text: OJ L 189, 3.7.1998, p. 42. 2 Act CIV/2008 on reinforcing the stability of the financial intermediary system. Magyar Közlöny, 22 December 2008, p. 24618.

text: ECB Opinion

text: of 1 December 2008 at the request of the Hungarian Ministry of Finance on a draft law on strengthening the financial intermediary system. 4 The Declaration is available on the French Presidency’s website at www.ue2008.fr. 5 See paragraphs 2.2 and 3.2 et seq. of Opinion

text: . 6 See paragraph 3.2 of ECB Opinion

text: of 17 October 2008 at the request of the Belgian Ministry of Finance on a draft royal decree adopted under

text: Article 117

text: bis of the Law of 2 August 2002 on the supervision of the financial sector and on financial services.

text: See the Recommendations of the Governing Council of the European Central Bank on government guarantees for bank 7 debt, issued on 20 October 2008 and available on the ECB’s website at www.ecb.europa.eu.

title: Opinion of the European Central Bank of 25 March 2009 at the request of the Hungarian Minister for Finance on a draft government regulation on the procedural rules for State guarantees in the interests of stabilising the financial system (CON/2009/28)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 25 March 2009 at the request of the Hungarian Minister for Finance on a draft government regulation on the procedural rules for State guarantees in the interests of stabilising the financial system (

text: ) Introduction and legal basis

text: On 17 March 2009 the European Central Bank (ECB) received a request from the Hungarian Minister for Finance for an opinion on a draft government regulation on the procedural rules for State guarantees in the interests of stabilising the financial system (hereinafter the ‘draft regulation’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and on the sixth indent of

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

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

text: 1. Purpose of the draft regulation

text: 1.1 The legal basis for the adoption of the draft regulation is the Law on strengthening the financial intermediary system (hereinafter the ‘Law’) , which was intended to limit the effects of the global financial crisis in Hungary and maintain its financial stability. To that end, the Law provides inter alia that the Hungarian State is authorised to guarantee credit institutions’ debts vis-à-vis their creditors subject to the cumulative fulfilment of the following conditions: (a) the Chair of the Hungarian Financial Supervisory Authority’s Supervisory Council and the Governor of the Magyar Nemzeti Bank (MNB) jointly propose the guarantee; (b) the debt is based on a loan agreement or debt security; (c) the credit institution’s debt maturity is between three months and five years; (d) the credit institution’s debt arises between the entry into force of the draft law and 31 December 2009; (e) the debt is denominated in euro, Swiss francs or forint. The aggregated

text: amount of the State guarantee may not exceed HUF 1 500 billion. Article 7(8) of the Law provides that procedural rules related to the guarantees provided under the Law shall be laid down in a regulation by the Government. 1.2 The draft regulation lays down detailed procedural provisions for applications for and grants of State guarantees to beneficiary institutions. It sets out the procedure for the approval of applications for guarantees, the requirements relating to the provision of information, and detailed rules for enforcing the guarantees. The draft regulation also provides that agreements entered into with credit institutions must specify the credit institutions’ commitments in relation to lending activities and other commitments and the consequences of breaching such commitments. 1.3 In line with the Law, the draft regulation will apply until 31 December 2009.

text: 2. General observations

text: 2.1 As stated, the draft regulation lays down detailed provisions for implementing the Law, on which the ECB commented in its Opinion

text: . The observations made in Opinion

text: also apply to the draft regulation. 2.2 In particular, in line with the ‘Declaration on a concerted European action plan of the euro area countries’ issued by the Heads of State of the euro area on 12 October 2008 (hereinafter the ‘Declaration’) , Member States must act in a coordinated manner to avoid significant differences in national implementation having a counter-productive effect and creating distortions in global banking markets. The Declaration acknowledges the need to work in cooperation with the ECB to ensure consistency with the Eurosystem’s management of liquidity and compatibility with its operational framework . 2.3 Moreover, the ECB emphasises the importance of ensuring that the proposed arrangements comply with the relevant Community law provisions, including European Union single market principles and financial services legislation, as well as competition and State aid rules. 2.4 In paragraph 3.5 of its Opinion

text: the ECB noted that State guarantees to cover interbank deposits should be avoided as they have the potential to interfere with the conduct of a central bank’s liquidity-providing operations, and thus with the transmission of monetary policy decisions . In particular, the ECB considered that State guarantees to be provided under the Law could relate to the repayment of unsecured loans drawn by a borrower bank from another bank, in which case the guarantee could have the same effect as a guarantee for the repayment of an

text: interbank deposit. In this context, the ECB reiterates its recommendation that the provision of State guarantees which have the same effect as guarantees for deposits should be avoided. 2.5 Finally, the ECB refers to the Recommendations of the Governing Council of the ECB on government guarantees for bank debt . On this basis, the ECB reiterates its position that the price of a State guarantee should be risk-based and market-oriented, and determined on the basis of the costs of a corresponding guarantee in the market. It is important that the pricing of a State guarantee should link the level of charges to be paid by a credit institution receiving a guarantee to the residual maturities of the guaranteed obligations with maturities exceeding one year.

text: 3. Specific observations

text: In line with the Law, the draft regulation provides for the involvement of the MNB, but limited only to the process of granting guarantees. In particular, the ECB understands that the Governor of the MNB gives his opinion on whether the provision of a guarantee to a given credit institution is justified in the light of the liquidity situation and the role of the credit institution in the financial system. It is understood that the involvement of the MNB will not go beyond this advisory role. In this context, the ECB recommends that the MNB should also be informed when the activation of a guarantee is expected, as provided for in Article 7(1) of the draft regulation in the case of the minister responsible for the state budget and the Government Debt Management Agency.

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

text: Done at Frankfurt am Main, 25 March 2009.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


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

text: Concerning

text: Article 117

text: bis of the Law of 2 August 2002, see ECB Opinion

text: of 8 October 2008 at the request of the Belgian Ministry of Finance on a preliminary draft law on measures promoting financial stability and in particular establishing a State guarantee for the provision of credit in the context of financial stability, in particular paragraphs 1.1, 2.1 and 5; and ECB Opinion

text: Article 117

text: bis of the Law of 2 August 2002 on the supervision of the financial sector and on financial services, in particular paragraph 2.1. All ECB opinions are available on the ECB website at www.ecb.europa.eu.

text: New

text: Article 117

text: bis, first subparagraph 1°, of the Law of 2 August 2002. These legislative acts are: (i) the Law of 2 January 1991 on the market in public debt securities and on the monetary policy instruments; (ii) Book VIII, Title III, Chapter II, Section III of the Companies Code; and (iii) Royal Decree No 62 on the deposit of fungible financial instruments and the settlement of transactions involving such instrument coordinated by the Royal Decree of 27 January 2004.

text: Explanatory memorandum, comment on the new

text: Article 117

text: Current

text: Article 117

text: bis, first subparagraph, (2°), of the Law of 2 August 2002, which is the legal basis for (i) the Royal Decree of 16 October 2008 (see Opinion

text: ), and for the Royal Decree of 10 December 2008 (see ECB Opinion

text: of 21 November 2008 at the request of the Belgian Ministry of Finance on a draft royal decree on the guarantee for certain risks assumed by financial institutions), which is to be amended shortly (on the draft amending royal decree see ECB Opinion

text: of 19 March 2008 at the request of the Belgian Ministry of Finance on a draft royal decree amending the Royal Decree of 10 December 2008 on the guarantee for certain risks assumed by financial institutions).

text: New

text: Article 117

text: bis, first subparagraph 2°, of the Law of 2 August 2002.

text: Article 117

text: New

text: Article 117

text: bis, first subparagraph 3°, of the Law of 2 August 2002.

text: See ECB Opinion

text: of 28 October 2008 at the request of the Belgian Minister for Finance on a draft royal decree implementing the Law of 15 October 2008 on measures promoting financial stability and in particular establishing a State guarantee for the provision of credit in the context of financial stability, in relation to the protection of deposits and life insurance and amending the Law of 2 August 2002 on the supervision of the financial sector and on financial services.

text: Article 117

text: New

text: Article 117

text: bis, first subparagraph 4°, of the Law of 2 August 2002 and the comment on this provision in the Explanatory memorandum.

text: New

text: Article 117

text: bis, first subparagraph 5°, of the Law of 2 August 2002 and the comment on this provision in the Explanatory memorandum.

text: Article 117

text: bis, first subparagraph 4° and 5°, of the Law of 2 August 2002.

text: Article 117

text: bis, first subparagraph 6°, of the Law of 2 August 2002.

text: The ECB has been consulted by the Belgian authorities on six other draft legislative provisions adopted in this context: (i) Opinion

text: ; (ii) Opinion

text: ; (iii) Opinion

text: ; (iv) Opinion

text: ; (v) ECB Opinion

text: of 22 December 2008 at the request of the Belgian Ministry of Justice on a draft law aimed at enhancing the rules on the functioning of company bodies, in particular by introducing into the Companies Code provisions regarding a corporate governance statement and the establishment of a remuneration committee, by limiting severance payments for certain company representatives and by reforming the system of statutory disabilities in the banking and financial sector; and (vi) Opinion

text: See the Declaration of 12 October 2008, available on the website of the French Presidency, www.ue2008.fr.

text: See (i) the Recommendations of the Governing Council of the European Central Bank on government guarantees for bank debt, 20 October 2008, available on the ECB’s website at www.ecb.europa.eu; (ii) Communication from the Commission – The application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis, (OJ C 270, 25.10.2008, p. 8); (iii) the Eurosystem’s Guiding principles for bank asset

text: support schemes, 25 February 2009; and (iv) Commission Communication of 25 February 2009 on the treatment of impaired assets in the Community banking sector.

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 25 March 2009 at the request of the Belgian Ministry of Finance on a draft law amending the Law of 2 August 2002 on the supervision of the financial sector and on financial services (CON/2009/29)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 25 March 2009 at the request of the Belgian Ministry of Finance on a draft law amending the Law of 2 August 2002 on the supervision of the financial sector and on financial services (

text: ) Introduction and legal basis

type: rubrik

text: On 18 March 2009 the European Central Bank (ECB) received a request from the Nationale Bank van België/Banque Nationale de Belgique (NBB), acting on behalf of the Belgian Ministry of Finance, for an opinion on a draft law amending the Law of 2 August 2002 on the supervision of the financial sector and on financial services (hereinafter the ‘draft law’). Given the current turbulence in the financial markets and the need for firm intervention by the authorities involved, the consulting authority has requested the ECB to provide its opinion as a matter of extreme urgency to allow the swift adoption of the draft law. The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and on the sixth indent of

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

type: stycke

text: 1. Purpose of the draft law

text: 1.1 In the context of the current financial market crisis, the draft law extends in two respects the scope of the measures that, under

text: Article 117

text: bis of the Law of 2 August 2002 on the supervision of the financial sector and on financial services , the King is empowered to take, after consulting the

text: Financial Stability Committee, in the event of a sudden crisis on the financial markets or of a

text: serious threat of systemic crisis, in order to limit the scale or effects thereof.

text: 1.2 First, the draft law adds three legislative acts to the list of financial sector legislation which can be

text: complemented or derogated from by regulations adopted by the King. These three legislative acts

text: govern in particular the holding of dematerialised and immobilised securities . The draft law will

text: allow the King to amend these legislative acts in order to enhance the protection of depositors of

text: dematerialised or fungible financial instruments held with a financial intermediary that becomes

text: insolvent with regard to certain legal risks revealed in the context of the current financial crisis and

text: in particular by the Lehman bankruptcy .

text: 1.3 Second, the draft law provides that, in addition to guarantees for the liabilities of supervised

text: institutions , the King may also establish a system to grant the guarantee of the Belgian State for:

text: (i) certain claims (schuldvorderingen/créances) held by supervised financial institutions .

text: Reference is made, for example, to the loans granted by Fortis Bank to a special purpose

text: vehicle established to acquire part of its structured products portfolio ;

text: (ii) the repayment to natural persons who are partners of a cooperative company (coöperatieve

text: vennootschapp/société cooperative) of their shares in such a company, provided it is a

text: supervised institution or that at least half of its assets are invested in a supervised institution .

text: The aim of this provision is to ensure that the shares issued by such cooperative companies

text: enjoy similar protection to that put in place for other substitutes for savings (i.e. deposits and

text: ‘branche 21’ insurance products ) insofar as such shares have the same characteristics as

text: savings (i.e. offering a regular return and guaranteeing the repayment of the invested capital

text: on demand, subject to limited constraints) .

text: (iii) losses incurred by supervised institutions on certain assets (e.g. in the context of an asset protection scheme, losses on a portfolio of toxic assets that exceed a certain threshold) or liabilities taken on by entities whose business is to acquire and manage assets held by supervised institutions (e.g. a guarantee granted to a ‘bad bank’, a special purpose vehicle created to acquire a portfolio of toxic assets held by supervised institutions) . These two amendments are justified by the fact that similar measures have been put in place or are currently being considered in other countries and by the similarity of market expectations in different countries . (iv) the liabilities taken on by Gemeentelijke Holding NV/Holding Communal SA .

text: 2. General observations

text: 2.1 The ECB has already delivered opinions on several elements of the general rescue package put in place by the Belgian authorities in response to the current turbulence in the financial markets . All the comments and recommendations made in its previous opinions given in this context, and especially in Opinion

text: and Opinion

text: , apply equally to the draft law. 2.2 As a general matter, it is important to ensure that the draft law and any subsequent implementing royal decrees fully comply with the relevant provisions of Community law, including competition and State aid rules. In particular, it is important that national authorities should seek to coordinate their responses to the current financial situation with their European Union partners. This is in line with the Declaration of 12 October 2008 on a concerted European action plan of the euro area countries made at the summit of the euro area Member States in Paris, which stressed the need for the Member States to ‘act in a united manner and avoid that national measures adversely affect the functioning of the single market and the other Member States’ . Certain instruments have been adopted with the aim of guiding Member States when designing support measures to alleviate the tensions on the financial markets that can be relevant in the context of the draft law and the ECB

text: recommends the consulting authority to take these into account when adopting measures pursuant to the enabling clauses in the draft law in order to ensure the existence of a level playing-field within the euro area. It is noted, in this respect, that royal decrees adopted pursuant to

text: Article 117

text: bis of the Law of 2 August 2002 are subject to the duty to consult the ECB under Article 105(4) of the Treaty when they fall within the ECB’s advisory competences.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET

type: vagledning

utgivare: ecb


text: EGT L 189, 3.7.1998, s. 42. 2 Europeiska centralbankens yttrande av den 29 oktober 2008 på begäran av Finansdepartementet om ett utkast till förordning om statliga garantier till banker m.fl.

text: ”Declaration on a concerted European action plan of the euro area countries” (ej på svenska), som antogs av statscheferna för euroområdet den 12 oktober 2008, finns på franska ordförandeskapets webbplats, www.ue2008.fr.

text: Detta är även i linje med vad ECB förklarat i andra yttranden av nyare datum, se t.ex. punkt 3.1 i ECB:s yttrande

text: av den 17 mars 2009 på begäran av det tyska finansministeriet över ett förslag till ytterligare stabiliseringsåtgärder för finansmarknaden och punkt 3.2 i ECB:s yttrande

text: av den 26 januari 2009 på begäran av det danska ekonomi- och företagsministeriet över ett förslag till lag om statliga investeringar i kreditinstitut samt ett lagförslag om ändring av lagen om finansiell stabilitet.

text: ECB-rådets rekommendation angående statliga garantier för bankers skuldförbindelser av den 20 november 2008, finns på ECB:s webbplats www.ecb.europa.eu.

text: Se rådets slutsatser om bankkapital, som antogs av rådet (Ekofin) den 20 januari 2009.

sprak: sv

title: Europeiska centralbankens yttrande av den 26 mars 2009 på begäran av Finansdepartementet om ett utkast till förordning om ändring i förordningen 2008:819 om statliga garantier till banker m.fl. (CON/2009/30)

text: EUROPEISKA CENTRALBANKENS YTTRANDE av den 26 mars 2009 på begäran av Finansdepartementet om ett utkast till förordning om ändring i förordningen 2008:819 om statliga garantier till banker m.fl. (

text: ) Inledning och rättslig grund

text: Den 23 mars 2009 mottog Europeiska centralbanken (ECB) en begäran från Finansdepartementet om ett yttrande över ett utkast till förordning om ändring i förordningen 2008:819 om statliga garantier till banker m.fl. (nedan kallat förslaget till förordning). ECB:s behörighet att avge ett yttrande grundas på artikel 105.4 i fördraget om upprättandet av Europeiska gemenskapen och artikel 2.1 sjätte strecksatsen i

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

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

text: artikel 17.5

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

text: 1. Syftet med förslaget till förordning

text: Genom förslaget till förordning ändras förordningen om statliga garantier till banker m.fl. (SFS 2008:819) som utfärdades av Finansdepartementet den 29 oktober 2008. ECB ombads yttra sig över utkastet till SFS 2008:819 och avgav sitt yttrande

text: den 29 oktober 2008 . Enligt det nuvarande regelverket upphör den svenska garantiordningen att gälla den 30 april 2009. Denna ordning och andra åtgärder har visserligen bidragit till att stabilisera de finansiella marknaderna, men den svenska regeringen bedömer att marknaderna inte kommer att ha återgått till det normala i slutet av april 2009 och att det därför krävs ytterligare stöd. För att undvika onödig osäkerhet för berörda institut och de finansiella marknaderna föreslår den svenska regeringen följande ändringar i den befintliga garantiordningen:

text: a) Förlängning av den period då det är möjligt att tillhandahålla garantier till den 31 december 2009. Möjligheten att förlänga det aktuella stödet nämndes redan i samband med att den aktuella garantiordningen antogs. Motivet för att förlänga garantiordningen är att den svenska regeringen vill skicka en tydlig signal om att stödåtgärderna kommer att bibehållas så länge som oron på finansmarknaderna består. b) Justering av maxbeloppet för de garanterade instrumenten per deltagande institut. Till följd av förlängningen av den period då det är möjligt att tillhandahålla garantier föreslår regeringen att beräkningen av maxgränsen för garanterade instrument för respektive institut ska justeras. Den nya gränsen avser det sammanlagda beloppet för ett instituts skuldförbindelser som förfaller mellan den 1 september 2008 och den 31 december 2009 (tidigare den 30 april 2009). Ordningens övre samlade beloppsgräns på 1 500 miljarder kronor för skuldförbindelser är oförändrad. c) Att skuldförbindelser utan säkerhet med löptider på upp till fem år inkluderas i ordningen. Regeringen anser att tre års löptid är alltför kort för att upprätthålla den långfristiga utlåningen. Denna justering tar hänsyn till de problem som banker och företag står inför när de söker finansiering med längre löptid än ett till två år. d) Justering av kapitaltäckningskraven. Enligt den nuvarande svenska garantiordningen är kapitalkraven för deltagande institut högre än lagkraven. Endast institut med minst sex procent nivå-1 kapital och minst nio procent kombinerat nivå-1 och nivå-2 kapital omfattas av ordningen. Den svenska regeringen är orolig över att detta kan ha fått oönskade effekter genom att det indirekt har fastställts en ny minimistandard för kapitaltäckningskrav. Man föreslår därför att kapitaltäckningskraven justeras så att de är i linje med de grundläggande lagkraven.

text: 2. Allmänna kommentarer

text: 2.1 Förlängning av ordningen

text: Vad gäller garantiordningens förlängning med åtta månader understryker ECB, i enlighet med den förklaring av den 12 oktober 2008 som avgavs vid euroländernas toppmöte i Paris , att EU:s medlemsstater måste samordna sina åtgärder eftersom det är mycket viktigt att harmonisera slutdagen för nationella ordningar för finansiellt stöd i EU .

text: 2.2 Instrumentens löptid

text: ECB uppfattar det som att, när garantiordningen ändrats genom förslaget till förordning, bankers skuldförbindelser med upp till fem års löptid kan omfattas av garantierna. I detta sammanhang vill

text: ECB ännu en gång påpeka att beviljandet av sådana statliga garantier av bankers skuldförbindelser bör a) ta sikte på de finansieringsproblem som solventa banker med likviditetssvårigheter står inför genom att förbättra likviditeten på marknaden för bankers skuldförbindelser med längre löptider, b) upprätthålla likvärdiga konkurrensvillkor mellan finansinstituten och undvika snedvridningar på marknaden, c) säkerställa överensstämmelse med Riksbankens likviditetshantering. Vad gäller utvidgandet av den statliga garantin till att omfatta även skuldförbindelser med upp till fem års löptid noterar ECB att denna åtgärd är i linje med ECB:s rekommendation för harmonisering och samordning av statliga garantier inom EU och uttalandet att euroområdets regeringar bör tillhandahålla nya medellånga (upp till fem år) statliga garantier avseende bankers skuldförbindelser. I detta sammanhang, och med tanke på hur integrerade finansmarknaderna inom EU är, upprepar ECB att löptiden på de instrument som omfattas av garantierna bör harmoniseras inom EU så att konkurrens på likvärdiga villkor, som är mycket viktig på detta område, kan säkerställas.

text: 2.3 Kapitalkrav

text: ECB noterar att kapitalkraven för deltagande institut enligt den nuvarande svenska garantiordningen är högre än lagkraven, vilket förslaget till förordning syftar till att ändra. I detta avseende vill ECB framhålla rådets (Ekofin) slutsatser av den 20 januari 2009 om bankkapital där rådet konstaterar att ”tillhandahållandet av kapital till banksektorn inte är tänkt att skapa nya, högre i lag föreskrivna kapitalkrav för banksektorn. Kapitalkravet på banker bör även fortsättningsvis bedömas från fall till fall enligt gällande EU-bestämmelser med utgångspunkt i den enskilda riskprofilen och rigorösa stresstester. Det bör inses att kapitalet skapar en buffert såväl mot de svåra ekonomiska villkoren som för fortsatta lån till kreditvärdiga låntagare” .

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

text: Utfärdat i Frankfurt am Main den 26 mars 2009.

text: [Namnteckning]

text: Jean-Claude TRICHET

text: ECB:s ordförande


title: Opinion of the European Central Bank of 26 March 2009 at the request of the Latvian Financial and Capital Market Commission on a draft law amending the Law on deposit guarantees (CON/2009/31)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 26 March 2009 at the request of the Latvian Financial and Capital Market Commission on a draft law amending the Law on deposit guarantees (

text: ) Introduction and legal basis

text: On 23 March 2009 the European Central Bank (ECB) received a request from the Latvian Financial and Capital Market Commission (FCMC) for an opinion on a draft law (hereinafter the ‘draft law’) amending the Law of 3 June 1998 on deposit guarantees (hereinafter the ‘Law on deposit guarantees’ ). 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

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

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

text: 1. Purpose of the draft law

text: The draft law will introduce certain changes to the operation of the Latvian Deposit Guarantee Fund (hereinafter the ‘Fund’), and in particular it will: (1) broaden the scope of the Fund’s coverage as regards branches in Latvia of banks not registered in the European Union ; (2) clarify the scope of categories of depositors excluded from the Fund’s protection ;

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

text: 4 See amended

text: Article 17

text: points (4) and (6) of the Law on deposit guarantees. The new categories of excluded depositors are (i) specified categories of persons involved in management, supervision or auditing of the Fund member; and (ii) depositors who have obtained individual conditions for their deposit holdings that facilitated the deterioration of the Fund member’s financial situation. Such categories correspond to points 7 and 11 of the Annex I to the Directive

text: on deposit-guarantee schemes (OJ L 135, 31.5.1994, p. 5). (3) introduce risk-based calculation of premiums paid to the Fund by its members, as well as a possibility for a special temporary increase of the Fund’s premiums where deposit payouts have been made ; and (4) enhance the Fund’s deposit payout procedure, in particular by allowing for payments to be made through a selected commercial credit institution . According to the FCMC , such amendments are necessary in order to address the present international and domestic financial situation and to take account of the regulatory regime introduced by Directive

text: of the European Parliament and of the Council of 11 March 2009 amending Directive

text: on deposit-guarantee schemes as regards the coverage level and the payout delay .

text: 2. General observations

text: In its Opinion

text: of 4 February 2009, the ECB has already commented on the special legislative measures proposed by the Latvian authorities to deal with the financial crisis, including the changes to the Law on deposit guarantees . To the extent relevant, the observations made in Opinion

text: also apply to the changes proposed by the draft law. The present opinion concentrates on the selected issues specified below and does not constitute a comprehensive assessment of the Law on deposit guarantees, nor of the implementation of Directive

text: in Latvia. Nevertheless, the ECB takes this opportunity to reiterate that, when implementing Directive

text: or otherwise amending the legal framework for operation of the national deposit-guarantee schemes, Member States should act in a coordinated manner to avoid significant differences in national legal frameworks having a counterproductive effect, by creating distortions in global banking markets .

text: 5 Risk-based calculation of the Fund premiums will apply from 1 January 2010; see amended Article 8 of the Law on deposit guarantees (new wording in paragraphs (2) to (2 ) and in paragraph (6)) together with the point 9 of the draft law.

text: 6 See new

text: Articles 13

text: and the paragraphs (1) to (4) added to Article 20 of the Law on deposit guarantees.

text: 7 See consultation letter received by the ECB on 23 March 2009 from the FCMC.

text: 8 OJ L 68, 13.3.2009, p. 3.

text: 9 See paragraph 3.1 of ECB Opinion

text: of 4 February 2009 at the request of the Latvian Financial and Capital Market Commission on draft amendments to certain legal acts in connection with the financial turmoil. All ECB opinions are available on the ECB website at www.ecb.europa.eu.

text: 10 See paragraph 2.1 of ECB Opinion

text: of 18 November 2008 at the request of the Council of the European Union on a proposal for a Directive of the European Parliament and of the Council amending Directive

text: on deposit-guarantee schemes as regards the coverage level and the payout delay (OJ C 314, 9.12.2008, p. 1); paragraph 2.1 of ECB opinion

text: of 28 October 2008 at the request of the Belgian Minister for Finance on a draft royal decree implementing the Law of 15 October 2008 on measures promoting financial stability and in particular establishing a State guarantee for the provision of credit in the context of financial stability, in relation to the protection of deposits and life insurance and amending the Law of 2 August 2002 on the supervision of the financial sector and on financial services; and paragraph 2.1 of ECB Opinion

text: of 10 March 2009 at the request of the Central Bank of Cyprus and of the Cypriot Authority for the Supervision and Development of Cooperative Societies on certain draft regulations related to the Deposit Protection Scheme.

text: 3. Specific observations

text: 3.1 Participation in the Fund The draft law broadens the scope of the Fund’s coverage as regards branches in Latvia of non-EU banks . Such branches will become mandatory and unconditional members of the Fund, unlike the branches in Latvia of credit institutions established in another Member State, which may participate in the Fund upon notification and on a ‘supplementary cover’ basis, i.e. to the extent that the deposit-guarantee scheme of the home Member State does not cover all the categories of deposits protected in Latvia or the amount of compensation offered by the home Member State’s scheme is less than amount applicable under the Latvian provisions . While such provisions are in line with the requirements of

text: Article 4(2) of Directive 94/19/EC

text: , they provide for different treatment of branches of EU banks and non-EU banks operating in Latvia. Under such provisions, the Fund will fully cover the guaranteed deposits held with the branches of credit institutions established in non- EU countries, while it will only top-up the coverage of deposits held with the branches of credit institutions established in the EU Member States. 3.2 Sanctioning regime The draft law, together with the existing provisions of the Law on deposit guarantees, introduces a sanctions regime under which members of the Fund who do not comply with the financial obligations of Fund participation may, after one month’s notice: (i) in the case of banks established in Latvia and branches in Latvia of non-EU banks, have their banking licence revoked; or (ii) in the case of branches in Latvia of credit institutions established in other Member States, have their Fund participation terminated . The ECB understands that the intention behind the proposed sanction provisions is to establish an effective sanctioning system in relation to all categories of Fund members. However, the ECB draws the attention of the FCMC to

text: Article 3(2)

text: and (3) and

text: Article 4(4) of Directive 94/19/EC

text: that establish minimum rules for sanctions procedures in relation to non-compliant members of national deposit-guarantee schemes . The ECB recommends that the Law on deposit guarantees, as amended by the draft law, should be aligned with the provisions of Directive

text: , in particular as regards the involvement in the sanction procedures of the relevant supervisory authorities and the required period of notice.

text: 12 See new paragraphs (2)(2) and (4 ) in Article 2 of the Law on deposit guarantees.

text: 13 See the current paragraphs (4) and (5) and the new paragraphs (6) and (7) in Article 12 of the Law on deposit guarantees.

text: 14 The provisions require that appropriate measures should be taken to ensure compliance, in the first instance by the home supervisory authority of the relevant institution, in collaboration with the national guarantee-scheme of the institution or of its foreign branch, as relevant. Only if these measures fail to secure compliance, and after an appropriate period of notice of not less than 12 months, may the non-compliant institution or its foreign branch be excluded from the institution’s home country guarantee-scheme or from the supplementary cover of the branch’s host country guaranteescheme, with the consent of the institution’s home supervisory authority. 3.3 Calculation of contributions to the Fund The draft law introduces the possibility that levels of contributions to the Fund by its members may be differentiated according to specified prudential criteria, such as the capital adequacy ratio of a Fund member, its liquidity and large exposures ratios, and the quality of its loan portfolio . In its previous opinions on draft national provisions proposing changes to the calculation of contributions to national deposit-guarantee schemes, the ECB has welcomed the principle of risk-based premiums , while at the same time it has emphasised that sound funding arrangements are critical to the schemes’ effectiveness and to the maintenance of public confidence in the banking system . At present, Directive

text: does not prescribe any method for financing deposit-guarantee schemes, as long as: (i) the costs of financing are borne, in principle, by the credit institutions themselves; (ii) the financing capacity of the scheme is in proportion to credit institutions’ liabilities; and (iii) the stability of the banking system of the Member State concerned is not jeopardised . However, Directive

text: provides that, by 31 December 2009, the European Commission must present a report concerning, inter alia, the harmonisation of the funding mechanisms of deposit-guarantee schemes and possible models for introducing risk-based contributions . Any changes to national legal frameworks for the operation of the depositguarantee schemes will need to take into account the work initiated at Community level. 3.4 Reduction of delays in the payout of guaranteed deposits As noted in previous ECB opinions , reducing delays in making payouts of guaranteed deposits may strengthen depositor confidence and play a key role in the effectiveness of deposit-guarantee schemes. At the same time, it is essential that a pragmatic approach should be taken to the reduction of payout delays, thereby preserving the credibility of the deposit-guarantee schemes. Moreover, it is important to establish efficient operational processes for verifying claims and reimbursing depositors, as well as for ensuring that sufficient funding is available. The ECB acknowledges the intention behind the draft law to provide for speedy payout procedures, in particular by imposing on Fund members a requirement to make daily updated lists of entitled depositors and of the amounts of guaranteed deposits . Such measures appear to be in line with the objectives of Directive

text: , which specifies that Member States should aim to ensure the continuity of banking services, in particular in periods of financial turmoil .

text: 16 See paragraph 3.2 of ECB Opinion

text: of 17 October 2008 at the request of the Greek Ministry of Economy and Finance on a draft law on, inter alia, the establishment of the ‘Depositors and Investors of Credit Institutions Compensation Fund’.

text: 17 See paragraph 2.5 of the ECB Opinion

text: of 27 August 2007 at the request of the Polish Minister for Finance on a draft law amending the Law on the Bank Guarantee Fund; see also the Financial Stability Forum, ‘Guidance for Developing Effective Deposit Insurance Systems’, September 2001, point V.4 (‘Funding arrangements’), p. 26.

text: 18 See

text: recital 23

text: of

text: Directive 94/19/EC

text: 20 See paragraph 2.2 of Opinion

text: and paragraph 2.2 of Opinion

text: 21 See new Article 13 of the Law on deposit guarantees.

text: 22 See

text: recital 13

text: of

text: Directive 2009/14/EC

text: . 3.5 Payments of guaranteed deposits through a commercial credit institution The new paragraphs (1) to (4) of Article 20 of the Law on deposit-guarantees provide the possibility that payments of the guaranteed deposits could be made: (i) through one or more selected commercial credit institutions, or (ii) by transferring the guaranteed deposits, to the extent protected by the Fund, to another credit institution. The draft law does not clarify the criteria for selecting the credit institution responsible for the payout procedures, the precise tasks to be assigned to such a credit institution, or its liability. In this context, the ECB refers to

text: Article 10(1) of Directive 94/19/EC

text: which requires that ‘[d]eposit-guarantee schemes shall be in a position to pay duly verified claims by depositors in respect of unavailable deposits’. This means that it is primarily the responsibility of the national deposit-guarantee scheme to ensure that the guaranteed deposits are made available to entitled depositors in an orderly and timely manner, whatever the payment system chosen. It is therefore important to clarify the elements of the proposed provisions referred to above, and in particular to ensure that the credit institution appointed will have sufficient resources available to ensure orderly and timely payouts under the deposit-guarantee scheme. In addition, the responsibility of the commercial credit institution appointed should be limited to the technical payment of the guaranteed deposits and should not include the verification of the claimants’ entitlement to payment, for which the national deposit-guarantee scheme is responsible. 3.6 More generally, the appointment of a commercial credit institution to act as payment administrator may raise concerns because of issues of distortion of competition and moral hazard, as well as issues related to the potential to increase pressures in the distribution of liquidity. In particular, if a specific commercial credit institution were pre-appointed for this function, this could be viewed as a guarantee from the government that the credit institution in question would remain viable. Similar concerns may be related to an alternative solution under the amended

text: Article 20(1)

text: (2) of the Law on deposit guarantees, whereby the service-providing credit institution may, in practice, acquire customer accounts from an institution in relation to which deposit-guarantee payments are activated. In view of the above, the ECB recommends strengthening the Fund’s own technical capacities as opposed to providing for temporary outsourcing solutions as the principal method for ensuring that the payment of guaranteed deposits is properly organised .

text: 24 See the ECB opinions issued in the context of the present financial crisis, which emphasise the need to protect the operational capacity of the existing national deposit-guarantee schemes; see paragraph 3.10 of ECB Opinion

text: of 15 October 2008 at the request of the Irish Minister for Finance on a draft Credit Institutions (Financial Support) Scheme 2008; and paragraph 2.2 of ECB Opinion

text: of 17 November 2008 at the request of the Irish Minister for Finance on a draft Financial Services (Deposit Guarantee Scheme) Bill 2008. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 26 March 2009. [signed] The President of the ECB Jean-Claude TRICHET


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

text: All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 3 See ‘Immediate Responses to Financial Turmoil’, Ecofin Council Conclusions of 7 October 2008, available on the former French Presidency’s website at www.ue2008.fr. The Ecofin Council recommended that: (i) interventions should be timely and the support should in principle be temporary; (ii) the interests of taxpayers should be protected; (iii) existing shareholders should bear the due consequences of the intervention; (iv) the Government should be in a position to bring about a change of management; (v) management should not retain undue benefits; (vi) governments may have, inter alia, the power to intervene in remuneration; (vii) legitimate interests of competitors must be protected, in particular through the State aid rules; and (viii) negative spill-over effects should be avoided.

text: The text of the Declaration is available on the former French Presidency’s website at www.ue2008.fr. The Member States agreed to: (i) ensure appropriate liquidity conditions for financial institutions: (ii) facilitate the funding of banks; (iii) provide financial institutions with additional capital resources to continue to ensure the proper financing of the economy; (iv) allow for an efficient recapitalisation of distressed banks, (v) ensure sufficient flexibility in the implementation of accounting rules; and (vi) enhance cooperation procedures among European countries.

text: See ECB Opinion

text: of 9 February 2009 at the request of the Cypriot Ministry of Finance on a draft law amending the Laws of 2002 and 2004 on the management of revenues and expenditure and on the accounting system of the Republic and other related matters.

text: See Brussels European Council of 15 to 16 October 2008, paragraph 3 of the Presidency Conclusions.

text: See paragraph 3.1 of ECB Opinion

text: of 20 October 2008 at the request of the Austrian Ministry of Finance on draft legal measures to ensure the stability of the Austrian financial market.

text: In this context also see paragraph 3.7 of ECB Opinion

text: For more information on Lietuvos bankas’ institutional and financial independence see recent ECB Opinion

text: of 24 March 2009 at the request of Lietuvos bankas on behalf of the Ministry of Finance of Lithuania on a draft law amending the Law on Lietuvos bankas as regards the rules on the distribution of the profits of Lietuvos bankas. 11 OJ L 332, 31.12.1993, p. 1. See also paragraph 3.2 of ECB Opinion

text: of 17 October 2008 at the request of the Spanish State Secretary for Economic Affairs on a Royal Decree-Law creating a Fund for the acquisition of financial assets and on a Royal Decree-Law adopting urgent financial and economic measures in relation to the concerted European action plan of the euro area countries and paragraph 3.7 of ECB Opinion

text: . 12 Articles 10 and 11 of the draft law.

text: Article 3(1)

text: (1) of the draft law. 14 See paragraph 3.1.2 of ECB Opinion

text: of 9 March 2009 at the request of Riigikogu on a draft law on stabilising measures for the Estonian financial system.

text: The reference is to the Recommendations of the Governing Council of the European Central Bank on the government guarantees for bank debt of 20 November 2008, available on the ECB’s website at www.ecb.europa.eu. 16 See also paragraph 3.2 of ECB Opinion

text: of 13 November 2008 at the request of the Spanish Ministry for Economic Affairs and Finance on a draft order implementing Royal Decree-Law 7/2008 authorising State guarantees. 17

text: Article 3(2)

text: (4) of the draft law. 18 ‘… In all cases, these actions will be designed in order to avoid any distortion in the level playing field and possible abuse at the expense of non beneficiaries of these arrangements. As a consequence the scheme will be limited in amount, temporary (emphasis is ours) and will be applied under close scrutiny of financial authorities …’ taken from the Declaration.

text: See the Recommendations of the Governing Council of the European Central Bank on the pricing of recapitalisations issued on 20 November 2008, available on the ECB’s website at www.ecb.europa.eu. 20 See the Communication from the Commission ‘On the Treatment of Impaired Assets in the Community Banking Sector’, available on the Commission’s website at www.ec.europa.eu. 21 See the ECB’s ‘Guiding principles for bank asset support schemes’, available on the ECB’s website at www.ecb.europa.eu. 22 Article 8(1) of the draft law.

text: See e.g. paragraph 3.2.2 of ECB Opinion

text: of 17 March 2009 at the request of the German Ministry of Finance on a draft law on the further stabilisation of the financial market. 24 See e.g. paragraph 3.8 of ECB Opinion

text: of 13 November 2008 at the request of the Finnish Ministry of Finance on a draft government proposal for laws amending the Law on the Government Guarantee Fund and the Law on credit institutions. 25 The text of the Memorandum of Understanding is available on the ECB’s website at www.ecb.europa.eu.

text: See the Annex to the draft law.

title: Opinion of the European Central Bank of 2 April 2009 at the request of the Lithuanian Ministry of Finance on a draft law on financial sustainability (CON/2009/32)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 2 April 2009 at the request of the Lithuanian Ministry of Finance on a draft law on financial sustainability (

text: ) Introduction and legal basis

text: On 25 March 2009 the European Central Bank (ECB) received a request from the Lithuanian Ministry of Finance for an opinion on a draft law on financial sustainability (hereinafter the ‘draft law’). 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

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

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

text: 1. Purpose of the draft law

text: 1.1 The aim of the draft law is to enable the Lithuanian State to protect essential public interests and to take measures to strengthen financial stability and the credibility of the banking system. 1.2 The draft law provides for four categories of measures to strengthen financial stability: (a) State guarantees; (b) redemption of bank assets; (c) State involvement in a bank’s capital; and (d) taking shares in a bank in the public interest. The draft law is intended to apply to banks and branches of foreign banks established in Lithuania. 1.3 The draft law provides for a general legal framework allowing the Government or an institution authorised by it to apply one or several of the new measures when the conditions for their application are met. Detailed rules for the implementation of the four categories of measures are to be adopted by the Government. 1.4 The draft law is of a permanent nature – its validity is not limited in time.

text: 2. General observations

text: 2.1 The ECB has issued a number of opinions at the request of the competent Member States’ authorities on national measures adopted in response to the global financial crisis . The ECB therefore invites the Ministry of Finance to take into account the relevant observations made in its recent opinions on similar draft legislative provisions in other Member States, some of which are repeated again below. 2.2 The ECB also draws attention to the guidance provided by the Ecofin Council to the Member States in the conclusions of its Meeting of 7 October 2008 as well as the Declaration issued by the Heads of State of the euro area on 12 October 2008 (hereinafter the ‘Declaration’) . In particular, the ECB stresses that any initiatives put in place by the competent national authorities to restore confidence in the financial markets should be coordinated and should aim to implement the common principles in question, in a spirit of close cooperation with other Member States and the Community institutions . The principles contained in the Declaration as well as the conclusions raised by the Ecofin Council were endorsed by the European Council of 15 to 16 October 2008 . 2.3 As the draft law provides for a general legal framework and the detailed rules of its implementation will be laid down by the Government, the ECB expects to be consulted on any new draft legislative provisions should they materially influence the stability of financial institutions and markets. 2.4 With these general observations in mind, and against the background of the guidance previously given by the ECB and the Community institutions in this regard, the ECB has the following observations to make on the draft law.

text: 3. Specific comments

text: 3.1 Entities eligible for the application of the new measures 3.1.1 As regards the entities to which the measures to strengthen financial stability provided for in the draft law could be applied, the ECB understands that subsidiaries are also covered under ‘banks

text: and branches of foreign banks established in Lithuania’ . The ECB emphasises that any distortion in the level playing-field as regards the treatment of domestic financial institutions and subsidiaries of foreign institutions should be avoided . 3.2 Involvement of Lietuvos bankas 3.2.1 The ECB understands that the draft law will be implemented and the new measures will be applied by the Government or another executive institution authorised by it. Lietuvos bankas’s role in relation to the new measures will only be limited to a consultative one, i.e. advising the Government or the institution authorised by it in respect of specific measures and/or providing its findings on the situation of a particular bank. 3.2.2 The ECB appreciates that these provisions recognise Lietuvos bankas’s expertise in the fields relevant to the stability of the financial market. In this respect, the ECB notes that any involvement of Lietuvos bankas in application of the measures to strengthen financial stability must be compatible with the Treaty provisions . First, the ECB expects that functions to be performed by Lietuvos bankas in the context of implementation of the new measures will be conducted in manner that is fully compatible with Lietuvos bankas’s institutional and financial independence to safeguard the proper performance of its existing tasks under the Treaty and the Statute of the European System of Central Banks and of the European Central Bank. Second, the ECB also expects that Lietuvos bankas’s involvement in the procedure provided for in the draft law will not go beyond an advisory function and that it will in other respects comply fully with the prohibition on monetary financing laid down in Article 101(1) of the Treaty, read in conjunction with

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) [now Articles

text: and

text: ] of the Treaty . In this respect, the ECB understands that the measures to strengthen financial stability will be exclusively financed from budgetary and similar State resources . In the same vein, this observation also concerns

text: Article 3(1)

text: (1) of the draft law, referring to the measures that Lietuvos bankas may apply to resolve problems relating to a bank’s liquidity or solvency. In this respect, it is noted that any possible measures undertaken by Lietuvos bankas should only relate to liquidity

text: support provided to solvent institutions in order to comply with the prohibition on monetary financing. 3.3 Circumstances under which the new measures could be applied 3.3.1 The draft law provides that the measures to strengthen financial stability could be applied when the bank concerned ‘faces liquidity problems or is insolvent, or there is a real threat that it will have liquidity problems or will become insolvent, and that the measures, which may possibly be applied by Lietuvos bankas pursuant to legal acts are insufficient to resolve the problems related to the bank’s liquidity or solvency’ . In this context, the ECB would welcome clarification, as, according to the guidance previously given by the ECB and the Community institutions in this regard, only one measure could be applied to insolvent banks, namely taking shares in a bank in the public interest. 3.3.2 The ECB also recommends that the consulting authority clarifies the coverage of the proposed measures under the draft law. Indeed, in line with previous opinions , attention should be drawn to the importance of putting a transparent, predictable framework in place, by defining the terms and conditions for financial institutions to have recourse to it and the parameters of and limitations to the exercise by the Lithuanian authorities of their powers when deciding whether to activate the support measures contained in the draft law. 3.4 Relationship of the draft law with monetary policy 3.4.1 The ECB reminds the consulting authority that, in line with the Declaration, Member States have to act in a coordinated manner to avoid that significant differences in national implementation could have a counter-productive effect, creating distortions in global banking markets. Against this background, the ECB has the following remarks. 3.4.2 First, the ECB understands that State guarantees may be issued to cover all types of liabilities of domestic financial institutions and national guarantee schemes. However, the ECB notes that the draft law does expressly exclude interbank deposits from its material scope of application. The ECB welcomes this provision as such guarantees could entail a substantial distortion in the various segments of the money market by potentially increasing short-term debt issuance activity across Member States, thus impairing the implementation of the single monetary policy of Lietuvos bankas, and possibly altering the transmission of monetary policy decisions. 3.4.3 Second, the ECB understands that, by extension, State guarantees may be given for loans taken out by banks. In this respect, the ECB notes that such arrangements for the granting of government guarantees on bank debt should, in their practical implementation, aim at: (a) addressing the funding problems of liquidity-constrained solvent banks by improving the functioning of the market for bank debt of longer term maturity; (b) preserving the level playing-field among financial

text: institutions and avoiding market distortions; and (c) ensuring consistency with the management of liquidity by Lietuvos bankas. In line with the Declaration, the ECB also notes that the governments should make available a Government guarantee of new medium term (up to five years) bank senior debt issuance and that guarantees must be limited in time. In this respect, the ECB reminds the consulting authority that the draft law should lay down not only the maximum maturity of a bank’s liabilities that are guaranteed by the State, but also the minimum maturity, currently recommended to be three months. 3.4.4 Third, as regards the pricing of the State guarantees, the ECB notes that it also appears crucial to ensure the harmonisation of the price determination of such guarantees within the euro area and the European Union where a level playing-field is of essence. In this respect, the ECB’s contribution to the harmonisation and coordination across the EU of the price determination of State guarantees is helpful. In particular, it is important to ensure that the price of the State guarantee is risk-based and market-oriented and determined on the basis of the costs of a corresponding guarantee in the market. In this respect, the ECB notes that Article 4(3) of the draft law introduces a direct reference to the ECB’s recommendations on government guarantees on bank debt. While appreciating that the draft law includes such provisions, for reasons of legal certainty, the ECB recommends deleting the specific reference to its recommendations on government guarantees on bank debt, which do not constitute a legal act and which may be subject to revision . 3.4.5 Fourth, the ECB also reminds the Lithuanian authorities that it is important to ensure that the beneficiary financial institutions may not profit from undue use of their guaranteed status to engage in a heightened level of activities which distort the market and facilitate abnormal balance sheet growth. In this regard, the ECB reiterates the importance of establishing appropriate safeguards such as limits on the marketing of financial products or on expansion of activities on the basis of State guarantees. 3.4.6 Finally, the draft law provides that the measures to strengthen financial stability must be applied for a ‘limited’ time and that, once applied, they will have to be reviewed under the procedure and terms prescribed by legislation regulating State aid . The ECB reminds the consulting authority that open-ended schemes are not line with the Declaration. In particular, the Declaration clearly draws attention to the need for any domestic support schemes, and for the framework that provides for them, to be temporary in nature, even if these can be extended or renewed . Accordingly, the ECB recommends that more specific provisions on the time limits of the support measures are

text: inserted in the draft law, as well as provisions establishing means aimed at redeeming the new measures. 3.5 Conditions for State capital investments 3.5.1 In line with the Declaration, the ECB reiterates that uncoordinated decisions among Member States should be avoided as they may have a negative impact on the integrity of financial markets and lead to significant differences in the treatment of financial institutions between Member States. This remark also applies to the measures related to State capital investments. 3.5.2 The ECB thus takes the opportunity here to reiterate the points made in its previous opinions. In this respect the ECB notes that the recapitalisation measures considered in Member States are aimed at strengthening the capital position of fundamentally sound financial institutions in order to improve the functioning and stability of the banking system and to ensure the proper financing of the economy. Against this background, the ECB has the following observations. 3.5.3 First, a consistent approach should be used in defining the conditions for recapitalisations and the pricing of the instruments intended to provide Tier 1 capital to financial institutions. The ECB underlines the importance of appropriate pricing for recapitalisations in terms of the goals of enhancing the stability of the financial system, facilitating a return to normal market conditions and ensuring the proper financing of the economy. Against this background, the ECB published recommendations of the Governing Council of the ECB on the pricing of recapitalisations (hereinafter the ‘Recommendations on recapitalisations’) . The ECB highlights that the pricing conditions for capital support should be risk-based and market-oriented, determined by taking into consideration the specific risk of both the specific instrument chosen for injecting capital and the institution concerned. Specific features of the instruments for capital injections (such as preference shares) should be appropriately chosen so that, while encouraging an early end to the State’s capital support of banks, they should not result in an excessive increase in the cost of capital. 3.5.4 Second, as far as the redemption of bank assets is concerned, the ECB reiterates that this measure should not be applied to the insolvent banks. The ECB also draws attention to the fact that a mechanism for fixing a fair price for the assets should be established for this measure, in 20 21 accordance with the guidance provided by the European Commission and by the ECB . 3.5.5 Third, as regards taking shares in a bank in the public interest, the ECB understands that no limits are set with reference to the amount of shares that the Government may take and, therefore, that such a measure could also result in the takeover of a credit institution. Furthermore, the ECB also notes that the adoption of such a measure is provided for ‘solely in exceptional cases’ . In line

text: with previous opinions , the ECB stresses that due to their far reaching effects on market participants, it should be ensured that such measures are only used as a last resort, that the disturbances to the level playing-field are minimised and that the State’s role is limited in time. The ECB also draws particular attention to the appropriate pricing of the shares. Moreover, in respect of an exit strategy, pursuant to Article 9 of the draft law, expropriation is meant to be temporary. The ECB notes that the conditions for re-privatisation provided in this article are unclear. As mentioned in previous ECB opinions, it is important to ensure that the State’s involvement is limited in time and that companies are reprivatised without undue delay as soon as they are stabilised and their operations are sustainable. 3.5.6 Fourth, in line with the Declaration, the ECB also emphasises that harmonisation regarding the expiry of national financial support schemes across the EU and in particular within the euro area is of crucial importance, including for State capital investments in financial institutions. In this context, it is stressed that capital investments under the draft law must expressly provide for the temporary nature of the Lithuanian State’s intervention. More generally, concerning the issue of the application of State aid rules to measures taken by the Member States in connection with financial institutions in the context of the ongoing financial crisis, the ECB also draws the consulting authority’s attention to the importance of ensuring that the proposed arrangements comply with the relevant Community law provisions and with the criteria recently laid down by the Commission in its guidance on compliance by financial sector support schemes with EU State aid rules and to the need to ensure that the State’s role as shareholder resulting from a possible recapitalisation under the draft law is limited in time. In this respect, and in accordance with the Recommendations on recapitalisations, consideration should be given to setting out terms for the redemption or conversion of the instruments, either on the basis of a period of time or development of market conditions, in order to retain the temporary nature of State involvement and discourage financial institutions from maintaining such involvement for an extensive period of time. 3.6 Provisions on confidentiality 3.6.1 Article 12 of the draft law, providing for the protection of the confidential information provided by the banks, does not expressly establish a list of subjects to which such an obligation to maintain the confidentiality of information is applied. The ECB notes that for the sake of clarity this obligation should also apply to Lietuvos bankas, without prejudice to supervisory information and to the extent what is required under the Memorandum of Understanding on cooperation between the financial supervisory authorities, central banks and finance ministries of the European Union on cross-border financial stability of 1 June 2008 .

text: 3.7 Implementation of ‘EU legal acts’ 3.7.1 As laid down in its

text: Article 1(4)

text: , the draft law is meant to provide for the implementation of two ‘EU legal acts’, namely the Communication from the Commission on ‘The application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis’ of 13 October 2008 and the Communication from the Commission on ‘The recapitalisation of financial institutions in the current financial crisis: limitation of aid to the minimum necessary and safeguards against undue distortions of competition’. The ECB notes that from a legal point of view, the term ‘implementation’ does not seem appropriate in respect of the abovementioned Communications from the Commission, since they cannot be properly defined as ‘legal acts’ and are not a source of Community law. However, the ECB understands that the intention is to follow and respect these documents in the draft law. In this context, the ECB draws again attention to the new Communication from the Commission ‘On the Treatment of Impaired Assets in the Community Banking Sector’, which applies from 25 February 2009 and which also should be taken into consideration.

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

text: Done at Frankfurt am Main, 2 April 2009.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: See ECB Opinion

text: of 22 January 2009 at the request of the Austrian Ministry of Finance on a draft Federal law on the increase of Austria’s quota with the International Monetary Fund.

title: Opinion of the European Central Bank of 3 April 2009 at the request of the Italian Ministry of Economy and Finance on a draft law on the increase of Italy’s quota with the International Monetary Fund (CON/2009/33)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 3 April 2009 at the request of the Italian Ministry of Economy and Finance on a draft law on the increase of Italy’s quota with the International Monetary Fund (

text: ) Introduction and legal basis

text: On 13 March 2009, the European Central Bank (ECB) received a request from the Italian Ministry of Economy and Finance (MEF) for an opinion on a draft law on the increase of Italy’s quota with the International Monetary Fund (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the third indent of

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

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft law relates to the Banca d’Italia. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 On 28 April 2008 the Board of Governors of the International Monetary Fund (IMF) adopted Resolution No 63-2 on the ‘Reform of Quota and Voice’ and on 5 May 2008 it adopted Resolution No 63-3 amending the Articles of Agreement of the IMF to expand its investment authority. When the first of the proposed amendments becomes effective (i.e. when it has been accepted by three fifths of the members of the IMF having 85 % of the total voting power), there could be an increase in the IMF quota for up to 54 countries, including Italy, provided that, within 30 days of the entry into effect of the amendment, each of those countries both consents to the increase and pays the amount of their increased quota to the IMF. As stated in the explanatory report on the draft law, it is expected that, as in the case of previous amendments of the IMF’s Articles of Agreement, Italy’s declaration of acceptance will be signed by the President of the Republic. 1.2 Following the increase of 11.5 % of the total quotas decided by the IMF’s Board of Governors in April 2008, the objective of the draft law – as regards the part of it which refers to the Banca d’Italia and is therefore the subject of this opinion – is to authorise the MEF to pay, by having recourse to the Banca d’Italia, for the proposed increase in Italy’s IMF quota from 7 055.5 million

text: special drawing rights (SDRs) to 7 882.3 million SDRs. As stated in the explanatory report on the draft law, ‘it is envisaged that the necessary funds will be obtained from the Banca d’Italia’.

text: 2. General observations

text: 2.1 Article 4 of the draft law provides that the MEF is authorised to make the payments, having recourse to the Banca d’Italia, and has the right to grant the Banca d’Italia the necessary guarantees to cover any risk connected with the payment made by it or made ‘using their liquidity’ in the name of and on behalf of the State. In this respect, the ECB notes that it is not clear which subject the word ‘their’ refers to. For the sake of linguistic accuracy and legal clarity, it would be advisable to draft the provision in Article 4 of the draft law more precisely. 2.2 The ECB also notes that, according to the explanatory report on the draft law, such payments do not entail negative effects for the Treasury or for Italy’s balance sheet as they will constitute (i) in part a credit with the IMF that could only affect Italy’s balance sheet for the purpose of reimbursing the Banca d’Italia in the event of the liquidation of the IMF and losses related to such liquidation, and (ii) in part serve to constitute a line of credit in favour of the IMF in a current account specially opened with the Banca d’Italia. 2.3 As recently expressed in a very similar case , the ECB reminds the MEF that the tasks performed by the Banca d’Italia must comply with the monetary financing prohibition under Article 101 of the Treaty and

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

text: Articles 104

text: [now 101] and 104b(1) [now

text: Article 103(1)

text: ] of the Treaty . Pursuant to

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

text: , the financing by national central banks of obligations falling upon the public sector vis-à-vis the IMF is not regarded as a credit facility within the meaning of Article 101 of the Treaty. Therefore, the ECB notes that any possible payment by the Banca d’Italia of the proposed increase in Italy’s IMF quota complies with

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

text: and does not infringe the monetary financing prohibition.

text: Done at Frankfurt am Main, 3 April 2009. [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


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

text: All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 3 See ‘Immediate Responses to Financial Turmoil’, Ecofin Council Conclusions of 7 October 2008, available on the former French Presidency’s website at www.ue2008.fr. The Ecofin Council recommended that: (i) interventions should be timely and the support should in principle be temporary; (ii) the interests of taxpayers should be protected; (iii) existing shareholders should bear the due consequences of the intervention; (iv) the Government should be in a position to bring about a change of management; (v) management should not retain undue benefits; (vi) governments may have, inter alia, the power to intervene in remuneration; (vii) legitimate interests of competitors must be protected, in particular through the State aid rules; and (viii) negative spill-over effects should be avoided. 4 The text of the Declaration is available on the former French Presidency’s website at www.ue2008.fr. The Member States agreed to: (i) ensure appropriate liquidity conditions for financial institutions; (ii) facilitate the funding of banks; (iii) provide financial institutions with additional capital resources to continue to ensure the proper financing of the economy; (iv) allow for an efficient recapitalisation of distressed banks; (v) ensure sufficient flexibility in the implementation of accounting rules; and (vi) enhance cooperation procedures among European countries. 5 See ECB Opinion

text: of 9 February 2009 at the request of the Cypriot Ministry of Finance on a draft law amending the Laws of 2002 and 2004 on the management of revenues and expenditure and on the accounting system of the Republic and other related matters. 6 See Brussels European Council of 15 to 16 October 2008, paragraph 3 of the Presidency Conclusions.

text: See

text: Article 29

text: b(2). 8 Available on the ECB’s website at www.ecb.europa.eu. 9 Available on the Commission’s website at ec.europa.eu. 10 According to the explanatory memorandum to the draft law, a bridge bank may acquire a business by means of a contract made directly with the concerned bank (through a decision of its General Meeting) or from the conservator during the period of conservatorship of the bank.

title: Opinion of the European Central Bank of 15 April 2009 on certain amendments to the Law on banks in connection with the financial markets crisis (CON/2009/34)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 15 April 2009 on certain amendments to the Law on banks in connection with the financial markets crisis (

text: ) Introduction and legal basis

text: On 8 April 2009 the European Central Bank (ECB) received a request from the Czech Ministry of Finance for an opinion on a draft law amending Law No 21/1992 Coll. on banks (hereinafter the ‘draft law’). 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

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

text: 1. Purpose of the draft law

text: The draft law is a preventive measure in response to the turbulent situation on the financial markets in connection with the global financial crisis. The main purpose of the draft law is to establish a legal framework which would facilitate increasing a distressed bank’s capital or the transfer of its business or liabilities to a sound institution. The proposed changes include: (i) a state-owned special purpose bank, i.e. a bridge bank, may be established for the purpose of acquiring and operating the business of a distressed bank. This is considered necessary in the event that at the relevant time there would be no bank on the market willing to take over the business of a distressed bank; (ii) special rules are laid down for the increase of a bank’s capital in the event that the purpose of such increase is to comply with regulatory capital requirements. The objective is to ensure the fastest possible supply of real money to a distressed bank while maintaining maximum transparency and fairness when increasing a bank’s capital under such circumstances; (iii) Česká národní banka (CNB), the integrated financial market supervisor, is provided with a special regulatory instrument (a measure of general application) for a limited period in the event the banking or financial system is threatened. By means of this measure it would be possible to mitigate certain regulatory requirements, prohibit certain types of operations or increase reporting frequency;

text: (iv) the applicable regime governing the takeover of a debt based on an agreement with the debtor is, in the context of conservatorship, modified so that the consent of creditors to the takeover of a distressed bank’s obligations by another bank will not be necessary. Given its importance, such transaction will be subject to the prior consent of CNB, which will be given only if the person taking over the debts ensures the proper and smooth continuation of the relationships with clients relating to the debts taken over; and (v) the purchase price for the sale of the business of a bank under conservatorship must be based on a valuation prepared by a CNB-appointed valuator. To this end, basic valuation principles and procedures are provided for in the draft law.

text: 2. General observations

text: 2.1 The ECB has issued a number of opinions at the request of the competent Member State authorities on national measures adopted in response to the global financial crisis . The ECB invites the Ministry of Finance to take into account the relevant observations made in its recent opinions on similar draft legislative provisions in other Member States, some of which are repeated again below. 2.2 The ECB also draws attention to the guidance provided by the Ecofin Council to the Member States in the conclusions of its Meeting of 7 October 2008 as well as the Declaration issued by the Heads of State of the euro area on 12 October 2008 (hereinafter the ‘Declaration’) . In particular, the ECB stresses that any initiatives put in place by the competent national authorities to restore confidence in the financial markets should be coordinated and should aim to implement the common principles in question, in a spirit of close cooperation with other Member States and the Community institutions . The principles contained in the Declaration as well as the conclusions raised by the Ecofin Council were endorsed by the European Council of 15 and 16 October 2008 . 2.3 With these general observations in mind, and against the background of the guidance previously given by the ECB and the Community institutions in this regard, the ECB has the following observations on the draft law.

text: 3. Specific observations

text: Valuation

text: Article 29

text: b(1) of the draft law provides that where the business of a bank placed into conservatorship is being sold, the purchase price must be based on a valuation drawn up according to the situation on the date the contract comes into effect.

text: Article 29

text: b(2) and (3) of the draft law set out certain requirements concerning such valuation. In particular, the valuation is to be drawn up impartially, thoroughly, without unnecessary delay, with due professional care and in accordance with generally accepted procedures in the field of valuation of businesses and other property . Finally,

text: Article 29

text: c(8) of the draft law states that when a part of the business of a bank placed into conservatorship is being sold, the provisions of

text: Articles 29

text: b and 29c will apply mutatis mutandis. In this context, insofar as public measures of relief for impaired assets may be implemented within the framework of

text: Articles 29

text: b and 29c of the draft law, the ECB would like to draw attention to the Eurosystem’s Guiding principles for bank asset support schemes of 25 February 2009 and the Commission Communication of 25 February 2009 on the treatment of impaired assets in the Community banking sector , which provide important guidance, inter alia, as regards valuation.

text: The temporary nature of state involvement

text: 3.2 Article 16(5) of the draft law provides for the establishment of a bridge bank. Under this provision, a bank’s business may be transferred to a State owned joint-stock company that fulfils the statutory minimum capital requirements . If CNB grants its prior consent to the sale of the business, it will concurrently issue a licence to the bridge bank that is identical in scope to the licence held by the bank transferring the business. According to the explanatory memorandum to the draft law, the acquisition and operation of a distressed bank’s business by a bridge bank would, as rule, be temporary and would cater for situations where, at the relevant time, there would be no bank on the market willing to take over the distressed bank’s business. The ECB welcomes the introduction in the draft law of the possibility to address a crisis situation through the transfer of a distressed bank’s business to a bridge bank. Such reorganisation mechanism is in line with similar procedures introduced in other countries to rescue distressed banks. However, in this context, the ECB reiterates the importance of ensuring that the State’s involvement is limited in time to the extent deemed necessary for the success of the reorganisation measure.

text: Prohibition or restriction on transfers of funds

text: 3.3 The ECB understands that the draft law introduces the possibility for CNB to prohibit or restrict certain permitted activities, the execution of certain transactions, the transfer of funds or other transactions of a bank or a foreign bank branch by a measure of general application issued in

text: accordance with

text: Article 26

text: bb. The ECB notes that prohibiting or restricting the transfer of funds or other transactions of foreign bank branches could impair the possibility for foreign banks to manage their liquidity. Therefore, the ECB recommends that the draft law require CNB to coordinate its actions with the home authorities of the foreign branches concerned. Moreover, should such measures concern branches of Member State banks, Community law obligations, requiring in particular the provision of information to the Commission and the concerned Member States, should be duly complied with.

text: Role of the central bank

text: 3.4 The ECB expects that CNB’s involvement in the procedures provided for in the draft law will not go beyond the proper performance of its existing tasks and that it will comply fully with the prohibition on monetary financing laid down in Article 101(1) of the Treaty, read in conjunction with

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

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

text: Articles 104

text: [now 101] and 104b(1) [now 103(1)] of the Treaty.

text: Done at Frankfurt am Main, 15 April 2009.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


title: Opinion of the European Central Bank of 16 April 2009 at the request of the Spanish Ministry for Economic Affairs on an agreement authorising the increase of Spain’s quota in the International Monetary Fund (CON/2009/35)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 16 April 2009 at the request of the Spanish Ministry for Economic Affairs on an agreement authorising the increase of Spain’s quota in the International Monetary Fund (

text: ) Introduction and legal basis

text: On 27 March 2009, the European Central Bank (ECB) received a request from the Spanish Ministry for Economic Affairs for an opinion on a Council of Ministers’ agreement authorising the increase of Spain’s quota in the International Monetary Fund (hereinafter the ‘agreement’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the third indent of

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

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the agreement relates to the Banco de España. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the agreement

text: On 28 April 2008 the Board of Governors of the International Monetary Fund (IMF) adopted Resolution No 63-2 on Quota and Voice Reform proposing an amendment to the IMF’s Articles of Agreement (hereinafter the ‘proposed amendment’). When the proposed amendment becomes effective (i.e. after it has been accepted by three fifths of the IMF membership having 85 % of the total voting power), there could be an increase in the IMF quota for up to 54 countries, including Spain, provided that each of those countries, within 30 days of the entry into effect of the amendment, consents to the increase and pays the amount of the increased quota to the IMF. The objective of the Council of Ministers’ agreement is to accept the proposed amendment and submit it to the Spanish Parliament as provided for in

text: Article 94(1)

text: (d) of the Spanish Constitution for treaties implying financial liabilities for the Treasury. Pursuant to Article 13(2) of Law 13/1994 on autonomy of the Banco de España (hereinafter the ‘Banco de España’s Statute’), the Banco de España would pay the proposed increase in Spain’s IMF quota, namely 974.5 million special drawing rights (SDRs), which would bring Spain’s quota to a total of SDR 4 023.4 million. As stated in the explanatory memorandum to the agreement, 25% of the proposed increase would be paid in SDRs, in currencies of other members specified by the IMF or in any combination of SDRs and such currencies. The remaining 75% of the proposed increase would be paid in national currency to be

text: deposited on the IMF’s accounts. The payment of the proposed increase would be included in the Banco de España’s balance sheet, as provided for in Article 13(2) of the Banco de España’s Statute.

text: 2. General observations

text: The ECB reminds the Spanish Ministry for Economic Affairs that the tasks performed by the Banco de España must comply with the monetary financing prohibition under Article 101 of the Treaty and

text: Articles 104

text: [now 101] and 104b(1) [now 103(1)] of the Treaty . Pursuant to

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

text: , the financing by national central banks of obligations falling upon the public sector vis-à-vis the IMF is not regarded as a credit facility within the meaning of Article 101 of the Treaty. Furthermore, the ECB notes that any payment by the Banco de España of the proposed increase in Spain’s quota complies with

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

text: and does not infringe the monetary financing prohibition.

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

text: Done at Frankfurt am Main, 16 April 2009.

text: [signed]

text: The Vice-President of the ECB

text: Lucas D. PAPADEMOS


text: OJ L 189, 3.7.1998, p. 42. 2 OJ L 319, 5.12.2007, p. 1. 3 Law 188(I)/2007, Episimi Efimerida tis Dimokratias, Annex I(I), No 4154 of 31.12.2007.

text: See also paragraph 3.1 of ECB Opinion

text: of 24 March 2009 at the request of the Slovenian Ministry of Finance on a draft law on payment services and systems.

title: Opinion of the European Central Bank of 16 April 2009 at the request of the Cypriot Ministry of Finance on draft provisions on payment services and systems (CON/2009/36)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 16 April 2009 at the request of the Cypriot Ministry of Finance on draft provisions on payment services and systems (

text: ) Introduction and legal basis

text: On 11 March 2009 the European Central Bank (ECB) received a request from the Cypriot Ministry of Finance for an opinion on draft provisions on payment services and systems (hereinafter the ‘draft provisions’). The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and on the third and fifth indents of

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft provisions relate to the Central Bank of Cyprus (CBC) and to payment and settlement systems. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose and contents of the draft provisions

text: 1.1 The main purpose of the draft provisions is to transpose into Cypriot legislation Directive

text: of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives

text: and

text: and repealing Directive

text: . This objective is to be achieved mainly through adopting (i) the Law on payment services (hereinafter the ‘Law’) and (ii) the CBC Directive laying down the licensing and prudential supervision requirements applicable to domestic payment institutions, as well as through amendments to the Law on the prevention and suppression of money laundering activities of 2007 . 1.2 As stated in the explanatory memorandum accompanying the consultation request, the draft provisions go beyond transposition of Directive

text: . In particular, the Law goes beyond

text: Article 2(1)

text: and (2) of Directive

text: and extends the national scope of application to (i) payment services where only one payment service provider (either that of the payer or that of the payee) is located in the Community, as well as (ii) to payment services provided in a currency

text: other than the euro or the currency of a Member State outside the euro area (see Section 3 of the Law). Moreover, in deviation from

text: Article 52(2) of Directive 2007/64/EC

text: , the Law extends, subject to the contracting parties’ agreement to the contrary, the scope of application of

text: Article 52(2)

text: to payment transactions involving currency conversion (see Section 45 of the Law). 1.3 On the basis of

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

text: , this opinion only covers those draft provisions that directly relate to payment systems and the CBC. While acknowledging the importance of Directive

text: for the establishment of the Single European Payments Area (SEPA), this opinion does not assess the overall transposition of the Directive in Cyprus.

text: 2. General observations

text: The ECB welcomes the draft provisions that fulfil the regulatory conditions needed for the introduction of the SEPA. They will comprehensively govern the operation of the payment services market in Cyprus and ensure close cooperation between the CBC and the Ministry of Finance in transposing Directive

text: 3. New tasks and sufficient human and material resources

text: The draft provisions will entrust the CBC with new payment institution authorisation and supervision tasks (see, in particular, Titles III and X of the Law, read in conjunction with the CBC Directive). Significantly, these new tasks also extend to the assumption by the CBC of supervisory functions in connection with the prevention and suppression of money laundering by payment institutions (see amended Section 59(1) of the Law on the prevention and suppression of money laundering activities of 2007). In order for the CBC to be in a position to perform its new tasks in parallel with its Eurosystemrelated tasks and other tasks assigned to the CBC by national law it is essential that the CBC has sufficient human and material resources .

text: [signed]

text: The Vice-President of the ECB

text: Lucas D. PAPADEMOS