EN ECB -PUBLIC 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 2 December 2013  
on the prudential supervision of credit institutions and on macro -prudential oversight  
(CON/2013 /82) 
 
Introduction and legal basis  
On 11 October 2013, the European Central Bank (ECB) received a request from the Finnish Ministry of 
Finance  for an opinion on a draft law amending the  Law on credit institutions and certain other related 
laws (hereinafter the ‘ draft law ’). 
The ECB’s competence to deliver an opinion is bas ed on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the third, fifth and sixth  indents of Article  2(1) of Council 
Decision 98/415/EC of 29  June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative pr ovisions1, as the draft law relates to Suomen Pankki, payment and 
settlement systems and rules applicable to financial institutions insofar as they materially influence the 
stability of financial institutions and markets . In accordance with the first sente nce 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 aims to implement Directive 2013/36/EU of the European Parliament and of the 
Council  (hereinafter the ‘Capital Requirements Directive’ )2 into Finnish l aw, as well as effect ing 
changes and clarifications to Finnish law made necessary by Regulation (EU) No 575/2013 of the 
European Parliament and of the Council3. The draft law proposes repla cing the Law on c redit 
institutions  with a new law under  the same name and amending its content with regard to, inter 
alia, capital buffers, risk management , corporate governance  and administrative sanctions, as 
required by the C apital Requirements Directi ve. It also proposes  amend ments to  several related 
laws, such as the Law on the Financial Supervisory Authority and the Law on investment s ervices.   
1.2 The dr aft law further  aims to clarify  that the Financial Supervisory Authority (FSA) would only be 
responsible for those  statutory tasks that have not been conferred on the ECB under Council 
                                                 
1  OJ L 189, 3.7.1998, p.  42. 
2 Directive 2013/36/EU of the European Parli ament and of the Council of 26 June 2013 on access to the activity of credit 
institutions and the prudential supervision of credit institutions and investment firms  (OJ L 176, 27.6.2013, p. 338 ). 
3  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements 
for credit institutions and investment firms (OJ L 176, 27.6. 2013 , p. 1). 
ECB -PUBLIC  
2 Regulation (EU) No 1024/2013 (hereinafter the ‘Single Supervisory Mechanism ( SSM ) 
Regulation’)4. 
1.3 The draft law also assigns the task of macro -prudential oversight of the financial system to th e 
FSA. The FSA’s Board will make decisions concerning the institution -specifi c countercyclical 
buffer , minimum risk weights and loss given default ( LGD)  floors on exposures secured by 
mortgages , as well as concerning the classif ication of credit institutions for the purposes of the G-
SII5 and O -SII6 buffers.  
1.4 The draft law would slightly amend the rules on information exchange  contained in S ection 26(4)  
of the Law on Suomen Pankki . Other confidentiality provisions n otwithstand ing, Suomen Pankki 
would be obliged to im mediately notify various other authorities, such as the FSA, the Ministry of 
Finance, the Ministry of Social Affairs and He alth, any  authorities responsible for the smooth 
functioning of the financial markets of oth er E uropean Economic Area Member States, the 
European Supervisory Authorities and the European Systemic Risk Board ( ESRB ) of emergency 
situations  referred to in Article 18 of Regulation (EU) No 1093/2010 of the European Parliament 
and of the Council7. 
 
2. General observations   
2.1 The proposed changes relate largely to implementation of the C apital Requirements Directive . It is 
important that the transposition and application into national law of the C apital Requirements 
Directive ’s micro - and macro- prudent ial tools and the requirements that fall under the remit of the 
SSM Regulation are implemented precisely . This will also increase the consistency in the 
application of these tools and processes across all participating Member States, thereby  helping to 
ensure a level playing field and  lower ing the risk of regulatory arbitrage.  
 
3. Implementation of the C apital R equirements D irective  
3.1 The ECB notes that the draft law propos es implement ing the C apital Requirements Directive  into 
Finnish l aw in accordance w ith the  minimum requirements  of that Directive.  
The capital conservation buffer, which is referred to in the draft law as ‘fixed additional own 
funds ’, would be 2.5 %  according to Section 3 of Chapter 10 of the draft  law. The i nstitution -
specific countercyclical buffer , which is referred to in the draft law as ‘ variable additional own 
funds ’, would be determined by the FSA’s B oard, in accordance with the criteria in Section 5 of 
Chapter 10 of the same law.  
                                                 
4 Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank 
concernin g policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10. 2013, p. 63).  
5  G-SII stands for global systemically important institutions.  
6  O-SII stands for other systemically important institutions.  
7  Regulation (EU) No 109 3/2010 of the European Parliament and of the Council of 24 November 2010 establishing a  
European Supervisory Authority (European Banking Authority  (OJ L 331, 15.12.2010, p. 12).  
ECB -PUBLIC  
3 3.2 The draft law contains provisions relating to four macro -prudential tools, namely the 
countercyclical capital buffer, minimum risk weights and LGD floors on exposures secured by 
mortgages8, the G -SII buffer and the O-SII buffer. However, it  does not contain provisions on the 
systemic risk buffer. The ECB acknowledges that the systemic risk buffer is optional and 
understands that the decision not  to implement the systemic risk buffer in to Finnish law is based on 
an analysis of the current state of the Finnish financial sector  and the possible consequences for the 
real economy of its activation over the course of the current economic cycle . The systemic risk 
buffer, if implemented in national law, would fall under the scope of Article 5  of the SSM 
Regulation as one of the capital buffers provided for by r elevant Union law. Due to  the importance 
of both the ECB and national competent authorities or designated authorities  having the broadest 
possible range of macro -prudential tools  at their disposal , the ECB would welcome the 
implementation of a systemic ris k buffer  in order to  ensur e consistency of the available macro -
prudential tools  and lowering the risk of regulatory arbitrage . 
3.3 The draft law should at all times be compatible with the guidelines of the European Banking 
Authority  (EBA)9 on the criteria , e.g. size for identifying O -SIIs. At the same time, f rom a financial 
stability and  level playing field perspective, this will ensure that similar criteria apply across all 
Union Member States  in the identification of G -SIIs and O -SIIs. 
 
4. Macro -prudentia l oversight  
4.1 The draft law proposes assigning the task of macro -prudential oversight to the FSA. Decisions on 
the institution -specific countercyclical buffer will be made by the FSA’s B oard. The Board is 
composed of five members , three of whom are appoi nted on the basis of proposals  by Suomen 
Pankki, the Ministry of Finance and the Ministry of Social Affairs and Health , respectively . The 
FSA will be required to prepare decisions relating to the institution- specific countercyclical buffer 
in cooperation w ith Suomen Pankki and the Ministry of Finance, and also to consult them and the 
Ministry of Social Affairs and Health before any decision- making.  
4.2 The ECB supports the design of effective macro -prudential policy frameworks within Member 
States, in line with the guiding principles set out in Recommendation ESRB/2011/3 of the 
Euro pean Systemic Risk Board10. Moreover, the ECB considers that the ECB and the national 
central banks should play a leading role in macro -prudential oversight, given their expertise and 
existing responsibilities in the area of financial stability11. 
                                                 
8  Articles 124 and 164 of Regulation (EU) No 575/2013 . 
9  Available on  the EBA’s website at www.eba.europa.eu.  
10  Recommendation ESRB/2011/3 of the European Systemic Risk Board of 22 December 2011 on the macro -prudential 
mandate of national authorities (OJ C 41, 14.2.201 2, p.1). 
11  See paragraph 2.1 of Opinion CON/2013/ 30 and par agraph 2.1 of Opinion CON/2013/45. All ECB opinions are 
published on the ECB’s website at www.ecb.europa.eu.  
ECB -PUBLIC  
4 4.3 This opinion is without prejudice to the conclusions of the ESRB’s follow -up assessment, which 
will be prepared pursuant to Article 17 of Regulation (EU) No 1092/2010 of the European 
Parliament and of the Council12. 
 
This opinion will be published on the ECB’s website.  
  
Done at Fran kfurt am Main, 02 December 2013 . 
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
 
 
                                                 
12  Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union 
macro -prudential oversight of t he financial system and establishing a European Systemic Risk Board (OJ L 331, 
15.12.2010, p. 1) .