorities where these bodies have regulatory powers. However, this does not mean that the ECB should be consulted on all secondary legislation implementing primary legislation falling within the ECB’s fields of competence. Given the objectives of Decision

text: , it is clear that an opinion should only be sought from the ECB on draft secondary legislation where its subject-matter is closely related to the ECB’s tasks and if the impact on areas within the ECB’s fields of competence differs from that resulting from the primary legislation itself.

text: 3.3 Supervisory college The ECB welcomes Article 12 of the draft law on the PSZÁF that introduces the concept of the supervisory college. The ECB is of the opinion that this will ensure smooth cross-border cooperation among the relevant supervisory authorities. 3.4 Respect of MNB’s independence As already indicated in ECB Opinion

text: , the PST will contribute to fostering cooperation and information sharing between the three represented authorities and contribute to financial market stability. The ECB expects that the PST will be a separate body for which the PSZÁF and the MNB will provide administrative and logistical support. Also, the ECB expects that the exercise of the PST’s powers will fully respect the MNB’s exclusive competence over monetary policy and any legislative proposals and recommendations that may be made by the PST should not impinge on the MNB’s implementation of monetary policy decisions. 3.5 PSZÁF’s institutional framework Concerning the PSZÁF’s institutional framework, the ECB refers to paragraphs 2.13 and 2.16 of Opinion

text: in line with the position taken by the ECB in previous opinions , and in the light of the widespread practice in the Union on decision-making in supervisory matters. The ECB would prefer if the PSZÁF’s decision-making body consisted of a formal board, acting on the basis of collegiality, rather than a President acting alone. In many Member States that have adopted supervisory models based on an independent financial supervisory authority, the central bank either provides members of the decision-making body of the supervisory authority or plays an institutional role in the appointment and dismissal of its members. In some cases there is joint membership of the decision-making bodies of the central bank and of the supervisory authority. Such an approach would retain some of the advantages of the existing institutional framework for the supervision of credit institutions in Hungary, and provide a practical means for exchanging information between the MNB and the PSZÁF. The ECB would, furthermore, welcome the inclusion in the draft law of provisions establishing a collegiate decision-making body with an appropriate number of MNB representatives having the full right to participate in its meetings, to vote and to share in all information available to the PSZÁF. The inclusion of MNB representatives in the PSZÁF’s collegiate body would need to give due consideration to safeguards for the independence of the MNB’s staff and its governing body . 3.6 Determination of the salary for the PSZÁF’s staff by its President The ECB notes the discretionary powers conferred on the PSZÁF’s President with respect to the salary of the PSZÁF’s staff who have civil servant status . The President may reduce the civil servants’ basic salary by up to 35% or increase it by up to 50%. He has also the power to grant a

text: personal salary for civil servants achieving outstanding performance, which amounts to 150% of the basic salary and which is revocable without explanation. These discretionary powers are not in line with sound governance; they disrespect the need for transparency and legal certainty in the decision-making process. 3.7 Limiting the PST’s powers The PST’s powers were originally tailored to the financial crisis, enabling it to efficiently assess and evaluate the implementation of prudential supervision policies. The ECB considers that under the draft law on the PSZÁF, the PST should still be entitled to be informed of how the addressee is going to proceed with its legislative proposals. Due to its composition, the PST has the knowledge and expertise to ensure a proper reaction to any financial stability issues. The proposed limitation on its powers will considerably weaken the impact of its legislative proposals. Moreover, limiting the PST’s supervisory powers without entrusting these powers to another competent body or institution raises concerns.

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

text: Done at Frankfurt am Main, 21 December 2010.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: OJ L 189, 3.7.1998, p. 42. 3 See Opinion

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

text: Dziennik Ustaw of 2010 No 40, Item 226. 7 See Opinion

text: . 8 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). 9 See Article 1 of the draft law. See explanatory memorandum to the draft law, p. 1. 10 See Article 1 of the Law amending the Law on State support. 11 See the explanatory memorandum to the draft law, p. 1, second paragraph. 12 See Article 2 of the draft law, repealing the Law amending the Law on State support and Articles 1 and 3 of the draft law amending Article 20 of the Law on State support and Article 24 of the Law on recapitalisation, respectively. 13 See the explanatory memorandum to the draft law, p. 1, third paragraph.

text: See second paragraph of the consultation letter of 8 December 2010. 15 See, for example, paragraph 3.2 of Opinion

text: , paragraph 2.3 of Opinion

text: and paragraph 3.2(i) of Opinion

text: . 16 See paragraph 4.3 of Opinion

text: See

text: Article 4(2)

text: . 18 See the explanatory memorandum to the draft law. 19 Communication from the Commission on the application, from 1 January 2011, of State aid rules to support measures in favour of banks in the context of the financial crisis (OJ C 329, 7.12.2010, p. 7), p. 2, point 2.

title: Opinion of the European Central Bank of 22 December 2010 on the extension of State Treasury support and recapitalisation measures to financial institutions subject to a European Commission decision (CON/2010/95)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 22 December 2010 on the extension of State Treasury support and recapitalisation measures to financial institutions subject to a European Commission decision (

text: ) Introduction and legal basis

text: On 8 December 2010, 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, the Law amending the Law on the provision of State Treasury support to financial institutions and the Law on recapitalisation of some 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 Union and the sixth 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 contains 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 following legislation: (i) 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 at the drafting stage in November 2008 ; (ii) the Law of 19 November 2009 on the Law amending the Law on the provision of State Treasury support to financial institutions (hereinafter the ‘Law amending the Law on State support’) on which the ECB was consulted at the drafting stage in October 2009 ; and (iii) the Law on recapitalisation of

text: certain financial institutions of 12 February 2010 (hereinafter the ‘Law on recapitalisation’), on which the ECB was consulted at the drafting stage in March 2009 . 1.2 The Law on State support introduced a scheme whereby various support measures were offered to eligible financial institutions . The deadline for applying for support measures under this Law was originally set at 31 December 2009 and was subsequently extended until 31 December 2010 by the Law amending the Law on State support. The Law on recapitalisation provides for public intervention instruments to address potential liquidity or solvency difficulties that may arise in the financial market by way of enabling public authorities to (i) provide a State guarantee for marketinitiated recapitalisation operations, and (ii) initiate compulsory State takeovers of a distressed financial institution . Under the provisions currently in force, the measures provided for in both the Law on State support and the Law on recapitalisation are available until 31 December 2010 . 1.3 According to the explanatory memorandum, the Polish financial institutions do not currently need to use the support foreseen by the abovementioned Laws. At the same time, because of possible future financial market changes, it is useful to extend those measures to 2011 subject to the European Commission’s consent . Nevertheless, the draft law does not specify a date until which the relevant measures foreseen by the Law on State support and the Law on recapitalisation may be applied. Rather, the draft law repeals the current time limit established by the Law amending the Law on State support and provides that the relevant measures may be applied if the European Commission’s declaration of the State aid scheme’s compatibility with the common market is in force on the day of granting this support . According to the explanatory memorandum, this would allow the temporary character of ‘those provisions to become permanent’, whereby the time limit for the application of measures would ‘result from the fact that the European Commission’s consent for the State aid scheme is only issued for a limited period of time’ . 1.4 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 or Law on recapitalisation.

text: 2. The appropriate time to consult the ECB

text: 2.1 The consulting authority submitted the draft law to the ECB on 8 December 2010, requesting the ECB’s opinion within seven days due to ‘the urgent character of the matter and the brief and uncomplicated content’ of the draft law. 2.2 The ECB emphasises that according to Article 3 of the

text: Council Decision 98/415/EC

text: , the authorities of the Member States preparing legislative provisions may, if they consider it necessary, set the ECB a time limit for the submission of its opinion which may not be less than one month. This time limit may be reduced only in case of extreme urgency for which the consulting authority must state the reasons. 2.3 In view of the above, the ECB emphasises that the consultation should take place at a point in the legislative process which affords the ECB sufficient time to examine the draft legislative provisions and to adopt its opinion in all required language versions, and which also enables the relevant national authorities to take the ECB’s opinion into consideration before the provisions are adopted.

text: 3. Interaction with monetary policy decisions

text: 3.1 Since the draft law will inter alia extend the application of the support scheme laid down in the Law on State support on which the ECB has already been consulted, the ECB reiterates certain points in Opinion

text: , also reiterated in Opinion

text: , to the extent they have not been incorporated in the Law on State support, and now in the draft law. 3.2 First, the ECB notes that the Law on State support does not explicitly exclude interbank deposits from among the obligations that may be secured with a State guarantee. Although the draft law amends the Law on State support, the ECB understands that it does not include amendments which explicitly exclude interbank deposits. In this respect, the ECB once again reiterates that State guarantees for interbank deposits should be avoided as they have the potential to interfere with the conduct of the central bank’s liquidity-providing operations, and thus have an impact on the transmission of Narodowy Bank Polski’s monetary policy decisions . 3.3 Second, the ECB understands that the Law on State support introduces an explicit legal basis for the provision of State guarantees securing the repayment of Narodowy Bank Polski’s refinancing credit, including in cases where such credit is provided as emergency liquidity assistance (ELA). In this context, the ECB would like to reiterate that, in order to ensure that the extension by national central banks of ELA secured by a State guarantee complies with the monetary financing prohibition, it is essential for the State guarantee to cover 100% of the amount of the credit where

text: such guarantee would constitute the sole form of collateral for the ELA operation, and not only up to 50% of the amount remaining for repayment, as provided by the Law on State support .

text: 4. Open-ended measures by referring to a Commission decision

text: 4.1 The ECB reiterates its view that coordination of the duration of national financial support schemes across the Union is of crucial importance in order to ensure a level playing field. In addition, the ECB notes the need for national support measures to be temporary in nature. The ECB is therefore concerned about the Polish authorities’ intention of removing the expiry date for the measures foreseen by the Law on State support and the Law on recapitalisation, thus converting the temporary provisions into permanent provisions . As emphasised in the European Commission’s Communication, such measures ‘can only be justified as an emergency response to the unprecedented stress in financial markets and only as long as these circumstances prevail’ . 4.2 The fact that the European Commission renews its consent to the measures in place from a State aid perspective does not render a complete legal review of the measures unnecessary. Avoiding the renewal of a temporary legal regime circumvents the duty to consult the ECB, and thereby deprives the prolongation of such a regime from the necessary review with respect to monetary policy and financial stability aspects. Furthermore, this approach avoids the necessary regular review of the continued adequacy of the measures adopted by national authorities and does not lead to the necessary coordination of crisis management measures at European level.

text: Done at Frankfurt am Main, 22 December 2010.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET