text: Law 50 of 2005 on the procedure related to international agreements (Magyar Kozlony, 2005/8, 2005.6.16) provides for the rules on acknowledging the binding effect of an international agreement.

text: Pursuant to Article 38 of the Law on the MNB, the MNB is the paying agent for the amounts payable periodically to the IMF on behalf of Hungary, from appropriate sources determined by law or in a directly applicable Union legal act, also including the payments in connection with the participation in the Special Drawing Rights Department of the IMF. The MNB may issue non-negotiable, non-remunerated notes payable to the IMF on demand. In this context, the MNB is the authorised body on behalf of Hungary to establish and implement all the operations and transactions that may be carried out pursuant to the Articles of Agreement of the IMF, including acting as a beneficiary in its capacity as a fiscal agent with respect to any amount transferred or paid to Hungary on the basis of the Articles of Agreement of the IMF. Thus, it is incumbent on the MNB to make the payments to the IMF in relation to the increase of Hungary’s IMF quota.

text: See the most recent opinions:

text: and

text: and

text: . All ECB Opinions are available on the ECB’s website at www.ecb.europa.eu. 6 Similarly, see

title: Opinion of the European Central Bank of 1 June 2012 on the increase of Hungary’s quota with the International Monetary Fund (CON/2012/45)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 1 June 2012 on the increase of Hungary’s quota with the International Monetary Fund (

text: ) Introduction and legal basis

text: On 20 April 2012, the European Central Bank (ECB) received a request from the Hungarian Ministry for the National Economy for an opinion on a draft law amending the Articles of Agreement of the International Monetary Fund (IMF) on the reform of the Executive Board and on the increase of Hungary’s quota with the International Monetary Fund (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 Magyar Nemzeti Bank (MNB). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 On 15 December 2010, the IMF Board of Governors adopted Resolution No 66-2 on the ‘Fourteenth General Review of Quotas and Reform of the Executive Board’. This Resolution covers two issues, which require the consent of the IMF member countries: (i) increases in the quotas of members, and (ii) an amendment to the Articles of Agreement on the reform of the Executive Board, which provides that all the Executive Directors on the IMF Executive Board will be elected by IMF member countries. The quota increase will become effective only after the proposed amendment has entered into force. IMF member countries have committed in the same Resolution to use their best efforts to complete these steps no later than the Annual Meetings 2012. 1.2 The draft law will authorise Hungary’s Governor to the IMF, currently the Minister for the National Economy, to acknowledge the abovementioned amendment’s binding effect on Hungary, and to adopt the proposed increase in Hungary’s IMF quota by SDR 901.6 million thereby bringing Hungary’s quota to a total of SDR 1,940 million. The draft law incorporates the IMF quota increase into Hungarian law.

text: Article 5 of the draft law appoints MNB as paying agent with regard to the quota increase. However, the draft law is silent on the specific scope of MNB’s role in the quota increase. Therefore, the ECB understands that Article 38(1) of the Law on the MNB applies, which means that the scope of MNB’s paying agent role with regard to the payment of Hungary’s quota increase will be the same as the role that MNB already has with regard to Hungary’s payments of its current quota . Under Article 38(4) of the Law on the MNB, the MNB holds, as a depository, the IMF’s foreign exchange assets held in Hungary. The payment of the quota increase therefore would result in the change of the structure of the MNB’s reserves on the one hand, and in an increase of the MNB’s balance sheet assets and liabilities on the other, which would acquire the IMF quota in return for the SDR 901.6 million.

text: 2. Monetary financing

text: Several ECB opinions have noted that the tasks performed by a national central bank must comply with the monetary financing prohibition under Article 123 of the Treaty and

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

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

text: and

text: b(1) of the Treaty . Pursuant to

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

text: , the financing by national central banks 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. Accordingly, any possible payment by the MNB of the proposed increase in Hungary’s IMF quota complies with

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

text: and does not infringe the monetary financing prohibition.

text: 3. Central bank independence

text: The ECB understands that the fiscal agent functions entrusted to the MNB in connection with Hungary’s IMF membership, pursuant to Article 38 of the Law on the MNB, are without prejudice to MNB’s management of the SDRs in a fully independent manner in line with the principle of central bank independence enshrined in Article 130 of the Treaty and Article 7 of the Statute of the European Central Bank and of the European System of Central Banks .

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

text: Done at Frankfurt am Main, 1 June 2012. [signed]

text: The Vice-President of the ECB

text: Vítor CONSTÂNCIO


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

text: See

text: Article 4 of Decision 98/415/EC

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 5 June 2012 on the reorganisation and sale of real estate assets in the financial sector (CON/2012/46)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 5 June 2012 on the reorganisation and sale of real estate assets in the financial sector (

text: ) Introduction and legal basis

type: rubrik

text: On 17 May 2012, the European Central Bank (ECB) received a request from Banco de España, on behalf of the Spanish Secretary of State for Economic Affairs, for an opinion on Royal Decree Law 18/2012, on the reorganisation and sale of real estate assets in the financial sector (hereinafter, the ‘Royal Decree- Law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the Royal Decree-Law relates to the role of Banco de España and contains rules applicable to financial institutions that 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 Royal Decree-Law

text: 1.1 The Royal Decree-Law increases the provisioning measures established for non-troubled real estate assets under Royal Decree Law 2/2012 of 3 February 2012 on the reorganisation of the financial sector (hereinafter the ‘RDL 2/2012’). The rate for generic provisions was set at 7% and is now increased, as a one-off measure. The increase ranges from 7% to 45%, depending on the type of loan, i.e. loans secured by land, ongoing and finished developments and real estate related loans without security interest. The provisions must be created within the same time-frame as that established by RDL 2/2012, namely before 31 December 2012, with an additional 12 months for credit institutions involved in a restructuring process. Credit institutions must present a plan to Banco de España detailing the measures they intend to adopt to create the provisions before 11 June 2012. Banco de España can then impose additional measures, such as requiring a credit institution to request financial aid from the Fund for Orderly Bank Restructuring (FROB).

text: 1.2 The Royal Decree-Law establishes the creation of asset management companies (AMCs) to which credit institutions must transfer all real estate assets which have been foreclosed or received in lieu of payment i.e. properties, but not loans. Such transfers must be completed before the end of 2012, with an additional 12 months for those institutions involved in a restructuring process. All banks are also required to transfer to their respective AMC assets which have been foreclosed or received in payment of debt after the end of 2012. The AMCs will be public limited companies without banking activities, and their purpose will be the management and disposal of real estate assets received. Assets have to be transferred at fair value or, if that value cannot be determined, according to book value, net of the provisions required under RDL 2/2012 and the Royal Decree- Law. From 2013 onwards, the assets transferred will be valued on the basis of the general method established in the Law on commercial companies, namely an evaluation by an independent expert. The AMCs created by credit institutions that have received financial aid must make an annual disposal of at least 5% of their assets to an unrelated third party. Likewise, credit institutions that have received financial aid will have a three year period to reduce their stake in the AMCs to a non-controlling position. 1.3 The Royal Decree-Law also contains some tax incentives to encourage the disposal of urban real estate assets, including partial exemptions on corporate tax, income tax and non-resident income tax.

text: 2. General observations

text: The ECB was consulted on 17 May 2012 following the approval of the Royal Decree-Law by the Government on 11 May 2012. This means that the ECB was consulted on a law which is already in force and not on ‘draft legislative provisions’ as defined by Decision

text: . The ECB reminds the consulting authority of the importance of consulting the ECB at an appropriate point in time in order to enable the authority initiating the draft legislative provisions to ‘take into consideration the ECB’s opinion before taking its decision on the substance’ .

text: 3. Specific comments

text: 3.1 Rules regarding the one-off increase in provisioning for non-troubled real estate assets The ECB welcomes this measure as part of the general efforts taken by the Spanish Government to restore the confidence of investors and markets in the Spanish financial system. It is in line with the previous provisioning exercise established in February 2012 under RDL 2/2012 and the increase of the core capital requirements under Royal Decree Law 2/2011 of 18 February 2011 on the strengthening of the financial system. In this context, the ECB takes note of the recently announced measure concerning the appointment of (a) two external consulting firms to assess the resilience of the Spanish banks’ balance sheets, and (b) three audit firms to perform on-site work on the

text: procedures for recognising and provisioning for impairment in Spanish banking groups’ accounts. The ECB welcomes an increase of generic provisions for performing real estate assets, which forces the banks to build up effective buffers for this part of their portfolios in view of the downturn of the cycle for such assets. The ECB understands that a further adjustment of the provisions may be the consequence of the results provided by external consulting and audit firms. The ECB also notes the scope of the Royal Decree-Law and that the provisioning measures concern only loan assets relating to land for real estate development and property construction and not the rest of the banks’ loan portfolios. 3.2 Creation of AMCs The ECB welcomes the proposed creation of AMCs as a step in the right direction. Combined with the creation of provisions, this should (a) contribute to greater transparency regarding the real estate portfolios of Spanish banks, and (b) enhance asset management processes in banks, thus decreasing the potential for future losses. In addition, the creation of AMCs should create incentives for the sale of assets. It remains unclear, however, whether the envisaged framework is sufficient to achieve an effective separation of the risks of banks. In addition, the Royal Decree- Law is not very specific on how the AMCs will be funded, and whether there might be any kind of Government guarantees in place. Likewise, the economic rationale for an annual disposal rate of 5% of assets transferred to AMCs, which are receiving support from the FROB, remains unclear. In this regard, the ECB would recommend further steps towards a complete deconsolidation and separation of risks between entities. However, the ECB welcomes that institutions that have received financial aid from the FROB will have to reduce their stake in the AMC within three years.

text: Done at Frankfurt am Main, 5 June 2012.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI

type: vagledning

utgivare: ecb


text: Official Gazette of the Republic of Slovenia No 18/11.

text: See Opinions

text: and

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

text: See Part VI of the draft law (

text: Articles 39

text: to 53) for more details. 6 OJ L 48, 23.2.2011, p. 1. 7 See Part II of the draft law (

text: Articles 10

text: to 13) for more details. 8 See Article 6 of the draft law. 9 See paragraph 3.1 in Opinion

text: and paragraph 3.1 in Opinion

text: . 10 The Customs Authority of the Republic of Slovenia, the Tax Administration of the Republic of Slovenia and the Market Inspectorate of the Republic of Slovenia. 11 I.e. the obligation to register money obligations in a multilateral netting system and the mandatory registration of money obligations from bills of exchange for multilateral netting. 12 See paragraph 3.3 in Opinion

text: and paragraph 3.2.2 in Opinion

title: Opinion of the European Central Bank of 18 June 2012 on prevention of late payments (CON/2012/47)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 18 June 2012 on prevention of late payments (

text: ) Introduction and legal basis

text: On 24 May 2012, the European Central Bank (ECB) received a request from the Slovenian Ministry of Finance for an opinion on a draft law on prevention of late payments and on 12 June 2012 the ECB received an amended version of the draft law from the consulting authority (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 Banka Slovenije. 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 regulates measures to prevent late payments as part of the Government’s efforts to improve economic and business conditions for small and medium size enterprises. The ECB understands the draft law is intended to replace the Law on prevention of late payments which was subject to previous ECB consultations . 1.2 The draft law defines payment periods and the duty to register money obligations for mandatory multilateral netting applicable to contracts concluded between economic operators or between economic operators and public authorities, where one party provides goods or services and the other party fulfils a money obligation. The draft law does not apply where insolvency proceedings have been initiated against a debtor pursuant to the law governing insolvency proceedings . 1.3 To accelerate repayment of debts and to protect creditors, the draft law introduces a document (‘izvršnica’) through which a debtor undertakes to pay the amount stated in it. It is deemed to contain: (a) the debtor’s irrevocable authorisation to the creditor to order the execution of a

text: payment transaction by debiting the debtor’s funds with the debtor’s payment services provider; and (b) the debtor’s irrevocable consent to all its payment services providers to execute the payment transaction ordered by the creditor by debiting the debtor’s funds . 1.4 The draft law is also intended to transpose Directive

text: of 16 February 2011 on combating late payment in commercial transactions as regards defining payment periods and the moment of late payment into the Slovenian legal order. 1.5 In accordance with

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

text: , the ECB is not providing its opinion on the transposition of Directive

text: and it limits its views to the impact of the draft law on Banka Slovenije.

text: 2. Independence of Banka Slovenije

text: Application of the draft law to Banka Slovenije’s contractual relations 2.1 The draft law applies to public authorities, which include Banka Slovenije as regards its contractual relations in the area of administration, in particular. Article 5 of the draft law clarifies that the draft law does not apply to Banka Slovenije when it acts within the scope of its exclusive competences in accordance with the law governing Banka Slovenije or any other laws or European Union regulations laying down exclusive competences of Banka Slovenije and the competences of Banka Slovenije as an integral part of the European System of Central Banks (ESCB). The ECB welcomes this clarification as it ensures that the draft law does not interfere with the tasks of the ESCB and the Eurosystem carried out by Banka Slovenije in accordance with the Treaty and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), in particular the implementation of the monetary policy of the Union. As recommended in the ECB’s previous opinions , for the sake of clarity, the draft law could be further improved by making an additional reference to Banka Slovenije’s competences as part of the Eurosystem.

text: Supervision of the implementation of the draft law

text: 2.2 Article 55 of the draft law defines which national authorities supervise the implementation of Articles 31 and 35 of the draft law and initiate minor criminal offences proceedings for related breaches of the draft law. Under the draft law, Banka Slovenije is also subject to this supervision. As emphasised in previous ECB opinions , in order to fully respect central bank independence, it

text: should be made clear that any supervision of Banka Slovenije’s compliance with the draft law should observe its status as an independent central bank as granted by the Treaty and the Statute of the ESCB. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 18 June 2012. [signed]

text: The President of the ECB

text: Mario DRAGHI


text: See

text: Article 43

text: a in the Law on banking as inserted by Article 3 of the draft law.

text: See

text: Article 45

text: c in the Law on banking as inserted by Article 4 of the draft law.

text: See

text: Article 45

text: d in the Law on banking as inserted by Article 4 of the draft law.

text: See

text: Article 45

text: e in the Law on banking as inserted by Article 4 of the draft law.

text: See Title IV, Section I of the Guide to consultation of the European Central Bank by national authorities regarding draft legislative provisions, available on the ECB’s website at www.ecb.europa.eu.

text: See EBA Recommendation and figures relating to the recapitalisation needs of European banks published on 8 November 2011, available on the EBA website at www.eba.europa.eu. 10 See paragraph 2.2 of Opinion

text: In this context see the Commission’s Proposal for a Directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directives

text: and

text: , Directives

text: and

text: and

text: Regulation (EU) No 1093/2010

text: (COM (2012) 280/3).

title: Opinion of the European Central Bank of 21 June 2012 on bank recapitalisation (CON/2012/48)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 21 June 2012 on bank recapitalisation (

text: ) Introduction and legal basis

text: On 1 June 2012, the European Central Bank (ECB) received a request from the Slovenian Ministry of Finance (hereinafter the ‘Ministry’) for an opinion on the draft law amending the Law on banking (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of

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

text: 1. Purpose of the draft law

text: 1.1 The main aims of the draft law are: (a) to allow for systemically important banks to achieve at least 9% capital adequacy measured with the core capital of the highest quality, in accordance with the recommendations of the European Banking Authority (EBA); (b) to allow banks to increase their capital by way of issuing contingent convertible bonds, given the substantial decrease in the bank shareholders’ financial power which makes a recapitalisation significantly more difficult; and (c) to ensure appropriate capital adequacy of the banking system which is key to maintaining an appropriate state rating. 1.2 In order to achieve the aims set out in paragraph 1.1 above, the draft law provides for the following key solutions. 1.2.1 A share capital increase with non-cash contributions is now also permitted, provided that the share capital increase is based on an additional measure of Banka Slovenije .

text: 1.2.2 General restrictions on the amount of a bank’s share capital increase do not apply (a) in the case of a conditional share capital increase, and (b) with respect to the management board’s authority to increase the share capital on the basis of the authorised capital . 1.2.3 Special rules on the acquisition of bank shares and the submission of an obligatory takeover bid are put in place . 1.2.4 Additional exemptions from the obligation to submit a takeover bid are provided for bank shareholders who have obtained their shares in the process of a bank’s share capital increase . 1.2.5 A special sanctioning regime now applies when shares are acquired and (a) the takeover threshold is exceeded, and (b) a takeover bid is not submitted .

text: 2. Duty to consult the ECB

text: 2.1 The ECB notes that the Slovenian government endorsed the draft law with additional changes on 7 June 2012 and forwarded it to the Parliament for adoption in an urgent procedure. In this case, the ECB appreciated the need for a swift adoption of the draft law and thus also accepted the short deadline of 10 working days set by the Ministry for the submission of this opinion. The draft law was adopted by the Slovenian parliament on 15 June 2012. The ECB would like to draw the Ministry’s attention to the proper procedure for its consultations as set out below . 2.2 The second sentence of

text: Article 4 of Decision 98/415/EC

text: states 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 where necessary translate them) 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. Where draft legislative provisions are prepared by an authority other than the adopting authority, it can be derived from

text: Article 4 of Decision 98/415/EC

text: that consultation on such provisions must take place at a time which enables the authority initiating the draft legislative provisions to consider whether they should be amended in order to accommodate the ECB’s opinion, i.e. before transmission of the provisions to the adopting authority. The timetable should also factor in a reasonable period for the ECB to examine the consultation dossier and deliver its opinion.

text: Article 4

text: does not preclude national authorities from taking steps in accordance with their legislative procedures that do not affect the substance of the draft legislative provisions. 2.3 It follows from the wording of

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

text: that Member States are obliged to suspend the process for adoption of the draft legislative provision pending submission of the

text: ECB’s opinion. This does not mean that the whole national legislative process (for example, preparatory work of parliamentary standing committees, discussion of other opinions submitted by national authorities, etc.) should be suspended pending delivery of the ECB’s opinion. Rather it means that the adopting authority has to have the opportunity meaningfully to deliberate the ECB’s opinion prior to taking its decision on the substance. If a time limit has been set for submission of the ECB opinion and this time limit has expired, the national authority concerned may restart the adoption process. But even in such a case, and as long as the legislation has not yet been adopted, the national authorities continue to be obliged to take the ECB’s opinion into consideration.

text: 3. General observations

text: The ECB generally welcomes the draft law proposed in the context of the EBA capital adequacy requirements for the Slovenian banking sector . The EBA’s measures were part of the broader European package, agreed by the European Council on 26 October 2011 and confirmed during the ECOFIN Council on 30 November 2011. This package aims to address the current situation in the Union by restoring stability and confidence in the markets. The ECB has consistently stressed the importance of bank recapitalisation as an essential condition for financial and systemic stability, as well as a condition precedent to the preservation, by Eurosystem counterparties, of their eligible counterparty status, within the meaning of Section 2.1 of Annex I to the Guideline ECB/2011/14 of the European Central Bank of 20 September 2011 on monetary policy instruments and procedures of the Eurosystem .

text: 4. Specific observations

text: While the ECB welcomes the initiative of the Slovenian authorities to introduce measures facilitating bank recapitalisation, it has the following specific observations on the draft law. 4.1 Bank share capital increase against non-cash contributions 4.1.1

text: Article 43(8)

text: , point 2 of the Law on banking as amended by Article 2 of the draft law provides for an exemption from the general requirement for bank shares to be paid in money. This exemption provides that the bank share capital may be increased by non-cash contributions if such increase is based on an additional measure of Banka Slovenije. Instead of vaguely referring to ‘non-cash contributions’, the ECB would recommend specifying eligibility criteria for non-cash contributions that may be used for such an exemption. 4.1.2 As consistently expressed in its opinions , the ECB generally prefers issuances of shares against a cash contribution for financial stability reasons. Other forms of capital injections, for example, against government bonds which tend to be rather volatile in value, might not provide the

text: envisaged additional buffer against unexpected losses, when this protection is needed most, i.e. during times of market stress. Therefore, the issuance of shares or contingent convertible bonds, i.e. debt instruments that convert into shares upon specific trigger events, against non-cash contribution should be limited to exceptional circumstances. 4.1.3 Pursuant to the draft law, banks would be allowed to issue contingent convertible bonds against both cash and non-cash contribution, including government bonds. The ECB understands that the features of these contingent convertible bonds would, in any case, be aligned with the requirements for ‘Buffer Convertible Capital Securities’, as laid down in the EBA Common Term Sheet, in order for these instruments to be eligible for the Core Tier 1 buffer in the context of the EBA recapitalisation exercise. As explained in more detail above, issuances of contingent convertible bonds against non-cash contribution should be accepted by Banka Slovenije in exceptional circumstances only. 4.2 Recapitalisation versus resolution In view of the fact that the measures under the draft law aim to address solvency problems at a credit institution, the ECB considers that the objectives pursued by the measures may also be achieved through bank resolution tools. A fully-fledged bank resolution regime, comprising tools such as bridge banks, asset separation and transfers of business would offer legally sound means of resolving institutions on the brink of insolvency, safeguarding financial stability, whilst addressing stakeholder rights .

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

text: Done at Frankfurt am Main, 21 June 2012.

text: [signed]

text: The Vice-President of the ECB

text: Vítor CONSTÂNCIO


text: Magyar Közlöny, 2011/166., 30.12.2011, p. 41648. 2 Opinions

text: and

text: . All ECB Opinions and Convergence Reports are available on the ECB’s website at www.ecb.europa.eu. 3 OJ L 189, 3.7.1998, p. 42. 4 See ECB Opinion

text: According to Article 32 of the Law on MNB, the MNB has to be consulted on any draft legal acts related its tasks. 6 The public commitment was made in letters on 18 June 2012 - referenced in the letter consulting the ECB - by Prime Minister Mr Orban to Commission President Mr Barroso and by the Chair of the Parliamentary Committee on Economic and Information Technologies Mr Rogan to Commission Vice-President Mr Rehn.

text: See footnote 5. 8 As specified in paragraph 6.1 of

text: , the first step involves notifying the person concerned about a proposal for dismissal. The proposal for dismissal is subject to judicial review under national law. The proposal for dismissal can only be submitted to the Parliament, or in respect of the Governor and Deputy Governors to Hungary’s President if no action for domestic judicial review has been filed or following the final ruling of the Labour Court. The second step is a decision to dismiss the Governor and Deputy Governors by Hungary’s President, and for other members of the Monetary Council, by the Parliament.

text: See, for example, paragraph 3.3 of Opinion

text: , paragraph 8 of Opinion

text: and paragraph 4.3 of Opinion

text: . 10 See paragraph 3.2 of Opinion

text: . 11 See, for example, ECB Convergence Report 2012, p. 58.

title: Opinion of the European Central Bank of 28 June 2012 on the Magyar Nemzeti Bank (CON/2012/49)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 28 June 2012 on the Magyar Nemzeti Bank (

text: ) Introduction and legal basis

text: On 20 June 2012, the European Central Bank (ECB) received a request from the Hungarian Ministry for the National Economy for an opinion on a new draft law (hereinafter the ‘draft law’) introducing changes to Law CCVIII of 2011 on the Magyar Nemzeti Bank (hereinafter the ‘MNB Law’) . Previous ECB Opinions considered earlier versions of the draft law, now withdrawn from the Parliament . The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third 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 Magyar Nemzeti Bank (MNB). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: The draft law introduces additional amendments to the MNB Law compared to the previous draft legislation on which the ECB commented in Opinion

text: . The draft law amends Article 46(1) of the MNB Law to better delineate the division of responsibilities between the Monetary Council, which will focus strictly on policy formulation and related oversight activities, and the Executive Board, which will be solely responsible for policy implementation. The draft law limits the possible combinations of the number of executive and non-executive members of the Monetary Council, by specifying in

text: Article 46(3)

text: that the number of non-executive members should be higher than the number of executive members, but by less than a two-to-one ratio. With regard to the rules for dismissal of Monetary Council members, the draft law carries over verbatim from the previous draft legislation the changes to Articles

text: and

text: of the MNB Law. These amendments clarify the procedure for dismissal of members of the Monetary Council and align it with 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’). The draft law further improves the wording of

text: Article 47(6)

text: by stipulating that a proposal for dismissal of the MNB Governor first requires a final ruling by the Labour Court that the conditions for dismissal specified in Article 14.2 of the Statute of the ESCB are met. In addition, the draft law aligns the wording of

text: Article 46(13)

text: , regulating the circumstances under which the other members of the Monetary Council can be removed from office, with the new wording of

text: Article 47(6)

text: . The draft law carries over from the previous draft amendment law, on which the ECB commented in Opinion

text: , the repeal of

text: Article 34

text: and Article 46(17) of the MNB Law. These amendments remove the MNB’s obligation to submit the agendas for Monetary Council meetings to the Government and the right of the Government’s representative to be present at Monetary Council meetings, as well as the abolition of the Monetary Council when Hungary adopts the euro. Finally, the draft law inserts a new

text: Article 36(5)

text: in the MNB Law to limit in time the disclosure of nonclassified data related to the management of gold and foreign exchange reserves for up to 10 years. Within this period the MNB Governor decides on the disclosure of such data. Since the adoption of

text: , Article 30 of the Transitional Provisions to Hungary’s Constitution which had allowed for the possibility of a merger of the MNB with the Hungarian Financial Supervisory Authority - has been repealed through a separate amendment to the Constitution.

text: 2. General observations

text: The draft law addresses the most important remaining concerns regarding the MNB’s independence. The ECB notes that this time the MNB was consulted on the draft law, as required by national legislation . The draft amendments, alongside a commitment not to increase the size of the Monetary Council during the term of the current MNB Governor, are an indication that the Hungarian Government is now ready to respect the MNB’s institutional independence. The ECB will monitor closely the observance in practice of central bank independence, and will continue to liaise with the Hungarian Government to address the remaining open issues, which were also acknowledged in the consultation letter.

text: 3. Specific observations

text: 3.1 Distribution of executive power among MNB decision-making bodies The draft law fully resolves the concerns in ECB Opinion

text: 3.2 Possibility to vary the number of Monetary Council members; appointment of a third Deputy

text: Governor

text: The MNB governance structure has been changed through making the number of non-executive members of the Monetary Council larger, but not by a wide margin, than the number of executive members. This aims to safeguard the MNB’s independence and in practice limits the ability of the Government to vary the number of Monetary Council members. Furthermore, the commitment not to increase the size of the Monetary Council during the term of the current MNB Governor addresses the immediate concern at the lack of consultation of the MNB on the issue. However, the introduction of additional checks and balances in this area is advisable. One possibility is the introduction of a consultation procedure with the Governor in office before appointing any new members to the Monetary Council. This would ensure the necessary dialogue between the appointing body and the central bank and the consideration of the MNB’s needs. Another possibility is staggering the terms of office of members of the Monetary Council, which would ensure policy continuity and make it less likely that all Monetary Council members are appointed by the same Government. 3.3 Rules of dismissal of Monetary Council members The draft law addresses in a satisfactory manner the issues of personal independence of the members of the MNB’s decision-making bodies related to the rules on their dismissal, which were raised in ECB Opinions

text: and

text: . Article 46(13) of the draft law clarifies that in the two step dismissal procedure provided by the MNB Law, the national court examines whether the conditions for dismissal specified in Article 14.2 of the Statute of the ESCB are met and the decision to make a proposal for a dismissal can only be taken by the Parliament’s competent committee with regard to the external members of the Monetary Council, and by the Prime Minister with regard to the Governor and other Monetary Council members, if the court establishes that these conditions are met. The ECB understands that the express reference in Article 47(5) of the MNB Law to Article 14.2 of the Statute of the ESCB clarifies that, in the event of a decision to dismiss the MNB Governor, the Governor may refer the decision to the Court of Justice irrespective of having sought remedy at the national court against the motion for dismissal. 3.4 Remuneration of the MNB’s decision-making bodies The ECB remains concerned about the frequent changes to the remuneration of the members of the MNB’s decision-making bodies. Such earlier changes had been made without the MNB’s prior

text: consultation and disregarding its views . The ECB reiterates its view that, in its present form, Article 51 of the MNB Law should only apply for future appointments and subject to prior consideration of the MNB’s views. 3.5 Empowering the MNB Governor to limit disclosure of data related to management of gold and

text: foreign exchange reserves

text: When Hungary adopts the euro, a safeguard clause should be inserted in the newly introduced

text: Article 36(5)

text: on the confidentiality regime for foreign reserve management to prevent infringements of specific confidentiality obligations towards the ECB and the European System of Central Banks in the area of foreign reserves management.

text: 4. Other outstanding concerns related to the MNB Law

text: The ECB reiterates its observation from Opinion

text: related to the replacement of the MNB’s Governor. Pursuant to Article 47(8) of the MNB Law, the Deputy Chair of the Monetary Council may replace the Governor in the latter’s absence. The MNB Law needs to provide sufficient guarantees and rules for a successor to the Governor in the event of termination of office due to expiry of the term of office, resignation, dismissal or death to avoid any external ad hoc interference and at the same time to ensure the smooth and continuous functioning of the Monetary Council . Other issues concern, inter alia, the oath taken by the MNB’s Governor and Deputy Governors and the single spelling of the euro in several Hungarian legal acts. Previous ECB Opinions and Convergence Reports have also pointed out the requirements for the MNB’s legal integration into the Eurosystem and that the recast of the MNB Law offered the Hungarian authorities the opportunity to meet those requirements.

text: Done at Frankfurt am Main, 28 June 2012.

text: [signed]

text: The Vice-President of the ECB

text: Vítor CONSTÂNCIO


text: 4 to be traded without restrictions . The rights are issued at a price of EUR 0.10 per share . To facilitate the Government’s exit strategy, freely transferable, non-listed share warrants are to be issued to the Republic , with any shares acquired by the Republic being eligible to be repurchased within five years, either by the CPB’s shareholders through exercise of their share warrants, by the CPB itself or by third parties . The Republic reserves its right to exchange at any time, in whole or in part, the government bonds through which it has subscribed to the rights issue with cash .

title: Opinion of the European Central Bank of 2 July 2012 on the recapitalisation of the Cyprus Popular Bank (CON/2012/50)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 2 July 2012 on the recapitalisation of the Cyprus Popular Bank (

text: ) Introduction and legal basis

text: On 30 May 2012, the European Central Bank (ECB) received a request from the Cypriot Ministry of Finance for an opinion on a Ministerial Decree regarding the recapitalisation of the Cyprus Popular Bank Public Co. Ltd. (hereinafter, the ‘Ministerial Decree’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and 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 decree relates to a national central bank and to rules applicable to financial institutions, insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose and contents of the Ministerial Decree

text: 1.1 The Ministerial Decree lays down a scheme for the recapitalisation of the Cyprus Popular Bank (CPB), with the involvement of the Government of the Republic of Cyprus. The legal basis for the Ministerial Decree is Article 4 of the Management of Financial Crises Laws of 2011 to 2012 (No.2) , read in conjunction with Articles

text: and

text: thereof. 1.2 More specifically, Articles 3 and 4 of the Ministerial Decree provide that the Government of the Republic is to underwrite the full amount of a rights issue to be launched by the CPB. The issue is to be open to existing shareholders and new investors alike and will be up to an amount of EUR 1 800 million. The Republic is to acquire any non-subscribed rights in consideration for the provision of zero-coupon government bonds with a one-year maturity which are to be automatically renewed upon maturity. The government bonds are to be listed on the Cyprus Stock Exchange and are stated

text: 1 OJ L 189, 3.7.1998, p. 42.

text: 2 Law Ν. 200(Ι)/2011 Episimi Efimerida tis Dimokratias No 4314, 30.12.2011, p. 1678, as amended by Law 40(Ι)/2012, Episimi Efimerida tis Dimokratias 4330, 27.4.2012, p. 371. The ECB was previously consulted on the Financial Crises Law and issued Opinion

text: in response.

text: 2. General observations on the Ministerial Decree

text: The ECB understands that the Ministerial Decree is a follow-up to the European Banking Authority’s (EBA) publication of a formal Recommendation and final figures relating to the recapitalisation needs of European banks on 8 December 2011. The EBA’s Recommendation and figures were part of the broader European package agreed by the European Council on 26 October 2011 and confirmed during the ECOFIN Council on 30 November 2011. This package aims to address the current situation in the Union by restoring stability and confidence in the markets. The ECB stresses the importance of bank recapitalisation as an essential condition for financial and systemic stability, as well as a condition precedent to the preservation, by Eurosystem counterparties, of their eligible counterparty status, within the meaning of Section 2.1 of Annex I to the Guideline ECB/2011/14 of 20 September 2011 on monetary policy instruments and procedures of the Eurosystem .

text: 3. Specific observations on the draft law on financial crisis management

text: While the ECB welcomes the initiative of the Cypriot authorities to recapitalise the CPB, it has the following observations to make on the particular recapitalisation scheme proposed in the Ministerial Decree. 3.1 Recapitalisation needs of the CPB The Ministerial Decree estimates that the total recapitalisation needs of the CPB will not exceed EUR 1 800 million. In the event that the CPB’s rights issue fails to attract sufficient private sector participation, the Government would need to provide the necessary capital up to the amount of EUR 1 800 million . Should the need for a government capital injection prove to be higher than the

text: 4 Ministerial Decree,

text: Article 5

text: 8 OJ L 331, 14.12.2011, p. 1.

text: 9 Taking into account that the rights issue will be exercised at EUR 0.10 a share against the current share price of EUR 0.08, the private sector participation in the rights issue is expected to be very modest. amount currently envisaged in the Ministerial Decree, this would not provide an adequate legal basis for government capital injections in excess of EUR 1 800 million. 3.2 Monetary financing considerations 3.2.1 The monetary financing prohibition in Article 123 of the Treaty prevents central banks from providing overdraft facilities or any other type of credit facility to the public sector, including any financing of the public sector’s obligations vis-à-vis third parties . The ECB has repeatedly stated that the financing of credit institutions by a national central bank (NCB), granted independently and at its full discretion, other than in connection with central banking tasks (such as monetary policy, payment systems or temporary liquidity support operations) is incompatible with the monetary financing prohibition . This applies, in particular, to the support of insolvent credit institutions. The rationale behind the ECB’s stance is that, by financing an insolvent credit institution, an NCB would be assuming a state task. The same concerns apply to the Eurosystem financing of a credit institution which has been recapitalised to restore its solvency by way of direct placement of stateissued debt instruments where no alternative market-based funding sources exist (hereinafter the ‘recapitalisation bonds’), and where such bonds are to be used as collateral. Against this background, the ECB notes that, in such a case of a state recapitalisation of a credit institution by way of direct placement of recapitalisation bonds, the subsequent use of the recapitalisation bonds as collateral in central bank liquidity operations raises monetary financing concerns. 3.2.2 Furthermore, Article 123 of the Treaty prohibits central banks from purchasing debt instruments issued by Member States directly from Member States. Thus, debt instruments issued by central governments may be purchased on the secondary market only and such purchases made on the secondary market may not be used to circumvent the objective of Article 123 of the Treaty . In this respect, the ECB notes that, in the absence of any alternative market-based funding sources for recapitalisation bonds, and to the extent that such bonds have been acquired by the credit institution in the context of a direct placement, the acceptance of the bonds used for the recapitalisation as collateral could amount to a circumvention of the prohibition on direct purchases of debt instruments from central governments by the central bank. 3.2.3 In view of the legal constraints under the monetary financing prohibition, a case-by-case assessment of the existence of alternative market-based funding sources will be required for credit institutions receiving central bank financing, where they have been recapitalised to restore their solvency by way of direct placement of recapitalisation bonds which are to be used as collateral.

text: 10 See

text: Article 1(1)

text: (b)(ii) of

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: 11 See, for example, the ECB’s Convergence Report May 2012, pp. 29-30.

text: 12 See the seventh recital of

text: Council Regulation (EC) No 3603/93

text: . 3.3 Fiscal considerations The use of recapitalisation bonds entails a number of fiscal drawbacks which are linked to their non-funded nature. Recapitalisation bonds have to be booked by the recipient bank at book value, meaning that they cannot be issued at a substantial discount to serve recapitalisation purposes. Moreover, as the total amount of government bonds to be issued for recapitalisation purposes depends on the prevailing market rates, their issuance could have adverse implications on the government balance for years to come. Besides, the increased government debt burden can reduce a government’s options for raising funds from the private market increasing the likelihood that the issuing government has to turn to international or foreign parties for financial support. Finally, in those cases where recapitalisation bonds bear interest, the unfunded character of their issuance increases the government’s debt service payments. 3.4 Recapitalisation versus resolution In view of the fact that the support measures under the Ministerial Decree aim to address solvency problems at a financial institution, the ECB considers that the objectives pursued by the support measures may be better achieved through bank resolution tools. A fully-fledged bank resolution regime, comprising tools such as bridge banks, asset separation and transfers of business would offer legally sound means of resolving institutions on the brink of insolvency, safeguarding financial stability, whilst addressing stakeholder rights . 3.5 Financial stability considerations With respect to the choice of recapitalisation instruments, the recapitalisation of banks with funded or, a fortiori, unfunded government bonds has a number of drawbacks from a financial stability perspective. More specifically, market participants may not regard the injection of unfunded recapitalisation bonds as a credible recapitalisation technique, as it does not result in the provision of fresh cash to the banks, and thus may not help restore market access. Despite the fact that it can serve as a means of meeting the capital adequacy ratio, recapitalisation through the injection of such unfunded recapitalisation bonds can only change the risk absorption capacity of the bank gradually over time, as cash flows associated with these bonds are accumulated. Also, recapitalisations through government bonds forming part of the bank’s assets can reinforce the feedback loop between the state and the bank. This is to be avoided. 3.6 Central bank involvement The ECB notes that the Ministerial Decree caters for the involvement of the Central Bank of Cyprus (CBC) at various stages of the recapitalisation process envisaged in the Ministerial Decree.

text: 14 In this context see the Commission’s Proposal for a Directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directives

text: and

text: , Directives

text: and

text: and

text: Regulation (EU) No 1093/2010

text: (COM(2012) 280/3). These stages include (a) the approval of the repurchase of own shares by the CPB, (b) the appointment to the CPB of an Independent Advisor who is responsible, inter alia, for preparing a restructuring plan, and (c) the appointment of up to five members of the CPB’s Board of Directors . When considering the CBC’s supervisory tasks, and the powers conferred upon it under the Management of Financial Crises Laws of 2011 to 2012, the ECB is satisfied that the CBC’s involvement at various stages of the recapitalisation process does not raise concerns relevant to the CBC’s independent exercise of its Eurosystem tasks, in line with the Treaty and the Statute of the European System of Central Banks and of the European Central Bank. This opinion will be published on the ECB’s website 6 months after its adoption. Done at Frankfurt am Main, 2 July 2012. [signed] The President of the ECB Mario DRAGHI


text: OJ L 189, 3.7.1998, p. 42. 2 Law 138(I) of 2002. 3 ECB Convergence Report 2007, p. 74, paragraph 5.1.2, available on the ECB’s website at www.ecb.europa.eu.

title: Opinion of the European Central Bank of 11 July 2012 on the Central Bank of Cyprus Laws of 2002 to 2007 (CON/2012/51)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 11 July 2012 on the Central Bank of Cyprus Laws of 2002 to 2007 (

text: ) Introduction and legal basis

text: On 27 June 2012 the European Central Bank (ECB) received a request from the President of the Cypriot House of Representatives for an opinion on a proposal for a law amending the Central Bank of Cyprus Laws 2002-2007 (hereinafter the ‘proposal for a 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 proposal for a 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 proposal for a law

text: The proposal for a law amends Article 13 of the Central Bank of Cyprus Laws of 2002 to 2007 (hereinafter the ‘basic law’) on the appointment of the Governor and the members of the Board of the CBC. It provides that the Ministerial Council must consult the Budget and Economic Affairs Parliamentary Committee (hereinafter the ‘Committee’) prior to the appointment, removal or early termination of the term of office of any Board Member of the CBC.

text: 2. Personal independence

text: The ECB previously considered the nomination procedure for the Board members of the CBC under the basic law to be compatible with the Treaty and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’) and not to interfere with the personal independence requirements under Article 14.2 of the Statute of the ESCB . The ECB has no objections to the proposed involvement of the Committee in the appointment process of the CBC Board Members, as it would not impair the personal independence guarantees in the Statute of the ESCB and the basic law, nor the mandate of the current CBC Board members.

text: 3. Smooth functioning of the decision-making bodies

text: The proposed involvement of the Committee may mean that a longer time period is needed for the nomination procedure. In this regard, the ECB notes the need for the smooth and unimpeded functioning of the decision-making bodies of the CBC under the new nomination procedure. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 11 July 2012. [signed]

text: The Vice-President of the ECB

text: Vítor CONSTÂNCIO


text: All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 2 OJ L 189, 3.7.1998, p. 42.

text: See, for example, the proposed amendment to section 53(1) of the draft law to replace the expression ‘overseas regulator’ with ‘Member State and third county authorities’. 4 The first step was the Central Bank Reform Act 2010 which renamed the Central Bank and Financial Services Authority of Ireland, that became a single fully-integrated structure with a unitary board to replace the two-pillar structure of the previous Central Bank and Financial Services Authority of Ireland. 5 See also paragraph 2.1 of Opinion

text: See the ECB’s Convergence Report, May 2010, p. 21, paragraph 3.1.5 of Opinion

text: , paragraph 3.2.1 of Opinion

text: and paragraph 3 of Opinion

text: . 7 See, for example, paragraph 3 of Opinion

text: and paragraph 3.3 of Opinion

title: Opinion of the European Central Bank of 16 July 2012 on new measures strengthening supervision and enforcement in financial regulation (CON/2012/52)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 16 July 2012 on new measures strengthening supervision and enforcement in financial regulation (

text: ) Introduction and legal basis

text: On 18 May 2012, the European Central Bank (ECB) received a request from the Irish Department of Finance for an opinion on the proposed parliamentary committee stage amendments to the Central Bank (Supervision and Enforcement) Bill 2011 (hereinafter the ‘draft law’) on which the ECB had adopted Opinion

text: on 9 September 2011 . 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: 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 (CBI) 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.

text: 1. Purpose of the draft law

text: 1.1 This opinion concerns certain amendments and supplements (hereinafter the ‘draft amendments’) to the draft law. The draft law is intended to provide the CBI with enhanced powers for the supervision of regulated financial service providers and the enforcement of financial services legislation. The publication of the draft law by the end of July 2011 was a structural benchmark of the EU-IMF Financial Support Programme for Ireland. 1.2 First, the draft amendments set out a regulatory regime for the services of debt management firms and bill payment firms which currently fall outside existing regulatory regimes, making these firms subject to the existing regulatory regime applicable to financial service providers. 1.3 Furthermore, the draft amendments will allow the CBI to obtain any information necessary for the performance of its duties relating to the proper and effective regulation of financial service

text: providers, by requiring all regulated financial service providers to provide information if asked to do so. 1.4 Moreover, the draft amendments will provide for changes to the rules relating to the hearing of evidence, legal presumptions, legal professional privilege and the admissibility of expert evidence in the context of financial services legislation. 1.5 The draft amendments will also introduce a requirement that auditors of regulated financial service providers should give reasonable assurances that the firms in question are compliant with certain regulatory requirements relating to administrative or accounting procedures, internal control mechanisms and risk management, organisational structure, governance and oversight functions. 1.6 The CBI will also have the power to direct regulated firms to give compensation to customers. The purpose of this power is to ensure that customers are compensated quickly and with minimum inconvenience. 1.7 Finally, the draft amendments will further extend and enhance the CBI’s powers to give directions and make regulations, including, significantly, to enable the CBI to adopt regulations discharging its European System of Central Banks (ESCB) obligations.

text: 2. General observations

text: 2.1 The ECB welcomes that the draft amendments address several specific issues raised by the ECB in Opinion

text: on the draft law. Any other issues in that Opinion not addressed by the draft amendments still remain valid. 2.2 It is not yet clear how certain draft amendments will be incorporated into existing legislation, such as the provision giving the CBI the ability to apply for court orders to take action against persons or entities outside the CBI’s current regulatory competence. The form of the draft law has also still not been finalised. The ECB notes in this respect that the draft amendments remain subject to further review, including by the Irish Attorney General, meaning that they may be subject to further revision. 2.3 This draft law is the second step in the legislative reform of the Irish central banking and financial regulatory regime . The ECB notes the robust nature of the new measures and welcomes the draft law as substantially enhancing the supervisory and enforcement tools available to the CBI . As regards the financing of these enhanced CBI powers, the ECB refers to the principle of financial independence under which a national central bank (NCB) must have sufficient means to perform its

text: tasks related to the ESCB and its national tasks . As pointed out in previous ECB opinions, when allocating specific non-ESCB related tasks to the NCBs, e.g. tasks in the area of financial supervision or consumer protection, an adequate amount of human and financial resources must also be allocated in order for these tasks to be carried out in a manner which will not affect the NCBs’ operational capacity to perform their ESCB-related tasks . The CBI should therefore possess sufficient human and financial resources to efficiently perform any additional tasks introduced by the draft law in addition to its current tasks, and should not be adversely affected in carrying out its ESCB-related tasks, from an operational or financial point of view, due to any additional tasks introduced by the draft law. 2.4 In particular, the ECB notes the expansion of the CBI’s prerogatives in the area of consumer protection. Although consumer protection is not included in the NCB tasks specified in the Statue of the European System of Central Banks and of the European Central Bank, as pointed out on previous occasions, the ECB does not consider this task as interfering with the ESCB’s objectives and tasks. In addition, measures designed to enhance investor and consumer protection contribute to safeguarding the soundness of the financial market and preserving confidence in the marketplace. 2.5 The ECB notes that various provisions of Union law relating to supervision and enforcement in financial regulation will shortly be introduced. As a general matter, the ECB underlines the importance of ensuring that the draft law fully complies and is consistent with the relevant provisions of Union law.

text: 3. Legal instruments

text: Part 6 of the draft law will be amended to empower the CBI to adopt regulations enabling it to discharge its ESCB obligations and transpose into Irish law any ECB legal instrument that does not have direct effect but which is required to bind third parties, including ECB Guidelines. The ECB welcomes this provision as at present the method for implementing these types of legal instruments is through contracts. By giving the CBI the power to adopt regulations to discharge its ESCB obligations, in addition to the contractual approach, the enforceability of these legal instruments is reinforced.

text: 4. Judicial and procedural amendments

text: The draft amendments provide for changes to the rules relating to the hearing of evidence, legal presumptions, legal professional privilege, the admissibility of expert evidence and statements and copies of documents for jurors. These rules will apply to the CBI’s performance of its duties under financial services legislation and to proceedings under financial services legislation. The ECB understands that

text: these provisions will assist the CBI in enforcing financial services legislation and will contribute to more effective application of the legislation.

text: 5. Winding-Up Directives

text: The ECB would welcome a clarification of the draft amendment to Part 5 of the draft law which introduces additional wording after section 39 of the draft law. This wording provides that if the CBI gives a direction in relation to a credit institution or insurance undertaking with the intention of restoring or preserving the financial position of such institution or undertaking, the CBI will declare in the direction that it is made with that intention, in accordance with the Winding-Up Directives . In the ECB’s view, if the direction is to qualify as a ‘reorganisation measure’ in accordance with the Winding-Up Directives, the direction would not only have to be intended to preserve or restore the financial situation of the institution but it would also have to satisfy the second part of the definition of a reorganisation measure set out in those Directives, as it could affect the pre-existing rights of third parties . It would be helpful if the draft amendments to this part of the draft law and the corresponding amendments to the implementing regulations for the Winding-Up Directives clarified this point in more detail. The ECB understands that not all directions the CBI may give to an institution would impact on its shareholders or creditors.

text: 6. CBI governance

text: The draft law will be amended to provide that a high-level official or significant shareholder of a regulated financial service provider cannot be a member of the Commission of the CBI. Further, individuals will be ineligible to be members of the Commission where (a) they have been adjudged bankrupt, or (b) have entered into a composition with their creditors, or (c) have been convicted of an offence for which they have been sentenced to a term of imprisonment. Lastly, the Commission may appoint an Audit Committee from among its appointed members that includes at least one expert member of the Committee who is not a member of the Commission. The ECB understands that these amendments aim to ensure that the CBI’s auditing, financial reporting, control systems, legal structure and independence are adequate to ensure the integrity of operations and minimise the risk of misuse of resources or misreporting of data. The ECB welcomes these amendments as they will help to ensure good corporate governance in the CBI. 8 Part 5 of the draft law ‘Bank’s power to give directions’. 9 Section 37 of the draft law. 10 Directive

text: of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions (OJ L 125, 5.5.2001, p. 15) and Directive

text: of the European Parliament and of the Council of 19 March 2001 on the reorganisation and winding up of insurance undertakings (OJ L 110, 20.4.2001, p. 28). 11 See

text: Article 2 of Directive 2001/24/EC

text: and

text: Article 2

text: (c) of Directive

text: . In the case of the latter definition, the reorganisation measure would have to affect the pre-existing rights of parties other than the insurance undertaking itself. 12 The draft amendments also include a corresponding amendment to the European Communities (reorganisation and winding up of credit institutions) Regulations 2011 to add directions given by the CBI under Part V of the draft law to the list of reorganisation measures defined in those regulations.

text: 7. Customer redress

text: The draft law will also be amended to provide for a procedure for customer redress including a provision allowing the CBI to direct a firm to review transactions and to issue a further direction to make redress to consumers affected by errors identified. The ECB understands that the power to allow the CBI to direct regulated firms to redress customers will be a means of ensuring that customers are compensated quickly and with minimum inconvenience, and that it would be used where the loss or damage as a result of an occurrence is widespread within a particular firm or across a particular industry. The ECB welcomes this provision insofar as the adoption of measures aimed to strengthen investor and consumer protection would contribute to safeguarding the stability of the financial system. However, the ECB would welcome clarification in the draft law to address how such a provision is to interact with other provisions of national and Union law relating to customer redress.

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

text: Done at Frankfurt am Main, 16 July 2012.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


text: Article I(1) of the draft law.

text: Article 7(2)

text: ). 5 Article I(5) of the draft law (proposed new

text: Article 6(1)

text: ). 6 Financial considerations include, inter alia, prices, charges, fees and interest rates. See also the specific part of the explanatory memorandum relating to Article I(5). 7 Article II(2) of the draft law. 8 Article II(3) of the draft law. 9 Article 4(3) of Law No 384/2011. See paragraph 3.1 of the Opinion

text: . All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 10 Paragraphs 3.2.1-2 of the Opinion

text: . 11 See the proposal for a directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directives

text: and

text: , Directives

text: and

text: and

text: Regulation (EU) No 1093/2010

text: , COM(2012) 280 final (hereinafter the ‘proposed directive on bank recovery and resolution’). 12 Paragraph 2.1 of Opinion

text: . 13 See, in particular, Article 94(1) of the proposed directive on bank recovery and resolution.

text: Article 4(1) of Law No 384/2011. 15 Paragraph 8 of Opinion

text: and paragraph 2.5 of Opinion

text: . 16 See ‘Guidance for developing effective deposit insurance systems’, Financial Stability Forum, September 2001, point V.4. 17 Article 6(2) of Law No 118/1996. 19

text: Recital 23

text: of

text: Directive 94/19/EC

text: . 20 See the proposal for a directive …/…/EU of the European Parliament and of the Council on deposit guarantee schemes (recast), COM(2010) 368 final – COD 2010/0207 (hereinafter the ‘proposed directive on deposit guarantee schemes’). 21 Article 9(1) of the proposed directive on deposit guarantee schemes.

title: Opinion of the European Central Bank of 16 July 2012 on the bank levy and contributions to the deposit guarantee scheme (CON/2012/53)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 16 July 2012 on the bank levy and contributions to the deposit guarantee scheme (

text: ) Introduction and legal basis

text: On 12 June 2012 the European Central Bank (ECB) received a request from the Slovak Ministry of Finance for an opinion on a draft law amending Law No 384/2011 on a special levy on selected financial institutions and on amendments to certain laws, and Law No 118/1996 on the protection of deposits and on amendments to certain laws (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the 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 relates to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: The purpose of the draft law is to amend Law No 384/2011, on the draft of which the ECB issued Opinion

text: , and Law No 118/1996. The proposed amendments concern the following areas: 1.1 Rules concerning the bank levy. Under the draft law, the levy introduced by Law No 384/2011 will no longer exclude from its base the value of: (a) deposits received by a bank or the branch of a foreign bank (hereinafter the ‘bank’) within the territory of the Slovak Republic and protected within the Slovak Deposit Protection Fund (hereinafter the ‘Fund’); and (b) deposits received by a bank within the territory of the Slovak Republic and protected in other Member States of the European Economic Area . Moreover, the draft law imposes an obligation for banks to pay, together with the instalment of the regular bank levy for the last quarter of 2012, an extraordinary one-off levy of 0.1% of the bank levy base . This extraordinary levy is intended to support the development programmes of the Slovak government and to enhance own sources of funding for legal

text: entities established to promote the foreign trade operations of exporters and importers . Finally, the draft law also introduces a provision under which the bank may neither increase, nor introduce, new financial consideration to cover higher costs triggered by the increased levy. If there is an increase in financial consideration which is unrelated to the payment of the levy, the grounds for the increase will need to be disclosed. 1.2 Rules concerning contributions to the Fund. Under Law No 118/1996 the Fund itself determines the amount of annual contributions which it receives from the member banks. Under the draft law, the amount will be determined either by Law No 118/1996 or by the Fund. At the same time, the draft law establishes that the member banks will not pay any contributions to the Fund in 2013.

text: 2. Financing and governance of a bank resolution fund

text: 2.1 Law No 384/2011 introducing the bank levy specified that its sole purpose is the provision of financing to a dedicated resolution mechanism for banks . The ECB recommended in its previous opinion the introduction of: (a) a clear separation between the extra-budgetary account created out of the levy proceeds and the general budgetary resources; and (b) detailed rules on the application of the resolution fund to finance the bank resolution measures . The ECB reiterates those recommendations, given that that they have not been taken into account in Law No 384/2011. At the same time, the ECB invites the Slovak authorities to take into account that their approach may need to be adjusted in the light of ongoing harmonisation of the Union framework for bank recovery and resolution . 2.2 Further, the ECB notes that the obligation to pay the bank levy under Law No 384/2011 applies among others to Slovak branches of credit institutions located in other Member States. As already pointed out by the ECB, this may lead to double charging of a bank levy by the Slovak authorities and by the authorities of the relevant home Member State . The ECB reiterates its recommendation that the Slovak authorities should address the risk of double charging adequately following the harmonised solutions which are being developed in this respect at Union level .

text: 2.3 The extraordinary one-off levy introduced by the draft law is unrelated to the establishment of a dedicated resolution mechanism for banks. The ECB recommends that the proceeds from this levy are clearly separated from the proceeds of the regular bank levy established for bank resolution purposes and that the dedicated extra-budgetary account used for collection of the regular bank levy is not used for other purposes.

text: 3. Financing of the deposit guarantee scheme

text: As already noted by the ECB , deposit protection is an important element of the financial safety net and therefore contributes to safeguarding financial stability. According to international standards, sound funding arrangements are critical to the effectiveness of deposit guarantee schemes and the maintenance of public confidence in the banking system . In this respect, the ECB would like to make the following remarks. First, the contributions to the deposit guarantee scheme are currently collected and managed by the Fund, which is a self-standing legal entity and which has the power to determine the amount of annual contributions paid by the member banks . The draft law foresees that the amount of the annual contributions should in the future be determined either by the Fund or by Law No 118/1996 i.e. by the legislature. The proposed wording is ambiguous, as it is not clear which method takes precedence. Second, while Directive

text: of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes does not prescribe a specified funding level for deposit guarantee schemes, it refers to the need to ensure that the financing capacities of the schemes are in proportion to the liabilities of their member credit institutions . At the same time, the proposal for a recast of Directive

text: introduces a rule under which credit institutions will be required to make annual contributions to deposit guarantee schemes with a view to achieving a pre-defined funding level . The proposed suspension of the member bank contributions to the Fund is introduced by the draft law without having safeguarded that the Fund has achieved an adequate funding level and hence it contravenes the above principles. The ECB therefore recommends not introducing such a suspension of the contributions to the Fund.

text: This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 16 July 2012. [signed]

text: The President of the ECB

text: Mario DRAGHI


text: EGT L 189, 3.7.1998, s. 42.

sprak: sv

title: Europeiska centralbankens yttrande av den 17 juli 2012 om vissa äldre sedlars upphörande som lagliga betalningsmedel (CON/2012/54)

text: Inledning och rättslig grund

text: Den 15 juni 2012 mottog Europeiska centralbanken (ECB) en begäran från Sveriges riksbank om ett yttrande över ett lagförslag vissa äldre sedlars upphörande som lagliga betalningsmedel (nedan kallat lagförslaget). ECB:s behörighet att avge ett yttrande grundas på artiklarna

text: och

text: i fördraget om Europeiska unionens funktionssätt och artikel 2.1 andra 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 förslaget rör betalningsmedel. I enlighet med

text: artikel 17.5

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

text: 1. Syftet med lagförslaget

text: Enligt lagförslaget ska 50-kronorssedlar respektive 1 000-kronorssedlar utan folieband upphöra att vara lagliga betalningsmedel den 31 december 2013. Motivet till lagförslaget är att det för närvarande finns två giltiga versioner av 50- respektive 1 000-kronorssedeln, de äldre versionerna har färre säkerhetsdetaljer, bland annat saknar sedlarna folieband. För att minska mängden sedlar i omlopp föreslår Sveriges riksbank att de äldre sedlarna ogiltigförklaras. För att kunna informera allmänheten i god tid föreslår Riksbanken att lagförslaget bör träda i kraft 1 januari 2013. Efter den 31 december 2013 finns det fortfarande möjlighet för både banker och allmänhet att lösa in sedlar genom att brevledes sända dem till Riksbanken.

text: 2. Allmänna kommentarer

text: Enligt 9 kap. 14 § regeringsformen har Riksbanken ensamrätt att ge ut sedlar och mynt. Av 5 kap. 1 § lagen (1988:1385) om Sveriges riksbank framgår att sedlar och mynt som ges ut av Riksbanken är lagliga betalningsmedel. Riksbanken har således ensamrätt att ge ut sedlar och mynt och besluta om utformningen av dessa. Allmänna regler om penning- och betalningsväsendet, såsom beslut om att vissa

text: svenska sedlar och mynt ska upphöra att vara lagliga betalningsmedel, ska däremot beslutas av Sveriges riksdag. ECB noterar att Riksbanken gjort en ingående granskning av kontantmarknadens behov och beaktat de synpunkter som marknadsaktörerna, bl.a. banker, värdetransportföretag och handel, framfört. ECB anser även att tidsperioden mellan lagförslagets ikraftträdande och den dag då sedlarna upphör att vara lagliga betalningsmedel är tillräckligt lång. Mot bakgrund av detta välkomnar ECB att gamla sedlar ogiltigförklaras och ersätts med nya sedlar av samma valör som har mer avancerade säkerhetsdetaljer. Genom bytet av sedlarna säkerställs kronans ställning samtidigt som förfalskningsskyddet ökar.

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

text: Utfärdat i Frankfurt am Main den 17 juli 2012.

text: [Namnteckning]

text: Mario DRAGHI

text: ECB:s ordförande


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

text: Such developments contain in particular the establishment of the European System of Financial Supervision (ESFS) by a set of Union regulations adopted in December 2010; see

text: Regulation (EU) No 1092/2010

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

text: Regulation (EU) No 1093/2010

text: of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority (OJ L 331, 15.12.2010, p. 12),

text: Regulation (EU) No 1094/2010

text: of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority) (OJ L 331, 15.12.2010, p. 48, and

text: Regulation (EU) No 1095/2010

text: of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority, (OJ L 331, 15.12.2010, p. 84) and

text: Council Regulation (EU) No 1096/2010 of 17 November 2010

text: conferring specific tasks upon the European Central Bank concerning the functioning of the European Systemic Risk Board (OJ L 331, 15.12.2010, p. 162).

text: Article 1

text: Section 3 of the draft law.

text: Article 1

text: Section 5 of the draft law; see

text: Council Regulation (EC) No 2223/96 of 25 June 1996

text: on the European system of national and regional accounts in the Community (OJ L 310, 30.11.1996, p. 1).

text: Article 1

text: , Section 4 of the draft law.

text: Finanzdienstleistungsaufsichtsgesetz as published in the announcement of 22 April 2002, Bundesgesetzblatt I, p. 1782, as amended.

text: The Board will consist of six people with expertise in the area of finance and insurance, instead of ten representatives of the supervised companies.

text: Article 2

text: , Section 5 of the draft law, amending Section 7 of the Law on BaFin.

text: Article 2

text: Section 6 of the draft law, inserting Section 8a in the Law on BaFin.

text: See in this respect the relevant provisions of the proposed regulation of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms (COM (2011) 452). See the Council’s general approach of 21 May 2012, available on the Council’s website at www.consilium.europa.eu.

text: See e.g. paragraph 5 of Opinion

text: , paragraph 2.3 of Opinion

text: and paragraph 5.1 of Opinion

text: . See also

text: recital 24

text: of

text: Regulation (EU) No 1092/2010

text: See, e.g. paragraph 4 of Opinion

text: , paragraph 2.2.4 of Opinion

text: and paragraph 2.9 of Opinion

text: Gesetz über die Deutsche Bundesbank, as published in the announcement of 22 October 1992, Bundesgesetzblatt I, p. 1782, as amended, Section 12.

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: Article 1

text: , Section 5 of the draft law; information that may be collected by the Deutsche Bundesbank may cover all data that allow deep insight into the status and the development of the economic conditions for the financial corporations and into their on-going business operations, e.g. balance sheet and off-balance sheet figures collected and the firm and group level, as well information on group structures, bilateral relations, risk management practices and solvency and liquidity status.

text: Section 32 of the Law on Bundesbank and Section 11 of the Law on BaFin.

text: See paragraph 3.2 of Opinion

text: and paragraph 2.2.6 of Opinion

text: ; see, e.g.,

text: Article 12 of Directive 2002/87/EC

text: of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate (OJ L 35, 11.2.2003, p. 1),

text: Article 58(5) of Directive 2004/39/EC

text: of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (OJ L 145, 30.4.2004, p. 1),

text: Article 49 of Directive 2006/48/EC

text: relating to the taking up and pursuit of the business of credit institutions (OJ L 177, 30.6.2006, p. 1), Article 70 of the Directive

text: of the European Parliament and of the Council of 25 November 2009 on the taking up and pursuit of the business of insurance and reinsurance (Solvency II) (OJ L 335, 17.12.2009, p. 1) and

text: Article 1(4) of Regulation (EU) No 1092/2010

text: , and paragraph 5.3 of Opinion

text: ; see also

text: Article 57

text: (aa) of the Proposal for a Directive of the European Parliament and of the Council on the access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms and amending Directive

text: of the European Parliament and of the Council on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate (‘CRD IV’), Council general approach of 21 May 2012.

text: See paragraph 5.3 of opinion

text: . See also

text: Article 57

text: (aa) of Proposal for a Directive of the European Parliament and of the Council on the access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms and amending Directive

text: of the European Parliament and of the Council on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate, Council general approach of 21 May 2012.

text: Article 1

text: Section 6 of the draft law.

text: See paragraph 2.2.2 of Opinion

text: and paragraph 2.11 of Opinion

text: See Section B4 of Recommendation

text: See paragraph 2.2.2 of Opinion

text: and paragraph 2.11 of Opinion

title: Opinion of the European Central Bank of 17 July 2012 on the strengthening of financial supervision and establishment of a financial stability committee (CON/2012/55)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 17 July 2012 on the strengthening of financial supervision and establishment of a financial stability committee (

text: ) Introduction and legal basis

text: On 14 May 2012, the European Central Bank (ECB) received a request from the German Federal Ministry of Finance for an opinion on a draft law on the strengthening of German financial supervision (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of

text: Article 2(1) of Council Decision 98/415/EC 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 Deutsche Bundesbank and to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 The draft law is aimed at further strengthening the institutional arrangements through which microprudential supervision of financial services operators and macro-prudential oversight of the financial system are exercised. It fosters smooth cooperation between the Federal Ministry of Finance, the Deutsche Bundesbank and the Federal Financial Supervisory Authority (hereinafter ‘BaFin’) with regard to the early identification of and reaction to systemic risks arising in the financial system, taking also into account Union level developments .

text: 1.2 Article 1 of the draft law introduces the Law on financial stability oversight (hereinafter the ‘proposed Law on financial stability oversight’), which in particular concerns the establishment of a Financial Stability Committee and the strengthening of the financial stability (macro-prudential) role of the Deutsche Bundesbank. 1.2.1 Establishment of a Financial Stability Committee The Financial Stability Committee (hereinafter the ‘Committee’) will be composed of: (a) three representatives from the Federal Ministry of Finance, including the Chair and the Vice-Chair of the Committee, (b) three Deutsche Bundesbank representatives, (c) three BaFin representatives, and (d) the Chair of the Management Board of the Financial Market Stabilisation Authority participating in the Committee without voting rights . The Committee’s decisions are adopted by a simple majority of its members unless specified to the contrary . The Committee will be responsible for, inter alia, advising on the handling of warnings and recommendations issued by the European Systemic Risk Board (ESRB) under

text: Article 16 of Regulation (EU) No 1092/2010

text: and for adopting its own non-binding warnings and recommendations concerning risks to financial stability, addressed to German public authorities . The recipients of the Committee’s warnings and recommendations will be obliged to notify the Committee as regards the timeline for their implementation or to explain non-action. The warnings and recommendations may be made public after giving the recipient an opportunity to comment . 1.2.2 Strengthening the financial stability (macro-prudential) role of the Deutsche Bundesbank The Deutsche Bundesbank’s mandate will be complemented with the task of contributing to the stability of the financial system, in particular through: (a) analysing issues affecting financial stability and identifying arising risks, and (b) providing analytical support to the Committee, inter alia, through making proposals for the Committee’s warnings and recommendations and evaluating their implementation . Moreover, the Committee may not adopt decisions concerning (a) the adoption and publication of its warnings and recommendations; or (b) the adoption of its annual reports submitted to the Parliament in the cases where the Deutsche Bundesbank representatives cast a block vote . The Deutsche Bundesbank will also acquire the right to impose specified reporting requirements on the financial service providers falling within the sector ‘Financial corporations’ as defined in

text: Regulation (EC) No 2223/96

text: . In addition, the Deutsche Bundesbank

text: and BaFin will be required to share all information relevant for the performance of their respective tasks . 1.3 Article 2 of the draft law amends the Law on the Federal Financial Supervisory Authority (hereinafter the ‘Law on BaFin’) by: (a) replacing members of BaFin’s Supervisory Board appointed by the supervised entities with independent experts , and (b) enhancing BaFin’s consumer protection function by establishing a Consumer Advisory Board, appointed by the Federal Ministry of Finance, to advise BaFin in the performance of its supervisory tasks from a consumer perspective .

text: 2. General observations

text: 2.1 The ECB has assessed the draft law taking into account its previous opinions on national financial stability committees, and the present state of development of Union legislation concerning the exercise of macro-prudential oversight. The ECB understands that the ESRB will assess the followup to its Recommendation

text: of 22 December 2011 on the macro-prudential mandate of national authorities . 2.2 As a result of advanced legislative proposals at Union level, Member States may be required to designate an authority for the exercise of specific binding macro-prudential powers in relation to supervised entities within their jurisdiction . The adoption of such Union legislation may require future adjustments to the macro-prudential framework laid down under the draft law.

text: 3. The Deutsche Bundesbank’s role in the Committee

text: 3.1 Performance by the central bank of macro-prudential oversight tasks The ECB supports that the proposed institutional framework for macro-prudential oversight recognises the essential role played by the central bank . It also welcomes the adequate representation of the Deutsche Bundesbank in the Committee, the performance by the Deutsche Bundesbank of analytical tasks in support of the Committee and the fact that Deutsche Bundesbank’s consent will effectively be required for the adoption and publication of Committee warnings and recommendations.

text: 3.2 At the same time, the performance of these new tasks should not affect: (a) the Deutsche Bundesbank’s institutional, functional and financial independence, or (b) the performance by the ESCB of its tasks under the Treaty and the Statute of the European System of Central Banks and of the European Central Bank . In this respect, the ECB welcomes the express confirmation in the draft law that: (i) the assignment to the Deutsche Bundesbank of the new macro-prudential tasks should not affect its present competences, and (ii) the central bank independence principle defined in the Law on Deutsche Bundesbank should apply also to the exercise of such new tasks. Similarly, the ECB expects that the performance by the Deutsche Bundesbank of the tasks laid down in the draft law will comply with the prohibition of monetary financing under Article 123(1) of the Treaty, read in conjunction with

text: Council Regulation 3603/93/EC

text: . In particular, the Deutsche Bundesbank’s new tasks performed in support of the Committee should not give rise to any form of overdraft facility or any type of credit facility provided for the public sector. 3.3 Central bank access to macro-prudential information The Deutsche Bundesbank should have the competence to require and obtain in a timely fashion all national data and information relevant for the exercise of its newly assigned macro-prudential tasks. Hence, the ECB welcomes the arrangements introduced by the draft law under which: (a) BaFin and the Deutsche Bundesbank should communicate all relevant information to one another whereby data stored at the other body may be retrieved automatically , and (b) the Deutsche Bundesbank is entitled to collect information from financial corporations on the basis of a statutory instrument issued by the Federal Ministry of Finance in consultation with the Deutsche Bundesbank, should the data available from BaFin and other authorities be insufficient for the fulfilment of the Deutsche Bundesbank’s tasks defined in the proposed Law on financial stability 23 24 oversight . The ECB understands that the draft law ensures that the confidentiality obligations imposed on the staff of the Deutsche Bundesbank and BaFin should not prevent effective information sharing amongst these institutions , also as regards sharing of disaggregated supervisory or statistical information.

text: 4. Cross-border cooperation

text: 4.1 General cooperation and information-sharing arrangements

text: National provisions establishing national financial stability committees should be consistent with

text: the Union law provisions that regulate the exchange of supervisory and statistical information and

text: that establish the ESRB as a Union body responsible for macro-prudential oversight of the financial

text: system within the Union . While the ECB understands that the members of the Committee are

text: already bound by such Union law provisions, Section 2 of the proposed Law on financial stability

text: oversight should expressly mandate the Committee to cooperate with the ESRB and, where needed,

text: with the macro-prudential authorities of the other Member States, in particular as regards exchange

text: of information . To this end, the ECB further understands that confidentiality obligations

text: established by the draft law for staff involved in Committee work do not limit the possibility for

text: the Committee to engage in cross-border cooperation and information-sharing since Section 6 of

text: the proposed Law on financial stability oversight refers to exclusions from the confidentiality rules

text: information obtained by the Committee .

text: 4.2 Cooperation concerning warnings and recommendations

text: National financial stability committee actions should not conflict with but rather complement

text: ESRB actions taken at Union level . Hence, the ECB recommends that Section 3 of the proposed

text: Law on financial stability oversight states that the Committee closely liaises with the ESRB and

text: informs the ESRB of all actions taken to address systemic risks at national level , and further, that

text: it informs the ESRB prior to the issuance or the publication of its warnings and recommendations

text: addressed to German authorities, if significant cross-border effects are to be expected. Provision of

text: such advance information on Committee warnings and recommendations is necessary, given their

text: potential overlap in substance with analogous ESRB instruments, the need to avoid conflicting policy messages produced at Union and national level, and the need to ensure the effectiveness of the ESRB’s warnings and recommendations . This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 17 July 2012.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI