EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 8 June 2017  
on a new category of debt instruments , new macroprudential tool, the creation of a new category 
of settlement institution  and the e xclusion of set- off rights    
(CON/ 2017/23) 
 
Introduction and legal basis  
On 3 April 2017 , the European Central Bank (ECB) received a request from the Governor of the Nationale 
Bank van België/Banque Nationale de Belgique (NBB), on behalf of the Minister of Finance,  for an 
opinion on a draft  law on various financial and tax provi sions (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  (TFEU) and the third, fourth, fifth and sixth indent s of Article  2(1) of 
Council Decision 98/415/EC1, since  the draft law concerns the  NBB, the collection of balance of 
payments statistics, payment and settlement systems as well as 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.  
 
1.  Purpose of the draft law  
1.1 The draft law amends various provisions contained in (a) the Law of 22 February 1998 establishing 
the Organic Statute of the Nationale Bank van België/Banque Nationale de Belgique (here inafter 
the ‘NBB Organic Law ’); (b) the Royal Decrees of 14 November 2008 and 22 April 2012 
implementing the NBB Organic Law as regards the establishment of the guarantee fund f or 
financial services ; (c) the L aw of 28 February 2002 organising the establishment of the balance of 
payments  (hereinafter the ‘Law of 28 February 2002’) ; and (d) the L aw of 25 April 2014 on the 
status and supervision of credit institutions and brokerage firms (herein after the ‘ Banking Law ’). 
1.2 The draft la w amends the NBB Organic Law in order to specify that the set-off that might result in 
the extinguishment of all or part of the claims pledged to the NBB or enforced by the NBB may not 
be asserted against the NBB or any other  third-party purchasers of the said claim s. According to 
the explanatory memorandum  accompanying the draft law2, under the current text of Article 7 of 
the NBB Organic Law a third party purchasing such a credit claim does not benefit from the 
exclusion of set -off rights . This implies that the debtor of pledged claims is able to assert a right of 
                                                 
1  Council Decision of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding 
draft legislative provisions (OJ L 189, 3.7.1998, p. 42).  
2  See section entitled ‘Comments on the articles’ in the explanatory memorandum, pp. 10- 12.  
ECB -PUBLIC  
2 set-off against a third-party purchaser of the claims in the same way that it c an assert a right of set -
off against its creditor. This situation lower s the sale value of the credit claims involved and could 
expose the NBB to potential losses, as it may incur liability towards  the third-party purchaser. To 
neutralise this risk, the draft law proposes  to expand the scope of the exclusion of set -off rights , 
which would therefore also  benefit a third-party purchaser of the credit claim , in line with recent 
legislative amendments passed in France and Italy . However , the draft law does not extend th e 
protection provided by this  provision to the ECB and to other national central banks (NCBs) of the 
European System of Central Banks ( ESCB)3.  
1.3 The draft law also amends  the NBB Organic Law to clarify that the  NBB’ s decisions relating to its 
task of contributing to the stability of the financial system may not be suspended  or opposed by the 
Minister of Finance.  
1.4 The draft law establishes a new category of institutions  which may, in addition to  the provision of 
custody, account maintenance and financial instrument settlement services , also carry out 
settlement -related non-banking services  as well as certain specified activities . According to the 
explanatory memorandum4, the low risk profile of these credit institutions , whose business model 
consists mainly of holding financial instruments on their customers’ behalf, calls for a prudential 
supervisory approach specific to their risk profile. These credit institutions w ill accordingly  be 
treated similar ly to settlement institutions as far as prudential supervisory rules are concerned, 
without becoming fully fledged settlement institutions  governed by Regulation (EU) No 909/2014 of 
the European Parliament and of the Council5.  
1.5 The draft law also  empower s the NBB, when acting in its capacity as macroprudential supervisor, to 
impose on credit institutions and brokerage firms minimum funding requirement s consisting of (a) 
Common Equity Tier 1 or additional Tier 1 or Tier 2 capital ; (b) subordinated debt ; (c) the debt 
instruments belonging to the new category of  senior  non-preferred debt (see paragraph 1.8 below) ; 
and (d) any liabilities that may be subject  to bail-in. According to the explanatory memorandum6, 
this provision aims at strengthening the arsenal of macroprudential tools available to the NBB, 
which w ill be empowered to impose additional requirements , either on  a single institution (at 
individual or consolidated level) or a category of institutions, t o hold additional  amount s of own 
funds and debt eligible for bail -in. According to the explanatory memorandum, this w ill, in particular,  
empower the NBB  to take appropriate action with respect to small credit institutions, in accordance 
with the principle of proportionality .  
1.6 The draft law also amends the Royal Decrees  of 14 November 2008 and 22 April 2012 relating to 
the guarantee fund for financial services . In line with Directive 2014/49/ EU of the European 
Parliament and of the Council7, the draft law introduces the concept of covered deposits , instead of 
                                                 
3  See Opinion CON/2016/37 and paragraph 5.1 of Opinion CON/2017/1. All ECB opinions are published on the ECB’s 
website at www.ecb.europa.eu.  
4  Explanatory memorand um, pp. 9 and 10.  
5  Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities 
settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 
2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1) . 
6  Explanatory memorandum, pp. 38- 44.  
7  Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes 
(OJ L 173, 12.6.2014, p. 149) . 
ECB -PUBLIC  
3 eligible deposits , and adapt s the ratio of individual contributions  payable by credit institutions and 
brokerage firms upwards, so as to maintain the same level of  overall  contribution to the fund.    
1.7 The draft law also amend s the Law of 28 February 2002 to empower the NBB to impose new 
penalty payment s on reporting institutions that fail to provide the information necessary for the 
establishment of balance of payment s statistics.  Currentl y, if reporting institutions  fail to meet  their 
obligations under the Law of 28 February 2002, the NBB may take a series of measures in order to 
obtain the information necessary for the establishment of balance of payments statistics that  
reporting institutions fail to share voluntarily . These include,  inter alia,  consulting the relevant 
documents onsite, interviewing  members of the reporting institution and drawing up a report on  the 
failure to comply.  In respect of  the consultation of documents onsite, the NBB may, following  
authori sation by a judge, without the permission of the reporting agent, have access to the 
buildings where such documents are kept. According to the explanatory memorandum, the existing 
mechanisms have proved cumbersome and inadequate. This explains why the Belgian legislator 
seeks to impose penalty payments , which are administrative measures  expected to be efficient and 
straightforward as they will accumulate as long as the reporting institution has not compl ied with its 
obligations. A Royal Decree will determine the procedural safeguards to be complied with by the 
NBB when im posing  such penalty payments.  
1.8 Finally, t he draft law amends  the Banking Law to introduce a new category of unsecured creditors 
which, in the order of priority of creditors with competing claims over the assets of a credit 
institution or investment firm that is the subject of  liquidation proceedings , will rank below  ordinary 
unsecured creditors but above creditors holding subordinated debt. In order t o belong to this new 
category, the debt instruments held must (a) incorporate a monetary claim against the credit 
institution or investment  firm, the principal and interest of which are not contingent on the 
occurrence of an event that is uncertain at the time of issue (while floating -rate debt instruments 
are not affected by this restriction) ; (b) have a maturity of not less than one year ; (c) be subscribed 
and/or held by professional investors ; and (d) be subject to rules governing their issuance to the 
effect that the claim will rank below other unsecured creditors in accordance with the above-
described new provision. According to the explanatory memorandum8, the p urpose of this 
amendment , which is inspired by recent similar amendments in France on which the ECB was 
consulted9, is to facilitate the implementation of bail -in measures with respect to credit institutions , 
as the debt instruments falling within the ambit of this new category w ill be easily identifi able. 
Furthermore, l oss-absor ption by such debt instruments w ill mitigate possible contagion risk s and 
adhere to the principle that no creditor should be worse off in resolution than in insolvency, as this 
particular ranking w ill also apply in the context of liquidation proceedings.   
 
2. Preliminary comment  
 This opinion does  not address the issue of whether the draft law  effectively implements  Directive 
2014/49/EU in Belgian law. Th e focus of this opinion is on the various provisions  of the draft law 
                                                 
8  Explanatory memorandum, pp. 29- 38.  
9 See Opinion CON/2016/7.  
ECB -PUBLIC  
4 relating to ( a) the creation of a new category of senior  non-preferred debt instruments  in the 
insolvency hierarchy of credit institutions ; (b) the introduction of new macroprudential tools ; (c) the 
creation of a new category of settlement institution ; (d) the exclusion of set -off rights with respect to 
credit claims pledged to the NBB ; (e) the introduction of new penalty payments in the context of 
balance of payments  statistics;  and (f) the independence of the NBB ’s decision- making bodies with 
regard to financial stabilit y matters .   
 
3. A new category of senior debt instruments in the insolvency hierarchy of credit institutions   
3.1 A new category  of senior debt instruments  
3.1.1  The ECB welcomes the provisions in the draft law for the creation of a new asset class of ‘non-
preferred’ senior debt instruments , which are senior debt instruments with a lower rank than 
ordinary senior unsecured claims in liquidation proceedings10. This lower rank is proposed to be 
achieved by establishing a statutory framework that recognises  the contractual subordination 
arrangements contained in the rules governing the issue of such ‘non- preferred’  senior debt 
instruments by credit institutions and investment  firms, where such debt instruments w ill rank 
before subordinated debt instruments but after other senior liabilities , including senior debt 
instruments and deposits , in liquidation proceedings.  
3.1.2  Where the draft law requires that the principal and interest of such ‘non- preferred’  senior debt 
instruments are not contingent on the occurrence of an event that is uncertain at the time of issue, 
except as it relates to interest and can be calculated at any time according to a formula set out in 
the rules governing the issue of the debt  instrument, some additional guidance to market 
participants in the form of an NBB regulation or a Royal Decree may be useful  in order to enhance 
legal certainty . 
3.2 Effect on the loss-absorbing capacity of an institution in resolution  
3.2.1  Changing the statutory creditor hierarchy in bank insolvency proceedings is expected to enhance 
the loss -absorbing capacity of credit institutions in resolution, to the extent that they issue debt 
instruments belonging to this new category of ‘non- preferred’  senior debt instruments. The 
resolution authority may allocate losses in resolution to ‘non- preferred’  senior debt instruments 
prior to other senior liabilities, which w ill include operational liabilities such as corporate deposits 
and certain claims under derivativ e transactions. Imposing losses on ‘non- preferred’  senior debt 
instruments is regarded as carrying a lower contagion risk than that posed by  operational liabilities , 
and will likely be more effective and appear more credible to market participants.  The clear 
distinction in the insolvency ranking on a statutory basis created by the category of  ‘non- preferred’  
senior debt instruments will increase legal certainty regarding the ability of such debt instruments to 
absorb losses and, hence, help to minimi se the risk of compensation claims under the principle that  
no creditor should be worse off in resolution than in insolvency . The presence of a layer of new 
‘non-preferred’  senior debt instruments  has the potential , depending on how substantial this layer  is 
in a given institution , to foster effective resolution action and reduce the need for recourse to the 
                                                 
10  See paragraph 2.1 of Opinion CON/2017/6, paragraph 3.1 of Opinion CON/2016/28 and paragraphs 3.1 and 3.2 of 
Opinion CON/2016/7.  
ECB -PUBLIC  
5 resolution fund. This is in turn expected to promote adequate pricing of risk for investors. The 
statutory recognition of contractual subordination is  therefore expected to improve the resolvability 
of credit institutions under the Union resolution regime and enhance market discipline11. 
3.2.2  In addition, the establishment of a statutory basis for the issuance of ‘non- preferred’  senior debt 
instruments , which include  contractual subordination arrangements , may facilitate the application of 
MREL and TLAC requirement s concerning the loss -absorption and recapitalisation capacity of 
credit institutions and investment firms12. As such, the draft law provides a n additional means for 
credit institutions to comply with these  requirements and improve their resolvability, without 
constraining their respective funding strategies. However, the draft law will not change the ranking 
of senior debt instruments that have already been issued,  and requires newly issued debt 
instruments to contain an explicit contractual clause in order to be subordinated.  
3.3 Reform initiatives currently underway at Union level  
 The ECB notes that a proposal for a directive of the European Parliament and of the Council on 
amending Directive 2014/59/EC as regards the ranking of unsecured debt instruments in insolvency hierarchy is currently under discussion
13, and reiterates its position that a common 
framework at Union level on the hierarchy of creditors, including as regards the subordination of 
debt instruments and other similar financial instruments in bank resolution and/or insolvency proceedings, may hel p to advance the integration of the financial services markets within the Union 
and facilitate the tasks of the ECB with regard both to monetary policy and supervision within the 
Single Supervisory Mechanism.  
3.4 General depositor preference 
3.4.1  The ECB considers that additional reforms would be useful to enhance the resolvability of credit 
institutions and to promote further harmonisation in the hierarchy of creditor claims in bank 
insolvency. In particular, a general depositor preference rule, based on a tiered approach, would enhance resolvability by clarifying the hierarchy of creditor  claim s and facilitating the allocation of 
losses to unsecured bank debt instruments ahead of certain operational liabilities, while alleviating concerns regarding the principle that no creditor should be worse off in resolution than in 
insolvency
14. This would be complementary to the proposals set out in the draft law. It is worth 
noting that Member States are not precluded under Directive 2014/59/EU  of the European 
Parlia ment and of the Council15 from establishing general depositor preference rules in national 
law16, and recently a number of Member States have done so17.  
                                                 
11  See paragraph 3.1 of Opinion CON/2016/7.  
12  See the Financial Stability Board’s (FSB’s) ‘Principles on Loss -absorbing and Recapitalisation Capacity of G -SIBs in 
Resolution: Total Loss -absorbing Capacity (TLAC) Term Sheet’, 9 November 2015, available on the FSB’s website 
at www.fsb.org.  
13  See Opinion CON/2017/6.  
14  See paragraphs 1.4 and 2.3.1 of Opinion CON/2017/6, paragraph 3.1.2 of Opinion CON/2016/28, and paragraph 
3.7.1 of Opinion CON/2015/35.  
15  Directive 2014/59/EU 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 Council Directive 82/891/EEC, 
and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 
2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the 
Council (OJ L 173, 12.6.2014, p. 190).  
16  See paragraph 2.3.1 of Opinion CON/2017/6 and paragraph 3.1.3 of Opinion CON/2016/28.  
ECB -PUBLIC  
6 3.4.2  A general depositor preference, based on a tiered approach, could be achieved by introducing in 
national law another priority ranking for other deposits, such as large corporate deposits, deposits 
by credit institutions, collective investment undertakings, pension funds etc.  Such deposits  would 
rank below the higher priority ranking for deposits up t o the EUR 100, 000 coverage level, which are 
guaranteed by the deposit guarantee scheme, and the preference for certain eligible deposits held by natural persons or micro, small or medium -sized enterprises, but ahead of other senior 
liabilities
18.  
3.5 Restriction to professional investors  and resolvability  
 The draft law stipulates  that the new ‘non- preferred’  senior debt instruments may only be 
subscribed and/or held by professional investors , in accordance with the  documentation r ules 
governing the issuance of debt instruments . Given  that the rationale for such a requirement is 
based on investor protection considerations  and the desire  to enhance resolvability , consideration 
should be given to address ing the issue in the context of the prospectus regime . The ECB notes 
that c lear and easily understandable disclosure requirements  and other safeguards that raise 
investors’ awareness as to the risk s associated with such instruments  would be an alternative to 
restricting the investor base to professional investors . In the same vein, consideration c ould be 
given to requiring a mini mum denomination per unit of each instrument  of at least  EUR 100 ,000, 
which would increase the investment h urdle and thus also the awareness of investors, thereby 
limiting direct  retail investment.  An impact study could be useful in this context to inform the policy 
decision  taken.  A common framework at Union level and a coordinated approach among Union and 
Member State authorities should be pursued on  these issues. This would avoid different 
approaches being taken across Member States, and thus fragmentation within the Union market for 
these instruments. Finally, the ECB notes that the abovementioned rationale also applies with 
respect to retail invest ment in subordinated debt instrument s, which will normally be subject to bail -
in before the new ‘ non-preferred’  senior class.  
3.6  Effect on the eligibility of debt instruments as collateral for Eurosystem credit operations  
 The ECB notes the potential implications of subordinating senior debt instruments to other debt 
instruments of the same issuer with respect to the eligibility of the former as collateral for 
Eurosystem credit operations. Guideline (EU) 2015/510 of the Europea n Central Bank 
(ECB/2014/60)19 sets out a single framework that applies in the Eurosystem to assets that may be 
submitted as eligible collateral for such operations. In order to be eligible as collateral, marketable 
assets must be debt instruments that fulfil the eligibility criteria laid down in Guideline (EU) 
2015/510 (ECB/2014/60). Pursuant to Article 64 of the Guideline, ‘eligible debt instruments shall 
not give rise to rights to the principal and/or the interest that are subordinated to the rights of 
holders of other debt instruments of the same issuer’20.  
                                                                                                                                                             
17  See Article 91 of the Italian Banking Law (Legislative Decree no. 385 of 1 September 1993); Article 207 of the 
Slovenian Law on the resolution and winding- up of banks (OJ No. 44/2016); and Article 145A of the Greek Banking 
Law (Law 4261/2014).  
18  See Opinion CON/2017/6.  
19  Guideline (EU) 2015/510 of the ECB of 19 December 2014 on the implementation of the Eurosystem monetary 
policy framework  (ECB/2014/60) (OJ L 91, 2.4.2015, p. 3).  
20  See paragraph 2.5 of Opinion CON/2017/6 and, in particular, paragraph 3.3 of Opinion CON/2016/7.  
ECB -PUBLIC  
7  
4. New macroprudential tool   
 When applied to significant institutions, t he proposed macroprudential tool to impose minimum 
funding requirements, including capital requirements, may interact with the ECB’s supervisory 
powers. In this context, due care should be given to avoid doublecounting of risks. Furthermore, 
this new tool risks increasing the complexity of the institutional framework, blurring the division of responsibilities  for setting adequate levels of capital requirements and loss absorption and 
recapitalisation capacity for individual credit institutions. It also risks further complicating the 
interplay of different prudential requirements.  
 
5. A new category of credit institutions equivalent to settlement institutions  
 The ECB understands that the establishment of a new category of institutions , whose business 
activity consists chiefly in the holding of financial instruments on their customers’ behalf, is 
necessary as the current prudential framework applicable to institutions with such a business 
model  does not address the specific risks  stemmi ng from such activity . The ECB therefore 
welcomes the extension of measures to mitigate such risks through the introduction of this new 
category of institutions, to which the NBB may apply supervisory tools akin to those applied to 
international and domest ic central securities depositories .  
 
6. Exclusion of set -off rights with regard to credit claims pledged to the NBB  
6.1 In line with its previous opinions  regarding similar legal changes introduced under French
21 and 
Italian22 law, the ECB welcomes the extension of the prohibition of set -off to the debtor of a credit 
claim pledged to the NBB in relation to the third party acquirer of such credit claim. With this 
change, the Belgian legislator protects the NBB against any potential loss arising from the 
acceptance of credit claim s, thereby strengthening the requirement laid down in the second indent 
of Article 18.1 of the Statute of the European System of Central Banks  and of the European Central 
Bank , pursuant to which lending by ES CB central banks must be based on adequate collateral. In 
addition, adequately addressing set -off risks also facilitates the continued eligibility of credit claims 
as eligible collateral in Eurosystem credit operations, and thereby contributes to the effic iency of the 
transmission of monetary policy to the real economy.   
6.2 The ECB notes, however, that the prohibition of set -off by the debtor w ill only apply in its 
relationship towards a third party acquirer and the NBB , but not in respect of any other central bank 
of the ESCB.  As a consequence thereof, another central bank of the ESCB, when acting as 
Correspondent Central Bank (“CCB”) in the context of C orrespondent Central Banking Model 
(“CCBM”) under the laws of the Membe r State of that CCB on behalf of the home NCB (here NBB), 
as well as any other third party purchaser – would not be protect ed against set -off that may hence 
be applied by the debtor of such claim.  The ECB understands that this approach currently does not 
give rise to legal risk s in view o f three elements. First, credit claims in Belgium  are currently only 
                                                 
21  See Opinion CON/2016/37.  
22  See Opi nion CON/2017/1, especially paragraph 5.1.  
ECB -PUBLIC  
8 mobilised as collateral in Eurosystem operations with the NBB. Second, Article 6 of the Law of 3 
August 2012 on various measures intended to facilitate the mobilisation of credit claims i n the 
financial sector (hereinafter the ‘ Law of 3 August 2012’)  ensures that set-off may not be opposed 
after notification of recognition of the transfer  of the credit claim. Third, Article 6 of the Law of 3 
August 2012 ensures that set -off may not be opposed after the insolvency of the creditor of the 
transferred claims . Nevertheless , the Belgian legislator is encouraged to consider expanding the 
additional protection afforded to the NBB under the draft law to all other ESCB central banks, in 
order to support the growing use of credit claims at cross -border level  in the future. In some 
Member States the relevant statutory provisions, similar ly to the draft law, only exclude set -off 
rights for credit claims mobilised as collateral for operations with the NCB of that particular Member 
State . However , other  Member States also have statutory provisions that  provide protection not 
only for their own NCBs  but also for the ECB and other ESCB NCBs23. The latter solution is 
preferable, as it offers a higher degree of financial protection to ESCB NCBs and promotes financial 
integration by facilitating cross -border mobilisation of credit claims.  
 
7. Penalties imposed by the NBB in the context of the balance of payments  
 The ECB welcomes the draft law, insofar as it endows the NBB with the power to impose penalty 
payment s on institutions that fail to comply with reporting requirements necessary in order to 
ensure the accuracy of balance of payment s statistics.  
 8. Decisions made by the NBB with regards to financial stability  
The ECB welcomes the change introduced by the draft to Article 22 of the NBB O rganic Law to the 
effect that the Minister of Finance may not suspend or oppose any decision made by the NBB with 
regard to f inancial stability , which the ECB had previously recommended
24. 
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 8  June 2017.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                 
23  See paragraphs 1.1, 1.3, 2.3 and 2.4 of Opinion CON/2016/37.  
24  See paragraph 2.4 of Opinion CON/2016/55.