EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 27 November 2008 
at the request of the Greek Ministry of Economy and Finance on a draft law on enhancing liquidity 
of the economy to address the impact of the intern ational financial crisis and on a draft decision 
on its implementation 
(CON/2008/79) 
 Introduction and legal basis
 
On 18 November 2008 the European Central Bank (ECB) received a request from the Greek Ministry of 
Economy and Finance for an opinion on a draft law on  enhancing liquidity of the economy to address the 
impact of the international financial crisis (hereina fter the ‘draft law’) and on a draft decision of the 
Minister of Economy and Finance implementing the draft law (hereinafter the ‘draft decision’). 
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 law and the draft decision relate 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 first sen tence 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 and the draft decision 
1.1 Objective and nature  
 According to its explanatory memorandum, the draft law is aimed at strengthening the national 
economy against the implications of the internati onal financial crisis by enhancing liquidity. In 
particular, the provision of additional capital shoul d enable credit instituti ons to grant credit to 
households and businesses and contri bute to reducing the pressure on lending interest rates. Finally, 
the draft law aims at safeguarding the proper implementation of the financial support measures 
(hereinafter the ‘measures’) by establishing a Supe rvisory Council (SC) and provides for sanctions 
in cases of non-compliance with the terms of use of  such measures as laid down in the draft law. 
The draft decision implements the draft law, taking into account, inter alia , the capital adequacy 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2 and solvency of credit institutions, which are necessary factors to ensure financial stability2; in 
particular it lists the conditions for using the m easures, such as the commission to be paid by 
beneficiary CIs and the rating requirements for eligible collateral. 
1.2 Main features   
 The measures comprise the following: (i) State participation in the capital of credit institutions 
authorised by the BoG (hereinafter the ‘benefic iary CIs’) through the acquisition of preference 
shares with a value of up to EUR 5 billion to be i ssued by 1 February 2009 and subscribed for by 
the Greek State by 31 December 20093; (ii) provision of State guarantees with a value of up to 
EUR 15 billion to beneficiary CIs for loans to be granted to them by 31 December 2009 with a maturity of three months to three years against payment of commission and/or provision of adequate collateral
4; and (iii) issuance by 31 December 2009 of Government securities with a value 
of up to EUR 8 billion and a maturity of up to th ree years, to be lent to beneficiary CIs for 
enhancing liquidity against payment of comm ission and provision of adequate collateral5. In 
principle, the specific terms of implementation of  the above measures will be determined by a 
decision of the Minister for Economy and Finance (hereinafter the ‘MEF’) on a proposal by the Governor of the Bank of Greece (her einafter the ‘BoG Governor’).  
 Moreover, under Article 4 of the draft law, funds provided by the State for the purposes of 
implementing Articles 2 and 3 may, by an MEF Decision on a proposal by the BoG Governor, be allocated within a total cap on State guarantees and securities of EUR 23 billion, depending on the 
take-up and the overall needs that might arise. In  addition, under Article 5, beneficiary CIs are 
obliged to use the proceeds of the liquidation of securities received under Article 3 to grant 
mortgage loans and loans to small and medium-s ized enterprises (SMEs) on competitive terms, 
while the guarantee provided under Article 2 may apply to lending to businesses of vital 
importance for the growth of Greece. Article  6 provides for a simplified procedure for 
collateralising loans or credit granted to credit ins titutions using as collateral in favour of the State 
or the BoG claims of such credit institutions agains t third parties. Finally, Article 7 provides for the 
establishment of the SC to monitor implementation of the measures
6, as well as for sanctions. 
                                                 
2  See recital 2 of the draft decision. 
3  See Article 1 of the draft law. These shares give voting rights and a right to a fixed dividend on the capital contributed 
and shall allow for State representation at a general meeting of  ordinary shareholders and on the Board entailing a right to 
veto any decision on dividend distribution and executive pay co nsidered to jeopardise the interest of depositors or to 
substantially affect the solvency and smooth running of the ba nk; finally, these shares may not be transferred by the 
Greek State to third parties or listed on regulated markets; in case of liquidation, the claims of the Greek State as a 
shareholder shall be satisfied in priori ty to any other ordinary shareholder. 
4  See Article 2 of the draft law. State representation on the Board has the same legal effects as under Article 1(3) for the 
period of the guarantee’s validity. 
5  See Article 3 of the draft law. 
6  The SC will be chaired by the MEF; other participants w ill be the BoG Governor, the deputy MEF in charge of the State 
General Accounting Depa rtment and the State representative appoin ted to the Board of beneficiary CIs. 
3 2. General observations 
2.1 The Government submitted the dr aft law to the Greek Parliament on 23 October 2008 and a further 
amendment to the draft law was submitted on 6 November 2008. The Ministry of Economy and Finance consulted the ECB on 18 November 2008, re questing that the consultation be treated as a 
matter of urgency, and indicated that it was likel y that Parliament would enact the draft law by 
21 November 2008. The draft law provides for retro active entry into force from the date of its 
submission to Parliament. The ECB understands that  the legislative procedure is at an advanced 
stage and notes that a consultation should take pl ace at a point which affords the ECB sufficient 
time to examine the draft legislative provisions and also enables the relevant national authorities to 
take the ECB’s opinion into consideration before the provisions are adopted. It even follows from 
Article 3(4) of Decision 98/415/EC that Member States are obliged to susp end the adoption process 
of the draft legislative provision pending submissi on of the ECB’s opinion, given that the adopting 
national authority should have the opportunity to deliberate the ECB’s opinion in a meaningful way before taking its decision on the substance
7. The ECB also wishes to draw the consulting 
authority’s attention to the recent ECB opinions issu ed at the request of other Member States, in 
which the ECB has already commented on draft legislation sharing some of the features of the draft law
8. Moreover, the ECB notes that harmonisation rega rding the end of such schemes across euro 
                                                 
7  See the Guide to consultation of the Eu ropean Central Bank by national authoritie s regarding draft legislative provisions, 
Title IV, Section 1, available on the ECB’s website at www.ecb.europa.eu. 
8  See the following ECB Opinions: CON/2008/44 of 3 October 2008 at the request of the Irish Minister for Finance on a 
draft Credit Institutions (Financial Support) Bill 2008; C ON/2008/46 of 8 October 2008 at the request of the Belgian 
Ministry of Finance on a preliminary draft law on measures promoting financial stability a nd in particular establishing a 
State guarantee for the provision of credit in the context of  financial stability; CON/2008/48 of 15 October 2008 at the 
request of the Irish Minister for Finance on a draft Credit  Institutions (Financial Support) Scheme 2008; CON/2008/50 of 
17 October 2008 at the request of the Belgian Ministry of Fi nance on a draft royal decree adopted under Article 117bis of 
the Law of 2 August 2002 on the supervision of the financ ial sector and on financia l services; CON/2008/51 of 
17 October 2008 at the request of the Greek Ministry of  Economy and Finance on a draft law on, inter alia, the 
establishment of the ‘Depositors and Investors of  Credit Institutions Compensation Fund’; CON/2008/52 of 
17 October 2008 at the request of the Spanish State Secr etary for Economic Affairs on a Royal Decree-Law creating a 
Fund for the acquisition of financial assets and on a Royal Decree-Law adopting urgent financial and economic measures 
in relation to the concerted European action plan of the euro area countries; CON/2008/54 of 17 October 2008 at the 
request of the Danish Ministry of Ec onomic and Business Affairs on a proposed Law on financial stability; CON/2008/55 
of 20 October 2008 at the request of the Austrian Ministry of Finance on draft legal measures to ensure the stability of the 
Austrian financial market; CON/2008/56 of  21 October 2008 at the request of the Banque de France on a draft amending 
finance law for the financing of the economy; CON/2008/57 of 21  October 2008 at the request of the German Ministry of 
Finance on a Law on the implementation of a package of meas ures to stabilise the financial market and an order on its 
implementation; CON/2008/58 of 23 October 20 08 at the request of the Banca d’Italia  on behalf of the Italian Ministry 
for Economic Affairs and Finance on two Decree-Laws containing urgent measures  to guarantee the stability of the 
banking system and the continuity of the provision of credit; CON/2008/59 of 24 October 2008 at the request of the 
Swedish Ministry of Finance on a draft proposal on stabilis ing measures for the Swedish financial system; CON/2008/60 
of 27 October 2008 at the request of the Spanish State S ecretary for Economic Affairs on a draft Order implementing 
Royal Decree-Law 6/2008 cr eating the Fund for the acquisition of financial assets and on a draft Basic Agreement of the 
Fund’s Executive Council; CON/2008/61 of 28 October 2008 at the re quest of the Belgian Minister for Finance on a draft 
royal decree implementing the Law of 15  October 2008 on measures promoting fi nancial stability and in particular 
establishing a State guarantee for the provision of credit in th e context of financial stability, in relation to the protection  
of deposits and life insurance and amending the Law of 2 August 2002 on the supervision of the financial sector and on 
financial services; CON/2008/62 of 29 Oc tober 2008 at the request of the Swedish Ministry of Finance on a draft 
ordinance on State guarantees for banks et c.; CON/2008/65 of 12 November 2008 at the request of the Banca d’Italia on 
behalf of the Italian Ministry for Econom ic Affairs and Finance on a draft minist erial decree containing provisions to 
implement Decree-Law No 157/2008 on furthe r urgent measures to guarantee th e stability of the credit system; 
CON/2008/67 of 13 November 2008 at the request of the Span ish Ministry for Economic Affairs and Finance on a draft 
order implementing Royal Decree-Law 7/2008 authorising State guarantees; and CON/2008/68 of 13 November 2008 at 
the request of the Finnish Ministry of Finance on a dr aft government proposal for laws amending the Law on the 
4 area and EU Member States is also crucial. The ECB should be involved in such concertation and 
coordination and would welcome the explicit provi sion for this in subsequent legislation. 
2.2 As already mentioned in recent ECB opinions on draft national laws in other Member States 
relating to emergency measures arising out of the current financial turmoil, it is important for 
national authorities to coordinate their responses to  the current financial situation with their EU 
partners. Given the similarities of the causes and consequences of the financial crisis across 
Member States and the potential interdependenc ies of policy responses, the ECB notes that 
coordination is already taking place at the interna tional and European level to preserve confidence 
and financial stability. More specifically, the ECB re fers to the conclusions adopted at the Ecofin 
Council meeting on 7 October 2008, which highlighted common principles to guide the action of Member States as follows: (i) interventions should be timely and the support should in principle be 
temporary; (ii) the interests of taxpayers should be  protected; (iii) existing shareholders should bear 
the due consequences of the intervention; (iv) the government should be in a position to bring about 
a change of management; (v) mana gement should not retain undue benefits; (vi) governments may 
have, inter alia , the power to intervene in remuneration; (v ii) the legitimate interest of competitors 
must be protected, in particular through the St ate aid rules; and (viii) negative spill-over effects 
should be avoided
9. Against this background, the ECB is pleased to note that the draft law and draft 
decision closely follow these conclusions. 
2.3 On 12 October 2008, the Heads of State of the euro area issued a ‘Declaration on a concerted 
European action plan of the euro area c ountries’ (hereinafter the ‘Declaration’)10, in which they 
confirmed their commitment to act together in  a decisive and comprehensive way to restore 
confidence and the proper functioning of the financia l system, with the aim of restoring appropriate 
and efficient financing conditions for the econo my. They agreed on common principles to be 
followed by the EU and euro area governments, ce ntral banks and supervis ors to avoid national 
measures adversely affecting the functioning of the single market and the other Member States. Such coordinated approach includes initiatives ai med at all of the following: (i) ensuring 
appropriate liquidity; (ii) facilitating the funding of  banks through various means; (iii) providing 
additional capital resources to financial instituti ons; (iv) recapitalisation of distressed banks. The 
European Council also endorsed these principles for all Member States on 16 October 2008. Against this background, the ECB highlights that all initiatives put in place by national 
governments to restore confidence in the financia l markets should be aimed at implementing such 
common principles, in the spirit of close cooperation with other Member States and EU institutions. 
                                                                                                                                                             
Government Guarantee Fund and the Law on credit institutions . All ECB opinions are available on the ECB’s website at 
www.ecb.europa.eu.  
9  See the press release of the 2894t h Council meeting (13784/08), availa ble on the Council’s website at 
www.consilium.europa.eu. 
10  The Declaration is available on the French Presidency’s website at www.ue2008.fr. 
5 3. Specific comments 
3.1 Eligibility for support  
 The draft law states that beneficiary CIs are e ligible for the measures. The ECB understands that 
subsidiaries of foreign credit institutions are include d in the scope of beneficiary CIs, in line with 
the Commission’s guidance on comp liance by the financial sector support schemes with State aid 
rules11, as also referred to in the preamble of the draf t decision, in particular with the eligibility 
criteria that all institutions incorporated in the Member State concerned, including subsidiaries of 
foreign credit institutions, with significant activities in that Member State, should be covered by the 
support scheme concerned. In relation to this, the ECB notes that for reasons of legal certainty and 
clarity, terminological consistency should be ensu red in the draft decision and the draft law when 
referring to such beneficiary CIs.  
3.2 Conditions for support and relationship with the single monetary policy of the euro area and 
financial stability  
 The ECB notes that, in line with the Declaration, Member States must act in a coordinated manner 
to avoid significant differences in national impl ementation from having a counter-productive effect 
and creating distortions in global banking markets.  The Declaration acknowledges the need to work 
in cooperation with the ECB to ensure consistency with the Eurosystem’s management of liquidity 
and compatibility with its operational framework. Si milarly, harmonisation regarding the expiry of 
such financial support schemes across the euro area would also be necessary. Against this 
background, the ECB recalls that uncoordinate d decisions among Member States should be 
avoided as they may lead to a fragmentation of th e euro area money market. In this respect, the 
ECB makes the following observations, which are im portant from a monetary policy perspective, 
as regards the measures. 
 First, the ECB notes that Article 1 of the draft law provides for State participation in the capital of 
beneficiary CIs through the acquisition of preference shares. In this respect, in line with previous 
opinions, the ECB recalls that harmonisation and coordination of government measures intended to 
alleviate tensions in the financial markets is of  crucial importance. The recapitalisation measures 
considered in 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, a consistent approach should be 
used when defining the conditions for recapitalisations including the pricing of the instruments to 
provide Tier 1 capital to financial institutions, in order to support the implementation of the 
                                                 
11  See the ‘Communication from the Commission – The application of State aid rules to measures taken in relation to 
financial institutions in the context of the current gl obal financial crisis’ of 13 October 2008, available on the 
Commission’s website at www.ec.europa.eu. Pa ragraph 18 specifies that ‘T he eligibility criteria of  financial institutions 
… must be objective, taking due account of their role in the relevant banking 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 Declaration of 12 October 2008. Against this b ackground, the ECB notes that in general the 
conditions for capital support should aim at protecti ng the interests of taxpayers and respecting the 
level playing field among institutions. Moreover, th e ECB highlights that the pricing conditions for 
capital support should be risk-based and market-orien ted, determined by taking into consideration 
the specific risk of both the specific instrument  chosen for injecting capital and the institution 
concerned. Specific features of the instruments fo r capital injections (such as preferred shares and 
other hybrid instruments) should be  appropriately chosen so that, wh ile encouraging an early end to 
the State’s capital support of banks, they should not  result in an excessive increase in the cost of 
capital. Finally, the temporary nature of the Stat e’s intervention should be ensured by providing 
financial institutions with incentives to rede em such instruments as soon as possible. 
 Second, the ECB notes that under Article 2 of the draft law, the MEF may issue a State guarantee 
for loans to be concluded by beneficiary CIs by 31 December 2009 with a maturity of up to three years. The ECB also notes that, under Article 2(1) of the draft law, as implemented by Section 2A of the draft decision, the deadline for such guarantees will expire on 31 December 2012 at the 
latest. The ECB recalls that such arrangements for the granting of government guarantees on bank debt should, in their practical implementation, aim at: (i) addressing the funding problems of 
liquidity-constrained solvent banks by improving th e functioning of the market for bank debt of 
longer term maturity; (ii) preserving the level- playing field among financial institutions and 
avoiding market distortions and (iii) ensuring consis tency with the management of liquidity by the 
Bank of Greece. In this context, the ECB understa nds that the above provision seeks to implement 
Article 8 of the Declaration which states, inter alia , that the euro area governments would make 
available a Government guarantee of new medium te rm (up to five years) bank senior debt issuance 
and meets the principles stated in the Declaration indicating the temporary feature of such schemes.  
 Third, the ECB notes that the draft decision, in line with paragraph 3.4 of CON/2008/52, 
recognises the ECB’s contribution
12 to the harmonisation and coordination across the EU  of the 
exercise of determining the price of State guarant ees. In particular, the ECB recalls that it is 
important to ensure that the price of the Stat e guarantee is risk-based and market-oriented and 
determined on the basis of the costs of a corre sponding guarantee in the market. However, it has to 
be highlighted that the abovementioned contributio n by the ECB is not formally incorporated in 
any ECB legal act. 
 Fourth, the ECB welcomes the provision of Secti on 9 of the draft decision which aims to ensure 
that the beneficiary CIs do not profit from undue use of their guaranteed status13 to engage in a 
heightened level of activities which could distort the market and facilitate abnormal balance sheet 
                                                 
12  Under Section 2A(c) of the draft decision the pricing of St ate guarantees will be determined in accordance with the 
procedure established by the ECB. Under Section 3(d) thereof, such pricing also applies to Government securities.  
13  See, e.g. paragraph 3.4 of ECB Opinion CON/2008/48, paragraph 3.1 of E CB Opinion CON/2008/50 and paragraph 3.4 
of ECB Opinion CON/2008/57. 
7 growth14. In this regard, the ECB reiterates the im portance of establishing appropriate safeguards 
such as limits on the marketing of financial produc ts or on expansion of activities on the basis of 
State guarantees. 
 Fifth, as stated in previous opinions, the ECB considers that extending State guarantees to 
interbank deposits  should be avoided, as it 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 States and therefore impairing the implementation of the single monetary policy. Therefore, the ECB welcomes Section 2A (a) of the draft decision, which states that interbank deposits may not be  covered by State guarantees. 
3.3 Role of the central bank 
 The ECB notes the participation of the BoG in th e measures, as provided for in the draft law and 
further specified and supplemented in the draft deci sion. In particular, Articles 1 to 4 of the draft 
law require a proposal of the BoG Governor prior to the adoption of ministerial decisions determining the terms of implemen tation of the draft law. Moreover, Article 7(1) provides for the 
participation of the BoG Governor in the newly established SC with the task of coordinating the 
proper and efficient implementation of the draft la w and ensuring that the liquidity provided will 
benefit depositors, borrowers and th e Greek economy in general. In this respect the ECB notes that 
the draft law expressly clarifies that the establis hment and operation of the SC will be without 
prejudice to the supervisory competences of the BoG. In addition, Article 7(2) provides for 
sanctions to be imposed under Article 55A of th e Statute of the Bank of Greece in cases of non-
compliance by beneficiary CIs with the terms of use of the scheme, including revocation of the 
measures by an MEF decision on a proposal by the BoG Governor
15. The ECB appreciates that the 
draft law recognises the BoG’s expertise as it will fa cilitate the BoG’s effective performance of its 
financial stability role. The ECB understands that su ch advisory function w ill be performed without 
prejudice to the BoG’s independence and in fu ll compliance with the Treaty provisions on the 
prohibition of monetary financing.  
 
                                                 
14  Section 9 states, inter alia , that in implementing the draft law beneficiary CIs must abstain from aggressive market 
strategies, including advertising by invoking their guaranteed status especially against non- beneficiary CIs. They must 
also abstain from expanding their activities or from pursuing other purposes in manners unduly distorting competition. To 
this end, beneficiary CIs must ensure that during the impl ementation the average increase of total assets does not exceed 
a determined limit. The SC will monitor compliance with such obligations on the basis of reports provided for in 
Section 8. 
15  In this context, Section 8 of  the draft decision stipulates, inter alia , that beneficiary CIs must regularly inform the BoG on 
the precise use of the funds received. The BoG Governor then informs the SC accordingly. On the basis of quarterly 
reports from beneficiary CIs, the BoG prepares a biannual re port on the use of funds, outlining the implementation of the 
business plans of each beneficiary CI as well as any restruct uring plans. Such report will be submitted to the SC and the 
Commission of the European Communities. 
8 This opinion will be published on the ECB’s website.  
  Done at Frankfurt am Main, 27 November 2008. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET