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

title: Opinion of the European Central Bank of 25 March 2008 at the request of Riigikogu on a draft law amending the Law on Eesti Pank (CON/2008/14)

text: OPINION OF THE EUROPEAN CENTRAL BANK 25 March 2008 at the request of Riigikogu on a draft law amending the Law on Eesti Pank (

text: ) Introduction and legal basis

text: On 6 March 2008 the European Central Bank (ECB) received a request from Riigikogu (Parliament) for an opinion on a draft law amending the Law on Eesti Pank (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 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 Eesti Pank. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: The purpose of the draft law is to remove the requirement for Riigikogu to select candidates for the posts of Governor or Chair of the Supervisory Board of Eesti Pank among persons only with a law or economics degree. In future any university degree will suffice. Two other amendments, proposed by Eesti Pank to be able to better fulfil its role as a member of the European System of Central Banks (ESCB), are the following: (a) Eesti Pank’s right to restrict access to information if it concerns risk to price or financial stability and if the information is subject to restrictions on access as specified by the ESCB; and (b) establishment of a multi-year mandate for the independent external auditors of Eesti Pank.

text: 2. General observations

text: 2.1 The ECB notes that the draft law was submitted to Riigikogu for adoption on 12 March 2008 and that the ECB received the consultation request on 6 March 2008, i.e. only a few working days before the submission of the draft law for adoption. The ECB would like to draw attention to

text: Article 4 of Council Decision 98/415/EC

text: , which requires Member States to ensure that the ECB is consulted at an appropriate point in time, to allow the consulting authority to take its opinion into consideration before deciding on the substance of the draft legislative provisions. The ECB expects

text: that the obligation to consult the ECB at an appropriate stage in the Estonian legislative process will in the future be respected. More generally, internal administrative procedures should be in place to ensure that the timely consultation of the ECB is foreseen whenever such a consultation is mandatory. 2.2 The ECB notes that the proposed amendment to the educational requirements for appointing the Governor and the Chair of the Supervisory Board of Eesti Pank would not undermine the personal independence requirements under Article 14.2 of the Statute of the European System of Central Banks and of the European Central Bank (the ‘ESCB Statute’). 2.3 The ECB welcomes the streamlining of the access rights to the information received by Eesti Pank. The amendment further brings the law into line with Article 38.1 of the ESCB Statute. 2.4 The ECB also welcomes the amendment to the procedure for appointing independent auditors in line with the ESCB good practices.

text: Done at Frankfurt am Main, 25 March 2008.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: EGT L 332, 31.12.1993, s. 7. Förordningen senast ändrad genom förordning

text: (EG) nr 2103/2005

text: (EGT L 337, 22.12.2005, s. 1).

publisher: Europeiska centralbanken

sprak: sv

title: Europeiska centralbankens yttrande av den 3 april 2008 på begäran av Europeiska unionens råd över ett förslag till rådets förordning om tillämpningen av protokollet om förfarandet vid alltför stora underskott som är fogat till fördraget om upprättandet av Europeiska gemenskapen (CON/2008/15)

serie: con

text: Inledning och rättslig grund

type: rubrik

text: Den 19 mars 2008 mottog Europeiska centralbanken (ECB) en begäran från Europeiska unionens råd om ett yttrande över ett förslag till rådets förordning om tillämpningen av protokollet om förfarandet vid alltför stora underskott som är fogat till fördraget om upprättandet av Europeiska gemenskapen (nedan kallat förslaget till förordning) som kodifierar

text: rådets förordning (EG) nr 3605/93 av den 22 november 1993

text: om tillämpningen av protokollet om förfarandet vid alltför stora underskott som är fogat till fördraget om upprättandet av Europeiska gemenskapen.

type: stycke

text: ECB:s behörighet att avge ett yttrande grundas på

text: artikel 105.4

text: första strecksatsen i fördraget om upprättandet av Europeiska gemenskapen. I enlighet med

text: artikel 17.5

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

text: Kommentarer

text: ECB har inga specifika kommentarer till förslaget till förordning.

type: vagledning

utgivare: ecb


text: The Law on supervision fees of the Financial and Insurance Supervision Authority (a new draft law) and amendments to the following: the Law on credit institutions (121/2007), the Law on commercial banks and other credit institutions in the form of a limited company (1501/2001), the Law on savings banks (1502/2001), the Law on cooperative banks and other credit institutions established as cooperatives (1504/2001), the Law on the operation of a foreign credit institution or financial institution in Finland 1608/1993), the Law on temporary suspension of the operations of a deposit bank (1509/2001), the Law on supervision of financial and insurance conglomerates (699/2004), the Law on investment firms (922/2007), the Law on the right of a foreign investment firm to provide investment services in Finland (580/1996), the Law on mutual funds (48/1999), the Law on the operations of a foreign management company in Finland (225/2004), the Law on securities markets (495/1989), the Law on pawn shops (1353/1992), as well as certain other laws relating to financial markets.

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

text: The Finnish name is ‘Finanssivalvonta’. The word ‘insurance’ is added in the English translation of the name of the new authority, in order to avoid confusion with the present FSA (‘Rahoitustarkastus’).

text: See Section 1 of the draft law.

text: See the FISA’s activities listed in Section 3 of the draft law. Certain further adjustments concern, inter alia, the FISA’s supervisory powers specified in Chapter 3 of the draft law.

text: See Chapter 5 of the draft law.

text: I.e. pawn shops and certain boards and committees, such as the Traffic Insurance Board and the Treatment Insurance Board (see Section 4 of the draft law).

text: See Sections 9 and 11 of the Law on Suomen Pankki (214/1998) (hereinafter, the ‘Law on Suomen Pankki’) provides that Suomen Pankki’s governing bodies are the Parliamentary Supervisory Council, supervising the administration and activities of Suomen Pankki, and the Board.

text: See Sections 8 and 9 of the draft law. Currently, the Board of the FSA is composed of six members and three deputy members appointed by the Parliamentary Supervisory Council for a period of three years. Two members and one deputy member are appointed on the basis of a proposal by the Ministry of Finance, one member and a deputy member on the basis of a proposal by the Suomen Pankki and one member and deputy member on the basis of a proposal by the Ministry of Social Affairs and Health. The director generals of the FSA and the ISA are ex officio members of the Board. The Board of the ISA is appointed in a similar way, and its composition is in practice the same as that of the current FSA (see Sections 8 and 9 of the Law of 27 June 2003 on the Financial Supervision Authority (587/2003) (hereinafter, the ‘current Law on the FSA’)).

text: See the third paragraph of Section 9 of the draft law. Currently the Board Chairman and Vice-Chairman are appointed by the Parliamentary Supervisory Council from among Board members nominated by Suomen Pankki and the Ministry of Finance (see Section 8(3) of the current Law on the FSA).

text: See Section 10 of the draft law.

text: The Parliamentary Supervisory Council will have the power to issue a warning and suspend the Director General from duty; the Director General may be suspended if they are prosecuted or under investigation for an offence (Sections 8 and 11 of the draft law).

text: See Section 9 of the draft law and Section 9 of the current Law on the FSA.

text: Under Section 13 of the draft law: (1) the matters listed in Subsection 1 (e.g. granting an authorisation to a supervised entity) will be provided by the Director General to the Board ‘for information’; (2) any Board member may require that such matter is taken up by the Board ‘for consideration’; and (3) the Board is entitled to take a decision on the matter if it may significantly affect the stability of financial markets or otherwise significantly affect their development.

text: See Section 70 of the draft law and Chapter 5.6 ‘Covering the costs of supervision’ of the explanatory memorandum.

text: See the fifth paragraph of Section 71 of the draft law. The fourth paragraph of Section 36 of the current Law on the FSA only specifies the duty to provide information on matters that may jeopardise financial stability or cause major disruptions to the operation of the financial system.

text: See Chapter 6 of the draft law. The ‘Capital Requirements Directives’ are Directive

text: of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) (OJ L 177, 30.6.2006, p. 1), as last amended by Directive

text: (OJ L 319, 5.12.2007, p. 1), and Directive

text: of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast) (OJ L 177, 30.6.2006, p. 201). The Capital Requirements Directives have been implemented in Finland by the Law on credit institutions (121/2007) and certain other laws.

text: See, e.g. paragraph 5 of ECB Opinion

text: of 11 May 2004 at the request of the Italian Ministry of Economic Affairs and Finance on a draft law on the protection of savings. 21 See paragraph 6 of ECB Opinion

text: of 24 October 2003 at the request of the Ministry of Finance of the Netherlands on a draft law on provisions concerning the merger of De Nederlandsche Bank and the Pensions and Insurance Supervisory Authority Foundation. 22 See paragraph 4 of ECB Opinion

text: of 25 May 2001 at the request of the Austrian Ministry of Finance on a draft law establishing and organising the financial market supervisory authority [title shortened]. 23 See paragraph 5 of ECB Opinion

text: of 8 November 2001 at the request of the German Ministry of Finance on a draft law establishing an integrated financial services supervision. 24 See paragraphs 3.1 and 3.2 of ECB Opinion

text: of 2 August 2006 at the request of Poland’s Sejm Marshall on a draft law amending the Law on Narodowy Bank Polski. See also the Bank for International Settlements (BIS), Core Principles for Effective Banking Supervision, October 2006, Principle 1 (available on the BIS website (www.bis.org)). 25 Section 1 of the draft law. 26 Section 3 second paragraph, subparagraph 3 of the Law on Suomen Pankki.

text: See paragraph 6 of ECB Opinion

text: , of 18 September 2002, at the request of the Finnish Ministry of Finance on a draft proposal concerning a revision of the Act on the Financial Supervision Authority. 28 Section 26 of the Law on civil servants of Suomen Pankki (1166/1998) includes a general rule, pursuant to which an employee may be dismissed in cases of serious breach or negligence in their duties. 29 See paragraph 6 of ECB Opinion

text: of 5 June 2002 at the request of the Irish Department of Finance on a draft Central Bank and Financial Authority of Ireland Bill, 2002. 30 See the ECB Convergence Report, December 2006, ‘Introduction and executive summary’, Section 2 (Compatibility of national legislation with the Treaty), Subsection 2.3.1 (Central bank independence) under the heading ‘Financial independence – Financial liability for supervisory authorities’, p. 28.

text: See Article 108 of the Treaty. 32 In Estonia, for instance, Eesti Pank’s President is an ex officio member of the Financial Supervision Authority’s supervisory board, while further two members in the six-person board are appointed by Eesti Pank’s Board on a proposal by Eesti Pank’s President (Section 8 of the Law of 9 May 2001 on the Financial Supervision Authority). Cf. the supervisory structures in Austria, Belgium and Latvia described in footnotes 58, 60 and 61 to ECB Opinion

text: of 9 March 2006 at the request of the Polish Minister of Finance on a draft law on the supervision of financial institutions. 33 In France, for example, the Commission Bancaire is chaired by the President of the Banque de France (Articles L. 613-3 and L. 613-7 of the French Financial and Monetary Code). Cf. paragraph 3.1.1 of the ECB Opinion

text: . 34 The Irish Financial Services Regulatory Authority is required to consult the Governor of the Central Bank and Financial Services Authority of Ireland, and may act only with the agreement of the Governor on any matter relating to the financial stability of the State’s financial system, including (but not limited to) the issue, revocation and suspension of a licence or other authority. See Sections 33C(9), (9A) and (9B) of the Central Bank Act 1942, as amended. Some elements of such structure are also present in Denmark and Hungary (see the detailed description in footnotes 64 and 66 to ECB Opinion

text: ). 35 This recommendation is related to the ECB’s concerns regarding the reimbursement mechanism, as explained in paragraph 4.2(c) of this opinion. 36 See Section 10 of the draft law.

text: See paragraph 8 of ECB Opinion

text: . 38 According to Section 69 of the draft law, Suomen Pankki is liable for damage arising from an error or omission by the FISA as provided for in the Law on tort liability, but the Government will reimburse Suomen Pankki, without undue delay, for any payment made in compensation of such damage, to the extent the compensation exceeds the amount of profits distributable to the State by Suomen Pankki according to Section 21(2) of the Law on Suomen Pankki. 39 See chapter 3.2 ‘Administration – Basic structure of the governance model’ of the explanatory memorandum. 40 See paragraph 4.2(a) of this opinion.

text: See the first paragraph of Section 76 of the draft law. 42 See paragraphs 8 to 12 of the ECB Opinion

text: of 15 July 2005 at the request of the Ministry of Finance of the Czech Republic on a draft law on the integration of financial market supervisors. 43 See the ECB Convergence Report, May 2007, Chapter 2 (Framework for analysis), Subsection 2.2.4.1 (Prohibition on monetary financing) under the heading ‘Assumption of public sector liabilities’, p. 22. National legislation requiring an NCB to take over the liabilities of a previously independent public body as a result of a national reorganisation of certain tasks and duties (for example, in the context of a transfer to the NCB of certain supervisory tasks previously carried out by the State or independent public authorities or bodies) without insulating the NCB from financial obligations resulting from the prior activities of such previously independent public bodies is incompatible with the monetary financing prohibition. 44 See paragraphs 8 and 10 to 11 of ECB Opinion

text: See paragraphs 17 and 18 of ECB Opinion

text: of 15 October 2003 at the request of the Finnish Ministry of Finance on a draft governmental proposal to amend the Suomen Pankki Act and other related acts; also paragraphs 14 and 15 of ECB Opinion

text: of 20 January 2004 at the request of the Economic Committee of the Finnish Parliament on the governmental proposal to amend the Suomen Pankki Act and other related acts. 46 See paragraph 3.2 of ECB Opinion

text: of 25 April 2006 on the Dutch draft law concerning financial sector supervision and paragraph 2.8 of ECB Opinion

text: of 16 November 2006 at the request of the Polish Minister for Finance on a draft law amending the Law on trading in financial instruments. See also the BIS Committee on Payment and Settlement Systems, ‘Central Bank Oversight of Payment and Settlement Systems’, May 2005, p. 1 (available on the BIS website (www.bis.org)). 47 See, e.g. paragraph 2.4.1 of ECB Opinion

sprak: en

title: Opinion of the European Central Bank of 4 April 2008 at the request of the Finnish Ministry of Finance on a draft government proposal for a law on the Financial and Insurance Supervisory Authority and certain related draft laws (CON/2008/16)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 4 April 2008 at the request of the Finnish Ministry of Finance on a draft government proposal for a law on the Financial and Insurance Supervisory Authority and certain related draft laws (

text: ) Introduction and legal basis

text: On 13 February 2008, the European Central Bank (ECB) received a request from the Finnish Ministry of Finance for an opinion on a draft government proposal including a draft law on the Financial and Insurance Supervision Authority (hereinafter, the ‘draft law’), as well as certain other related draft laws . The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the third and sixth indents of

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

text: 1. Purpose of the draft law

text: The purpose of the draft law is to merge the existing Financial Supervision Authority (FSA), which supervises financial markets with the Insurance Supervisory Authority (ISA), which supervises the insurance and pensions industry. The FSA and the ISA will form a new consolidated supervisor under the name ‘Financial and Insurance Supervision Authority’ (FISA) which will begin to operate on

text: 1 January 2009. The FISA will have a similar organisational structure to the FSA, and its powers will largely be a combination of those currently exercised by the FSA and the ISA. The new elements of the FISA’s structure and powers, in particular, relate to the following: (a) The FISA’s objectives and tasks. The FISA’s objective will be ‘to promote the stability of the operations of credit, insurance and pension institutions and other supervised entities, thereby contributing to financial stability and to safeguarding of the interests of the insured, while otherwise maintaining confidence in financial market activity’ . The draft law also contains some tasks that are new or formulated in a more detailed way than the tasks of the FSA and the ISA . In particular, the draft law will include comprehensive provisions in the area of customer protection, combining existing provisions from a number of separate acts . Further, some entities currently supervised by FSA and the ISA will be removed from the scope of the FISA’s supervision . (b) Organisational framework and governance of the FISA. As is the case for the current FSA, the FISA will be established within the organisational structure of Suomen Pankki. The FISA’s governing bodies will be similar to those of the current FSA, namely: (i) the Parliamentary Supervisory Council (which is also one of the governing bodies of Suomen Pankki) ; (ii) the FISA’s Board, which will have powers to decide on the direction of supervisory activity; and (iii) the FISA’s Director General who will exercise most of the direct supervisory powers. The key new elements introduced into the framework are as follows: – as regards the FISA’s Board: (i) the composition of the Board will now include three nominees proposed for appointment by the Suomen Pankki, the Ministry of Finance and the Ministry of Social Affairs and Health, respectively, as well as two members appointed directly by the Parliamentary Supervisory Council ; (ii) any of the Board members will be eligible to be appointed as Board Chairman or Vice-Chairman ; (iii) certain administrative

text: responsibilities of the Board will be broadened ; and (iv) the Parliamentary Supervisory

text: Council will decide on Board members’ compensation ;

text: – as regards the FISA’s Director General: (i) the Director General will be appointed by the

text: Parliamentary Supervisory Council on a proposal of the Board ; the Director General will

text: have a fixed term of office of five years ; (ii) the Director General will be entitled to

text: participate in the FISA’s Board meetings, but not as a voting member as is the case now ;

text: and (iii) the provisions regarding submission of decisions falling within the scope of the

text: Director General’s competence for consideration by the Board will be made clearer .

text: (c) The FISA’s financing: the draft law proposes a funding mechanism aiming at ensuring that 90% of

text: the FISA’s operational costs are funded by fees collected from the supervised entities, while the

text: remaining 10% of such costs will be contributed by Suomen Pankki. According to the explanatory

text: memorandum to the draft law, this Suomen Pankki’s contribution to the FISA’s financing will

text: ultimately decrease the amounts of profit distributions provided by Suomen Pankki to the State

text: budget .

text: (d) Cooperation with other authorities: the FISA’s obligation to disclose information to Suomen

text: Pankki or to the Government will be broader. In particular, the FISA will be obliged to disclose any

text: information that may have a significant effect on ‘financial market developments’ . Certain new

text: detailed administrative and cost-sharing rules will also be introduced in the areas where closer

text: cooperation with other European Economic Area supervisory authorities is required under the

text: provisions implementing Capital Requirements Directives .

text: 2. General comment

text: 2.1 The ECB broadly welcomes the general aim of the draft law to strengthen the supervisory structure in Finland, by ensuring that it is appropriately equipped to respond to risks emerging in financial markets, particularly in cross-sectoral domestic activity and in a cross-border context. The ECB has recognised in its previous opinions that the nature and scope of risk in the financial sector is widening, due to closer links between credit institutions, insurance companies, investment firms and pension funds, as demonstrated by the emergence of hybrid financial products, the increased use of risk transfer instruments and the growing role of financial conglomerates . 2.2 Moreover, the ECB notes that, like the FSA, FISA will operate in connection with Suomen Pankki. Indeed, central banks have traditionally been closely involved in the prudential supervision of credit institutions due to their pivotal role in the financial system, in particular regarding the implementation of monetary policy and ensuring the proper functioning of payment systems . Moreover, the maintenance of a close involvement of euro area national central banks (NCBs) in prudential supervision is an important condition for allowing the Eurosystem to contribute adequately to monitoring the risks to financial stability in the euro area , in accordance with Article 105(5) of the Treaty, and to safeguarding smooth coordination between the central banking functions exercised at Eurosystem level and the supervisory functions carried out at national level . 2.3 In this context, the ECB makes a number of comments relating to specific provisions of the draft law, with a view to ensuring the operational independence of the proposed supervisory authority and the appropriate scope of central bank involvement in supervision and oversight policies.

text: 3. Objectives and governance of the supervisory authority

text: 3.1 The ECB broadly welcomes the objectives assigned to the FISA, as well as the clear statement that the FISA will operate in connection with Suomen Pankki . Such cooperation would be particularly important as regards the FISA’s contribution to financial stability, which is also a task performed by Suomen Pankki .

text: 3.2 The ECB notes that the proposals set out in the draft law seek to establish a sound decision-making structure within the FISA. Further to its earlier recommendations , the ECB would like to underline that granting the Director General full membership of the FISA’s Board would enhance the quality of the decision-making process. It should also increase the acceptance and credibility of Board decisions in the market place and the FISA’s commitment to implementing the decisions. 3.3 The ECB welcomes the introduction of a provision providing for a fixed term of office for the FISA’s Director General. It understands that certain general safeguards against dismissal before the lapse of the statutory term in office will apply to the Director General on the basis of Finnish law governing Suomen Pankki staff . The ECB considers nevertheless that appropriate express safeguards should be introduced against unfair dismissal before expiry of the statutory term of office, both in relation to the FISA’s Director General and its Board members. As a minimum, it is recommended to include in the draft law a list of the possible grounds for dismissal of Board members and of the Director General, as well as a clarification regarding the applicable court review procedure. The draft provisions regarding suspension from office should also be reviewed to take into account the issues raised in this paragraph.

text: 4. FISA’s relationship with Suomen Pankki

text: 4.1 Central bank independence safeguards Like the FSA, the FISA will be a body operating in connection with Suomen Pankki. It will form part of Suomen Pankki’s organisational structure, as regulated by the Law on Suomen Pankki and other relevant provisions. As a consequence, all FISA’s acts or omissions will be attributable to Suomen Pankki as the sole legal person liable for such acts or omissions. However, the practical influence of Suomen Pankki’s Board on decisions of the FISA’s Board and Director General will be limited to nomination of one FISA Board member. In the above context, the ECB would like to remind the consulting authority of its views expressed in its previous opinions in circumstances where national laws provide for supervisory authorities to share legal personality with an NCB but be governed by a separate decision-making body, independent from the NCB’s governing bodies responsible for the conduct of core central bank tasks. The ECB has noted in particular that: (i) such a structure, together with the potential exposure of an NCB to liabilities resulting from the supervisory authority’s activity, could be seen as a threat to the NCB’s overall institutional and financial independence ; and (ii) it is important to ensure that decisions adopted by such supervisory authorities do not endanger the finances of the NCB as a whole . The ECB notes that

text: Suomen Pankki may face risks in relation to the operation of FISA (both as regards its internal management and the adopted supervisory policies and decisions) that will not be limited to its potential financial liability, but may also include, in particular, reputational and operational risks relating to diminished effectiveness of central bank operations, e.g. in the event of disputes arising between the supervised entities and the supervisor. 4.2 Taking the above into account, the institutional framework proposed by the draft law should be reviewed to ensure that Suomen Pankki’s institutional and financial independence will be protected under the proposed reform. In this regard, the ECB’s comments relate to five separate but inter-related dimensions, which will require further consideration individually and in terms of their inter-relationships, with a view to finding a balanced solution. (a) Institutional set-up Some Member States with similar supervisory structures as proposed in the draft law have adopted institutional frameworks which adequately protect their NCBs from risks to their institutional and financial independence. Such frameworks rely, inter alia, on: (i) a sufficiently strong representation of the NCB in the supervisory authority’s governing 32 33 body , which may include the NCB governor acting as ex officio Chair ; or (ii) a duty to obtain the governor’s approval on key supervisory decisions relating to the stability of the financial system . Having regard to central bank independence requirements, the ECB recommends that one of these institutional mechanisms is introduced into the Finnish legal framework . One important safeguard in this respect could be statutory recognition of the current practice of appointing the FISA’s Board member nominated by Suomen Pankki as Chair. (b) Budgetary arrangements FISA’s revenues and expenses will be included in Suomen Pankki’s annual accounts, while the FISA’s Board will be obliged to submit the FISA’s annual budget to the Board of Suomen Pankki for confirmation . The ECB understands that the FISA’s Board is entitled to

text: independently determine, inter alia, the FISA’s specific objectives and strategic directions, including their budgetary implications, while Suomen Pankki’s powers are limited to returning the FISA’s budget to the FISA’s Board for reconsideration. The ECB recommends that the Board of Suomen Pankki should be given the explicit power to oppose any budgetary proposals submitted by the FISA’s Board and to decide on essential changes to the FISA’s budget if this is necessary in view of the budget’s implications for Suomen Pankki’s independence and its capacity to pursue central banking tasks . (c) The reimbursement mechanism and its financial implications The ECB notes that the draft law provides for a reimbursement mechanism under which the State would ultimately cover any damages paid by Suomen Pankki as a result of errors or omissions in the performance of the FISA’s supervisory tasks, to the extent that such damage exceeds the amount of remaining profit distributable to the State . As stated in the explanatory memorandum to the draft law, the reimbursement mechanism is intended to cater for exceptional situations where Suomen Pankki’s exposure to financial liability resulting from the FISA’s supervisory liability could jeopardise Suomen Pankki’s financial position . The ECB understands from the explanatory memorandum that, under the reimbursement mechanism, Suomen Pankki will in the first place pay the damages to third parties, but ultimately Suomen Pankki will carry the burden of the payment of such damages only up to the amount of profits distributable to the State. If the damages payable by Suomen Pankki exceed the amount of profits distributable to the State, Suomen Pankki (i) will not distribute any profit, as damages have been paid equal to such amount, and (ii) will be reimbursed by the State for the part of the damages paid in excess of the distributable profits ‘without undue delay’. The ECB understands that, due to the nature of this scheme, the reimbursement will not occur until Suomen Pankki’s accounts for the year have been closed and the distributable profit duly determined. Although the ECB welcomes the intention underlying these provisions preventing supervisory liability from being detrimental to Suomen Pankki’s finances as a whole, the ECB remains concerned that the proposed reimbursement mechanism, in the light of the proposed FISA institutional framework , is not sufficient to ensure the NCB’s financial independence. The ECB would therefore suggest giving further consideration to the proposed reimbursement mechanism. One solution would be to ensure that compensation for damage suffered by third parties as a result of errors or omissions in the performance of FISA’s supervisory tasks is paid directly from the State budget. Another possibility, taking into account the function of the reimbursement

text: mechanism as a measure intended to ensure Suomen Pankki's financial independence, would be to include express provisions in the draft law specifying that expenses relating to the FISA’s supervisory liability will be reimbursed by the State immediately after such expenses have been incurred and presented for repayment by Suomen Pankki. (d) Transfer of ISA’s liabilities and commitments to Suomen Pankki The draft law further provides for a transfer to Suomen Pankki of, inter alia, ‘liabilities and 41 42 commitments’ of the current ISA . In line with its previous opinions , the ECB notes that provisions making an NCB a legal successor to the liabilities of a separate supervisory authority raise issues of compliance with the monetary financing prohibition in Article 101 of the Treaty. The ECB notes that the ISA is currently, unlike the FSA, a legal entity distinct from Suomen Pankki, and that Suomen Pankki will take over the existing liabilities and commitments of the current ISA without being insulated from the financial obligations resulting from the prior activities of such a previously independent public body. This arrangement would be incompatible with Article 101 of the Treaty . The ECB therefore recommends specifying in the draft law that the State will meet any financial obligations incurred by Suomen Pankki as a result of it being substituted for the ISA and that the State should not have any recourse to Suomen Pankki in relation to its liability in this respect . (e) Auditing and reporting regime The draft law is silent with regard to the auditing and reporting regime applicable to FISA. As Suomen Pankki’s annual accounts are audited by independent external auditors under Article 27.1 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘ESCB Statute’), the ECB assumes that the auditors’ mandate will be extended to the FISA. However, this point should be clarified expressly in the draft law. 4.3 Central bank role in relation to oversight Article 105(5) of the Treaty assigns the ESCB the task of contributing to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system. The ECB understands that this task is recognised in Section 3 of the Law on Suomen Pankki, which specifies that Suomen Pankki

text: participates in maintaining the reliability and efficiency of the payment system and overall financial system and participates in their development. 4.4 More specifically, an oversight function is inherent in a central bank’s task of promoting a sound market infrastructure to safeguard the effectiveness of monetary policy and the overall stability of the financial system. As expressed in its earlier opinions, the ECB understands that Section 3, second paragraph, subparagraph 3 of the Law on Suomen Pankki provides the legal basis for Suomen Pankki’s oversight function. The ECB notes that it would be helpful to include an explicit reference in the Law on Suomen Pankki to the oversight function regarding securities clearing and settlement systems and market infrastructure . In the context of the current reform, the ECB recommends that the tasks of Suomen Pankki and the FISA relating to the oversight and supervision of payments and securities clearing and settlement systems and market infrastructure, are specified more explicitly in the legislation, in particular by referring explicitly to Suomen Pankki’s responsibility for oversight of all such systems and infrastructures operating in Finland . 4.5 Exchange of information Under Section 71(5) of the draft law, the FISA will be obliged to disclose, without undue delay, to the Ministry of Finance, the Ministry of Social Affairs and Health and Suomen Pankki any information on ‘matters that, according to the FISA’s judgement, may have significant effect on financial stability or other financial market developments, or cause major disruptions in the operation of the financial system’. The ECB notes that this provision clarifies that the FISA is under a legal obligation to disclose supervisory information to Suomen Pankki. However, extending the disclosure of confidential information to central government administration should not impair the FISA’s operational independence and should comply with Community law. 4.6 As emphasised in previous ECB opinions , central banks provide valuable input to the supervisory process and their access to supervisory information benefits the conduct of monetary policy operations, the oversight of payment systems and the pursuit of financial stability. Transmission of supervisory information and data, primarily in aggregated form, is necessary for effective monitoring of financial stability and for assessing the prevailing conditions in the financial system as a whole as well as for the efficacy of the response when a financial crisis occurs. The ECB would therefore welcome insertion of an explicit provision in the draft law stipulating that FISA has a duty to exchange information with Suomen Pankki in relation to all ESCB-related tasks.

text: 4.7 The ECB recommends that the provisions regarding exchange of information between the FISA and Suomen Pankki and between the FISA and other administrative bodies (domestic or foreign) are combined with express safeguards ensuring the effectiveness of the confidentiality rules applicable to the ESCB, as specified in Article 38 of the ESCB Statute. This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 4 April 2008. [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


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

text: Report of the Commission des Finances et du Budget (Luxembourg’s Commission of Finances and Budget, 10.12.1998) on draft law No 4468/07, p. 2.

text: See the opinion addressed to the President of the Luxembourg Chamber of deputies on 6 November 1998, draft law 4468/2, 4469/2, ordinary session 1998/99.

text: OJ L 318, 27.11.1998, p. 1.

text: OJ L 250, 2.10.2003, p. 10.

text: According to national law (

text: Article 1.27

text: read in conjunction with

text: Article 1.28

text: and Article 13.1 of the Law of 5 April 1993 on the financial sector), the term ‘financial sector professional’ covers credit institutions as well as natural and legal persons which exercise, under certain conditions, financial sector activities, including those of investment firms.

text: ‘La loi peut créer des établissements publics, dotés de la personnalité civile, dont elle détermine l’organisation et l’objet. Dans la limite de leur spécialité le pouvoir de prendre des règlements peut leur être accordé par la loi qui peut en outre soumettre ces règlements à l’approbation de l’autorité de tutelle ou même en prévoir l’annulation ou la suspension en cas d’illégalité, sans préjudice des attributions des tribunaux judiciaires ou administratifs.’ [unofficial translation: ‘the Law may establish public institutions, endowed with legal personality, for which it determines the organisation and purpose. Within the limit of their specialisations, these institutions may be conferred a regulatory power by the Law, which may, in addition, require the approval of the supervisory authority or even provide for the invalidity or suspension in case of breach of law, without prejudice to the jurisdiction of the judicial or administrative courts’].

text: See in this sense, ECB Opinion

text: of 18 September 2002 at the request of the Finnish Ministry of Finance on a draft proposal concerning a revision of the Act on Financial Supervision Authority.

text: OJ L 354, 30.11.2004, p. 34. Guideline as amended by Guideline ECB/2007/3 (OJ L 159, 20.6.2007, p. 48).

text: OJ L 334, 11.12.2002, p. 24. Guideline as last amended by Guideline ECB/2007/13 (OJ L 311, 29.11.2007, p. 47).

text: OJ L 109, 29.4.2005, p. 81. Guideline as last amended by Guideline ECB/2007/14 (OJ L 311, 29.11.2007, p. 49).

text: Article 5 of the ESCB Statute.

text: Articles 34-3 and 47-1 of the Law of 5 April 1993 on the financial sector, as amended.

text: The 2000 Governing Council’s policy statement is available on the ECB’s website at www.ecb.europa.eu.

text: See in this sense, ECB Opinion

text: of 15 October 2003 at the request of the Finnish Ministry of Finance on a draft government proposal to amend the Suomen Pankki and other related acts, particularly paragraph 18.

text: See ECB Opinion

text: of 5 November 2007 at the request of the Austrian Ministry of Finance on a draft law amending the Law on banking, the Law on savings banks, the Law on the Financial Market Supervisory Authority and the Law on the Oesterreichische Nationalbank, particularly paragraph 2.2.1.

text: See ECB Opinion

text: of 21 February 2008 at the request of the German Ministry of Finance on a draft law amending the Law on Deutsche Bundesbank.

text: ECB Opinion

text: of 19 March 2008 on a draft law concerning the reform of the Greek social security system.

title: Opinion of the European Central Bank of 15 April 2008 at the request of the Luxembourg Minister for the Treasury and the Budget on a draft law improving the legislative framework for Luxembourg as a financial centre and on a draft law relating to social insurance contributions (CON/2008/17)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 15 April 2008 at the request of the Luxembourg Minister for the Treasury and the Budget on a draft law improving the legislative framework for Luxembourg as a financial centre and on a draft law relating to social insurance contributions (

text: ) Introduction and legal basis

text: On 12 February 2008 the European Central Bank (ECB) received a request from the Luxembourg Minister for the Treasury and the Budget for an opinion on a draft law improving the legislative framework for Luxembourg as a financial centre and amending the provisions on bonds in the Law of 5 April 1993 on the financial sector, as amended, the Law of 15 June 2004 on the company investing in risk capital, the Law of 23 December 1998 creating a commission for the prudential supervision of the financial sector, as amended, and the Law of 23 December 1998 on monetary status and on the Banque centrale du Luxembourg, as amended (hereinafter referred to as ‘the first draft law’). On 20 February 2008, the ECB received a second request from the Luxembourg Minister for the Treasury and the Budget for an opinion on a draft law amending the Law of 28 July 2000 on the coordination of the statutory pension schemes, as amended, the Code of social insurance contributions, the Law of 26 May 1954 governing State agents’ pensions, as amended, the Law of 27 August 1977 on the status of agents entering into the service of international institutions, as amended, the Law of 3 August 1998 on the special pension schemes for the communes’ State agents as well as for the agents of the Luxembourg national railway company, as amended and the Law of 23 December 1998 on monetary status and on the Banque centrale du Luxembourg, as amended (hereinafter referred to as ‘the second draft law’). In view of the convergence between the provisions contained in the first and second draft laws amending the rules governing the pension scheme of the agents of the Banque centrale du Luxembourg (BCL), the following opinion addresses both draft laws. 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 both draft laws amend the BCL’s role as a pension agency. In addition, the first draft law contains provisions on the increase of the BCL’s capital, its national regulatory powers and the rules it

text: applies to minimum reserves. 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. Purposes of the first and second draft laws

text: The first draft law modernises the legislative framework for Luxembourg as a financial centre. For this purpose, it amends the rules governing banks issuing bonds, the Law relating to the investment company in risk capital (SICAR), the Commission de surveillance du secteur financier (CSSF) as well as the Law of 23 December 1998 on the BCL (hereinafter the ‘Law on the BCL’). More particularly, the BCL’s capital may be increased by incorporating reserves, following a proposal by the BCL, under a grand-ducal regulation. In addition, the imposition by the BCL of minimum reserve requirements, which is currently presented as an option, will become an obligation. Furthermore, the first draft law will confer on the BCL a general regulatory power. Finally, the first draft law will authorise the BCL to have recourse to the decision-making bodies and services of the Luxembourg pension agencies. This latter amendment has to be read in conjunction with the amendments contained in the second draft law. In order to remedy the practical problems encountered in the day-to-day management of the BCL pension’s fund which had been designed separately from the other Luxembourg pension agencies, the second draft law brings the BCL into the scope of the Law of 28 July 2000 on the coordination of statutory pension schemes. In addition, the second draft law organises the financial transfers to be operated between the BCL’s pension fund and the other pension agencies, if a State or private agent transfers from or to the BCL. This opinion concentrates on the aspects of the draft laws concerning the BCL and its powers.

text: 2. Provisions on the BCL’s capital increase

text: 2.1 By virtue of the draft law, the BCL’s capital, which currently amounts to EUR 25 million, may be increased by incorporating reserves on a proposal by the BCL under a grand-ducal regulation. The BCL’s capital could therefore be periodically rebalanced, by incorporating reserves, without resorting to the legislator, the latter’s intervention being however maintained for an increase in capital through new funds. 2.2 The ECB notes that although the reinforcement of BCL’s financial position had been presented as priority during the legislative works leading to the adoption of the Law on the BCL in 1998 , the BCL had advised at that time that the capital of EUR 25 million would be insufficient to cover its costs and operations. The BCL had therefore proposed increasing its capital to EUR 150 million and providing for the creation of a general reserve fund, to which the net profits of its activities would be transferred, up to a limit equal to 100% of the capital (as such is the case under

text: Article 33(1)

text: (a) of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘ESCB Statute’)). The BCL’s proposal has been partially followed.

text: Article 31 of the Law on the BCL provides for the creation of a general reserve fund and the BCL’s duty to transfer into it its profits, so long as the total of the capital and the reserve fund falls short of the total of its assets which do not yield freely-available income, after deducting liabilities which form the direct counterpart to such assets. 2.3 In this perspective, the ECB welcomes the possibility offered to the BCL to increase its capital by incorporating reserves, which will indirectly contribute to reinforcing its financial position. The ECB would, nevertheless, recommend that it should be verified whether the BCL’s capital, as increased by incorporating such reserves, would be sufficient to effectively perform all its tasks and cover properly its administrative and operational expenses, as they have evolved since its establishment.

text: 3. Provisions on minimum reserves

text: 3.1 By virtue of Article 23 of the Law on the BCL, the Central Bank is the custodian of sums which the professionals of the financial sector may if necessary be required to deposit by virtue of monetary control measures, in particular under the terms of Article 19 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank. The draft law substitutes the words ‘shall be required to deposit’ for the current wording ‘may if necessary be required to deposit’, hence transforming an option into an obligation. The preparatory work advises in this respect that ‘the terms proposed to be replaced in this area, having been appropriate in 1998, are no longer [appropriate] since compulsory reserves have become a common ECB monetary policy instrument’. 3.2 It should be recalled that, under Article 19.1 of the ESCB Statute, the ECB ‘may require’ credit institutions to hold minimum reserves on accounts with the ECB and national central banks (NCBs) in pursuance of monetary policy objectives. Pursuant to

text: Article 2 of Council Regulation (EC) No 2531/98 of 23 November 1998

text: concerning the application of minimum reserves by the European Central Bank , which is binding erga omnes, ‘the ECB may, on a non-discriminatory basis, exempt institutions from minimum reserves in accordance with criteria established by the ECB’. In addition, Article 2 of Regulation ECB/2003/9 of 12 September 2003 on the application of minimum reserves , which is also applicable erga omnes, lists the categories of institutions that ‘shall be subject’ to reserve requirements and specifies that the ECB ‘may exempt’ certain institutions from these requirements. Furthermore,

text: Article 6

text: provides that an institution ‘shall hold its minimum reserves on one or more reserve accounts with the national central bank in each participating Member State in which it has an establishment, in relation to its reserve base in the corresponding Member State’. In line with the provisions referred to above, the ECB would,

text: however, recommend replacing the words ‘financial sector professionals’ by ‘credit institutions’ and deleting the word ‘in particular’ before ‘under the terms of Article 19 of the ESCB Statute’, which gives the false impression that the BCL could impose minimum reserves.

text: 4. Provisions on regulatory powers

text: 4.1 Article 34 of the Law on the BCL provides that 'the Executive Board shall be authorised, within the framework of the tasks of the ESCB, to enforce ECB decisions and to implement the sanctions imposed by the ECB’. By virtue of the first draft law and based on the new

text: Article 108

text: bis of the Luxembourg constitution ,

text: Article 34

text: would now contain a second paragraph, conferring regulatory powers on the BCL ‘within the limits imposed by its competences and tasks’, the corresponding regulations being published in the Mémorial. 4.2 The ECB very much welcomes this amendment to the Law on the BCL, which will allow the latter to effectively enforce ECB legal acts. Prior to examining how such regulatory powers would, in practice, be implemented, the ECB wishes to stress that, for the sake of efficiency, this regulatory power should be combined with a sanctioning power, which forms an integral part of regulatory power and ensures due compliance with the regulatory requirements . Such sanctioning power, at the national level, would, nevertheless, be without prejudice to the ECB’s sanctioning power. The types of infractions and sanctions, as well as the procedure leading to the imposition and review of such sanctions, should, however, be set forth in a law. In addition, for the sake of flexibility, it could also be appropriate for the draft law to expressly authorise the BCL to continue adopting circulars, if deemed more appropriate to leverage its moral suasion rather than its regulatory powers. 4.3 The BCL’s regulatory power, potentially combined with a sanctioning power, is especially welcome in the collection, compilation and reporting of statistical data. The ECB notes that in particular, the BCL will especially be able to implement Guideline ECB/2004/15 of 16 July 2004 on the statistical reporting requirements of the European Central Bank in the field of balance of payments and international investment position statistics, and the international reserves template , Guideline ECB/2002/7 of 21 November 2002 of the European Central Bank on the statistical

text: reporting requirements in the field of quarterly financial accounts and Guideline ECB/2005/5 of 17 February 2005 on the statistical reporting requirements of the European Central Bank and the procedures for exchanging statistical information within the European System of Central Banks in the field of government finance statistics . The Luxembourg Government’s grant of a regulatory power to the BCL is, however, without prejudice to the overall obligation of the Grand-Duchy of Luxembourg to cooperate with the BCL to ensure an effective allocation of work between the BCL and the national statistics institute (STATEC) and avoid overlaps or inconsistencies in the reporting requirements imposed on economic agents. For this latter purpose, cooperation between the STATEC and the BCL similar to that organised for the collection of the balance of payments statistics by the Law of 28 June 2000 might be considered. 4.4 Regulatory powers, possibly combined with a sanctioning power, would also be very much welcome in the field of financial stability and in particular with resepect to payment and securities settlement systems, payment instruments and e-money schemes. Under the current Law on the BCL, the BCL has been empowered to oversee the systems falling within the scope of the Settlement Finality Directive, as implemented by the Luxembourg Law of 12 January 2001 amending the Law of 5 April 1993 on the financial sector, as amended, provided that the BCL participates in such systems . The BCL’s new regulatory power would apply in particular to Clearstream Banking Luxembourg, as a securities settlement system, and TARGET2-LU, as a payment system. The BCL’s new regulatory power should, however, not be limited to these systems. It should be recalled, however, that Article 105(2) of the Treaty and Article 3.1 of the Statute include as a basic Eurosystem central bank task the promotion of the smooth operation of ‘payment systems’. Further, according to

text: Article 22

text: , the ECB and NCBs may provide facilities, and the ECB may make regulations, to ensure efficient and sound clearing and payment systems within the Community and other countries. These Articles provide a legal basis for the oversight activities generally performed at NCB level, in line with the common oversight policy defined for the Eurosystem by the ECB’s Governing Council. It is also understood that in its capacity of promoting the smooth operation of payment systems, the Eurosystem is keen on gathering information related to new developments in connection with payments. Furthermore, the Governing Council’s policy statement regarding the ‘Role of the Eurosystem in the field of payment systems oversight’ confirms that the scope of the Eurosystem’s oversight competence embraces also systems such as e-money schemes and payment instruments. To allow the BCL to duly comply with the Governing Council’s common oversight policy, it would be advisable to bring all systems, regardless of whether they are protected by the

text: Settlement Finality Directive, as well as payment instruments, under the BCL’s regulatory powers as far as its oversight function is concerned . To support this extension of the scope of application of the regulatory powers, the provisions of the Law on the BCL relating to its competencies should be redrafted accordingly. In particular, the amendment should provide for an express legislative recognition of the BCL’s role in financial stability. The BCL would thus be able to monitor and assess the financial system in Luxembourg . 4.5 The ECB finally notes that granting the BCL a regulatory power would allow it to replace with a regulation the contractual framework of its general terms and conditions for the implementation of monetary policy operations. When combined with a sanctioning power, such regulation would allow the BCL to impose sanctions, subject to judicial review, thereby avoiding the uncertainties associated in Luxembourg with the imposition of sanctions by contractual means.

text: 5. Provisions on the pension scheme of BCL’s agents

text: 5.1 Under Article 14 of the Law on the BCL, the pension benefits of BCL’s agents are determined by their status and financed by the BCL pension fund. Such a fund, which is financed by a pure system of capitalisation partly by statutory deductions from agents’ salaries, partly by the BCL’s contributions, has, however, been designed separately from the other Luxembourg pension agencies. Consequently, practical difficulties have arisen in the day-to-day management of pension benefits of BCL’s agents, especially if they transfer from or to other private or public institutions to or from the BCL, as well as if invalidity of a BCL agent for the purpose of an invalidity pension must be declared. These practical difficulties are addressed in both the first and second draft law. Article V(2) of the first draft law provides that the BCL ‘may have recourse to the decision-making bodies and services of the pension agencies following the pension regime of the agent in question.’ Article 1 of the second draft law also brings the BCL into the scope of the Law of 28 July 2000 on the coordination of statutory pension schemes. Furthermore, it acknowledges the specificity of BCL’s agents in respect of pensions so that if a State agent transfers to the BCL, the corresponding administration pays into the BCL’s pension fund the necessary amount to subsequently finance pension benefits arising from State service previously performed. In the opposite situation, i.e. a BCL agent moving to another administration or the private sector, the BCL will transfer its contribution to the other relevant scheme or body under such scheme. 5.2 As a rule, the regime governing the staff of central banks should not impair the ability of the latter to employ and retain the qualified staff necessary for the performance of the tasks conferred on it by the Treaty, the ESCB Statute and national legislation in an independent manner . Hence, the

text: ECB very much welcomes these amendments, which will facilitate the management by the BCL of its agents’ pension benefits, also if transferring from or to the private or public sector. Ideally, the efficiency achieved at national level in this latter respect should be transposed at cross-border level. For the sake of efficiency and transparency, the practical modalities of the cooperation between the BCL and the pension agencies should be set forth in a cooperation agreement or regulation. Proper attention should be paid, in this last respect, to adequately protect the BCL’s independence .

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

text: Done at Frankfurt am Main, 15 April 2008.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: 3 The revised draft law amends the Law on payment systems within the context of NBS’s preparations to connect to TARGET2 and implement the TARGET2 legal framework, including the TARGET2 Guideline . The revised draft law also amends certain provisions governing the existing domestic payment system, although the revised draft law does not address certain additional issues that it is envisaged will be governed by the Law on payment systems at a later stage . This opinion therefore

text: OJ L 189, 3.7.1998, p. 42. 2 In line with the National Euro Changeover Plan for Slovakia adopted by Government Resolution No 525 of 6 July 2005, as amended. 3 Law No 510/2002 Coll. on the payment system and on amendments to certain laws, as amended. 4 Trans-European Automated Real-time Gross settlement Express Transfer system. 5 Guideline ECB/2007/2 of 26 April 2007 on a Trans-European Automated Real-time Gross settlement Express Transfer system (TARGET2) (OJ L 237, 8.9.2007, p. 1). 6 For example, issues related to the implementation of the Single European Payments Area as from 2010 or issues related to the transposition of 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: (OJ L 319, 5.12.2007, p. 1).

text: See point 5.2 of ECB Opinion

text: of 19 December 2007 at the request of the Slovak Ministry of Finance on a draft law on the introduction of the euro in Slovakia and on amendments to certain laws. 8 See Article 1(1) of the TARGET2 Guideline. 9 See Article 1(2) of the TARGET2 Guideline. 10 OJ L 166, 11.6.1998, p. 45. See also

text: Article 3(1)

text: and (2) of the TARGET2 Guideline.

text: See Article 4 of the Treaty and Article 2 of the ESCB Statute.

title: Opinion of the European Central Bank of 25 April 2008 at the request of Národná banka Slovenska on a draft law amending Law No 510/2002 Coll. On payment systems and on amendments to certain laws (CON/2008/18)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 25 April 2008 at the request of Národná banka Slovenska on a draft law amending Law No 510/2002 Coll. on payment systems and on amendments to certain laws (

text: ) Introduction and legal basis

text: On 11 March 2008 the European Central Bank (ECB) received a request from Národná banka Slovenska (NBS) for an opinion on a draft law amending Law No 510/2002 Coll. on payment systems and on amendments to certain laws. On 10 April 2008 NBS sent the ECB a revised version of the draft law (hereinafter the ‘revised 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 second and fifth indents of

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

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the revised draft law relates to means of payment and 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 of the draft law

text: focuses on the provisions of the Law on payment systems that relate to NBS’s migration to TARGET2 .

text: 2. General observations

text: The ECB welcomes the revised draft law as an important preparatory measure for the future migration of NBS to TARGET2. Whether NBS has properly implemented the TARGET2 legal framework will be assessed separately by the ECB.

text: 3. Specific observations

text: Execution of payments through the European payment system

text: 3.1 Article 3(2) of the revised draft law provides for the possibility to execute domestic payments through a payment system operated by NBS, by any other person authorised as the operator of a payment system, or through a ‘European payment system’, which is defined in Article 31(2) of the revised draft law as a component system of TARGET2. The ECB notes that TARGET2 ‘provides real-time gross settlement [RTGS] for payments in euro, with settlement in central bank money’ . Moreover, TARGET2 is ‘legally structured as a multiplicity of RTGS systems’ and each Eurosystem central bank operates its own TARGET2 component system, which is designated as a system under national legislation implementing Directive

text: of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (hereinafter the ‘Settlement Finality Directive’). A TARGET2 component system operated by NBS would therefore be designated as a system for the purposes of the Settlement Finality Directive and would already be covered by Article 3(2) of the Law on payment systems, as it would be operated by NBS. Nonetheless, the amendment of this provision as proposed in the draft law serves as clarification and as such the ECB has no objection.

text: Participants in a payment system

text: 3.2 The ECB notes that the terminology used in the TARGET2 Guideline and the Law on payment systems is different with respect to entities offering clearing and settlement services and understands that the provisions of the Law on payment systems do not prevent such entities from connecting to the TARGET2 component system operated by NBS, unless the latter decides not to admit such entities to TARGET2.

text: Payment system rules

text: in the payment system rules, which includes defining ‘the moment of acceptance of an order by the payment system’. Further, Article 35 of the law defines the moment of irrevocability by operation of law (with reference to the moment of acceptance of a payment order) rather than by definition in the rules of the system. The ECB understands that according to Slovak legislation, the moment of acceptance of an order by the payment systems means the same as the ‘entry of a payment order’ under the Settlement Finality Directive. However, for reasons of legal certainty, it would be welcome for the legislation to be explicitly clarified with regard to this point.

text: License to operate a payment system

text: 3.4 Under Article 61(3) of the Law on payment systems, an entity applying for a license to operate a payment system governed by Slovak law must fulfil certain criteria, which include a requirement to be a joint-stock company with a registered office in Slovakia. In conjunction with the registration requirement, the ECB notes that the services offered in TARGET2 are designed in accordance with the principle of an open market economy with free competition and with respect to the principle of equal treatment and non-discrimination when offering access to fund transfer services in TARGET2. Notwithstanding the fact that TARGET2 is exempted from the above-mentioned license requirement, the national authorities should in general avoid measures which may discriminate against any entities on grounds of residence or place of establishment since this would be contrary to the Treaty and the Statute of the European System of Central Banks and of the European Central Bank . Therefore, the ECB invites the national authorities to reconsider the requirement that an entity intending to operate a system governed by Slovak law has to be a jointstock company that has a registered office in Slovakia.

text: Done at Frankfurt am Main, 25 April 2008.

text: [signed]

text: The President of the ECB

text: Jean-Claude TRICHET


text: KOM(2007) 741 slutlig och KOM(2008) 71 slutlig. ECB har ombetts yttra sig över första och fjärde delen av förslaget till förordning.

text: Europaparlamentets, rådets och kommissionens uttalande om rådets beslut av den 17 juli 2006 om ändring av beslut

text: om de förfaranden som skall tillämpas vid utövandet av kommissionens genomförandebefogenheter (

text: ) (EUT C 255, 21.10.2006, s. 1).

text: Se det inledande stycket i Europeiska centralbankens yttrande

text: av den 12 december 2006 om ett utkast till kommissionens direktiv om genomförande av

text: rådets direktiv 85/611/EEG

text: om samordning av lagar och andra författningar som avser företag för kollektiva investeringar i överlåtbara värdepapper (fondföretag), när det gäller förtydligandet av vissa definitioner (EUT C 31, 13.2.2007, s. 1). Se även punkt 1.2 i ECB:s yttrande

text: av den 15 februari 2007 på begäran av Europeiska unionens råd över förslag om ändring av de åtta direktiven

text: och

text: , avseende kommissionens genomförandebefogenheter (EUT C 39, 23.2.2007, s. 1).

text: Det faktum att gemenskapsinstitutioner brustit när det gäller att höra varandra har varit föremål för flera av EG-domstolens avgöranden. Om skyldigheten att höra Europaparlamentet, se

text: mål C-138/79

text: Roquette Frères mot Europeiska gemenskapernas råd (REG 1980, s. 3333) och

text: mål C-21/94

text: parlamentet mot rådet (REG 1995, s. I-1827, punkt 17). Om skyldigheten för den höga myndigheten att höra rådet och de rådgivande kommittéerna enligt EKSG-fördraget, se

text: mål 1/54

text: Frankrike mot EKSG:s höga myndighet (REG 1954-56, s. 1), punkt 15 och

text: mål 2/54

text: Italien mot EKSG:s höga myndighet (REG 1954-56, s. 37), punkt 52, som bekräftats i

text: mål 6/54

text: Nederländerna mot EKSG:s höga myndighet (REG 1954-56, s 103), punkt 112. När det gäller artikel 105.4 i fördraget är

text: mål C-11/00

text: kommissionen mot Europeiska centralbanken (REG 2003, s. I-7147) av intresse, där generaladvokat Jacobs underströk Att ECB skall höras angående förslag till rättsakter inom dess behörighetsområde är ett led i förfarandet som krävs enligt fördraget och som uppenbarligen kan påverka innehållet i de rättsakter som antas. En underlåtenhet att uppfylla ett sådant krav skall enligt min uppfattning kunna leda till att den antagna rättsakten ogiltigförklaras. Yttrande av generaladvokat Jacobs av den 3 oktober 2002, punkt 131.

title: Europeiska centralbankens yttrande av den 5 maj 2008 på begäran av Europeiska unionens råd över ett förslag till Europaparlamentets och rådets förordning om anpassning till rådets beslut 1999/468/EG, ändrat genom beslut 2006/512/EG, av vissa rättsakter som omfattas av det förfarande som anges i artikel 251 i fördraget, med avseende på det föreskrivande förfarandet med kontroll (CON/2008/19)

text: Inledning och rättslig grund

text: Den 17 mars 2008 mottog Europeiska centralbanken (ECB) en begäran från Europeiska unionens råd om ett yttrande över ett förslag till Europaparlamentets och rådets förordning om anpassning till

text: rådets beslut 1999/468/EG

text: , ändrat genom beslut

text: , av vissa rättsakter som omfattas av det förfarande som anges i artikel 251 i fördraget, med avseende på det föreskrivande förfarandet med kontroll (nedan kallat förslaget till förordning).

text: ECB:s behörighet att avge ett yttrande över förslaget till förordning grundar sig på artikel 105.4 i fördraget om upprättandet av Europeiska gemenskapen. I enlighet med

text: artikel 17.5

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

text: Allmänna kommentarer

text: Förslaget till förordning innebär att man inför det nya föreskrivande förfarandet med kontroll bl.a. för kommissionens genomförandebefogenheter avseende en rad av gemenskapens rättsliga instrument inom statistikområdet. ECB har inga specifika kommentarer till bestämmelserna i förslaget till förordning eftersom de står i överensstämmelse med det gemensamma uttalandet från Europaparlamentet, rådet och kommissionen om införandet av det nya föreskrivande förfarande med kontroll i kommittéförfarandet.

text: Mot bakgrund av den stora betydelse som genomförandeåtgärder har för EU:s lagstiftning på statistikområdet, vill ECB ta tillfället i akt och understryka betydelsen av bankens rådgivande roll enligt artikel 105.4 i fördraget som stadgar att ECB ska höras om varje förslag till gemenskapsrättsakt inom ECB:s behörighetsområde. I linje med den ståndpunkt som ECB intagit i sina tidigare yttranden om genomförandeåtgärder på området finansiella tjänster, anser ECB att de föreslagna genomförandeåtgärderna på statistikområdet har lagstiftningskaraktär och utgör förslag till gemenskapsrättsakter i enlighet med artikel 105.4 i fördraget. Därför inkluderar den bestämmelse i fördraget enligt vilken ECB ska höras om varje förslag till gemenskapsrättsakt inom ECB:s behörighetsområde en skyldighet att höra ECB även om dessa genomförandeåtgärder.


text: The proposed amendments are divided into three separate draft laws: (i) draft law amending the Law of 29 July 2005 on trading in financial instruments (Dz.U. 2005, No 183, item 1538, as amended) and other legislation; (ii) draft law amending the Law of 29 July 2005 on public offerings and the conditions for admitting financial instruments into the organised system of trading and on public companies (Dz.U. 2005, No 184, item 1539, as amended); and (iii) draft law amending the Law of 24 May 2004 on investment funds (Dz.U. 2004, No 146, item 1546, as amended).

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

text: The implemented Directives include: (i) Directive

text: of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives

text: and

text: and Directive

text: of the European Parliament and of the Council and repealing

text: Council Directive 93/22/EEC

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

text: of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast) (OJ L 177, 30.6.2006, p. 201); and (iii) other Community directives (

text: and

text: See ECB Opinion

text: of 16 November 2006 at the request of the Polish Minister for Finance on a draft law amending the Law on trading in financial instruments.

text: Such amendments were either added in the text of the legislative draft submitted to the Parliament (Sejm) following ECB Opinion

text: (see Sejm document No 64) or are proposed in the separate Governmental submission of 15 February 2008, complementing the original draft.

text: See publication references in the footnote 1 above.

text: Dz.U. 2001, No 123, item 1351, as amended. One of the other laws subject to the amendmnets proposed by the draft law is the Law on banking of 29 August 1997 (consolidated text: Dz.U. 2002, No 72, item 665, as amended).

text: See Article 46 of the Law on trading in financial instruments following the amendments introduced in this Law by Article 1(37) of the draft law, as amended by point 1(15) of the Governmental submission of 15 February 2008, and by

text: Article 18

text: a of the draft law, as added by point 8 of the abovementioned Governmental submission.

text: See Articles

text: a, 68a(5) and 68b(1) of the Law on trading in financial instruments following the amendments introduced in this Law by

text: Article 1(38)

text: , (50a), (51a) (added by point 1(22) of the Governmental submission of 15 February 2008) and Article 56 of the draft law.

text: The draft law will allow KDPW only to outsource to its own subsidiaries. See

text: Article 48(7)

text: to (15) of the Law on trading in financial instruments following the amendments introduced in this Law by Article 1(38) of the draft law, as partially amended by point 1(17) of the Governmental submission of 15 February 2008.

text: In certain cases, in view of the systemic risk considerations, the following competence will be given to NBP’s President in relation to payment systems and to the Financial Supervision Commission in relation to securities settlement systems: (i) recognition of arrangements involving only two participants as a ‘system’; and (ii) recognition of indirect participants as participants in the system; see

text: Articles 2

text: and

text: Articles 2

text: a and 17a and Article 19 of the Law on settlement finality following the amendments introduced in this Law by

text: Article 13(1)

text: -(2a), (7a) and (9) of the draft law, as partially amended by point 4 of the Governmental submission of 15 February 2008.

text: In particular, certain amendments will be introduced to the applicant bank’s initial capital and the organisational separation of banking and brokerage activities; see Article 111 of the Law on trading in financial instruments following the amendments introduced in this Law by Article 1(96) of the draft law, as amended by point 1(44) of the Governmental submission of 15 February 2008.

text: See paragraph 2.3 of ECB Opinion

text: , as currently relating to

text: Article 45

text: b of the Law on trading in financial instruments, as amended by Article 1(36) of the draft law.

text: See paragraph 2.4 of ECB Opinion

text: , as currently relating to

text: Article 68

text: a(11) of the Law on trading in financial instruments, as amended by Article 1(56) of the draft law.

text: See paragraph 2.5 of ECB Opinion

text: , as currently relating to

text: Article 48

text: and

text: Article 68

text: a(1) to (2) of the Law on trading in financial instruments, as amended by

text: Article 1(33)

text: and (56) of the draft law.

text: See paragraph 2.6 of ECB Opinion

text: , as currently relating to

text: Article 68

text: c(2) to (3) of the Law on trading in financial instruments, as amended by Article 1(56) of the draft law.

text: See paragraph 2.10 of ECB Opinion

text: , as currently relating to

text: Article 15(1)

text: to (2) of the Law on settlement finality, as amended by Article 13(5) of the draft law.

text: NBP may register and settle transactions in securities: (i) issued by itself or by the State Treasury; or (ii) incorporating derivative rights based on such securities (Article 49 of the current Law on trading in financial instruments; cf.

text: Article 45

text: c of the Law on trading in financial instruments following the amendments introduced by Article 1(36) of the draft law).

text: See the KDPW Annual Report 2006, p. 6 and its English translation available on KDPW’s website at www.kdpw.com.pl.

text: See Article 5(6) of the Law of 29 July 2005 on supervision of the capital market (Dz.U. 2005 No 183, item 1537, as amended, hereinafter the ‘Law on supervision of the capital market’). 21 Article 5(2) of the Law of 21 July 2006 on supervision of the financial market (Dz.U. 2006, No 157, item 1119, as amended). 22 KDPW Supervisory Board comprises six to nine members appointed for a three-year term by KDPW Shareholders’ General Meeting (see paragraph 15 of the KDPW Statute, as last amended by Resolution No 5/2007 of the KDPW Extraordinary General Shareholders’ Meeting of 22 August 2007, hereinafter, the ‘KDPW Statute’ (available with its English translation on KDPW’s website at www.kdpw.com.pl)). 23 The KDPW Supervisory Board continuously monitors KDPW’s activities. The responsibilities of the Supervisory Board include, inter alia: (i) review of KDPW financial statements and KDPW Management Board accounts; (ii) suspension of Management Board members from their duties; (iii) adopting the KDPW Rules, the Rules of the KDPW Settlement Guarantee Fund and the Rules of the Investor Compensation Scheme; (iv) appointing a certified auditor; (v) approving the KDPW business plans and financial plans; and (vi) approving the establishment of KDPW subsidiaries (see paragraph 20 of the KDPW Statute).

text: See page 53 of the explanatory memorandum to the Governmental submission of 15 February 2008. The ECB understands that the assignment to NBP of certain public law oversight competences was already proposed in the version of the draft law consulted in 2006, whereby it was not linked with the proposal to force NBP’s sale of KDPW shares. 25 The NBP President may also issue a non-binding opinion on the operating licence to be given by the FSC to such clearing houses and settlement houses (see provisions referred to in footnote 9 above). 26 See new

text: Article 64

text: a of the Law on trading in financial instruments, introduced by

text: Article 1

text: (51a) of the draft law, added by point 1(22) of the Governmental submission of 15 February 2008. 27 See paragraph 9 of ECB Opinion

text: of 11 May 2004 at the request of the Italian Ministry of Economic Affairs and Finance on a draft law on the protection of savings. 28 See

text: Article 16(1)

text: and (3) and

text: Articles 17

text: to 19 of the Law on settlement finality. As a result of provisions introduced by the draft law, the NBP President will obtain certain new competences relating to the recognition of arrangements involving only two participants as a ‘system’ (see provisions listed in footnote 11 above).

text: Paragraph 2.8 of ECB Opinion

text: ; cf. paragraph 3.2 of ECB Opinion

text: of 25 April 2006 on the Dutch draft law concerning financial sector supervision and paragraphs 4 to 14 of ECB Opinion

text: of 20 January 2000 at the request of the Luxembourg Ministry for the Treasury and the Budget on a draft legislative proposal implementing Directive

text: [title shortened]; cf. CPSS, ‘Central Bank Oversight of Payment and Settlement Systems’, May 2005, point 1.1; publication available on the BIS website at www.bis.org. 30 See paragraph 5 of ECB opinion

text: of 7 August 2003 at the request of the Banca d’Italia on a draft regulation on payment systems, payment infrastructures and payment instruments. 31 Cf. paragraph 14 of ECB Opinion

text: of 15 July 2005 at the request of the Ministry of Finance of the Czech Republic on a draft law on the integration of financial market supervisors; see also paragraph 4.2 of ECB Opinion

text: of 9 March 2006 at the request of the Polish Minister of Finance on a draft law on the supervision of financial institutions. 32 Cf. paragraph 15 of ECB Opinion

text: . 33 See e.g. joint CPSS-IOSCO publications ‘Recommendations for securities settlement systems’, November 2001 and ‘Recommendations for Central Counterparties’, November 2004; publications available on the BIS website at www.bis.org. 34 See e.g. joint ESCB-CESR publication ‘Standards for securities clearing and settlement in the European Union’, September 2004; publication available on the ECB website at www.ecb.europa.eu. 35 See the informal ECOFIN Council meeting of 4 to 5 April 2008, ‘EU financial markets infrastructures’, point 3; publication available on the website of the Slovenian Presidency of the EU at www.eu2008.si. 36 The SORBNET-EURO is soon to be replaced by TARGET2-NBP system.

text: See paragraph 4.3 of ECB Opinion

text: , as also repeated in the paragraph 2.8 of ECB Opinion

text: . 38 As introduced by

text: Article 51

text: a of the draft law, amended by point 1(22) of the Governmental submission of 15 February 2008. 39 As introduced by Article 13(2) of the draft law, amended by point 4 of the Governmental submission of 15 February 2008. 40 See Article 16 of the draft law in the wording proposed by point 5 of the Governmental submission of 15 February 2008, amending relevant provisions of the Law on supervision of the capital market. 41 As amended by Article 1(38) of the draft law.

title: Opinion of the European Central Bank of 21 May 2008 at the request of the Polish Minister for Finance on a draft law amending the Law on trading in financial instruments and other legislation (CON/2008/20)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 21 May 2008 at the request of the Polish Minister for Finance on a draft law amending the Law on trading in financial instruments and other legislation (

text: ) Introduction and legal basis

text: On 28 February 2008 the European Central Bank (ECB) received a request from the Polish Minister for Finance for an opinion on draft legislative provisions amending Polish laws in the area of capital market regulation . The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the European Community and the third, fifth and sixth indents of

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

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

text: 1. The purpose of the draft law and the scope of the consultation

text: 1.1 The legislative package subject to the current ECB consultation will transpose a number of Community directives into the Polish legal system and make other amendments that do not directly relate to implementation requirements. The ECB was already consulted on draft provisions contained in the legislative package in 2006 . Currently, the consulting authority has requested an ECB opinion on certain new amendments and provisions which have been proposed since the time

text: of the original ECB consultation . The present ECB opinion is limited to one of the draft laws

text: submitted with the current consultation request (hereinafter, the ‘draft law’), which is amending the

text: Law of 29 July 2005 on trading in financial instruments (hereinafter, the ‘current Law on trading in

text: financial instruments’) and other legislation, including the Law of 24 August 2001 on settlement

text: finality in payment and settlement systems and on the supervision of such systems (hereinafter, the

text: ‘Law on settlement finality’) .

text: 1.2 The draft law introduces new elements inter alia as regards the following issues related to

text: securities clearing and settlement: (i) Krajowy Depozyt Papierów Wartościowych (KDPW, the

text: Polish central securities depository and settlement system) is to change its shareholder structure in

text: that NBP will be obliged to dispose of its shares currently possessed in KDPW ; (ii) in view of the

text: forced sale of KDPW shares, NBP’s oversight powers over KDPW will be reduced, while NBP

text: will obtain certain limited consultation and information powers in relation to KDPW and other

text: clearing and settlement operators, as a result of the proposed public law provisions ; and

text: (iii) outsourcing of KDPW’s activities to third parties is to be restricted . Additionally, the

text: statutory definition and procedure for recognition of payment and settlement systems and

text: licensing requirements for banks conducting brokerage activities are amended.

text: 2. General remarks

text: The ECB would like to reiterate its comments in Opinion

text: to the extent they have not been

text: incorporated in the current version of the draft law, particularly on the following: (i) the need to adapt the

text: statutory definitions of ‘clearing’ and ‘settlement’ to standards developed by the Committee on Payment

text: and Settlement Systems (CPSS) of the Bank for International Settlements (BIS) and by the ECB ; (ii) the

text: need to prevent spillover of risks from the entity providing central counterparty services to the entity

text: providing security settlement services ; (iii) the need to assign tasks related to ensuring proper operation

text: of the clearing and settlement process not only to KDPW but also to other clearing or settlement system

text: operators which may be established in Poland ; (iv) the need for clearing and settlement system operators

text: to submit rules on business continuity measures and on secondary sites as a prerequisite for obtaining a

text: licence ; and (v) the need to ensure express coverage of clearing houses under the provisions of the Law

text: on settlement finality . The ECB recommends taking into account past ECB comments at the current

text: stage of the legislative work, in addition to the more detailed remarks presented below.

text: 3. Central bank ownership and oversight of securities clearing and settlement systems

text: 3.1 At present, the sole securities clearing and settlement operators in Poland are: (i) KDPW; and

text: (ii) NBP, for certain types of securities . KDPW, which performs a whole range of depository and

text: settlement functions, is owned in equal parts by the State Treasury, the Warsaw Stock Exchange

text: and NBP . KDPW is supervised by the Financial Supervision Commission (FSC) and is also

text: subject to oversight exercised by NBP through: (i) participation of one NBP representative in the

text: FSC ; and (ii) wide corporate-law control measures available to NBP due to its holding of KDPW

text: shares, such as being represented in KDPW Supervisory Board and exercising rights available to

text: the Supervisory Board members .

text: Article 18

text: a of the draft law requires NBP to dispose of its shares held in KDPW’s capital within 12 months of the draft law’s entry into force. If NBP does not dispose of its shares in KDPW, the sanction of not being able to exercise shareholder rights would apply to NBP. This would result in NBP losing its current oversight powers over KDPW stemming from its rights as a KDPW shareholder. The explanatory memorandum to the draft law suggests that such discontinuation of NBP’s oversight powers exercised on the basis of its shareholder status may be compensated by the assignment of certain public law competences to the NBP, as proposed by the draft law . It proposes that the NBP President will have a right to issue a non-binding opinion on: (i) the KDPW rules and amendments to such rules, presented to the FSC for approval, to the extent such rules concern clearing and settlement of transactions in financial instruments; and (ii) within the same scope – rules of KDPW’s subsidiaries conducting securities clearing and settlement functions delegated by KDPW and rules of other clearing houses or settlement houses, established on the basis of the Law on trading in financial instruments, once it is amended . Further, at the NBP President’s request, members of the KDPW management and staff will be obliged to disclose in writing information regarding KDPW’s activities related to the clearing and settlement of transactions in financial instruments . 3.3 Central bank financial independence The ECB wishes to point out that the concept of central bank financial independence in Article 108 of the Treaty should be seen from the perspective of whether any third party is able to exercise either direct or indirect influence over the ability of the national central bank (NCB) to fulfill its mandate . The draft law does not comply with the principle of central bank independence as it forces NBP to dispose of its assets, namely all its shares held in KDPW. The ECB is of the view that the NBP’s shareholder status may be modified, if and when needed, in agreement with the NBP’s decision-making bodies, at the market price. 3.4 Recognition of NBP’s oversight functions The ECB understands that the draft law does not substantially affect NBPs’ supervision of payment systems under the Law on settlement finality . However, the draft law foresees express specification of certain NBP’s oversight powers over securities clearing and settlement systems. As recalled in previous ECB opinions, an oversight function is inherent in the central bank task of promoting a sound market infrastructure, in order to safeguard the effectiveness of monetary policy

text: and the overall stability of the financial system . It should be recognised in this context that payment systems and security settlement systems (SSSs) are interlinked given the use of the mechanism of ‘delivery versus payment’ under which settlements of securities and transfers of funds take place simultaneously. There is therefore a strong argument for integrating the oversight of payment and securities settlement systems, and for the NCB to perform this function. Settlement of both legs of such transactions should be subject to similar safeguards to avoid asymmetries with systemic implications. The role of NCBs in SSS oversight is evident given SSSs’ crucial role in the functioning of the financial markets and, therefore, the need for them to be safe and efficient. Oversight of payment and clearing systems is one of the core competencies attributed to the Eurosystem, with its legal basis specified in Article 105(2) of the Treaty and

text: Article 3.1

text: and Article 22 of the Statute of the European System of Central Banks and of the European Central Bank . In particular, the Eurosystem central banks perform oversight of payment systems in line with the common oversight policy defined by the Governing Council, which will also apply to NBP 31 32 once Poland adopts the euro . As noted in previous ECB opinions , the central bank oversight role is also reflected: (i) at international level, in the joint work on SSSs concluded by the CPSS and the International Organization of Securities Commissions (IOSCO) ; and (ii) at Community level, in the joint work of the ESCB and the Committee of European Securities Regulators (CESR) in establishing common standards for EU SSSs , the mandate for which has recently been reaffirmed by the Council . 3.5 The ECB further notes that in the particular case of NBP’s oversight of KDPW the need to ensure the effectiveness of the oversight functions is supported by the systemic importance of KDPW in maintaining financial market stability in Poland, by the key role of KDPW settlement services in the operations implementing NBP’s monetary policy and by the close operational link between KDPW and the NBP-operated payment systems, including the SORBNET-EURO system connected with the Eurosystem’s TARGET system . In view of the above, the ECB recommends

text: that the Polish authorities adopt solutions ensuring NBP’s capacity to perform its oversight tasks, including in particular meaningful and direct access by NBP to information relevant for the performance of its financial stability role and NBP’s long-term capacity to ensure the smooth functioning of the payment and settlement infrastructure relevant to its monetary policy and intraday credit operations. In particular, the ECB makes the following comments: (i) The ECB reiterates its earlier recommendation for NBP to be expressly made responsible, as one of its tasks, for the oversight of all securities clearing and settlement systems that operate or will operate in Poland, including the systems’ rules, and given access to all information and data relevant to the performance of such oversight tasks. In this context, the ECB also draws the Polish legislator’s attention to the following provisions proposed by the draft law: (i)

text: Article 64

text: a of the Law on trading in financial instruments , which requires only KDPW and not any other operators to provide NBP with information in writing as regards their clearing and settlement activities; and (ii) Article 2(2) of the Law on settlement finality , which does not provide for any NBP involvement in the exercise of the competence to recognise the legal arrangements between two participants as securities settlement systems. (ii) It needs to be further considered how the NBP’s oversight competences should be adequately exercised in cooperation with the FSC exercising its supervisory competences on the basis of the provisions amended by the draft law . If other authorities have legal or other responsibilities for aspects of payment and settlement systems, central banks are open to cooperation with these authorities.

text: 4. Delegation of securities clearing and settlement services to third parties

text: The ECB draws the Polish legislator’s attention to the proposed provision of Article 48(7) of the Law on trading in financial instruments , which specifies that the listed KDPW tasks may be delegated solely to KDPW’s own subsidiaries. The ECB notes that while national laws may provide for authorisation or review requirements in respect of delegating or outsourcing to third parties of the activities of the central securities depositories (CSDs) conducting settlement functions, such laws normally do not require legal dependence by the CSD on third parties to which CSD activities are delegated or outsourced. Any provisions proposed in this regard should not prejudice further evolution of the securities infrastructure in Poland, its integration with the European securities infrastructure and further market harmonisation, as it could negatively affect Polish investors and issuers.

text: This opinion will be published on the ECB’s website. Done at Frankfurt am Main, 21 May 2008. [signed]

text: The President of the ECB

text: Jean-Claude TRICHET