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: The amendments to the Law on credit institutions were adopted by the Parliament on 19 September 2024. The ECB was consulted on these draft amendments and adopted Opinion

text: thereon. All ECB opinions are published on EUR-Lex. 3 See Section 73.1 of the Law on credit institutions, as amended by the amendments to the Law on credit institutions.

text: See paragraph 2.2 of Opinion

text: , paragraph 3.3 of Opinion

text: , paragraph 2.3 of Opinion

text: , paragraph 2.3 of Opinion

text: and paragraph 2.3 of Opinion

text: . 5 See paragraph 2.2 of Opinion

text: , paragraph 1.2 of Opinion

text: , paragraph 2.2 of Opinion

text: and paragraph 2.3 of Opinion

text: . See also Principle 6 of ELTEG III in the Final report of the Euro Legal Tender Expert Group (ELTEG) of 6 July 2022, available on the Commission’s website at www.ec.europa.eu.

text: COM(2023) 364 final. 7 Recitals 8, 9 and 12, and

text: Article 9(2)

text: and (5) of the proposed regulation on the legal tender of euro cash. 8 See paragraphs 2.3 and 2.4 of Opinion

text: , and paragraph 2.7 of Opinion

title: Opinion of the European Central Bank of 18 October 2024 on the management of the cash withdrawal service (CON/2024/34)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 18 October 2024 on the management of the cash withdrawal service (

text: ) Introduction and legal basis

text: On 21 August 2024 the European Central Bank (ECB) received a request from Latvijas Banka for an opinion on a draft regulation on the management of the cash withdrawal service (hereinafter the ‘draft regulation’). 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 Article 2(1), first, second and third indents, of

text: Council Decision 98/415/EC

text: , as the draft regulation relates to currency matters, means of payment and Latvijas Banka. In accordance with

text: Article 17.5

text: , first sentence, of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft regulation

text: 1.1 The overall purpose of the draft regulation is to define the numerical values for the cash withdrawal service in line with the delegation contained in the draft amendments to the Law on credit institutions, which aim to ensure access to cash to the population throughout the territory of Latvia by setting minimum requirements for the provision of cash withdrawal services . The draft regulation establishes the requirements regarding the distance to automated teller machines (ATMs), their number, their operating hours, monthly limits on the number and amount of cash withdrawals that may be made from them, as well as the conditions for the application of these requirements. 1.2 Under the Law on credit institutions, Latvijas Banka will assess the compliance of credit institutions with the relevant criteria stipulated therein and prepare a list of service providers that qualify as major credit institutions, which have a significant role in providing access to cash in Latvia and, as a consequence, will have to comply with requirements defined in the draft regulation. Latvijas Banka will review and, where necessary, update the list of service providers by 1 February each year. 1.3 Under the proposed regulation, credit institutions identified as service providers would have to ensure compliance with the following requirements: (1) a customer must have access to at least one ATM that is provided by this service provider or any other service provider within a 20-kilometre radius of any location in the territory of Latvia; (2) the number of ATMs provided by the service provider within

text: the territory of Latvia must be no less than 45 ATMs per 100 000 active customers of that service provider; (3) the ATM provided by the service provider must be available to the customer and operate every day for at least 12 hours between 6 a.m. and 12 p.m. or, if the ATM is installed in a public space or public outdoor space with limited accessibility, during the time period when the respective public space or public outdoor space is accessible to the public; and (4) a customer must be able to withdraw free of charge no less than EUR 750 per month irrespective of the number of cash withdrawals if the service provider relies only on its own ATMs. The number of withdrawals is limited to five per month if it also relies on ATMs provided by another service provider. 1.4 The draft regulation allows for certain exemptions from the abovementioned requirements: (1) a service provider is exempted from the 20-kilometre radius requirement in certain territories of Latvia if the total number of residents without access to at least one ATM within a 20-kilometre radius of their residence does not exceed 1 % of the total population of Latvia; (2) a service provider is exempted from the 45 ATMs per 100 000 active customers requirement if the number of ATMs provided by the service provider within the territory of Latvia is no less than 30 ATMs per 100 000 active customers of the respective service provider and if the total number of ATMs provided by service providers in Latvia exceeds 45 ATMs per 100 000 active customers of all service providers in Latvia; and (3) 3 % downtime per month is allowed from the required operating hours for routine or emergency maintenance purposes and to cater for unforeseen circumstances, such as power outages. 1.5 The draft regulation requires Latvijas Banka to verify compliance with the cash withdrawal service requirements by means of planned or unplanned inspections at ATM locations and by means of remote inspections. Latvijas Banka is also required to ensure the creation, maintenance, improvement and public availability of an information system whereby current information on ATMs provided by service providers is electronically displayed on a map of Latvia.

text: 2. Observations

text: 2.1 The ECB considers it important that all Member States take appropriate measures to ensure that credit institutions and branches operating within their territories provide adequate access to cash services, in order to facilitate the continued use of cash . Sufficient and effective access to cash is necessary to preserve the effectiveness of the legal tender status of cash. If citizens do not have easy access to cash, they will not be able to use it as a means of payment and store of value . The ECB welcomes the establishment of numerical values, that will be regularly reviewed, to ensure a minimum availability of cash withdrawal services at ATMs that credit institutions have to maintain in Latvia in accordance with the Law on credit institutions.

text: 2.2 On 28 June 2023 the Commission published a proposal for a Regulation of the European Parliament and of the Council on the legal tender of euro banknotes and coins (hereinafter ‘the proposed regulation on the legal tender of euro cash’), which includes an obligation for Member States to ensure sufficient and effective access to cash throughout their territory. The proposed regulation on the legal tender of euro cash provides that, following its adoption, the Commission will adopt implementing acts on a set of common indicators of general application in the euro area, which would allow Member States to effectively monitor and assess the acceptance of payments in cash and access to cash throughout their territory, in all their different regions, including urban and non-urban areas. The ECB will be consulted by the Commission on the preparation of such implementing acts . Once the implementing acts on the common indicators are adopted by the Commission, the cash withdrawal service requirements included in the draft regulation to be adopted by Latvijas Banka would need to be reviewed and, if necessary, adjusted accordingly. 2.3 The ECB understands that access to cash through cash counters with in-person assistance operated by credit institutions or appointed agents, or any other alternative means of providing access to cash, and access to cash deposit services provided by credit institutions are not governed by statutory requirements in Latvia, and accordingly they fall outside the scope of the draft regulation. The ECB notes that there are no viable alternatives in Latvia to cash withdrawal from ATMs of credit institutions. Furthermore, it is particularly important to ensure that small and medium enterprises (SMEs) have sufficient and effective access to cash service points, where banknotes and coins can be deposited and withdrawn, thereby ensuring that retailers will not be disincentivised from accepting payments in cash. Furthermore, sufficient and effective access to cash service points is particularly relevant for those SMEs that only accept cash. It may therefore be advisable to set minimum or recommended levels for the number of machines (including ATMs) which can be used to deposit banknotes or coins. These facts need to be taken into account when setting numerical values for cash withdrawal services at ATMs of credit institutions. 2.4 According to the explanatory memorandum accompanying the draft regulation, Latvijas Banka has assessed the appropriateness of the EUR 750 free of charge withdrawal threshold against criteria such as: (1) the contractually agreed threshold with private customers (i.e. natural persons) currently applied by credit institutions which will qualify as major credit institutions after the entry into force of the draft amendments to the Law on credit institutions; (2) the statutory minimum wage (currently EUR 700 gross or EUR 601.20 net); (3) the average old age pension (EUR 547.38 per month in 2023); and (4) the average unemployment benefit (EUR 428.54 per month in 2023). Consistent with its previous stance , and in order to preserve the effectiveness of the legal tender status of euro banknotes, the ECB would caution against low monthly thresholds for free of charge withdrawals of cash from ATMs to the extent that these could make the use of euro banknotes more expensive than electronic means of payment. Latvijas Banka is therefore invited to reflect on whether the minimum threshold from which cash withdrawals can be charged should be set at a higher level to ensure that the use of cash is not unduly discouraged, both as a means of payment and as a store of value, also

text: taking into account the legal tender status of euro banknotes and coins. Finally, the ECB invites Latvijas Banka to carefully monitor the appropriateness of the free of charge access to cash threshold for the purposes of implementing legislation whose objective is to ensure that, despite the growing proportion of non-cash payments, Latvia’s population continues to enjoy access to cash and freedom of payment choice. 2.5 Regarding the requirement for there to be an ATM within a 20-kilometre radius from any geographic location in Latvia, the draft regulation is essentially intended to preserve the existing ATM network in Latvia, rather than to improve access to cash in less populated areas. As noted above, once the implementing acts on the common indicators are adopted by the Commission at Union level, this requirement may need to be reviewed by Latvijas Banka.

text: This opinion will be published on EUR-Lex.

text: Done at Frankfurt am Main, 18 October 2024.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE


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

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

text: Regulation (EU) 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: See page 22 of the Latvijas Banka report, ‘Financing of the Economy’, October 2023, available on Latvijas Banka’s website at www.latvijasbanka.lv.

text: The ECB has previously opined on draft legislation introducing taxes applicable to credit institutions in several Member States. See Opinions

text: and

text: . All ECB opinions are published on EUR-Lex.

text: See paragraph 3.4 of Opinion

text: , paragraph 3.7 of Opinion

text: , paragraph 4.6 of Opinion

text: and paragraph 4.5 of Opinion

text: See paragraph 4.2 of

text: See, e.g.,

text: Article 53 of Directive 2013/36/EU

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, amending Directive

text: and repealing Directives

text: and

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

text: See paragraph 3.2.2 of Opinion

text: , paragraph 3.1 of Opinion

text: and paragraph 3.4 of Opinion

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 4 November 2024 on the imposition of a temporary solidarity contribution on credit institutions for national security purposes (CON/2024/35)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 4 November 2024 on the imposition of a temporary solidarity contribution on credit institutions for national security purposes (

type: rubrik

text: On 4 October 2024 the European Central Bank (ECB) received a request from the Latvian Ministry of Finance for an opinion on a draft law on the imposition of a temporary solidarity contribution (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 Article 2(1), third and sixth indents, of

text: Council Decision 98/415/EC

text: , as the draft law concerns Latvijas Banka and rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with

text: Article 17.5

type: stycke

text: 1. Purpose of the draft law

text: 1.1 The draft law imposes an obligation to pay a temporary solidarity contribution on credit institutions established in Latvia as well as branches of credit institutions from other countries in Latvia (hereinafter the ‘solidarity contribution payers’). The contribution is temporary in nature – it applies during the payment periods starting in 2025, 2026 and 2027. 1.2 The objective of the solidarity contribution is, under conditions of increased national security risks, to seek direct or indirect additional resources to meet fiscal needs relating to the national security of the State, in solidarity with Latvian society as a whole. The draft law provides that the solidarity contribution payers are to make solidarity contributions to the State budget through atypically high net interest income, or indirectly by significantly increasing lending amounts to non-financial corporations, households, and non-profit organisations that provide services to Latvian households. This will translate into an increase in economic activity and promote total budget revenues, which will in turn enable an increase in the financing of growing national security needs in the coming years. 1.3 The explanatory memorandum accompanying the draft law states that the rationale for the draft law is based, inter alia, on the following elements. First, the profitability of credit institutions was mainly supported by the ECB’s policies to reduce inflation, which led to a sharp increase in market interest rates. As loans with variable interest rates account for more than 90 % of the credit portfolios of Latvian credit institutions, the interest rates applied to loans increased with market interest rates, resulting in a significant increase in the interest income of credit institutions. The assets of credit institutions in Latvia

text: consist mainly of loans, while loans to non-financial corporations and households account for more than 50 % of the total assets of credit institutions. For most loans in Latvia, the interest rate is composed of two components: the base rate, which is variable over time and largely follows the short-term Euribor rate; and the fixed interest rate added, which is determined by credit institutions on an individual basis, taking into account credit risk and other factors. As a result of this principle of credit pricing, higher central bank interest rates were almost automatically reflected in higher lending rates, consequently resulting in higher interest incomes for credit institutions. Second, the interest income of credit institutions has increased as a result of excess liquidity placed at the central bank and other credit institutions. Third, deposits from non-financial corporations and households account for around 70 % of credit institutions’ liabilities. This means that the price of funding and interest expenses for credit institutions are also closely linked to the cost of deposits. While deposit rates have increased, in particular for longer-term deposits, they have increased at a slower pace than money market rates. One reason for this is the high proportion of demand deposits, for which interest is not paid in most cases, in total deposits. As a result, credit institutions’ funding costs have increased at a much slower pace than credit interest rates. Fourth, the returns on equity and on credit institutions’ assets were strong in 2023 and well above the euro area average. As income grows much faster than costs, the cost-efficiency of credit institutions has significantly improved. Fifth, lending in Latvia remains sluggish, with credit to non-financial corporations and households remaining at only 27.5 % of gross domestic product (GDP) in the first quarter of 2024. Sluggish lending has been a persistent and structural problem in Latvia. The outstanding amount of credit to non-financial corporations, measured against GDP, is currently not far from 2004 levels, but in the housing sector the current level is the lowest since Latvia’s accession to the EU and is closer to low and lower-middle income countries than high-income countries. 1.4 The base for the temporary solidarity contribution is calculated as the net interest income that is 50 % greater than the average net interest income in the credit institution’s consolidated financial statements in the five-year reference period from 2018 to 2022. The net interest income and the average annual net interest income are multiplied by the base calculation factor of the solidarity contribution. The base is reduced by the deposit insurance premiums paid to the Deposit Insurance Fund and by contributions to the Single Resolution Fund in accordance with

text: Regulation (EU) No 806/2014

text: of the European Parliament and of the Council . The solidarity contribution is 60 % of the base. 1.5 The draft law provides for a solidarity contribution rebate which ensures that a discount of up to 100 % is applied if the credit institution reaches a certain rate of credit growth during the payment period. The credit growth indicator is the annual growth rate of total loans from the solidarity contribution payer to Latvian non-financial corporations, households and non-profit institutions serving households. The information contained in the Credit Register maintained by Latvijas Banka will be used for the calculation of the credit growth rate. The rebate is calculated by comparing the credit growth rate of the solidarity contribution payer with the forecast annual growth rate of GDP at current prices set out in the Law on the State Budget for the payment period. In order to apply the rebate, the solidarity contribution payer must ensure that the growth rate of credit during the payment period is at least 1.75 times higher

text: than the annual growth rate of the GDP at current prices used by the State Budget Law for the calendar year corresponding to the payment period. A rebate of 100 %, 75 %, 50 % and 25 % of the amount of the solidarity contribution calculated in the payment period is applied if its credit growth rate reaches or exceeds, respectively, the growth rate of GDP multiplied by a factor of 2.5, 2.25, 2 and 1.75. 1.6 According to the explanatory memorandum accompanying the draft law, the motivation for the introduction of the rebate is to provide an incentive for credit institutions to significantly increase their lending to the economy, as this would support economic activity and thus indirectly contribute to increasing the revenues of the Latvian State, in the context of sluggish lending growth. The draft law sets a ceiling for the payment of the solidarity contribution at 33 % of the amount of the payer’s profits before the application of corporate income tax and the solidarity contribution. Furthermore, the solidarity contribution is not payable if the solidarity contribution payer suffers losses as a result of its economic activity during the payment period. 1.7 The solidarity contribution payer makes quarterly advance payments of the solidarity contribution during the payment period. The advance solidarity contribution must be paid by the 23rd day of the second month following the respective quarter of the advance payment period into a special income account of the State Budget opened for this purpose. The rebate also applies to the quarterly advance payments of the solidarity contribution. 1.8 The solidarity contribution is administered by the State Revenue Service. Latvijas Banka submits the information required for the administration of the solidarity contribution that is at its the disposal to the State Revenue Service by 10 June of the year following the payment period, or at the request of the State Revenue Service.

text: 2. Monetary policy considerations

text: 2.1 The euro area inflation rate reached record levels over the course of 2022 and posed significant challenges for the conduct of monetary policy. Guided by its primary objective of maintaining price stability, the ECB has taken determined action to ensure a timely return of inflation to the 2 % target over the medium term. Key ECB policy rates were raised by a cumulative 450 basis points between July 2022 and September 2023, with the intention of dampening demand and guarding against the risk of a persistent upward shift in inflation expectations. More recently, following a period of rate stabilisation, key interest rates have been reduced in view of the ongoing disinflationary process. 2.2 The conditions under which credit institutions operate play a key role in the transmission of monetary policy to financing conditions in the economy, and thus in the impact of monetary policy on aggregate demand and ultimately on inflation rates. The ECB's observations as to the impact of the draft law on monetary policy are set out below. 2.3 First, the draft law adversely affects the conditions at which credit institutions operate, so that its overall effects on lending growth and thus indirectly on the State budget are unclear, especially over the long term. On the one hand, the draft law will lead to a decline in credit institutions’ profitability, albeit from a relatively high position compared with the situation in other euro area jurisdictions, and thus erode the taxation base relevant for the standard tax on credit institutions’ profits. A decline in profitability, if prolonged, might limit credit institutions’ ability to provide credit to the Latvian economy

text: in the long run. On the other hand, the rebate that is conditional on the lending amount of the individual credit institution provides an incentive for its provision of credit in the short run. The incentive achieved by the rebate may be especially effective in increasing lending to Latvian nonfinancial companies, which has been assessed to be structurally subdued in particular because of credit supply constraints in a context of relatively low competition among credit institutions . Careful monitoring and assessment of the two opposite effects of the draft law on lending growth and State revenues will be needed. 2.4 Second, the draft law may create distortions in the transmission of monetary policy depending on the credit institutions’ business models, which could adversely impact the efficient allocation of credit in the economy. Credit institutions might optimise the profitability and fiscal impact of the application of the draft law over the three years of its application, depending on their individual situations. These may differ, notably as regards each credit institution’s business model, including its sector of activity and client base, so that the implications of the draft law will be heterogeneous. This concern is, however, offset by the fact that most Latvian credit institutions have similar business models and it is assessed that the current allocation of credit in the economy is not efficient in view of existing supply constraints. 2.5 Third, the draft law entails pro-cyclical effects: it was designed for a phase of increasing policy rates but will not have the envisaged effects on State revenues in an easing phase of monetary policy. Past increases in policy rates have so far been rapidly transmitted to interest rates on loans issued in Latvia, but the recent monetary policy easing is reverting this and lending has rebounded to a greater extent in Latvia as compared to the euro area as a whole without the State’s intervention through such a law. 2.6 Evidence shows that credit institutions’ net interest income typically tends to expand on impact as policy rates increase. This effect is faster the greater the weight of short-term or variable interest rate loans within balance sheets of credit institutions. However, the tightening cycle has also resulted in lower lending volumes, a higher cost of funding, losses recorded in the securities portfolio and an increase in provisions resulting from potential deterioration of the quality of the credit portfolio. The realisation of downside risks in the current environment may significantly reduce the repayment capacity of debtors and translate into lower profitability of credit institutions. The net effect of tighter monetary policy on profitability when measured across the policy cycle may therefore be less positive, or even negative, over an extended horizon. Against this backdrop, and noting the latest ECB key interest rate reductions, which could limit credit institutions’ net interest income, care should be taken to ensure that any measures taken do not hamper the ability of credit institutions to maintain solid capital bases, which are required to ensure the smooth transmission of monetary policy.

text: 3. Financial stability considerations

text: 3.1 The ECB has previously warned about possible negative effects of extraordinary tax regimes on financial stability owing to such legislative measures having the potential to make it more difficult for

text: credit institutions to build up a sound capital base, as their retained earnings will be reduced, thus making them less resilient to economic shocks . At the same time, the temporary solidarity contribution may make attracting equity capital investors and wholesale funding more costly for credit institutions, as domestic and foreign investors may have less appetite to invest in Latvian credit institutions. 3.2 Regarding the rebate, the mechanism is designed to incentivise credit institutions to increase lending by providing discounts on the solidarity contribution, hence supporting financial intermediation, economic activity and revenues for the State. However, by setting larger rebates for stronger credit growth rates, the draft law may have the unintended effect of incentivising credit institutions to provide lending to riskier borrowers. Competition among credit institutions for a limited pool of borrowers may also induce them to charge lending rates which are not commensurate with the risks they are taking. Borrower based measures are already in place in Latvia, which should limit a deterioration in standards in respect of lending to households. At the same time, the authorities should make sure that lending standards are also maintained for other lending categories. The maintenance of adequate lending standards is important to avoid higher losses for credit institutions in the medium and long run, which could have an impact on credit institutions’ capital. Moreover, incentivising stronger lending growth could erode solvency positions by increasing risk-weighted assets, causing credit institutions to be left with smaller solvency ratios after the expiration of the rebate. Finally, as the rebate is based on the nominal GDP forecast at the time when the budget is adopted (the year prior to the calculation of the solidarity contribution and rebate), it is possible that credit institutions may need to make lending decisions in an environment that could be very different from that envisaged at the time the budget was adopted. 3.3 Two welcome features of the draft law are, first, that it sets a ceiling for the payment of the solidarity contribution at 33 % of the amount of the solidarity contribution payer’s profits before the application of corporate income tax and, second, that the solidarity contribution is not payable if the solidarity contribution payer suffers losses because of its economic activity during the payment period. At the same time, it would also be useful to analyse potential behavioural effects associated with the ceiling, inter alia by shifting the cost base, in order to minimise credit institutions’ profitability and the solidarity contribution. 3.4 The proposed solidarity contribution may lead to fragmentation in the domestic and European financial system because of the heterogeneous nature of the banking sector. This may particularly be the case where the interest income of some credit institutions is relatively high compared to other activities. Moreover, the temporary solidarity contribution is implemented for a three-year period, which is long. Finally, it is the ECB’s understanding that credit institutions established after 2022 are to be exempted from the temporary solidarity contribution due to the impossibility of calculating the contribution base, which could contribute to the creation of an uneven playing field as between incumbents and new players.

text: 3.5 In the light of the above, the ECB recommends that in order to assess whether the application of solidarity contribution poses risks to financial stability, and in particular whether it has the potential to impair the banking sector’s resilience and cause market distortion, a thorough analysis of potential negative consequences for the banking sector should be undertaken . Careful analysis of the potential negative effects of the temporary solidarity contribution on the banking sector and its impact on financial stability is particularly important in the current context of elevated geopolitical uncertainty and volatility in financial markets.

text: 4. Considerations relating to the prudential supervision of credit institutions

text: 4.1 The ECB understands that the draft law would apply to significant credit institutions directly supervised by the ECB and less significant credit institutions directly supervised by national competent authorities under the oversight of the ECB within the framework of the Single Supervisory Mechanism. 4.2 The basis on which the temporary solidarity contribution would be established does not take into consideration the full business cycle . 4.3 The solidarity contribution may affect the credit risk strategy of credit institutions and incentivise them to increase their loan portfolios to benefit from the rebate mechanism and reduce their payments. While the draft law’s objective is acknowledged in the light of subdued lending, it should not result in a worsening of credit institutions’ credit risk profiles as a result of pursuing imprudent credit growth, opting for relaxed credit loan origination and underwriting standards with limited restrictions for entering into new market segments. Credit institutions must ensure sufficient capital positions and adequate levels of provisioning on a forward-looking basis, as well as robust risk management practices, as a prerequisite for a sustainable increase in credit supply and ensuring well-managed credit risk exposures. Potential negative effects of increased credit risk exposures and their impact on the safety, soundness and stability of credit institutions should be reflected in credit institutions’ business, funding and capital plans. Moreover, any impact on credit institutions’ overall risk profile needs to be closely monitored.

text: 5. Role of Latvijas Banka in providing information to the State Revenue Service

text: The ECB understands that the obligation imposed on Latvijas Banka under the draft law to submit to the State Revenue Service the information necessary for administration of the solidarity contribution is not a new task of Latvijas Banka. In accordance with the Law on Latvijas Banka, Latvijas Banka already has the duty to provide all necessary information and data for the performance of the functions of the State Revenue Service . The ECB understands that this duty of Latvijas Banka is

text: without prejudice to the obligation to maintain professional secrecy in respect of confidential prudential supervisory information under Union law .

text: 6. Other observations

text: The draft law ensures that the solidarity contribution is to be temporary in nature. The ECB has previously recommended that a clear separation is necessary between the extraordinary proceeds and the general budgetary resources of a government to avoid their use for general fiscal consolidation purposes . In this regard, the draft law seems to take previous ECB recommendations into account, as the ECB understands that the proceeds of the solidarity contribution will be specifically directed to increasing fiscal spending to address increased national security risks.

text: Done at Frankfurt am Main, 4 November 2024.

text: [signed]

text: The President of the ECB

text: Christine LAGARDE

type: vagledning

utgivare: ecb


title: Opinion of the European Central Bank of 8 November 2024 on a financial transaction tax (CON/2024/36)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 8 November 2024 on a financial transaction tax (

text: ) Introduction and legal basis

text: On 25 September 2024 the European Central Bank (ECB) received a request from the Ministry of Finance of the Slovak Republic for an opinion on a draft law on a financial transaction tax and amending certain acts. The draft law was adopted by the National Council of the Slovak Republic on 3 October (hereinafter the ‘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 Article 2(1), third, fifth and sixth indents, of

text: Council Decision 98/415/EC

text: , as the Law relates to Národná banka Slovenska (NBS), payment and settlement systems, and rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with

text: Article 17.5

text: , first sentence, of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the Law

text: 1.1 The aim of the Law is to burden debit transactions recorded on the accounts of legal entities, organisational units and natural persons-entrepreneurs by introducing a tax on financial transactions (hereinafter the ‘tax’) and to define the range of entities and transactions that are exempt from the tax. The Law also aims to boost electronic payments to prevent tax evasion and fraud, and to enhance tax collection and the controls for ensuring compliance with tax obligations. 1.2 The Law applies to taxpayers that are: (1) natural persons-entrepreneurs, (2) legal persons, or (3) branches of foreign legal persons, provided they are clients of a payment service provider (PSP) performing financial transactions . The tax does not apply to the Social Insurance Agency, entities connected to the State budget, or municipalities and regions . 1.3 The tax is payable by a PSP, a branch of a PSP based in Slovakia, or the taxpayers themselves if they: (1) are a client of a PSP based outside Slovakia that does not have an branch in Slovakia; (2) are a client to whom the costs related to the execution of a financial transaction, which refers to their

text: 1 Zákon č. 279/2024 Z. z. z 3. októbra 2024 o dani z finančných transakcií a o zmene a doplnení niektorých zákonov.

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). activity performed in Slovakia, are charged; or (3) have performed financial transactions on a nontransaction account . 1.4 The following are subject to the tax: (1) any financial transaction in which an amount of funds is debited from the taxpayer’s account; (2) the use of a payment card issued with the transaction account for carrying out financial transactions; and (3) any booked expenses related to the execution of a financial transaction that refers to the taxpayer’s activity performed in Slovakia . 1.5 The Law also lists a number of financial transactions that are not subject to the tax, including, inter alia: (1) payment transactions carried out in connection with the payment of taxes, levies and contributions from the State budget and health insurance contributions; (2) payment transactions in connection with the write-off and recovery of funds resulting from unauthorised or incorrectly executed payments pursuant to Law No 492/2009 Coll. on payment services and on amendments to certain laws, as amended (hereinafter the ‘Law on payment services’); (3) payment transactions relating to the management of securities or other financial instruments; (4) payment transactions in relation to the purchase of government bonds; (5) payment transactions by securities traders related to the purchase of securities on behalf of their clients; (6) payment transactions carried out from separate non-assigned payment accounts maintained by financial institutions; (7) payment transactions executed by banks or licensed traders engaged in foreign exchange activities; (8) payment transactions carried out by the State Treasury; (9) compensation payments for unavailable deposits under deposit protection legislation; (10) payment transactions executed within a payment or clearing and settlement system between settlement agents, central counterparties, clearing houses or central banks and other participants in the payment or clearing and settlement system in financial instruments and PSPs; and (11) payment transactions carried out using payment cards, excluding cash withdrawals . 1.6 The tax basis is the amount of funds debited from the taxpayer’s account in a financial transaction . For this purpose, a transaction account is defined broadly to include the payment account of a taxpayer that is a legal person or a branch of a foreign person or a payment account of a taxpayer who is a natural person-entrepreneur in which that taxpayer carries out financial transactions related to their business . With reference to booked expenses related to the execution of a financial transaction, which refers to the taxpayer’s activity performed in Slovakia, the tax basis is the amount of booked expenses related to the execution of a financial transaction . If the transaction is carried out in foreign currency, the transaction amount is converted to euro at the reference exchange rate determined by the ECB or NBS for the purpose of determining the tax basis .

text: 7 Zákon č. 492/2009 Z. z. zo 4. novembra 2009 o platobných službách a o zmene a doplnení niektorých zákonov v znení neskorších predpisov. 1.7 A tax rate of 0.4 % applies for financial transactions, excluding cash withdrawals, in which an amount of funds is debited from the taxpayer’s account, with the tax amount capped at EUR 40. For cash withdrawals, a tax rate of 0.8 % applies. A tax of EUR 2 per year applies for the use of a payment card related to the transaction account. Lastly, a tax rate of 0.4 % applies for the amount of booked expenses related to the execution of a financial transaction, which refers to the taxpayer’s activity performed in Slovakia . 1.8 The Law contains detailed provisions relating to the calculation, collection and administration (including record-keeping requirements) of the tax in respect of each tax period for which it is due . 1.9 The Law will apply as of 1 January 2025 .

text: 2. Appropriate time to consult the ECB

text: 2.1 As previously noted by the ECB, in cases of particular urgency that do not allow for a normal consultation period, the consulting authority may indicate urgency in the consultation request and the time limit for the submission of the ECB’s opinion may be reduced . However, as emphasised by the ECB on several occasions in its opinions , even in cases of particular urgency, or where the legislation has reached an advanced stage, the national authorities are not relieved of their duty under Articles 127(4) and 282(5) of the Treaty to consult the ECB at an appropriate stage in the national legislative process that allows sufficient time for the ECB to examine the draft legislative provisions and for the relevant national authorities to take the ECB’s opinion into consideration before the provisions are adopted. In this respect, the Court of Justice of the European Union has noted that the obligation to consult the ECB under the Treaty is intended ‘essentially to ensure that the legislature adopts the act only when the body has been heard, which, by virtue of the specific functions that it exercises in the Community [Union] framework in the area concerned and by virtue of the high degree of expertise that it enjoys, is particularly well placed to play a useful role in the legislative process envisaged’ .

text: 3. Application of the tax to NBS

text: 3.1 The ECB understands that the tax applies to NBS. While the Law excludes a number of bodies governed by public law from its scope of application, it does not exclude NBS. The Law applies to legal persons, including NBS. 3.2 Eurosystem monetary policy operations carried out by NBS may benefit from the exemption from the tax in respect of payment transactions executed within a payment or clearing and settlement system between settlement agents, central counterparties, clearing houses or central banks and other

text: 13 Article I, Sections 6 and 7, of the Law.

text: 14 Article I, Sections 9 to 13, of the Law.

text: 15 Article V of the Law.

text: 16 See Opinions

text: and

text: . All ECB opinions are published on EUR-Lex.

text: 17 See Opinions

text: and

text: 18 See

text: Article 4

text: , second sentence, of Decision

text: 19 Judgment of the Court of Justice of 10 July 2003, Commission v ECB,

text: , EU:C:2003:395, paragraphs 110 and 111. participants in the payment or clearing and settlement system in financial instruments and PSPs . In this respect, the ECB understands that all euro-denominated payment orders relating to the participation by NBS’s counterparties in Eurosystem open market operations or the use of the Eurosystem’s standing facilities are settled on the counterparties’ accounts with NBS in the TARGET payment system . However, the wording of this exemption could give rise to legal uncertainty. For example, it might be argued that the exemption is limited to payment orders arising out of NBS’s counterparties’ participation in the TARGET payment system, as distinct from their participation in Eurosystem monetary policy operations. 3.3 The ECB understands that all payment system operations carried out by NBS (1) within the TARGET payment system, including the TARGET-SK component, and (2) within the retail payment system SIPS, both operated by NBS, will clearly benefit from the exemption from the tax under the Law in respect of payment transactions executed within payment or clearing and settlement systems . 3.4 Other exemptions from the tax which may be relevant to certain Eurosystem monetary policy operations carried out by NBS concern payment transactions relating to the management of securities or other financial instruments, which could be relevant to payment orders in connection with collateralised Eurosystem monetary policy operations, and payment transactions in relation to the purchase of Slovak Government bonds . 3.5 The extent to which NBS’s foreign exchange and foreign reserve management operations may benefit from the exemptions from the tax in respect of payment transactions executed within payment or clearing and settlement systems or relating to the management of securities or other financial instruments is unclear. 3.6 Finally, the ECB understands that the issuance of banknotes by NBS to credit institutions will be subject to the tax.

text: 4. Monetary policy considerations

text: 4.1 The euro area inflation rate reached record levels over the course of 2022 and posed significant challenges for the conduct of monetary policy. Guided by its primary objective of maintaining price stability, the ECB has taken determined action to ensure a timely return of inflation to the 2 % target over the medium term. Key ECB policy rates were raised by a cumulative 450 basis points between

text: 21 See Article 27(6) of the Decision of the NBS 2/2015 on the implementation of the Eurosystem monetary policy framework in the Slovak Republic, as amended. One of the preconditions to be able to participate in the monetary policy operations of the Eurosystem is to have an account with the national central bank (NCB) where transactions can be settled. Usually, this account is in TARGET. See also Articles 19 and 22 of Guideline

text: (EU) 2015/510

text: of the European Central Bank of 19 December 2014 on the implementation of the Eurosystem monetary policy framework (ECB/2014/60) (OJ L 91, 2.4.2015, p. 3). TARGET provides, inter alia, main cash accounts for the settlement of operations with central banks in euro and in central bank money. See

text: Article 1

text: (a) of Guideline

text: (EU) 2022/912

text: of the European Central Bank of 24 February 2022 on a new-generation Trans-European Automated Real-time Gross Settlement Express Transfer system (TARGET) and repealing Guideline ECB/2012/27 (ECB/2022/8) (OJ L 163, 17.6.2022, p. 84). While there are cases where the euro-denominated account of the counterparty with the NCB is not in TARGET, this is not the case for NBS, where all euro-denominated payment orders arising out of Eurosystem monetary policy operations are settled via TARGET accounts. July 2022 and September 2023, with the intention of dampening demand and guarding against the risk of a persistent upward shift in inflation expectations. More recently, following a period of rate stabilisation, key interest rates have been reduced in view of the ongoing disinflationary process. 4.2 The conditions under which credit institutions deposit funds in the deposit facility play a key role in the monetary policy stance, and thus in the impact of monetary policy on aggregate demand and ultimately on inflation rates. If the Eurosystem monetary policy operations carried out by NBS are not exempted, the imposition of a tax will raise the price of central bank money, thereby interfering with the ECB’s monetary policy that sets the price of money through its key interest rates. For the reasons set out below, the imposition of a tax under such circumstances would not be justified. 4.3 First, the tax would interfere with the ECB’s monetary policy decisions by tightening the monetary policy stance. The monetary policy stance is steered by the key ECB interest rate on the deposit facility, which is the policy rate of reference since the revision of the operational framework implemented on 18 September 2024. The imposition of a tax, by penalising the participation of credit institutions in monetary policy credit operations, would affect the attractiveness of overnight deposits with NBS. Such a tax would thus be equivalent to an increase in the ECB’s deposit facility rate. 4.4 Second, the tax would distort the signalling of the monetary policy stance. The imposition of a higher tax on the issuance of banknotes by NBS than on digital reserves, as provided for by the Law, would indeed distort the price of central bank money, by affecting central bank reserves differently, depending on whether they are held digitally or in the form of cash. 4.5 In addition to their access to central bank reserves, credit institutions exchange liquidity in the money market. The ECB’s monetary policy decisions are determined by price stability considerations, such as the need to provide or absorb liquidity in the market, and favourable liquidity conditions in the money market are crucial for the effective implementation of these decisions. The tax may indirectly affect monetary policy implementation through its likely detrimental impact on financial market liquidity, which could impede price discovery. This could impede the achievement of the monetary policy objectives of the Eurosystem, of which NBS is a part . 4.6 Moreover, the imposition of a tax could lead to an increase in bank funding costs, which would adversely affect the provision of credit to the Slovak economy. This possibility exists in view of the increase in the cost of central bank funding – in the event that the Eurosystem monetary policy operations carried out by NBS are not exempted from the tax – and in view of the potential depletion of the deposit base of Slovak banks, as taxpayers would try to avoid the tax on their financial transactions in Slovakia and possibly shift part of their financial activity to other jurisdictions. In that respect, the tax could additionally give rise to some degree of distortion in the transmission of monetary policy throughout the euro area. 4.7 The tax may also give rise to further distortion in the transmission of monetary policy within the Slovak economy itself, with adverse implications for recovery. First, the tax could lower the demand for corporate loans. In a context of policy rate cuts, this would have detrimental repercussions on the transmission of monetary policy. Second, the tax would de facto represent a turnover tax for firms and disadvantage firms that have a high turnover and/or are cash-intensive. As the tax applies

text: 25 See paragraph 3 of Opinion

text: . irrespective of profits, it may have a disproportionate impact on smaller firms that have lesser ability to optimise their tax liabilities, and on firms that generate low profits relative to their turnover. Moreover, this type of tax would asymmetrically affect certain transaction-intensive sectors, such as retail trade or mail-order services. This effect is likely to be exacerbated by the fact that the tax is anticipated to be higher for cash withdrawals than for electronic payments.

text: 5. Financial stability considerations

text: 5.1 The introduction of a permanent tax in a manner that is not harmonised with other Member States may produce distortions in financial markets and lead to fragmentation in the European financial system . As noted in paragraph 4.6, the asymmetric imposition of the tax may incentivise taxpayers to shift part of their financial activity to other jurisdictions in an effort to optimise their own tax liability. This may take the form of transferring financial operations to other entities in the same corporate group or establishing payment accounts in other jurisdictions. This may result in the migration of taxpayer deposits from payment accounts held in Slovakia which may negatively impact bank funding liquidity and costs and PSPs’ profitability. This may in turn interfere with the ability of PSPs authorised and supervised by NBS to meet the prudential requirements laid down in

text: Directive (EU) 2015/2366

text: of the European Parliament and of the Council as transposed into Slovak law. 5.2 Additionally, in order to comply with the Law, PSPs will be required to implement the necessary adjustments to IT and administrative systems for the collection and transfer of the tax to the Slovak tax authority . The increased operational costs may be passed on to clients, making PSPs providing services in Slovakia less competitive vis-à-vis other providers in the Union. This may result in an increase in the price of payment services and consequently weaken demand for payment services in Slovakia, decrease the access of certain segments of the taxpayer population to payment services and partially divert economic and financial activity to other Member States . Additionally, there is a risk of double taxation for taxpayers that also operate through branches in other jurisdictions where a similar tax is also levied . 5.3 Given the potential impact the tax may have on the volume of financial transactions and the demand for payment services, the ECB recommends that the Slovakian legislature should undertake a comprehensive impact assessment to identify potential negative consequences of the tax for the Slovakian financial system and wider economy. 5.4 The ECB has consistently expressed its support for efforts taken towards the realisation of a Capital Markets Union (CMU) which would strengthen the role of the euro and integrate the Union’s financial sector . The Commission has identified heterogenous national tax regimes, leading to market

text: 26 See paragraph 4.2 of Opinion

text: 27 Law on payment services.

text: Directive (EU) 2015/2366

text: of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives

text: and

text: and

text: Regulation (EU) No 1093/2010

text: , and repealing Directive

text: (OJ L 337, 23.12.2015, p 35).

text: 30 See paragraph 4 of Opinion

text: 31 See paragraph 4.5 of Opinion

text: 32 See, for example, paragraph 1.4 of Opinion

text: , paragraph 1.2 of Opinion

text: , paragraph 1.2.1 of Opinion

text: and paragraph 1.3 of Opinion

text: . fragmentation and impeding cross border investment, as one of the most significant barriers to the establishment of a well-functioning CMU . In this vein, the heterogenous tax treatment of financial transactions by a Member State may interfere with the advancement of the CMU and of Union efforts to harmonise the regulation of payment transactions to ensure market participants fully benefit from the internal market . Accordingly, the ECB invites the Slovakian legislature to consider the consequences of the tax on the Union’s objectives with respect to the CMU.

text: 6. Cash withdrawal considerations

text: 6.1 Payment transactions carried out with payment cards, other than cash withdrawals, are exempted from the tax . While a tax rate of 0.4 % and a maximum of EUR 40 apply for financial transactions in which funds are debited from the taxpayer’s account, a tax rate of 0.8 % with no upper limit applies for cash withdrawals. Furthermore, a tax of EUR 2 per year is payable for the use of a payment card related to the transaction account. 6.2 On 28 June 2023 the Commission published a proposal for a Regulation of the European Parliament and of the Council on the legal tender of euro banknotes and coins , which includes an obligation for Member States to ensure sufficient and effective access to cash throughout their territory. 6.3 Cash withdrawals are a key channel of access to euro cash. Since individual payment transactions carried out with payment cards are exempted from the tax, the tax introduces an additional cost with respect to the use of cash that does not apply to card payments. As a result, it introduces a constraint on access to cash that undermines the effectiveness of the legal tender status of euro banknotes . The ECB therefore recommends that the tax should be reconsidered. The ECB is neutral with regard to cash and electronic means of payment, meaning that it does not favour one instrument over another. As a result, the ECB follows a carefully considered and balanced approach to national measures taken in this area. National measures should not make the use of euro banknotes more expensive in practice than electronic methods of payment, thus putting the effectiveness of legal tender at a disadvantage . 6.4 Moreover, the ECB is concerned that the tax may set a precedent for the possible future taxation on the channels available to access euro banknotes and coins .

text: 7. Legal and central bank independence considerations

text: 7.1 Pursuant to

text: Article 127(1)

text: , first sentence, of the Treaty, together with the Law on Národná banka Slovenska (hereinafter the ‘Law on NBS’), the primary objective of the European System of Central Banks (ESCB) and of NBS is to maintain price stability. Pursuant to

text: Article 127(2)

text: , first indent, of the

text: 33 COM(2020) 590.

text: 34 See Opinion

text: 36 COM(2023) 364 final.

text: 37 See paragraph 2.3 of Opinion

text: 38 See paragraphs 2.1, 2.2 and 2.4 of Opinion

text: 39 See paragraph 2.3 of Opinion

text: . Treaty, a basic task to be carried out through the ESCB, including NBS, is to define and implement the monetary policy of the Union. Pursuant to Article 17 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), in order to conduct their operations, the NCBs, including NBS, may open accounts for credit institutions, public entities and other market participants and accept assets, including book entry securities, as collateral. Pursuant to Article 18.1 of the Statute of the ESCB, in order to achieve the objectives of the ESCB and to carry out its tasks, the NCBs may (1) operate in financial markets by buying and selling outright (spot and forward) or under repurchase agreement and by lending or borrowing claims and marketable instruments, whether in euro or other currencies, as well as precious metals; and (2) conduct credit operations with credit institutions and other market participants, with lending being based on adequate collateral. Pursuant to Article 18.2 of the Statute of the ESCB, the ECB is to establish general principles for open market operations and credit operations carried out by itself or the NCBs, including NBS, including for the announcement of the conditions under which they stand ready to enter into such transactions. 7.2 Pursuant to

text: Article 127(2)

text: , second and third indents, of the Treaty, two of the basic tasks to be carried out through the ESCB, including NBS, are to conduct foreign exchange operations consistent with the exchange-rate policy for the euro in relation to non-EU currencies and to hold and manage the foreign reserves of the Member States, including Slovakia. Pursuant to

text: Article 23

text: , second and third indents, of the Statute of the ESCB, the NCBs, including NBS, may acquire and sell spot and forward all types of foreign exchange assets and precious metals, and hold and manage these assets. 7.3 Pursuant to Article 128(1) of the Treaty, the ECB has the exclusive right to authorise the issue of euro banknotes within the Union. The ECB and the NCBs, including NBS, may issue such notes. The banknotes issued by the ECB and the NCBs are the only such notes to have the status of legal tender within the Union. Furthermore, according to the Court of Justice, Article 128(1) of the Treaty underpins the singleness of the euro and is a precondition for the effective conduct of the Union’s monetary policy . 7.4 NBS is a public institution whose primary objective – in line with the Treaty, the Statute of the ESCB and the Law on NBS – is, as noted above, to maintain price stability. In order to achieve this, NBS participates in the common monetary policy which the ECB sets for the euro area. In the performance of such tasks by NBS, the Slovak authorities should respect the principle of central bank independence . The principle of central bank independence enshrined in Article 130 of the Treaty requires, inter alia, that: (1) an NCB’s functional independence should be ensured by having the necessary means and instruments for achieving price stability independently of any other authority; and (2) an NCB’s financial independence should be respected by ensuring that a Member State may not put its NCB in a position where it has insufficient financial resources and inadequate net equity to carry out its ESCB-related tasks. 7.5 If Eurosystem monetary policy operations carried out by NBS are not exempted from the tax, the Law may impair NBS’s functional and institutional independence. First, the Law may impair functional

text: 41 See judgment of the Court of Justice of 26 January 2021, Hessischer Rundfunk,

text: and

text: , EU:C:2021:63, paragraph 43.

text: 42 See paragraph 3 of Opinion

text: . independence as the tax – if applicable to NBS’s monetary policy operations – could disrupt the monetary policy transmission mechanism by penalising the participation of credit institutions in monetary policy operations, such as credit operations, and hence affect the attractiveness of overnight deposits within NBS. Second, the Law may impair NBS’s financial independence as the imposition of the tax on NBS’s monetary policy operations might negatively impact NBS’s ability to restore its reserves independently with the income arising from these operations, because part of this income would need to be systematically allocated to the payment of the tax, leading de facto to limiting the financial resources available to NBS to carry out its ESCB-related tasks . 7.6 To conclude, as a matter of principle, the imposition of a tax on NBS’s monetary policy, foreign exchange, foreign reserve management and cash issuance operations would be incompatible with the Eurosystem’s functional independence, and therefore unjustified. Given the unclear and inconsistent scope and wording of the exemptions from the tax that NBS may to some extent enjoy in respect of its Eurosystem operations, and also taking account of the need to protect NBS’s financial independence, the ECB invites the Slovak authorities to consider granting NBS a general exemption from the tax. This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 8 November 2024. [signed] The President of the ECB Christine LAGARDE

text: 43 See paragraph 3 of Opinion


title: Opinion of the European Central Bank of 11 November 2024 on the supervision of compliance with sanctions by credit and financial institutions (CON/2024/37)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 11 November 2024 on the supervision of compliance with sanctions by credit and financial institutions (

text: ) Introduction and legal basis

text: On 15 October 2024 the European Central Bank (ECB) received a request from the Austrian Ministry of Foreign Affairs for an opinion on a draft federal law adopting a Law on sanctions 2024 and amending the Law on sanctions 2024, the Law on banking, the Law on e-money 2010, the Law on the Financial Market Authority, the Law on consumer payment accounts, the Law on foreign exchange 2004, the Law on state protection and the intelligence service and the Law on the Austrian Accounts Register and accounts inspection (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 (TFEU) and Article 2(1), third indent, of

text: Council Decision 98/415/EC

text: , as the draft law relates to the Oesterreichische Nationalbank (OeNB) and the tasks conferred upon the ECB concerning the prudential supervision of credit institutions pursuant to

text: Article 127(6)

text: TFEU. In accordance with

text: Article 17.5

text: , first sentence, of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 The draft law regulates the implementation of international sanctions by the United Nations (UN) and the Union in Austria as well as the imposition and implementation of national sanctions (hereinafter collectively referred to as ‘sanctions’). As noted in the explanatory memorandum accompanying the draft law , the draft law aims to implement the recommendations of the Financial Action Task Force (FATF) and rectify certain issues related to the practical application of the Law on sanctions 2010 . 1.2 In particular, the draft law revises the distribution of responsibilities among the Austrian authorities concerning sanctions. The Federal Minister for Finance and the Financial Market Authority (FMA) will assume the duties currently performed by the OeNB under the Law on sanctions 2010 . Under the draft law, the FMA will henceforth oversee compliance with sanctions by various financial market participants, including credit, financial, and payment institutions, which are presently supervised in

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: 2 See Article 1 of the draft law, proposing Section 1 of the Law on sanctions 2024.

text: 3 Page 1 of the explanatory memorandum accompanying the draft law.

text: 4 Bundesgesetz vom 15.06.2010 über die Durchführung internationaler Sanktionsmaßnahmen (Sanktionengesetz 2010 – SanktG), BGBl. I Nr. 36/2010.

text: 5 Section 8 of the Law on sanctions 2010. this respect by the OeNB in its capacity as the authority responsible for monitoring compliance with sanctions. 1.3 As outlined in the explanatory memorandum accompanying the draft law , the transfer of powers from the OeNB to the FMA is intended to enhance efficiency and capitalise on potential synergies stemming from the FMA’s existing role as the Austrian Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) supervisory authority.

text: 2. Observations

text: 2.1 Cooperation with the ECB in its prudential supervisory function 2.1.1 Article 127(6) of the Treaty and the provisions of

text: Council Regulation (EU) No 1024/2013

text: (hereinafter the ‘SSM Regulation’) confer various specific tasks concerning the prudential supervision of credit institutions upon the ECB. For significant credit institutions directly supervised by the ECB, the ECB has the task, inter alia, of supervising compliance with relevant Union law imposing prudential requirements on credit institutions, including the requirement to have in place robust governance arrangements, such as sound risk management processes and internal control mechanisms . In this context, the ECB notes that on 21 December 2023 the European Banking Authority published a consultation paper on two sets of draft guidelines on internal policies, procedures and controls to ensure the implementation of Union and national restrictive measures which are addressed, inter alia, to prudential supervisors, including the ECB. These draft guidelines aim to clarify how restrictive measures policies and procedures interact with financial institutions’ wider governance and risk management frameworks, to avoid operational and legal risks for financial institutions and ensure the effective implementation of restrictive measures. The draft guidelines may affect cooperation between prudential supervisors of credit institutions and the national authorities monitoring compliance of credit institutions with restrictive measures. 2.1.2 The ECB neither imposes sanctions within the meaning of the Law on sanctions 2024 nor has it received the task of monitoring compliance with them, even if significant institutions directly supervised by the ECB must comply with them. It is for those entities to implement and ensure compliance with the relevant sanctions regimes . Meanwhile, Member States are responsible for laying down the rules on penalties applicable to infringements of sanctions applicable within the Union, take all measures necessary to ensure that they are implemented, and provide for appropriate measures concerning confiscation of the proceeds of such infringements. The Commission assists them as necessary with the interpretation of the Union’s restrictive measures. 2.1.3 Consequently, the draft law does not concern the exercise of the ECB’s prudential supervisory tasks or underpin a prudential supervisory function under Union law . The competences and powers under

text: 6 Page 1 of the explanatory memorandum accompanying the draft law.

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: 9 Available on the European Banking Authority’s website at www.eba.europa.eu. The consultation has now been closed.

text: 10 See paragraph 2.1.2 of Opinion

text: . All ECB opinions are published on EUR-Lex.

text: 11 See paragraphs 2.4 and 2.5 of Opinion

text: . the draft law are therefore distinct from, and without prejudice to, the ECB’s prudential supervisory tasks under the SSM Regulation. Although the subject matter of the draft law accordingly falls outside the ECB’s fields of competence, the exercise of competences by the FMA under the draft law could have prudential repercussions for credit institutions concerned, which would need to comply with the modalities of the application of sanctions envisaged by the FMA on the basis of the applicable Union legislation. Therefore, the ECB would welcome the introduction of a possibility to inform the ECB of measures taken under the draft law insofar as such measures could be relevant for the exercise of the ECB’s prudential supervisory tasks under the SSM Regulation; for example, if they have prudential repercussions for institutions that fall under the supervision of the ECB . Such information could be shared using the channels well established and in existence for the AML/CFT information flow. Also for this reason, the Austrian legislator may want to consider clarifying that the draft law is without prejudice to the tasks and powers conferred on the ECB for prudential supervisory purposes under the Treaty and the SSM Regulation . 2.1.4 The current national legal framework in Austria does not explicitly provide for cooperation and information exchange between the OeNB and the ECB in relation to sanctions . The ECB welcomes that the draft law will enable the FMA to share information acquired in the conduct of FMA’s supervisory role related to sanctions with the ECB in its prudential supervisory function in the future . In this respect, the ECB understands that the information exchange regime applicable to the AML/CFT supervision will also apply to information obtained in the field of monitoring compliance with sanctions. 2.1.5 First, the ECB understands that the FMA will have at its disposal the same supervisory powers and measures as set out in the relevant provisions of the Law on money laundering to monitor and enforce compliance with internal governance requirements on financial market participants , 19 20 relevant legal acts and directly applicable sanctions measures of the Union . The relevant provisions of the Law on money laundering contain, inter alia, provisions on cooperation and information exchange between the FMA and other authorities. In this respect, the ECB understands that the FMA may exchange information and engage in mutual cooperation with certain other authorities insofar as this is useful for the performance of tasks relating to the prevention of money laundering and terrorist financing or for other statutory tasks as part of the supervision of the financial market. This also explicitly includes exchanges and cooperation with the ECB when the ECB is acting in accordance with the SSM Regulation . Based on this, the ECB understands that the draft law will

text: 12 For example, the imposition of fines under the third chapter of the Law on sanctions 2024, as proposed by Article 1 of the draft law, proposing Sections 16 to 18 of the Law on sanctions 2024.

text: 13 See paragraphs 2.1.3 and 2.1.4 of Opinion

text: 14 See Section 9 of the Law on sanctions 2010.

text: 15 See paragraph 2.1.5 of Opinion

text: 17 See Chapter 7 of the Bundesgesetz zur Verhinderung der Geldwäscherei und Terrorismusfinanzierung im Finanzmarkt (Finanzmarkt-Geldwäschegesetz – FM-GwG), BGBl. I Nr. 118/2016.

text: 18 See Article 1 of the draft law, proposing Section 7 of the Law on sanctions 2024.

text: 19 See Article 1 of the draft law, proposing Sections 2 and 4 of the Law on sanctions 2024. enable the FMA, once it assumes its function as competent authority for monitoring compliance with sanctions, to cooperate and exchange information in the field of sanctions with the ECB when the ECB is acting in accordance with the SSM Regulation. 2.1.6 Second, the ECB understands that the transmission to the ECB of information, documents and data which the FMA obtained in accordance with its tasks is permitted insofar as the requested information is necessary for the discharge of the ECB’s statutory tasks . By extending the FMA’s banking supervisory mandate to also cover the monitoring of compliance with sanctions, the FMA will be able to obtain information and data in that field . Therefore, the ECB understands that information gathered by the FMA in its function as the authority monitoring compliance with sanctions under its banking supervisory mandate would in principle, subject to an assessment in each individual case, not be excluded from the scope of information which may be transmitted to the ECB . 2.1.7 The draft law also introduces a new provision on cooperation and information exchange with the ‘European Union’ . This provision provides that enquiries under the Law on sanctions 2024 may also be carried out at the reasoned request of the Union and authorises the transmission of the information collected to the Union, unless such transmission is contrary to overriding public interests and, in the case of personal data, to the extent that the transmission is necessary for the purpose of performing the duties under the Law on sanctions 2024. This provision does not define the term ‘European Union’ for this purpose; it could therefore be interpreted to cover all Union institutions, including the ECB. The explanatory memorandum accompanying the draft law makes it apparent that the legislator at least intended to cover the Commission which, as the guardian of the Treaties, also monitors the implementation of Union restrictive measures. The ECB would welcome clarification of whether the legislator intends to create a separate legal basis in the Law on sanctions 2024 – in addition to those referred to in paragraphs 2.1.5 and 2.1.6 – enabling the ECB to request the information acquired by the FMA in connection with the FMA’s supervisory role related to sanction measures adopted by the UN or the Union. 2.2 Cooperation with ECB in its central banking function The ECB welcomes that the draft law will also enable the FMA to share information related to sanctions directly with the ECB in its central banking function in the future. In this respect, the ECB understands that the transmission of information, documents and data which the FMA obtains in accordance with its tasks is permitted in crisis situations to central banks of the European System of Central Banks and other bodies in the Member States with a similar function in their capacity as monetary authorities when this information is relevant for the exercise of their respective statutory tasks, including the conduct of monetary policy and related liquidity provision, oversight of payments,

text: 22 See Section 77(5), point (1), of the Bundesgesetz über das Bankwesen (Bankwesengesetz – BWG), BGBl. Nr. 532/1993 (hereinafter the ‘Law on banking’).

text: 23 See, in particular, Article 5 of the draft law, which amends the scope of banking supervision as outlined in Section 2(1) of the Law on the Financial Market Authority by including the official functions and powers of the FMA set out in the Law on sanctions 2024. The ECB therefore understands that the monitoring of compliance with international sanctions will be conducted by the FMA as part of its banking supervisory activities.

text: 26 See page 14. clearing and securities settlement systems, and the safeguarding of stability of the financial system . As noted above, under the draft law the FMA’s banking supervisory mandate will also cover the monitoring of compliance with sanctions, and the FMA will be able to obtain information and data in this field. Therefore, the ECB understands that the draft law could enable disclosures to the ECB’s central banking arm in crisis situations of information that the FMA has obtained in its function as the authority monitoring compliance with sanctions. 2.3 The OeNB’s access to supervisory information in the field of sanctions Finally, the ECB welcomes that, following the transfer of powers from the OeNB to the FMA under the draft law, the OeNB will retain access to relevant information gathered by the FMA in the context of its banking supervisory activities in the field of sanctions via a joint database for the purpose of conducting supervisory analyses in line with the OeNB’s mandate . This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 11 November 2024. [signed] The President of the ECB Christine LAGARDE

text: 27 See Section 77(5), point (4), of the Law on banking, which transposes into Austrian law

text: Article 114 of Directive 2013/36/EU

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, amending Directive

text: and repealing Directives

text: and

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

text: 29 Section 79(4a) of the Law on banking as amended by Article 3 of the draft law.


text: See Part IV (‘Amendments to the Central Bank of Malta Act’) of Act XIII of 2024, entitled ‘an Act to implement Budget Measures for the Financial Year 2024 and other administrative measures’.

text: The draft bye-laws are being proposed for adoption by the Board of Directors of the CBM under Article 58 of the CBM Act, which provides that ‘The Board may make bye-laws not inconsistent with this Act, for the good order and management of the Bank’. 3

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: The Board of Directors of the CBM is composed of the Governor, the two Deputy Governors and the four directors of the CBM appointed under Article 9 of the CBM Act.

text: See ECB Convergence Report, June 2024, pp. 27-28 (Chapter 2.2, Section entitled ‘Financial Independence’), available on the ECB’s website at www.ecb.europa.eu.

text: See ECB Convergence Report 2024, pp. 30-31 (Chapter 2.2, sub-section entitled ‘Autonomy in staff matters’). This sub-section also deals with the remuneration of staff and requires that Member States may not impair an NCB’s ability to employ and retain the qualified staff necessary for the NCB to perform independently the tasks conferred on it by the Treaty and the Statute of the ESCB. In addition, an NCB may not be put into a position where it has limited or no control over its staff, or where the government of a Member State is in a position to influence the NCB’s policy on staff matters. See also, paragraph 3.1.1 of Opinion

text: , paragraph 3.2 of Opinion

text: , paragraph 3.1 of Opinion

text: , paragraph 3.2.1 of Opinion

text: , paragraph 8 of Opinion

text: , paragraph 4.3 of Opinion

text: , paragraph 2 of Opinion

text: , paragraph 3.2 of Opinion

text: , paragraph 2.9 of Opinion

text: See ECB Convergence Report, June 2024, p. 25 (Chapter 2.2, sub-section entitled ‘Personal independence’). See also paragraph 3.5 of Opinion

text: , paragraph 3.2.9 of Opinion

text: , paragraph 8 of Opinion

text: , paragraph 4.3 of Opinion

text: and paragraph 3.5.2 of Opinion

text: Article 8(3)

text: , points (a) and (b), of the CBM Act provide that in the event of (a) the absence of the Governor, the Governor shall designate a Deputy Governor to perform the duties of the Governor; (b) a vacancy in the office of the Governor, the Board shall designate a Deputy Governor to perform the duties of the Governor, until a new Governor is appointed as soon as possible; and the Deputy Governor so designated shall have and may exercise the powers and perform the functions of the Governor.

title: Opinion of the European Central Bank of 26 November 2024 on the establishment of the remuneration of the Governor and Deputy Governor of the Central Bank of Malta (CON/2024/38)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 26 November 2024 on the establishment of the remuneration of the Governor and Deputy Governor of the Central Bank of Malta (

text: ) Introduction and legal basis

text: On 2 April 2024 the Parliament of Malta adopted an amendment to Article 8(1) of the Central Bank of Malta Act (hereinafter the ‘amendment to the CBM Act’) concerning the remuneration of the Governor and Deputy Governors of the Central Bank of Malta (CBM). On 19 July 2024 the European Central Bank (ECB) received a request from the CBM for an opinion on draft amendments to the Central Bank of Malta Bye-Laws, 1968 (hereinafter the ‘draft bye-laws’) concerning the remuneration of the Governor and Deputy Governors of the CBM. 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 Article 2(1), third indent, of

text: Council Decision 98/415/EC

text: , as the amendment to the CBM Act and the draft bye-laws relate to the CBM. In accordance with

text: Article 17.5

text: , first sentence, of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the amendment to the CBM Act

text: 1.1 The amendment to the CBM Act relates to the establishment of the remuneration of the Governor and Deputy Governors of the CBM. Prior to the amendment to the CBM Act, Article 8(1) of the CBM Act provided that the remuneration of the Governor and Deputy Governors was set out in their respective letters of appointment. In practice, this meant that it was previously the Government’s responsibility to set the remuneration of the Governor and Deputy Governors. 1.2 Following the adoption of the amendment to the CBM Act, this responsibility has been transferred to the Board of Directors of the CBM (hereinafter the ‘Board’). Article 8(1) of the CBM Act now provides

text: that the Governor and Deputy Governors are to receive such remuneration as approved by the Board .

text: 2. Purpose of the draft bye-laws

text: 2.1 The draft bye-laws provide for the setting-up of a Remuneration Committee entrusted with advising the Board on its new responsibility of establishing the remuneration of the Governor and Deputy Governors under Article 8(1) of the CBM Act. 2.2 The draft bye-laws provide for the Remuneration Committee to be composed of three members: (1) a retired judge or an advocate, preferably with experience in commercial matters; (2) a professional with extensive experience in human resources matters; and (3) a retired central banker preferably from a Eurosystem Member State. The members of the Remuneration Committee are to receive the remuneration determined by the Board and hold office for a period of 3 years, with eligibility for reappointment. They are to be independent from the CBM and cannot be removed during their term of office except on grounds of proven inability to perform the functions of their office or any other cause, or proven misbehaviour. The Remuneration Committee is to meet when necessary, however not less than once per year. The presence of all the members of the Remuneration Committee will be necessary for a quorum. 2.3 The draft bye-Laws provide that when the Board makes a decision related to the recommendations of the Remuneration Committee, any Governor or Deputy Governor whose remuneration is the subject of the decision will be excused from the Board meeting and will not participate in any discussions or vote.

text: 3. Observations

text: 3.1 As the amendment to the CBM Act and the draft bye-laws affect the remuneration of the Governor and Deputy Governors of the CBM, they should be examined from the perspective of the requirements of central bank independence. 3.2 Financial independence 3.2.1 Member States may not put their national central banks (NCBs) in a position where they have insufficient financial resources and inadequate net equity to carry out their European System of Central Banks or Eurosystem-related tasks, as applicable . This financial independence also entails that any amendment to the legislative provisions on the remuneration for members of an NCB’s decision-making bodies should be decided in close and effective cooperation with the NCB, taking

text: due account of its views, to ensure the ongoing ability of the NCB to independently carry out its tasks . 3.2.2 Against this background, the ECB welcomes the transfer of responsibility for setting the remuneration of the CBM Governor and Deputy Governors from the Government to the Board pursuant to the amendment to the CBM Act and the draft bye-laws as this will strengthen the CBM’s autonomy with regard to the setting of the remuneration of the Governor and Deputy Governors. 3.3 Personal independence 3.3.1 Article 130 of the Treaty prohibits national governments and any other bodies from influencing the members of NCBs’ decision-making bodies in the performance of the tasks and duties conferred upon them by the Treaties and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). In this context, the protection of the remuneration of the members of the decision-making bodies of NCBs is necessary to safeguard their personal independence. In particular, Member States may not seek to influence the members of a NCB’s decision-making bodies by amending national legislation affecting their remuneration, which, as a matter of principle, should apply only for future appointments . 3.3.2 The ECB understands that the Governor of the CBM has the sole responsibility for the performance of the functions imposed, and the exercise of powers conferred, on the CBM by or under the Treaties and the Statute of the ESCB . However, the two Deputy Governors of the CBM can also be considered to be members of the decision-making bodies of the CBM, in so far as they could perform the duties of the Governor in certain cases . 3.3.3 As the amendment to the CBM Act has transferred the responsibility of approving the remuneration of the CBM Governor and Deputy Governors from the Government to the Board (see paragraphs 1.1 and 1.2), the Government would not be able to change the remuneration of the CBM Governor and Deputy Governors during their term of office. Accordingly, the independence requirements laid down in Article 130 of the Treaty would not be breached by such changes in the remuneration of the CBM Governor and Deputy Governors, particularly if they are based on objective criteria, for example, by

text: benchmarking their salaries with designated positions within the CBM, with the aim of ensuring proportionality between the different hierarchical positions at the CBM. This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 26 November 2024. [signed]

text: The President of the ECB

text: Christine LAGARDE