EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 27 May 2009  
on measures to mitigate financial turmoil 
(CON/2009/49) 
 
Introduction and legal basis  
On 12 May 2009 the European Central Bank (ECB) received a request from the Slovak Ministry of 
Finance for an opinion on a draft law on measures to m itigate the effects of the global financial crisis on 
the banking sector and on amendments to certa in laws (hereinafter the ‘draft law’). 
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 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 main purpose of the draft law is to est ablish a legal framework laying down the conditions 
under which aid may be granted to banks to remedy  serious shortcomings in the functioning of the 
economy by mitigating the impact of the globa l financial crisis on the banking sector and 
strengthening the conditions for maintaining the stability of the whole financial system. The draft law also provides for the procedure to be followe d by national authorities, in particular by the 
Slovak Ministry of Finance and Národná banka Slovenska (NBS), when granting such stabilisation 
aid and for checking compliance with the conditions under which it is granted. 
1.2 Article 5(5) of the draft law lays down an enab ling provision pursuant to which the details of prices 
and other conditions for State support (e.g. a fee am ount or methods for returning the stabilisation 
aid) will be provided for in the form of an im plementing measure to be adopted by the Slovak 
Ministry of Finance in agreement with NBS. 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2 1.3 Stabilisation aid may be granted to banks with th eir registered office in Slovakia that perform their 
activities on the basis of a banking licence, including subsidiaries of foreign banks, by virtue of the draft law and the Law on banks
2. It may take the form of a capital contribution from the State’s 
financial assets managed by the Slovak Ministry of  Finance to the bank’s registered capital but 
must not exceed 50% of the bank’s own funds requireme nts. Alternatively it may take the form of a 
special guarantee: (a) for bonds issued by the bank,  where the maturity period of the nominal value 
is not less than three months and not more than thr ee years; and/or (b) for a loan with a maturity of 
up to one year provided to the bank by  another bank, NBS or another entity. 
1.4 While the final approval of stabilisation aid falls  within the competence of the Slovak Government, 
the Slovak Ministry of Finance is responsible fo r its implementation. Given NBS’s importance and 
its role as the single supervisory authority, implem entation of stabilisation aid is subject to NBS’s 
prior consent by means of delivery of its opinion to the Slovak Ministry of Finance. Stabilisation aid may be granted on more than one occasion and concurrently. Before stabilisation aid may be 
granted, the parties must conclude a stabilisa tion aid agreement. Such agreements must be 
concluded by 31 December 2010 at the latest. 
1.5 The draft law also amends eight other laws
3. This opinion concentrates on legislative provisions 
that relate directly to the Slovak national rescue scheme, and does not fully assess the other 
amendments contained in the draft law.  
 2. General observations  2.1 The ECB has issued a number of opinions at the request of the competent authorities of the 
Member States on national measures adopted in  response to the global financial crisis
4. The ECB 
therefore invites the Slovak Ministry of Finance to take into account the relevant observations 
made in its recent opinions on similar draft legislative provisions in other Member States. 
2.2 The ECB also draws attention to the guidan ce provided by the Ecofin Council to the Member 
States in the conclusions of its Meeting of 7 October 20085 as well as the Declaration issued by the 
                                                 
2  The Law No 483/2001 Coll. on banks (including amendments to certain laws), as amended.  
3  The Law No 513/1991 Coll. (the Commercial Code), as ame nded; the Law No 530/1990 Coll . on bonds, as amended; the 
Law No 483/2001 Coll. on banks (including  amendments to certain laws), as amended; the Law No 566/2001 Coll. on 
securities and investment se rvices (including amendments to certain laws ), as amended; the Law No 386/2002 Coll. on 
state debt and state guarantees (incl uding amendments to certain  laws), as amended; the Law No 747/2004 Coll. on 
financial market supervision (includi ng amendments to certain laws), as  amended; the Law No 7/2005 Coll. on 
bankruptcy and restructuring (including amendments to certa in laws), as amended; and the Law No 8/2008 Coll. on 
insurance (including amendments to  certain laws), as amended. 
4  All ECB opinions are available on th e ECB’s website at www.ecb.europa.eu. 
5  See ‘Immediate Responses to Financial 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 Heads of State of the euro area on 12 Oc tober 2008 (hereinafter the ‘Declaration’)6. In particular, 
the ECB emphasises 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 clo se cooperation with other Member States and the 
Community institutions7. The principles contained in the Declaration as well as the conclusions 
raised by the Ecofin Council were endorsed by  the European Council of 15 and 16 October 20088. 
Moreover, measures taken by competent national aut horities in relation to financial institutions in 
the context of the current global financial crisis  have been object of further coordination at 
European Union level9. As a general remark in this context,  the ECB, in line with its previous 
opinions10, notes the importance of putting a transparen t and predictable framework in place by 
defining the terms and conditions for financial institu tions to have recourse to it and the parameters 
of and limitations to the exercise by the authoriti es of their powers when deciding whether to apply 
such aid measures11. 
2.3 With these general observations in mind, and against the background of the guidance previously 
given by the ECB and the Community institutions  in this regard, the ECB has the following 
observations on the draft law. 
 3. Specific observations 
Provision of emergency liquidity assistance by NBS 
3.1 The provision of emergency liquidity assistance is a central bank function, which consists in giving 
support in exceptional circumstances and on a case-by-case basis to temporarily illiquid but solvent credit institutions. One of the specific tools availabl e to central banks in a crisis situation is the 
provision of emergency liquidity assistance (ELA) to individual banks
12.  
                                                 
6  The text of the Declaration is available on the former Fren ch 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. 
7  See ECB Opinion CON/2009/12. 
8   See Brussels European Council of 15 to 16 October 2008, paragraph 3 of the Presidency Conclusions. 
9  Communication from the Commission — The application of State aid rules to meas ures taken in relation to financial 
institutions in the context of the current global financia l crisis (OJ C 270, 25.10.2008, p. 8); Communication from the 
Commission — The recapitalisation of fina ncial institutions in the current financial crisis: limitation of aid to the 
minimum necessary and safeguards ag ainst undue distortions of compe tition (OJ C 10, 15.1.2009, p. 2);  
Recommendations of the Governing Council of the European Central Bank on government gua rantees for bank debt and 
Recommendations of the Governing Council of the European Ce ntral Bank on the pricing of recapitalisations, both latter 
documents available on the ECB’s website at www.ecb.europa.eu.  
10  See paragraph 3.1.2 of ECB Opinion CON/2009/18. 
11   In this regard the ECB notes that Article 4(5) of the dr aft law contains a direct reference to the Communication from the 
Commission — Community guidelines on State aid for resc uing and restructuring firm s in difficulty (OJ C 244, 
1.10.2004, p. 2) and the obligation of the Slovak Ministry of  Finance to report regularly to the European Commission on 
the review of the justification of the State aid scheme esta blished by the draft law pursua nt to Article 8(6) thereof. 
12  See the ECB Financial Stability Review, December 2006, pp. 171-172 and the ECB’ s Annual Report 1999, p. 98. 
4 3.2 The extension of ELA falls within NBS’s task of contributing to the stability of the financial 
system, as set out in Article 24 of the Law on NBS13. Under the second subparagraph of 
Article 2(1)(b) of the draft law, the State will provide a special guarantee for a loan with a maturity of up to one year provided to a bank. Since the NB S, as expressly stated in the explanatory notes to 
the draft law, is potentially one of the entities entitled  to provide such a short-term loan, it is of 
crucial importance to ensure –that, under Slovak la w, the provision of the loan complies with the 
rules on the provision of ELA. In particular, the decision whether to provide ELA against a State guarantee must remain at NBS’s discretion and must  strictly respect the following criteria in order 
to comply with the prohibition on monetary financ ing laid down in Article 101(1) of the Treaty, 
read in conjunction with Council Regulation (E C) No 3603/93 of 13 December 1993 specifying 
definitions for the application of the prohibitions  referred to in Articles 104 [now 101] and 104b(1) 
[now 103(1)] of the Treaty
14. First, as expressed in previous ECB opinions addressing the provision 
of ELA by a Eurosystem central bank15, the ECB is of the view that the draft law should 
unequivocally guarantee NBS’s independence to deci de on the provision of ELA. Second, it should 
be ensured that the credit provided by NBS is as short-term as possible. Third, there must be systemic stability aspects at stake for ELA to be granted. Fourth, there must be no doubts as to the legal validity and enforceability of the State guarant ee. Fifth, there must be no doubts as to the 
economic adequacy of the State guarantee, which should cover both principal and interest on the 
loans, thereby fully preserving NBS’s financial independence. 
3.3 Against this background, the ECB is of the vi ew that the position in respect of ELA should be 
clarified, at least in the explanatory memorandum to  the draft law. In particular, the current wording 
of the second subparagraph of Article 2(1)(b) of th e draft law is unclear, especially if read in 
conjunction with the explanatory notes, which, as stated above, explain that NBS is potentially one 
of several entities entitled to grant a loan to a bank. In this context, the maturity of the ELA should 
remain at the central bank’s discretion. Similarl y, NBS may not be involved in State operations 
which are incompatible with the Treaty provision
16, and the draft law should be more precise in this 
regard in order to clarify the link to the provisions of the Law on NBS relating to ELA17. 
Prohibition on monetary financing and NBS  
3.4 The ECB understands that, under the draft la w, NBS will be directly involved in granting 
stabilisation aid. In particular, NBS will be  responsible for assessing the need for and 
appropriateness of applying State measures to a credit institution, indicating whether the credit 
                                                 
13  The Law No 566/1992 Coll. on Národná banka Slovenska. 
14  OJ L 332, 31.12.1993, p. 1.  
15  See paragraphs 4.9 to 4.11 of ECB Opin ion CON/2008/42 . See also ECB Opinion CON/2008/46. 
16  It is the ECB’s view that ‘national legislation foreseeing the financing by [national central banks] of credit institutions 
other than in connection with central banking tasks (such as  monetary policy, payment sy stems or temporary liquidity 
support operations), in particular to support insolvent credit a nd/or other financial institutions, is incompatible with the 
monetary financing prohibition’: see the ECB’s May 2006 C onvergence Report, p. 68; the December 2006 Convergence 
Report, p. 30; the May 2007 Convergence Report,  p. 22; the May 2008 Convergence Report, p. 24. 
17  The ECB notes that this could be achieved by inserting a footnote in the second subparagraph of Article 2(1)(b) of the 
draft law referring to Article 24 of the Law on NBS. 
5 institution concerned fulfils the conditions set by the State under the law. In line with previous 
ECB opinions, it is noted that NBS’s involvement in the procedures provided for in the draft law will not go beyond the proper performance of its exis ting tasks and that it will comply fully with 
the prohibition on monetary financing laid down in Article 101(1) of the Treaty.  
NBS’s advisory role 3.5 As regards NBS’s advisory role pursuant to the draft law, the ECB understands that it will be 
limited to providing advice through consultation on stabilisation aid. While the ECB appreciates 
that provisions of the draft law recognise NBS’s e xpertise in this field, the ECB restates that 
functions to be performed by NBS in the contex t of granting stabilisation aid should be conducted 
in a manner fully compatible with NBS’s institu tional and financial independence in order 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
18. 
Selection of beneficiary credit institutions 3.6 Pursuant to Article 1(1)(a) of the draft law,  all credit institutions as defined by the Law on banks 
with their registered office in Slovakia are entitle d to benefit from the measures under the draft law. 
The ECB understands, therefore, that the term ‘bank’  applies to any bank with its registered office 
in Slovakia that has been licensed by NBS to pr ovide banking services, including subsidiaries of 
foreign banks but excluding branches of forei gn banks. The ECB welcomes the above provisions, 
as they avoid preferring specific credit institutions and distorting the level playing-field as regards 
the treatment of Slovak financial institutions  and subsidiaries of foreign institutions
19. The ECB 
notes that, in the specific context of provision of State guarantees, the Commission’s guidance includes detailed rules on the eligibility criteria for beneficiary institutions
20. 
Interaction of the draft law with the si ngle monetary policy of the euro area 
3.7 In line with the Declaration, Member States have to act in a coordinated manner to avoid 
significant differences in national implementati on having a counter-productiv e effect and creating 
distortions in global banking markets. The euro ar ea Heads of State also acknowledged the need to 
cooperate with the ECB to ensure consistency in  liquidity management by the Eurosystem and 
compatibility with the Eurosystem’s operational framework. Against this background, the ECB 
notes that uncoordinated decisions among Member St ates should be avoided as they may lead to a 
fragmentation of the euro area money market. The ECB therefore reiterates the points made in its previous opinions. In particular, the ECB reminds the consulting authority of the specific 
                                                 
18  See paragraph 3.7 of ECB Opinion CON/2008/68. 
19   On these aspects see, in pa rticular, the following ECB Opinions : CON/2008/44, CON/2008/48, CON/2008/52 and 
CON/2008/55. 
20  See paragraph 18 of the Commission’s guida nce, specifying that ‘The eligibility criteria of financial institutions … must 
be objective, taking due acco unt of their role in the relevant banki ng system and the overall economy, and non-
discriminatory so as to avoid undue distortive effects on ne ighbouring markets and the intern al market as a whole. In 
application of the principle of non disc rimination on the grounds of nationality, all institutions incorporated in the 
Member State concerned, including subsidiaries, and with si gnificant activities in that Me mber State should be covered 
by the scheme’. 
6 recommendations made by the Governing Council in relation to government guarantees for bank 
debt21 and in relation to recapitalisations22. In this context, the ECB has the following remarks. 
3.8 Pursuant to Article 5(5) of the draft law the ‘d etails regarding the determination of, changes to, and 
method of paying the amount of the fee, and details  regarding the method of returning stabilisation 
aid, shall be laid down in a generally binding le gal regulation to be issued by the Ministry of 
Finance on agreement with Národná banka Slovens ka’. The ECB would like to emphasise how 
important it is for the pricing of stabilisation aid and other measures under the draft law to be 
harmonised with measures within both the euro area and the EU so as to create the essential 
conditions for a level playing-field. In particular , it is important to ensure that the price of 
stabilisation aid is risk-based and market-oriented in  that it is determined on the basis of the costs 
of a corresponding guarantee in the market. 
3.9 Pursuant to Article 10 of the draft law, the st abilisation aid agreement, which has to be concluded 
before any form of stabilisation aid may be gran ted, must be concluded by 31 December 2010 at 
the latest. As stated in Article 2(1)(b) of the draft law, stabilisation aid in the form of a special State 
guarantee for a bond issue or for a short-term loan may be granted for up to three years and up to 
one year respectively (i.e. until 2013 at the la test). Pursuant to the second subparagraph of 
Article 2(1)(b) of the draft law, a special State guarantee may be provided for short-term loans with 
maturity of up to one year. As further explained in the explanatory notes to the draft law, such loans can be provided by one bank to another meaning that interbank deposits are potentially 
covered by the draft law. In this resp ect, the ECB has the following observations. 
 First, the ECB notes that State guarantees may be i ssued to cover all types of liabilities of domestic 
financial institutions and nationa l guarantee schemes. The ECB therefore understands that the draft 
law does not exclude from its material scope of appl ication, expressly or by implication, interbank 
deposits, subordinated or collatera lised liabilities (such as covered bonds). The ECB reiterates that 
State guarantees should not cover inte rbank deposits, in particular, as this could entail a substantial 
distortion in the various national segments of the euro area money market by potentially increasing 
short-term debt issuance activity across Member St ates. This would impair the implementation of 
the single monetary policy, which is an exclus ive competence of the Eurosystem under Article 
105(2) of the Treaty. It could also affect the transmission of monetary policy decisions
 23. 
 Second, the ECB understands that, by extension, St ate guarantees may be issued in respect of loans 
taken out by banks. In this respect, the ECB reminds the consulting authority that such 
arrangements for the granting of government gua rantees on bank debt should, when practically 
implemented, aim at: (i) addressing the funding problems of liquidity-constrained solvent banks by improving the functioning of the market for bank debt of longer term maturity; (ii) preserving the 
                                                 
21   The reference is to the Recommendations of the Govern ing Council of the European Central Bank on the government 
guarantees for bank debt of 20 November 2008, avai lable on the ECB’s website  at www.ecb.europa.eu. 
22  The reference is to the Recommendati ons of the Governing Council of the European Central Bank on the pricing of 
recapitalisations of 20 November  2008, available on the ECB’s website at www.ecb.europa.eu. 
23  See paragraph 3.4 of ECB Opinion CON/2008/52. 
7 level-playing field among financial institutions and avoiding market distortions; and (iii) ensuring 
consistency with the management of Eurosystem liquidity. In line with its recommendations, the 
ECB restates its view that euro area government s should make available a Government guarantee 
of new medium term (up to five years) bank senior debt issuance which must be limited in time. In 
the same vein, government guarantees on short-term ba nk debt with maturity of three to 12 months 
may be provided in order to revita lise the short-term bank debt market. 
 Third, the ECB also reminds the Slovak authorities th at it is important to ensure that the beneficiary 
financial institutions may not profit from undue u se of their guaranteed status to engage in a 
heightened level of activities which distort the ma rket and facilitate abnorma l balance sheet growth. 
In this regard, the ECB reiterates the importan ce of establishing appropriate safeguards such as 
limits on the marketing of financial products or on expansion of activities on the basis of State 
guarantees.  
3.10 As regards stabilisation aid in the form of reca pitalisation as provided for in Article 2(1)(a) of the 
draft law, the ECB notes that recapitalisation measures in the Member States are aimed at strengthening the capital position of fundamentally sound financial institutions  in order to improve 
the functioning and stability of the banking system  and to ensure the proper financing of the 
economy. In particular, there should be a consis tent approach to defining the conditions for 
recapitalisations and the pricing of the instrument s intended to provide Tier 1 capital to financial 
institutions. The ECB underlines the importance of appropriate pricing for recapitalisations with a 
view to enhancing the stability of the financia l system, facilitating a return to normal market 
conditions and ensuring the proper financi ng of the economy. Against this background, 
recommendations of the Governing Council of the ECB on the pricing of recapitalisations
24 have 
been published. The ECB highlights that the pric ing conditions for capital support should be risk-
based and market-oriented, determined by taking into consideration the specific risk of both the 
specific instrument chosen for in jecting capital and the institution concerned. Specific features of 
the instruments for capital injections (such as pref erence shares) should be appropriately chosen so 
that, while encouraging an early end to the Stat e’s capital support of banks, they should not result 
in an excessive increase in the cost of capital. In line with the Declaration, the ECB also 
emphasises that harmonisation regarding the e xpiry of national financial support schemes 
throughout the EU, and in particular within the eu ro area, is of crucial importance, including in 
relation to State capital investments in financ ial institutions. Against this background, it is 
emphasised that the draft law does not currently provide for an exit strategy. In this context, the ECB notes that the Declaration clearly draws atte ntion to the need for any national support scheme 
to be temporary in nature, even if it may be extended or renewed. The ECB therefore recommends 
that specific provisions on the time limits in re lation to the stabilisation aid measures under the 
draft law should be adopted
25. 
                                                 
24  Recommendations of the Governing Council of the European Ce ntral Bank on the pricing of recapitalisations, issued on 
20 November 2008 and available on the ECB’s website at www.ecb.europa.eu. 
25  See paragraph 3.5 of ECB Opinion CON/2008/76 or paragraph 3.2 of ECB Opinion CON/2009/6. 
8  
This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 27 May 2009. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET