title: Opinion of the European Central Bank of 25 March 2020 on close cooperation between the European Central Bank and Hrvatska narodna banka (HNB) within the Single Supervisory Mechanism, and on the macroprudential mandate and tools of HNB (CON/2020/10)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 25 March 2020 on close cooperation between the European Central Bank and Hrvatska narodna banka (HNB) within the Single Supervisory Mechanism, and on the macroprudential mandate and tools of HNB (

text: ) Introduction and legal basis

text: On 29 January 2020 the European Central Bank (ECB) received two requests from Hrvatska narodna banka (HNB) for opinions on draft amendments to the Law on HNB (the ‘draft law on HNB’) and to the Law on credit institutions (the ‘draft law on credit institutions’, together with the draft law on HNB, the ‘draft laws’) . The ECB’s competence to deliver this 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 Article 2(1) of Council Decision 2 3

text: , as the provisions of the draft laws addressed by this opinion relate to HNB, rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets, and the ECB’s tasks concerning the prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft laws

text: The provisions of the draft laws with respect to which this opinion is issued have three main purposes. First, the draft laws adapt Croatian law to the provisions of

text: Council Regulation (EU) No 1024/2013

text: Regulation (EU) No 468/2014

text: of the European Central Bank (ECB/2014/17) and Regulation (EU)

text: 1 HNB’s authority to consult the ECB is based on Article 39(1) of the Law on HNB, according to which HNB may require the Croatian Government to propose the enactment of laws concerning HNB and other matters to the Croatian Parliament. The Ministry of Finance is the sponsor of the draft laws, which were approved by the Croatian Government on 23 January 2020 and were delivered on the same day to the Croatian Parliament for the next steps in the legislative process.

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

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

text: 3 This opinion addresses those provisions of the draft laws that concern the establishment of close cooperation between the ECB and HNB within the framework of the Single Supervisory Mechanism, Croatia’s participation in the Single Resolution Mechanism, HNB’s macroprudential mandate and tools, and certain other provisions affecting credit institutions. The remaining provisions of the draft laws are addressed in a separate opinion.

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

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

text: Regulation (EU) No 468/2014

text: of the European Central Bank of 16 April 2014 establishing the framework for cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities (SSM Framework Regulation) (ECB/2014/17) (OJ L 141, 14.5.2014, p. 1). No 806/2014 of the European Parliament and of the Council to provide for the establishment of close cooperation between the ECB and HNB within the framework of the Single Supervisory Mechanism (SSM) and for Croatia’s entry into the Single Resolution Mechanism (SRM). Second, the draft laws contain provisions concerning the macroprudential mandate and tools of HNB. Third, the draft laws contain provisions addressing a range of matters affecting credit institutions, including restrictions on the remuneration of staff, the outsourcing of business activities and the exchange of information for purposes of assessing the creditworthiness of a credit institution’s clients and managing credit risks.

text: 2. The draft law on HNB

text: 2.1 The draft law on HNB regulates HNB’s tasks within close cooperation with the ECB and participation in the SRM on matters including the issuance and withdrawal or revocation of authorisations and approvals, the adoption of other decisions, the exercise of supervision and oversight in accordance with the laws governing the operation of credit institutions, and the exercise of resolution powers. It is envisaged that HNB will also adopt subordinate legislation regulating banking operations and establishing standards for sound and safe operation of credit institutions. These tasks are to be carried out by HNB within close cooperation with the ECB, or within the SRM, in accordance with EU law . 2.2 The draft law on HNB provides that the HNB Council is to issue and revoke authorisations of credit institutions, authorisations for performing specific operations, authorisations for acquiring shares of credit institutions, approve mergers by acquisition, formation and other changes in the status of credit institutions, approve and revoke the approval of appointments of chairpersons and members of credit institutions’ management and supervisory boards, and decide whether a credit institution is failing or is likely to fail, within close cooperation established with the ECB and under the conditions governed by the Statute of the European System of Central Banks and of the European Central Bank or the legal acts of the EU, its institutions and bodies . 2.3 The draft law lays down the competences that HNB’s Governor exercises within the framework of close cooperation with the ECB and HNB’s participation in the SRM, including the regulation of detailed conditions for and methods of exercising supervision, the procedure for taking measures with respect to credit institutions and the conditions applicable to the resolution planning process . 2.4 The draft law makes provision for the imposition of administrative monetary sanctions in cooperation with the ECB, and for the cooperation of HNB with the Single Resolution Board (SRB) in the procedure of imposing penalties when SRB exercises its powers to impose penalties . 2.5 The draft law provides that HNB is competent for the definition and implementation of Croatia’s macroprudential policy, for the purposes of contributing to the stability of the financial system as a

text: Regulation (EU) No 806/2014

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

text: Regulation (EU) No 1093/2010

text: (OJ L 225, 30.7.2014, p. 1).

text: 7 See Articles 4 and 24 of the draft law on HNB (amending

text: Article 4

text: and replacing Article 77 of the Law on HNB).

text: 9 See Article 10 of the draft law on HNB (amending Article 43 of the Law on HNB).

text: 10 See Article 26 of the draft law on HNB (introducing new

text: Articles 87

text: a and 87c of the Law on HNB). whole, acting in accordance with relevant EU legal acts. HNB’s Governor is to implement macroprudential policy and adopt subordinate legislation, recommendations and decisions in the field of macroprudential policy . 2.6 The draft law provides that on the date of the introduction of the euro as Croatia’s official currency, or if after the establishment of close cooperation with the ECB this cooperation is terminated in accordance with

text: Regulation (EU) No 1024/2013

text: , the relevant provisions of the Law on HNB which arise out of HNB’s close cooperation with the ECB cease to have effect . 2.7 Finally, the draft law provides that HNB will be independent in the performance of its tasks within the SRM conferred on it pursuant to

text: Regulation (EU) No 806/2014

text: , without prejudice to the powers of the Single Resolution Board (SRB) in relation to HNB . It also gives HNB powers to adopt implementing acts providing for the application of SRB guidelines, subject to the SRB’s approval .

text: 3. The draft law on credit institutions

text: 3.1 The draft law on credit institutions empowers HNB to impose supervisory measures that may be required upon the completion of the comprehensive assessment performed by the ECB pursuant to

text: Regulation (EU) No 1024/2013

text: . HNB is to cooperate with the ECB in identifying significant credit institutions in Croatia on the basis of this comprehensive assessment and the requirements set out in

text: Regulation (EU) No 468/2014

text: (ECB/2014/17) . 3.2 The draft law seeks to ensure that, whenever the ECB exercises its supervisory powers concerning acquisitions of qualifying holdings in credit institutions, HNB cooperates with the ECB in the decision-making procedure in order to ensure that joint procedures carried out with the ECB in the course of close cooperation may be applied mutatis mutandis to supervised entities with a head office in Croatia . 3.3 The draft law seeks to ensure cooperation with the ECB in the decision-making procedure concerning the prior approval and revocation of approval for management and supervisory board members. A credit institution’s management board is obliged to ensure that the credit institution operates, inter alia, in accordance with ECB regulations adopted under

text: Regulation (EU) No 1024/2013

text: . These provisions are necessary as the ECB does not have directly applicable powers over supervised entities and groups in Croatia during the course of close cooperation . 3.4 The draft law seeks to facilitate joint decision-making procedures in which HNB takes a decision upon the instruction of the ECB on the authorisation of credit institutions’ provision of banking and/or financial services, mergers by acquisition or formation of new credit institutions, the

text: 11 See Articles 4, 10, 25 and 27 of the draft law on HNB (amending Articles

text: and

text: and introducing new

text: Article 77

text: a of the Law on HNB).

text: 12 See

text: Articles 34

text: (amending Article 118 of the Law on HNB) and 36 of the draft law on HNB.

text: 13 See Article 21 of the draft law on HNB (introducing new

text: Article 71

text: a of the Law on HNB).

text: 14 See Article 21 of the draft law on HNB (introducing new

text: Article 71

text: b of the Law on HNB).

text: 15 See Articles 5-6 of the draft law on credit institutions (amending

text: Articles 11

text: b-11c of the Law on credit institutions).

text: 16 See Articles 7-11 of the draft law on credit institutions (amending Articles 24, 26, 27, 29 and 32 of the Law on credit institutions).

text: 17 See Articles 13-15 and 17-18 of the draft law on credit institutions (amending Articles 39, 41, 44, 46 and 47 of the Law on credit institutions).

text: 18 See Explanation accompanying the draft law on credit institutions, Articles

text: and

text: , pp. 48-49. granting, expiry and revocation of authorisations, and the establishment of a branch in another participating Member State by a significant credit institution . 3.5 The draft law requires HNB to decide on changes to credit institutions’ internal models, the classification of capital instruments as additional tier 1 or tier 2 capital instruments, and a credit institution’s capital conversion plan in accordance with the ECB’s instructions . The existing limitation of exposures to members of the same group or to a single person or group of connected clients, set at 25% of the credit institution’s eligible capital, is to remain in force after the establishment of close cooperation . As regards the assessment of recovery plans, HNB is to decide in line with ECB instructions . 3.6 The draft law envisages that credit institutions will continue to address all their applications, notifications or requests to HNB. An unannounced inspection of a credit institution’s business premises may only be performed by order of the High Administrative Court where such an order is requested independently by HNB or by the ECB, with HNB submitting such requests on behalf of the ECB . 3.7 Whenever the ECB exercises and performs its supervisory powers and tasks, HNB as the consolidating supervisor must cooperate with the ECB in the decision-making procedure for the approval of a financial support agreement for a group of credit institutions in Croatia and decide in accordance with the ECB’s instructions . Provision is made for cooperation and decision-making according to the ECB’s instructions in relation to supervisory measures in the early intervention phase . Where the ECB or a supervisory authority from a non-participating Member State is the consolidating supervisor, HNB may participate in the college of supervisors as an observer, and must act in accordance with the ECB’s instructions . 3.8 Under the draft law the provisions of the law governing the general administrative procedure apply to administrative procedures carried out by HNB. The draft law on credit institutions establishes the legal framework for the exercise of the right to be heard and to access files. In particular, before adopting a decision that could adversely affect the legal rights of a party, HNB must notify the party of all facts, circumstances and legal issues relevant to the adoption of the decision and invite the party to provide its comments in writing. Where HNB deems it appropriate, it may provide the party with the opportunity of commenting in an oral hearing. In addition, a party subject to a supervisory

text: 19 See Articles 19-23, 24 and 26-27 of the draft law on credit institutions (amending Articles 60, 63, 65, 67-69, 73 and 75 of the Law on credit institutions).

text: 20 See Articles 34 and 38 of the draft law on credit institutions (amending Articles 114 and 143 of the Law on credit institutions).

text: 21 See Article 40 of the draft law on credit institutions (introducing new

text: Article 145

text: a of the Law on credit institutions). See also

text: Article 493(3)

text: (c) of

text: Regulation (EU) No 575/2013

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

text: Regulation (EU) No 648/2012

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

text: 22 See Article 41 of the draft law on credit institutions (introducing new

text: Article 154

text: a of the Law on credit institutions).

text: 23 See Article 44 of the draft law on credit institutions (amending Article 175 of the Law on credit institutions).

text: 24 See Article 49 of the draft law on credit institutions (amending

text: Article 216

text: b of the Law on credit institutions).

text: 25 See Article 53 of the draft law on credit institutions (amending

text: Article 235

text: a of the Law on credit institutions).

text: 26 See Article 56 of the draft law on credit institutions (amending Article 277 of the Law on credit institutions). procedure and a party against whom a procedure for imposing administrative sanctions has been initiated have a right to access the file . 3.9 Under the draft law HNB is competent for establishing breaches and carrying out the procedure for imposing administrative sanctions and imposing administrative sanctions on legal persons and responsible persons for particular breaches of credit institutions . As noted in the explanatory memorandum accompanying the draft law, in accordance with

text: Article 7 of Regulation (EU) No 1024/2013

text: , the ECB may give instructions that the HNB is obliged to comply with. In exercising its powers under

text: Article 18

text: in conjunction with

text: , the ECB may instruct HNB to impose administrative sanctions. To enable HNB to comply with such instructions, HNB is given the power to impose administrative sanctions. The procedure by which HNB imposes administrative sanctions aims to fulfil the requirements under close cooperation with the ECB. This includes the types of administrative sanctions that HNB may impose at the request of the ECB . The draft law introduces administrative disputes and judicial protection as the legal remedy against a decision on administrative sanctions. An appeal against a decision of HNB on administrative sanctions may be made before the Administrative Court in Zagreb, with such an appeal regarded as urgent . The limitation period for imposing administrative sanctions and executing fines is five years , in line with Articles

text: and

text: of Regulation (EU) No 468/2014 (ECB/2014/17) . Whenever the ECB exercises its powers, HNB is to cooperate with the ECB in the administrative sanctions procedure and comply with the ECB’s instructions . In this respect, HNB must follow the same procedural requirements as apply when it imposes administrative sanctions of its own accord . 3.10 Where certain provisions of the Law on credit institutions are breached, a misdemeanour may be committed, the establishment and sanctioning of which falls within the competence of county courts. The draft law provides, in contrast, that HNB, and not the county courts, is to have the power to impose administrative sanctions in relation to certain breaches . 3.11 The draft law contains further provisions regulating HNB’s macroprudential mandate and tools. In particular, where necessary to safeguard the stability of the financial system as a whole, to strengthen the resilience of the financial system and to prevent and mitigate systemic risks, HNB as a designated authority must adopt subordinate legislation to set appropriate measures and instruments that may include: (1) the highest permitted ratio of the approved loan amount to collateral value; (2) the highest permitted ratio of the loan amount to the income of the loan

text: 27 See Articles 62-63 of the draft law on credit institutions (introducing new

text: Articles 322

text: a, 323a and 323b of the Law on credit institutions).

text: 28 See Article 65 of the draft law on credit institutions (introducing new

text: Articles 359

text: a to 359s of the Law on credit institutions).

text: 29 See Explanation accompanying the draft law on credit institutions,

text: Article 65

text: , pp. 56-58.

text: 30 See Article 65 of the draft law on credit institutions (introducing new

text: Article 359

text: k of the Law on credit institutions).

text: 31 See Article 65 of the draft law on credit institutions (introducing new

text: Articles 359

text: m and 359n of the Law on credit institutions).

text: 32 See Explanation accompanying the draft law on credit institutions,

text: Article 65

text: , p. 58.

text: 33 See Article 65 of the draft law on credit institutions (introducing new

text: Article 359

text: s of the Law on credit institutions).

text: 34 See Explanation accompanying the draft law on credit institutions,

text: Article 65

text: , p. 56.

text: 35 See Article 66 of the draft law on credit institutions (amending Article 360 of the Law on credit institutions); Explanation accompanying the draft law on credit institutions,

text: Article 66

text: , p. 59. beneficiary; (3) the highest permitted ratio of the amount of loan instalment repayment or annuity to the income of the loan beneficiary; (4) the maximum duration of the loan agreement; (5) the requirements related to the loan repayment calculation method; or (6) other measures and requirements aimed at safeguarding the stability of the financial system as a whole and preventing and mitigating systemic risks . Further, HNB is the designated authority responsible for setting the countercyclical and systemic risk buffer rates for Croatia for the purposes of Articles

text: and

text: of Directive 2013/36/EU of the European Parliament and the Council and must also set other systemically important institutions (O-SII) buffer rate. In these cases, HNB carries out these macroprudential tasks together with the ECB, and follows the ECB’s instructions . 3.12 The draft law contains provisions prescribing the ratio between the fixed and variable components of the total remuneration of a staff member of a credit institution and restricting the type and design of instruments in which variable remuneration may be awarded . 3.13 The draft law amends existing provisions concerning credit institutions’ outsourcing of business activities, prescribing in more detail the content of subordinate legislation that HNB may adopt on outsourcing . 3.14 The draft law removes legal impediments to the exchange of confidential information necessary for a credit institution to assess a client's creditworthiness and manage credit risk, ensuring the compliance of such information exchanges with banking secrecy, data protection and other legal requirements. These changes are proposed following the discontinuation of the exchange of information on the credit obligations of citizens by the Croatian Registry of Credit Obligations in 2018 .

text: 4. Observations regarding close cooperation between HNB and the ECB within the SSM

text: 4.1 The ECB welcomes the draft laws as an important step in the process leading to the establishment of close cooperation between the ECB and HNB pursuant to

text: . 4.2 The ECB notes that it has already been consulted, and issued an opinion, on a first piece of Croatian legislation adopted for the purpose of establishing close cooperation . 4.3 This opinion is without prejudice to the overall assessment of the request filed on 27 May 2019 by the Republic of Croatia to establish close cooperation between the ECB and HNB, which is taking

text: 36 See Article 39 of the draft law on credit institutions (introducing new Title VIIa - Macroprudential measures and

text: Article 144

text: a of the Law on credit institutions).

text: 37 Directive

text: of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive

text: and repealing Directives

text: and

text: (OJ L 176, 27.6.2013, p. 338).

text: 38 See Articles 35-37 of the draft law on credit institutions (amending Articles 119, 129 and 137 of the Law on credit institutions).

text: 39 See Article 30 of the draft law on credit institutions (introducing new

text: Articles 100

text: a and 100b of the Law on credit institutions); Explanation accompanying the draft law on credit institutions,

text: Article 30

text: , pp. 50-51.

text: 40 See Articles 31-33 of the draft law on credit institutions (amending Articles 109-111 of the Law on credit institutions); Explanation accompanying the draft law on credit institutions, Articles

text: , p. 51.

text: 41 See Articles 42 and 61 of the draft law on credit institutions (amending Articles 157 and 321 of the Law on credit institutions); Explanation accompanying the draft law on credit institutions, Articles

text: and

text: , pp. 52 and 55.

text: 42 See Opinion

text: . All ECB Opinions are published on the ECB’s website at www.ecb.europa.eu. place in line with the existing procedures established under

text: and under Decision ECB/2014/5 of the European Central Bank . In particular, this opinion remains without prejudice to the assessment being conducted by the ECB in accordance with Article 4 of Decision ECB/2014/5, which includes a broader assessment of the relevant national legislation, also taking into account its practical implementation . 4.4 The ECB welcomes the comprehensive approach taken in the draft laws to the establishment and operation of close cooperation with the ECB. As previously noted, the ECB understands that the new provisions will be read in accordance with the other provisions of the Law on HNB and the Law on credit institutions, so that the exercise of prudential supervision over credit institutions established in Croatia will take place under the framework provided for in

text: Regulation (EU) No 1024/2013

text: . 4.5 The ECB welcomes the establishment of a legal framework providing HNB with all necessary powers to comply with all the instructions which the ECB may adopt under

text: Regulation (EU) No 1024/2013

text: . 4.6 The ECB welcomes the provisions enabling the ECB to carry out the tasks in the areas referred to in

text: Article 4(1)

text: and (2) and

text: Article 5 of Regulation (EU) No 1024/2013

text: once close cooperation between the ECB and HNB is established. 4.7 The ECB welcomes the provisions ensuring that the common procedures laid down in Part V of

text: Regulation (EU) No 468/2014

text: (ECB/2014/17) can be applied in respect of supervised credit institutions during close cooperation. Consistent with

text: Regulation (EU) No 468/2014

text: (ECB/2014/17), the draft laws provide for the right of a party to be heard before a decision that could adversely affect its rights is adopted . However, the draft laws do not contain provisions on HNB’s powers and procedure in case of the adoption of an urgent decision necessary to prevent significant damage to the financial system. The Croatian authorities are encouraged to align the draft laws in this respect with

text: Article 31 of Regulation (EU) No 468/2014

text: (ECB/2014/17) and provide HNB with all necessary powers to comply with all the instructions which the ECB may adopt under

text: Regulation (EU) No 1024/2013

text: in cases of urgency. 4.8 The ECB welcomes the fact that the draft law on credit institutions introduces and specifies HNB’s sanctioning powers in order to align Croatian law with the scope of the ECB’s sanctioning power under

text: Article 18 of Regulation (EU) No 1024/2013

text: . In particular, the ECB welcomes the express requirement for HNB to open proceedings for the imposition of administrative penalties when so requested by the ECB on the basis of

text: Article 18(5) of Regulation (EU) No 1024/2013

text: . The procedure by which HNB imposes administrative sanctions is harmonised with the procedure by which the ECB imposes administrative penalties under Part X of

text: Regulation (EU) No 468/2014

text: (ECB/2014/17). However, a provision should be added empowering HNB to impose sanctions on holding companies in the event that they breach decisions adopted by HNB pursuant to ECB

text: 43 Decision ECB/2014/5 of the European Central Bank of 31 January 2014 on the close cooperation with the national competent authorities of participating Member States whose currency is not the euro (OJ L 198, 5.7.2014, p. 7).

text: 44 See paragraph 2.3 of Opinion

text: 45 See paragraph 3.1.1 of Opinion

text: 46 See Article 63 of the draft law on credit institutions (introducing

text: Article 323

text: a of the Law on credit institutions). instructions or act contrary to legal acts adopted by the ECB which are directly applicable in Croatia. Further on, the definition of total income for the imposition of administrative sanctions on entities belonging to groups should, in line with

text: Article 128 of Regulation (EU) No 468/2014

text: (ECB/2014/17), take into account the consolidated annual financial accounts of the group irrespective of the place of establishment of the parent undertaking. Also, the provisions on the publication of decisions on administrative sanctions by HNB on its website should be amended to include all sanctions imposed on all subjects sanctioned by HNB upon the ECB’s request. Further on, the exceptional ground provided for in the new

text: Article 215(9)

text: (4) of the Law on credit institutions allowing for publication on an anonymous basis should not be applicable to HNB decisions imposing administrative sanctions upon the ECB’s request, as it departs from the publication regime provided for in

text: Article 132 of Regulation (EU) No 468/2014

text: 5. Observations regarding HNB’s macroprudential mandate and tools

text: 5.1 The ECB understands that the part of the draft laws which relates to the macroprudential mandate and tools of HNB is to be adopted in line with the commitments made by Croatia in policy areas which are of high relevance for a smooth transition to, and participation in, the exchange rate mechanism (ERM II) . 5.2 HNB is competent in the area of macroprudential policy for its contribution to the stability of the financial system as a whole . Based on this competence HNB has already adopted a number of macroprudential measures . HNB is also the designated national authority for the purposes of identifying macroprudential or systemic risks under

text: Article 458(1) of Regulation (EU) No 575/2013

text: of the European Parliament and of the Council . The draft law does not therefore confer genuinely new tasks on HNB, but rather specifies a more broadly formulated macroprudential mandate and certain new macroprudential tools that HNB may use when discharging its macroprudential responsibilities. Consequently, it is not necessary to assess whether the conferral of new tasks on a national central bank complies with the prohibition of monetary financing. 5.3 The ECB welcomes the clarification of the details of HNB’s macroprudential toolkit. The objectives of the draft law are also in line with the principles set out in the Recommendation of the European Systemic Risk Board on intermediate objectives and instruments of macroprudential policy , in particular with regard to the objective to mitigate and prevent excessive credit growth and leverage .

text: 47 See press release, ‘Statement on Croatia’s path towards ERM II participation’, 8 July 2019, available at www.consilium.europa.eu.

text: 48 See Article 4 of the Law on HNB.

text: 49 See HNB Recommendation for mitigating interest rate and interest rate credit risk in long-term consumer lending (26 September 2017) and HNB Recommendation on the procedure for granting non-residential loans to consumers (28 February 2019), available on HNB’s website at https://www.hnb.hr.

text: 50 See Article 11(2) of the Law on credit institutions;

text: Regulation (EU) No 575/2013

text: Regulation (EU) No 648/2012

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

text: 51 Recommendation

text: of the European Systemic Risk Board of 4 April 2013 on intermediate objectives and instruments of macroprudential policy (OJ C 170, 15.6.2013, p. 1).

text: 52 See paragraph 2.2 of Opinion

text: , paragraph 2.3 of Opinion

text: , paragraph 3.1 of Opinion

text: and paragraph 3.1 of Opinion

text: . 5.4 From a financial stability perspective, the ECB welcomes the implementation of a legislative framework for borrower-based measures. The ECB takes positive note of the fact that HNB may activate some or all of the abovementioned tools, as well as any other measures and requirements aimed at safeguarding the stability of the financial system as a whole and preventing and mitigating systemic risks, thereby responding in a flexible and proportionate way to potential risks to financial stability. A thorough quantitative impact assessment will be important to verify the effect and appropriateness of the new tools when they are activated . 5.5 The ECB expects HNB to consult the ECB in accordance with Article 127(4) of the Treaty on subordinate legislation that HNB adopts under the draft law on credit institutions .

text: 6. Observations regarding Croatia’s participation in the SRM

text: 6.1 The ECB welcomes the provisions of the draft laws which allow for the implementation of

text: Regulation (EU) No 806/2014

text: in relation to the SRM.

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

text: Done at Frankfurt am Main, 25 March 2020.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE

text: 53 See paragraph 2.3 of Opinion

text: , paragraph 2.4 of Opinion

text: , paragraph 3.2 of Opinion

text: , paragraph 3.2 of Opinion

text: and the Governing Council’s statement on macroprudential policies of 15 December 2016, available on the ECB’s website at www.ecb.europa.eu.

text: 54 See paragraph 2.4 of Opinion


text: 1994 m. gruodžio 1 d. Lietuvos Respublikos Lietuvos banko įstatymas Nr. I-678, Valstybės žinios, 1994, Nr. 99- 1957, 2001, Nr. 28-890 (su vėlesniais pakeitimais ir papildymais).

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

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

text: See paragraph 1.2 of the Eurosystem Agreement on emergency liquidity assistance (17 May 2017), available on the ECB’s website at www.ecb.europa.eu.

text: See paragraph 10 of Opinion

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

text: See paragraph 1.2 of the Eurosystem Agreement on emergency liquidity assistance (17 May 2017).

text: The ECB/ Eurosystem Agreement on emergency liquidity assistance (17 May 2017).

text: See paragraph 2.1 of Opinion

text: ; paragraph 5 of Opinion

text: ; paragraph 4.1 of Opinion

text: and paragraph 4.2 of Opinion

text: See ECB Convergence Report 2018, p. 25, available on the ECB’s website at www.ecb.europa.eu; see also paragraph 2.5 of Opinion

text: ; paragraph 2.1 of Opinion

text: and paragraph 3.3 of Opinion

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 30 March 2020 on the provision of emergency liquidity assistance by Lietuvos bankas (CON/2020/11)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 30 March 2020 on the provision of emergency liquidity assistance by Lietuvos bankas (

text: ) Introduction and legal basis

type: rubrik

text: On 26 March 2020 the European Central Bank (ECB) received a request from Lietuvos bankas for an opinion on a draft law initiated by Lietuvos bankas to amend the Law on the Lietuvos bankas (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

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

type: stycke

text: 1. Purpose of the draft law

text: 1.1 The purpose of the draft law is to enable Lietuvos bankas to extend emergency liquidity assistance (ELA) beyond only credit institutions to a broader range of financial institutions experiencing temporary liquidity problems. As noted in the explanatory memorandum accompanying the draft law, access for a wider range of financial market participants to ELA will contribute to the business continuity of those institutions when they are solvent but face temporary liquidity problems and are unable to borrow from the market due to a disruption in financial markets. This will contribute to the overall maintenance of financial stability in Lithuania. 1.2 The draft law expands the range of institutions to which Lietuvos bankas may grant loans secured by adequate collateral, in accordance with the terms and conditions established by Lietuvos bankas, to include financial institutions and insurance and reinsurance undertakings. As clarified in the explanatory memorandum, this means that under the draft law Lietuvos bankas may grant loans to not only credit institutions but also to payment institutions, electronic money institutions, and companies providing securities, insurance, leasing and other financial services.

text: 1.3 The draft law retains the existing requirement that Lietuvos bankas may grant such loans without prejudice to the requirements derived from Lietuvos bankas’ participation in the European System of Central Banks (ESCB), and notably those resulting from operations on behalf of public entities. 1.4 As noted in the explanatory memorandum, the draft law is particularly relevant to the current situation in which quarantine has been enforced in Lithuania, which may cause the financial situation of financial market participants and other persons dependent on their activities to deteriorate. The explanatory memorandum also notes that the right of a central bank to grant loans to a broader range of financial institutions other than credit institutions is provided for in the central bank laws of other Member States, including Belgium, Germany, Greece, Ireland, Latvia and Slovenia.

text: 2. Observations

text: 2.1 The provision of ELA refers to the provision by a Eurosystem national central bank (NCB) of central bank money and/or any assistance that may lead to an increase in the provision of central bank money to a solvent financial institution or a group of solvent financial institutions that faces temporary liquidity problems, where this operation is not part of the single monetary policy . 2.2 The ECB welcomes that the draft law confirms that ELA should be provided by Lietuvos bankas without prejudice to the requirements derived from Lietuvos bankas’ participation in the ESCB, thus providing a safeguard to ensure compliance with the requirements relating to the provision of ELA by NCBs in the ESCB pursuant to the Treaty and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’) . 2.3 The ECB notes the possibility under the draft law for Lietuvos bankas to provide ELA to non-bank financial institutions in Lithuania experiencing liquidity problems. The inclusion of financial institutions in the list of potential ELA recipients is consistent with the Eurosystem Agreement on emergency liquidity, which explicitly refers to the possible provision of ELA by an NCB to a financial institution or a group of financial institutions facing liquidity problems . The flexibility of the provision of ELA by Lietuvos bankas introduced by the draft law is of particular relevance in the context of the ongoing COVID-19 pandemic. 2.4 The responsibility for the provision of ELA lies with the NCB concerned. This means that any costs and risks arising from the provision of ELA are incurred by the relevant NCB. However, pursuant to Article 14.4 of the Statute of the ESCB, the Governing Council of the ECB may restrict ELA operations if it finds that these interfere with the objectives and tasks of the ESCB. The Governing Council must be informed of such operations in a timely manner in order for it to adequately assess such interference. A procedure to this end has been in place since 1999 and its key features are

text: summarised in the Eurosystem Agreement on Emergency Liquidity Assistance of 17 May 2017 . Strict compliance with the ELA procedures is of utmost importance. 2.5 In view of compliance with the monetary financing prohibition under Article 123 of the Treaty, it is reiterated that ELA may only be extended to illiquid but solvent credit institutions or financial institutions. The financing by an NCB of insolvent credit institutions or financial institutions would not be compatible with the monetary financing prohibition since the financing of insolvent credit institutions or financial institutions constitutes a government task . 2.6 With regard to financial independence, as required of an ESCB central bank under Article 130 of the Treaty, the ECB recalls that an NCB within the ESCB is required to have sufficient financial resources not only to perform its ESCB-related tasks but also its national tasks, including the provision of ELA. Member States may not put their NCBs in a position where they have insufficient financial resources and inadequate net equity to carry out their ESCB or Eurosystem-related tasks, as applicable. Losses incurred by an NCB in the exercise of its national tasks could negatively impact the exercise of ESCB-related tasks. As a consequence, the NCB may not have sufficient financial resources to perform the ESCB-related tasks required of it under the Treaty and the Statute of the ESCB. For all these reasons, financial independence under the Treaty implies that an NCB should always be sufficiently capitalised .

text: Done at Frankfurt am Main, 30 March 2020.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE

type: vagledning

utgivare: ecb


text: Loi du 28 février introduisant le Code de droit économique/Wet van 28 februari 2013 tot invoering van het Weboek van economisch recht, telle que modifiée/zoals nader gewijzigd, Moniteur Belge/Belgisch Staatsblad, 29.3.2013, p. 19975.

text: See

text: Article 4(1)

text: (d) and (e) of

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

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

title: Opinion of the European Central Bank of 17 April 2020 on the identification and reporting by financial institutions of the allocation of sums deposited in savings accounts (CON/2020/12)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 17 April 2020 on the identification and reporting by financial institutions of the allocation of sums deposited in savings accounts (

text: ) Introduction and legal basis

text: On 20 February 2020 the European Central Bank (ECB) received a request from the Secretariat of the Belgian Parliament’s Commission of Economy on a draft law amending the Belgian Code of Economic Law (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: , as the draft law relates to the Banque Nationale de Belgique/Nationale Bank van België (‘NBB’) and the ECB’s tasks concerning the prudential supervision of credit institutions pursuant to Article 127(6) of the Treaty. 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 imposes a duty on financial institutions to identify the allocation of sums deposited on savings accounts in their balance sheets. According to the explanatory memorandum, the purpose of this obligation is to encourage transparency, higher ethical standards and greater control in the Belgian banking sector. 1.2 Pursuant to the draft law, financial institutions would have to draft a report each year on the allocation of those sums. This report would be filed with the NBB. Under the draft law, the report would also be sent to the Belgian Chamber, one of the two main assemblies of the Belgian Parliament. The explanatory memorandum specifies that the Committee of Finance and Budget within the Chamber would analyse the report carefully. 1.3 The draft law would further confer on the King the power to adopt a Royal Decree in order to determine the technical modalities of the allocation of the sums and to establish a model of the report.

text: 2. Observations

text: 2.1 The ECB appreciates that the draft law intends to encourage transparency, higher ethical standards and greater control in the Belgian banking sector. However, whether the measures contemplated by the draft law adequately serve this purpose should be reconsidered. 2.2 First, regarding Belgian credit institutions supervised by the ECB within the framework of the Single Supervisory Mechanism, the ECB is responsible for carrying out various tasks for prudential supervisory purposes in relation to credit institutions established in Belgium. These tasks include ensuring compliance with all relevant Union law, including Union regulations and Belgian legislation transposing Union directives, which impose (a) prudential requirements in the areas of own funds requirements, securitisation, large exposure limits, liquidity, leverage, and reporting and public disclosure of information on those matters, and (b) requirements on credit institutions to have in place robust governance arrangements, including the fit and proper requirements for the persons responsible for the management of credit institutions, risk management processes, internal control mechanisms, remuneration policies and practices and effective internal capital adequacy assessment processes . Against this backdrop, the Belgian legislator is invited to consider how the proposed new reporting obligation imposed by the draft law on financial institutions to identify in their balance sheets the allocation of sums deposited on saving accounts would fit into the existing Union and Belgian legal and regulatory framework for the prudential supervision of credit institutions. Taking existing reporting and disclosure obligations of credit institutions regarding prudential matters into account, consideration could also be given as to whether this new reporting obligation would increase the reporting burden of credit institutions, and if so, for what purposes, such as encouraging transparency, higher ethical standards and greater control. It is suggested that the Belgian legislator considers the added value of the reporting obligations that would be implemented under the draft law. 2.3 Second, while it should be feasible for a credit institution to identify and report on the amount of liabilities that are represented by deposits on savings accounts, it is not clear what is intended by the obligation on credit institutions to identify and report on the allocation of sums deposited on savings accounts. The liabilities, including deposit liabilities and the equity of a credit institution, come from a variety of different funding sources, as clarified in the financial statements of that credit institution. In principle, insofar as credit institutions comply with the prudential requirements set out in Union law, there are no constraints on how funding is used. Therefore, the identification of the allocation of each source of financing is in practice extremely difficult, if not completely impossible. Given the diversity of a credit institution’s sources of funding, and – quite importantly given the intrinsically fungible character of money, it would not be feasible for a credit institution to identify the exact source of financing when extending a particular loan or investing in a particular asset. In fact, this would only be possible in cases where the assets, invested in using deposits in savings accounts, had been segregated from the rest of the institution’s assets. 2.4 Third, the reporting obligation of financial institutions vis-à-vis the NBB, as set out in the draft law,

text: raises some uncertainties. The content of the report has not been specified. Although the draft law provides that the King must determine a model of the report in a royal decree, the level of detail that the financial institutions will have to respect remains undefined in the draft law. Moreover, the King must determine the ‘technical modalities of the allocation of the sums’. The draft law does not specify what this precisely refers to. As the Royal Decree would clarify the content of the report and the practical modalities of the obligations set forth in the draft law, the ECB expects to be consulted on the draft Royal Decree on the basis of Article 127 (4) of the Treaty. 2.5 Fourth, the NBB’s powers and tasks with respect to the measures contemplated by the draft law, and more particularly the annual report to be filed by Belgian financial institutions with the NBB, remain at this stage undefined in the draft law. The draft law requires that the report be annually submitted to the NBB, but does not specify what the NBB should do with the information received. The draft law could helpfully indicate whether the NBB is expected to use this annual report within the scope of its existing powers and tasks, or whether the submission of the report would trigger any particular obligation or power for the NBB. The ECB expects to be consulted under Article 127 (4) of the Treaty insofar as new tasks are conferred on the NBB under the draft law.

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

text: Done at Frankfurt am Main, 17 April 2020.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE