EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 25 June 2009 
on changes to financial support measures for credit institutions 
(CON/2009/56) 
 
Introduction and legal basis  
On 18 June 2009 the European Central Bank (ECB) recei ved a request from the Irish Minister for Finance 
(hereinafter the ‘Minister’) for an opinion on a draf t Credit Institutions (Guarantee of Eligible Debt 
Securities) Scheme 2009 (hereinafter the ‘draft sch eme’), and Section 17 of the Financial Measures 
(Miscellaneous Provisions) Bill 2009 (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 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 scheme and the draft law relate to the stability of Ireland’s financial 
system and the Central Bank and Fina ncial Services Authority of Ireland (hereinafter the ‘CBFSAI’). 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 scheme 
1.1 The draft scheme is made pursuant to the Credit Institutions (Financial Support) Act 2008 
(hereinafter the ‘2008 Act’). Financial s upport may only be granted under the 2008 Act until 
29 September 2010
2. Section 17 of the draft law extends that  provision to allow for a later date as 
specified by the Minister, after consulting the Governor of the CBFSAI (hereinafter the ‘Governor’) and the Irish Financial Services Regu latory Authority (hereinafter the ‘Regulatory 
Authority’). This extension will allow financia l support to be granted under the draft scheme, 
which will, inter alia , provide credit institutions with acces s to a stable funding stream and to 
longer term funding from the capital markets in order to maintain the stability of the Irish financial 
system
3.  
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  Section 6(3) of the 2008 Act 
3  Paragraphs 1 and 2 of the draft scheme. 
2 1.2 Under the draft scheme, credit institutions may a pply to the Minister for certain debt securities to 
be guaranteed by the Minister4. The Minister has discretion whether or not to guarantee 
unconditionally and irrevocably senior unsecured ce rtificates of deposit and commercial paper, 
other senior unsecured bonds and notes, and ot her debt securities specified by the Minister5. These 
debt securities must be issued during a six-m onth issuance period from the commencement date 
specified by the Minister (hereinafter the ‘comme ncement date’), subject to any extension of this 
period specified by the Minister, consiste nt with European Union State aid rules6. Further, an 
eligible security must not have a maturity in excess of five years7. The guarantee will terminate five 
years after the end of the issuance period, unless extended at the Minister’s discretion, also subject to EU State aid requirements
8. 
1.3 The draft scheme alters the Credit Institutions (Financial Support) Scheme 2008 (hereinafter ‘the 
existing Scheme’) under which the Minister guarant ees an extensive range of liabilities of covered 
credit institutions, including retail, corporate and interbank deposits, as well as unsecured debt, 
asset covered securities and dated subordinated de bt (Lower Tier 2) for the period from 
30 September 2008 to 29 September 20109. Under the draft scheme, all retail, corporate and 
interbank deposits remain uncondi tionally and irrevocably guaranteed in accordance with the terms 
of the existing Scheme10. However, asset covered securities a nd dated subordinated debt (Lower 
Tier 2) will no longer be guaranteed after the commencement date11. Any other debt securities 
issued by credit institutions from the commencem ent date onwards may only be guaranteed in 
accordance with the draft scheme, as desc ribed in paragraph 1.2 of this opinion12. 
1.4 The draft scheme provides that participating credit institutions will have to abide by the Minister’s 
directions to comply with restrictions on th e wide range of commercial conduct, governance, 
transparency and reporting requirement s applicable under the existing Scheme13. In addition, the 
Minister, after consultation with the Governor  and the Regulatory Authority, may direct a 
participating credit institution to draw up a restructuring plan to ensure compliance with the objectives of the draft scheme, and will do so if a participating institution’ s applicable solvency 
ratio falls below the minimum regulatory standards on  a material basis. Any such plan must comply 
with EU State aid and competition law
14. 
                                                 
4  Paragraph 8 of the draft scheme. 
5  Paragraphs 10 and 12 of the draft scheme.  
6  Paragraph 10 of the draft scheme.  
7  Paragraph 13 of the draft scheme.  
8  Paragraph 16 of the draft scheme.  
9  Credit Institutions (Financial  Support) Scheme 2008 (hereinafter ‘the existing Scheme’). 
10  Paragraph 28 of the draft scheme. 
11  Paragraph 27 of the draft scheme. 
12  Paragraph 26 of the draft scheme. 
13  Paragraph 24 of the draft scheme. 
14  Paragraph 25 of the draft scheme. 
3 1.5 The draft scheme is subject to review by the Mi nister at no later than six-month intervals, the 
results of which are to be provided to the Commission of the European Communities15. The 
Minister will also monitor the amount of eligible  securities guaranteed under the draft scheme, and 
will also be able to vary its terms; however, an y such variation will not affect any guarantee in 
issue at the date of that variation16. The draft scheme describes the fee arrangement between 
relevant institutions and the Minister in respect of each guaranteed security, which is broadly in 
line with the Recommendations of the Governi ng Council of the ECB on government guarantees 
for bank debt issued on 20 October 2008 (herei nafter the ECB’s recommendations on government 
guarantees’), as further discussed in paragraph 3.2 of this opinion.  
1.6 Credit institutions will have to take certain acti ons to participate in the draft scheme, including 
filing an application and executing certain documen tation, following which the Minister may issue 
a security guarantee certificate in respect of the guaranteed securities17. The Minister may delegate 
the operation of the draft scheme to the National Treasury Management Agency18. 
 2. General observations 2.1 The ECB has issued opinions on both the 2008 Act and the existing Scheme
19. In its opinion on the 
existing Scheme, the ECB stressed that it is of utmost importance to ensure harmonised and coordinated decisions throughout the EU. In this  context, the ECB wishes to again draw the 
consulting authority’s attention to the ‘Declaration on a concerted Eu ropean action plan of the euro 
area countries’ of 12 October 2008
20 (hereinafter the ‘Declaration’) which states that Member 
States’ actions ‘will be designed in order to avoid an y distortion in the level playing-field’, which is 
a crucial element for the integration of European financial markets.  
2.2 The ECB welcomes the fact that the draft scheme appears to have been expressly constructed with 
due regard to ensuring consistency with the re quirements of EU State aid and competition law21. 
2.3 The ECB notes that, subject to a number of grandfathering arrangements, the draft scheme reduces 
the scope of liabilities guaranteed by the Minister , as compared with the existing Scheme. Instead 
of offering blanket coverage to the debt secur ities eligible under the existing Scheme, debt 
securities will only be guaranteed under the draft sche me at the Minister’s discretion. Newly issued 
asset covered securities and dated subordinated debt  (Lower Tier 2) will no longer be guaranteed 
under the draft scheme.  
 
                                                 
15  Paragraph 5 of the draft scheme.  
16  Paragraphs 6 and 11 of the draft scheme.  
17  Paragraphs 3 and 10 of the draft scheme.  
18  Paragraph 7 of the draft scheme.  
19  ECB Opinions CON/2008/44 and CON/2008/48 respectively. 
20  Available on the website of the former French Presidency at www.ue2008.fr. 
21  See paragraphs 2.3, 10, 12.4, 16, 22 and 25 of the draft scheme.  
4 3. Specific observations 
3.1 Fee arrangements  
 The ECB welcomes the fee arrangements detailed by the draft scheme, which largely replicate the 
ECB recommendations on government guarantees. The ECB notes that the fee arrangements also 
contain provisions authorising the Minister, at their discretion, to apply an alternative credit default 
swap spread if the relevant data referred to in the ECB’s recommendations on government 
guarantees are not publicly available, or vary the fee (subject to EU State aid requirements)22. 
Furthermore, an additional fee may be charged in  relation to any non-euro denominated guaranteed 
security23. 
3.2 Scope of the guarantees and implementa tion of Eurosystem monetary policy  
 The ECB takes the opportunity of this opinion to reiterate the points made in its previous opinions 
and to reemphasise the key elements of the D eclaration. In addition, the ECB reminds the 
consulting authority of the ECB’s recommendations  on government guarantees. First, the euro area 
Heads of State also acknowledged the need to coope rate with the ECB to ensure consistency in 
liquidity management by the Eurosystem and co mpatibility with the Eurosystem’s operational 
framework. Second, with a view to ensuring a sufficient level playing-field, uncoordinated 
decisions among Member States should be avoided as  they may involve a fragmentation of the euro 
area money market. Against this background,  the ECB has the following observations. 
 First, the extension of a guarantee to cover in terbank deposits, as is th e case under the existing 
Scheme, should be avoided as it could entail a s ubstantial distortion in the various national 
segments of the euro area money market by poten tially increasing short-term debt issuance activity 
across Member States and therefore impairing the implementation of the single monetary policy, which is a unique competence of the Eurosystem under Article 105(2) of the Treaty. The ECB has expressed this particular concern in a number of  opinions delivered to the authorities of Member 
States, including Ireland
24.  
 Second, in line with the Declaration, the ECB reminds the consulting authority that the euro area 
‘Governments would make available for an inte rim period … a Government guarantee … of new 
medium term (up to 5 years) bank senior debt issuance’. In the same vein, the ECB’s 
                                                 
22  Paragraphs 20 and 22 of the draft scheme.  
23  Paragraph 21 of the draft scheme.  
24  See paragraph 3.7 of ECB Opinion CON/2008/48; paragra ph 3.2 of ECB Opinion CON/2008/50; paragraph 3.3 of ECB 
Opinion CON/2008/50; paragraph 3.4 of ECB Opinion C ON/2008/52; paragraphs 2.3 and 2.4 of ECB Opinion 
CON/2008/54; paragraph 3.5 of ECB Opinion CON/2008/55; paragraph 3.2 of ECB Opinion CON/2008/56; paragraph 
3.4 of ECB Opinion CON/2008/57; paragraph 3.2 of E CB Opinion CON/2008/58; paragraph 3.3 of ECB Opinion 
CON/2008/59; paragraph 2.1.2 of ECB Opinion CON/2008/62; paragraph 2.1 of  ECB Opinion CON/2008/65; paragraph 
3.3 of ECB Opinion CON/2008/67; paragraph 3.4 of E CB Opinion CON/2008/68; paragraph 3.3 of ECB Opinion 
CON/2008/76, paragraph 3.2 of ECB Op inion CON/2008/79; paragraph 3.2 of ECB Opinion CON/2008/80; paragraph 
3.5 of ECB Opinion CON/2008/81; paragraph 3.1 of E CB Opinion CON/2008/88; paragraph 3.3 of ECB Opinion 
CON/2009/2; paragraph 2.3 of ECB Op inion CON/2009/6; paragraph 3.2.2 of  ECB Opinion CON/2009/12; paragraph 
3.3.2 of ECB Opinion CON/2009/18; para graph 2.4 of ECB Opinion CON/2009/28;  paragraph 3.4.3 of ECB Opinion 
CON/2009/32; paragraph 3.9 of ECB Opinion CON/2009/49. 
5 recommendations on government guarantees further st ate that ‘Government guarantees on short-
term bank debt with maturity of three to 12 months  could be provided to help revitalise the short-
term bank debt market.’ However, it is noticeable  that under the draft scheme there is no limit on 
the maturity of the short-term certificates of de posit and commercial paper that may be guaranteed 
by the Minister, implying that short-term bank debt with a maturity of less than three months may be guaranteed in practice. While acknowledging th e significant challenges currently faced by the 
banking sector in Ireland, granting government guar antees for bank debt with a maturity of less 
than three months should be also avoided to the exte nt possible. In particular, it is essential that the 
scheme will not impair the implementation of the si ngle monetary policy throughout the euro area.  
 Finally, the ECB notes that the draft scheme does not  specify an end-date, instead suggesting it will 
terminate at the discretion of the Minister. As st ated before, the ECB emphasises that in accordance 
with the Declaration, harmonisation regarding the expiry of the various financial support measures 
within a particular country and the national fina ncial support schemes across the EU is of crucial 
importance in order to ensure a level playing field
25. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 25 June 2009. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
25  See ECB Opinion CON/2009/6.