EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 11 December 2012 
on financial legislation 
(CON/2012/104) 
 
Introduction and legal basis 
On 5 November 2012, the European Central Bank (ECB)  received a request from the Danish Financial 
Supervisory Authority (FSA) ( Finanstilsynet ) for an opinion on a draft law amending the Law on 
financial business, the Law on securities trading, the Law on payment services and electronic money, the 
Law on measures to prevent money laundering and fina ncing of terrorism, the Law on equal treatment of 
men and women in connection with insurance, pensi on and similar financial ser vices and various other 
laws (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 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. Purpose of the draft law 1.1 The draft law introduces a number of amendments to  the financial legislation. These are intended to 
enhance the supervision of financia l institutions, ensure effective en forcement in cases of breach of 
the financial legislation, and strengthen the financ ial sector overall. The draft law also provides for 
the establishment of a national Systemic Risk Board
2 to exercise macro-prudential oversight, and 
provides for the implementation in national la w of certain European Union legislation. 
1.2 Enhancing financial supervision and ensuring efficient enforcement 
In order to enhance financial supervision and ensu re efficient enforcement  where there is a breach 
of the financial legislation, the draft law amends the financial legislation, inter alia, as set out 
below.  
                                                 
1  OJ L 189, 3.7.1998, p. 42. 
2  See Section 1(30) of the draft law. 
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2 (a)  The draft law extends the current reporting obligations laid down in section 75 of the Law on 
financial business to financial holding companie s regarding matters of material significance 
to the continued operation of their subsidiaries3. 
(b)  It allows the FSA to exchange confidentia l information with the public prosecutor and the 
police at an earlier stage than is  currently possible, i.e. before  it has been established that 
there are reasonable grounds fo r suspecting that a legal or natural person has committed an 
offence covered by the Criminal C ode or the supervision legislation4. 
(c)  It provides that the FSA may publish the outcomes of (i) cases referred by the FSA to the 
police for investigation, (ii) cases which concl ude with the imposition of an administrative 
fine, and (iii) orders by the FSA that a financial institution shall correct misleading 
information which it has published about itself5. 
(d)  It provides that the FSA may enter into agre ements to perform, for payment, certain kinds of 
tasks for public authorities, state institutions and other similar bodies, if the performance of 
such tasks contributes to financial stability6. 
(e)  It introduces a new approach to the enforc ement of solvency requirements, including the 
possibility for the FSA to impose certain meas ures on financial institutions in order to 
enhance the capital position of such institutions7. 
1.3 Measures to strengthen the financial sector 
In order to strengthen the individual financial ins titutions and the financial sector overall, as well as 
facilitate further consolidation, the draft law also provides for the measures set out below. 
(a)  The scope of loans raised by financial institu tions which have been granted a licence to issue 
covered bonds is widened so that loans may al so be used to strengthen these institutions’ 
solvency ratios8. 
(b)  New rules are established regarding merg ers between savings banks, cooperative savings 
banks, mutual insurance companies and limited co mpanies in order to facilitate consolidation 
of the financial sector9. In order to ensure the independence of the board of directors in 
savings bank trusts or cooperativ e savings bank trusts, the appointment of members of board 
of directors of such trusts10 is made more transparent. 
(c)  The FSA is made responsible  for supervising the procedures us ed by financial institutions to 
establish benchmark interest rates. The aim of this measure is to restore confidence in the 
                                                 
3 See new Section 75(4) of the Law on fi nancial business, as inserted by  Section 1(7) of the draft law. 
4  See new wording of Section 354(6) of the Law on financial bus iness, as inserted by Section 1(39) of the draft law. 
5  See Section 1(43) and (46), Section 2(33) , Section 3(4), Section 4(9), Section 5( 6), Section 8(3), Section 11(5), Section 
12(2), Section 13(2), Section 14(4) a nd Section 15(2) of the draft law. 
6  See new Section 344(5) of the Law on financial business,  as inserted by Section 1(33) of the draft law. 
7 See new Section 225(2) of the Law on financial business,  as inserted by Section 1(23) of the draft law. 
8  See new wording of Section 152(b) of the Law on financial bus iness, as inserted by Section 1(18) of the draft law. 
9  See new wording of Section 205 of the Law on financial bus iness, as inserted by Section 1(19) of the draft law. 
10  See new wording of Section 209(2) of the Law on financial bus iness, as inserted by Section 1(21) of the draft law. 
ECB-PUBLIC  
3 Copenhagen Interbank Offered Ra te (CIBOR) and ensure enhanced control over the setting 
of CIBOR and other relevant benchmark rates11. 
1.4 Establishment of a national Systemic Risk Board 
The draft law provides for the establishment of a national macro-prudential Systemic Risk Board 
competent to adopt and communicate observations, warnings and recommendations to the relevant 
public authorities, the government and the public re garding systemic risks in the financial area12. 
These warnings and recommendations will primarily be addressed to the FSA, but those relating to 
legislation will be addressed to the Government. The Systemic Risk Board may be consulted on 
warnings and recommendations issued by th e European Systemic Risk Board (ESRB)13. 
The Systemic Risk Board will comprise two re presentatives from Danmarks Nationalbank, two 
from the FSA, one from each of the three economic  ministries, and three independent experts 
nominated by the Ministry of Business Affairs a nd Growth following consultation with Danmarks 
Nationalbank14. The Governor of the Board of Danmar ks Nationalbank will chair the Systemic 
Risk Board15. 
The Systemic Risk Board's decisions will be adopt ed by simple majority. However, representatives 
from the FSA and the ministries have no voting righ ts with regard to decisions on observations, 
recommendations and warnings to be addressed to the Government16. These observations, 
recommendations and warnings are to be made public unless the Systemic Risk Board takes the 
view that confidentiality is neces sary to safeguard financial stability17. The recipients of a warning 
or a recommendation shall be obliged within three m onths of receipt to publicly notify the Board as 
regards the measures which will be taken or explain any non-action18. 
The FSA, the relevant ministries and Danmarks Nati onalbank shall be obliged to exchange relevant 
information and documentation on request of the Systemic Risk Board, including confidential 
statistical information obtained by Danmarks Nationalbank, if the Board assesses that such 
information is necessary for it to fulfil its tasks19. 
2. General observations 2.1 The ECB welcomes the proposed amendments to th e Danish financial legislation, which provide 
for enhanced supervision and enforcement and th e overall strengthening of the financial sector. 
2.2 Taking into account the need for appropriate ac tion to address the possible systemic impact of 
failing cross-border institutions, the ECB highlights that the domestic legal framework for crisis 
                                                 
11  See new Section 343(s) and (t) of the La w on financial business, as inserted by Section 1(31) of the draft law. 
12  See new Section 343(s) of the Law on financial business,  as inserted by Section 1(30) of the draft law. 
13  See new Section 343(s)(3) of the Law on financial business. 
14  See new Section 343(s)(1) of the Law on financial business.  
15  See new Section 343(s)(1)of th e Law on financial business. 
16  See new Section 343(s)(5) of th e Law on financial business. 
17  See new Section 343(s)(6) of th e Law on financial business. 
18  See new Section 343(s)(7) and (8) of  the Law on financial business. 
19  See new Section 343(s)(9) of th e Law on financial business. 
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4 management may need to be further adapted to re flect future regulatory initiatives at Union level20. 
In particular, the ECB urges that any initiatives undertaken by the competent national authorities to 
restore confidence in the financial markets be c oordinated with other Member States and the Union 
institutions in a spirit of close cooperation, w ith a view to implementing common principles. 
3. Enhancing financial supervision and ensuring efficient enforcement  
3.1 The financial crisis has shown the importance of having effective and efficient supervision and 
enforcement mechanisms in place with regard to the financial system. The ECB welcomes 
measures that strengthen the powers of competent authorities to intervene when the stability of 
either individual financial institutions or the financia l system as a whole is at risk. In this context, 
the draft law enhances the FSA’s capacity to respond in a timely and effective manner to 
difficulties that solvent financial institutions f ace by imposing early intervention measures upon 
them in order to enhance their capital position. 
3.2 The ECB also notes the propo sed measures to facilitate info rmation-sharing and cooperation 
between competent authorities and the increased openness regarding the work of the FSA which 
aims to bring about greater transparency as well as efficient supervision and enforcement in the 
financial area. When considering measures aime d at achieving increased openness and information-
sharing, it is however necessary to ensure that confidential information is adequately protected21. 
4. Measures to strengthen the financial sector 
The ECB supports the measures proposed to strengt hen the solvency ratio via loans raised by 
financial institutions which have been grante d a licence to issue covered bonds. Widening the 
scope for loans raised gives financial institutions  greater flexibility and may thus contribute to 
maintaining a well-functioning mortgage-credit sect or. However, the ECB notes that where junior 
covered bonds are used in the cover pool this s hould only be within the same banking group22. 
The ECB welcomes initiatives to restore confiden ce in benchmark interest rates and emphasises 
that proposals to reform such benchmark interest  rates should be coordinated at Union level to 
ensure consistency and a level playing field. In this regard, the ECB notes the Eurosystem's 
response to the European Commission’s public c onsultation on the regulati on of indices, published 
on 14 November 201223. While the Eurosystem’s recommendations focus on the strengthening of 
governance relating to Euribor calculations, they may also serve as guidelines for the regulation 
and supervision of other systemically important  indices. Such guidelines would include ensuring 
that the membership of the boards of the rate -setting bodies and the relevant steering committees 
                                                 
20  See the proposal for a directive of the European Parliament  and of the Council on the access to the activity of credit 
institutions and the prudential supervision of credit instituti ons and investment firms and amending Directive 2002/87/EC 
of the European Parliament and of the Council on the suppl ementary supervision of credit institutions, insurance 
undertakings and investment firms in a financial conglomerate (COM(2011) 453 fi nal) and the proposal for a regulation 
of the European Parliament and of the Council on prudentia l requirements for credit institutions and investment firms 
(COM(2011) 452 final). 
21  See Opinion CON/2011/5, paragraph 3.10. 
22  See Opinion CON/2012/5. 
23  See the Eurosystem's response of 14 N ovember 2012 to the European Commission's public consultation on the regulation 
of indices, available on the ECB's website www.ecb.europa.eu. 
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5 are sufficiently diverse to reflect the public nature of the rates, that entities independent of the rate-
setting bodies perform substantive checks of the rates, and that the banks’ rate-submission 
processes are subject to mandatory audits. 
5. Establishment of a national Systemic Risk Board 5.1  The ECB welcomes the proposed amendments, wh ich provide for  the establishment of a national 
Systemic Risk Board as a national macro-prudential authority
24. It supports the proposed 
institutional framework for nationa l macro-prudential oversight in  which Danmarks Nationalbank 
is represented and acts as chair. The ECB unde rstands that pursuant to the explanatory 
memorandum of the draft law Danmarks Nationa lbank’s central bank independence will not be 
affected by its involvement in the Systemic Risk Board25. In this respect, the ECB notes that the 
secretariat services for the Systemic Risk Board will be provided by Danmarks Nationalbank in 
conjunction with other authorities. The ECB recomme nds that measures are taken to ensure that the 
increased use of resources by Danmarks Nationalb ank does not affect its financial independence26. 
5.2 The draft law provides that the Systemic Risk  Board and Danmarks Nationalbank may exchange 
information insofar as the Systemic Risk Board need s this information to carry out its tasks. The 
ECB notes that national provisions establishing na tional macro-prudential authorities should be 
consistent with Union law provisions which regulat e the exchange of supervisory and statistical 
information27 and establish the ESRB as a Union body r esponsible for macro-prudential oversight 
of the financial system within the Union28. In this context, the ECB is of the view that the draft law 
should expressly mandate the Systemic Risk Boar d to exchange information with other macro-
prudential authorities, central banks and the ES RB, particularly on actions taken to address 
systemic risks at national level29. 
                                                 
24  See Opinion CON/2012/55. 
25  See paragraph 2.6.3 of the explanatory memorandum of the draft law. 
26  See the ECB’s Convergence Report, May 2012, p. 25. Al l ECB documents are availabl e on the ECB’s website at 
www.ecb.europa.eu. 
27  See paragraph 2.2.6 of Opinion CON/2010/7. See Article 12 of  Directive 2002/87/EC of the European Parliament and of 
the Council of 16 December 2002 on the supplementary superv ision of credit institutions, insurance undertakings and 
investment firms in a financial conglomerate and amending Council Dire ctives 73/239/EEC, 79/267/EEC, 92/49/EEC, 
92/96/EEC, 93/6/EEC, 93/22/EEC, 98/78/EC and 2000/12/EC (OJ L 35, 11.2.2003, p. 1), Article 58(5) of Directive 
2004/39/EC of the European Parliament and of the Counc il of 21 April 2004 on markets in financial instruments 
amending Council Directives 85/ 611/EEC and 93/6/EEC and Directive 2000/12/E C of the European Parliament and of 
the Council and repealing Council Directive 93/22/EEC (OJ L 145, 30.4.2004, p. 1), Article 49 of Directive 2006/48/EC 
of the European Parliament and of the Council of 14 June  2006 relating to the taking up and pursuit of the business of 
credit institutions (OJ L 177, 30.6.2006, p. 1), Article 70 of the Directive 2009/138/EC of the European Parliament and of 
the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency 
II) (OJ L 335, 17.12.2009, p. 1) and Article  1(4) of Regulation (EU) No 1092/2010; see also Article 57(a) of the proposal 
for a directive of the European Parliament and of the Counc il on the access to the activity of credit institutions and the 
prudential supervision of credit institutions and investment  firms and amending Directive 2002/87/EC of the European 
Parliament and of the Council on the supplementary superv ision of credit institutions, insurance undertakings and 
investment firms in a financial conglomerate (COM(2011) 453 final). 
28  See Article 3(1) of Regulation EU (No) 1092/2010. 
29  See Opinion CON/2012/55, paragraph 4.1.  See also Article 57(a) of the propos al for a directive of the European 
Parliament and of the Council on the access to the activity of  credit institutions and the prude ntial supervision of credit 
institutions and investment firms and am ending Directive 2002/87/EC of the European Parliament and of the Council on 
the supplementary supervision of cred it institutions, insurance undertakings and investment firm s in a financial 
conglomerate (COM(2011) 453 final). 
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6 5.3 Lastly, actions taken by national macro-pruden tial authorities should not conflict with but rather 
complement ESRB actions taken at Union level30. The ECB recommends that the draft law ensures 
that the Systemic Risk Board liaises closely with  the ESRB and informs it of all actions taken to 
address systemic risks at national level and that it also ensures that, if significant cross-border 
effects are anticipated, the Systemic Risk Board no tifies the ESRB of this prior to the issuance or 
the publication of its warnings and recommendations. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 11 December 2012. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI 
                                                 
30  See Opinion CON/2012/55, paragraph 4.2.