EN ECB -PUBLIC 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 17 February 2012  
on the terms of securities issued or guaranteed by the Greek State  
(CON/201 2/12) 
 
Introduction and legal basis  
On 2 February  2012, the European Central Bank (ECB) received a request from the Gree k Ministry of 
Finance  for an opinion on draft legislative provisions introducing rules for the modification of the terms 
of securities issued or guaranteed by the Greek State on the agreement of bondholders . Later on, these 
draft provisions have been further revised . This opinion refers to the latest received revised draft 
provisions o f 16 February 2012  (hereinafter the ‘draft provisions’) . 
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 on 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 Central Bank by national authorities 
regardi ng draft legislative provisions1, as the draft provisions relate to the Bank of Greece and to rules 
applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. 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 provisions  
The draft provisions author ise the Greek Ministerial Council, on  a recommendation of the Minister for 
Finance, to launch a process for the modification of the terms of eligible securities, as defined in 
paragraph  1 of the first Article of the draft provisions , to determine  such eligible securities  and, in the 
event of an exchange, to define the principal, the interest rate, the duration and the English or  other law 
governing the new securities to be issued by the Greek State. The Greek Public Debt Management 
Agency (PDMA)  will invite the holders  of eligible securities  to decide, within a specific deadline, on the 
modification of the  eligible securities’ legal documentation. This invitation, which is to be notified to the 
process manager
2 and publis hed on the Internet , will specify : (a) the eligible securities , (b) the terms on 
which modifications are proposed, ( c) the new content of the terms, ( d) any new t erms, (e) in case of an 
exchange of eligible securities, the terms of the new securities, as determined by the Ministerial Council, 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  The process manager will be the Bank of Greece, as operator of the dedicated system for monitoring transactions in 
book -entry securities under Law 2198/1994 (hereinafter the ‘System’), including in G reek government bond s. 
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2 and any additional terms thereof , (f) the deadline by which bondholders  will be invited to decide on the 
modification , and (g) other specific issues , including the bondholders’ participation in the decision-
making process. A quorum of bondholders holding at least half of the aggregate outstanding principal of 
all eligible securities  is required, together with  a majority of at l east two thirds  of the outstanding 
principal of eligible securities held by  participating  bondholders .  
 
2. General observations  
2.1 As a general proposition, it is important that the Member States preserve their ability to honour at 
all times their commitments, also with a view to ensuring financial stability. The case of the 
Hellenic Republic is exceptional and unique.  
2.2 The aim of the draft provisions is to facilitate private sector involvement agreed by the Heads of 
State or Government of the euro area Member S tates on 2 6 October  20113, exceptionally and only 
for the Hellenic Republic, by introducing into Greek law a procedure to facilitate, in accordance 
with collective action clauses (CACs) , bondholder negotiation of and agreement to an exchange 
offer by the H ellenic Republic for its government bonds. The adoption of the draft provisions, 
together with other fiscal and structural measures, will facilitate a possible restructuring of the 
sovereign debt of the Hellenic Republic to help place it on a path of debt sustainability.  
2.3 The ECB welcomes that the terms of such exchange is the result of negotiations held between the Hellenic Republic and the institutions representing its bondholders.  
2.4 The use of CACs as a procedure to a chieve an exchange of bonds is broadly aligned with general 
practice. In 2002 the Group of Ten recommended
4 to issuers of sovereign bonds the introduction of 
CACs to allow amendments to their payment terms with the approval of a supermajority of 
bondholders and without a minority being able to obstruct the process. Subsequently, the Member 
States agreed in April 2003 that the Member States should include CACs in their international debt 
issuance to promote international efforts for orderly restructuring in the event of sovereign debt 
crises5. The terms and conditions of the sovereign debt issued by the Hellenic Republic under non-
Greek law  normally  contain CACs. The Euro Group stated on 28 November 2010 that CACs 
should be included in the terms and conditions of all new euro area government bonds . 
Article  12(3) of the Treaty establishing the European Stability Mechanism signed by all euro area 
Member States on 2 February 2012 provides that following 1 January 2013, CACs must be 
included in all new euro area government securities with maturity abov e one year.  
                                                 
3  Euro Summit Statement, Brussels, 26 October 2011, available on the website of the Council of the European Union at 
www.consilium.europa.eu.  
4  Report of the G -10 Working Group on Contractual Clauses, 26 September 2002, available on the website  of the Bank for 
International Settlements at www.bis.org . 
5  See ‘Common understanding on implementing the EU commitment regarding the use of Collective Action Clauses (CACs)’, available at http://europa.eu/efc/sub_committee/pdf/common_understanding_cacs_ en.pdf . See also 
‘Implementation of the EU commitment on Collective Action Clauses in documentation of International Debt Issuance’, 
available at http://europa.eu/efc/sub_committee/pdf/cacs_en.pdf .  
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3 2.5 The explanatory memorandum to the draft provisions  provides that “ The public sector (ΕU, ECB) 
has demonstrated its support to the programme of reforms of the Greek economy, including the 
earmarking of an amount of EUR 30 billion for the restructuring of debt held by private sector 
creditors; it has also demonstrated, via the Eurosystem and the European Central Bank’s 
programme for intervening in the bond markets SMP, its commitment to the stability of the 
European financial sector. In the conte xt of materializing the above -mentioned commitments and 
while waiting for the exchange to be proposed to private sector creditors, the Hellenic Republic 
acknowledges the above support of the European Central Bank and the other Eurosystem members 
considering the higher interests of the Greek economy and the continued functioning of the 
Eurosystem monetary policy framework. ” 
2.6 The ECB notes that it remains the sole responsibility of the Government of the Hellenic Republic 
to take the necessary action that will ultimately ensure its debt sustainability.  
 
3. Definition of bondholders  
The draft provisions  define bondholders as participants in the System rather than as the beneficiaries of 
the bonds. However, t hey do not explain how System participants are to vote for the modification of the 
terms of  eligible securities , including where they have no active portfolio management rights over t hem, 
or how the voting is to take place , both procedurally and substantively . For reasons of legal certainty , and 
with a view to protecting the legitimate expectations of the bondholders of eligible securities, the draft 
provisions  should in clude s uch details .  
 4.  Disenfranchisement  
Paragraph 5 of the first Article of the draft provisions provides for the disenfranchisement of eligible 
securities directly owned by the Greek State , and also in the case of  eligible securities guaranteed by the 
Greek State, eligible securities directly owned by the issuer . The ECB understands that, as provided for in 
the explanatory memorandum to the draft provisions, this provision does not disenfranchise certain public 
sector entities not forming part  of the Greek State, i.e. public law legal persons, local government 
authorities or private law legal persons of the public sector. The Report of the G -10 Working Group on 
Contractual Clauses
6 recommended a mechanism for disenfranchising bonds directly or indirectly owned 
or controlled by the sovereign issuer, and its public sector instrumentalities , to address creditor concerns 
about manipulation of vote s by a sovereign.  The disenfranchisement provisions of the draft provisions 
could be widened to protect the integrity of the voting process . 
 
                                                 
6  See Report of the G -10 Working Group on Contractual Clauses, p. 5.  
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4 5.  Calculation method  
The draft provisions  do not stipulate the calculation  method for the outstanding principal of eligible 
securities issued as zero coupon, stripped or index -linked bonds. The matter is, instead, left to the 
PDMA’s invitation. For reasons of legal certainty , reliable statistical measurement of the debt  and 
protection of the legitimate expectations of the bondholders, the draft provisions should specify the 
calculation method for the above types of eligible securitie s.  
 
This opinion will be published on the ECB’s website.  
  Done at Frankfurt am Main, 17 February 2012.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI