EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 26 March 2010 
on a draft law on State capital investment in deposit banks 
(CON/2010/26) 
 
Introduction and legal basis  
On 9 March 2010 the European Central Bank (ECB) received a request from the Finnish Ministry of 
Finance for an opinion on a draft proposal for a law on state capital investment in deposit banks 
(hereinafter the ‘draft law’), including as an annex a draft decree on State capital investment in deposit 
banks (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 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 provisions1, as the draft law relates to rules applicable  to financial institutions insofar as they 
materially influence the stability of financial ins titutions 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. 
 1.  Background and purpose of the draft law 
On 24 November 2008, the ECB gave its opinion
2 on a draft Government proposal for a law on state 
capital investment in deposit banks (hereinafter the ‘original draft proposal’) and a draft decree annexed 
to it. However, the ECB notes that the law which was eventually enacted  and which is currently in force 
differs in some respects from the original draft proposal which had been the subject of Opinion 
CON/2008/75. The scheme which was established under th e law came into force on 1 January 2010 and 
will operate until 30 April 20103. The main purpose of the scheme is to enable the provision of capital 
support to sound and solvent deposit banks, to en sure the proper financing of the economy. 
The draft law aims at extending the operation of the scheme until the end of 2010, without making any 
further amendments to it. Under the scheme, the St ate may provide capital support to sound and solvent 
deposit banks by subscribing an unsecured capital loan wh ich will form part of the original own funds of 
the bank referred to in Section 45 of the Law on Cred it Institutions (Tier 1 capita l). Eligible institutions 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  Opinion CON/2008/75. All ECB opinions are availa ble on the ECB’s website  at www.ecb.europa.eu. 
3  Law on State Capital Investment in Deposit Banks, 1171/2009 and G overnment Decree on State Capital Investment in 
Deposit Banks, 1749/2009. The scheme was approved by the European Commission on 11 September 2009, 
C(2009)6931. 
2 are all Finnish deposit banks authorised by the Financ ial Supervisory Authority (FSA), including central 
bodies of co-operative banks, subsidiaries of forei gn credit institutions and deposit banks’ holding 
companies incorporated in Finland. 
Capital loans may be subscribed up to a maximum of  EUR 4 billion in total, and up to 25 % of each 
supported bank’s minimum ow n funds. The capital loan principal of a capital loan is only repayable to the 
State after three years from the date of its issue, pr ovided that certain solvency requirements are met and 
that the FSA gives its consent for the repayment. The Government has no right to demand the repayment 
of the capital loan. 
The interest rate on the capital loan is based on the reference rate determined on the basis of the rate 
applicable to five year Government bonds plus six percentage points. If the issuer does not pay the full 
interest for a calendar year, the Government is entitled  to appoint two additional members to the issuer’s 
board of directors. The scheme contains certain restric tions applicable to the issuer of a capital loan, for 
example with regard to profit distribution, busine ss restructuring, marketing and remuneration of the 
management. 
 2. General observations 2.1 In its Opinion CON/2008/75 the ECB emphasised, inter alia , the importance of complying with the 
Declaration on a concerted European action plan of the euro area countries
4 of 12 October 2008 and 
referred to the criteria set out in the Commissi on Communication entitled ‘The application of State 
aid rules to measures taken in relation to financia l institutions in the context of the current global 
financial crisis’5. 
2.2 The ECB would like to reiterate that any initiatives put in place by the competent national 
authorities to restore confidence in the financial markets should be coordi nated and should aim to 
implement common principles in a spirit of close cooperation with other Member States and the Union institutions since significant differences in  national implementation could create distortions 
in global banking markets. In this regard, the E CB emphasises that it is necessary to coordinate the 
duration of national financial support schemes across the Union in order to ensure a level playing 
field
6. In addition, the ECB again underlines the need for national support measures to be temporary 
in nature7. The temporary nature of the State’s in tervention should be ensured by providing 
financial institutions with incentives to redeem such  instruments as early as possible after a certain 
period of time. 
 
                                                 
4  The Declaration is ava ilable on the French Presidency’s website at www.ue2008.fr. 
5  OJ C 270, 25.10.2008, p. 8. 
6  See, in particular, paragraph 3.1 of Opinion CON/2009/24,  paragraph 2.5.2 of Opinion CON/2009/54, and paragraph 3.2 
of Opinion CON/2009/73. 
7  See, in particular, paragraph 3.2 of ECB Opinion C ON/2010/11, paragraph 2.2 of CON/2009/24, paragraph 3.3 of 
CON/2009/62,  paragraph 3.2 of CON/2009/ 73, and paragraph 3.6 of CON/2009/92. 
3 2.3 The ECB points out that the draft law should be in line with the guidance provided in the 
abovementioned documents, as well as with the Commission Communication on ‘The 
recapitalisation of financial institutions in the cu rrent financial crisis: limitation of aid to the 
minimum necessary and safeguards against undue distortions of competition’8 and the 
recommendations of the ECB’s Governing Co uncil on the pricing of recapitalisations9. 
 3. Temporary nature of the scheme 3.1 The ECB understands that the draft law aims to extend the scheme for a period of eight months, so 
that capital loans could be subscribed until 31 D ecember 2010. The ECB notes that in line with the 
abovementioned Commission Communication on th e recapitalisation of financial institutions a 
regular review of the scheme is to  be conducted. The continued oper ation of the scheme in line with 
the State aid rules is dependent on the scheme be ing notified to and approved by the Commission. 
Such approval is usually provided for six months. Thus, if the Commission so decides, it may be 
necessary to resubmit the scheme for ap proval for the remaining two months. 
3.2 The draft law, as with the existing scheme, requires from the issuer commitments related to 
management remuneration, profit distribution, ac quisition of own shares and business restructuring 
until the capital loan has been repaid in full. The ECB notes, however, that the draft law, and hence 
also the existing scheme, differ from the original  draft proposal on which the ECB gave its opinion 
in 2008
10, in that the minimum term for the repayment of  the capital loan is three years rather than 
five and no specific penalties apply if the capital lo an principal is not repaid after this period of 
time11. Therefore, there are fewer incentives than in  the original draft proposal for financial 
institutions to redeem the State capital investment , making it more difficult to ensure the temporary 
nature of the State’s intervention.  
 
4. The appropriate time to consult the ECB  The ECB notes that in cases of particular urgency that do not allow for a normal consultation 
period, the consulting authority may indicate urge ncy in the consultation request and ask for a 
shorter time limit for the ECB’s opinion to be  adopted. This does not prejudice the national 
authorities’ duty under Articles 127(4) and 282(5) of the Treaty to consult the ECB on national 
draft legislative provisions falling within its fiel ds of competence in due course of the national 
legislative process. Given that the consulting aut hority has not specified reasons for the extreme 
urgency, except that the current scheme expires on 30 April 2010, the ECB considers that the 
                                                 
8  OJ C 10, 15.1.2009, p. 2. 
9  Recommendations of the Governing Council of the European Central Bank on the pricing of recapitalisations, issued on 
20 November 2008 and available on the ECB’s website at www.ecb.europa.eu. 
10  CON/2008/75. 
11  See CON/2008/75. The original draft proposal provided that th e principal amount of the loan would be gradually raised 
in the event of non-repayment, but the law that was passe d and is currently in force does not contain this penalty. 
4 minimum consultation period of one month provide d for in Article 3(1) of Decision 98/415/EC 
applies.  
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 26 March 2010. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET