EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 22 May 2006 
at the request of the Slovenian Ministry of Justice 
on a draft law amending the Law on financial collateral 
(CON/2006/24) 
 
Introduction and legal basis  
On 13 April 2006 the European Central Bank (ECB) received a request from the Slovenian Ministry of 
Justice for an opinion on a draft law amending the La w on financial collateral (hereinafter the ‘draft 
law’). 
The ECB’s competence to de liver an opinion is based on Article 105(4) of the Treaty establishing the 
European Community and on the fifth and sixth indent s of Article 2(1) and Article 2(2) of Council 
Decision 98/415/EC of 29 June 1998 on the consulta tion of the European Central Bank by national 
authorities regarding draft legislative provisions1, as the draft law relates to payment and settlement 
systems, the rules applicable to financial institutions  insofar as they materially influence the stability of 
financial institutions and markets, and instruments of monetary policy. 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 
The main objectives of the draft law are: (i) to  introduce into the Law on financial collateral
2 (hereinafter 
the ‘Law’) the concept of a ‘maximum pledge’ with respect to the provision of financial collateral; and 
(ii) to implement Directive 2002/47/EC of the European  Parliament and of the Council of 6 June 2002 on 
financial collateral arrangements (herei nafter the ‘Collateral Directive’)3. 
 2. General observations 
2.1 In general terms, the ECB welcomes the proposed  amendments as the draft law addresses matters 
that are directly relevant to the Eurosystem’s co re fields of competence and will have an impact 
                                                     
 
1  OJ L 189, 3.7.1998, p. 42.  
2  Zakon o finan čnem zavarovanju , adopted on 22 April 2004, published in the Offi cial Gazette of the Republic of Slovenia 
No 47/04. 
3  OJ L 168, 27.6.2002, p. 43. 
2 both on the efficient and safe use of financial co llateral arrangements in EU financial markets and 
the Eurosystem’s credit operations. As the Law applies, inter alia, to financial collateral 
arrangements concluded by nati onal central banks of Member States and the ECB with their 
counterparties, the new provisions should give  additional support to the conduct of credit 
operations with Banka Slovenije’s domestic counterparties, as well as operations in the context of 
the correspondent central banking model. In this  respect, the introduction of the concept of a 
‘maximum pledge’ (as defined in Article 1 of th e draft law) will allow collateral providers to 
provide collateral up to a defined amount or, in case the maximum amount is not stipulated, up to 
the full value of the pledged financial instrument in relation to one or several claims in a legal 
relationship without the need to do so separately for each individual claim. 
2.2 Articles 2, 3 and 4 of the draft law would furt her clarify the implementation of the Collateral 
Directive in Slovenia. In this respect, the EC B notes the following proposed changes: (a) the draft 
law specifies for the avoidance of doubt that, am ong other rights arising unde r a financial collateral 
contract, the right to enforce collateral also rema ins valid even after an insolvency procedure has 
been opened against a collateral provider or collate ral taker: such a procedure should therefore not 
represent an obstacle to the swift and unimpeded rea lisation of collateral (in line with Article 8 of 
the Collateral Directive); (b) the validity of a cl ose-out netting agreement is expressly extended to 
cases of judicial and other attachment to fully m eet the requirement laid down in Article 7 of the 
Collateral Directive; and (c) the law applicable to financial collateral provided by way of entry of a 
transfer as collateral or pledge in the register of fi nancial instruments is stated to be the law of the 
country of the register (see Article 9 of the Collateral Directive). 
 3. Maximum pledge 
3.1. The new concept of ‘maximum pledge’ should fac ilitate the provision of collateral, as it enables 
collateral providers to provide collateral up to a defined amount for several claims in a legal 
relationship without having to do so separately for each individual claim. It is noted that a ‘maximum pledge’ may only be established in rela tion to financial instruments entered in the 
official register, thereby ensuring transparency of established collateral rights. In this context, the 
ECB refers to Article 3 of the Collateral Direc tive and would like to reiterate its position that 
‘simple and reliable methods of collateralisation, which include efficient enforcement methods, are 
of fundamental interest to the Eu rosystem, as they help, inter alia, to ensure the smooth functioning 
of the Eurosystem’s single monetary policy’
4.  
3.2. As regards the presumption contained in the last sen tence of Article 7.a(1) of the draft law, the 
ECB suggests that the wording ‘it sh all be deemed that the financia l instrument fully guarantees the 
                                                      
4  See paragraph 12 of ECB Opinion CON/2005/12 of 25 May 2005 at the request of the Ministry of Finance of 
Luxembourg on a draft law on financial collateral arrange ments; available on the E CB’s website at www.ecb.int.  
3 secured claims’ should be made clearer by providi ng that, in such case, it is deemed that the 
financial instrument is fully available to guarantee the secured claims. 
 4. Implementation of the Collateral Directive   
4.1. The ECB notes that the definition of ‘financial inst ruments’ in Article 3 of the Law reflects the 
wording used in the Collateral Directiv e. The ECB has consistently maintained
5 that the scope of 
national implementation of the Collateral Directiv e should cover all types of assets eligible for 
Eurosystem credit operations. This is particularly re levant with regard to credit claims in the form 
of bank credits. In 2005, the Governing Council of  the ECB approved a unified regime for the use 
of bank credits from all euro area countries as  collateral for Eurosystem credit operations 
from 2007. It is therefore of crucial importance to the Eurosystem that credit claims can be handled 
safely and smoothly both domestically and on a cross-border basis. In this context, pursuant to Article 22.d of the Law on Banka Slovenije
6, credit claims provided as collateral by means of an 
entry in the register of financial assets to be established and maintained by Banka Slovenije will fully benefit from the regime established by the Law.  This regime would thus ensure, inter alia, the 
validity of an assignment for security purpo ses or simplified enforcement of bank credits. 
4.2. The ECB welcomes the provision inserted into Artic le 11 of the Law, which makes it clear that, 
among other rights arising under a fina ncial collateral contract, the right to enforce collateral also 
remains valid even after an insolvency procedure has been opened against the collateral provider or 
collateral taker. The ECB suggests that this provision could be made even clearer by stating that the 
relevant methods of enforcement are those listed in point 9 of Article 3 of the Law, and that such 
methods are without prejudice to close-out ne tting as provided for under Article 12 of the Law. 
4.3. Pursuant to Article 12 of the Law, the validit y of a close-out netting agreement is expressly 
extended to cover cases of judicial and other att achment to meet the requirement laid down in 
Article 7 of the Collateral Directive. If considered  appropriate, the application of this provision 
could be extended further to cover certain in solvency-like proceedings, such as regulatory 
moratoria. 
4.4. The draft law proposes a revised Article 15, which contains a conflict-of-law provision regarding 
the determination of the applicable law in relati on to securities provided as collateral by means of 
an entry in a financial instruments register. It is acknowledged that this provi sion is consistent with 
Article 9 of the Collateral Directive. However, the ECB suggests introducin g an additional general 
conflict-of-law provision, which would determine the applicable law in cases where financial 
                                                     
 
5 See paragraph 10 of ECB Opinion CON/2001/13 of 13 June 20 01 at the request of the Council of the European Union 
concerning a proposal for a Directive of the European Parliame nt and of the Council on financ ial collateral arrangements, 
paragraph 6 of ECB Opinion CON/2003/11 of 26 June 2003 at the request of Austrian Federa l Ministry of Justice on a 
draft federal law implementin g Directive 2002/47/EC on financial collateral  arrangements, and paragraph 15 of ECB 
Opinion CON/2005/12. The opinions are availa ble on the ECB’s website at www.ecb.int. 
6  Zakon o Banki Slovenije , adopted on 19 June 2002 and last amended on 30 March 2006; published in the Official Gazette 
of the Republic of Slovenia, Nos 58/02, 85/02 and 39/06. 
4 instruments are held on securities accounts outside a register or a central securities depository. This 
additional provision would cover situations where financial instruments are provided as collateral 
by way of an entry on a securities account held with a financial intermediary (e.g. a credit 
institution), whereby the applicable law is determ ined by the jurisdiction of the place of the 
relevant securities account in accordance with Article 9 of the Collateral Directive.  
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 22 May 2006. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET