EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 17 December 2010 
on emergency stabilisation of credit institutions  
(CON/2010/92) 
 
Introduction and legal basis  
On 10 December 2010, the European Central Bank (ECB)  received a request from the Irish Minister for 
Finance for an opinion on the Credit Institutions (Stabili sation) Bill 2010 (hereinafter 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 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 the Central Bank of Ireland (hereinafter the ‘Central 
Bank’) and contains rules applicable to financial in stitutions insofar as they materially influence the 
stability of financial institutions and markets. In accor dance 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, amongst other things, intends to fac ilitate and implement the programme agreed between 
the Minister for Finance, the European Commissi on, the ECB and the International Monetary Fund 
(IMF), protect the State’s interest in respect of the guarantees issued by the St ate, restore confidence in 
the banking sector and  achieve financial stability in the Irish economy. 
The draft law grants far-reaching powers to the Minister and provides that, amongst other things, the 
Minister may (i) make direction orders with the in tention of preserving or rest oring the financial position 
of a credit institution, (ii) propose special manage ment orders to appoint a special manager to an 
institution, (iii) propose subordinated liabilities orders  on matters, such as the payment of interest, the 
repayment of principal, events of default and the timing of obligations, (iv) propose transfer orders 
relating to all or any part of a relevant institution’ s assets and/or liabilities, (v) apply general powers to 
matters relating to companies, when an institution is  formed as such, including the removal of directors 
and/or officers and the appointment of directors a nd/or officers. It also contains various other 
                                                      
1  OJ L 189, 3.7.1998, p. 42. 
2 miscellaneous provisions including, but not limited to , a provision overriding inconsistent provisions in 
any agreement by which an institution or any of its subsidiaries are bound. 
 2. General observations  2.1 The Minister for Finance has requested the E CB to deliver an opinion by 17 December 2010. The 
ECB notes that, in cases of particular urgency which do not allow for the normal consultation period, the consulting authority may indicate such urgency in its consultation request and ask for a 
shorter deadline for the adoption of the ECB’s opi nion. However, even though the ECB welcomes 
this consultation request and unders tands the need for an accelerated legislative procedure, it would 
have appreciated being consulted by the authority pr eparing the draft legislation at an earlier stage.  
2.2 Article 4 of Decision 98/415/EC requires Member St ates to ensure that the ECB is consulted at an 
appropriate point in time to allow the consulting authority to take its opinion into consideration 
before deciding on the substance of the draft legi slative provisions. The ECB therefore expects that 
the consulting authority w ill take any additional measures necessary  to reflect the ECB’s opinion to 
the extent appropriate. It also encourages furt her consultation on any new amendments to the 
adopted Act or any related implementing measure s which fall within its field of competence, 
provided that such measures do not merely constitute the implementation of the ECB’s recommendations. More generally, internal administ rative procedures should be in place to ensure 
that timely consultation of the ECB is taken into  account whenever such consultation is mandatory. 
2.3 The ECB would like to stress that, given the very short time in which it has been consulted on this 
important legislation, it has not been possible to assess all the many constitutional, other legal and 
regulatory issues which this draft law undoubtedly  raises. In particular, the ECB has serious 
concerns that the draft law is insufficiently le gally certain on a number of critical issues for the 
Eurosystem. For example, problems of legal uncertainty relate to the impact of, inter alia , Article 
61 (effects of orders on certain other obligations) of  the draft law on the rights of the Central Bank, 
the ECB and possibly other central banks within th e ESCB, the scope of collateral rights of central 
banks given as security against ELA, as well as other issues. The ECB would expect that nothing in this Act would affect operations, rights or entitleme nts of the Central Bank or the European Central 
Bank, or any other central banks within the ESCB. 
2.4 In line with its previous opinions, the ECB em phasises that, when adopting measures to deal with 
the financial crisis, Member States should act in a coordinated manner in order to avoid significant 
differences in national implementation having a counter-productive effect, which may involve 
distortions in global banking markets. Moreover, it  is crucial to ensure consistency with the 
Eurosystem’s management of liqui dity and its operational framework
2. Against this background, 
any national measure should ensure a sufficiently leve l playing field within the euro area, which is 
of key importance to maintain the integrity of the euro area banking system. 
                                                      
2  See, for example, Opinion CON/2009/54. All ECB Opinions are published on th e ECB’s website at ww.ecb.europa.eu.  
3 The ECB welcomes the wider powers under the draf t law that will be available to the Irish 
authorities to manage and solve a financial institu tion crisis. They will include, for instance, the 
appointment of special managers with the intent  of preserving or restoring a credit institution’s 
financial position. This is in line with the consen sus emerging at EU level. At the same time these 
emergency powers interfere significantly with the pr operty rights of institutions’ shareholders and 
creditors. Thus it is important for any regime to  properly balance these fundamental rights with the 
general interest in the financial system’s stability . The Irish framework may have to be adapted in 
the light of the forthcoming Commission’s legisl ative proposals on a Union crisis management and 
bank resolution regime. Second, the draft law is a temporary emergency measure which will cease 
to have effect, unless prolonged, by the end of 2012.  In view of the expected introduction in Ireland 
of legislation on bank resolution by the first quarter  of 2011, the draft law needs to clarify how it 
will interact with the powers and tools under the future bank resolution regime. 
2.5 Regarding the features and implementation m odalities of asset support schemes, the Eurosystem 
has developed a number of guiding principles3 to: (i) safeguard financial stability and restore the 
provision of credit to the private sector while limiti ng moral hazard, (ii) ensure a level playing field 
within the single market to the extent possible, and (iii) contain the impact of possible asset support 
measures on public finances. 
2.6 Previous ECB Opinions noted that it is appr opriate to maintain a clear distinction between 
procedures leading to antitrust and banking supervision decisions4 and that draft national laws 
should reflect in these circumstances the principle of allocating powers to authorities in accordance 
with their respective objectives5. In the present case, the dual competence of the Minister in 
banking mergers and the consultative or a dvisory role conferred on the Governor6 could conflict 
with these principles. 
2.7 Moreover, previous ECB Opinions pointed out the need to balance the potentially conflicting 
objectives of market competition and financial stab ility by introducing safeguards similar to those 
which apply under Union law7. While acknowledging that cases might  occur in which a merger in 
the form of a balance sheet merger would be  necessary on stability grounds, although it raises 
concerns for its effects on competition8, the ECB stressed that these cases should remain 
exceptional and should not unduly restrain competition9. The ECB recommends applying the 
                                                      
3  Guiding principles for bank asse t support schemes, 25 February 2009, available on the ECB’s website at 
www.ecb.europa.eu.  
4 See, for example, paragraph 8 of ECB Opinion C ON/2005/58 and paragraph 4.1 of ECB Opinion CON/2008/44.  
5  See, for example, paragraph 4 of ECB Opinion C ON/2007/17 and paragraph 4.1 of ECB Opinion CON/2008/44.  
6  Section 7(2), Section 13(2), Section 28(1)(a) and Section 33(2) of the draft law.  
7  See, for example, paragraph 3.3, la st sentence, of ECB Opinion CON/2006/ 51 and paragraph 4.2 of ECB Opinion 
CON/2008/44.  
8  See for example paragraph 8, second sentence, of ECB Opinion CON/2005/58 and paragraph 4.2 of ECB Opinion 
CON/2008/44.  
9  See, for example, paragraph 3.3, la st sentence, of ECB Opinion CON/2006/ 51 and paragraph 4.2 of ECB Opinion 
CON/2008/44.  
4 Minister’s prerogatives under the draft law in accordance with the principle of proportionality and 
with appropriate safeguards. 
2.8 The measures intended to safeguard financial st ability should involve coopera tion with the relevant 
Member State authorities, in line with Union legi slation and the arrangements in place, such as the 
Memorandum of Understanding on cooperation between the financial supervisory authorities, 
central banks and finance ministries of the Eu ropean Union on cross-border financial stability10. 
2.9 The ECB recommends referring to the Eurosystem’s ‘operations’ rather than to its ‘functions’, in 
line with ECB Opinion CON/2008/37. In particular, references to the Eurosystem should include 
all actions, rights, arrangements and agreem ents relating to it by all participants. 
2.10 The draft law does not contain any general pr ovision protecting the rights of the Central Bank and 
the ECB under any relevant agreements from the ef fects of Article 61 and other provisions of the 
draft law, such as regarding transfer orders, which potentially may impact on the Eurosystem’s 
operations and the functions and in terests of its members. Article 5 of the draft law recognises that 
the draft law has no effect on the performance of the Central Bank Governor’s or the Central 
Bank’s ‘functions’ in relation to any credit instituti on authorised or regulated in Ireland. However, 
this appears to refer only to the supervisory f unctions of the Central Ba nk and its Governor and 
does not include the potential impact of the draft law provisions on the Central Bank, the ECB or any other central bank within the ESCB when appearing as counterparty in a monetary policy or emergency liquidity operation conclu ded with a relevant institution. It is essential that such a 
general carve out provision is contained in the dr aft law to protect Eurosystem operations and the 
rights of the Central Bank, the ECB and any other central bank within the ESCB. 
 
3. Specific observations   
Role of the Central Bank of Ireland 3.1 Any involvement of the Central Bank and its G overnor in the application of the measures to 
strengthen financial stability must be compatible w ith the Treaty and consequently with the Central 
Bank’s institutional and financ ial independence, as well as w ith the Governor’s personal 
independence to safeguard the proper performance of  their tasks under the Treaty and the Statute of 
the European System of Central Banks and of the European Central Bank
11. The draft law specifies 
in Section 5 that nothing in its provisions preven ts the performance by the Governor or the Central 
Bank of their functions in relation to any credit ins titution authorised or regulated in the State, or 
affects any obligation arising under the Treaties or the ESCB Statute12. Section 5 of the draft law 
should make clear that the Treaty principle of central bank independence prevails over any incompatible draft law provision.  
                                                      
10  As published on the ECB we bsite, www.ecb.europa.eu.  
11   See also similar observations in  paragraph 3.1.4 of CON/2009/93. 
12  Section 5 of the draft law.  
5  This provision should also specify that nothing in  the draft law will prejudice the compliance by the 
Central Bank with the prohibition on monetary financing under Article 123 of the Treaty13. 
Furthermore, the ECB suggests further clarification that the rights of the Central Bank and the ECB, as creditors of any relevant institution, will not be affected. The ECB also recommends 
reinserting the general provision with respect to  the preservation of the operations, rights or 
entitlement of the Central Bank, the ECB or any ot her central banks within the ESCB regarding the 
provisions of the draft law which was included in a previous version of the draft law, on which the 
ECB was consulted. 
3.2  Section 61 of the draft law details the effect of  the various orders that the Minister may make under 
the draft law on certain other obligations. This shou ld not impair the ability of the Central Bank or 
the ECB to maintain the Eurosystem’s operations  and, in particular, to enforce their rights 
including, without limitation, the enforcement of security over any eligible collateral posted by any 
relevant institution, any of its s ubsidiaries, its holding company or any subsidiaries of its holding 
company. The Section needs to clarify this, in particular since the published Bill does not contain an Article 60 which appeared in a previous versio n of the draft law and which usefully stated that 
‘nothing in this Act affects any function, right, or entitlement of the [Central] Bank or the European 
Central Bank’.    
3.3  The draft law should also be c onsistent with the overall tasks and functions of the Central Bank and 
of the Governor under the existing Irish legal framework. Further, the ECB recommends drafting 
any ‘relationship framework’ under Section 6 of the draft law in agreement with the Governor to 
ensure that it does not go beyond the overall task and functions of the Ce ntral Bank and Governor 
and that it is consistent with the Central Bank’ s institutional and financial independence and the 
Governor’s pers onal independence
14. 
3.4  Section 22 of the draft law provides for the appointment of a special manager. It is important to 
ensure that this would not impair the ability of  the Central Bank or the ECB to maintain the 
Eurosystem’s operations and, in particular, to en force their rights including, without limitation, the 
enforcement of security over any eligible collate ral posted by an institu tion. In this regard, 
Section 22(2) excludes certain paragraphs of Secti on 22(1) from its application to the Central Bank, 
the ECB or any other central banks within the ESCB. The ECB would, moreover, welcome clarification with respect to the remainder of sub- section (1) of Section 22 in  the event that actions 
not currently excluded were taken by such entities as a result of action taken in the normal course 
of Eurosystem operations. 
                                                      
13  The monetary financing prohibition in  Article 123 of the Treaty is further clarified in Council Regulation (EC) 
No 3603/93 of 13 December 1993 specifying definitions for the application of prohibitions in Article 104 and 104b(1) of 
the Treaty (OJ L 332, 31.12.1993, p. 1) according to which overdraft facilities or any other type of credit facility with the 
ECB or the national central banks (NCBs) of Member States  in favour of Community inst itutions or bodies, central 
governments, regional, local or other public authorities, othe r bodies governed by public law, or public undertakings of 
Member States are prohibited, as is any purchase directly from these public sector entities by the ECB or NCBs of debt 
instruments. 
14  See also similar observations in pa ragraph 3.1.6 of Opinion CON/2009/93. 
6 Direction orders 
3.5  In respect of direction, special management, subordinated liabilities and tran sfer orders, the Minster 
may, in exceptional circumstances, waive the requirement to notify in writing the relevant 
institution, allowing the relevant institution time to make written submissions to the Minister. 
Under the current draft, exceptional circumstances wi ll exist where: (a) there is an imminent threat 
to the stability of the institution concerned, (b) ther e is an imminent threat to the stability of the 
national financial system, or (c) the Minister  has reasonable grounds for believing that the 
confidentiality of the proposed order or the po ssibility of making such an order would not be 
maintained and that the breach of such c onfidentiality would have significant adverse 
consequences. The draft law should clarify whet her the exceptional circumstances justifying a 
waiver of the written notice requirement are establis hed when any of either (a), (b) or (c) are 
satisfied or whether (a) and (b) must both be sa tisfied, with (c) being an exceptional circumstance 
on its own15. In the ECB’s view, waiver of the basi c notice requirement for measures interfering 
with creditors’ property rights would only be justif ied by the additional risk to the stability of the 
financial system.  
Reorganisation of credit institutions 3.6  Section 4(1)(c) provides that a further purpose of the draft law is to continue the process of 
reorganisation, preservation and restoration of  the financial position of Anglo Irish Bank 
Corporation Limited (Anglo) and, due to the refere nce in Section 4(1)(d) to the financial position of 
building societies, potentially also  of Irish Nationwide Building Soci ety (INBS). This appears to go 
beyond the position agreed with the IMF and the European Commission in liaison with the ECB, 
which envisaged a specific resolution plan fo r these two non viable banks. The ECB would 
welcome an amendment to the recital and confirma tion that any action taken by the Minister under 
the draft law with respect to Anglo and INBS w ill be conditional on agreement by the IMF and the 
European Commission, in consultation with the EC B, and will relate to the State’s commitments 
under the agreement reached with the IMF and the European Commission, in liaison with the ECB. 
Netting agreements 3.7  The ECB welcomes Section 65 of the draft law wh ich provides that nothing in the draft law affects 
the operation of, among other things: (a) the nettin g of the Financial Contracts Act 1995, (b) the 
European Communities (Settlement Finality) Re gulations, and (c) the European Communities 
(Financial Collateral Arrangements) Regulations. In  relation to an agreement to which a relevant 
institution or any of its subsidiaries is a party, Sectio n 65 should ensure that its effect is to exclude 
the provisions of the draft law, in particular Sections 21 and 61, from the operation of contracts 
which fall within the scope of the identified excluded legislation. 
 
                                                      
15  Sections 7(5), 13(5), 28(6) and 33(5) of the draft law. 
7 This opinion will be published on the ECB’s website.  
  Done at Frankfurt am Main, 17 December  2010. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET