EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 12 November 2009  
on conditions and procedures for the application of  the measures to strengthen financial stability  
(CON/2009/93) 
 
Introduction and legal basis  
On 19 October 2009 the European Central Bank (ECB) received a request from the Lithuanian Ministry 
of Finance for an opinion on a draft Government resolution  implementing the Law on financial 
sustainability (hereinafter the ‘d raft Government resolution’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community 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 Government resolution  relates to rules applicable to financial 
institutions insofar as they materially influence th e 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 Government resolution  
1.1 The aim of the draft Government resolution  is to specify conditions and procedures for the 
application of measures to strengthen financia l stability provided for by  the Law on financial 
sustainability, namely: (a) State guarantees; (b) s ubordinated loans; and (c) redemption of bank 
assets. The fourth category of measures to strengthe n financial stability, provided for by the Law 
on financial sustainability, i.e. taking shares in a bank in the public interest, is not covered by the 
draft Government resolution.  
1.2  The application of the draft Government resolution  is limited in time – the Government may decide 
on the application of any of the three categories of measures to strengthen financial stability during 
a period of six months after the adoption of the draft Government resolution. 
 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2 2. General observations  
2.1 On 2 April 2009 the ECB adopted Opinion CON/2009/32 at the request of the Lithuanian Ministry 
of Finance on a draft law on financial sustainability  (hereinafter the ‘April draft law’). The April 
draft law provided for a general legal framework  of national measures to strengthen financial 
stability.  
2.1.1  In Opinion CON/2009/32 the ECB drew the consulting authority’s attention to the guidance 
provided by the Ecofin Council to the Member States in the Conclusions of its Meeting of 
7 October 20082 and to the Declaration issued by th e Heads of State of the euro area on 
12 October 2008 (hereinafter the ‘Declaration’)3. In particular, the ECB stressed that any initiatives 
put in place by the competent national authorities to restore confidence in the financial markets 
should be coordinated and should aim to implement the common principles in question, in a spirit 
of close cooperation with other Member States and the Community institutions4. The principles 
contained in the Declaration and the Conclusions  of the Ecofin Council were endorsed by the 
European Council of 15 to 16 October 20085. 
2.1.2  In that opinion the ECB also made specific co mments regarding, inter alia, the entities to which the 
new measures could be applied, the involvement  of Lietuvos bankas, the circumstances under 
which the new measures could be applied, the relatio nship of the April draft law to monetary policy 
and the conditions for State capital investments. 
 The ECB welcomes that its comments were largely taken into account. 2.2 However, the ECB notes that its comments re main valid as regards the draft Government 
resolution. With these general observations in  mind, and against the background of the 
abovementioned guidance the ECB has the fo llowing observations to make on the draft 
Government resolution. 
 
                                                 
2  See ‘Immediate Responses to Financia l Turmoil’, Ecofin Council Conclusions of  7 October 2008, available on the former 
French Presidency’s website at www. ue2008.fr. The Ecofin Council recommended that: (i) interventions should be 
timely and the support should in pr inciple be temporary; (ii) the interests of taxpayers should be protected; (iii) existing 
shareholders should bear the due conseque nces of the intervention; (iv) the Gove rnment should be in a position to bring 
about a change of management; (v) management should not retain undue be nefits; (vi) governments may have, inter alia , 
the power to intervene in remuneration; (vii) legitimate intere sts of competitors must be protected, in particular through 
the State aid rules; and (viii) negative spill-over effects should be avoided.  
3  The text of the Declaration is available on the former Fr ench Presidency’s website at www.ue2008.fr. The Member States 
agreed to: (i) ensure appropriate liquid ity conditions for financial institutions: (ii) facilitate the funding of banks; 
(iii) provide financial institutions with additional capital resources to continue to ensure the proper financing of the 
economy; (iv) allow for an efficient recapitalisation of distressed banks; (v) ensure su fficient flexib ility in the 
implementation of accounting rules; and (vi) enhance cooperation procedures am ong European countries. 
4  See ECB Opinions CON/2009/12, paragraph 2.2, and CON/ 2009/32, paragraph 2.2. All ECB opinions are published on 
the ECB’s website at www.ecb.europa.eu. 
5   Brussels European Council of 15 to 16 October 2008, paragraph 3 of the Presidency  Conclusions, available at 
www.europa.eu. 
3 3. Specific comments  
3.1 Involvement of Lietuvos bankas 
3.1.1 In its Opinion CON/2009/32 the ECB noted that  the April draft law recognised Lietuvos bankas’s 
expertise in the fields relevant to the stability of the financial market. However, the ECB expressed 
its understanding that Lietuvos bankas’s role in relation to the new measures would only be a 
consultative one, i.e. advising the Government or an institution authorised by it in respect of 
specific measures and/or providing its findings  on the situation of a particular bank. 
3.1.2 The ECB understands from the consulting authorit y that the draft Government resolution envisages 
Lietuvos bankas’s participation in the application of the measures to strengthen financial stability, 
including the submission of all relevant informati on to the Ministry of Finance that would allow it 
to adopt a decision on the application of a speci fic measure. It also gives Lietuvos bankas an 
important role in the supervision of the benefi ciary financial institution during the period of its 
application and in monitoring how the beneficiary financial institution fulf ils its obligations under 
the corresponding legal arrangement signed with and/or approved by the Government or the 
Ministry of Finance. 
3.1.3 The ECB also understands from the consulting aut hority that Lietuvos bankas is to be assigned this 
role because it considers Lietuvos bankas best qua lified for it considering its expert knowledge, and 
in view of the aim of safeguarding the taxpayers’ interest and ensuring the efficient use of public 
funds. 
3.1.4  The ECB reiterates that any involvement of Li etuvos bankas in the application of the measures to 
strengthen financial stability must be compatible with the Treaty6, i.e. Lietuvos bankas’s functions 
must be conducted in a manner that is fully co mpatible with Lietuvos bankas’s institutional and 
financial independence7 to safeguard the proper performance of its existing tasks under the Treaty 
and the Statute of the European System of Central Banks and of the European Central Bank. In the same vein, it should also be borne in mind that  the involvement of Lietuvos bankas in the 
application of the measures contained in the draf t Government resolution must fully comply with 
the prohibition on monetary financing laid down in Article 101(1) of the Treaty, read in 
conjunction with Council Regulati on (EC) No 3603/93 of 13 December 1993 specifying definitions 
for the application of the prohibitions referred to  in Articles 104 and 104b(1) [now Articles 101 and 
103(1)] of the Treaty
8. 
                                                 
6  ECB Opinions CON/2008/68, paragraph 3.7, and CON/2009/32, paragraph 3.2.2. 
7  See ECB Opinion CON/2009/26, paragraphs 2.1-2.3, in relation to Lietuvos bankas’s institutional a nd financial 
independence. 
8  OJ L 332, 31.12.1993, p. 1. See also ECB Opinions C ON/2008/52, paragraph 3.2, and CON/2008/68, paragraph 3.7. 
4 3.1.5 The ECB notes that although according to the draft Government resolution Lietuvos bankas 
generally is being given an advisory role in the sense that final decisions on the application of the 
measures to strengthen financial stability will be ma de by the Government and/or the Ministry of 
Finance on the advice of Lietuvos bankas, certai n provisions seem to go beyond such an advisory 
role and require Lietuvos bankas to assume task s which appear to be more related to the 
administration of the measures to strengthen fina ncial stability. The draft Government resolution 
should ensure that these functions will not affect Lietuvos bankas’s ability to carry out its ESCB-related tasks from an operational a nd financial point of view. The E CB recalls that the principle of 
financial independence implies that an NCB must  have sufficient means not only to perform 
ESCB-related tasks but also its own national t asks (e.g. financing its administration and own 
operations)
9. 
3.1.6  The ECB considers that the draft Government resolution should also be consistent with Lietuvos 
bankas’s overall tasks and functions under the Law on Lietuvos bankas and the Law on financial 
sustainability. In addition, with respect to the Ag ency Contract which is to be concluded between 
Lietuvos bankas and the Ministry of Finance, the ECB understands that the content of this Contract will not go beyond Lietuvos bankas’s tasks and func tions under those laws a nd will be consistent 
with institutional and financial independence. 
3.2 Solvency of the beneficiary financial institutions 
3.2.1 The ECB reiterates its remark made in  Opinion CON/2009/32 that, according to the 
abovementioned guidance in this regard, the meas ures to strengthen financial stability (except for 
taking shares in a bank in the public interest, wh ich is not covered in the draft Government 
resolution) should not be applied to insolvent banks . It is recalled in particular that any measures 
undertaken by Lietuvos bankas should only rela te to liquidity support provided to solvent 
institutions in order to comply with the prohibition on monetary financing. 
3.2.2 In this context, paragraph 3 of the draft rul es on State guarantees contained in the draft Government 
resolution provides that ‘The State guarantee fo r bank stability enhancement shall be issued if, 
according to the information received from the bank and Lietuvos bankas, it is possible to expect that the bank will have sufficient funds to fulfil the State guarantee liabilities’, and in some other 
draft rules contained in the draft Government r esolution such a condition is not present at all (for 
example, in the draft rules on redemption of bank assets). The ECB would welcome more explicit provisions in this regard in the draft Government resolution. 
3.3 Restrictions as regards undue use of the guaranteed  status of beneficiary financial institutions to 
engage in a heightened level of activities 
3.3.1 In Opinion CON/2009/32 the ECB noted that it is important to ensure that beneficiary financial 
institutions may not profit from undue use of their gua ranteed status to engage  in a heightened level 
of activities which distort the market and facilitate  abnormal balance sheet growth. In this regard, 
                                                 
9   See the ECB’s Convergence Report, May 2008, p. 20. 
5 the ECB reiterated the importance of establishing appropriate safeguards such as limits on the 
marketing of financial products  or on expansion of activities on the basis of State guarantees. 
3.3.2 In this context the draft rules for the applica tion of the measures to strengthen financial stability 
contained in the draft Government resolution (for example, paragraph 12.3 of the draft rules on State guarantees and paragraph 12.4 of the draft ru les on subordinated loans) provide for a similar 
prohibition on the use by the beneficiary financial institution of the information of the fact that the 
measure to strengthen financial stability has been gr anted for the marketing of financial activities or 
the expansion of such activities. The ECB notes th at, not only information about the measure, but 
also the measure itself should not be used for th e marketing or expansion of financial activities. 
Therefore, the ECB would welcome an amendment to this effect in the draft Government resolution. 
3.4 Temporary nature of the measures to strengthen financial stability  
3.4.1 In Opinion CON/2009/32 the ECB noted that the Declaration clearly draws attention to the need 
for any domestic support schemes, and for the framewo rk that provides for them, to be temporary 
in nature, even if they can be extended or renewed
10. Accordingly, the ECB recommended that 
more specific provisions on the time limits of the support measures be inserted in the April draft 
law, and provisions establishing means to redeem the new measures. 
 The ECB notes that this remark was taken in to account: Article 4(2) of the Law on financial 
stability provides that the measures to strengthen financial stability ‘shall be applied for a limited 
period established by the Government’, and Artic le 5(2) provides for the maximum and minimum 
maturity (three years and three months respectivel y) of a bank’s liabilities that are guaranteed by 
the State. 
3.4.2 However, the ECB must reiterate its remarks as regards the other two categories of measures to 
strengthen financial stability, i.e. subordinated loans and redemption of bank assets. Even though 
the application of the draft Government resolution  itself is limited in time – the Government can 
decide on the application of any of the three categor ies of measures for a period of six months after 
adoption of the draft Government resolution, the draft rules on subordinated loans provide for minimum maturity of subordinated loans only
11, while in the draft rules on redemption of bank 
assets there are no provisions on the temporary natu re of this measure or on the exit strategy.  
 The ECB understands that the specific term/maturity of the measure could be set in the particular 
legal arrangement signed between the beneficiary financial institution and the Government or the 
Ministry of Finance, and/or approved by the Govern ment or the Ministry of Finance. However, in 
order to ensure that a transparen t and predictable legal framework is  in place and to facilitate the 
                                                 
10  The Declaration states ‘In all cases, thes e actions will be designed in order to avoid any distortion in the level playing 
field and possible abuse at the expense of non beneficiaries of these arrangements. As a consequence…the scheme will 
be limited in amount, temporary  [italics  added] and will be applied under close scrutiny of financial authorities’.  
11  Two years, as laid down in paragraph 3.4 of the draft rules on subordinated loans. 
6 adoption of individual decisions, the ECB would we lcome specification in this regard in the draft 
Government resolution. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 12 November 2009. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET