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

text: The ECB notes that a law providing for such a tax has existed in France since the end of 2001 (see

text: Article 235

text: ter ZD of the French General Tax Code). The French law provides for a maximum tax of 0.1% on foreign exchange transactions and not for an extraordinary tax in the event of major exchange rate fluctuations. The French law provides that it will only enter into force from the date that ‘the EC Member States will have finished the integration in their legislation of the measures adopted by the Council that provide for the establishment, in all the Member States, of a tax on foreign exchange transactions, and at the earliest from 1 January 2003’.

text: It is understood that this will be a royal decree.

title: Opinion of the European Central Bank of 4 November 2004 at the request of the Belgian Ministry of Finance on a draft law introducing a tax on exchange operations involving foreign exchange, banknotes and currency (CON/2004/34)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 4 November 2004 at the request of the Belgian Ministry of Finance on a draft law introducing a tax on exchange operations involving foreign exchange, banknotes and currency (

text: ) Introduction

text: 1. On 12 July 2004 the European Central Bank (ECB) received a request from the Belgian Ministry of Finance for an opinion on a draft law introducing a tax on exchange operations involving foreign exchange, banknotes and currency (hereinafter the ‘draft law’).

text: 2. The ECB is competent to deliver an opinion, since the draft law – in view of its subject matter, purpose and effects – directly concerns the fields of competence of the Eurosystem and the ECB. The ECB’s competence is, in particular, based on the second indent of Article 105(4) of the Treaty establishing the European Community and on the first, second, 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: (i) deals with foreign exchange, banknotes and currencies that are legal tender (third paragraph of

text: Article 4

text: ); and (ii) provides for the possibility for agreements to be concluded with the ‘central bank which controls the legal tender in Belgium’, which would include verification measures regarding the application of the law (third paragraph of

text: Article 12

text: ); and (iii) excludes foreign exchange transactions conducted by, inter alia, central banks (

text: Article 9(2)

text: ); and (iv) if it enters into force, might have a significant impact on financial transactions conducted by financial institutions and on international capital flows, which, in view of their volume, might have a substantial impact on (international) financial markets.

text: 3. The purpose of the draft law is to impose a tax on all exchange transactions involving foreign exchange (hereinafter ‘foreign exchange transactions’) taking place in Belgium. It contains the following elements: (i) The draft law defines foreign exchange transactions extremely broadly (

text: Article 2

text: and paragraphs 3 to 5 of

text: Article 4

text: ). The tax envisaged by the draft law applies to transactions involving the exchange of the euro against a non-euro currency and vice versa, as well as involving the exchange of non-euro currencies. The ECB understands that a non-euro currency may be the currency of a Member State that has not adopted the euro (hereinafter ‘non-euro area Member State’), or of a country outside the European Union. (ii) The draft law also defines very broadly the factors determining whether a foreign exchange transaction is deemed to take place in Belgium and, thus, whether such transaction will be taxable under the draft law. According to the draft law, the place of establishment in Belgium of one of the parties or intermediaries to the transaction is only one of the three alternative factors (

text: Article 5

text: §1(1)). The two other factors are (a) the payment of, or the negotiations or orders for, the transaction take place in Belgium (

text: Article 5

text: §1(2)); or (b) one of the currencies in the foreign exchange transaction is legal tender in Belgium (

text: Article 5

text: §1(3)). Since the euro is legal tender in Belgium, the tax provided for in the draft law would apply to each foreign exchange transaction involving the euro, wherever the transaction is negotiated, concluded or executed and whatever the residence of the parties or intermediaries to the transaction. It is noted that the application of this third factor is subject to agreement by the ‘competent European authorities’ (paragraph 19). (iii) The tax envisaged by the draft law consists of a two-tier system with (i) a normal tax rate of 0.02% on each foreign exchange transaction; and (ii) a tax rate of up to 80% on foreign exchange transactions carried out at an exchange rate outside a predetermined fluctuation margin around a 20 day moving average. The draft law provides that it will only enter into force if either all Member States of the Economic and Monetary Union (EMU) include in their legislation a tax on foreign exchange transactions or if a Community directive or regulation is adopted on this issue (third paragraph of

text: Article 13

text: Preliminary remark

text: 4. The ECB acknowledges the good intentions underlying the draft law. However, for the reasons mentioned hereunder, the ECB considers that pursuing these intentions through the imposition of a tax such as envisaged by the draft law raises serious economic and legal difficulties.

text: Economic assessment

text: 5. In his letter to the President of the ECOFIN Council of 21 September 2001, the ECB’s President already conveyed the Eurosystem’s assessment of a tax on foreign exchange transactions, generally referred to as Tobin tax. This letter was written in view of a discussion of this matter in the ECOFIN Council in 2001 under the Belgian Presidency of the EU.

text: 6. From the explanatory memorandum to the draft law, the ECB understands that the rationale for the draft law corresponds to the three main arguments generally invoked for introducing such a tax. First, excessive short-term trading has often been blamed for extremely high volatility in foreign exchange markets. The tax has, therefore, been proposed to mitigate the part of exchange rate fluctuations that is not directly related to fundamentals and to allow a larger degree of monetary policy autonomy. Second, some variants of the tax, such as the Spahn variant, have been proposed as instruments to prevent and/or counteract speculative attacks. Third, the tax is considered as having great potential for raising revenue. However, in terms of effectiveness, such a tax would fulfil the abovementioned expectations only if (i) excessive trading created significant excessive volatility; (ii) this volatility significantly affected other economic activities, such as trading or investment; and (iii) the tax could reduce this excessive volatility without creating excessive distortions.

text: 7. The ECB notes that economic analysis and empirical evidence indicate that there is reasonable doubt with regard to the general validity of each of these three conditions and that the tax could instead give rise to significant costs. First, economic literature provides little evidence that a transaction tax such as the Tobin tax would reduce exchange rate volatility. In fact, the effect of such a tax on volatility is ambiguous, i.e. it could also increase volatility, as it may result in reduced depth and liquidity of the foreign exchange markets. Therefore, the effectiveness of the tax with regard to its main objective could be seriously questioned. Second, as regards the impact of the tax on market efficiency and allocation, while daily turnover in short-term transactions is very high, a large part of it is related to hedging and distribution of risks among market participants. To the extent that the functioning of financial markets might be hampered by the tax, the risk-sharing benefits of deep and liquid markets might be reduced by its implementation. Furthermore, since the demise of the Bretton Woods system, there is a widespread view among economists that exchange rate volatility is inherent in floating exchange rate regimes and is not necessarily detrimental to international trade. On the contrary, a flexible exchange rate can play an important role in cushioning asymmetric shocks. Also, strong empirical evidence that exchange rate volatility has a negative effect on trade, especially among developed economies, is lacking.

text: 8. The ECB also notes that, while excessive volatility may adversely affect economic transactions, allocation of investment and, hence, growth, significant exchange rate volatility and a high level of short-term capital flows do not necessarily signal market failure. Instead, they can frequently be interpreted as symptoms of underlying macroeconomic imbalances and cannot schematically be interpreted as being excessive. In these circumstances, the tax would on the one hand largely focus on the symptoms, while on the other hand financial market participants are likely to find ways to circumvent the tax. In particular, the tax might not help prevent speculative attacks, as any proposed levy from such a tax would be small compared with expected gains from exchange rate changes.

text: 9. The Spahn variant of the tax, which is also proposed in the draft law, consists of a two-tier system with a very low ‘normal’ tax rate, and a very high ‘extraordinary’ tax rate in the event of extreme exchange rate market turbulence. The Spahn variant is presented as being more effective in regulating capital flows and avoiding speculative attacks. However, the ECB notes that economic theory often argues against variable-rate taxes because they create price uncertainty in the markets. In this case, ensuing widened spreads in financial markets are likely to make investment more costly, especially in countries whose currencies seem to be more prone to volatility, i.e. emerging markets.

text: 10. Also, there is little evidence that, in today’s world, monetary and exchange-rate autonomy would economically benefit from such a tax. Experience suggests that, in the main currency areas, sufficient monetary policy autonomy exists and there is no need to enhance it by introducing further distortions to the asset price setting mechanisms.

text: 11. Finally, the introduction of such a tax would raise serious difficulties in terms of its implementation. The tax raises transaction costs and would create incentives among market participants to develop alternative instruments and/or to operate in financial centres not subject to the tax. In the latter case, offshore centres would become more attractive, thereby increasing opacity and facilitating fraud in financial transactions. Therefore, the feasibility of the tax is highly questionable, given the welfare costs arising from distortions in the working financial markets and the likely difficulties in agreeing on universal implementation of the tax at international level and bearing in mind the difficulty of enforcing sanctions against non-participants.

text: 12. Considering the above, the ECB concludes that the economic and monetary usefulness of a tax, such as envisaged by the draft law, is highly questionable, given the uncertainty of its claimed benefits and the likely welfare costs arising from distortions in the working of financial markets. This assessment is reinforced by the difficulties expected with respect to its implementation.

text: Legal assessment

text: 13. The euro area’s exchange-rate policy is an exclusive Community competence. As the purpose of the tax envisaged by the draft law is to influence the euro’s exchange rate vis-à-vis another currency, in particular to smooth exchange-rate developments and reduce volatility, the draft law would provide a national government with the means to impinge on the Community’s authority to define and conduct exchange-rate policy. On these grounds, the draft law should be deemed incompatible with the Treaty, as its application would interfere with the Community’s exclusive competence in the field of exchange-rate policy.

text: 14. Furthermore, under the ECB’s analysis, the tax provided for in the draft law is incompatible with the free movement of capital and payments between Member States, and between Member States and third countries (Article 56 of the Treaty). This tax is indeed a measure imposed by a public authority which may or will, directly or indirectly, hinder the conclusion and/or execution of the capital or payment transfer involving foreign exchange on which the tax is imposed. Also, the tax will imply less favourable treatment of certain transactions in the currency of a non-euro area Member State or a third country compared to the same kind of transaction in euro only. It is underlined in this context that EMU’s proper functioning depends on the fundamental freedom of capital movement and payments both within and beyond the boundaries of the EU. EMU is indeed based on completion of the internal market, of which the free movement of capital and payments is a centrepiece (Article 14(2) of the Treaty).

text: 15. Furthermore, the ECB considers that the exceptions laid down in

text: Article 57(1)

text: Article 60(2)

text: , Articles

text: and

text: , and Article 297 of the Treaty, which allow Member States to restrict under specific circumstances the free movement of capital and payments, do not cover the measures envisaged by the draft law. Also,

text: Article 58(1)

text: (a) of the Treaty only justifies a tax measure that distinguishes between taxpayers on the basis of their place of residence or the place where their capital is invested. However, the draft law does not distinguish according to taxpayers, but according to transactions. Considering the narrow interpretation of ‘public policy’ and ‘public security’ in

text: Article 58(1)

text: (b) of the Treaty, as well as the exchange-rate policy nature of the tax envisaged by the draft law (paragraph 12), the ECB is of the opinion that such a tax may not be introduced on such grounds. Similarly, the ECB is of the opinion that such a tax cannot be justified and objectively required for mandatory reasons of general interest.

text: 16. The draft law considers as a ‘State’ the ‘European Economic and Monetary Union or every other territory with a single currency’ (second paragraph of

text: Article 4

text: ). EMU includes all Member States and, thus, also the Member States that have not adopted the euro as their currency (these Member States are either in the second stage or in the third stage with a derogation). A reference to EMU for the purposes of defining a currency area is therefore inappropriate. Also, considering EMU as a ‘State’ is inconsistent with the draft law’s intention to impose the tax on, inter alia, transactions involving the exchange of euro for the currency of a non-euro area Member State (paragraph 3), since this implies that the euro and the currencies of the non-euro area Member States are currencies of the same ‘State’.

text: 17. According to

text: Article 5

text: §1 of the draft law, ‘the proceeds of the tax (…) shall be paid in full into a fund, managed by the European Union and to be allocated for cooperation and development, to promoting social and ecological justice and to conserving and protecting international public property’. A legislator of an individual Member State adopting this provision would attribute the management of a fund established at national level to the EU. However, the creation of new Community tasks by national legislation does not appear to be compatible with the Community legal framework and order.

text: 18. The second paragraph of Article 8 of the draft law provides that the tax rate of maximum 80% will be established ‘by a decision adopted after deliberation in the [Belgian] Council of Ministers and respecting Article 59 of the EC Treaty and the secondary law derived from it’. The draft law also provides that such a tax will only apply ‘after the competent European authorities have given their agreement’ (second paragraph of

text: Article 13

text: ). Article 59 of the Treaty concerns safeguard measures with regard to third countries where, in exceptional circumstances, movements of capital to or from third countries cause, or threaten to cause, serious difficulties for the operation of Economic and Monetary Union. It provides for an exclusive Community competence, whereby the measures are taken by the Council on a proposal from the Commission and after consulting the ECB – and not by, or on, a proposal from a Member State. Therefore, the procedures defined by the draft law for the adoption and implementation of the tax rate of maximum 80% do not comply with Article 59 of the Treaty. Also, if and when the conditions for applying Article 59 of the Treaty are fulfilled, the Community is free to assess whether or not to use this provision, as well as to assess and take any safeguard measure(s) that it deems appropriate, without being subject to, or bound and restricted by, a Member State’s legislation, procedures or measures.

text: 19. The second paragraph of Article 13 of the draft law provides that the provision that a foreign exchange transaction is deemed to take place in Belgium if one of the involved currencies is the euro will only apply ‘after the competent European authorities will have given their agreement’. The ECB refers on this issue to the preceding paragraph 18 on the compatibility of the draft law with Article 59 of the Treaty.

text: 20. The third paragraph of Article 13 of the draft law requires that ‘all Member States of the European Economic and Monetary Union have introduced a tax on the exchange of foreign exchange in their legislation’ as a condition precedent for the law to enter into force. However, a measure remains at Member State level and is not transformed into a Community measure if and because all Member States individually adopt such a measure under their respective laws. Therefore, the arguments raised in paragraphs 13 to 15 regarding a Member State’s competence to introduce a Tobin tax, as well as paragraph 18 regarding Article 59 of the Treaty, still fully apply if all Member States were to individually introduce such a tax in their national legislation. The draft law requires, as an alternative condition for its entry into force, ‘a European directive or regulation’ (third paragraph of

text: Article 13

text: ; the ECB understands that this would be a directive or regulation introducing such a tax). In view of the subject matter of the present opinion (draft national legislation) and, therefore, without assessing the introduction of such a tax at Community level, the ECB refers also as regards this alternative condition to the above observations regarding the exclusive Community competence for exchange-rate policy of the euro area (paragraph 13) and to the relationship between Community and national law (paragraph 18).

text: 21. Considering the subject matter of the draft law and the measures it envisages, the ECB would need to be consulted on any act or decree implementing the law (see, inter alia, the second and third paragraphs of

text: Article 8

text: Article 9(2)

text: and Article 12 of the draft law).

text: 22. On the basis of the assessment above, the ECB is of the opinion that the introduction by a euro area Member State of a tax, such as envisaged by the draft law, is incompatible with the Treaty. This assessment is without prejudice to an assessment of the draft law by the Community institutions that are entrusted with ensuring the application and observance of the Treaty.

text: Final remark

text: 23. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 4 November 2004. [ signed ] The President of the ECB Jean-Claude TRICHET


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

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 4 November 2004 at the request of the Hungarian Ministry of Finance on a draft law amending the Law on Magyar Nemzeti Bank (CON/2004/35)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 4 November 2004 at the request of the Hungarian Ministry of Finance on a draft law amending the Law on Magyar Nemzeti Bank (

type: rubrik

text: 1. On 13 October 2004 the European Central Bank (ECB) received a request from the Hungarian Ministry of Finance for an opinion on a draft law (hereinafter the ‘draft law’) amending Law LVIII of 2001 on Magyar Nemzeti Bank (hereinafter the ‘MNB Law’).

type: stycke

text: 2. The ECB’s competence to deliver an opinion is based on 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 contains provisions concerning a national central bank (NCB). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 3. The draft law’s officially stated intention is to facilitate the achievement and maintenance of price stability by increasing the number of Monetary Council members and by further separating the decision-making and executive tasks. Currently, the Monetary Council consists of nine members. The draft law would introduce nine as a minimum and establish a maximum of 11 members. Articles 2, 3 and 6 of the draft law also significantly change the composition and rules for nominating Monetary Council members. At present, the Governor of Magyar Nemzeti Bank (MNB), as well as the three Deputy Governors, are Monetary Council members ex officio. The other five Monetary Council members are nominated by MNB’s Governor, and are, on the Prime Minister’s consent, appointed by the President of the Republic. In addition the Governor is nominated by the Prime Minister before being appointed by the President. Following the changes, the Governor will continue in the Monetary Council, as will the Deputy Governor responsible for monetary policy. Moreover, four members will continue to be nominated by the Governor, and be appointed by the President upon the consent of the Prime Minister. The remaining three to five members would be nominated by the Prime Minister, with the right of appointment remaining with Hungary’s President. Thus, as a result of the amendments, two MNB Deputy Governors would lose their ex officio membership of the Monetary Council. It is unclear from the draft law whether they could still be nominated by the Governor as other Monetary Council members.

text: 4. The ECB notes that the current Monetary Council rules in force are compatible with central bank independence and provide an appropriate framework for the formulation of monetary policy. This view has been reflected in both the Convergence Report of the European Commission and the ECB’s Convergence Report for 2004. From this point of view, there would thus be no need for changes to the Monetary Council’s composition.

text: 5. The draft law’s statement of reasons indicates that ‘the Monetary Council is MNB’s supreme decision making body, so it is not justified that the Deputy Governors responsible for executing decisions - except the Deputy Governor responsible for monetary policy – participate in taking this body’s decisions’. While, as pointed out in paragraph 3, it is unclear whether this reasoning has actually been transposed into the draft law, there is no convincing need to separate decision-making and executive tasks in the field of monetary policy. By way of example, all ECB Executive Board members are members of the ECB’s Governing Council, the Eurosystem’s main policy decisionmaking body.

text: 6. Credibility is the cornerstone of central banking. A credible monetary policy is a key condition for controlling inflationary expectations and promoting sustainable convergence towards price stability. An independent central bank in a stable institutional environment forms the basis for monetary policy’s credibility. The Treaty’s requirement for central bank independence reflects the generally held view that the primary objective of price stability is best served by a fully independent institution with a precisely defined mandate. It is therefore of utmost importance to design an institutional structure that separates monetary policy from the influence of short-term political interests. The Convergence Reports of the European Monetary Institute (EMI) and of the ECB have, over the years, consistently confirmed the importance of central bank independence. The functional, institutional, personal and financial aspects of independence have also been further refined through ECB opinions.

text: 7. Given the relevance of central bank independence for EMU’s proper functioning, this is unambiguously anchored in Article 108 of the Treaty and Article 7 of the Statute of the European System of Central Banks and of the European Central Bank and supported by Article 14.2 of the Statute.

text: Article 14.2

text: provides for the security of tenure of NCB Governors. The EMI’s 1998 Convergence Report pointed out that personal independence would be jeopardised if the same rules for Governors’ security of tenure were not also applied to other members of NCB decision-making bodies involved in the performance of ESCB-related tasks. The abovementioned Treaty and Statute provisions require comparable security of tenure, as Article 14.2 of the Statute does not restrict the security of tenure of office to Governors, whilst Article 108 of the Treaty and Article 7 of the Statute refer to any members of NCB decision-making bodies rather than to Governors specifically. This applies in particular where a Governor is primus inter pares between colleagues with equivalent voting rights or where such other members may have to deputise for the Governor. This approach, adopted in the EMI’s 1998 Convergence Report, was fully shared by the Commission in its 1998 evaluation of the compatibility of NCBs’ statutes with the Treaty under

text: Article 121(1)

text: and (2), and has been accepted by the Council. The ECB has reiterated this principle in its opinions in response to previous consultations.

text: 8. The ECB notes that according to the draft law, two of the Deputy Governors would lose their ex officio membership of the Monetary Council. In this context the ECB would like to point out that in order to protect the personal independence of the members of NCB decision-making bodies, any reorganisation of an NCB affecting its Monetary Council members’ tenure of office should allow incumbents to continue to perform their duties until the end of their term of office for which they have been appointed, in accordance with Article 14.2 of the Statute. The tenure of the affected two Deputy Governors as Monetary Council members has not expired, and therefore the draft law amounts to an ex lege revocation of these two members on grounds other than those foreseen in the abovementioned provision. Such revocation should be avoided in the light of Article 108 of the Treaty and Article 14.2 of the Statute. The ECB therefore objects to the termination of two of the Deputy Governors’ membership of the Monetary Council prior to the expiry of their term of office.

text: 9. The ECB notes that the draft law increases the Prime Minister’s role and influence in determining the Monetary Council’s composition. The argument put forward for this change is enhancement of central bank independence. However, as already mentioned the nomination rules for the Monetary Council’s members presently in force are compatible with the Treaty and fully serve the purposes of operational efficiency and of safeguarding MNB’s independence from the political sphere.

text: 10. The ECB furthermore notes that it would enhance the long-term independence of the decisionmaking body if vacancies in the Monetary Council are not filled ‘en bloc’, but instead there is a system in place whereby members are appointed and their term of office expires at different times, allowing sufficient interim periods between subsequent appointments. This would ensure that membership of the decision-making body is not determined by political cycles. Similarly, a reference may be made to the principle laid down in Article 11.2 of the Statute, so that members of the Monetary Council are ‘appointed from among persons of recognised standing and professional experience in monetary or banking matters’.

text: 11. The ECB notes that Article 4 of the draft law intends to amend the rules in

text: Article 53(1)

text: and (7) of the MNB Law relating to the annual adjustment to the remuneration of MNB’s Governor. The new provision will link it to planned instead of to actual inflation.

text: 12. The ECB further notes that Article 5 of the draft law intends to amend

text: Article 58

text: /A (1) to (3) of the MNB Law, changing the rules relating to the authority to decide on the publication of wealth declarations to be made by the Governor, Deputy Governors, members of the Monetary Council and members of the Supervisory Board. Although in principle making the Governor and Monetary Council members subject to a wealth declaration requirement is acceptable, it should be fully ensured that the application of these provisions takes full account of Article 108 of the Treaty and Article 7 of the Statute. The ECB welcomes the transfer of the right to make the abovementioned wealth declaration public from Hungary’s Prime Minister and President to Parliament’s Chair, as this change further enhances the guarantees of personal independence.

text: 13. The ECB’s General Council has recently approved the 2004 Convergence Report (available on the ECB’s website at www.ecb.int). This report includes an assessment of the compatibility of Hungary’s relevant national legislation with the Treaty and indicates the necessary adaptations to the MNB Law. The ECB would recommend that any amendment to the MNB Law should take such assessment into account.

text: 14. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 4 November 2004. [signed] The President of the ECB Jean-Claude TRICHET

type: vagledning

utgivare: ecb


title: Opinion of the European Central Bank of 5 November 2004 at the request of the Czech Statistical Office on a draft decree laying down the programme of statistical surveys for the year 2005 (CON/2004/36)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 5 November 2004 at the request of the Czech Statistical Office on a draft decree laying down the programme of statistical surveys for the year 2005 (

text: 1. On 5 October 2004, the European Central Bank (ECB) received a request from the Czech Statistical Office (CSO) for an opinion on a draft decree laying down the programme of statistical surveys for the year 2005 (hereinafter the ‘draft decree’).

text: 2. The ECB’s competence to deliver an opinion is based on the fourth 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 the collection of monetary, financial, banking, payment systems and balance of payments statistics. 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: 3. The draft decree lays down the programme for statistical surveys for 2005. The CSO is required to lay down such programmes on an annual basis pursuant to Article 10(1) of the Act on the State Statistical Service No 89/1995 Coll., as amended.

text: 4. An annex to the draft decree submitted by the CSO (hereinafter the ‘annex’) contains ‘template’ statistical surveys for each category of financial institution (reporting unit) regulated by the draft decree. The purpose of the surveys is to collect statistical data for use in assessing the state and estimating the development of key macroeconomic indicators for the Czech Republic, for compiling the national accounts of the financial institutions sector, calculating the government deficit and debt and for the CSO’s publications and analytical activity. The results of the surveys, once processed, are then to be forwarded to international monetary institutions and other international organisations. The financial institutions covered by the programme (mainly insurance companies, banks, nonbanking financial institutions preparing their accounts as banks, and ‘other financial institutions’ preparing their accounts as businesses and not as banks) are generally required to complete both quarterly and annual surveys in the form of exhaustive questionnaires. Government institutions either complete quarterly surveys or annual surveys. Furthermore, investment companies are obliged to complete a comprehensive survey including the financial results of their mutual funds and a separate questionnaire for their money market funds. As regards the means of collection, the surveys contained in the annex to the draft decree stipulate that the data may either be collected by completing questionnaires or by electronic data collection.

text: 5. Article 5.1 of the Statute of the European System of Central Banks and of the European Central Bank provides that in order to undertake the tasks of the European System of Central Banks (ESCB), the ECB, assisted by the national central banks, shall collect the necessary statistical information either from the competent national authorities or directly from economic agents. For these purposes it shall cooperate, inter alia, with the Community institutions or bodies and with the competent authorities of the Member States. Article 10 of the Treaty requires that ‘Member States shall take all appropriate measures … to ensure fulfilment of the obligations arising out of this Treaty’. More specifically,

text: Article 4 of Council Regulation (EC) No 2533/98 of 23 November 1998

text: concerning the collection of statistical information by the European Central Bank requires all Member States to ‘organise themselves in the field of statistics … and fully cooperate with the ESCB in order to ensure the fulfilment of the obligations arising out of Article 5 of the Statute’.

text: Recital 17

text: of

text: Council Regulation (EC) No 2533/98

text: provides that ‘… while it is recognised that the statistical information needed to fulfil the ECB’s statistical reporting requirements is not the same for the participating as for the non-participating Member States, Article 5 of the Statute applies to both participating and non-participating Member States; … this fact, together with Article [10] of the Treaty, implies an obligation to design and implement at the national level all the measures that Member States consider appropriate in order to carry out the collection of the statistical information needed to fulfil the ECB’s statistical reporting requirements and the timely preparations in the field of statistics in order for them to become participating Member States’.

text: 7. On the basis of the above, the ECB notes that the reporting obligations laid down by national authorities are an indispensable component of national collection systems. National collection systems are highly complex, may differ between each Member State and depend on many national and external factors. As a consequence, the ECB’s comments on the draft decree are mainly of a general nature and aim to draw attention to those aspects that could be stated more explicitly in the draft decree.

text: 8. The ECB concludes that the draft decree appears to impose on financial institutions in the Czech Republic some of the statistical reporting requirements applying to financial institutions in participating Member States. Furthermore, the draft decree seems to be consistent with these requirements.

text: 9. At the same time, it is the task primarily of the national authorities of non-participating Member States to assess whether any proposed detailed reporting requirements and collection methods at national level are the most efficient and effective and the least burdensome for the reporting agents concerned.

text: 10. This opinion does not prejudice any later assessment by the ECB of statistical data and other information collected under the CSO’s reporting requirements and reported to the ECB.

text: 11. The ECB confirms that it has no objection to the competent national authorities making this opinion publicly available at their discretion. This opinion will be published on the ECB’s website six months after the date of its adoption. Done at Frankfurt am Main, 5 November 2004. [signed] The President of the ECB Jean-Claude TRICHET


text: OJ L 189, 3.7.1998, p. 42. 2 OJ L 275, 27.10.2000, p. 39.

text: The term ‘bank’ here refers to the legal term laid down in Article 1(1) of the Banking Act, which transposes the concept of ‘credit institution’ in implementation of

text: Article 1(1) of Directive 2000/12/EC

text: of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (OJ L 126, 26.5.2000), as last amended by Directive

text: (OJ L 145, 30.4.2004, p. 1).

text: Common Position

text: (EC) No 8/2000

text: adopted by the Council on 29 November 1999 with a view to adopting a Directive of the European Parliament and of the Council on the taking-up, pursuit of and prudential supervision of the business of electronic money institutions (OJ C 26, 28.1.2000, p. 1). 5 OJ L 250, 2.10.2003.

text: OJ L 166, 11.6.1998, p. 45.

title: Opinion of the European Central Bank of 3 December 2004 at the request of Česká národní banka on a draft law amending the Act on transfers of funds, electronic means of payment and payment systems and certain other laws including the Act on Česká národní banka and the Act on banks (CON/2004/37)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 3 December 2004 at the request of Česká národní banka on a draft law amending the Act on transfers of funds, electronic means of payment and payment systems and certain other laws including the Act on Česká národní banka and the Act on banks (

text: 1. On 5 October 2004, the European Central Bank (ECB) received a request from Česká národní banka (ČNB) for an opinion on a draft law amending the Act No 124/2002 Coll., on transfers of funds, electronic means of payment and payment systems (the Payment Systems Act), as last amended by Act No 257/2004 Coll. (hereinafter the ‘Payment Systems Act’), and, inter alia, the Act No 6/1993 Coll. on Česká národní banka, as amended (hereinafter the ‘ČNB Act’) and the Act No 21/1992 Coll., on banks, as amended (hereinafter the ‘Banking Act’) (hereinafter the ‘draft law’).

text: 2. The ECB’s competence to deliver an opinion is based on the second, third, fifth and sixth indents of Article 2(1) and on

text: Article 2(2) 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 concerns means of payment, a national central bank, payment and settlement systems, rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets and an instrument of monetary policy of a nonparticipating Member State, i.e. minimum reserve requirements. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the ECB, the Governing Council has adopted this opinion.

text: 3. To implement Directive

text: of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions (hereinafter the ‘E-money Directive’), the draft law provides for the creation of electronic money institutions (ELMIs), which will be regulated in the Czech Republic pursuant to the Payment Systems Act and, to the extent not provided otherwise in the Payment Systems Act, by the Banking Act. The draft law also amends the ČNB Act, providing for ČNB to supervise ELMIs and other issuers of electronic money and enabling ČNB to issue electronic money. Finally, the draft law also concerns several items which do not relate to ELMIs, including: (i) the insertion of provisions into the ČNB Act enabling ČNB to adopt measures relating to minimum reserve requirements; and (ii) an increase in the penalty interest rate for breach of minimum reserve requirements.

text: 4. Pursuant to

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

text: , Member States do not have to consult the ECB on the transposition of Community directives into national law. The ČNB was not therefore legally obliged to consult the ECB regarding the draft law in as far as it implements the E-money Directive. While the ECB notes that the competent authority for verifying the transposition of Community directives into national law is the Commission, the ECB nevertheless welcomes the opportunity to deliver its opinion on the draft law insofar as its provisions fall under one or more of its fields of competence.

text: 5. The ECB notes that electronic money may have significant implications for monetary policy in the future. For reasons of monetary policy effectiveness and taking into account the need for a level playing field, it is important to ensure that price stability, the unit-of-account function of money, the efficient functioning of payment systems and confidence in payment instruments are given full consideration in the development of this important means of payment.

text: 6. The ECB welcomes the provisions of the draft law pursuant to which ČNB will supervise ELMIs and other issuers of electronic money. This is consistent with ČNB’s overall responsibility for the supervision of credit institutions. As noted in paragraph 14 of ECB Opinion

text: of 4 January 2002 at the request of the Finnish Ministry of Finance on a draft proposal concerning the revision of the Credit Institution Act, draft national legislation implementing the E-money Directive ‘may have implications for the smooth functioning of payment systems and the stability of financial markets…. [C]entral banks’ traditional focus on systemic risk, together with their knowledge of money and securities markets and market infrastructures and their function in the oversight of payment and settlement systems, places them in a unique position to identify threats to the stability of the financial system.’

text: 7. The draft law defines ELMIs. In particular, the Payment Systems Act provides that certain Articles of the Banking Act will apply to ELMIs, as appropriate, unless otherwise provided in the Payment Systems Act. This means that ELMIs will not require a banking licence to issue electronic money in the Czech Republic, but that they will be regulated, as appropriate, unless otherwise provided in the Payment Systems Act, by certain Articles of the Banking Act . However, it is not unambiguously clear from the draft law that ELMIs will be considered ‘credit institutions’ in the Czech Republic, as defined in

text: Article 1(1) of Directive 2000/12/EC

text: (hereinafter the ‘Consolidated Banking Directive’), which has been duly implemented into Czech law in the Banking Act.

text: 8. As noted in paragraph 11 of ECB Opinion

text: , ‘the ECB would like to stress that Article 1(4) of [the E-money Directive] provides that Member States shall prohibit persons or undertakings that are not credit institutions from carrying on the business of issuing electronic money. Furthermore, the Council of the European Union stated in its common position concerning the proposal for [the E-money Directive] that even though the Member States have the option to waive the application of some or all of the provisions of [the E-money Directive] and the application of [the Consolidated Banking Directive], this does not affect the nature of the institutions concerned; they remain credit institutions, as defined in

text: Article 1

text: , point 1, first subparagraph of [the Consolidated Banking Directive]. In addition, according to the common position, the competence of monetary authorities to impose minimum reserve requirements is not affected. The question of which types of institution are regarded as credit institutions is important for the ECB notably in the context of the European System of Central Banks’ operations.’

text: 9. While the ECB appreciates that it is possible for the Czech legislator to ensure that all relevant provisions of Community law applicable to banks are and will remain applicable to ELMIs, it is nonetheless of the opinion that Community law would be consistently applied if Czech law did not merely apply certain Articles of the Banking Act to ELMIs, as appropriate, but actually included them within the definition of ‘credit institutions’, as defined by the Consolidated Banking Directive and duly implemented into Czech law.

text: 10. A related issue arises in respect of how the draft law implements the waiver provision laid down in Article 8 of the E-money Directive.

text: Article 18

text: a(g) of the Payment Systems Act authorises ‘other entities’ [to issue electronic money] ‘on the basis of a permit from Česká národní banka’. Under the draft law, the entities affected are clearly intended to be a separate category of entity from either ELMIs or banks (

text: Article 18

text: a(d) and

text: Article 18

text: a(a) of the Payment Systems Act respectively). As noted in paragraph 7 of ECB Opinion

text: , ‘according to Article 19.1 of the Statute of the European System of Central Banks and of the European Central Bank, the ECB may require credit institutions established in the Member States to hold minimum reserves on accounts with the ECB and the national central banks in pursuance of monetary policy objectives. [The Consolidated Banking Directive] defines electronic money institutions as credit institutions.’ The ECB notes that these ‘other entities’ authorised to issue electronic money are potentially subject to ECB minimum reserve requirements because Article 2(1) of Regulation ECB/2003/9 of 12 September 2003 on the application of minimum reserves provides that credit institutions as defined in the Consolidated Banking Directive shall be subject to reserve requirements, without referring to the relevant definitions under national laws. The ECB is not generally in favour of provisions which risk creating a new type of entity in application of Article 8 of the E-money Directive. The ECB is of the opinion that these other entities should also fall within the definition of ‘credit institutions’ as provided in the Consolidated Banking Directive and duly implemented into Czech law.

text: 11. The ECB notes that under the draft law, ČNB is one of the entities given the right to issue electronic money pursuant to

text: Article 18

text: a of the Payment Systems Act. At the same time

text: Article 18

text: b(4) of the Payment Systems Act provides that ČNB should be the supervisory authority for the activities of electronic money institutions. If ČNB performed the roles of both issuer of electronic money and supervisor of ELMIs, it would combine the functions of service provider, supervisory authority and overseer. This would be challenging from the point of view of policy, since ČNB would simultaneously regulate and perhaps compete with private issuers of electronic money. To address this situation, ČNB would need to formulate a clear policy as to how these activities will be conducted as well as set up a proper organisational framework to deal with it. The ECB would suggest that prior to fulfilling such manifold roles, ČNB should adopt and publish its policies.

text: 12. The draft law specifically excludes ELMIs from being participants in payment systems designated under Directive

text: of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (hereinafter the ‘Settlement Finality Directive’ or ‘SFD’), although not excluding ELMIs from participating in payment systems as such, since a wider prohibition on ELMIs participating in any payment system would be disproportionate and could upset the level playing field between ELMIs and banks, for example. The ECB considers that the question of whether ELMIs can be excluded from participation in SFDdesignated systems may be due to different opinions regarding whether the SFD defines ‘participants’ to include, together with several other categories, credit institutions, as defined in the Consolidated Banking Directive, and therefore including ELMIs. At least one Member State has already implemented the E-money Directive in such a manner that ELMIs are not credit institutions for these purposes. As a result it is unclear whether ELMIs may participate in a system designated under the SFD or not. The potential systemic risk which would be created in these circumstances is the reason given for the exclusion of ELMIs from participating in such systems. The ECB considers that this situation is regrettable, and that a reference to credit institutions in national legislation should be understood as a reference to credit institutions as defined in the Consolidated Banking Directive, and therefore as including ELMIs.

text: 13. The ECB takes note of the proposed insertion of

text: Article 26

text: a into the ČNB Act, which enables ČNB to issue implementing measures laying down the rules for the amount of required minimum reserves, their remuneration and the amount of interest payable in case of failure to maintain required minimum reserves. The ECB welcomes these provisions as contributing to a more effective minimum reserve system for the purposes of implementing monetary policy in the Czech Republic.

text: 14. The ECB confirms that it has no objection to the competent national authorities making this opinion publicly available at their discretion. This opinion will be published on the ECB’s website six months after the date of its adoption. Done at Frankfurt am Main, 3 December 2004. [signed] The President of the ECB Jean-Claude TRICHET


text: OJ L 189, 3.7.1998, p. 42. 2 OJ L 375, 31.12.1985, p. 3. Directive as last amended by Directive

text: (OJ L 145, 30.4.2004, p. 1).

text: Dated 5 April 2000. 4 Dated 13 September 2004. 5 Rule 203(b)(3)-2 under the US Investment Advisers Act of 1940, adopted on 26 October 2004.

text: European Parliament resolution P5 TA(2004)0031 on the future of hedge funds and derivatives (2003/2082 (INI)).

title: Opinion of the European Central Bank of 14 December 2004 at the request of the Danish Financial Supervisory Authority on a proposal for a law amending the Act on investment associations and special-purpose associations and other collective investment undertakings etc. and the Financial Business Act (Hedge funds) (CON/2004/38)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 14 December 2004 at the request of the Danish Financial Supervisory Authority on a proposal for a law amending the Act on investment associations and special-purpose associations and other collective investment undertakings etc. and the Financial Business Act (Hedge funds) (

text: 1. On 25 October 2004 the European Central Bank (ECB) received a request via Danmarks Nationalbank from the Finanstilsynet (Danish Financial Supervisory Authority) on behalf of the Økonomi- og Erhvervsministeriet (Ministry of Economics and Business Affairs) for an opinion on a proposal for a law amending the Lov om investeringsforeninger og specialforeninger samt andre kollektive investeringsordninger m.v. (Act on investment associations and special-purpose associations and other collective investment undertakings etc.) and the Lov om finansiel virksomhed (Financial Business Act) (hereinafter the ‘draft law’).

text: 2. The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the sixth indent of Article 2(1) of the Council Decision (

text: ) of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions as the draft law contains provisions 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 of the ECB has adopted this opinion.

text: 3. The draft law will transpose into Danish law

text: Council Directive 85/611/EEC of 20 December 1985

text: on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) . In addition, the draft law lays down a specific legal and supervisory basis for the establishment of Danish ‘hedge’ funds. As draft national legal acts exclusively transposing directives fall outside the scope of

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

text: , this opinion is restricted to covering those provisions of the draft law which concern hedge funds and go beyond merely implementing a Community directive.

text: 4. Under the draft law, hedge funds catering to a wide circle or the general public will be subject to approval by the Danish Financial Supervisory Authority. It will be optional for funds which have only one or a few members to make themselves subject to such approval and thereby become subject to the supervisory regime established by the draft law. The funds which are approved will not be subject to any restrictions in terms of the type of instruments they may invest in or their diversification, but the board of each such fund will be required to lay down a risk profile to be communicated to the public by means of prospectuses and by means of its by-laws. The risk profile itself will not be subject to approval, but the depositary of the fund, which will be subject to approval by the Danish Financial Supervisory Authority, will be required to ensure compliance with this risk profile and to report any non-compliance to the Danish Financial Supervisory Authority. Approved hedge funds will be required to fulfil the general provisions of the Act on investment associations and special-purpose associations and other collective investment undertakings etc. as regards supervision, rules on prospectuses, audit and corporate governance requirements. As a consequence of creating a specific system for the supervision of Danish hedge funds, additional amendments to the rules and regulations governing investment management companies and depositaries are also proposed to enable these undertakings to act as depositaries for hedge funds.

text: 5. Hedge funds have attracted the attention of the global financial community because of their considerable growth and proliferation as an increasingly popular alternative investment vehicle. The pace of growth of the hedge fund industry indicates that hedge funds are becoming important non-bank financial intermediaries with potential implications for the stability of the financial system, especially because of their often active and highly leveraged trading strategies and their growing links to the banking sector. Against this backdrop, the ECB welcomes the fact that the Danish authorities have consulted it on the draft law and would like to emphasise the importance of doing so.

text: 6. While it is widely recognised that close monitoring of the development of the hedge funds industry is necessary, public debate on whether this should involve direct regulation of hedge funds is still ongoing. At the international level, both the Financial Stability Forum in its ‘Report of the working group on highly leveraged financial institutions’ and the IMF in its annual ‘Global Financial Stability Report’ have expressed support for efforts by authorities to better understand, monitor and influence hedge fund activities. More recently, developments in this direction occurred in the United States, with the recent adoption by the US Securities and Exchange Commission (SEC) of a new rule which will require many hitherto unregulated advisers to hedge (or ‘private’) funds to register with the SEC by 2006 . At the European level, on 15 January 2004 the European Parliament adopted a resolution on hedge funds based on a report by its Economic and Monetary Affairs Committee, which proposed a light regulatory regime for hedge funds . The ECB is studying the implications of hedge funds for financial stability and the possible need for a regulatory regime with a view to defining a policy stance in due course. Hence, the ECB would like to note that its views expressed in this opinion are without prejudice to the future development of its general position on this issue. This opinion is therefore restricted to technical comments.

text: 7. The ECB welcomes the overall thrust of the draft law since it lays down a number of disclosure requirements which will enhance transparency in relation to the activities of hedge funds and the potential risks incurred. The ECB would like to make two remarks, however. First, the draft law only applies a compulsory supervisory approval system to hedge funds catering to a wide circle or to the general public while such a system remains optional for other hedge funds. However, hedge funds may incur substantial leverage and liquidity risks with possible implications for financial stability regardless of the scope of distribution to investors. Therefore, a possible extension of the disclosure requirements set out in the draft law also to those hedge funds which are owned only by a limited number of members could be explored. Second, the disclosure requirements provided for are not very specific, especially with regard to the components of the risk profile and the ongoing information to be provided to investors. In the light of the complexity inherent to hedge funds’ activities and the limited number of available market benchmarks the possibility of more detailed provisions could be assessed with a view to ensuring that investors - particularly in the retail sector - are sufficiently informed to adequately assess the risk and performance of hedge funds.

text: 8. The ECB observes, as also stated in the general explanatory notes to the draft law, that there is no internationally recognised definition of the term ‘hedge fund’. The term covers a wide range of funds with various investment philosophies and degrees of exposure to risk. However, the general notes to the draft law identify the following common elements which would seem to characterise all hedge funds: (i) clear profit objectives and investment strategies, (ii) no legislative limitations on the investment freedom of the funds as regards markets, instruments, diversification or leverage, and (iii) that the investment adviser invests considerable assets in the fund in return for performance-related fees. Many different types of entities would be covered by these three elements. It is noted that the draft law does not contain any provisions which establish precisely the scope of such funds. Rather, in order to be able to identify the funds covered by the draft law, the draft law applies a definition (see

text: Article 114

text: a of the draft law) in the sense that it lays down a general description of the activities which hedge funds may perform. For reasons of legal certainty it might perhaps be helpful to consider whether a more precise definition could be introduced stipulating how hedge funds can be distinguished from other kinds of investment funds regulated (or not regulated) by Danish law.

text: 9. The ECB confirms that it has no objection to the competent national authorities making this opinion publicly available at their discretion. This opinion will be published on the ECB’s website six months after the date of its adoption. Done at Frankfurt am Main, 14 December 2004. [signed] The President of the ECB Jean-Claude TRICHET


text: Boletín Oficial de las Cortes Generales, 30.9.2004. 2 OJ L 189, 3.7.1998, p. 42. 3 B.O.E., Spanish Gazette, of 13 November 1999.

title: Opinion of the European Central Bank of 23 December 2004 at the request of the Spanish Ministry for Economic Affairs and Finance on the draft State Budget Law for 2005 amending Law 41/1999 of 12 December 1999 on payment and securities settlement systems and Law 13/1994 of 1 June 1994 on the autonomy of the Banco de España (CON/2004/39)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 23 December 2004 at the request of the Spanish Ministry for Economic Affairs and Finance on the draft State Budget Law for 2005 amending Law 41/1999 of 12 December 1999 on payment and securities settlement systems and Law 13/1994 of 1 June 1994 on the autonomy of the Banco de España (

text: 1. The European Central Bank (ECB) received on 5 November 2004 a request from the Spanish Ministry for Economic Affairs and Finance for an opinion on some provisions of the draft State budget law for 2005 (the draft law) amending Law 41/1999 of 12 December 1999 on payment and securities settlement systems (Law 41/1999) and Law 13/1994 of 1 June 1994 on the autonomy of the Banco de España (the Banco de España Statute).

text: 2. The ECB’s competence to deliver an opinion on the draft law is based on the third and fifth 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 . 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: 3. The draft law amongst others sets up a new management structure for the Sistema Nacional de Compensación Electrónica (National Automated Clearing System; hereinafter ‘SNCE’), the domestic clearing system for retail payments. SNCE resulted from a concentration of all the provincial clearing houses into a single and decentralised electronic clearing system, due to technology improvements. It clears current account cheques and promissory notes, credit transfers, direct debits, commercial bills, whether bills of exchange or otherwise and fuel and travel cheques.

text: 4. In addition, the draft law amends the Banco de España’s Statute, laying down in detail the Banco de España’s powers to regulate and oversee payment clearing and settlement systems.

text: Amendments to Ley 41/1999, de 12 de noviembre, sobre sistemas de pagos y de liquidación de valores

text: (Law 41/1999 of 12 November 1999 on payment and securities settlement systems)

text: 5. The Banco de España has managed the SNCE since 1987. The draft law provides that a public limited company (Sociedad Española de Sistemas de Pago, Sociedad Anónima; hereinafter the ‘Company’) will take over SNCE’s management from the Banco de España. Ley 41/1999, which implements the Settlement Finality Directive , is amended for this purpose. The draft law renames the public limited company, Servicio de Pagos Interbancarios, Sociedad Anónima (the Servicio), which becomes the Company. In addition, the Servicio’s purpose is modified to cover a wide range of payment services activities including, inter alia, facilitating clearing and settlement of transfer orders among credit institutions regardless of their support, facilitating processing of any means of payment, providing technical assistance and any other activity that the Government, following a report from the Banco de España, may attribute to it.

text: 6. As part of the transformation of the Servicio into the Company, the Servicio’s capital shares will be redistributed: the draft law provides that the entities participating in SNCE, which accept obligations resulting from settlements, may become initial shareholders of the Company. This initial distribution of capital will be proportional to the volume of their activity in SNCE. The Company’s internal rules will need to provide for the periodical review of this distribution. The Ministry for Economic Affairs and Finance, on a proposal from the Banco de España, may allow for extension of the participation in the Company’s capital share to participants in SNCE that are not settling members. Finally, if the Company in the future manages other systems than SNCE, its internal rules will need to provide for participation in the capital share of the Company of the participants in such other systems.

text: 7. The ECB takes note of these developments.

text: 8. A consequence of the privatisation of SNCE’s management is that the Company, subject to authorisation by the Banco de España, will establish the basic operating rules for SNCE and for the other systems that it may manage in the future.

text: 9. However, the draft law (new Article 17(2) of Ley 41/1999) imposes, inter alia, a limit on the Company when establishing the rules for participation in SNCE or in the other systems it manages. This participation is limited by the draft law to credit institutions operating in Spain and registered with Banco de España’s compulsory Official Registers.

text: 10. As to the meaning of the expression ‘operating in Spain’, the ECB understands that, in addition to credit institutions operating on the Spanish market through a branch in Spain, all credit institutions in the EU can be considered as ‘operating in Spain’ for as long as they have recourse, in respect of the Spanish market, to the regime of free provision of services established in Articles

text: and

text: to 22 of Directive

text: of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions . This interpretation would theoretically allow for direct remote participation in SNCE, which the ECB considers should in 4 Directive

text: of 19 May 1998 of the European Parliament and of the Council on settlement finality in payment and securities settlement systems, OJ L 166, 11.6.1998, p. 45. 5 OJ L 126, 26.5.2000, p. 1. principle be possible, while at the same time recognising the existence of presently different national technical and operational standards.

text: 11. In this regard, the ECB recalls that a very important Eurosystem objective and European banking industry project is the creation of a Single Euro Payments Area (SEPA). The SEPA project means that all euro area payments should become domestic at the euro area level and reach a level of reliability and efficiency at least on par with the current best performing national payment systems by 2010. As part of the SEPA, Pan-European Automated Clearing Houses (PEACH) will cover the entire euro area. Decisions related to the next generation of national systems should in future be made from a pan-European perspective to ensure compliance with SEPA instruments and standards and the overall SEPA infrastructure.

text: 12. In addition, the interpretation of the above limitation on participation in SNCE or in the other systems managed by the Company is also relevant to the possibility of participating in the Company’s share capital. Credit institutions in the EU participating remotely in SNCE or the other systems managed by the Company should have the possibility of participating in the Company’s share capital, which is only open to participants in SNCE or such other systems.

text: 13. The ECB welcomes the option given to the Company by the draft law (final subparagraph of new Article 17(1) of Ley 41/1999) to establish relations with other organisations or entities carrying out similar functions, and to manage other clearing and settlement systems, within or outside Spain as it opens up for pan-European activities in line with the SEPA.

text: 14. Finally, the ECB welcomes the draft law’s inclusion (new

text: Article 8

text: (b) of Ley 41/1999) of SNCE as a system recognised under the Settlement Finality Directive. The ECB notes, however, that the law (new additional eighth disposition of Ley 41/1999) introduces a special regime in the finality of the transfer orders sent to SNCE to allow refunds that may occur under SNCE’s rules. The ECB understands that this provision is intended to clarify the Spanish implementation of the Settlement Finality Directive in respect of SNCE.

text: Amendment to Law 13/1994 of 1 June on the Banco de España’s autonomy

text: 15. The new Article 16 of the Banco de España’s Statute empowers Banco de España to regulate clearing and settlement systems by way of circulars, in order to comply with the objective of promoting the smooth functioning of payment systems, and as part of its functions as a member of the European System of Central Banks. Under the draft law, the Banco de España may, in particular (but not limited to), develop or complete the legal acts adopted by the ECB. In addition, such circulars may also incorporate recommendations by international organisations. Without prejudice to this clarification of the Banco de España’s regulatory powers in this field, the ECB notes that the Banco de España retains the possibility of managing, where appropriate, clearing and settlement systems.

text: 16. In addition, the new Article 16 of the Banco de España’s Statute grants it detailed supervisory powers over the functioning of payment and settlement systems. The Banco de España may gather as much information and documentation as it considers necessary to evaluate their efficiency and reliability. In particular, the new

text: Article 16

text: expressly empowers the Banco de España to suspend, if necessary, the application of the decisions adopted by the entity managing a payment system and to adopt the necessary measures.

text: 17. The ECB particularly welcomes the new

text: Article 16

text: as it mirrors some of the ESCB’s powers under the Treaty and the ESCB Statute in the field of payment and settlement systems.

text: 18. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 23 December 2004. [ signed ] The President of the ECB Jean-Claude TRICHET


text: OJ L 189, 3.7.1998, p. 42. 2 See also

text: Recital 9

text: 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, which provides that notwithstanding the role assigned to the Commission pursuant to Article 169 of the Treaty, it is for the ECB, pursuant to

text: Articles 109

text: f(9) (now 117(9)) and 180 (now 237) of the Treaty, to ensure that NCBs honour the obligations laid down by the Treaty.

text: Letter to Commission President Delors of 20 April 1993.

title: Opinion of the European Central Bank of 3 February 2005 at the request of the Italian Ministry of Economic Affairs and Finance on a draft law amending Law Decree No 7 of 25 January 1999, as converted by Law No 74 of 25 March 1999, concerning urgent provisions on Italian participation in the International Monetary Fund’s interventions to confront severe financial crises of its member countries (CON/2005/1)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 3 February 2005 at the request of the Italian Ministry of Economic Affairs and Finance on a draft law amending Law Decree No 7 of 25 January 1999, as converted by Law No 74 of 25 March 1999, concerning urgent provisions on Italian participation in the International Monetary Fund’s interventions to confront severe financial crises of its member countries (

text: 1. On 22 October 2004 the European Central Bank (ECB) received a request from the Italian Ministry of Economic Affairs and Finance for an opinion on a draft legislative proposal amending Law Decree No 7 of 25 January 1999, as converted by Law No 74 of 25 March 1999 (hereinafter the ‘Law Decree’), concerning urgent provisions on Italian participation in the International Monetary Fund’s interventions to confront severe financial crises of its member countries (hereinafter the ‘draft law’).

text: 2. The ECB’s competence to deliver an opinion is based on

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

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law contains provisions concerning a national central bank (NCB). In addition, the ECB notes that its role under

text: Article 237

text: (d) of the Treaty of ensuring that NCBs fulfil their obligations thereunder , which includes ensuring that they comply with the prohibition on monetary financing laid down in

text: Article 101

text: , makes it necessary to ascertain whether the draft law is compatible with this prohibition. 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: 3. Article 1(1) of the Law Decree currently authorises the Italian Ministry of Economic Affairs and Finance to guarantee the repayment of principal and interest and cover any exchange rate risks on credit lines extended by the Banca d’Italia to the International Monetary Fund (IMF) member countries that respect the conditions of the adjustment programmes approved by the IMF, when unforeseen circumstances require financial resources additional to those provided by the latter, up to a cumulative limit of ITL 2 500 billion (approximately EUR 1,29 billion), which is the total amount of the possible interventions under that Article. It should be noted that the Law Decree was not submitted for consultation to the ECB at the time of its adoption. The present consultation refers only to the draft law. The latter would amend the Law Decree to the effect that the Ministry of Economic Affairs and Finance would be authorised, within the abovementioned cumulative limit, to guarantee the repayment of principal and interest and cover any exchange rate risks on credit lines extended by the Banca d’Italia to the Lebanese Republic, in respect of an amount not higher than EUR 200 million.

text: 4. In the explanatory memorandum accompanying the draft law it is explained that on 23 November 2002 an international conference was held in Paris to support Lebanon’s economic adjustment programme, which was convened by the President of France and attended by representatives of various EU and non-EU countries, the IMF and the World Bank. On that occasion, the Italian Prime Minister pledged to provide EUR 200 million to support Lebanon’s efforts in the context of the stabilisation process of the Middle East.

text: 5. The explanatory memorandum states that the draft law is required since Lebanon does not have a standard financed programme in place with the IMF. It further notes that the draft law is considered to be appropriate since (a) Lebanon is a member of the IMF and has a regular relationship therewith; (b) the IMF welcomed Lebanon’s efforts and the support of the international community at the Paris conference; and (c) the IMF confirmed its willingness at the said conference to closely cooperate with the Lebanese authorities. The explanatory memorandum then states that, from a fiscal point of view, the draft law (a) does not have an impact on the Italian national budget since it provides for a contingent liability within pre-approved limits; and (b) would not have any impact on the Italian Government’s budget even if the funding was provided by the latter since as a credit it would be a financial item which would not affect Italy’s net borrowing according to EU accounting rules. Finally, it states that the Banca d’Italia’s balance sheet and profit and loss account ‘are completely covered by the full guarantee of the Ministry of Economic Affairs and Finance’.

text: 6. The ECB understands that the draft law concerns a limited financial commitment entered into by Italy to provide support to a country that is emerging from a troubled period in its history. However, the draft law must be examined as to its conformity with the abovementioned prohibition on monetary financing, contained in Article 101 of the Treaty, which prohibits, inter alia, overdraft facilities or any other type of credit facility with the NCBs in favour of central governments. Already in 1993 the Committee of Governors of the central banks of the Member States of the European Economic Community noted that this prohibition is of ‘essential importance’ to ensure that ‘monetary policy [is not] hindered in the pursuit of its primary objective of price stability. Furthermore, central bank financing of the public sector lessens the pressure for fiscal discipline’ . Therefore, this prohibition must be interpreted in a strict manner, subject only to certain limited exemptions contained in Article 101(2) of the Treaty and

text: Council Regulation (EC) No 3603/93

text: . Article 1(1) of that Regulation provides that ‘any financing of the public sector’s obligations vis-àvis third parties’ is a ‘type of credit facility’ which is prohibited by

text: Article 104

text: (now 101) of the Treaty. The Regulation also contains a number of limited and explicit exemptions from the prohibition on monetary financing. In particular,

text: Article 7

text: provides that ‘The financing by the … national central banks of obligations falling upon the public sector vis-à-vis the International Monetary Fund … shall not be regarded as a credit facility within the meaning of Article 104 of the Treaty’. Recital 14 sets out the rationale behind this exemption, stating that it is appropriate to authorise the financing by the central banks of obligations falling upon the public sector vis-à-vis the IMF as this financing results in foreign claims which have all the characteristics of reserve assets.

text: 7. It is stated in the explanatory memorandum that under the draft law credit lines would be extended by the Banca d’Italia to Lebanon to fulfil the Italian Prime Minister’s commitment to provide EUR 200 million to support that country. Therefore, the purpose of the draft law may be considered as authorising the ‘financing of the public sector’s obligations vis-à-vis third parties’ which is prohibited by the abovementioned

text: Article 1(1) of Regulation (EC) No 3603/93

text: . It is therefore crucial to determine whether the draft law falls within the scope of the exemption contained in

text: Article 7

text: . More specifically, the legal question to be clarified is whether the Banca d’Italia’s extension of credit to Lebanon can be characterised as its financing of an obligation of the Italian State ‘vis-à-vis the IMF’. Although the ECB understands that the IMF takes a favourable view of the international community’s support for Lebanon, it notes that Lebanon does not have any financial assistance programme in place with the IMF. The fact that the draft provision constitutes an amendment which will be introduced into an act entitled ‘Urgent provisions on Italian participation in the [IMF’s] interventions to confront severe financial crises of its member countries’ does not affect the nature of the obligations it concerns. The available facts, including the provisions of the draft law itself identifying Lebanon as the direct beneficiary of the financing in question, indicate that the Italian Government’s commitment to Lebanon does not derive from any obligation of the Italian State vis-à-vis the IMF, including an IMF-administered mechanism. It is also clear that the extension of a credit line to Lebanon by the Banca d’Italia would not result in any claim on the IMF. Therefore this financing should not be considered as a fulfilment of any obligation towards the IMF and the

text: Article 7

text: exemption cannot be invoked to allow for Banca d’Italia’s proposed financing of Lebanon as set out in the draft law. In addition, it would appear that the credit lines to be extended by the Banca d’Italia to Lebanon would be denominated in euro. Such a euro-denominated loan would not have the characteristics of a reserve asset, as mentioned in Recital 14. In conclusion, the extension of a credit line by the Banca d’Italia to Lebanon under the draft law would thus breach the prohibition on monetary financing contained in Article 101 of the Treaty.

text: 8. This opinion will be published on the ECB’s website upon formal presentation of the draft law to the Parliament by the Italian Government. In any event, this opinion will be published at the latest six months after the date of its adoption. Done at Frankfurt am Main, 3 February 2005. [ signed ] The President of the ECB Jean-Claude TRICHET