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

text: on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 2 Directive

text: Council Directive 82/891/EEC

text: , and Directives

text: and

text: , and Regulations

text: (EU) No 1093/2010

text: and

text: (EU) No 648/2012

text: , of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).

text: Draft legislative decree implementing Directive 2014/59/UE of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending

text: Council Directive 82/891/EEC

text: , and Directives

text: and

text: , and Regulations

text: (EU) No 1093/2010

text: and

text: (EU) No 648/2012

text: , of the European Parliament and of the Council (hereinafter the ‘Implementation Decree’). 4 Draft Legislative Decree amending Legislative Decree No 385 of 1° September 1993 (‘Consolidated Law on Banking’) and Legislative Decree No 58 of 24 February 1998 (‘Consolidated Law on Finance’) in implementation of Directive 2014/59/UE of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending

text: Council Directive 82/891/EEC

text: , and Directives

text: and

text: , and Regulations

text: (EU) No 1093/2010

text: and

text: (EU) No 648/2012

text: , of the European Parliament and of the Council (hereinafter the ‘Amending Decree’). 5 Legislative Decree No 385 of 1 September 1993. 6 Legislative Decree No 58 of 24 February 1998.

text: See

text: Article 37(7)

text: and (8) of the Implementing Decree. 8 See

text: Articles 78

text: to 86 of the Implementing Decree. 9 See

text: Article 24

text: (6-bis) of Law No 262 of 28 December 2005.

text: Article 1(35) of the Amending Decree. 11

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

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

text: See Opinion

text: . 13 See paragraph 2.3.2 of Opinion

text: See paragraph 3.1.4 of Opinion

text: See

text: Articles 40(2)

text: (a) and 42(2)(a) of Directive

text: . 16 See paragraph 3.4.2 of Opinion

text: . 17

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

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

text: and

text: b (1) of the Treaty (OJ L 332 , 31.12.1993, p. 1). 18 See paragraph 3.3 of Opinion

text: , paragraph 5 of Opinion

text: and paragraph 3.6 of Opinion

text: . 19 See the ECB’s 2014 Convergence Report, p. 25.

text: See the ECB’s Convergence Report, 2014, p. 25. 21 See para. 3.2.2. 22 See paragraph 2.3 of Opinion

text: , paragraphs 2.1 and 3.2.4 of Opinion

text: , paragraph 4.1 of Opinion

text: , paragraph 2.1 of Opinion

text: , paragraph 2.3 of Opinion

text: , paragraph 2.2 of Opinion

text: , and paragraph 2.2 of Opinion

text: See paragraph 4.3 of Opinion

text: , paragraphs 5.1 and 5.2 of Opinion

text: , and paragraph 3.3 of Opinion

text: . 24 See the second subparagraph of

text: Article 3(3) of Directive 2014/59/EU

text: . 25

text: Regulation (EU) No. 575/2013

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

text: Regulation (EU) No 648/2012

text: (OJ L 176, 27.6.2013, p. 1), and Directive No.

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

text: and repealing Directives

text: and

text: (OJ L 176, 27.6.2013, p. 338). 26 See Opinion

text: , paragraph 3.1. 27

text: Article 3(6)

text: See paragraph 1.14. 29 Article 1(35) of the Amending Decree. 30

text: Article 1(2)

text: amending the Consolidated Law on Banking by reference to

text: Article 24

text: (6-bis) Law No 262 of 28 December 2005.

text: See paragraph 3.1.2 of Opinion

text: and paragraph 3.3 of Opinion

text: . 32 Articles 12(3) and 102(2) of the Implementing Decree. 33 See paragraph 3.2 of Opinion

text: and paragraph 3.3 of Opinion

text: . 34 See paragraph 3.3 of Opinion

text: See Articles

text: and

text: of Regulation (EU) No 1024/2013. 36 See

text: Article 41(1)

text: , subparagraph, of Directive

text: . 37 See

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

text: . 38 It should be noted that the TLAC proposals are still under discussion, particularly in light of the ongoing impact assessment.

text: See paragraph 3.4 of Opinion

title: Opinion of the European Central Bank of 16 October 2015 on recovery and resolution of credit institutions and investment firms (CON/2015/35)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 16 October 2015 on recovery and resolution of credit institutions and investment firms (

text: ) Introduction and legal basis

text: On 29 July 2015 the European Central Bank (ECB) received a request from the Italian Ministry of Finance (MoF) for an opinion on two legislative decrees on the recovery and resolution of credit institutions and investment firms (hereinafter jointly the ‘draft legislative decrees’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and on the third and sixth indents of

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

text: , as the draft legislative decrees relate to the Banca d’Italia and to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. For elements of the draft legislative decrees the exclusive purpose of which is the transposition of Union law, the ECB’s competence to deliver an opinion is based on Article 25.1 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

text: 1. Purpose of the draft law

text: 1.1 The purpose of the draft legislative decrees is to implement Directive

text: of the European Parliament and of the Council into Italian law, thereby aligning the Italian legal framework for the recovery and resolution of certain types of entities active in financial markets, including credit institutions, investment firms, and financial holding companies that have their head office in Italy, with the existing Union legislation in this field. 1.2 The draft legislative decrees regulate plans and procedures for the recovery and resolution of entities falling within their scope and the status and the powers of the supervisory and resolution authorities in relation to banking and financial institutions at both individual and group level.

text: 1.3 Directive

text: would be transposed by means of two legislative decrees. The first decree defines the status and powers of the relevant national authorities as well as the forms of cooperation and exchange of information among them, resolution plans, resolution tools and procedures, the establishment of resolution funds, safeguards, the right of appeal against decisions regarding crisis prevention or crisis management measures and administrative 4 5 penalties. The second decree would amend the Consolidated Law on Banking and the Consolidated Law on Finance by laying down rules for recovery plans at individual and group level, agreements for group financial support, and early intervention measures, including the removal of senior management and the appointment of a temporary administrator of a credit institution. Early intervention measures are to be coordinated with the compulsory administrative liquidation procedure to avoid any unwarranted overlap. Moreover, recovery and resolution measures applicable to credit institutions are extended to investment firms established in Italy. 1.4 Under the draft legislative decrees, the Banca d’Italia is designated as a resolution authority within the meaning of Directive

text: (with the National Committee for Companies and Stock Exchange, [Commissione Nazionale per le Società e la Borsa, CONSOB] entitled to make certain proposals within its remit in the case of investment firms). In observance of the principle of organisational autonomy, the Banca d’Italia is expected to implement appropriate measures to ensure operational independence between the tasks related to crisis management and other tasks conferred upon it and establish mechanisms for cooperation and coordination between the different structures involved. 1.5 The draft legislative decrees provide for crisis management tools. The Consolidated Law on Banking has already enabled the Banca d’Italia to take extraordinary measures. For example, the Banca d’Italia, acting alone, may prohibit credit institutions from carrying out new operations or require credit institutions to close branches. By contrast, the power to place credit institutions into special administration, possibly preceded by provisional management, or into compulsory administrative liquidation, was vested in the MoF, acting on a proposal of the Banca d’Italia. The draft legislative decrees amend the Consolidated Law on Banking so as to introduce recovery plans, group financing agreements and early intervention measures. The write-down and conversion of capital instruments, resolution tools and the establishment and use of resolution funds are also introduced by the draft legislative decrees. Finally, resolution tools would be made applicable, mutatis mutandis, to investment firms.

text: 1.6 The tools made available to the Banca d’Italia comprise preparatory measures, early intervention measures, the write-down or conversion of capital instruments and resolution measures. 1.7 Preparatory measures include recovery plans and group financial support agreements. Recovery plans are drawn up by the obliged credit and financial institutions and reviewed and assessed by the Banca d’Italia, which may also require these recovery plans to be updated. Any decisions taken by an institution to implement any measures envisaged in the recovery plan it has drawn up must be notified to the Banca d’Italia. Regarding group financial support agreements, the submission of the draft agreement to the extraordinary meeting of shareholders is subject to the prior authorisation of the Banca d’Italia. The decision providing financial support may be challenged by the Banca d’Italia in order to prevent or limit its implementation. 1.8 Early intervention measures include the implementation of recovery plans, a request for the removal of management and supervisory bodies, special administration and other extraordinary measures. Regarding the implementation of recovery plans, the Banca d’Italia may request obliged institutions to update the recovery plan and require its full or partial implementation. Regarding the request for the removal of management and supervisory bodies, the Banca d’Italia may request that senior managers and members of management and supervisory bodies of the institution are removed and replaced. The appointment of newly appointed senior managers and members is subject to the prior approval of the Banca d’Italia. Regarding special administration, the Banca d’Italia may remove the management and supervisory bodies of the institution and appoint special commissioners and a supervisory committee instead (special administration may be preceded by the interim measure of provisional management in particularly urgent cases). In principle, the special commissioners have the same powers as the management bodies of the institution but the Banca d’Italia may limit their powers and tasks. The special commissioners and the members of the supervisory committee may be removed or replaced by the Banca d’Italia at any time. Moreover the Banca d’Italia may appoint commissioners to work temporarily with the management body of the institution. Regarding other extraordinary measures, the Banca d’Italia may prohibit a credit institution from carrying out new operations or opening new branches. 1.9 The power to write down or convert relevant capital instruments is vested in the Banca d’Italia. 1.10 Regarding resolution measures, institutions which are failing or likely to fail may be placed into resolution and thus: (a) have their shares, ownership instruments, assets, rights or liabilities transferred to a purchaser under the sale of business tool; (b) have their shares or other ownership instruments transferred to a bridge institution under the bridge institution tool; (c) have their assets, rights, or liabilities transferred to an asset management vehicle company under the asset separation tool; (d) be subject to the bail-in tool. The Banca d‘Italia’s decision to place a distressed bank into resolution and any changes to the resolution programme are subject to the prior approval of the Minister of Economy and Finance, whereas the implementation of the measures outlined in the resolution programme is the sole responsibility of the Banca d’Italia. The Banca d’Italia implements the resolution programme by appointing special commissioners, and sending specific orders to the relevant bodies of the institution. The allowances due to special commissioners and members of the supervisory committee are set by the Banca d’Italia and either paid by the entity under resolution or advanced by the Banca d’Italia and then recovered

text: out of the price paid in exchange for the transfer of shares and other equities, from the institution under resolution or from the surplus, if any, of the bridge institution or the asset management vehicle company. Claims for such allowances enjoy general priority and, in case of insolvency, are treated as preferential claims in liquidation proceedings . 1.11 Resolution funds for the purpose of achieving resolution objectives may be established within the Banca d’Italia . The management of such funds may be delegated to recognised deposit guarantee schemes. The Banca d’Italia may also decide to establish resolution funds within other entities, including recognised deposit guarantee schemes. In this case the Banca d’Italia assesses whether their statutes are compliant with the rules laid down in the relevant provisions of the draft legislative decrees and approves them. 1.12 Resolution funds are financed by means of ordinary ex ante and extraordinary ex post contributions levied on banks established in Italy and on Italian subsidiaries of banks established outside the Union, borrowings and other forms of financial support, and amounts paid by the institution subject to resolution or by the bridge institution. The assets of the funds are ring-fenced from the Banca d’Italia’s and the funding institutions’ own assets and only meet the liabilities assumed in connection with resolution actions. The same applies where resolution funds are established within other entities, including recognised deposit guarantee schemes. Creditors of the Banca d’Italia, creditors of other entities within which the fund is established and creditors of the contributors to the funds are prevented from taking individual enforcement action against the funds. 1.13 In accordance with the no creditor worse off principle, shareholders or creditors that have incurred greater losses in a resolution than they would have incurred in a winding-up under normal insolvency proceedings are entitled to the payment of the difference from the resolution funds. Where a bridge institution tool or asset separation tool is used, the capital of the bridge institution and of the asset management vehicle company is wholly or partially held by the resolution fund or by other public entities. 1.14 Procedural requirements are established to ensure that resolution actions are properly notified and a confidentiality regime is imposed upon the authorities involved in resolution actions and their staff. A cooperation regime between public authorities is established, and the Banca d’Italia, other competent authorities and the MoF are also required to provide one another, upon request, with all the relevant information for the other authority to carry out its tasks. The Banca d’Italia is authorised to impose administrative measures and administrative sanctions. 1.15 The civil liability of the Banca d’Italia, the members of its bodies and its staff towards third parties for actions or omissions in the performance of their duties is limited to gross negligence and wilful misconduct . 1.16 In order to implement the depositor preference rule in Italian law, the ranking of unsecured claims in the context of compulsory administrative liquidation of credit institutions has been amended

text: such that deposit claims take priority over other unsecured claims in the following order: (a) claims related to covered deposits and claims of deposit guarantee schemes subrogated to the rights and obligations of covered depositors; (b) that part of the deposits of natural persons, micro, small and medium-sized enterprises eligible exceeding the amount covered by deposit guarantee schemes and comparable deposits referred paid into non-Union branches of banks having their registered office in Italy; and (c) other deposits. The definition of ‘deposits’ clarifies that it includes certificates of deposits not taking the form of transferrable securities and not issued in a series. 1.17 Finally, the draft legislative decrees provide for the provision of financing by the Banca d’Italia where a bank is placed into compulsory administrative liquidation and liquid financial resources are not available or insufficient to meet preference claims. In particular, the costs of proceedings in relation to any phases preceding the liquidation phase (provisional management, special administration or voluntary wind up) are paid in advance by the Banca d’Italia and advance payments are then recovered from the financial resources available to the credit institution, after reimbursement of the clients entitled to restitution of financial instruments held on custody by the credit institution, and before the payment of other preference claims. Where financial resources are insufficient to meet the costs of the proceedings in the liquidation phase, which are normally to be paid ahead of other preference claims, and where clients’ financial resources are not available or not easily available or insufficient for this purpose, the Banca d’Italia may make advance payments up to EUR 400,000 or double the amount payable to the liquidators, whichever is higher. Advance payments made by the Banca d’Italia are then recovered from the available financial resources with priority over other preference claims (and then from clients’ available financial resources) .

text: 2. General observations

text: 2.1 The ECB welcomes the draft legislative decrees, as they strengthen the tools and procedures available to the Banca d’Italia to carry out effective preventive, early intervention and effective resolution measures in line with the common framework of intervention powers, rules and procedures laid down in Directive

text: . 2.2 The ECB stresses, however, that it does not opine on whether the draft law effectively discharges the obligations of the Italian State to implement Directive

text: in Italian law. Rather, the ECB focuses primarily on those provisions that may impact on the role and tasks of the Banca d’Italia as a central bank and as a member of the European System of Central Banks (ESCB), as well as on those provisions that may impact on the specific tasks conferred on the ECB concerning policies relating to the prudential supervision of credit institutions by

text: Council Regulation (EU) No 1024/2013

text: 2.3 The ECB underlines that, in the context of the proposed conferral of tasks on an ESCB member, it is necessary to assess such conferral against the prohibition of monetary financing under Article 123 of the Treaty . The ECB has developed the guidance outlined below, in the form of general and specific considerations, on the basis of which it decides whether a new task conferred on an ESCB national central bank (NCB) is to be considered a central banking task or a government task for the purposes of the prohibition of monetary financing. 2.3.1 General considerations First, the systematic categorisation of tasks assigned to NCBs as central banking or government tasks applies to genuinely new tasks that either did not exist in the past or did not form an integral part of the central banking tasks assigned to the NCB in the past. In recognition of the different Member States’ legal frameworks, central banking traditions and national set-ups, the tasks currently discharged by an NCB as central banking tasks are not reviewed and re-categorised, but may be reassessed if they are subject to legislative amendments of substance. Second, the principle of financial independence requires that the Member States may not put their NCBs in a position where they have insufficient financial resources to carry out their ESCBor Eurosystem-related tasks, as applicable. Third, central banking tasks comprise in particular those tasks that are related to the tasks listed in

text: Article 127(2)

text: , (5) and (6) of the Treaty. Fourth, new tasks conferred on an NCB which are atypical of NCBs’ tasks, or which are clearly discharged on behalf of and in the exclusive interest of the government or of other public entities, should be considered as government tasks. In that context, a distinction should be drawn between liquidity- and solvency-related tasks of NCBs. While, for purposes of the monetary financing prohibition, solvency support is a government task, liquidity-related tasks, the ultimate objective of which are to finance the economy, are central banking tasks. 2.3.2 Specific considerations Resolution tasks can be considered central banking tasks, provided that they do not undermine an NCB’s independence in accordance with Article 130 of the Treaty. However, the discharge of these tasks by central banks may not extend to the financing of resolution funds or other resolution financial arrangements as these are government tasks . This is without prejudice to the following: (a) the possibility that central banks may provide short-term financing to deposit guarantee schemes under certain conditions; and (b) the possibility that NCBs may provide emergency liquidity assistance to solvent credit institutions. An important criterion for qualifying a new task as a government task is therefore the impact of the task on the institutional, financial and personal independence of the NCB. In particular, the following should be taken into account. First, it should be assessed whether the performance of the new task creates inadequately addressed conflicts of interests with existing central banking tasks, and does not necessarily

text: complement those existing central banking tasks. If a conflict of interest arises between existing and new tasks, there should be sufficient mitigation in place to adequately address that conflict. Complementarity between the new task and existing central banking tasks should not, however, be interpreted extensively, so as to lead to the creation of an indefinite chain of ancillary tasks. Complementarity should also be examined from the point of view of the financing of those tasks. Second, it should be assessed whether without new financial resources the performance of the new task is disproportionate to the financial or organisational capacity of the NCB and may negatively impact on its capacity to properly perform existing central banking tasks. Third, it should be assessed whether the performance of the new task does not fit into the institutional set-up of the NCB in the light of central bank independence and accountability considerations. Fourth, it should be assessed whether the performance of the new task harbours substantial financial risks. Fifth, it should be assessed whether the performance of the new task exposes the members of the NCB’s decision-making bodies to political risks which are disproportionate and may also impact on their personal independence and, in particular, the guarantee of the term of office under Article 14.2 of the Statute of the ESCB. 2.3.3 Any final assessment on the qualification of a task given to an NCB as either falling within the scope of a central banking task or a government task will be guided by the objective of ensuring the consistent application of the prohibition of monetary financing within the Eurosystem and the ESCB to the extent that it applies to its members.

text: 3. Specific observations

text: 3.1 Establishment of resolution funds within the Banca d’Italia 3.1.1 In line with

text: Article 105 of Directive 2014/59/EU

text: , the draft legislative decrees provide that the funding of resolution funds may be ensured through loans and other forms of financial support in the event that ordinary ex ante and extraordinary ex post contributions are not immediately accessible or sufficient. However, the ECB notes that the draft legislative decrees do not specify the financial institutions or the third parties that are allowed to provide financial support, the nature of eligible financial support arrangements or the terms and conditions of any such arrangements. The ECB underlines that, even though this is not expressly stated in the draft legislative decrees, the Banca d’Italia is not authorised to provide any loan or financing under any circumstances to the resolution funds, as the provision of such financing would constitute a government task in breach of the prohibition of monetary financing under the Treaty . 3.1.2 The draft legislative decrees provide that where a bridge institution tool or the asset separation tools are used the capital of the bridge institution and of the asset management vehicle company are wholly or partially held by the resolution fund or public bodies. While this provision

text: implements Directive

text: , where a resolution fund established within a central bank holds such capital, it should be clarified, for the avoidance of doubt, that the central bank will not employ its resources, other than those collected in the resolution fund, to assume or finance any obligation of these entities . The role of a resolution fund established within a central bank as owner of such an entity must remain consistent under all circumstances with the prohibition on monetary financing under Article 123 of the Treaty, as supplemented by

text: Council Regulation (EC) No 3603/93

text: , which prohibits, inter alia, any financing by a central bank of the public sector’s obligations vis-à-vis third parties. Moreover, this role must be performed without prejudice to central bank independence, in particular its financial and institutional independence . The principle of financial independence requires NCBs to have sufficient means to carry out not only their ESCB-related tasks from an operational and financial point of view, but also their national tasks . For that reason, it should be ensured that if a resolution fund established within the Banca d’Italia becomes the owner of such an entity, sufficient financial and human resources are provided to address the operational burden associated with it. 3.2 Conferral of resolution tasks on the Banca d’Italia The draft legislative decrees designate the Banca d’Italia as the resolution authority, broadening its responsibilities so as to include the power to propose placing obliged entities into resolution and to take resolution measures in respect of such entities. In the light of the guidance set out in paragraph 2.3, it must be assessed carefully whether the Banca d’Italia’s new tasks and responsibilities in this field could constitute a breach of the monetary financing prohibition. 3.2.1 New tasks The ECB notes that whilst the Banca d’Italia has had for many years powerful tools to intervene in distressed financial institutions which pose a risk to financial stability, principally in the form of the special administration regime, the draft legislative decrees introduce specific, new resolution tools, such as the bail-in, bridge institution and asset management vehicle tools, which in their proposed form do not currently exist in Italian law, as well as expanded ancillary powers which did not exist as separate resolution measures or powers in the past. The draft legislative decrees thus introduce substantial legislative amendments to the Banca d’Italia’s existing resolutionrelated tasks that are currently categorised as central banking tasks, and should therefore be assessed in the light of the monetary financing prohibition. 3.2.2 Principle of financial independence The principle of financial independence requires NCBs to have sufficient means to carry out not only their ESCB-related tasks from an operational and financial point of view, but also their

text: national tasks . Hence, the provisions of the draft legislative decrees authorise the Banca d’Italia to anticipate allowances due to special commissioners and members of the supervisory committee and then recover such expenses from the institutions concerned in order to safeguard the Banca d’Italia’s financial independence. Furthermore, the ECB notes that the Banca d’Italia, before deciding to place an obliged credit or financial institution into resolution or compulsory administrative liquidation, is required to obtain the MoF’s prior approval. However, the ECB understands that the liability for damages arising due to gross negligence or wilful misconduct under the Consolidated Law on Banking remains with the Banca d’Italia and its staff, while the MoF will also be liable in accordance with the general liability regime of the State. 3.2.3 Links to tasks listed in

text: Article 127(2)

text: , (5) and (6) of the Treaty Administrative resolution tasks are considered tasks related to those referred to in Article 127(5) of the Treaty, based on the understanding that administrative resolution tasks and supervisory tasks complement each other, particularly where, as in this case, an NCB has a mandate for the stability of the financial system, or where, as in this case, the designated resolution authority already has certain responsibilities in connection with the supervision of credit and financial institutions. 3.2.4 Atypical tasks A number of Member States have conferred on their NCBs a significant role in the resolution of financial institutions, whether as the resolution authority or as a competent authority in the decision-making process for resolution. The ECB has generally welcomed the allocation of such tasks to NCBs provided they do not interfere financially and operationally with the performance of the NCB’s ESCB-related tasks . The resolution tasks of an NCB can therefore be regarded as being tasks not atypical of a central bank, particularly if, as in the case of the Banca d’Italia, it has had for many years powerful tools to intervene in distressed financial institutions which pose a risk to financial stability. 3.2.5 Discharge of tasks on behalf of and in the exclusive interest of the Government or of other public

text: entities

text: Whilst the Banca d’Italia is designated as the sole resolution authority and takes resolution measures acting as an administrative authority in the exercise of public functions in its own name, and not on behalf of any other authority, as noted in paragraph 3.3.2 above, it is required, before deciding to place an obliged credit or financial institution into resolution or compulsory administrative liquidation, to obtain the MoF’s prior approval. There is, however, no indication that in discharging its resolution function the Banca d’Italia acts exclusively in the interests of the MoF or another public entity.

text: 3.2.6 Extent to which conflict of interests with existing Banca d’Italia tasks are addressed 23 24 The ECB has repeatedly noted , in line with Directive

text: , that staff involved in carrying out the functions of a resolution authority in accordance with Directive

text: must be structurally separate and subject to separate reporting lines from the staff involved in carrying out prudential banking supervision tasks pursuant to applicable EU legal acts or with regard to the other functions of the relevant authority. Directive

text: ‘exceptionally’ allows one authority to carry out both resolution and supervisory functions on the condition that adequate structural arrangements are put in place in order to ensure operational independence and to avoid conflicts of interest between that authority’s resolution function and its other functions. For example, Directive

text: envisages structural separation being achieved by keeping the reporting lines for staff involved in carrying out resolution tasks separate from those used by staff involved in supervision activities . Pursuant to the draft legislation, the Banca d’Italia, in full compliance with the principle of independence, shall provide appropriate arrangements for the separation of crisis management tasks from other tasks, to ensure the operational independence of the Banca d’Italia, and shall establish cooperation and coordination arrangement between the structures involved . 3.2.7 Extent to which the performance of tasks is proportionate to the Banca d’Italia’s financial and operational capacity and its ability to perform its ESCB-related tasks 3.2.7.1 In line with

text: Article 37(7) of Directive 2014/59/EU

text: , the draft legislative decrees authorise the Banca d’Italia to advance the allowances of commissioners and members of the supervisory committee of an institution placed into resolution, and then recover these advances out of the amounts paid in exchange for the transfer of shares and other equities from the entity under resolution or from the surplus, if any, of the bridge institution or the asset management vehicle company. Claims for such allowances enjoy general priority and, in case of insolvency, are treated as preference claims in liquidation proceedings. 3.2.7.2 Also, where a bank is placed into compulsory administrative liquidation and liquid financial resources are not available or insufficient, costs and allowances related to provisional management, special administration or voluntary winding up are paid in advance by the Banca d’Italia. Advance payments are then recovered from the financial resources available to the credit institution, after reimbursement of the clients entitled to restitution of financial instruments held on custody by the credit institution, and before the payment of other preference claims. Costs of proceedings in relation to compulsory administrative liquidation may be also paid in advance by

text: the Banca d’Italia where financial resources are not available. Such advance payments are then recovered from the available liquid financial resources with priority over other preference claims (and then from clients’ available financial resources) . 3.2.7.3 As noted in paragraph 3.2.2, in order to remain financially independent, NCBs must have sufficient means to carry out not only their ESCB-related tasks from an operational and financial point of view, but also their national tasks. 3.2.8 Extent to which the performance of tasks fits into the Banca d’Italia’s institutional set-up in the light of central bank independence and accountability considerations As noted above, the Banca d’Italia is required, before deciding to place an obliged credit or financial institution into resolution or compulsory administrative liquidation, to obtain the MoF’s prior approval. The Banca d’Italia and the MoF shall agree the practical arrangements for the timely sharing of information in order to ensure the efficiency and effectiveness of crisis management. The ECB considers that the broadened resolution tasks that the Banca d’Italia will assume under the draft legislative decrees entail closer cooperation with the MoF than for the exercise of its other functions. 3.2.9 Extent to which the performance of tasks involves substantial financial risks The draft legislative decrees stipulate that the Banca d’Italia, the members of its bodies and its staff are liable for damages caused by gross negligence or wilful misconduct in the course of discharging their functions under the Consolidated law on Banking . The ECB understands that liability could attach even if the Banca d’Italia had obtained prior approval from the MoF for the improper resolution measure. However, as noted above, the ECB understands that the MoF will also be liable for its decisions. 3.2.10 Conclusion The ECB considers that there are grounds for regarding the Banca d’Italia’s expanded resolution tasks as central banking tasks, in the sense that they complement the Banca d’Italia’s existing supervisory functions. The fact that the Banca d’Italia will be authorised to recover advance payments made for allowances from the institutions concerned should also mitigate their impact on its financial independence. In addition, even though the draft legislative decrees may create financial risks for the Banca d’Italia in terms of liability for damages incurred in the performance of the new resolution tasks, these risks will be mitigated by the provision whereby the Banca d’Italia will be liable, along with the members of its management bodies and its staff, only for damages incurred as a consequence of its acts or omissions constituting gross negligence and wilful misconduct, while the MoF will be liable for its decisions also in the approval of the Banca d’Italia’s resolution measures.

text: 3.3 The MoF’s role in resolutions In requiring the Banca d’Italia to obtain the MoF’s prior approval before deciding to place an obliged credit or financial institution into resolution or compulsory administrative liquidation, the question arises as to whether the MoF may be considered to be a second resolution authority alongside the Banca d’Italia. The consulting authority is invited to consider whether the MoF’s prior consent should be more appropriately limited to those cases in which the resolution measures have a direct fiscal impact or systemic implications, as required by

text: Article 3(6) of Directive 2014/59/EU

text: . This would avoid the MoF acting de facto as joint resolution authority alongside the Banca d’Italia, since, if this were the case, the MoF would need to ensure the operational independence of its resolution function . 3.4 Resolution planning The draft legislative decrees stipulate that the evaluation of resolvability and resolution plans must not assume the granting of extraordinary public financial support except the use of the resources of the resolution funds, nor the granting of central bank emergency liquidity assistance, nor central bank liquidity assistance provided under non-standard collateralisation, tenor and interest rates terms . While this appears to be in line with the requirements of Directive

text: , the ECB emphasises that these provisions do not in any way affect the competence of central banks to decide independently and in their full discretion on the provision of central bank liquidity to solvent institutions, both through standard monetary policy operations and emergency liquidity assistance, within the limits imposed by the monetary financing prohibition under the Treaty . 3.5 Determination of failing or likely to fail The draft legislative decrees stipulate that the Banca d’Italia, acting as resolution authority, may also determine autonomously that an institution is failing or likely to fail in line with

text: Article 32(2) of Directive 2014/59/EU

text: . The ECB notes that Directive

text: assigns the failing or likely to fail assessment also to the respective supervisory authority, i.e. the ECB or national competent authorities, in line with the distribution of competences provided for in

text: Regulation (EU) No 1024/2013

text: . The ECB also notes that, pursuant to

text: Article 9(1)

text: , subparagraph 2,

text: Article 4(1)

text: (e) and

text: Article 4(3) of Council Regulation (EU) No 1024/2013

text: , and

text: Article 104(1)

text: (b) of Directive

text: of the European Parliament and of the Council, the ECB shall have all the powers of the competent and designated authorities under the applicable Union law to ensure compliance with regard to significant institutions . 3.6 Establishment of a bridge institution Pursuant to the draft legislative decrees, and in line with

text: Article 41(1) of Directive 2014/59/EU

text: , the Banca d’Italia approves a bridge institution’s memorandum of association and articles of association, the appointment of the members of its management and supervisory bodies, their

text: remuneration and any conferral of delegations, and may impose restrictions on its activity to ensure compliance with applicable legislation on State aid. In this respect, the ECB underlines that under

text: Regulation (EU) No 1024/2013

text: provisions in relation to the ECB’s responsibilities with regard to the authorisation of a credit institution to be established in a participating Member State the banking licence necessary for the access to the activity of credit institutions by the bridge institution is to be granted solely by the ECB irrespective of the context and the size of the institution which is being created. .. Additionally, if the bridge institution is not able to comply with the requirements for authorisation from the intended start of its operations, then the resolution authority shall request a temporary exemption from some or all of these requirements. The ECB will assess the request and if it decides to grant such an authorisation, it shall indicate the period for which the bridge institution is waived from complying with the relevant requirements. Furthermore, the bridge institution is wholly or partially owned by one or more public bodies which may include the resolution funds. The remainder of the ownership may be held by third parties. In this respect an assessment of the resulting qualifying holdings might be necessary. In this case the ECB would need to take a decision on the qualifying holdings before the start of the operations of the bridge institution . 3.7 Depositor preference 3.7.1 The ECB notes that the draft legislative decrees confer a preference not only on claims arising out of deposits guaranteed under the deposit guarantee scheme (including claims of deposit guarantee schemes subrogated to depositor claims) and deposits above the guaranteed threshold of private individuals and micro, small and medium-sized enterprises, but also on all other deposits. Conferring a priority ranking on all deposits is expected to enhance the implementation of the bail-in tool in resolution, because the resolution authority will be able to bail-in other senior unsecured bank debt instruments prior to deposits, while minimising the risk of compensation claims under the ‘no-creditor-worse-off-than-in-insolvency’ principle. The bail-in of such senior unsecured bank debt instruments is perceived to carry a lower contagion risk than that of operational liabilities such as deposits. A general depositor preference is therefore likely to render the bail-in of senior unsecured bank debt more effective and credible, thus fostering effective resolution action and reducing the need to have recourse to the resolution fund. 3.7.2 The ECB understands from the explanatory memorandum accompanying the draft law, that one motivation of introducing the depositor preference is to make it easier for Global Systemically Important Banks (G-SIBs) to meet the forthcoming Total Loss Absorbing Capacity (TLAC) requirement, as foreseen in the Financial Stability Board’s draft proposal on G-SIBs . This would notably be the case if other senior unsecured bank debt became eligible to count as TLAC.

text: However, the ECB notes that the depositor preference does not address the fact that other operational liabilities, such as derivatives, still rank pari passu to senior unsecured bank debt instruments. In this respect, the ECB notes that TLAC eligibility in the draft FSB proposal would require subordination with respect to all TLAC excluded liabilities, not only deposits. 3.7.3 A common framework at Union level on the scope of the depositor preference in bank resolution and/or insolvency proceedings may help to avoid fragmentation of the market within the Union and avoid complicating the tasks of the ECB both with regard to monetary policy and to supervision within the Single Supervisory Mechanism .

text: Done at Frankfurt am Main, 16 October 2015.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


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

text: Pursuant to Article 38(3) of the Act on Banks No. 21/1992 Coll., as amended, reports on matters concerning a client which are subject to banking secrecy may be submitted by a bank without the client’s consent only upon the written request of certain listed authorities. The respective laws governing the activities of each of the listed authorities stipulate which individuals(s) may submit the request for such report on the authority’s behalf in the performance of its public tasks. Under the draft law however a much narrower list of authorities would be permitted to request data from the CRBA.

text: See footnote 2 above.

text: See in the first instance paragraph 2 of Opinion CON2015/22.

text: See paragraph 2.1 of Opinion

text: ČNB is obliged to carry out checks on transactions with credit institutions and other obliged entities under the domestic legal acts implementing the EU anti money laundering and terrorist financing directives – principally Act No. 253/2008 Coll. June 5, 2008 on selected measures against legitimisation of proceeds of crime and financing of terrorism; also ČNB Decree No. 281/2008 Coll. of 1 August 2008 on certain requirements for the system of internal principles, procedures and control measures against money laundering and terrorist financing. However those tasks do not involve the collection of individual account data.

text: See paragraph 2.3.1 (general considerations) of Opinion CON2015/22.

text: See the General part of the MoF explanatory memorandum to the draft law (page 7).

text: Under the Act on Banks 21/1992 Coll. and the Act on the ČNB 6/1993 Coll.

text: This would be for example applicable to the preparatory work launched by the ESCB under Decision ECB/2014/6 of the European Central Bank of 24 February 2014 on the organisation of preparatory measures for the collection of granular credit data by the European System of Central Banks (OJ L 104, 8.4.2014, p. 72), subject to national provisions as regards the re-use of the information for statistical purposes.

text: Article 3 of the Act on State Liability No.82/1998 Coll., as amended.

text: Articles 16-18 of the Act on State Liability No.82/1998 Coll., as amended.

text: See paragraph 2 of Opinion

text: and paragraph 2 of Opinion

text: See paragraph 2 of Opinion

text: Under

text: Directive (EU) 2015/849

text: of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing amending

text: Regulation (EU) No 648/2012

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

text: of the European Parliament and of the Council and

text: Commission Directive 2006/70/EC

text: (OJ L141, 5.6.2015, p. 73), NCB Board members are also deemed to be ‘politically exposed persons’.

publisher: Europeiska centralbanken

sprak: en

title: Opinion of the European Central Bank of 16 October 2015 on the central register of bank accounts (CON/2015/36)

serie: con

text: OPINION OF THE EUROPEAN CENTRAL BANK of 16 October 2015 on the central register of bank accounts (

text: ) Introduction and legal basis

type: rubrik

text: On 4 September 2015 the European Central Bank (ECB) received a request from the Czech Ministry of Finance (MoF) for an opinion on a draft law on the Central Register of Bank Accounts (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of

text: 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 a national central bank. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

type: stycke

text: 1. Purpose of the draft law

text: 1.1 The main purpose to the draft law is to set up a centralised database of basic information on bank accounts in the Czech Republic. A centralised database could significantly simplify and streamline the delivery of account information from the banking sector to the competent authorities. It will enable the competent authorities to more efficiently identify who owns which account and to use that information to make further enquiries at the credit institution concerned with a view to prosecuting eventual offenders and thereby protecting the financial resources and security of the State. 1.2 The main provisions of the draft law are as follows:  The draft law sets up a central database of basic information on accounts maintained for their clients by credit institutions, i.e., banks, credit unions and branches of foreign banks established in the Czech Republic (hereinafter, the ‘central register of bank accounts’ or ‘CRBA’).  The Czech National Bank (ČNB) will administer the CRBA and be responsible for supervising the obligations of the above institutions under the draft law.  The CRBA will hold certain basic data on accounts held by individuals and legal entities with the above institutions, namely data identifying the account holder and the credit institution,

text: the date of the account’s opening and closing, any change to the identification data and any authorisation to dispose of resources held on the account. No information on the resources on the account will be collected in the CRBA.  The State commits to pay ČNB for the costs that ČNB incurs in setting up and administering the CRBA. Detailed rules on the CRBA information system and on the reimbursement of ČNB’s costs will be covered in an agreement to be concluded between the MoF and ČNB.  Credit institutions will be required to submit the prescribed data for the CRBA to ČNB in a form, structure and frequency to be set out in a ČNB Decree.  The CRBA will be accessible only to listed competent public authorities (e.g. the State authorities responsible for financial or customs administration, the authorities involved in criminal proceedings and the State intelligence agency, hereinafter referred to as ‘applicant(s)’) that are entitled to request data subject to banking secrecy requirements from credit institutions, under the conditions laid down by a further law and only upon a request made via an encrypted electronic data box specifically intended for this purpose.  ČNB will enable access to the CRBA only if the applicant meets the access conditions and follows the stipulated procedures.  The applicants will be exclusively responsible for ensuring that they are properly authorised and meet the other conditions for accessing data subject to banking secrecy requirements under the applicable banking laws .  ČNB will be obliged to store the aforementioned data on closed accounts for 10 years.  ČNB will also be obliged to publish an annual report on its website on the operation and use of the CRBA, including aggregated data. 1.3 It is understood that the MoF intends to bring the draft law into force on 1 January 2016. To allow time to set up the database, the draft law stipulates that the CRBA will only be accessible to applicants after fifteen months from the date of the draft law’s entry into force. The ECB notes however that this provision was not contained in the draft law on which the MoF consulted it, but in a later version of the draft law attached to the MoF explanatory memorandum. A number of related laws will also consequently need to be amended.

text: 2. General observations

text: 2.1 The ECB would like to recall that when new tasks are conferred on an ESCB member, it is necessary to assess these tasks against the prohibition of monetary financing under Article 123 of the Treaty. For this purpose and in the light of that basic need, the ECB has developed guidance in the form of general and specific considerations on the basis of which the ECB may decide whether

text: the new task conferred on an ESCB national central bank (NCB) is to be considered a central banking task or a government task for the purposes of the monetary financing prohibition . This guidance is set out in this paragraph 2.1. The concrete assessment of whether the ČNB’s task to administer and operate the CRBA is to be considered a central banking task or a government task is then undertaken in paragraphs 3.1 and 3.2. 2.1.1 General considerations First, the systematic categorisation of tasks assigned to NCBs as central banking or government tasks applies to genuinely new tasks that did not exist in the past or did not form an integral part of the central banking tasks already assigned to an NCB. In recognition of the different Member States’ legal frameworks, central banking traditions and national set-ups, the tasks currently discharged by an NCB as central banking tasks are not reviewed and re-categorised, but may be reassessed if their substance is amended. Second, the principle of financial independence requires that the Member States may not put their NCBs in a position where they have insufficient financial resources to carry out their ESCB or Eurosystem-related tasks. Third, central banking tasks comprise in particular those tasks that are related to the tasks listed in

text: Article 127(2)

text: , (5) and (6) of the Treaty. Fourth, new tasks conferred on an NCB which are atypical of NCBs’ tasks, or which are clearly discharged on behalf of and in the exclusive interest of the government or of other public entities, should be considered as government tasks 2.1.2 Specific considerations An important criterion for qualifying a new task as a government task is therefore the impact of the task on the institutional, financial and personal independence of the NCB. In particular, the following issues should be taken into account. First, it should be assessed whether the performance of the new task creates inadequately addressed conflicts of interests with existing central banking tasks, without necessarily complementing the existing central banking tasks. If a conflict of interest arises between existing and new tasks, there should be sufficient mitigation measures in place to adequately address that conflict. Complementarity between the new task and existing central banking tasks should not, however, be interpreted broadly, as this could lead to the creation of an indefinite chain of ancillary tasks. The assessment of the complementarity of a new task should also take into account the financing of that task. Second, it should be assessed whether without new financial resources the performance of the new task places a disproportionate burden on the financial or organisational capacity of the NCB and may negatively impact on its capacity to properly perform existing central banking tasks.

text: Third, it should be assessed whether the performance of the new task is aligned with the institutional set-up of the NCB, in particular as regards central bank independence and accountability considerations. Fourth, it should be assessed whether the performance of the new task entails substantial financial risks. Fifth, it should be assessed whether the performance of the new task exposes the members of the NCB’s decision-making bodies to political risks that are disproportionate and could also impact on their personal independence and, in particular, the guarantee of the Governor’s term of office under Article 14.2 of the Statute of the ESCB. 2.2 Any final assessment on the qualification of a task given to an NCB as either falling within the scope of a central banking task or a government task will be guided by the objective of ensuring the consistent application of the monetary financing prohibition within the Eurosystem and the ESCB.

text: 3. Specific observations

text: 3.1 Conferral of the task of administering the CRBA on ČNB The ECB notes that the draft law would assign to ČNB the administration and operation of the CRBA. 3.1.1 New task The administration of the CRBA is an entirely new task, which no public authority has yet been assigned to perform. In the light of the guidance set out in paragraph 2.1 it must therefore be assessed carefully whether this new task and the associated responsibilities for ČNB could constitute a breach of the monetary financing prohibition. 3.1.2 The principle of financial independence The principle of financial independence requires that the Member States may not put their NCBs in a position where they have insufficient financial resources to carry out not only their ESCB related tasks, but also their national tasks, both from an operational and financial perspective. In this regard the ECB welcomes Article 14(1) of the draft law, which requires the State to reimburse ČNB for any costs that ČNB incurs in setting up and operating the CRBA. This statutory commitment by the State will alleviate the burden that the performance of this new task might otherwise put on ČNB’s financial and operational independence and which might also negatively impact on its capacity to properly perform existing central banking tasks. The ECB notes that Article 14(2) of the draft law requires an agreement to be concluded between the MoF and ČNB detailing, among other matters, how ČNB’s costs for the establishment and operation of the CRBA will be paid. The ECB would appreciate being provided with a copy of this agreement for information purposes, as well as the final draft of the ČNB Decree referred to in

text: Article 17

text: (enabling provisions) of the draft law.

text: 3.1.3 Discharge of tasks on behalf of and in the exclusive interest of the Government or of other public

text: entities

text: The ECB has previously opined that tasks entrusted to an ESCB member relating to the establishment of a central register of bank account numbers are not central bank tasks nor do they facilitate the enforcement of such tasks . Similarly, the new task of administering the CRBA does not relate to banking supervision, the collection of data for statistical purpose or other existing ČNB tasks whether under the Treaty or under Czech law . The ECB considers this new task to be clearly a government task since its purpose is exclusively to further the State’s interest in being able to more efficiently locate bank accounts held in the Czech Republic which may hold proceeds of crime and thereby protect the financial interests and security of the State. It thus cannot be regarded in any respect as a central bank task . 3.1.4 Complementarity of the new task with existing ČNB tasks and extent to which conflicts of interest

text: with existing ČNB tasks are addressed

text: The ECB appreciates that one of the main reasons for assigning the administration of the CRBA to ČNB is that it is regarded as having the necessary technical experience and integrity for performing such a task. It is the only authority which currently possesses an information system for data transmission which enables it to obtain from credit institutions information on their clients’ accounts in the manner required for operating such a database . The ECB also notes that the ČNB will be bound by the same secrecy and personal data obligations in respect of CRBA data as apply currently to data reported by credit institutions under the banking laws. Furthermore, only designated employees will be authorised to operate the CRBA and no exchange of data will be permitted between the CRBA and any other legally prescribed register. Taken together, these elements should limit the possibility of conflicts of interest arising between the operation of the CRBA and other ČNB tasks. The ECB further understands that the reporting scheme that institutions will use to submit account data to ČNB for the CRBA will be entirely separate from that used by credit institutions to meet their prudential reporting requirements and that only the technical format for the transmitted data will be the same . In the light of the above - particularly the prohibition on sharing CRBA data with other registers - the new task cannot be regarded as complementing the ČNB’s existing tasks. Nonetheless, the ECB considers that - if such legal restrictions were appropriately amended administering the CRBA could serve additional purposes linked to ČNB’s existing or foreseen ESCB tasks, or other national tasks such as banking supervision or the collection of granular

text: statistical information from credit institutions . Such new task could then potentially complement ČNB’s other statutory tasks. 3.1.5 Extent to which the performance of the new task is aligned with the institutional set-up of the NCB In view of the fact that operating a bank account register cannot be regarded as a central bank task, it might raise concerns as to how such a task would fit into the institutional set-up of a central bank. In this case, the ECB notes that the reporting scheme is legally entirely separate from the prudential reporting scheme for credit institutions, and that the data obtained is not accessible to other ČNB departments carrying out ESCB or other national tasks 3.1.6 Extent to which the performance of the new task entails substantial financial risks The State's commitment under the draft law to pay all costs of operating the CRBA should ensure that ČNB bears no significant financial risk in taking up this new task. The ECB understands that the State will be primarily responsible for any damage or loss, including costs of proceedings, incurred by ČNB taking an unlawful decision or using the wrong administrative procedure in administering the CBRA . It is however also noted that the State may request reimbursement from ČNB should ČNB be ordered by a court of law to pay damages as a result of its negligence or wilful intent when carrying out this task . It will also be necessary to consider the exact financial terms of the agreement to be concluded between the MoF and ČNB under Article 14(2) of the draft law. In order to assuage any monetary financing concerns, it needs to be ensured that ČNB will be fully and adequately reimbursed for all the costs incurred in performing activities related to the tasks entrusted to it in connection with the CRBA . The reimbursement should be made on the basis of ‘at arm’s length’ commercial terms either in advance of costs being incurred or on a regular and prompt basis as the costs arise . 3.1.7 Extent to which the performance of the new task exposes the members of ČNB’s Board to disproportionate political risks or could impact on their personal independence The ECB notes that the draft law makes applicants exclusively responsible for being properly authorised and meeting the other conditions for accessing data subject to banking secrecy under the banking laws when requesting data from the CRBA. This should limit the risk of ČNB being sued for allowing an applicant unauthorised access to the CRBA data. However, ČNB will be obliged to perform the new task as any other public function that is assigned to it by law. ČNB’s Board will therefore be responsible for the due and proper operation of the CRBA. It cannot be excluded that ČNB’s Board could be exposed to reputational risks should the CRBA data – albeit of a less sensitive nature than some of the other data received from credit institutions when performing its supervisory tasks - be accessed by a non-authorised applicant or

text: otherwise be ‘leaked’. The fact that the CRBA will contain sensitive information, such as the basic data on accounts of politically exposed persons , could place ČNB’s Board members in a difficult position should this information enter into the public domain in breach of the law. This could also entail a negative impact on their personal independence. 3.2 Conclusion Whilst welcoming the State's financial commitment to cover ČNB's costs for setting up and operating the CRBA, which will deal with certain concerns over ČNB's financial and operational independence, as regards the terms of such financing ČNB should either be reimbursed for the full budgeted costs of setting up and operating the CRBA in advance of these costs being incurred or on a regular and prompt basis as the costs arise. Additionally, as the reporting scheme for the CRBA will be entirely separate from the prudential reporting scheme for credit institutions, and the data obtained will not be accessible to other ČNB departments carrying out ESCB or other national tasks, the new task of administering the CRBA cannot be regarded as complementary to ČNB’s current ESCB related and other national tasks. In view of these other considerations, the ECB has a more general concern about the assignment to ČNB of this sensitive new task.

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

text: [signed]

text: The President of the ECB

text: Mario DRAGHI

type: vagledning

utgivare: ecb


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

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

text: See

text: Article 8

text: and Second Table of the draft law.

text: See Opinion

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

text: See the ECB’s 2014 Convergence Report, p. 25. 11 See Article 11(5) of the draft law. In accordance with

text: Article 6(2)

text: In accordance with

text: Article 6(2)

text: (d) of the Central Bank of Cyprus Laws of 2002 to 2007, the CBC exercises supervision of banks. Banks are allowed to provide financial leasing services by virtue of item 3 in Annex IV of the Business of Credit Institutions Laws of 1997 to 2015. 13

text: Article 6(2)

text: (e) of the Central Bank of Cyprus Laws of 2002 to 2007. 14 Directive

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

text: and repealing Directives

text: and

text: (OJ L 176, 27.6.2013, p. 338). 15 These include Portugal, Spain, Iceland, Germany, Italy, Greece, Liechtenstein, France, Romania, Bulgaria and Malta. 16 These include Belgium, the Czech Republic, Estonia, Lithuania, Luxembourg and Sweden. 17 See Opinion

text: . 18 See

text: Article 6(2)

text: (d) and (e) of the Central Bank of Cyprus Laws of 2002 to 2007.

text: See Section 26(3) of the Business of Credit Institutions Laws of 1997 to 2015, which similarly empowers the CBC to require credit institutions to pay to it all the fees, related to their supervision and inspection in accordance with CBC directives. 20 Article 32(1) of the Business of Credit Institutions Laws of 1997 to 2015. See also Principle 2 of the ‘Core Principles for Effective Banking Supervision’ setting out that the supervisor and its staff should be protected against lawsuits for actions taken and/or omissions made while discharging their duties in good faith.

title: Opinion of the European Central Bank of 19 October 2015 on the regulation of financial leasing and financial leasing companies’ activities (CON/2015/37)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 19 October 2015 on the regulation of financial leasing and financial leasing companies’ activities (

text: ) Introduction and legal basis

text: On 4 September 2015 the European Central Bank (ECB) received a request from the Minister of Finance of Cyprus for an opinion on a draft law regulating financial leasing and financial leasing companies’ activities (hereinafter the ‘draft law’). On 28 September 2015 the ECB received a new version of the draft law from the Ministry of Finance. The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third and sixth indents of

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

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

text: 1. Purpose of the draft law

text: 1.1 The purpose of the draft law is to regulate the provision of financial leasing services to the public and ensure the regulation and supervision of financial leasing services providers’ activities. As noted in the explanatory memorandum accompanying the draft law, the draft law aims to provide natural persons and businesses with alternative ways of financing, thus contributing to the growth of the leasing services sector and generally the financial sector and the Cypriot economy as a whole. 1.2 The draft law provides that financial leasing services may be provided to the public by: (a) authorised credit institutions in Cyprus; (b) authorised credit institutions in other Member States of the European Economic Area (EEA) which are licensed to provide financial leasing services, and which provide such services through a branch or on a cross-border basis; (c) financial leasing companies which are subsidiaries of credit institutions established in EEA Member States, and which provide such services in Cyprus through a branch or on a cross-border basis; and (d) a new category of regulated entity – financial leasing companies registered in Cyprus, which shall be .2 licensed by the CBC to provide such services under the draft law . The draft law sets out the types

text: of activities to be performed by those entities . Furthermore, the draft law defines the supervisory and regulatory powers of the CBC with respect to financial leasing companies, including the power to take enforcement measures and impose sanctions, and puts in place a comprehensive legal framework regulating financial leasing service providers and the provision of financial leasing services. 1.3 The draft law provides that financial leasing contracts that are a result of the settlement or restructuring of credit facilities are subject to terms and conditions determined by the CBC . In this respect, in relation to any leasehold described in the contract, the financial leasing must include, inter alia, the nominal and effective interest rate included in the rent, their calculation method and their amendment . 1.4 Pursuant to the draft law, a financial leasing company may provide both financial leasing services and ancillary services, including operating leasing services, the negotiation and purchase of movable or immovable property for the purpose of sale and lease-back transactions, services for the maintenance and safekeeping of property for leasing purposes, assignment of the manufacture or construction of buildings or premises for buying purposes in order to lease them, assignment of the improvement or maintenance of buildings or premises for leasing purposes, and any other relevant services which may be determined by the CBC. A financial leasing company is not allowed to provide any other services or conduct any other activities other than those necessary for the purposes of the provision of financial leasing services under the draft law, or to manufacture itself movable or immovable property . 1.5 Without affecting the duty of the CBC to keep information obtained under the draft law confidential, the CBC may use any of the information provided under the draft law for the purpose of the preparation of anonymous, aggregated statistical data, which the CBC may publish . 1.6 The draft law provides that the CBC has the power, pursuant to directives issued by the CBC, to require that financial leasing companies pay to the CBC all costs related to their supervision .

text: 2. General observations

text: 2.1 The ECB understands that the draft law may facilitate private debt restructuring by opening up the possibility to transform mortgage loans into real estate leases through sale and lease-back transactions, and potentially impact the resolution of non-performing loans in Cyprus. In this context, it is welcome that financial leasing activities are going to be subject to prudential supervision, also with a view to avoiding regulatory arbitrage. 2.2 The draft law expands the CBC’s powers to supervise financial leasing companies, thus complementing the CBC’s current responsibilities for the supervision of the leasing activities of

text: licenced credit institutions and the macroprudential supervision of the financial system for the purpose of safeguarding financial stability. The ECB underlines that, in the context of a proposed conferral of tasks on an ESCB member, it is necessary to assess such conferral against the prohibition of monetary financing under Article 123 of the Treaty. The ECB has developed the guidance set out in paragraphs 2.2.1 to 2.2.3 of this opinion, in the form of general and specific considerations, on the basis of which it may decide whether a new task conferred on an ESCB national central bank (NCB) is to be considered a central banking task or a government task for the purposes of assessing such conferral against the prohibition of monetary financing under Article 123 of the Treaty . The concrete assessment of whether the CBC’s task of supervising financial leasing companies is to be considered a central banking task or a government task is then undertaken in paragraph 3.1 of this opinion. 2.2.1 General considerations First, the systematic categorisation of tasks assigned to NCBs as central banking or government tasks applies to genuinely new tasks that did not exist in the past or did not form an integral part of the central banking tasks already assigned to the NCB in the past. In recognition of the different Member States’ legal frameworks, central banking traditions and national set-ups, the tasks currently discharged by an NCB as central banking tasks are not reviewed and re-categorised, but may be reassessed if they are subject to legislative amendments of substance. Second, the principle of financial independence requires that the Member States may not put their NCBs in a position where they have insufficient financial resources to carry out their ESCB- or Eurosystem-related tasks, as applicable. Third, central banking tasks comprise in particular those tasks that are related to the tasks listed in

text: Article 127(2)

text: , (5) and (6) of the Treaty. Fourth, new tasks conferred on an NCB which are atypical of NCBs’ tasks, or which are clearly discharged on behalf of and in the exclusive interest of the government or of other public entities, should be considered as government tasks. In that context, a distinction should be drawn between liquidity- and solvency-related tasks of NCBs. While, for the purposes of the monetary financing prohibition, solvency support is a government task, liquidity-related tasks, the ultimate objective of which are to finance the economy, are central banking tasks. 2.2.2 Specific considerations Banking supervision and macro-prudential tasks are central bank tasks when discharged by an NCB provided they do not undermine its independence in accordance with Article 130 of the Treaty. An important criterion for qualifying a new task as a government task is the impact of the task on the institutional, financial and personal independence of the NCB. In particular, the following should be taken into account. First, it should be assessed whether the performance of the new task creates inadequately addressed conflicts of interests with existing central banking tasks, and does not necessarily

text: complement those existing central banking tasks. If a conflict of interest arises between existing and new tasks, there should be sufficient mitigation in place to adequately address that conflict. Complementarity between the new task and existing central banking tasks should not, however, be interpreted extensively, so as to lead to the creation of an indefinite chain of ancillary tasks. Complementarity should also be examined from the point of view of the financing of those tasks. Second, it should be assessed whether without new financial resources the performance of the new task is disproportionate to the financial or organisational capacity of the NCB and may negatively impact on its capacity to properly perform existing central banking tasks. Third, it should be assessed whether the performance of the new task does not fit into the institutional set-up of the NCB in the light of central bank independence and accountability considerations. Fourth, it should be assessed whether the performance of the new task harbours substantial financial risks. Fifth, it should be assessed whether the performance of the new task exposes the members of the NCB’s decision-making bodies to political risks which are disproportionate and may also impact on their personal independence and, in particular, the guarantee of the term of office under Article 14.2 of the Statute of the European System of Central Banks and of the European Central Bank. 2.2.3 Any final assessment on the qualification of a task given to an NCB as either falling within the scope of a central banking task or a government task will be guided by the objective of ensuring the consistent application of the prohibition of monetary financing within the Eurosystem and the ESCB to the extent that it applies to its members.

text: 3. Specific observations

text: 3.1 Conferral on the CBC of the task of supervising financial leasing companies The draft law designates the CBC as a supervisory authority for financial leasing companies thus broadening its current functions and activities. In the light of the guidance set out in paragraphs 2.2.1 to 2.2.3, it must be assessed whether the CBC’s new tasks could constitute a breach of the monetary financing prohibition. 3.1.1 Principle of financial independence The principle of financial independence requires NCBs to have sufficient means to carry out not only their ESCB-related tasks from an operational and financial point of view, but also their national tasks . In this regard the ECB notes that the draft law provides that the CBC has the power to require that financial leasing companies pay to the CBC all costs related to their supervision . The

text: new tasks assigned to the CBC would not affect the resources the CBC allocates to the performance of its monetary policy tasks. 3.1.2 Links to tasks listed in Article 127(5) of the Treaty Supervision over financial leasing companies can be considered a task related to those referred to in Article 127(5) of the Treaty, based on the understanding that it is complementary to the supervisory tasks exercised by the NCB, particularly where, as in this case, the CBC already carries out supervision of credit institutions, including their financial leasing activities , and has the task of ensuring the stability of the financial system . Financial leasing is an instrument which has significantly gained in importance in the Union as an alternative to classical credit financing for consumers, small and medium-sized enterprises (SMEs) and large companies, as it also provides for the acquisition of property through the payment of instalments. Although not required under Directive

text: , several EEA Member States have established a legal framework for the supervision of financial leasing companies on a solo basis while others have introduced a registration requirement . It is understood that these Member States have legislated in this area based on the assumption that the improper functioning of the financial leasing business as a consequence of poor management may lead to severe damage not only for customers, but for the economy as a whole. In view of these developments, point 3 of Annex 1 of Directive

text: lists financial leasing as an activity that is subject to mutual recognition. Financial leasing activities may thus be carried out cross-border by credit institutions authorised and supervised by the competent authorities of another Member State, provided that such activities are covered by the relevant authorisation of the credit institution. 3.1.3 Atypical tasks A number of Member States have conferred on their NCBs supervisory tasks related to the provision of financial leasing services and financial leasing companies. The ECB has generally accepted the allocation of such tasks to NCBs provided they do not interfere with the performance of the NCB’s ESCB-related tasks . The tasks of an NCB with regard to the supervision of financial leasing companies can therefore be regarded as being tasks not atypical of a central bank, particularly if, as in the case of the CBC, it has a statutory responsibility for bank supervision and financial stability . Moreover, the complementarity between the supervisory tasks already discharged by the CBC and the new task of supervising financial leasing companies is reflected in

text: the common system of financing of the CBC’s supervisory tasks via contributions from the supervised entities . 3.1.4 Discharge of tasks on behalf of and in the exclusive interest of the Government or of other public

text: entities

text: The CBC is designated as the sole supervisory authority for companies providing financial leasing services in its own name and not on behalf of any other authority. There is no indication that in discharging its supervisory function the CBC acts exclusively in the interests of another public entity. 3.1.5 Extent to which conflicts of interests with existing CBC tasks are addressed and the performance of tasks fits into the CBC’s institutional set-up in the light of central bank independence and

text: accountability considerations

text: The conferral of these tasks on the CBC does not, prima facie, raise any issues of conflict of interest. The performance of these tasks fits smoothly into the CBC’s institutional set-up, and does not raise any issues arising out of central bank independence and accountability considerations. 3.1.6 Extent to which the performance of tasks is proportionate to the CBC’s financial and operational

text: capacity and its ability to perform its ESCB-related tasks

text: As noted above, in order to remain financially independent, NCBs must have sufficient means to carry out not only their ESCB-related tasks from an operational and financial point of view, but also their national tasks. In this regard the ECB welcomes the fact that the draft law provides that the CBC’s costs for supervision of financial leasing companies will be coved by the industry. 3.1.7 Extent to which the performance of tasks harbours substantial financial risks The draft law contains provisions excluding or limiting the liability of the CBC as the authority responsible for the supervision of financial leasing companies for any act or omission or other breach of any legal obligation when exercising supervisory powers except if such an act or omission was not done in good faith or is the result of negligence. In contrast, the liability regime for the CBC when conducting its supervisory powers over credit institutions is excluded, unless it is shown that the act or omission was not done in good faith or was the result of gross negligence . The ECB considers that it would be useful to align the CBC’s liability under the draft law with the liability regime for the CBC when conducting its supervisory powers over credit institutions, given that potential liability issues could represent financial risks for the CBC. 3.1.8 Conclusion The ECB considers that there are grounds for regarding the CBC’s task of supervising financial leasing companies as a central banking task in the sense that it complements the CBC’s existing bank supervisory functions. The fact that the performance of the new supervisory function will be

text: financed by supervised entities has a positive impact on the CBC’s financial capacity to assume those tasks. However, the ECB considers that the draft law potentially creates financial risks for the CBC because it does not limit the CBC’s liability, as a public authority, for damages caused in the course of the exercise of its new supervisory powers, in similar terms to the CBC’s liability in connection with its bank supervisory tasks. It would be useful to align the CBC’s liability under the draft law with the liability regime for the CBC when conducting its supervisory powers over credit institutions. 3.2 Concerns over level playing field issues and opportunities for regulatory arbitrage The ECB welcomes the extension of the supervisory scope of national competent authorities to non-credit institutions providing services similar or equivalent to those provided by supervised credit institutions for level playing field reasons and to avoid regulatory arbitrage. The ECB acknowledges that financial leasing companies are subject to minimum capital and other regulatory requirements. The ECB understands that the Cypriot authorities opted not to impose explicit limits on leverage and liquidity requirements at this stage so as to offer wider opportunities for financing to new leasing companies, with a view to facilitating private debt restructuring, as mentioned in paragraph 2.1. Nevertheless, the ECB considers that it would be useful to explicitly clarify limits on leverage and liquidity requirements for these new entities at some stage, and particularly in the event of the emergence of risks relating to regulatory arbitrage or of concerns about financial stability. 3.3 Ancillary services The ancillary services to leasing activities covered in the draft law appear quite broad. The ECB considers that ancillary services should be carefully considered, in order to guarantee the financial nature of the entities authorised to perform leasing activities. In this sense, typical real estate services should be outsourced.

text: Done at Frankfurt am Main, 19 October 2015.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI


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

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

text: Published in Magyar Közlöny 2014/98.

text: Directive

text: of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending

text: Council Directive 82/891/EEC

text: , and Directives

text: and

text: , and Regulations

text: (EU) No 1093/2010

text: and

text: (EU) No 648/2012

text: , of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).

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

text: Article 17(1)

text: c) of the Law on resolution transposing

text: Article 32(1)

text: (c) of Directive

text: . 7 This provision transposes

text: Article 32(5) of Directive 2014/59/EU

title: Opinion of the European Central Bank of 23 October 2015 on the preliminary assessment of conditions related to the resolution of credit institutions and investment firms (CON/2015/38)

text: OPINION OF THE EUROPEAN CENTRAL BANK of 23 October 2015 on the preliminary assessment of conditions related to the resolution of credit institutions and investment firms (

text: ) Introduction and legal basis

text: On 22 September 2015 the European Central Bank (ECB) received a request from the Magyar Nemzeti Bank (MNB) for an opinion on the MNB’s draft decree on the methodology for the preliminary assessment of the realisation of resolution objectives (hereinafter the ‘draft decree’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the sixth indent of

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

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

text: 1. Purpose of the draft decree

text: 1.1 In 2014 the Hungarian Parliament adopted Law XXXVII of 2014 related to the resolution of credit institutions and investment firms (hereinafter the ‘Law on resolution’) in order to transpose Directive

text: of the European Parliament and of the Council into Hungarian law, in relation to which the ECB adopted Opinion

text: . The Law on resolution, inter alia, lays down the conditions under which MNB, acting as a resolution authority, may initiate a resolution 5 6 action . One condition is that resolution has to serve the public interest . According to Article 17(5) of the Law on resolution , a resolution action should be considered to be in the public interest if: (a) it is necessary for the achievement of, and is proportionate to one or more of the resolution objectives referred to in the Law on resolution, and (b) winding up of the institution under normal insolvency proceedings would not meet those resolution objectives to the same extent.

text: 1.2 Based on the powers delegated to MNB’s Governor by

text: Article 145(2)

text: (f) of the Law on resolution, the draft decree lays down specific criteria concerning each resolution objective listed in the Law on resolution, whereby the MNB examines the extent to which the concerned resolution objective can be better achieved through the winding up of an institution under normal insolvency proceedings or through resolution. The MNB assesses with equal weighing, both individually and collectively, the expected level of the realisation of the resolution objectives and the public interest in accordance with the nature and circumstances of the given case. The weight to be assigned to the public interest in this respect is not further specified in the draft decree. On this basis the MNB will decide whether the condition of acting in the public interest which is required to initiate a resolution, is met.

text: 2. Observations

text: 2.1 In accordance with

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

text: , this Opinion only addresses issues that go beyond the mere transposition of Directive

text: into Hungarian law. The ECB also stresses that this Opinion does not constitute an assessment of whether Hungary has effectively discharged its obligations to implement Directive

text: . 2.2 The ECB welcomes that the MNB intends to enhance transparency and legal certainty for market participants by laying down criteria concerning resolution objectives, whereby the MNB examines the extent to which a resolution objective can be achieved through the winding up of an institution under normal insolvency proceedings and/or through resolution. 2.3 The consulting authority may wish to consider however whether the draft decree might unduly constrain the MNB’s discretion as the resolution authority, beyond what is contemplated by Directive

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

text: Done at Frankfurt am Main, 23 October 2015.

text: [signed]

text: The President of the ECB

text: Mario DRAGHI