EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 26 June 2014 
on a systemic risk committee 
(CON/2014/46) 
 Introduction and legal basis 
On 28 March 2014, the European Central Bank (ECB) received two requests from the Luxembourg 
Ministry of Finance: one for an opinion on a draft law establishing a systemic risk committee (hereinafter 
the ‘first draft law’) and another for an opinion on a draft law implementing Directive 2013/36/EU of the 
European Parliament and of the Council1 (hereinafter the ‘second draft law’). 
The ECB’s competence to deliver an opinion on the fi rst and second draft laws is based on Article 127(4) 
and 282(5) of the Treaty on the Functioning of the European Union and the third, fourth and sixth indents of Article 2(1) of Council Decision 98/415/EC
2, since the two draft laws re late to the Banque centrale du 
Luxembourg (BCL) and to statistics and rules appli cable 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.  Purpose of the first draft law 
1.1  In order to implement Recommendations ESRB/2011/3
3 and ESRB/2013/14, the first draft law 
establishes a systemic risk committee (hereinafter the ‘committee’) with four members: (a) the member of the government responsible for the fina ncial sector, who shall be the chair; (b) the 
director general of the BCL, who replaces the chai r in case of absence; (c) the director general of 
the Financial Sector Supervisory Commission (‘CS SF’); and (d) the director of the Insurance 
                                                 
1 Directive 2013/36/EU of the European Parliament and of th e Council of 26 June 2013 on access to the activity of credit 
institutions and the prudential supervision of credit instit utions and investment firms, amending Directive 2002/87/EC 
and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338). 
2 Council Decision 98/415/EC of 29 June 1998 on the consultati on of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
3 Recommendation ESRB/2011/3 of the European Systemic Ri sk Board of 22 December 2011 on the macro-prudential 
mandate of national authorities (OJ C 41, 14.2.2012, p. 1). Available on the Europ ean Systemic Risk Board’s website at 
www.esrb.europa.eu. 
4  Recommendation ESRB 2013/1 of the European Systemic Risk  Board of 4 April 2013 on intermediary objectives and 
instruments of macro-prudential policy (OJ C 170, 15.6.2013, p. 1). 
ECB-PUBLIC 
2 Commission (IC)5. The BCL, subject to the authority of its director general, acts as secretary to the 
committee and is supported in this capacity by one  person designated by each of the members of 
the committee. All decisions of the co mmittee are adopted by unanimous vote6. 
1.2 The first draft law entrusts to the committee th e task of coordinating the implementation of macro-
prudential policy, with a view to safeguardi ng the stability of Luxembourg’s financial system7. By 
virtue of Article 1(2) of the first draft law, this objective is without prejudice to the powers vested in the ECB and in the BCL as members of the Euro pean System of Central Banks (ESCB) and the 
Eurosystem, and those vested in the BCL pursuant to the Law of 23 December 1998 concerning the monetary status and the Central Bank of Luxembourg
8 (hereinafter ‘the Organic Law’)9. To this 
end, the committee pursues intermediate objectiv es and periodically assesses the suitability of these 
objectives, as well as the effectiveness and efficien cy of the macro-prudential instruments chosen10.  
1.3 In order to accomplish its mission, the committee may, inter alia, carry out the following tasks: 
(a) identify, assess and monitor risks to financial stability; (b) designate systemically important 
financial institutions and structur es in Luxembourg; (c) issue notices, warnings regarding high risks 
to financial stability, and recommendations addr essed to the CSSF, IC, BCL and other players 
within the financial sector, including credit ins titutions, insurance and reinsurance companies, 
investment funds, payment systems, and securities settlement systems, that are capable, either collectively or individually, of having a negativ e impact on the financial system or one of its 
components
11; (d) assess and monitor responses made by recipients referred to under item (c) above 
in accordance with the ‘comply or explain’ principle12; and (e) support coope ration and information 
exchange at national and international level, esp ecially with the European  Systemic Risk Board 
(ESRB). 
1.4 The committee may request the authorities represented on the committee and any other national 
entities to provide all economic and financial in formation necessary for it to fulfil its tasks, 
including macroeconomic data and prudential information regarding individual financial 
institutions or market infrastructures13. 
 
                                                 
5  Article 3(1) of the first draft law.  
6  Article 3(6) of the first draft law.  
7  Article 1(1) of the first draft law.  
8  Law of 23 December 1998 concerning the monetary status and the Central Bank of Luxembourg, as modified by the Law 
of 13 July 2007, the Law of 24 October 2008 and the Law of 10 November 2009.  
9  Article 1(2)  of the first draft law.  
10  Article 1(4) of the first draft law.  
11 Article 4 of the first draft law.  
12  Ibid. 
13  Article 5 of the first draft law.  
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3 2.  Purpose of the second draft law 
2.1 The second draft law implements Directive 2013/36 /EU of the European Parliament and of the 
Council14 into Luxembourg law. It also designates the CSSF as the competent authority in the 
context of the Single Supervisory Mechanism (SSM). 
2.2 The second draft law appoints the CSSF as the ‘designated authority’ within the meaning of 
Articles 131, 133 and 136 of Directive 2013/ 36/EU and Article 458 of Regulation (EU) 
No 575/2013 of the European Parliament and of the Council15. When the CSSF acts in this capacity 
with respect to capital conservati on buffers, countercyclical capital bu ffers, buffers for systemically 
important institutions, systemic risk buffers and m acro-prudential risks identified at national level, 
it makes its decisions following negotiation with th e BCL in order to reac h a common position and, 
depending on the case at hand, after seeking the opinion of the committee or taking into account its recommendations. 
2.3 The second draft law also amends the Law of  23 December 1998 establishing a financial sector 
supervisory commission
16, in order to authorise the exchange of information with the committee. 
 3.  General observations 3.1 The ECB welcomes that the first draft law estab lishes the committee, ensures that all the relevant 
authorities and institutions involved in macro-pr udential policy are represented on the committee, 
and defines its objectives, mission and powers in li ne with the guiding principles expressed in 
Recommendation ESRB/2011/3 and Recommendation ESRB/2013/1. 
3.2 The ECB also welcomes that the second draft law implements Directive 2013/36/EU in 
Luxembourg law, including its optional provisions. In particular, it provides the CSSF, when acting 
in its capacity as designated authority, in close coordination with the BCL, on the one hand, and the 
ECB, on the other hand, with the broadest possibl e range of macro-prudential tools, including the 
capital conservation buffer, the countercyclical cap ital buffer, the global systemically important 
institution (G-SII) buffer, the other systemically important institution (O-SII) buffer and a systemic 
risk buffer. 
3.3 The establishment of the committee and the c ooperation arrangement between the CSSF, the BCL 
and the committee established pursuant to the second draft law are without prejudice to the 
                                                 
14  Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit 
institutions and the prudential supervision of credit instit utions and investment firms, amending Directive 2002/87/EC 
and repealing Directives 2006/48/EC and 2006/49/EC (OJ, L 176, 27.6.2013, p. 338). 
15  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements 
for credit institutions and investme nt firms and amending Regulation (EU) 648/2012 (OJ L 176, 27.6.2013, p. 1). 
16  Law of 23 December 1998 establishing a financial sector supervisory commission (‘Commission de surveillance du 
secteur financier’), as amended. 
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4 procedures provided for in Article 5 of  Council Regulation (EU) No 1024/201317 for close 
cooperation between the CSSF, in continuous clo se coordination with the BCL, and the ECB in 
respect of macro-prudential tasks and tools. This  national institutional framework is also without 
prejudice to the ECB’s power to act  in the CSSF’s stead and to apply higher requirements and more 
stringent measures, in accordance with Articles 5(2) and 9(1) of Council Regulation (EU) No 1024/2013, on the basis of close coordination with the CSSF. 
 4. Effective macro-prudential policy framework 
An effective macro-prudential policy framework must be designed in such a way as to foster the ability 
and willingness of the authority entrusted with macr o-prudential policy to act. The framework needs to 
foster, in particular, the authority’s ability to act  in the face of evolving systemic threats, ensuring the 
authority has access to information and that the aut hority has an appropriate range of macro-prudential 
instruments. It also needs to give  assurances that it will act if necessary  and offset any biases occurring 
due to its inaction or insufficiently timely action aris ing from difficulties in quantifying the benefits of 
macro-prudential action, and that are often exacerbate d by financial industry lobbying, political pressures, 
and the need for coordination among agencies
18. The following shortcomings should be addressed with a 
view to ensure that the institutional framework provide d for in the first and sec ond draft laws would entail 
effective macro-prudential policies in Luxembourg: (a) the limited role of the BCL in the field of macro-prudential policy; (b) the limited powers of the comm ittee, including its power to collect information; 
(c) the voting arrangements; (d) the lack of clar ity as regards the committee’s functions; and (e) the 
committee’s disclosure policy. These issues are discussed in the sections below. 
 5. Leading role of the BCL 5.1 The first draft law provides that the BCL sha ll act as secretariat to the committee, but shall not 
receive any other preferential treatment as compar ed to the other institutions represented on the 
committee, whether in terms of representation, voting arrangements, the power to put forward proposals or the allocation of specific macro-prudential tasks. The second draft law endows the BCL with an insufficient role as regards countercy clical capital buffers, buffers for systemically 
important institutions, systemic risk buffers a nd other macro-prudential measures described under 
Article 458 of Regulation (EU) No 575/2013. 
5.2 In principle, the ECB and the national central banks (NCBs) should play a leading role in macro-
prudential oversight, given their expertise and existing responsibilities in the area of financial 
                                                 
17 Council Regulation (EU) No 1024/2013 of  15 October 2013 conferring specific tasks on the European Central Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63). 
18  See the International Monetary Fund (IM F)’s ‘Key Aspects of Macroprudential Po licy’ of 10 June 2013, in particular 
paragraphs 71 and 87; and the IMF’s ‘Implementing Macropruden tial Policy - Selected Legal Issues’ of 17 June 2013, in 
particular paragraph 35.  Available on the IMF’s website at www.imf.org. 
ECB-PUBLIC 
5 stability19. This is particularly the case for the BCL, whic h is tasked with the supervision of market 
liquidity20 and has a general mandate to contribute to financial stability21.  
5.3 The preparatory work for the first22 and second23 draft laws explain that the BCL’s leading role 
would come about as a result of: (a) the BCL acting as chair in the absence of the chairman; (b) the 
BCL acting as the secretariat of the committee; an d (c) the BCL being a party to the cooperative 
arrangement under the second draft law. However, th ese arguments are not convincing. First of all, 
since the committee only meets a few times a year24, the likelihood that the chair will be absent is 
limited. Second, the central bank’s leading role in the field of macro-prudential policy may not 
result from the (ancillary) role played by the NCB in the implementation of some of the provisions 
of Directive 2013/36/EU of the European Parliament and of the Council25 and Regulation (EU) 
No 575/2013 of the European Parliament and of the Council26. Third, as echoed in the ECB’s 
previous opinions issued in respect of systemic risk committees chaired by ministers of finance 
with the NCB acting as secretariat27, the allocation of the secretariat function to the BCL does not 
in itself amount to a leading role on the part of  the NCB as recommended by the ESRB. In France, 
the leading macro-prudential role of the Banque de  France results from its additional tasks in this 
field. These comprise identifying and monitoring sy stemic risks, contributing to the implementation 
of the committee’s decisions and making proposal s to the committee on the use of specific macro-
prudential instruments28. In Germany, the leading role of th e Deutsche Bundesbank results from its 
tasks in identifying and analysing risks and pr oviding analytical support to the committee. The 
Deutsche Bundesbank also has a right of veto as re gards the adoption and publication of warnings 
and recommendations and the adoption of the annual report29. In the light of the above, the ECB 
strongly recommends that the Luxembourg legislator re visits the extent of the tasks entrusted to the 
BCL in order to effectively bolster its leading role in macro-prudential policy. 
5.4 From an operational and financia l point of view, the allocation of new tasks to an NCB should not 
affect its ability to carry out its existing tasks. It is thus important that th e BCL’s involvement in the 
performance of the committee’s mandate or the di scharge of any additional tasks that may be 
                                                 
19  See paragraph 2.3 of Opinion CON/2014/21. All ECB opinions are published on the ECB’s website at 
www.ecb.europa.eu. 
20  See Article 2(4) of the Organic Law. 
21 See Article 2(6) of the Organic Law. 
22 See page 8 of the preparatory work for the first draft law. 
23 See page 70 of the preparatory work for the second draft law. 
24 See Article 3(12) of the first draft la w. The committee shall meet every six mont hs, or when required, upon request of its 
President or two of its members.  
25  Directive 2013/36/EU of the European Parliament and of th e Council of 26 June 2013 on access to the activity of credit 
institutions and the prudential supervision of credit instit utions and investment firms, amending Directive 2002/87/EC 
and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338). 
26  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements 
for credit institutions and investme nt firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1). 
27 See Opinion CON/2012/106 and Opinion CON/2012/55. 
28 See paragraph 1.3 and paragraph 5 of Opinion CON/2012/106. 
29  See paragraph 1.2.2 of Opinion CON/2012/55. 
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6 entrusted to the BCL with regard to macro-pruden tial policy does not affect the BCL’s institutional, 
functional and financial i ndependence, or that of its governor, or the performance by the ESCB of 
its tasks under the Treaty and the Statute of the European System of Central Banks and of the European Central Bank. Financial independence, wh ich is an element of the principle of central 
bank independence referred to in Article 130 of the Treaty, requires that an NCB must have 
sufficient means to carry out its national tasks as well as its ESCB-related tasks. The ECB has 
consistently expressed its concern that, when a llocating additional tasks to NCBs, it must be 
ensured that the NCB is able to fulfil its ma ndate, both operationally, in  terms of manpower, and 
financially, in terms of a ppropriate financial resources
30. The ECB welcomes that Article 1(2) of the 
first draft law provides that the committee’s macro- prudential objective is without prejudice to the 
powers of the BCL and the ECB with respect to this objective. However, for reasons of legal 
certainty, the abovementioned provision should be  accompanied by an explicit provision stating 
that the committee’s recommendations  addressed to the BCL are wit hout prejudice to the principle 
of central bank independence under Article 130 of the Treaty. 
 6. Powers of the committee 6.1 In order to achieve its objectives, the committee only has the right to issue opinions and warnings 
and address recommendations, either to the author ities represented on the committee or to specific 
financial players. Accordingly, the committee ex clusively relies on the enforcement powers of the 
authorities represented on it. Such an approach, without any enforcement powers for the committee 
itself, undermines the committee’s ability to influen ce the scope of regulation or create new macro-
prudential instruments in reaction to changing circum stances, thus also rest ricting its ability to act 
in the field of macro-prudential policy. 
6.2 In the same vein, the committee may only obtai n information and statistics collected by the 
institutions represented on the committee and othe r domestic institutions in accordance with the 
existing institutional framework, but may not requ est information from agents falling outside the 
scope of the reporting requirements. This limits the committee’s access to information, which may 
be of relevance with regard  to its policy formulation. 
6.3 Furthermore, based on the restrictions currently  laid down in the laws governing the BCL and the 
IC
31, information and statistics may only be collected, used and shared in the context of the BCL’s 
and the IC’s respective tasks. It is therefore not entirely clear whether such information and data, in 
particular those concerning individual entities over seen by the BCL, may be legally passed on only 
                                                 
30 See paragraph 2.2 of Opinion CON/2014/27. 
31  See Article 27(3) (on information provided by payment and securities settlement systems as well as issuers of payment 
instruments to assess their efficiency and safety) and Article  33(2) (organising the exchange of information with the 
CSSF, the National Institute for Statisti c and Economic Studies (STA TEC) and the IC ‘to the extent necessary for the 
performance of its tasks’) of the Organic Law; and Article 15(4) of the Law of 6 December 1991 on the insurance sector 
(as amended). 
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7 to the committee in the context of th e latter’s macro-prudential policy mandate32 or whether it may 
also be subsequently circulated to other ins titutions active in this field. The ECB therefore 
recommends that the Luxembourg legislator should cl arify this point in the laws governing the BCL 
and the IC and ensure that information concer ning individual entities overseen by the BCL is 
shared only with the committee. As noted in para graph 1.2 above, the requirement for exchange of 
information stipulated in the first draft law do es not prejudice the tasks performed by BCL as an 
integral part of the Eurosystem. 
6.4 However, the issue described  above does not apply to the CSSF, since the second draft law 
formally authorises the CSSF to exch ange information with the committee33. 
 7. Voting arrangements 
The committee’s decisions are to be taken unanimously . In practice, this voting arrangement gives each 
member of the committee a right of veto, which c ould cause a risk of paralysis in macro-prudential 
policy. This risk may materialise if the committee, which has exclusive competence in respect of macro-
prudential policy, is unable to reach a unanimous decision. In such circumstances, the authorities 
represented on the committee regain the ability to act i ndividually on the basis of their shared competence 
with regard to financial stability. 
 8. Lack of clarity as regards the functions of the committee 
In accordance with best practice, the functions n ecessary to implement macro-prudential policy fall into 
three broad categories: (a) identification of systemic  risks; (b) formulation of a policy response; and 
(c) mitigation of systemic risk, or implementati on of the policy response, through rule-making, 
supervision and enforcement
34. However, these functions are containe d in various different provisions in 
the first draft law: the enforcement function is cont ained in the committee’s mission statement in Article 
1(1); the formulation of policy response is containe d in Article 1(3), which mentions ‘the pursuit of 
intermediary objectives’; and the identification a nd monitoring of risks is enumerated among the 
committee’s powers in Article 2. For the sake of cl arity, the ECB recommends consolidating all aspects 
of the committee’s functions in one provision. Cont rary to what the mission statement seems to imply, 
these functions are not restricted to coordinating the implementation of the macro-prudential policy by the authorities represented on the committee. 
 
                                                 
32  See the IMF’s ‘Implementing Macroprudent ial Policy - Selected Legal Issues’, of 17 June 2013. See in particular 
paragraph 36. 
33  See Article 60 of the second draft law. 
34  See the IMF’s ‘Implementing Macroprudential Policy- Select ed Legal Issues’ of 17 June  2013. See in particular 
paragraphs 16 and 17. 
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8 9. Transparency of macro-prudential policy 
9.1 Section 1, Recommendation D of Recommendati on ESRB/2011/3 stipulates that macro-prudential 
decisions and the reasons for making them should be made public in a timely manner, unless there 
are risks to financial stability in doing so. Such transparency, which supports accountability 
mechanisms, is of the utmost importance since it al so ensures that authorities’ policies and actions 
are fully explained to and understood by stakeholders.  
9.2 Article 3(6) of the first draft law merely sti pulates that ‘the systemic risk committee shall take 
decisions on whether to publish notices, alerts and recommendations by unanimous vote’. The ECB 
recommends that this provision should be amended in order to create greater transparency as regards macro-prudential policy decisions, which shoul d not be left entirely to the discretion of the 
authorities. 
 10. Strengthening the institutional framework 10.1 In view of the shortcomings described a bove, the ECB urges the Luxembourg legislator to 
thoroughly review the first draf t law in order to strengthen the overall effectiveness of the 
institutional framework for macro-prudential polic y in Luxembourg. For this purpose, the ECB 
strongly recommends that: (a) the BCL’s leading role in macro-prudential policy should be 
bolstered; (b) either the BCL, in its leading role  in respect of the macro-prudential policy or the 
committee, should be endowed with direct enfo rcement powers, including those relating to 
collecting information and statistics; (c) voti ng and disclosure arrangements should be more 
flexible; and (d) the overall clarity with regard to the committee’s role should be improved. Unless 
such amendments aim to accommodate the view expressed by the ECB in this opinion, a further 
consultation with the ECB on the revised  first draft law will be required. 
10.2 It is noteworthy that in its opinion issued on the first draft law
35, the State Council of Luxembourg 
also discusses: (a) the overall weakness of the committee, which has no regulatory and enforcement 
powers of its own; (b) the lack of a clear legal b asis for the exchange of aggregated and individual 
information between the committee and its members;  and (c) the ability of the committee to address 
recommendations to individual institutions, including with regard to shadow banking. In view of 
these concerns, the State Council of Luxembourg recommends limiting the scope of the committee’s action to mere recommendations exclus ively addressed to the existing institutions in 
the context of the sector-specific approach to fi nancial sector oversight . In addition, the ECB 
considers that the State Council’s proposal aimi ng at removing any mention of the Governor’s 
hierarchical power in relation to the secretaria t of the committee is not compatible with the 
independence of the BCL and its Governor.  
                                                 
35  Opinion of the Luxembourg State Council No. 50. 541, available on the State Council’s website at www.conseil-
état.public.lu . The Luxembourg State Council has not yet i ssued its opinion on the second draft law.  
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9  The ECB advises the Luxembourg legislator to proceed with caution as regards these 
recommendations, which would unduly weaken th e adopted macro-prudential policy framework, 
resulting, inter alia , in an inappropriate shift towards micro-prudential policy. 
10.3 This opinion is without prejudice to the conc lusions of the ESRB’s fo llow-up assessment, which 
will be prepared pursuant to Article 17 of Re gulation (EU) No 1092/2010 of the European 
Parliament and of the Council36. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 26 June 2014. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI 
                                                 
36  Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union 
macro-prudential oversight of the fina ncial system and establishing a Europe an Systemic Risk Board (OJ L 331, 
15.12.2010, p. 1).