EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 15 March 2007  
at the request of the Dutch Ministry of Finance 
on a draft law concerning systemic oversight of settlement institutions   
(CON/2007/7) 
 
Introduction and legal basis  
On 5 February 2007 the European Central Bank (ECB ) received a request from the Dutch Ministry of 
Finance for an opinion on a draft law concerning systemic oversight of clearing and settlement institutions (hereinafter the ‘draft law’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third and fifth indent s of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Ce ntral Bank by national authorities regarding draft 
legislative provisions
1, as the draft law relates to De Nederlandsche Bank (DNB) and payment and 
settlement systems. In accordance with  the first sentence of Article 17.5 of the Rules of Procedure of the 
European Central Bank, the Governing Council has adopted this opinion. 
 1.  Purpose of the draft law 
The draft law will amend the Law on financial sector supervision (hereinafter the ‘LFSS’)
2 by adding a 
Part 6 concerning systemic oversight of clearing and settlement institutions3. This is aimed at achieving 
an efficient system to supervise the safety and relia bility of payments clearing and settlement services and 
securities clearing and settlement services, in order to safeguard financial infrastructure stability. 
Adequate supervision of clearing and settlement institutions’ compliance with the relevant rules will 
increase confidence in the financial sector by managing  risks associated with the provision of clearing and 
settlement services and by establishing  clear rules for market participan ts. To this end, the draft law 
provides the financial market supervisors, DNB and the Autoriteit Financiële Markten (AFM, Authority 
for the Financial Markets), with the legal instrume nts necessary for enforcing supervisory measures. In 
particular, the supervisors can require  participants to comply with a cer tain line of conduct, appoint one or 
more persons as liquidator, impose incremental pena lty payments and impose administrative penalties. 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  Published in the Staatsblad  (the Dutch Official Journal) No 475 of 31 October 2006. The date of entry into force of 
1 January 2007 is laid down in Decision of 11 December 2006 published in the Staatsblad  No 664 of 20 December 2006. 
See also ECB Opinion CON/2006/20 of 25 April 2006 on the Dutc h draft law concerning financial sector supervision. 
3  Currently the Law contains 5 parts: the General Part, Market Access Financia l Undertakings, Prudential Supervision 
Financial Undertakings, Market Conduct Supervision Financial Unde rtakings, and Market Conduct Supervision Financial 
Markets. 
2 Furthermore, the supervisors may modify, withdraw fully or in part, or attach conditions to, an 
authorisation. The draft law adopts a functional appr oach by referring to clearing and settlement services 
instead of clearing and settlement systems. 
 2. General observations  2.1 As a rule, systemic supervision aims at preven ting financial problems enc ountered by one financial 
institution from spreading to othe r financial institutions and to the financial markets. The ECB 
understands that systemic oversight under the draft law is limited to clearing and settlement 
institutions and is aimed at ensuring the timely completion of clearing and settlement services, efficiency and the mitigation of legal, settlement , operational and financia l risks. Moreover, the 
draft law is also intended to prevent one particip ant’s default from causing another participant to 
default, which may disrupt the financial infrast ructure or, in the worst-case scenario trigger a 
systemic crisis. To this end, the draft law implements the Committee on Payment and Settlement Systems and the International Organizati on of Securities Commissions’ (CPSS-IOSCO) 
recommendations for securities settlement systems an d the CPSS Core Principles for Systemically 
Important Payment Systems
4. The ECB takes the view that the draft law should clarify that DNB 
continues to conduct oversight within the co mmon Eurosystem oversight policy framework5.  
2.2 The clearing and settlement institutions that currently operate on the market are: (i) Equens6, for 
payments clearing; (ii) LCH.Clearnet, as central counterparty for transactions in financial instruments; and (iii) Euroclear Netherlands/Necige f, for financial instruments settlement. The draft 
law does not apply to the Dutch real-time gross settlement payment system, TOP, since DNB is not a clearing and settlement institution, clearing institu tion or credit institution within the meaning of 
the draft law. 
2.3  The ECB also notes that the draft law is a r esponse by the Dutch authorities to the IMF Country 
Report assessment of the Netherlands which states that  ‘[i]f the new Act makes it clear that e.g., an 
institution that operates as a central counterparty or a securities settlement system, are subject to 
direct supervision, and that the roles of DNB  and AFM are clear, Recommendation 18 would be 
observed’
7.  
2.4  The ECB understands that payment products are not covered by the draft law and that DNB 
continues to conduct oversight of payment products, based on its task of promoting the smooth operation of the payment system laid down in Ar ticle 105(2) of the Treaty and Article 3.1 and 
Article 22 of the Statute of the European System  of Central Banks and of the European Central 
                                                 
4  Available on the Bank for International Settlement’s website at www.bis.org . 
5  See ECB Opinion CON/2003/14 of 7 August 2003 at the reques t of the Banca d’Italia on a draft regulation on payment 
systems, payment infrastructures and payment instruments, p. 3.  
6  On 30 November 2006 Equens was formed following the merger of Interpay and Transaktionsinstitut für 
Zahlungsverkehrsdienstleistungen AG.  
7  IMF Country Report, No 04/310 of September 2004, p.  166, available on the IMF’s website at www.imf.org . 
3 Bank, as well as the Eurosystem’s common oversi ght policy framework and Article 3(1)(e) and 
Article 4(2) of the Law on DNB8.  
2.5 The ECB also notes that under Section 6.21, th e Nederlandse Mededingingsautoriteit (the Dutch 
Competition Authority) can impose measures, with  regard to prices charged for clearing and 
settlement services, after receiving authorisation fro m the Minister for Finance, who must consult 
DNB and the AFM prior to granting such authorisation. These provisions are aimed at establishing objective, transparent and non-discriminatory prices. 
2.6  The ECB welcomes the introduction of direct  systemic supervision as it greatly improves 
transparency and accountability and provides the financ ial market supervisors with a clear basis for 
enforcing measures with regard to systemic, prudential and market conduct supervision.  
 3. DNB’s oversight of payment systems 3.1  In Opinion CON/2006/20, the ECB noted that cer tain parts of the LFSS did not distinguish between 
DNB’s Eurosystem- and non Eurosystem-related tasks. Under the LFSS, the AFM supervises the market conduct of financial institutions, includi ng clearing and settlement institutions. The draft 
law provides that the AFM will supervise the mark et conduct of clearing and settlement systems, 
including payment systems not operated by DNB . Market conduct superv ision is defined in 
Section 1.25 of the LFSS (previously Section 1.8 in  the draft available at the time of the adoption 
of Opinion CON/2006/20) as ‘promoting orderly a nd transparent financial market processes’. 
Given the similarity between the concepts of market conduct supervision and the Eurosystem’s 
statutory task of ‘promoting the smooth opera tion of payment systems’, which is performed 
through its oversight function, a nd also considering Article 25 of the Statute on the ECB’s financial 
stability role and the fact that payment system s are interlinked with securities clearing and 
settlement systems (SCSSs), this may give rise to a conflict between DNB’s responsibilities as an 
integral part of the Eurosystem, and AFM’s r esponsibilities as provided for in the draft law.  
3.2  Since payment systems are interlinked with SCSSs, there is a strong argument in favour of the 
model followed by some Member States to have th e national central bank perform the oversight of 
both payment systems and SCSSs. The draft law combines the integrated oversight model with respect to payment systems and SCSSs and divides the responsibilities and powers between the prudential and systemic supervisor, DNB and the su pervisor for market conduct, the AFM. In that 
sense, the draft law formalises DNB’s role in the oversight of SCSSs as part of systemic and prudential supervision. 
3.3  At Community level, the general legal basi s for the oversight of payment systems is in 
Article 105(2) of the Treaty and Article 3.1 and Article 22 of the Statute, with more detailed 
policies introduced by the Eurosystem’s comm on oversight policy as defined by the Governing 
Council. In the interest of clearly defining responsibilities, the ECB recommended in Opinion CON/2006/20 that the oversight of payment systems, including market conduct, should be 
                                                 
8  Bankwet  1998 (Bank Act 1998 ), Staatsblad  26 March 1998, p. 200. 
4 explicitly assigned to DNB, which would be c onsistent with DNB’s participation in the 
Eurosystem. As this has not been taken into acc ount in the draft law, the ECB reiterates this 
recommendation and strongly advises amending the draf t law to make it clear that DNB enjoys full 
oversight over payment systems.  
 4. Division of powers  
4.1  Under Section 2.3(c) of the draft law, if an  authorised clearing and settlement institution no longer 
complies with the provisions laid down in Part 4.3.4(A), the AFM may advise DNB to withdraw 
the authorisation or to exercise its authority to appoint one or more persons as liquidator. The ECB notes that the draft law divides responsibilities between DNB and the AFM. 
As DNB will be the lead overseer, meaning that DNB is the entity authorising the overseen entities 
to provide clearing and settlement services, the draft law should also provide for an advisory function for DNB in relation to the AFM, to exerci se its own powers in the event that the clearing 
and settlement institution no longer complies with Part 4.3.4(A).  
4.2  Furthermore, Section 4.76a(2) provides that  a participant may only be refused access by the 
clearing and settlement institution if such access wo uld negatively affect th e proper functioning of 
the settlement services offered by the clearing a nd settlement institution. This provision is laid 
down in Part 4, which covers the AFM’s respons ibility over market conduct supervision. The ECB 
notes that DNB, as the prudential and systemic supervisor, should play a role in assessing whether the rules of the clearing and settlement institution contain criteria limiting access on grounds other than risk.  
 5. Supervisory powers in the Securities Giro Law  
The ECB notes that Article 2 of the Securities Giro Law
9 provides for the appointment of the supervisor 
of the Central Institution, i.e. the Central Secur ities Depository, and specifies the supervisor’s powers. 
Given the definition of settlement services in Section 1.1 of the draft law10, the ECB would suggest 
adding these supervisory provisions to the draft law and removing them from the Securities Giro Law. 
 6. Influence on financial sector stability  
Section 2.3a(2) provides that ‘the first subsection is  not applicable to the provision of categories of 
clearing and settlement services to be established by order in council that do not or cannot have any 
significant influence on the stability of the financ ial sector’. The ECB notes that the criterion of 
insignificant influence is quite open-ended. Theref ore, the ECB would encourage establishing objective 
and transparent criteria, after consulting DNB, and making them publicly available.  
                                                 
9  Staatsblad  1977, No 333, as last amended by the Law of 25 June 1998, Staatsblad  No 446. 
10  Section 1.1(c) defines settlement services as the performan ce of ‘activities for the purpose of managing, safeguarding and 
administrating financial instru ments and facilitating the processing of trans actions in financial instruments by funds 
transfer’. 
5  
7. Conflicts of interest Section 6.3(1)(a) states that a clearing and settlement institution should avoid conflic ts of interest, but the 
draft law does not further define the term. The explan atory memorandum defines ‘conflicts of interest’ as 
‘evident violations of the relevant social standa rd seriously damaging confidence in the clearing and 
settlement institution or financial markets’, which is narrow in scope. The ECB considers that this 
definition is not sufficiently clear and recommends de fining it more precisely. In particular, the term 
should refer to situations where there is an incomp atibility between differing ai ms, such as between an 
agent and its principal. It also includes situations wh ere the aims of different groups of persons within a 
clearing and settlement institution, such as the users, owners and public authorities, are not completely 
aligned. 
 This opinion will be published on the ECB’s website.  
  Done at Frankfurt am Main, 15 March 2007. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET