EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
28 February 2012 
on the recapitalisation and resolution of credit institutions in Greece 
(CON/2012/14) 
 Introduction and legal basis
 
On 25 February 2012 the European Central Bank (ECB)  received a request from the Greek Ministry of 
Finance for an opinion on a draft law amending the legal framework for the recapitalisation and 
resolution of credit institutions in Greece  (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 third and sixth indents of Article 2(1) of Council Decision 
98/415/EC of 29 June 1998 on th e consultation of the ECB by national authorities regarding draft 
legislative provisions, as the draft law relates to the Bank of Greece and to rules applicable to financial 
institutions insofar as they materially influence th e 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 amends the Greek legal framewo rk for the recapitalisation and resolution of credit 
institutions. Article 1 amends Law 3864/2010 on the Hellenic Financ ial Stability Fund (hereinafter 
the ‘Law on the HFSF’). Article 2 amends Law 3601/2007 (hereinafter the ‘Law on banking’) and 
Article 3 amends Law 3746/2009 on the Helleni c Deposits and Investment Guarantee Fund 
(hereinafter the ‘Law on HDIGF’). These ame ndments are required by the Memorandum of 
Economic and Financial Policies
1.  
1.2 Amendments to the Law on the Hellenic Financial Stability Fund   
 The draft law reforms the governance structure of the Hellenic Financial Stability Fund (HFSF) by 
establishing a General Council and an Executive Bo ard and clarifying that the two bodies have 
responsibility for different functions. Furtherm ore, the draft law is intended to improve 
performance by the HFSF of its twofold mandate: ma nagement of its ownership interest in credit 
                                                 
1  Annex V to Law 4046/2012. FEK A 28/14.2.2012.   
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2 institutions, on behalf of the Government, and mana gement of transitional credit institutions (TCIs) 
established in accordance with Artic le 63E of the Law on banking. 
1.3 Amendments to the Law on banking   
 The amendments to the Law on banking aim to cl arify the procedures and allocation of tasks for 
valuing assets and liabilities and, thus, for the openi ng balance sheets of TCIs. Future resolutions 
will initially use, as their starting point, conserva tive asset valuations of failed banks’ assets, based 
on their fair value, and subsequently allow for proper due diligence and revaluation followed by 
complementary asset transfers within a specified time period. 
1.4 Amendments to the Law on the Helle nic Deposits and Insurance Guarantee Fund  
 The amendments to the Law on the HDIGF will strengthen the funding of the HDIGF depositor 
branch, inter alia , by: (i) increasing fees if its funds fall below a certain level of coverage of 
insured deposits, taking due account  of developments in the financial system; and (ii) ensuring 
adequate diversification of re-deposits of HDIGF  funds and gradually elim inating re-deposits in 
covered banks, in line with the restructuring of the Greek banking sector. The draft law also 
introduces rules on the management of conflicts of interest for HDIGF Board members. 
 2. General observations  
2.1 The draft law will align the Greek legislative fra mework for recapitalisation and resolution of credit 
institutions with the financial sector objec tives outlined by the Greek authorities in the 
Memorandum of Economic and Fi nancial Policies. Moreover, the ECB understands that in 
addition, the national authorities also intend to ha rmonise the Greek financial legislative framework 
with other objectives in the Memorandum in accordance with the time frame foreseen therein. 
These other objectives relate, inter alia , to the need to: (i) clarif y that the HDIGF’s status as 
privileged creditor does not impinge on claims secur ed with financial colla teral in the sense of 
Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial 
collateral arrangements
2 and follows best practice with respect to secured creditors in general; (ii) 
introduce a clear separation of the supervisory and resolution responsibilities within the Bank of 
Greece; and (iii) reform governance arrangements in the Bank of Greece and revise the structure 
and rights of Bank of Greece shareholders to elimin ate possible conflicts of interest in the Bank of 
Greece’s public policy role by end-December 2012. 
2.2 The ECB notes the strengthening of the HFSF’s role  and emphasises the need to clearly define its 
responsibilities, to ensure that the HFSF does not inadvertently interfere with the powers of the 
Bank of Greece as supervisory and resolution au thority and as guarantor of the stability of the 
financial system.  
                                                 
2  OJ L 168, 27.6.2002, p. 43. 
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3  
3. Amendments to the law on the HFSF 
3.1 In terms of the HFSF’s new dual governance stru cture, the ECB notes that to enable practical 
decision-making and in line with usual corporat e governance principles, it is important for the 
Executive Board members to be at the same time members of the Ge neral Council. In this respect, 
the ECB recommends amending the draft law to enab le this governance structure within the HFSF.  
3.2 The ECB welcomes the draft law’s requirement fo r ECB observers and their alternates to be invited 
to participate without voting rights in the H FSF’s General Council and Executive Board meetings3. 
The ECB’s observer status in the HFSF’s two bodi es is consistent with the rationale of Law 
3864/2010 establishing the HFSF, under which an ECB ob server was to be invited to participate in 
the Board of Director meetings4.  
3.3 In view of the Bank of Greece’s role as prudentia l supervisor and guarantor of the stability of the 
financial system, the ECB also welcomes the fact  that the Bank of Greece will appoint one member 
of the General Council and will designate one of the persons to be appointed as members of the 
Executive Board by the Minister for Finance. Moreover, the ECB welcomes that the Bank of 
Greece will also be represented in the Committ ee selecting the President and members of the 
General Council, the Managing Director and the members of the Executive Board5. The ECB notes 
that the draft law does not provide whether the member of the Executive Board designated by the 
Bank of Greece will at the time of appointment be a member of staff or an official of the Bank of 
Greece and suggests clarifying this in the draft la w. Moreover, the ECB suggests that the draft law 
could provide for participation in this Selec tion Committee by a representative from the ECB, in 
addition to one from the European Commission. 
3.4 The ECB draws attention to the fact that the draft law should foster best practice in terms of 
decision-making transparency and accountabilit y within the HFSF’s General Council and 
Executive Board. In this respect, the draft law s hould provide for the HFSF to adopt more detailed 
rules on how its affairs are managed as well as a code of conduct for members of the General 
Council and of the Executive Board. These should regulate, inter alia , procedures for both bodies’ 
meetings and the preparation of agendas and minutes. They should also provide rules and procedures for decision-making in emergency situations. 
3.5 According to Article 1(5) of the draft law, th e HFSF may participate in the increase of the share 
capital of credit institutions also through the issu ance of contingent convertible bonds. Article 1(7) 
of the draft law, inserting a new Article 7a in Law 3864/2010, provides that, in case of a capital increase of such a credit institution, the voting rights attached to the HFSF’s shares will be 
restricted, if the participation of private sector inv estors in the capital increase is at least 10% of the 
                                                 
3  Articles 1(2) and 1(3). 
4  Article 4(2)C of Law 3864/2010. 
5  Article 1(2), 1(3) and 1(4). 
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4 amount of the share capital increase. The ECB unde rstands that the conti ngent convertible bonds 
eligible for the own funds of the credit institu tion would not be included in the share capital 
increase of the bank when determining the Fund’s voting rights unless and until the event for their 
conversion into common shares has been triggered. Furthermore, the ECB considers that the rights of private investors could be clarified if the 10%  threshold of private sector participation in the 
capital increase under proposed Article 7a(3) is no t reached. In that case the ECB understands the 
private investors would still be issued certificates  representing rights to shares in proportion to their 
percentage participation in the capital increase, but  this is not expressly stated. Indeed, the first 
sentence of proposed Article 7(1) suggests the share certificates are only issued if the 10% 
threshold in Article 7a(3) is reached. 
 4. Amendments to the Law on banking 
4.1 Article 2(4) of the draft law amends Article 63 Β(4) of Law 3601/2007 on the conditions for 
activating resolution measures, whic h will provide that the Bank of Greece will, at its discretion, 
use adequate measures for the resolution of a credit institution, considering, inter alia , the need to 
allocate the eventual losses arising from the resolution of the credit institution to shareholders, to 
unsecured creditors and to depositors not cove red by Law 3746/2009. While the ECB understands 
this reflects the need to limit the costs of resolu tion, it nevertheless notes that this may compromise, 
if not exclude, the transfer of uncovered depos its, which should in any case remain an option.   
4.2 Article 2(6) of the draft law allows the Bank of Greece, within six months from the issuance of a 
decision activating a transfer of assets, to transf er further assets of the credit institution subject to 
the resolution measure or to transfer back to the latter assets that have already been transferred to 
the transferee credit institution. The difference be tween the value of the transferred liabilities and 
the value of the transferred assets will be adjusted  accordingly. The same holds under Article 2(9) 
of the draft law in respect of further transfers to or from the TCI
6. The ECB understands that these 
provisions serve the purposes of the resolution pro cedure, as defined in the Law on banking, and, 
therefore underlines that, for the sake of efficien cy of the procedure and legal certainty, such 
decisions by the Bank of Greece should be implemen ted also by the HFSF in a timely and efficient 
manner. 
 5. Amendments to the Law on the HDIGF  
As regards the regime on conflicts of interest for members of the Executive Board of the HDIGF, 
Article 3(5) of the draft law, which replaces the last  sentence of Article 23(4)  of Law 3746/2009, provides 
that ‘the two members of the Executive Board nominat ed by the Hellenic Banks Association must not be 
                                                 
6  Pursuant to Article 63E of the Law on banking, the Minist er for Finance may decide in the public interest and on 
recommendation from the Bank of Greece to establish a TCI to  whom the Bank of Greece may compel a credit institution 
to transfer the whole or part of its assets and /or liabilities under the procedur e set out in Article 63D. 
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5 actively involved in the credit institu tions participating in the HDIGF and,  in relation to these, there must 
be no ground for conflict of interests stemming, on the one hand, from their participation in HDIGF’s 
Board and, on the other hand, from any relationship they  may have with participating credit institutions’. 
The ECB considers the criterion of ‘active involvement  in credit institutions participating in the HDIGF’ 
is too vague to prevent conflicts of interest in  respect of HDIGF Board members. The regime for 
members of the Executive Board of the H SFS should also apply to the HDIGF Board7. 
 
This opinion will be published on the ECB’s website.  
  Done at Frankfurt am Main, 28 February 2012. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI 
                                                 
7  See Article 1(8) of draft law introduci ng a new Article 16B in the Law on the HSFS.