EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 19 September 2011 
on amendments to the Greek resolu tion regime for credit institutions 
(CON/2011/72) 
 Introduction and legal basis
 
On 5 September 2011, the European Central Bank (E CB) received a request from the Greek Ministry of 
Finance for an opinion on a draft law entitled ‘Enhan ced supervisory and resolution measures for credit 
institutions, regulation of financial issues, ratifi cation of the European Financial Stability Facility 
Framework Agreement and amendments thereto and othe r provisions’ (hereinafter the ‘draft law’). On 
16 September 2011, the Ministry subm itted another request in relation to a set of draft legislative 
provisions amending the legal fr amework governing the Hellenic Financial Stability Fund (HFSF) 
(hereinafter the ‘draft provisions on the HFSF’),  which also form part of the draft law.  
The ECB’s competence to deliver an  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
functioning of the European Union 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 E CB by national authorities regarding 
draft legislative provisions1, as the draft law relates to the Bank of Greece (BoG) and to rules applicable 
to financial institutions insofar as they materially influence the stability of financial institutions and 
markets. In accordance with the firs t sentence of Article 17.5 of the Rules of Procedure of the ECB, the 
Governing Council has adopted this opinion. 
 1.  Purpose and contents of the draft law  
The purpose of the draft law is to enhance the fra mework for the supervision and control of credit 
institutions and to introduce resolution powers to prot ect financial stability and public confidence in the 
Greek financial system. For this purpose, the draft la w will: (i) reinforce the BoG’s supervisory powers in 
addressing an actual or potential breach by credit in stitutions of the draft law following adoption and 
relevant BoG decisions; (ii) extend the role an d powers of the Commissioner appointed to manage 
troubled credit institutions; (iii) empower the BoG to  take specific resolution measures vis-à-vis credit 
institutions; and (iv) establish a resolution branch wi thin the Hellenic Deposit and Investment Guarantee 
Fund (HDIGF) to finance the resolution measures in the draft law. 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
ECB-PUBLIC  
2 1.1 Prudential supervisory measures : the BoG requires any credit institution actually or potentially 
failing to comply with the draft law and/or the BoG’s relevant decisions to take the necessary 
actions or corrective measures at an early stage to address any possible defects or weaknesses.  
1.2  Appointment of a commissioner : the BoG may appoint a commissioner to a credit institution for a 
renewable term of up to 12 months. The Commission er will assess the cred it institution’s situation 
and take the necessary action for its recovery, pr eparing it for any of the resolution measures under 
the draft law or putting it into special liquidation.  The Commissioner will be subject to the BoG’s 
oversight and report to it.  
1.3 Extension of the time limit for the fulfilment of obligations : following the appointment of a 
commissioner, the BoG may extend by up to 20 days the period for the fulfilment of part or all of 
the credit institution’s obligations, if the credit in stitution’s liquidity is significantly reduced and it 
is likely that its own funds are inadequate2.  
1.4  Resolution measures and their activation : the BoG may trigger certain resolution measures to 
ensure financial stability and strengthen public confidence in the Greek financial system. In 
particular, it may: (a) instruct the Commissioner to  decide on a capital increase within a specified 
time limit, disapplying any pre-emptive rights of the existing shareholders; (b) oblige a credit institution to transfer certain assets and liabilities to  a transitional credit institution (TCI) to another 
credit institution or entity, against consideration and within a specified time limit; (c) recommend 
that the Minister for Finance establish on grounds of p ublic interest a TCI to which all or part of the 
assets and liabilities of the credit institution will be tr ansferred. The credit institution’s licence will 
be revoked and the credit institution will be placed u nder special liquidation. The intrinsic value of 
its shares will be set to negative. Any rights emanating from the shares will cease to apply. The 
HFSF will pay the TCI’s share capital in full. The TC I will be subject to State control, regardless of 
the mandatory participation of other entities in its share capital or its funding in other ways. 
1.5 Special liquidation of credit institutions : where a credit institution’s licence is withdrawn, the BoG 
will appoint a special liquidator to manage the credit institution. Following the communication to 
the credit institution of the BoG’ s decision placing it under special liquidation, the credit institution 
may not accept deposits, and the BoG may also restrict other operations.  
1.6  Establishment of a resolution branch within the HDIGF to finance the resolution measures : the 
draft law amends Law No 3746/2000
3 (hereinafter the ‘Law on the HDIGF’), extending its scope to 
the provision of financial assistance to credit ins titutions for the purposes of resolution measures. In 
addition to the existing Depositors’ Coverage Bran ch and the Investors’ Coverage Branch, a new 
                                                 
2  Such extension will not apply to the fulfilment of the credit  institution’s obligations under proposed Article 63A(2), such 
as transactions in financial instruments carried out on the money or capital markets. 
3  FEK Vol Α 27/16.2.2009.  
ECB-PUBLIC  
3 separate resolution branch4 will be created within the HDIGF and financed by contributions paid by 
credit institutions.  
1.7 The draft provisions on the HFSF empower the HFSF to provide capital support to a TCI 
established under proposed Article 63E in the dr aft law. They also specify and extend the 
competence and procedure for the HFSF to recr uit its staff independently, including salaried 
lawyers. Further, they amend the provisions activ ating the HFSF by stating that capital support may 
only be provided to a credit institution, including any TCI, if: (a) there is well founded risk of it not 
being able to continue to meet minimum capital requirements under Article 27 of Law No 3601/2007
5 (hereinafter the ‘Law on banking’), and (b) the institution’s e fforts to increase its 
capital, even at a price significantly below the average market price, have failed. The draft 
provisions on the HFSF also specify that TCIs wh ich have been recapitalised by the HFSF have to 
submit a business plan guaranteeing that they are viable, and that the HFSF must approve the business plan. Other important provisions state that the HFSF receives common shares in consideration for any capital increase in the credit  institution that it funds, and that the HFSF 
appoints at least one member of the board of the credit institution.    
 2. General observations 2.1 The draft law is a structural benchmark under the EU/IMF support programme for Greece
6. It is 
intended to enhance the authorities’ powers of intervention in and resolution of ailing credit 
institutions. The introduction of amendments to the legal framework governing the HFSF, inter 
alia, to strengthen its role in bank resolution, is another of the structural benchmarks.  
2.2 The ECB also notes that one of the guiding pr inciples for implementation of the resolution 
framework should be to resolve ailing institutions without severe systemic disruption and to avoid 
taxpayer exposure to loss.  
2.3 The ECB welcomes the provisions specifying the conditions and objectives to be met before the 
BoG activates any of the resolution measures an d the BoG’s enhanced role as the resolution 
authority for credit institutions. The ECB also unders tands that, under the draft law, the BoG will 
have exclusive responsibility for supervision a nd resolution and that, when taking any of the 
resolution measures under the draft law, the Co mmissioner will act as th e BoG’s agent.   
                                                 
4    ‘Branch’ means a separate operational unit within the HDGIF availing of a segregated account for the purposes of 
resolution financing as specified in propos ed Article 13A of the Law on the HDGIF.   
5  FEK Vol Α 178/1.8.2007. 
6 See the Economic Adjustment Programme fo r Greece – Fourth Re view available at: 
http://ec.europa.eu/economy_finance/publications/occasional_paper/2011/op82_en.htm. In particular, paragraph 12 of the 
Memorandum of Financial and Ec onomic Policies in the Annex it erates the need, in  the context of ongoing initiatives at 
the EU level, to strengthen the resolution framework for pr oblem banks and to allow timely and effective intervention 
and resolution consistent with EU  Treaty rules and international sound practices. In this context, a broad set of tools is to 
be prepared to ensure that a resolution regime for financial institutions is put into place to safeguard financial stability 
and ensure effective depositor protection. 
ECB-PUBLIC  
4 2.4 The ECB considers that the draft provisions on the HFSF are broadly consiste nt with and reinforce 
the effectiveness of the resolution measures under th e draft law. However, there are several areas 
where specific further amendments will be required.  
  
3. Recovery and resolution plans The draft law rightly acknowledges the importance of th e preparation of recovery and resolution plans as 
a preventive supervisory measure. The ECB underlines that the preparation, submission and approval of 
recovery plans should be an ordina ry supervisory measure to be comp lied with by all credit institutions 
irrespective of a crisis
7. The draft law should expressly distinguish recovery from the resolution plans. 
Each institution will draw up and maintain recovery pl ans, whereas the supervisory authority will draw up 
resolution plans on the basis of informat ion provided by the credit institution8.  
 4. Commissioner   
The BoG will appoint a commissioner from among persons of recognised standing and professional 
experience in banking matters to perform certain statutory duties on a full-time basis, subject to 
confidentiality requirements
9. To avoid conflicts of interest, th e ECB considers it essential for the 
Commissioner to also be independent from the cred it institution to which it is appointed. The ECB also 
notes that the Commissioner is deemed to act as a ‘quasi-corporate’ body when participating in or 
exercising management of the credit institution, and as  a public official when exercising BoG supervisory 
activities10. For the sake of legal certainty, the ECB consider s that the draft law should ensure there is no 
ambiguity in the Commissioner’s status, role and powers under Greek law, and, in this regard, the 
consulting authority should consider deleting the reference to the dual role of the Commissioner.  
 5.   Recapitalisation in resolution  5.1 Proposed Article 63C in the draft law should be based on the principle that  the credit institution’s 
shareholders and not the taxpayer bear the costs of  resolution. The ECB notes that this principle 
should apply to all resolution measures. On the dr aft law’s exclusion of the pre-emption rights of 
existing shareholders in any new share issue by the credit institution in resolution, the ECB notes 
that proposed Article 63G in the draft law ca ters for the compensation of shareholders in 
institutions affected by resolution measures.   
                                                 
7   See proposed Article 62(2)(i) in the draft law. 
8    See also DG Internal Market and Services Working documen t on ‘Technical details of a possible EU framework for bank 
recovery and resolution’, January 2011, available on th e European Commission’s website at www.ec.europa.eu .  
9   See proposed Article 63(4) in the draft law. 
10  See proposed Article 63(15) in the draft law. 
ECB-PUBLIC  
5 5.2 In the same vein, to prevent banks’ moral hazard and minimise the public sector’s burden from a 
bank resolution, the ECB invites the consulting au thority to consider the interaction between 
proposed Article 63C of the Law on banking and th e draft provisions on the HFSF. In particular, 
the ECB recommends only allowing the possibility fo r an ailing credit institution to apply to the 
HFSF by decision of the BoG. Therefore, the application of the last paragraph of Article 7 of the draft law on the HFSF should expressly be excluded. 
 6. Transitional credit institution  6.1 The ECB welcomes the proposal to establish a TCI as a resolution tool
11, with the aim of 
preserving the continuity of financial service s, ensuring financial stability and protecting 
depositors. The ECB understands that the ‘assets’ to be transferred to the TCI also extend to 
liabilities including deposits, which represent an import ant part of the systemic function of credit 
institutions. Moreover, the ECB understands that th e reference to the TCI being controlled by the 
Greek State is to be construed as an indication that the TCI is State-owned. The ECB underlines 
that the proposed Article 63E(3), according to whic h the share capital of the TCI is entirely to be 
provided by the HFSF, and in Article 1 of Law No 3864/201012 (hereinafter the ‘Law on the 
HFSF’), providing that the HFSF is a private legal entity not forming part of the public sector, may not fulfil the requirement that the TCIs should be  State-owned. The ECB takes the view that the 
HFSF should finance the capital injection into th e TCI, while the shares corresponding to this 
capital increase should only be subscribed by th e State. This is notably because the voting and 
other rights attaching to these shares should belo ng to the Greek State and be exercised in the 
public interest, and not belong to the HFSF, being a private law entity.  
6.2 Accordingly, the ECB considers that the proposed  Article 63E(3) should specify that the State 
should exercise control over the TCI as the TCI’s sole shareholder. The ECB also understands that 
the HFSF’s contribution of the entire capital to the TCI should be exclusively based on the Minister’s decision, following a recommendation by the BoG. 
6.3 In the light of the above, the ECB also notes that the TCI’s governance should be clarified. The 
members of the Board of Directors of the TCI appoi nted by the Minister for Finance must convene 
within 20 days a general shareholders meeting to elect of the new Board of Directors
13. Given that 
the HFSF contributes the whole share capital of the TCI14, the ECB understands that the TCI’s new 
Board of Directors will be appointed by and represent the HFSF, i.e . a private law entity legally 
independent from the public sector. This would cont rast with the requirement for the TCI to be 
State-owned.   
                                                 
11     See proposed Article 63E in the draft law. 
12    FEK Vol A 119/21.7.2010. 
13  See proposed Article 63E(5) in the draft law. 
14  See proposed Article 63E(4) in the draft law. 
ECB-PUBLIC  
6 6.4 Along the same lines, to ensure  the resolution’s efficiency, the ECB notes that the draft law needs 
to clarify the BoG’s relationship as the resolution au thority, and/or the Minister, with the HFSF as 
regards the TCI.  
 7.  Resolution branch  7.1 The ECB welcomes the establishment of a sep arate resolution branch of the HDGIF to fund 
resolution measures, in particular the transfer of assets and liabilities to a third party or to the TCI. 
The ECB welcomes the segregation of the Resolu tion Branch from the Deposit Coverage Fund and 
the Investor Coverage Fund managed by the HDGIF. The ECB notes, however, that to fully satisfy the segregation requirement, the provision shoul d also expressly prohibit cross-compensation 
among each of the funds managed by the HDGIF.  
7.2 The ECB welcomes the banking sector’s r esponsibility for funding the HDGIF’s Resolution 
Branch through special levies, distinct from th e contributions to the Deposit Coverage Fund
15. To 
finance this Resolution Branch, the ECB suggests that the choice of liabilities, net of equity (not to 
discourage the accumulation of internal buffers ag ainst unforeseen idiosyncratic shocks) and other 
insured sources of funding, such as insured depos its to avoid double imposition of levies in the 
presence of the deposit coverage part of the HDGIF, appears to be an appropriate basis. The ECB 
notes, however, that during the early stages of th e Resolution Branch, its funds will consist of 
public financing by the Greek State, the HFSF or other entities of private or public law guaranteed 
by the State16. 
7.3 In the same context, the ECB notes that where the Resolution Bran ch is activated for the purposes 
of the resolution measures17, its claims will be satisfied in absolute priority over any other claims in 
the event of special liquidation of an ailing credit institution18. The ECB understands that the 
priority right statutorily established in favour of  the Resolution Branch would only be warranted 
during the early stages of its existe nce, when its funding is to still be provided by the State or a 
State-controlled entity. Once the Resolution Branch has built up its own funds through contributions by the participating credit institutions , no such priority right would be warranted.  
7.4 Finally, a provision on the recovery by the Resolution Branch of any funds it has granted for 
resolution purposes could be added to the draft law.  
7.5 The draft law could also clarify the authority to determine any funding gaps on transferring the 
assets and liabilities of the credit institution. Consistent ly with the rationale of the draft law, such 
authority should be vested in the BoG as the r esolution authority. The BoG will take into account, 
                                                 
15  See proposed Article 13A in the draft law. 
16  See proposed Article 13A(3) in the draft law. 
17  See proposed Article 63(D) and (E) in the draft law. 
18  See proposed Article 13A(3) and (4) in the draft law. 
ECB-PUBLIC  
7 but should not be bound by, the auditors’ reports provided for in the draft law as part of the 
statutory valuation process19. 
 8. Compensation  Proposed Article 63G lays down a ‘no worse-off’ pr inciple for the compensation of stakeholders in 
institutions affected by resolution measures. The dr aft law should additionally clarify that compensation 
will be based on an independent valu ation, which may result in no compensation being payable, and that 
any potential or actual financial assistance from the St ate or support from the central bank should be 
disregarded when assessing the credit institution’s fi nancial situation. It should also clarify that 
compensation claims are to be directed against the Hellenic Republic, rather than the BoG or the TCI.  
 9.  Other observations on bank resolution 9.1   The ECB notes that the protection of creditors and investors
20 should not qualify as an objective for 
activating the resolution measures. Moreover, the EC B invites the consulting authority to clarify the 
interaction between paragraph 2 of proposed Ar ticle 63B, setting out the grounds for activating 
resolution measures, and paragraph 3, setting out the considerations that the BoG is to take into 
account for the same purpose.  
9.2 The ECB draws the consulting authority’s atten tion to a possible inconsis tency between the draft 
law and the Greek transposition of Directive 2001/24/ EC of the European Parliament and of the 
Council of 4 April 2001 on the reorganisa tion and winding up of credit institutions21 as regards the 
qualification of the appointment of the Commissioner as a reorganisation measure.  
9.3 Proposed Article 62(2)(g) provides that the Bo G may authorise ‘certain transactions that may 
jeopardise the solvency of credit institutions’. The ECB understands that the power in question is to 
be exercised within the bounds of reason and subject to time restrictions.    
 10. Observations on the draft provisions on the HFSF 10.1 In order to prevent potentially high losses fo r the HFSF as a result of its participation in the 
provision of capital support for recapitalised credit institutions, the draft prov isions should make it 
clear that the price at which the HFSF recapitali ses credit institutions will be substantially below 
the market price, and specify furt her how the issue price of the new shares is to be determined. The 
ECB also notes that the title of Article 7 of the Law on the HFSF should also be reworded to match 
its contents, referring to ‘common’ shares instead of ‘preference’ shares. Furthermore, the law should specify clearly how the share price will be determined. 
                                                 
19  See proposed Article 63D(4) in the draft law. 
20  See proposed Article 63B in the draft law. 
21  OJ L 125, 5.5.2001, p. 125. 
ECB-PUBLIC  
8 10.2 In order to provide legal certainty, a sentence should be added to Article 3(4) of the Law on the 
HFSF, clarifying that the general prohibition on ‘o ther investments’ does not include the opening 
of an interest-bearing account with a private cr edit institution to settle the HFSF’s day-to-day 
operating costs. Such activities comprise in particular paying out salaries, purchasing office supplies and other operating costs. The money held in this account should be limited to the amount 
necessary to meet such operating costs and should be earmarked for this purpose.  
10.3 With regard to the proposed Article 7(3) in th e draft provisions on the HFSF, which relates to the 
determination of the fair value, the ECB r ecommends that the average value of the two 
assessments, by the two independent auditing firms,  should diverge by more than 10%, and not by 
25%, in order for the value to be finally defined by a third independent auditing firm appointed by 
decision of the Minister for Finance, following the recommendation of the BoG. The proposal to 
introduce a trigger of 25% divergence is not supported by any factual evidence. 
10.4 In the proposed Article 7(3)(i) in the draft provisions on the HFSF the ECB recommends that actual 
or potential support by the Greek State is ‘subtracted ’ when calculating the fair value. Furthermore, 
the calculation in this respect shall ‘in addition’  take into account as a ceiling ‘before the above 
subtractions’, the average price of the credit institu tion’s shares. The same criteria and subtractions 
should be followed by the independent auditing fi rms for the fair-value assessment. Furthermore, 
the words ‘outside Eurosystem operations’ should be replaced by the words ‘or by any Eurosystem operations’.  
10.5 In the light of the extension of the scope of the HFSF’s activities, the ECB invites the consulting 
authority to consider enhancing the governan ce structure and effectiveness of the Fund by, inter 
alia, increasing the number of members of the board of directors. 
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 19 September 2011. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET