EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 25 April 2006 
on the Dutch draft law concerning financial sector supervision 
(CON/2006/20) 
 
Introduction: background and legal basis  
On 6 May 2004 the European Central Bank (ECB) received a request from the Dutch Ministry of Finance 
for an opinion on the first part of the Voorstel Van Wet op het financieel toezicht (draft law on financial 
sector supervision) (hereinafter the ‘draft law’), which contained general provi sions of an institutional 
nature. 
On 7 June 2004 the ECB issued an opinion on the first part of the draft law1 pointing out, inter alia , that 
‘The ECB looks forward to being able to supplement this opinion when it is consulted on the other parts.’ 
On 1 September 2004 the ECB received part two of  the draft law for information purposes only. On 
30 September 2004 the President of the ECB sent a lette r to the Dutch Minister for Finance requesting 
that the ECB be consulted on part two of the draft law.  The Dutch Minister for Finance clarified in a letter 
of 5 November 2004 that, in his opinion, it is not necessary to consult the ECB on the parts of the draft law which concern prudential supervision, as we ll as those concerning the conduct of business by 
financial institutions. The Minister did undertake to cons ult the ECB in the future on the part of the draft 
law which concerns the infrastructure of the financia l markets. However, the ECB understands that this 
part is still under preparation. 
The ECB’s competence to deliver an opinion on part two of the draft law is base d on Article 105(4) of the 
Treaty establishing the European Community and the third, fifth and sixth indents of Article 2(1) of Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by 
national authorities regarding draft legislative provisions
2, as the draft law relates to a national central 
bank (NCB), namely De Nederlandsche Bank (DNB ), payment and settlement systems and rules 
applicable to financial institutions in so far as they materially influence the stability of financial 
institutions and markets.  
In view of the above, and furthermore considering th at the ECB has several comme nts with respect to the 
current draft law, the ECB has decided to submit this own-initiative opinion. 
                                                 
1  ECB Opinion CON/2004/21 of 7 June 2004 at the request of the Ministry of Finance of the Netherlands on a draft 
Financial Sector Supervision Act. 
2  OJ L 189, 3.7.1998, p. 42. 
2 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. 
 1. Purpose of the draft law  1.1 The purpose of the draft law is to establish a legal framework for the introduction of a functional 
model for supervision. 
1.2 The draft law is divided into six parts. Part ‘General Provisions’; Part ‘Market Access financial 
companies’; Part ‘Prudential Supervision on  financial companies’; Part ‘Market Conduct 
Supervision on financial companies’; Part ‘Marke t Conduct Supervision on financial markets’; Part 
‘Infrastructure financial markets’. The first five  parts of the draft law on Financial Sector 
Supervision are scheduled to ente r into force from 1 January 2007.  The sixth part ‘Infrastructure 
financial markets’ is currently under preparation an d is intended that it should enter into force on 
1 January 2008. The necessary transitional provisi ons and amendments of other laws will be 
covered in a separate law implementing the draft la w which will be submitted to Parliament in due 
course and will enter into force on 1 January 2007. 
 2. Comments on the proposed institutional framework 2.1  The draft law introduces a new functional model on th e basis of which DNB will be responsible for 
prudential supervision of the entire financial sect or, whereas the Authority for Financial Markets 
(AFM) will be responsible for market conduct supe rvision and will focus on ensuring orderly and 
transparent financial market processes, clear relationships between market entities and that 
consumers are treated with due care. 
2.2  As stated above, the ECB has already provided its  opinion on an earlier version of part one of the 
draft law. The ECB is aware that the draft la w has since been modified on several occasions 
through five memorandums of amendments. Curren tly the sixth memorandum of amendments is 
under preparation. 
2.3  In its earlier opinion, the ECB commented on sev eral aspects of the draft law’s institutional part 
and noted that some draft provisions did not di stinguish between DNB’s tasks relating to its 
participation in the European System of Centra l Banks (ESCB) and its non-ESCB related tasks. As 
a consequence, some of those provisions were deemed incompatible with the legal framework 
established by the Treaty concerning NCBs as members of the ESCB. These incompatibilities concerned parts of the draft law dealing with  the accountability of DNB and the AFM to the 
Minister for Finance, the budgetary approval process, the amendment of DNB’s statutes and the exchange of information between the Dutch s upervisors and the ECB and other central banks. 
These comments have not been taken into account in the latest version of the draft law.  
3 2.4 As already mentioned in the earlier ECB opinion3, the draft law allows the Dutch supervisory 
authorities to exchange confidential information with the ECB, a foreign central bank or other 
foreign authorities with similar tasks, but only to th e extent that this is conducive to fulfilling their 
‘monetary task’ (Article 1:77(1)(a) of the draft law). This limitation to the ‘monetary task’ is 
deemed too restrictive as this would not cover the entire set of tasks the Treaty and the Statute of the European System of Central Banks and of  the European Central Bank conferred upon the 
ESCB. Indeed, in addition to its basic task which consists of defining and implementing the single monetary policy, the ESCB’s basic tasks also in clude promoting the smooth operation of payment 
systems
4 and contributing to the smooth conduct of policies pursued by the competent authorities 
relating to the prudential supervis ion of credit institutions and the stability of the financial system5. 
With regard to the latter function, it is noted that  the transmission of supervisory information and 
data, primarily in aggregated form, is necessary fo r the effectiveness of the central bank’s financial 
stability monitoring and assessment of the conditions of  the financial system as a whole as well as 
of the efficacy of its response when a financial crisis occurs. 
2.5  In order to undertake these and other tasks, the ECB, assisted by the N CBs, collect the necessary 
statistical information either from the competent national authorities or directly from economic agents
6, while limiting the overall reporting burden. Moreover, the ECB anticipates that an 
exchange of such information can serve to furt her enhance the statisti cs needed by the ESCB. 
2.6  Therefore, the ECB emphasises the need to inser t an explicit provision in the draft law stipulating 
that the exchange of information under Article 1: 77(1)(a) applies to all ESCB-related tasks and not 
merely to the monetary policy task7, as well as introducing the other changes suggested in ECB 
Opinion CON/2004/21. 
 3. Payment and securities settlement systems 3.1  As has already been noted, the division of tasks under the draft law implies that the AFM will 
supervise market conduct of financial instituti ons, including clearing institutions. Market conduct 
supervision is defined in the draft law as ‘pro moting orderly and transparent financial market 
processes’ (Article 1:8).  
3.2  Payment systems fall under the draft law’s defin ition of financial institutions and might also fall 
under the scope of the AFM’s market conduct supe rvision. Given the similarity between the 
concept of market conduct supervision, as defined in  the draft law, and the Eurosystem’s statutory 
task of ‘promoting the smooth operation of payment systems’ (which it performs through its oversight function), considering Article 25.1 of the ESCB Statute on the ECB role in the area of 
                                                 
3  In paragraph 9 of ECB Opinion CON/2004/21,  the ECB made a similar recommendation.  
4  Article 3.1, fourth indent of the Statute. 
5  Article 3.3 of the Statute. 
6  See Article 5.1 of the Statute. 
7  In paragraph 9 of ECB Opinion CON/2004/21,  the ECB made a similar recommendation.  
4 financial stability and knowing that payment sy stems and securities settlement systems (SSSs) are 
interlinked, there may be a conflict betw een the responsibilities of the ESCB and the 
responsibilities of the AFM, as may be provided for in the future sixth Part ‘Infrastructure financial markets’ of the draft law.  
3.3  At the Community level, the general legal basis for the  oversight  of payment  systems  is provided 
by the Treaty and the Statute
8 with more detailed policies introduced by the Eurosystem’s common 
oversight policy, as defined by the Governing Council. 
3.4  In the interest of making responsibilities clear, the ECB recommends that the oversight of payment 
systems, including market conduct, be explicitly ass igned to DNB in the future sixth Part of the 
draft law, which would be consistent with  the participation of DNB in the ESCB. 
3.5  As noted in previous ECB opinions, payment syst ems and SSSs are interlinked, particularly in view 
of the use of the ‘delivery versus payment’ mechanism, under which settlements of securities and 
transfers of funds take place simultaneously. There is therefore a strong argument in favour of the model used in some Member States of integrati ng the oversight of payment systems and SSSs, and 
for the NCB to perform this function. Settlement of  both legs of such transactions should be subject 
to similar safeguards in order to avoid asymmetr ies, possibly with systemic implications.  
3.6  In order to safeguard the effectiveness of mone tary policy and the overall stability of the financial 
system, the NCBs’ oversight responsibilities mean that  they must ensure that SSSs are sufficiently 
protected against systemic disruptions. The frame work for the NCBs’ conduct of this function, 
although informal, has been effective and successful . A growing number of NCBs see a benefit in 
formalising their oversight role. The majority of NCBs carry out this function on the basis of their 
statutes without any explicit detailed legal pr ovisions. The ECB therefore also recommends 
clarifying DNB’s role in the oversight of SSSs.  
 4. Final institution  
4.1  Another important issue is that non-public banks  (or opting-in banks, i.e. banks that do not longer 
fall within the scope of the new definition of ‘bank’ in the draft law, but have opted in for a voluntary bank permit on the basis of Article 2:5 of  the draft law) also need to qualify as ‘final 
institutions’ within the meaning of Article 212a of  the Dutch Law on bankruptcies and Article 2(b) 
of the Settlement Finality Directive
9 in order to be able to participate in payment systems and SSSs.  
4.2  The ECB understands that the definition of final institution in Article 212a of the Law on 
bankruptcies will only be aligned with the definition of a bank in Article 1:1 of the draft law once 
the law implementing the draft law – which is now  under preparation – is adopted. Furthermore, 
the ECB would like to observe that, from the point of view of a level playing field, it is considered 
                                                 
8  Article 105(2) of the Treaty and Articles 3.1 and 22 of the Statute. 
9  Directive 98/26/EC of the European Parliament and of th e Council of 19 May 1998 on settlement finality in payment and 
securities settlement systems (OJ L 166, 11.6.1998, p. 45). 
5 desirable that opting-in banks that hold a voluntary bank permit on the basis of Article 2:5 of the 
draft law, are brought into line with banks that  hold a ‘conventional’ bank permit. The ECB would 
also welcome being consulted on this issue. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 25 April 2006. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET