EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 28 May 2010  
on amendments to the financial stability regime 
(CON/2010/45) 
 
Introduction and legal basis  
On 16 April 2010 the European Central Bank (ECB) r eceived a request from the Danish Ministry of 
Economic and Business Affairs for an opinion on a dr aft law amending the Law on financial stability, the 
Law on a Guarantee Fund for Depositors and Investors, and the Law on payment of State income tax (the 
treatment of failing credit institutions after the expiry  of the general State guarantee) (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 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 the rules app licable 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 will establish a new winding-up regime  for failing credit institutions from the expiry 
date of the Law on financial stability until the normalis ation of conditions in the financial markets.  
1.2. On 9 October 2008 the ECB was consulte d on a draft law on financial stability
2, and on 21 January 
2009 it was consulted on a draft law on State inv estments in credit institutions and a draft law 
amending the Law on financial stability3. The Law on financial stability established a general State 
guarantee scheme for ordinary individual credito rs and depositors, which expires on 30 September 
2010.   
1.3. As pointed out in the General Comments on the draft law4, the financial crisis has demonstrated to 
all stakeholders the benefits of a controlled wi nding-up of a failing credit institution compared to 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  See Opinion CON/2008/54. All ECB opinions are publis hed on the ECB’s websit e at www.ecb.europa.eu. 
3  See Opinion CON/2009/6. 
4  See General Comments on the draft law (available only  in Danish), 2 (Background), and Comments on the specific 
provisions, Re.: § 1,  subsection 1.  
2 the traditional and often lengthy winding-up procedures and compulsory sales in a bankruptcy. 
Against this background and also in view of  the relatively large number of smaller credit 
institutions in the Danish banking system, the purpose of the draft law is to provide for the 
continuation of the Financial Stability Company (h ereinafter the ‘Company’), established by the 
Law on financial stability, as a basis for a more permanent and general regime for handling failing credit institutions. This will facilitate greater tran sparency in the market on how to value credit 
default risk and also ensure that the Danish  banking sector will continue to benefit from the 
accumulated expertise on how to hand le failing credit institutions.   
1.4. In cases where a credit in stitution is unable to meet the capital adequacy requirements it will have 
the choice either to transfer its activities to a buy er designated by the Company or to enter normal 
bankruptcy proceedings. In the former case, the Co mpany will set up a new subsidiary to take over 
the activities of the failed credit institution with the clear aim of winding it up and of transferring existing customers to other institutions. The Comp any’s subsidiary will purchase the assets of the 
failed credit institution, at their realisation value
5, against payment in the form of the acquisition of 
a proportional share of its unsubordinated unsecu red liabilities. The liabilities exceeding the assets 
and, therefore, not taken over will remain with the failed credit institution and will be realised 
according to normal credit institutio n insolvency rules. Creditors not  accepting the change of debtor 
will remain creditors of the failed credit institution,  and they will retain the right to set-off assets 
against liabilities. The Company injects capital in to the new subsidiary in accordance with the 
capital adequacy requirements of the Law on Dani sh financial business. If more liquidity is 
required than can be raised in the central ba nk’s regular market operations, the Company can 
provide a liquidity facility, to ensure that the liqui dity adequacy requirements are met. The injected 
capital will earn a market return, to be borne  by the subsidiary, which will also cover the 
Company’s administration costs.  
1.5. As a second leg of the new winding-up regime, the Danish Guarantee Fund for Depositors and 
Investors (hereinafter ‘the Fund’) will set up a Wi nding-Up Department of the Fund, separated by 
Chinese walls from the Fund’s ordinary guarantee obligations. This new Winding-Up Department 
may guarantee loans for the capitali sation and liquidity, and it will bear any losses incurred by the 
winding-up of the Company’s subsidiary. The capital of the Winding-Up Department will be provided through guarantees from Danish credit institutions, amounting to DKK 3.2 billion (approx. EUR 430 million), and limited to 0.2 percent of the deposits of each institution within one 
financial year. In the event that the capital requirements exceed the guarantees, the Winding-Up 
Department can raise loans guaranteed by the Stat e in agreement with the Danish Parliament’s 
Finance Committee
6. 
                                                 
5  See the draft law § 1, subsection 3, Re .: § 16g, subsection 3; and Comments on sp ecific provisions of the draft law (only 
in Danish) § 1, subsection 3, Re.: § 16g, paragraph 7.   
6  According to the existing § 6, subsection 4, of the Law on a Guarantee Fund for Depositors a nd Investors (the unofficial 
English version is available on the website of th e Danish FSA at http://www.ftnet. dk/en/Regler-og-praksis.aspx) the 
Minister for Economic Affairs may, with the approval of Pa rliament’s Finance Committee, pr ovide a guarantee for a loan 
made to the Fund to meet its commitments . With the creation of the new and sepa rate winding-up department of the Fund 
a similar possibility of taking out a loan with the approval of the Finance Committee will also be provided for, if the 
3 1.6. In order to ensure the proper functioning of the new regime, the draft law requires each credit 
institution to have internal systems in place to en able it to provide within 24 hours all the necessary 
information regarding its deposit and loan account s in case it should need to be wound up through 
the Company7. 
 2. General observations  
2.1. The ECB welcomes the fact that the general State guarantee regime  will not be extended beyond 
the expiry date and that it will be replaced by a regime which entails the further disengagement of 
the State in the winding-up of failing credit institutions in favour of a regime based primarily on financing by the credit institution sector itself. Th e ECB also welcomes the fact that, as clearly 
stated in the General Comments on the draft law
8, a credit institution for which the Financial 
Supervision Authority has set a deadline to fulfil the solvency criteria mu st first seek a market-
based solution, and that the new winding-up regime  under the Company will be available only in 
situations where the credit institution considers that it has lost its capital or either is or must expect 
to be insolvent and only where the credit institu tion’s own efforts to find a market-based solution 
have proved unsuccessful.  
2.2. The ECB further welcomes the clear mandate for the Minister for Economic and Business Affairs, 
as set out in the Comments on § 16e, subsection 4, to lay down detailed rule s on the conditions for 
the transfer of the assets and the subsequent wi nding-up of the failed credit institution which will 
follow the European Commission’s gui delines for restructuring measures9, in order to be compliant 
with Article 107(3)(b) of the Treaty, so that domestic support measures to failing credit institutions and their terms of application are in accordance w ith the principle of non discrimination and with 
competition law rules, and in particular State aid rules, of the Union. 
 3. Specific comments  
3.1. The ECB notes that § 3, subsection 1, of the draft law lays down that the Fund shall assist in the 
winding-up of credit institutions in financial diffi culties under the Law on financial stability. In this 
regard, § 3, subsection 3, of the draft law stat es that the Fund shall be divided up into four 
departments, one of which is the Winding-Up  Department. The ECB welcomes the further 
clarification laid down in § 3, subsections 4 and 6, of the draft law according to which the 
Winding-Up Department may not take out loans from the other departments and that it shall have 
its own, separate resources provided by its manda tory contributors. These provisions are important 
                                                                                                                                                             
resources of this department should not suffice to cover the winding-up obligations of the Fund. See the Comments on 
specific provisions of the draft law (only in Danish) Re .: § 3, subsection 5, and Re.: §6, subsection 4.  
7  See the draft law, § 2, subsection 1. 
8  See the General Comments, 1 (Introduction), 2 (Background) and 3.1. 2. According to Danish legal tradition, as is also the 
case in the other Nordic countries, the Comments on a draf t law when adopted by Parliament will be binding on the 
Executive in its implementation and administ ration of the law, and will also be of  strong interpretive value for the courts. 
9  See the draft law, paragraph 3.1.2. (available only in Danish) citing also the Commission communication on the return to 
viability and the assessment of restructuri ng measures in the financial sector in the current crisis under the State aid rules.  
(OJ C 195, 19.8.2009, p. 9) . 
4 from a legal certainty perspective,  as they ensure that ex ante pay-ins by credit institutions to 
guarantee deposits in case of the insolvency of a credit institution are not used for other purposes 
such as the voluntary winding-up of credit institutions in financial difficulties.  
3.2. The ECB notes that in the even t that the capital requirements of the Fund’s Winding-Up 
Department exceed the guarantees provided, the Winding-Up Department can still raise loans 
secured by State guarantees in agreement with the Parliament’s Finance Committee. The ECB 
reminds the consulting authority about the importan ce of continuing vigilance as to the cost at 
market rates of this residual State guarantee to raise loans to fund  any additional capital 
requirements of the Winding-Up Department.   
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 28 May 2010. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET