EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 15 April 2008  
at the request of the Luxembourg Mini ster for the Treasury and the Budget  
on a draft law improving the legislative framework for Luxembourg as a financial centre and 
on a draft law relating to social insurance contributions 
(CON/2008/17) 
 
Introduction and legal basis  
On 12 February 2008 the European Central Bank (ECB) received a request from the Luxembourg 
Minister for the Treasury and the Budget for an opinion on a draft law improving the legislative 
framework for Luxembourg as a financial centre and amending the provisions on bonds in the Law of 5 April 1993 on the financial sector, as amended, th e Law of 15 June 2004 on the company investing in 
risk capital, the Law of 23 December 1998 creating a commission for the prudential supervision of the 
financial sector, as amended, and the Law of 23 D ecember 1998 on monetary status and on the Banque 
centrale du Luxembourg, as amended (hereinafter  referred to as ‘the first draft law’).  
On 20 February 2008, the ECB received a second requ est from the Luxembourg Minister for the Treasury 
and the Budget for an opinion on a draft law amendi ng the Law of 28 July 2000 on the coordination of the 
statutory pension schemes, as amended, the Code of social insurance contributions, the Law of 
26 May 1954 governing State agents’ pensions, as ame nded, the Law of 27 August 1977 on the status of 
agents entering into the service of international in stitutions, as amended, th e Law of 3 August 1998 on the 
special pension schemes for the comm unes’ State agents as well as fo r the agents of the Luxembourg 
national railway company, as amended and the Law of 23 December 1998 on monetary status and on the 
Banque centrale du Luxembourg, as am ended (hereinafter referred to as ‘the second draft law’).  
In view of the convergence between the provisions cont ained in the first and second draft laws amending 
the rules governing the pension scheme of the agents  of the Banque centrale du Luxembourg (BCL), the 
following opinion addresses both draft laws. 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third indent of 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
1, as both draft laws amend the BCL’s role as a pe nsion agency. In addition, the first draft law 
contains provisions on the increase of the BCL’s capita l, its national regulatory powers and the rules it 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2 applies to minimum reserves. In accordance with the first sentence of  Article 17.5 of the Rules of 
Procedure of the European Central Bank, th e Governing Council has adopted this opinion. 
 1. Purposes of the first and second draft laws 
The first draft law modernises the legislative framewo rk for Luxembourg as a financial centre. For this 
purpose, it amends the rules governing banks issuing bonds, the Law relating to the investment company 
in risk capital (SICAR), the Commission de surv eillance du secteur financier (CSSF) as well as the Law 
of 23 December 1998 on the BCL (hereinafter th e ‘Law on the BCL’). More particularly, the BCL’s 
capital may be increased by incorporating reserves, fo llowing a proposal by the BCL, under a grand-ducal 
regulation. In addition, the imposition by the BCL of  minimum reserve requirements, which is currently 
presented as an option, will become an obligation. Furthermore, the first draft law will confer on the BCL 
a general regulatory power. Finally, the first draft law will authorise the BCL to have recourse to the 
decision-making bodies and services of the Luxembourg pension agencies. This latter amendment has to 
be read in conjunction with the am endments contained in the second draf t law. In order to remedy the 
practical problems encountered in the day-to-day ma nagement of the BCL pension’s fund which had been 
designed separately from the other Luxembourg pensi on agencies, the second draft law brings the BCL 
into the scope of the Law of 28 July 2000 on the coor dination of statutory pension schemes. In addition, 
the second draft law organises the financial transfers to be operated between the BCL’s pension fund and 
the other pension agencies, if a State or privat e agent transfers from or to the BCL. This opinion 
concentrates on the aspects of the draft laws concerning the BCL and its powers.  
 2. Provisions on the BCL’s capital increase  2.1 By virtue of the draft law, the BCL’s capital, which currently amounts to EUR 25 million, may be 
increased by incorporating reserves on a proposal by the BCL under a grand-ducal regulation. The 
BCL’s capital could therefore be periodically re balanced, by incorporating reserves, without 
resorting to the legislator, the latter’s interven tion being however maintained for an increase in 
capital through new funds.  
2.2 The ECB notes that although the reinforcement of  BCL’s financial position had been presented as 
priority during the legislative works leading to the adoption of the Law on the BCL in 1998
2, the 
BCL had advised at that time3 that the capital of EUR 25 million would be insufficient to cover its 
costs and operations. The BCL had therefore pr oposed increasing its capital to EUR 150 million 
and providing for the creation of a general reserv e fund, to which the net profits of its activities 
would be transferred, up to a limit equal to 100% of the capital (as such is the case under Article 33(1)(a) of the Statute of the European System of Central Banks and of the European 
Central Bank (hereinafter the ‘ESCB Statute’)). The BCL’s proposal has been partially followed. 
                                                
 
2  Report of the Commission des Finances et du Budget  (Luxembourg’s Commission of Fina nces and Budget, 10.12.1998) 
on draft law No 4468/07, p. 2. 
3  See the opinion addressed to the President of the L uxembourg Chamber of deputies on 6 November 1998, draft law 
4468/2, 4469/2, ordinary session 1998/99. 
3 Article 31 of the Law on the BCL provides for the creation of a general reserve fund and the BCL’s 
duty to transfer into it its profits, so long as the to tal of the capital and the reserve fund falls short of 
the total of its assets which do not yield freely-available income , after deducting liabilities which 
form the direct counterpart to such assets. 
2.3 In this perspective, the ECB welcomes the possibility offered to the BCL to increase its capital by 
incorporating reserves, which will indirectly cont ribute to reinforcing its financial position. The 
ECB would, nevertheless, recommend that it shoul d be verified whether the BCL’s capital, as 
increased by incorporating such reserves, would be sufficient to effectively perform all its tasks and 
cover properly its administrative and operational expenses, as they have evolved since its 
establishment.  
 3. Provisions on minimum reserves  3.1 By virtue of Article 23 of the Law on the BCL, th e Central Bank is the custodian of sums which the 
professionals of the financial sector may if necessary be required to deposit by virtue of monetary 
control measures, in particular under the terms of Article 19 of the Protocol on the Statute of the 
European System of Central Banks and of the Eu ropean Central Bank. The draft law substitutes the 
words ‘shall be required to deposit’ for the curre nt wording ‘may if necessary be required to 
deposit’, hence transforming an option into an ob ligation. The preparatory work advises in this 
respect that ‘the terms proposed to be replaced in this area, having been appropriate in 1998, are no 
longer [appropriate] since compulsory reserves have become a common ECB monetary policy 
instrument’.  
3.2 It should be recalled that, under Article 19.1 of the ESCB Statute, the ECB ‘may require’ credit 
institutions to hold minimum reserves on accounts w ith the ECB and national central banks (NCBs) 
in pursuance of monetary policy objectives. Purs uant to Article 2 of Council Regulation (EC) 
No 2531/98 of 23 November 1998 concerning the application of minimum reserves by the 
European Central Bank
4, which is binding erga omnes , ‘the ECB may, on a non-discriminatory 
basis, exempt institutions from minimum reserv es in accordance with criteria established by the 
ECB’. In addition, Article 2 of Regulation ECB/ 2003/9 of 12 September 2003 on the application of 
minimum reserves5, which is also applicable erga omnes, lists the categories of institutions that 
‘shall be subject’ to reserve requirements and specifies that the ECB ‘may exempt’ certain institutions from these requirements. Furthermore, Article 6 provides that an institution ‘shall hold 
its minimum reserves on one or more reserve accounts with the national central bank in each participating Member State in which it has an estab lishment, in relation to its reserve base in the 
corresponding Member State’. In line with the provisions referred to above, the ECB would, 
                                                
 
4  OJ L 318, 27.11.1998, p. 1. 
5  OJ L 250, 2.10.2003, p. 10. 
4 however, recommend replacing the words ‘financial sector professionals’6 by ‘credit institutions’ 
and deleting the word ‘in particul ar’ before ‘under the terms of Article 19 of the ESCB Statute’, 
which gives the false impression that the BCL could impose minimum reserves.  
 4. Provisions on regulatory powers  4.1 Article 34 of the Law on the BCL provides that 't he Executive Board shall be authorised, within the 
framework of the tasks of the ESCB, to enfor ce ECB decisions and to implement the sanctions 
imposed by the ECB’. By virtue of the first draft law and based on the new Article 108bis of the Luxembourg constitution
7, Article 34 would now contain a sec ond paragraph, conferring regulatory 
powers on the BCL ‘within the limits imposed by its competences and tasks’, the corresponding 
regulations being published in the Mémorial.  
4.2 The ECB very much welcomes this amendment to the Law on the BCL, which will allow the latter 
to effectively enforce ECB legal acts. Prior to examining how such regulatory powers would, in 
practice, be implemented, the ECB wishes to stress  that, for the sake of efficiency, this regulatory 
power should be combined with a sanctioning power , which forms an integral part of regulatory 
power and ensures due compliance with the regulatory requirements8. Such sanctioning power, at 
the national level, would, nevertheless, be wit hout prejudice to the ECB’s sanctioning power. The 
types of infractions and sanctions, as well as the procedure leading to the imposition and review of 
such sanctions, should, however, be  set forth in a law. In addition, for the sake of flexibility, it 
could also be appropriate for the draft law to expressly authorise the BCL to continue adopting 
circulars, if deemed more appropriate to leve rage its moral suasion rather than its regulatory 
powers.   
4.3 The BCL’s regulatory power, potentially comb ined with a sanctioning power, is especially 
welcome in the collection, compilation and reportin g of statistical data. The ECB notes that in 
particular, the BCL will especially be able to  implement Guideline ECB/2004/15 of 16 July 2004 
on the statistical reporting requirements of the Euro pean Central Bank in the field of balance of 
payments and international investment position st atistics, and the international reserves template9, 
Guideline ECB/2002/7 of 21 November 2002 of the European Central Bank on the statistical 
                                                 
6  According to national law (Article 1.27 read in conjunction with Article 1.28 and Article 13.1 of the Law of 5 April 1993 
on the financial sector), the term ‘financial sector professi onal’ covers credit institutions as well as natural and legal 
persons which exercise, under certain c onditions, financial sector activities, including those of investment firms.  
7  ‘La loi peut créer des établi ssements publics, dotés de  la personnalité civile, dont elle détermine l’organisation et l’objet.  
Dans la limite de leur spécialité le pouvoir de prendre des règlements peut leur être  accordé par la loi qui peut en outre 
soumettre ces règlements à l’approbation de l’autorité de tute lle ou même en prévoir l’annu lation ou la suspension en cas 
d’illégalité, sans préjudice des attributi ons des tribunaux judiciaires ou administratif s.’ [unofficial translation: ‘the Law 
may establish public institutions, endowed with legal personality, for which it de termines the organisation and purpose. 
Within the limit of their specialisations , these institutions may be conferred a regulatory power by the Law, which may, 
in addition, require the approval of the supervisory authority or even provide fo r the invalidity or suspension in case of 
breach of law, without prejudice to the jurisdiction of the judicial or administrative courts’]. 
8  See in this sense, ECB Opinion CON/2002/23 of 18 September 2 002 at the request of the Finnish Ministry of Finance on 
a draft proposal concerning a revision of th e Act on Financial S upervision Authority. 
9  OJ L 354, 30.11.2004, p. 34. Guideline as amended by Guideline ECB/2007/3 (OJ L 159, 20.6.2007, p. 48). 
5 reporting requirements in the field of quarterly financial accounts10 and Guideline ECB/2005/5 of 
17 February 2005 on the statistical reporting requi rements of the European Central Bank and the 
procedures for exchanging statistical information w ithin the European System of Central Banks in 
the field of government finance statistics11. The Luxembourg Government’s grant of a regulatory 
power to the BCL is, however, without prejudice to the overall obligation of the Grand-Duchy of Luxembourg to cooperate with the BCL
12 to ensure an effective allocation of work between the 
BCL and the national statistics institute (STATEC) and avoid overlaps or in consistencies in the 
reporting requirements imposed on economic agents . For this latter purpose, cooperation between 
the STATEC and the BCL similar to that organised for the collection of the balance of payments 
statistics by the Law of 28 June 2000 might be considered. 
4.4 Regulatory powers, possibly combined with a sanctioning power, would also be very much 
welcome in the field of financial stability and in particular with resepect to payment and securities 
settlement systems, payment instruments and e-money schemes. Under the current Law on the 
BCL, the BCL has been empowered to oversee th e systems falling within the scope of the 
Settlement Finality Directive, as implemented by the Luxembourg Law of 12 January 2001 amending the Law of 5 April 1993 on the financ ial sector, as amended, provided that the BCL 
participates in such systems
13. 
 The BCL’s new regulatory power would apply in particular to Clearstream Banking Luxembourg, 
as a securities settlement system, and TARGET2-LU, as a payment system. The BCL’s new regulatory power should, however, not be limited to  these systems. It should be recalled, however, 
that Article 105(2) of the Treaty and Article 3.1 of the Statute include as a basic Eurosystem central bank task the promotion of the smooth operation of ‘payment systems’. Further, according to 
Article 22, the ECB and NCBs may provide fac ilities, and the ECB may make regulations, to 
ensure efficient and sound clearing and paym ent systems within the Community and other 
countries. 
These Articles provide a legal basis for the oversi ght activities generally performed at NCB level, 
in line with the common oversight policy define d for the Eurosystem by the ECB’s Governing 
Council. It is also understood that in its capac ity of promoting the smooth operation of payment 
systems, the Eurosystem is k een on gathering information related to new developments in 
connection with payments. Furthermore, the Gove rning Council’s policy statement regarding the 
‘Role of the Eurosystem in the field of payment systems oversight’
14 confirms that the scope of the 
Eurosystem’s oversight competence embraces also  systems such as e-money schemes and payment 
instruments. To allow the BCL to duly comply with the Governing Council’s common oversight 
policy, it would be advisable to bring all systems,  regardless of whether they are protected by the 
                                                 
10  OJ L 334, 11.12.2002, p. 24. Guideline as last ame nded by Guideline ECB/2007/13 (OJ L 311, 29.11.2007, p. 47). 
11  OJ L 109, 29.4.2005, p. 81. Guidelin e as last amended by Guideline EC B/2007/14 (OJ L 311, 29.11.2007, p. 49). 
12  Article 5 of the ESCB Statute.  
13  Articles 34-3 and 47-1 of the Law of 5 April 1993 on the financial sector, as amended.  
14  The 2000 Governing Council’s polic y statement is availabl e on the ECB’s website at www.ecb.europa.eu. 
6 Settlement Finality Directive, as well as payment instruments, under the BCL’s regulatory powers 
as far as its oversight function is concerned15. To support this extension of the scope of application 
of the regulatory powers, the provisions of the Law on the BCL relating to its competencies should be redrafted accordingly. In particular, the am endment should provide for an express legislative 
recognition of the BCL’s role in financial stability . The BCL would thus be able to monitor and 
assess the financial system in Luxembourg
16. 
4.5 The ECB finally notes that granting the BCL a regulatory power would allow it to replace with a 
regulation the contractual framewor k of its general term s and conditions for the implementation of 
monetary policy operations. When combined w ith a sanctioning power, such regulation would 
allow the BCL to impose sanctions, subject to judi cial review, thereby avoiding the uncertainties 
associated in Luxembourg with the imposition of sanctions by contractual means.  
 5. Provisions on the pension scheme of BCL’s agents  5.1 Under Article 14 of the Law on the BCL, the pens ion benefits of BCL’s agents are determined by 
their status and financed by the BCL pension fund. Such a fund, which is financed by a pure system 
of capitalisation partly by statutory deductions from agents’ salaries, partly by the BCL’s 
contributions, has, however, been designed separately from the other Luxembourg pension agencies. Consequently, practical difficulties have ar isen in the day-to-day management of pension 
benefits of BCL’s agents, especially if they transfer  from or to other private or public institutions to 
or from the BCL, as well as if invalidity of a BCL  agent for the purpose of an invalidity pension 
must be declared. These practical difficulties are addressed in both the first and second draft law. 
Article V(2) of the first draft law provides that the BCL ‘may have recourse to the decision-making bodies and services of the pension agencies following th e pension regime of the agent in question.’ 
Article 1 of the second draft law also brings the BCL  into the scope of the Law of 28 July 2000 on 
the coordination of statutory pension schemes. Furthermore, it acknowledges the specificity of 
BCL’s agents in respect of pensions so that if a State agent transfers to the BCL, the corresponding 
administration pays into the BCL’s pension fu nd the necessary amount to subsequently finance 
pension benefits arising from State service previous ly performed. In the opposite situation, i.e. a 
BCL agent moving to another administration or the private sector, the BCL will transfer its 
contribution to the other relevant scheme or body under such scheme.  
5.2 As a rule, the regime governing the staff of centr al banks should not impair the ability of the latter 
to employ and retain the qualified staff necessar y for the performance of the tasks conferred on it 
by the Treaty, the ESCB Statute and national legislation in an independent manner
17. Hence, the 
                                                 
15  See in this sense, ECB Opinion CON/ 2003/22 of 15 October 2003 at the request of  the Finnish Ministry of Finance on a 
draft government proposal to amend the Suomen Pankki and other relate d acts, particularly paragraph 18.  
16  See ECB Opinion CON/2007/33 of 5 November 2007 at the re quest of the Austrian Ministry of Finance on a draft law 
amending the Law on banking, the Law on savings banks, the Law on the Financial Market Supervisory Authority and 
the Law on the Oesterreichische Nationalbank, particularly paragraph 2.2.1. 
17  See ECB Opinion CON/2008/9 of 21 February 2008 at the requ est of the German Ministry of Finance on a draft law 
amending the Law on Deutsche Bundesbank.  
7 ECB very much welcomes these amendments, which will facilitate the management by the BCL of 
its agents’ pension benefits, also if transferring fro m or to the private or public sector. Ideally, the 
efficiency achieved at national leve l in this latter respect should be transposed at cross-border level. 
For the sake of efficiency and transparency, the practical modalities of the cooperation between the 
BCL and the pension agencies should be set forth in a cooperation agreemen t or regulation. Proper 
attention should be paid, in this last respect , to adequately protect the BCL’s independence18.  
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 15 April 2008. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                
 
18  ECB Opinion CON/2008/13 of 19 March 2008 on a draft law concerni ng the reform of the Greek social security system.