EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 7 June 2004 
at the request of the Ministry of Finance of the Netherlands 
on a draft Financial Sector Supervision Act 
(CON/2004/21)  
 1. On 6 May 2004 the European Central Bank (ECB) received a request from the Ministry of Finance 
of the Netherlands for an opinion on the Voorstel Wet op het financieel toezicht  (draft Financial 
Sector Supervision Act – hereinafter the ‘draft act’). 
2. The ECB’s competence to deliver an opinion is b ased on the third, fifth 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 re garding draft legislative provisions
1, as the draft act 
concerns national central banks (NCBs), payment and settlement systems and rules applicable to 
financial institutions in so far 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. 
3. Previously De Nederlandsche Ba nk (DNB) was in charge of supervising credit institutions and 
investment firms, while the Pensions and Insu rance Supervisory Authority Foundation (PVK) was 
in charge of supervising insurance companies a nd pension funds and the Authority for Financial 
Markets (AFM, previously STE) was in charge of  supervising securities firms and markets. Under 
the new functional model introduced by the draft act, DNB and the PVK after being merged under the name DNB will be responsible for prudential supervision of the entire financial sector. The 
AFM will be responsible for conduct of business su pervision and will focus on ensuring orderly 
and transparent financial market processes, clea r relationships between market entities and that 
consumers are treated with due care. 
The reforms proposed in the Parliamentary report are being implemented in two phases. The first 
phase involved adapting certain regulations and c oncluding covenants between  the two supervisors 
to redistribute their respective supervisory res ponsibilities. This phase was completed in September 
2002. In the second phase other laws  will be amended to take account  of this new situation. The 
first legal act to be proposed in this phase is the proposed law on provisions concerning the merger 
                                                     
 
1 OJ L 189, 3.7.1998, p. 42. 
2 of DNB and the PVK, on which the ECB was consulted in October 2003 (CON/2003/23)2. The 
ECB refers to this opinion with regard to th e statements made on DNB’s role in prudential 
supervision and protecting the qua lity of supervision while reducing administrative costs. In the 
current opinion the ECB addresses only issues raised by the section of the draft act on which it is consulted. 
The draft act is divided into five sections. S ection one sets out general provisions; section two 
covers prudential supervision; section three deal s with market conduct supervision; section four 
concerns infrastructure supervision; and section five contains final a nd transitional provisions. 
Section two assigns responsibility for prudential supervision to DNB whereas responsibility for 
market conduct supervision is assigned to AFM under section three. Under section four 
infrastructure supervision is a shared competence of both DNB and the AFM. The current consultation of the ECB relates only to section one. 
4. The ECB welcomes the fact that, having thoroughly considered the different approaches adopted in 
other Member States and elsewhere, the Dutch au thorities have adopted a functional division of 
labour with regard to supervisi ng the financial sector. In particular, the draft act envisages 
allocating regulatory and supervisory tasks on the basis of the functional approach as follows: DNB 
will be responsible for safegua rding financial stability and fo r the prudential regulation and 
supervision of the entire financial sector, while  the AFM will be responsible for conduct of 
business supervision as described above. This al location of tasks demonstrates a very good 
understanding of current financial system deve lopments and addresses the supervision of this 
changing market effectively, fully acknowledging DNB’s essential role in promoting the safety and 
soundness of financial institutions and the stability of the financial system as a whole.  
The ECB welcomes the proposed institutional frame work, in particular in so far as it pursues a 
functional model that organises the instruments and responsibilities of financial regulation and 
supervision around the two primary public objectives in this area, namely that: (i) DNB is mandated with a clear financial stability objec tive and entrusted with extensive supervisory 
responsibilities over individual financ ial institutions; and (ii) the AF M is entrusted with the main 
task of market conduct supervision. The new structure acknowledges the growing importance of financial groups that provide different types of fi nancial services. In order to address the specific 
prudential concerns related to such groups a nd ensure an overall level playing field among 
competing intermediaries, an effective coor dination between the supervisory policies and 
regulation in all sectors of financ ial activity is also required.  
From the ECB’s perspective, this approach rec ognises the distinct character of the two goals of 
financial stability and investor protection, taking in to account that the nature and scope of systemic 
risk is widening due to the closer links be tween credit institutions, insurance companies, 
                                                     
 
2  The law on which the ECB was consulted concerned the formal merger of the two bodies into one authority. The scope of 
its non-ESCB related tasks remained to be fo rmally defined in the draf t Financial Supervision Act. The draft merger act is 
currently being discussed in Parliament. 
3 investment firms and pension funds. At the same ti me, it should be noted that financial stability and 
investor protection are complementary objectives and must be pursued consistently by the authorities to which they are entrusted, with both authorities acting in close cooperation.  
5. The ECB notes as a matter of general concern that the Minister of Finance’s influence over the 
supervisory authorities is increased. The ECB welcom es the fact that supervisors are to be held 
accountable for their actions, as this will enhance their efforts to maintain the highest possible 
standards of supervision. The ECB understands that  the role of the Minister will continue to be 
based on the principle of ‘supervision at a distan ce’. This principle guarantees relative autonomy to 
the supervisors, implying that the Minister of Fi nance will only carry out an investigation into the 
Act’s adequacy or the way in which the supervisor implements or has implemented it where his ‘at a distance’ responsibility requires it. The Minist er of Finance monitors the exercise of the 
supervision and must be able to form a correct  assessment of the manner in which the supervisor 
implements or has implemented the law. Ho wever, it should be acknowledged that such 
accountability cannot apply to DNB’s ESCB-related f unctions. While it is recognised that the draft 
act in no way intends to affect these tasks, ne vertheless, the ECB would welcome an explicit 
statement regarding the scope of th is important principle. Furtherm ore, a similar qualification could 
usefully be introduced in Article 1(2)(1) of the draft act. 
6. A number of important general definitions will be  provided in Article 1(1)(a) of section one. The 
list of definitions is currently incomplete. The ECB notes that the explanatory memorandum states 
that only where definitions under the draft act ne ed to differ from definitions provided in other 
legal acts will they be defined in the draft act. The ECB underlines that that all terms and definitions, e.g. electronic money, branch office, qualified holding and credit institution, should be 
in line with those already existing in EU Regulations or Directives such as, inter alia , the 
Consolidated Banking Directive
3, the E-money Directive4 and the Directive on Markets in 
Financial Instruments5. 
7. Article 1(2) of section one details the budgetary framework for the supervisory bodies under the 
draft act. The draft act requires both supervisory bodies to submit their budgets, where these concern the supervisory tasks undertak en in accordance with sections tw o to four, to the Minister of 
Finance for approval. It should be noted that  the 1998 European Monetary Institute (EMI) 
Convergence Report states that where third parties, in particular the Government, are in a position, 
directly or indirectly, to exercise influence on th e determination of an NCB’s budget, the relevant 
statutory provisions should contain a safeguard  clause that this does not impede the proper 
performance of the NCB’s ESCB-related tasks. Th e ECB considers it essential that approval from 
                                                     
 
3  Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and 
pursuit of the business of credit institutions, OJ L 126, 26.5.2000, p. 1. 
4  Directive 2000/46/EC of the European Parliament and of  the Council of 18 September 2000 on the taking up, pursuit of 
and prudential supervision of the business of electr onic money institutions, OJ L 275, 27.10.2003, p. 39 
5  Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial 
instruments amending Council Directiv es 85/611/EEC and 93/6/EEC and Dire ctive 2000/12/EC of the European 
Parliament and of the Council and repealing Council Directive 93/22/EEC, OJ L 145, 30.4.2004, p. 1. 
4 the Minister is restricted to the budget for pr udential supervision tasks and would recommend 
including wording that specifica lly excludes approval of the budget for ESCB-related tasks of 
DNB.  
Under Article 1(2)(l) the Minister of Finance has the authority to request any information required 
to assess the feasibility of general policy intentions and draft legal provisions, where these relate to 
the supervision to be carried out by the supervis or in accordance with the draft act. The ECB notes 
that a similar provision exists in current fina ncial supervisory legislation. The ECB understands 
that this provision does not apply to DNB’s ESCB-re lated tasks. Indeed, Article 18(2) of the Bank 
Act 1998 already lays down DNB’s obligation to pr ovide information to the Minister of Finance 
when so requested. However, here the obligation is  qualified by the need to take into account the 
relevant provisions of the Treaty and the Statute of the European System of Central Banks and of 
the European Central Bank. 
8. Article 1(2)(h) of section one requires any proposed amendment to the Statutes of the supervisory 
authorities be submitted to the Minister of Finance for prior consent. The current wording of this 
provision is incompatible with Article 108 of th e Treaty in so far as it concerns DNB. Under 
Article 108 of the Treaty, when exercising the powers and carrying out the tasks and duties conferred upon it by the Treaty and the ESCB/ECB St atute, neither an NCB nor any members of its 
decision-making bodies will seek or take instructions from, inter alia , any government of a 
Member State or from any other body. The ECB recognises that the Government will be involved 
in any proposed amendment to DNB’s Statute in its  capacity as sole shareholder in DNB. However, 
this Article should not extend to amendments to provisions of DNB’s Statute that concern DNB’s 
ESCB-related tasks or both its ESCB-re lated and non-ESCB-related tasks.  
9. The ECB understands that the provisions on intern ational cooperation and confidentiality will 
provide that DNB may cooperate with other third country supervisors and pass on information on 
the basis of reciprocity, if all other conditions are met. The ECB understands that these provisions 
will be interpreted in accordance with the rele vant provision of DNB’s Statute and the Bank Act 
1998, which ensure compliance with DNB’s obligations under the Treaty and the ESCB/ECB Statute.  
The ECB notes that the draft article 1(5)(1 )(f) would allow DNB and the AFM to exchange 
confidential information with the ECB, a foreign central bank or other foreign institution, to the 
extent that this is conducive to fulfilling the E CB’s, a foreign central bank’s or other foreign 
institution’s ‘monetary task’. The drafting of th e latter part of this Article appears to be 
insufficiently comprehensive. This term ‘monetary  task’ could be narrowly interpreted as excluding 
the ECB’s and EU NCBs’ tasks in the field of ‘the smooth operation of payment systems’ and 
contributions ‘to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system’. To ensure 
an optimal exchange of information in th is area the ECB would recommend redrafting 
Article 1(5)(1)(f) so that it includes an explic it reference to all ‘ESCB-related tasks’.  
5 10. The ECB notes that due to the individual drafting schedules for the five sections of the draft act, it 
is not possible at this stage to provide a comprehensive opinion on the full scope of the restructuring of the supervisory framework. The ECB looks forward to being able to supplement 
this opinion when it is consulted on the other sections. 
11. The ECB confirms that it has no objection to the competent national authorities making this 
opinion publicly available at their discretion. Th is opinion will be published on the ECB’s website 
six months after the date of its adoption. 
  Done at Frankfurt am Main, 7 June 2004. 
  
[signed]  
The President of the ECB 
Jean-Claude TRICHET