EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 17 November 2008 
at the request of the Irish Minister for Finance  
on a draft Financial Services (Dep osit Guarantee Scheme) Bill 2008 
(CON/2008/69) 
 
Introduction and legal basis  
On 30 October 2008 the European Central Bank (ECB) received a request from the Irish Minister for 
Finance for an opinion on a draft Financial Servic es (Deposit Guarantee Scheme) Bill 2008 (hereinafter 
the ‘draft law’), accompanied by the draft Eu ropean Communities (Depos it Guarantee Schemes) 
(Amendment) Regulations 2008, an implementing in strument to be adopted under the draft law 
(hereinafter the ‘draft amending Regulations’).  
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third and sixth indents 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 Central Bank and Financial Services Authority of 
Ireland (hereinafter the ‘Central Bank’) and contains ru les 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 The draft law will amend the European Communiti es (Deposit Guarantee Schemes) Regulations 1995
2 
(hereinafter the ‘1995 Regulations’), which est ablished the Irish deposit-guarantee scheme. The 
amendments will be introduced in two forms: (i) by  way of transferring some of the provisions of the 
1995 Regulations into the draft law, which, when adopt ed, will have a higher legislative status than the 
1995 Regulations; and (ii) by way of amendments to the 1995 Regulations by the draft amending Regulations that are to be adopted by the Minister for Finance under the delegati on contained in the draft 
law
3. As a result, the following main changes will be introduced: (i) the statutory deposit protection level 
will be raised from current EUR 20 000 to EU R 100 000 and the present co-insurance requirement 
resulting in depositors bearing 10% of the loss up to the statutory deposit protection level4 will be 
                                                 
1  OJ L 189, 3.7.1998, p. 42. 
2  Statutory Instrument No 168 of 1995. 
3  See Section 2 of the draft law. 
4  See Section 11(3)(a) of the 1995 Regul ations, as amended by Section 8 of the draft amending Regulations. 
2 eliminated; (ii) credit unions will be included with in the scope of institutions covered by the deposit-
guarantee scheme5; and (iii) within the Central Bank’s ins titutional framework, the responsibility for the 
functions related to the deposit-gua rantee scheme will be taken away from the scope of responsibilities of 
the Irish Financial Services Regulatory Authority, an  autonomous statutory body forming part of the legal 
personality of the Central Bank and reallocated  to the Central Bank’s general responsibilities6. 
 2. General observations 2.1 In line with its previous opinions
7, the ECB welcomes the proposed increase in the total amount of 
protected deposits in accordance with the conclusions of the Ecofin Council held on 7 October 2008
8. In this respect, the ECB repeats that Member States must act in a coordinated 
manner to avoid significant differences in national implementation from having a counter-
productive effect and creating distortions in global  banking markets. In particular, harmonisation as 
regards the guaranteed amount and the duration of the guarantee are necessary within the European 
Union. Moreover, the ECB also emphasises the im portance of ensuring that any legislative 
proposals responding to the current financial situation comply with Community law, including EC competition law, and understands that nothing in the draft law and the draft implementing 
Regulations will preclude the Irish authorities appr opriately transposing the proposed amendments 
to Directive 94/19/EC of the European Parlia ment and of the Council of 30 May 1994 on deposit-
guarantee schemes
9, once they are adopted.  
2.2 The ECB commented in a recent opinion addressed to the Irish authorities on the set of Government 
guarantees covering all retail and corporate deposits to the extent they are not covered by the 
existing Irish deposit-guarantee scheme10. The ECB  highlighted that in general the existing 
mechanism of the deposit-guarantee scheme should be used to the extent possible when providing 
the guarantees. In the context of the present cons ultation, the ECB reiterates its earlier position that 
                                                 
5  See definition of ‘credit institution’ in  Section 3(1) of the 1995 Re gulations, as amended by Se ction 4(d) of the draft 
amending Regulations. 
6  See Part 1 of Schedule 2 to the Central Bank and Financ ial Services Authority of Ireland Act 2003, as amended by 
Section 10 of the draft law together with the Schedule to the draft law, Item 2. 
7   See, e.g., paragraph 2.2 of ECB Opinion CON/2008/51 of 17  October 2008 at the request of the Greek Ministry of 
Economy and Finance on a draft law on, inter alia, the esta blishment of the ‘Depositors and Investors of Credit 
Institutions Compensation Fund’ and paragraph 2.1 of E CB Opinion CON/2008/61 of 28 October 2008 at the request of 
the Belgian Minister for Finance on a draft royal d ecree implementing the Law of  15 October 2008 on measures 
promoting financial stability [title shortened]. 
8  The Council (Ecofin) agreed in its 7 October meeting that ‘all Member States would, for an initial period of at least one 
year, provide deposit-guarantee protecti on for individuals for an amount of at  least EUR 50 000, acknowledging that 
many Member States determine to rais e their minimum protected amount to EUR 100 000’. See the press release of the 
2894th Council meeting (13784/08), av ailable on the Council’s webs ite at www.consilium.europa.eu. 
9  OJ L 135, 31.5. 1994, p. 5. See also Eur opean Commission’s proposal for a Directive of the European Parliament and of 
the Council amending Directive 94/19/EC on Deposit Guarantee Schemes as rega rds the coverage level and the payout 
delay, 15 October 2008, COM(2008) 661 final. 
10  See ECB Opinion CON/2008/48 of 15 October 2008 at the request of the Irish Minister for Finance on a draft Credit 
Institutions (Financial Support) Scheme 2008. 
3 the relationship between the existing Irish deposit- guarantee scheme and the newly provided special 
Government guarantees should be further clarified11. 
 3.  Central bank independence and the monetary financing prohibition 3.1 The ECB notes that the proposed reallocation of responsibility for the performance of the functions 
related to the deposit-guarantee scheme will result in  the direct performance by the Central Bank of 
inter alia  the following functions foreseen by the 1995 Regulations: (i) hosting the deposit accounts 
on which the deposits contributing to the fundi ng of the Irish deposit-guarantee scheme are 
maintained
12; (ii) annually recalculating the amounts to be maintained on the deposit accounts by 
the covered credit institutions13; and (iii) determining that the cove red credit institution is unable to 
pay out deposits and ensuring in such cases that payouts of guaranteed deposits are made from the 
deposit accounts under the deposit-guarantee scheme14. Additionally, certain new functions related 
to the operation of the deposit-guarantee scheme are assigned by the draft law to the Central Bank, in particular the provision of advice to the Minister for Finance as regards variations in amounts required to be held by the respective credit institutio ns or classes of credit institutions, taking into 
account their capital and liquidity leve ls and other prudential parameters
15. The ECB appreciates 
that the principle of risk-based contributions has the effect of aligning the calculation of a credit 
institution’s contributions to the deposit guarantee scheme with its risk profile16. At the same time, 
the ECB notes that the activities performed by the Ce ntral Bank need to comply with the monetary 
financing prohibition contained in Article 101 of the Treaty and Council Regulation (EC) 
No 3603/93  of 13 December 1993 specifying definitions for the application of the prohibitions 
referred to in Articles 104 and 104b(1) of the Treaty17. In the same vein, the ECB expects that 
functions to be performed by the Central Bank fo r the benefit of the deposit-guarantee scheme will 
be conducted in a manner fully compatible with the Central Bank’s ins titutional and financial 
independence, as a safeguard for the proper perfo rmance of the Central Bank’s tasks under the 
Treaty and the Statute of the Eu ropean System of Central Banks and of the European Central 
Bank18. 
                                                 
11  See paragraph 3.10 of ECB Opinion CON/2008/48. 
12  Section 5(1) of the 1995 Regulations. 
13  Section 5(3) of the 1995 Regulat ions, to be superseded by Se ction 5(1) of the draft law. 
14  Sections 9(1)(a), 12(2) and 13(9) of the 1995 Regulations. 
15  Sections 4(3)-(4) of the draft law. 
16  See paragraph 3.2 of ECB Opinion CON/2008/51 of 17 October 2008 at the request of the Greek Ministry of Economy 
and Finance on a draft law on, inter alia , the establishment of the ‘Depositors and Investors of Credit Institutions 
Compensation Fund’. 
17  OJ L 332, 31.12.1993, p. 1. 
18   See paragraph 3.4 of ECB Opinion CON/2008/52 of 17 October 2008 at the request of the Spanish State Secretary for 
Economic Affairs on a Royal Decree-Law creating a Fund for th e acquisition of financial a ssets [title shortened] and 
paragraph 3.4 of ECB Opinion CON/2008/65 of 12 November 2008 at  the request of the Banca d’Italia on behalf of the 
Italian Ministry for Economic Affairs and Finance on a draft ministerial decree containing provisions to implement 
Decree-Law No 157/2008 on further urgent measures to guarantee the st ability of the credit system. 
4 3.2 Moreover, the ECB notes that under the current Section 19(1) of the 1995 Regulations, the Central 
Bank may, at its discretion and to such extent  as it may deem proper from time to time, make 
payments constituting refundable support to the Irish deposit-guarantee scheme, to protect the 
interests of depositors or to promote th e orderly and proper regulation of banking19. In this context, 
the ECB underlines that national deposit-gua rantee schemes’ funding arrangements must, inter alia , 
comply with the monetary financing prohibition laid  down in the Treaty, and in particular with the 
prohibition on national central banks providing ove rdraft facilities or any other type of facility 
within the meaning of Article 101 of the Treaty20, as more specifically stated in past ECB 
opinions21 and in the ECB’s Convergence Reports22. Section 19(1) of the 1995 Regulations needs to 
comply with the above criteria by specifying that the payments foreseen in this Section may only be made on a short-term basis to cover urgent needs re lated to maintaining the stability of the financial 
system.  
  This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 17 November 2008. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
19  Section 19(1) of the 1995 Regulations. 
20   Interpreted in line with  Regulation (EC) No 3603/93. 
21   See paragraphs 11-14 of ECB Opinion CON/2001/32 of 11 Oc tober 2001 at the request of the Portuguese Ministry of 
Finance on a draft decree law amending the legal framework of  credit institutions and financial companies; paragraphs 
11-13 of ECB Opinion CON/2005/50 of 1 December 2005 at th e request of Národná banka Slovenska on a draft law 
amending the Act No 118/1996 Coll. on the protection of bank deposits and on amendments to certain laws, as last 
amended; paragraphs 2.1-2.3 of ECB Opinion CON/2007/26 of 27 August 2007 at the request of the Polish Minister for 
Finance on a draft law amending the Law on the Bank Guar antee Fund; and paragraphs 2.2-2.8 of ECB Opinion 
CON/2008/5 of 17 January 2008 at the request of the Polish Mi nister for Finance on a draft law amending the Law on the 
Bank Guarantee Fund. 
22   See, e.g. the ECB’s Converg ence Report December 2006, p. 30.