EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 25 February 2021  
on the participation of the H ellenic Financial Stability Fund in increases in the capital of credit 
institutions for purposes other tha n precautionary recapitalisation  or resolution  
(CON/20 21/6) 
 
Introduction and legal basis  
On 8 February 2021  the European Central Bank (ECB) received a request from the Greek Ministry of 
Finance  for an opinion on a draft law on the participation of the Hellenic Financial Stability Fund ( HFSF ) in 
increases in the capital of credit institutions which cannot be characterised as  capital support  (for the 
purposes of precautionary recapitalisation) or as public financial support ( as part of  a resolution)  
(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 sixth indent  of Article  2(1) of Council Decision 98/415/EC1, as 
the draft law relates 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 law  
1.1 The draft law enables the HFSF to decide in connection with a capital increase whether to: 
(i) exercise some or all of its pre- emption rights; (ii) subscribe,  up to its existing shareholding 
percentage, for shares or other instruments of ownership2 issued as part of  such capital increase 
(including capital increases where pre- emption rights have been waived or restricted) ; (iii) in the case 
of a credi t institution which has been subject to a corporate reorganisation or group restructuring, 
participate,  up to its existing shareholding percentage,  in the issuance of new shares or other 
instruments of ownership by the relevant holding entity and/or the cr edit institution which will carry 
on the banking operations of the group,  as the case may be; or  (iv) to subscribe one or more 
unallocated shares resulting from a capital  increase or from issuances of other instruments of 
ownership, if distributions of such shares or instruments are foreseen. In order for a  capital increase 
to be eligible for the purposes of  (i) to (iv) above: (a)  it must be a credit institution or , in the case of 
 
1  Council Decision 98/415/EC of 29  June 1998 on the consultation of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).  
2  As defined in Article 2, internal Article 2(1)  point (107) of Law 4335/2015 (Government Gazette Α’87/2015 ) which 
transposes point (61) of Article 2(1) of Directive 2014/59/EU of the European Parliament and of the Council of 5 May 
2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending 
Council Dire ctives 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 
2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2012 and (EU) No  648/2012, of the 
European Parliament and of the Council (OJL 173, 12.6.2012, p. 190).  
ECB -PUBLIC  
2 a corporate reorganisation or group restructuring,  the holding entit y and/or credit institution which will 
carry on the banking operations of the group3 that is increasing its capital ; (b) the participation of the 
HFSF in that capital increase must not constitute capital support within the meaning of the Law on 
the HFSF4; and (c) private investors ’  participation in that capital increase must be o f real economic 
significance and on the same terms and conditions and,  therefore, with the same level of risk and 
rewards ( ie participation on a pari passu basis ). 
1.2 The draft law enables the HFSF , at its discretion and by decision of its General Council , to exercise 
the special veto r ights referred to in the Law on the HFSF5 in order to prevent the issuance of shares 
or other instruments of ownership by the credit institutions in which it retains a holding or , if a credit 
institution has been subject to a corporate reorganisation  or gr oup restructuring, by the credit 
institution that will carry on the banking operations of the group or by the holding entities of credit 
institution( s), if the terms of that issuance waiv e or restrict the pre- emptive rights of the existing 
holders of shares or other instruments of ownership. The exercise of these  special veto rights by the 
HFSF does not oblig e the HFSF to exercise its pre -emptive rights in whole or in part, if subsequently 
a decision to launch a capital increase with pre- emptive rights is adopted.  
1.3 The draft law provides that the participation of the HFSF in the capital increases set out in paragraph 
1.1 above takes  place by decision of its General Council, taken following a report by two independent 
financial advisors confirming that the proposed participation in the issue of new shares or other 
instruments of ownership contributes to maintaining, protecting or improving the value of the HFS F’s 
existing shareholding in the capital of the issuer or the prospects for di vesting  its shareholding, taking 
into account prevailing market conditions at the time and the business plan forecasts of the relevant 
credit institution at the time the credit institution decided to increase its  share capital increase or issue 
other instruments of ownership.  
1.4 The draft law also stipulates that t he registration for, subscription  for, and taking up of shares or other 
instruments of ownership by the HFSF in the context of these capital increases must  be: (a) at an 
acquisition price not  higher , and on terms not more onerous , than those applicable to the ot her 
shareholders of the issuer ; (b) without prejudice to the existing rights of the HFSF arising from its 
framework agreements with credit institutions referred to in the Law on the HFSF6; and (c) financed 
exclusively from HFSF’s own liquid  funds  or from the reinvestment of the proceeds  of a prior asset 
disposal.  
1.5 The new shares or other instruments of ownership thus acquired must  confer on the HFSF full 
shareholder or ownership rights, including voting rights, but shall not confer , inter alia,  the special 
rights referred to in the Law on the HFSF7. In the event of a partial divestment of its holdings in a 
 
3  Within the framework of Law 4548/2018 on reforming the Law on sociétés anonymes (Government Gazette 
A’ 104/13.6.2018).  
4  See Articles 6, 6a, 6b and 7 of law 3 864/2010 ‘on the establishment of a Financial Stability Fund’ Government  Gazette 
A 119/21.07.2010(Law on the HFSF) . 
5  See Article 10(2) of the Law on the HFSF.  
6  See Article 6(4) of the Law on the HFSF.  
7  These rights include the HFSF’s right to appoint a representative on the credit institution’s board of directors who may  
veto certain decisions of the credit institution’s board, convene a general assembly of shareholders or a board meeting 
or approve the appointment of a chief financial officer; the HFSF’s right of access to the credit institution’s books and 
records; the HFSF’s right to evaluate the credit institution’s corporate governance; the HFSF’s right to lay down criteria 
for the assessment of the credit institution’s governing bodies. See Article 10 of the Law on the HFSF.  
ECB -PUBLIC  
3 credit institution or holding  entity by the HFSF, the ordinary shares or instruments of ownership 
acquired by the HFSF by the exercise of its rights under the draft law  are deemed to be disposed of 
first, from among the other instruments of ownership of the same category  HFSF holds in that credit 
institution or holdi ng entity  (‘last in, first out’), such that the special rights of the HFSF under the  Law 
on the HFSF8 are maintained in full for as long as the HFSF continues to retain a participation in that  
credit institution or holding entity . 
1.6 The draft law also provides  that the new shares and/or other instruments of ownership acquired in 
the context of the HFSF’s participation as an investor  in credit institutions  may be disposed of by the 
HFSF by exemption fr om the rule to submit a mandatory takeover bid per Article 7 of Greek law  
3461/20069. 
1.7 The current Law on the HFSF provides that for all types of divestments ( be it decreases in its holdings 
via partial exercise of its pre -emptive rights in a capital increase or  ordinary disposals of bank shares 
held by the HFSF), the acquisition price (for the former) and the sale price (for the latter) may be 
lower than the most recent price at which HFSF acquired shares or the current market price of the 
share, provided that  such divestments fall within the mandate of the HFSF and there is a  report of 
two independent financial advisors of esteemed reputation exper ience d in evaluating credit 
institutions  and related matters . The draft law additionally provides  that if this designated procedure 
is followed, this is deemed to constitute a diligent management of its  property by the HFSF and that  
if this type of divestment proves  ultimately detrimental to the HFSF’s property, criminal charges may 
only be brought  if the HFSF itself decides  to trigger a criminal prosecution under the relevant 
provisions of  the Greek Criminal Code10. 
1.8 The draft law eliminate s the provision in the Law on the HFSF that ascribes to the HFSF , together 
with the Greek State,  priority ranking, compared to all other shareholders, in the proceeds from the 
liquidation of a credit institution.  In addition, the draft law revises the description of the capital 
instruments listed in the Law on the HFSF11 (in the context of allocating the capital shortfall of a credit 
institution to holders of capital instruments, as deemed appropriate), so that this description  follow s 
the description of Articles 26 (C ommon Equity Tier 1 items) and 31 (capital instruments s ubscribed 
by public authorities in emergency situations) of Regulation (EU) No 575/201312. 
1.9 Finally , the draft law assigns the judicial and extra- judicial representation of the HFSF to the General 
Council of the HFSF for all matters except those listed in the Law on the HFSF13 in respect of which 
 
8  See Article 10 of the Law on the HFSF.  
9  Law 3461/ 2006 ‘Ενσωμάτωση στο Εθνικό Δίκαιο της Οδηγίας 2004/25/ΕΚ σχετικά με τις δημόσιες προτάσεις’ 
(Government Gazette Α 106/30.5.2006), transposing Directive 2004/25/EC of the European Parliament and of the 
Council of 21 April 2004 on takeover bids (OJ L 142, 30.4.2004, p. 12).  
10  See Articles 390 and 405(1), second sentence, of the Greek Criminal Code (Law 4619/2019, Government Gazette 
Α 95/11.06.2019) . 
11  See Article 6A of the Law on the HFSF.  
12  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential 
requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 
27.6.2013, p. 1).  
13  See Article 4(10) of the Law on the HFSF.  
ECB -PUBLIC  
4 the HFSF is represented by the Executive Board14. The draft law also provide s that HFSF ’s General 
Council will be generally responsible for carrying out all tasks assigned to the HFSF, except for those  
tasks which  have been expressly assigned to HFSF’s Executive Board . 
 
2. General observations  
2.1 The E CB welcomes the fact that the draft law enables the HFSF to participate going forward as an 
investor in share capital increases of a Greek credit instit ution for purposes other than to provide 
capital support to cover capital shortfalls in a resolution scenario or as a precautionary 
recapitali sation or as a  public equity support measure. The ECB also welcomes the safeguards 
introduced by the requirement of the draft law that the HFSF m ust participate in such capital 
increases alongside private investor participation of real economic significance and under  the same 
terms and conditions as those private investors , in line with the relevant U nion legal framework.   
2.2 The ECB welcomes the flexibility afforded to the HFSF to decrease its holdings by participating in 
such capital increases  (for example by exercising only part of its pre- emptive rights in a capital 
increase, or by participating in capital increases where the pre- emptive rights are waived ), while 
being in a position to subscribe for unallocated shares or other instruments of ownership issued in 
such capital increases . 
2.3 The ECB considers that the above provisions of the draft law will contribute to the ability of Greek 
credit institutions in which the HFSF holds a participation to address both legacy vulnerabilities and 
additional challenges that may arise from the impact of COVID -19 on the asset quality  and capital 
adequacy of Greek credit institutions and from a future gradual lifting of the protective measures that 
have been taken by the Greek State in response to them to date. These provisions of the draft law 
should facilitate Greek credit institutions in their strategies to attract additional capital at market 
conditions, while at the same time affording them flexibility in their relevant planning for possible 
corporate reorganisations within the ir banking groups . In that context, it is also important that the 
draft law allows the HFSF to participate in  offerings  of shares or other instruments of ownership 
irrespective of whether the issuer and/or offeror of such shares or instruments is the credit institution 
itself or the holding entity of the credit institution following a reorganisation of the banking group (e.g. 
following a ‘hive- down’ restructuring). At the same time, t he ECB recogni ses the divestment of shares 
held in credit institutions as a strategic objective of the HFSF15 for the medium term and in line with 
its mandate so that Greek credit institutions gradually return to private ownership.  The ECB wishes 
to emphasise the importance it attaches to the stability  of the financial system in Greece and to the 
need to strengthen the intermediary role of the banking system to finance the real economy and 
support economic growth, while restoring access to market -based capital for credit institutions on 
commercial terms16. 
 
14  Namely tasks relating to the administration of the HFSF, procurement -related tasks, entering into contracts on behalf 
of the HFSF, hiring of personnel, delegations of tasks to any of the Exe cutive Boards’  members or to HFSF personnel, 
making recommendations to HFSF’s General Council in respect of the General Council’s tasks, and implementing the 
decisions of the General Council.  
15  The recently published HFSF strategy for 2021- 2022 also recog nises the ‘aim of returning systemic banks to private 
ownership’ as part of the HFSF’s objectives. See https:// hfsf.gr/wp -content/uploads/2021/02/Agenda- item-2-HFSF-
Strategy -Review -Workshop -results -for-Website- slides -2-3-5-ONLY.pdf .  
16  See Opinion CON/2014/29, paragraphs 3.2, 6.1 and 6.2.  
ECB -PUBLIC  
5 2.4 The ECB welcomes the provisions  of the draft law aligning the classification of the HFSF shares in 
credit institutions with the provisions of  Regulation (EU) 575/2013.  
2.5 The ECB reiterates the importance for independent decision- making by the HFSF bodies , which is 
ensured by the envisaged amendment regarding the judicial and extra- judicial representation of the 
HFSF by the General Council  that also contributes to a clear allocation of competences and 
responsibilities among the HFSF decision- making bodies . Any amendment to the HFSF’s 
governance structure should be geared towards enabling the HFSF to pursue effectively and deliver 
on its critical mandate to maintain the stability of the Greek banking system,  while minimis ing costs 
for taxpayer s17. 
 
This opinion will b e published on EUR -Lex.  
 
 
Done at Frankfurt am Main, 25 February  2021.  
 
[signed]  
 
The President of the ECB  
Christine  LAGARDE  
 
17  See Opinion CON2010/54, also paragraphs 2.1 and 2.8 and Opinion ECB/2013/ 38, paragraph 4.3.