EN ECB-PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 1 July 2015 
on recovery and resolution in the financial market 
(CON/2015/22) 
 
Introduction and legal basis 
On 27 March 2015 the European Central Bank (ECB) received a request from the Czech Ministry of 
Finance (MoF) for an opinion on a draft law on recovery and resolution in the financial market (hereinafter the ‘draft law’) and on a draft law amending certain laws connected with the adoption of the draft law
1 
(hereinafter the ‘draft amending law’; together with the draft law, the ‘draft laws’). The MoF asked for the adoption of the ECB’s opinion on an urgent basis within one month in line with Article 3 of Council 
Decision 98/415/EC of 29 June 1998
2. 
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 (the ‘Treaty’) and the third and sixth indents of Article 2(1) of 
Decision 98/415/EC, as the draft laws relate to Česká národní banka ( ČNB) and rules applicable to 
financial institutions insofar as they materially influe nce the stability of financial institutions and markets. 
For elements of the draft laws the exclusive purpose of which is the implementation of Union law, the 
ECB’s competence to deliver an opinion is based on Article 25.1 of the Statute of the European System of 
Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). In accordance 
with the first sentence of Article 17.5 of the Rule s of Procedure of the European Central Bank, the 
Governing Council has adopted this opinion. 
 1.  Purpose of the draft laws 
1.1 The purpose of the draft laws is to implement into Czech law Directive 2014/59/EU of the 
European Parliament and of the Council (the Bank Recovery and Resolution Directive, or ‘BRRD’)
3, thereby providing a legal framework for the recovery and resolution of certain types of 
entities participating in the financial markets, in cluding credit institutions, investment firms, and 
                                                 
1  Draft law on recovery measures and resolution of crisis in the financial markets ( Navrh zakona o ozdravnych 
postupech a reseni krize na financnim trhu)  and draft law amending certain other laws in connection with the 
adoption of that law ( Navrh zakona kterym se meni nektere zakony v souvislosti s prijetim zakona o ozdravnych 
postupech a reseni krize na financnim trhu ). The versions of the draft laws provided by the MoF were its draft 
proposals of 19 March 2015 after conclusion of an inter-ministerial consultation. 
2  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). 
3  Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for 
the recovery and resolution of credit institutions and investment firms and amending Council Directive 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 1093/2010 and (EU) No 648/2012, of the European Parliament and of the 
Council (OJ L 173, 12.6.2014, p. 190). 
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2 financial holding companies that have their head office in the Czech Republic (hereinafter 
‘obliged entities’)4.  
1.2 The draft law regulates plans and procedures for the recovery and resolution of obliged entities at 
both individual and group level, the status and powers of the competent supervisory authority and resolution authority, and the procedures under which they may intervene in distressed entities or 
subject them to resolution measures in the event that they are failing or likely to fail
5. The main 
provisions of the draft law dealing with resolution tasks are as follows. 
 ČNB, which is the competent authority for supervising the Czech financial markets, is 
designated as the resolution authority and ČNB’s tasks are broadened to include taking 
specified recovery and resolution measures in respect of obliged entities6. 
 ČNB is further required to ensure the operational independence of its resolution unit, which 
has been set up within ČNB by an internal regulation. 
 To resolve a financial crisis situation at an obliged entity, ČNB may apply a number of ‘crisis 
resolution measures’7. These measures include, besides the resolution tools provided for by 
the BRRD8, direct administration, which entails ČNB taking control of an institution for an 
undefined period by suspending the functions of its statutory and supervisory organs and taking decisions in their stead, either by itself or through a ČNB-appointed employee
9. 
 In general, ČNB may exercise its resolution powers without limitation or approval. However, 
ČNB may only apply a crisis resolution measure or order a capital write-down or debt 
conversion upon the prior approval of the MoF if the proposed action either: (a) requires the 
use of resources from public funds, provides for the introduction of a State guarantee, or the use of a bridge institution or an asset management entity; or (b) requires the use of 
resources from the Fund for Crisis Resolution (hereinafter the ‘Resolution Fund’) or from the Deposit Guarantee Scheme (hereinafter the ‘Scheme’) amounting to more than 60% of their 
available assets
10. 
 ČNB is authorised to collect any expenses properly incurred due to the taking of resolution 
actions from obliged entities and other prescribed persons11, and preferential ranking in 
insolvency is accorded to such claims and to claims arising from loans made by ČNB to 
obliged entities12. 
                                                 
4  See Article 2 of the draft law, which defines the obliged entities in accordance with the definitions in Article 2 BRRD. 
5  Articles 1 and 4 of the draft law. 
6  Article 5 and Part Six of the draft law. 
7  Part Six, Title II of the draft law. 
8  Articles 35 and 37 of the BRRD. 
9  Article 81 of the draft law. 
10  Article 214(1) of the draft law. 
11  Article 165(1) and (2) of the draft law. 
12  For the purposes of Article 168 of Law No182/2006 Coll. on Insolvency. The draft amending law sets out the order of 
preference of creditor claims, including, for example, the claims of covered depositors and those of the Scheme, but without making reference to the preferential claims of ČNB. See the proposed new Article 374 of Law No168/2006 
Coll. on insolvency. 
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3  The State is expressly required to pay ČNB’s properly incurred expenses in carrying out 
certain early intervention and resolution relat ed tasks, if the obliged entity does not have 
sufficient assets from which to make payment13. 
1.3 The draft law also lays down arrangements for financing the cost of resolution and minimising the 
need for State financing of resolution measures. In particular, the draft law: 
 establishes the Resolution Fund for the financing of resolution measures, to which 
institutions established in the Czech Rep ublic and Czech branches of institutions 
established in non-Member States are required to contribute14, and sets out the sources of 
its funding and how those funds may be used; 
 sets up the Guarantee System for the Financial Market (GSFM), a separate legal entity, to 
administer in its own name the Resolution Fund and the existing Scheme15. GSFM is a sui 
generis  entity16 and is expressly stated not to be a State fund under Czech law17. The 
Resolution Fund and the Scheme are not legal entities but separate accounting units, with 
separate sources of financing. The financial resources of each fund are ring-fenced by law and are required to be used exclusively for the legally prescribed purposes of that fund. 
The funds do not belong to the GSFM
18. Thus, the claims of creditors of either fund arising 
from performance of the fund’s functions may on ly be met from the assets of that fund; 
 provides for the governance of the GSFM through a five-person Supervisory Council 
whose members are appointed and dismissed by the MoF. The Supervisory Council is 
composed of two members nominated by the MoF, two members nominated by ČNB and 
one member nominated by the Czech Banking Association19; 
 requires the GSFM, ČNB and the MoF to cooperate closely in carrying out their respective 
tasks and activities including any exchange of information20. 
1.4  The draft law makes a number of consequential amendments to related laws, including:  
 to provide that in the event that the Sche me does not have sufficient available financial 
resources and this situation could affect  the stability of the financial markets ČNB may, on 
application, provide it with a short-term loan for a maximum period of three months, 
guaranteed by government bonds or other State-guaranteed securities that are held by the Scheme
21;  
                                                 
13  For example, under Article 41(6) of the draft law for the costs of putting an institution under temporary administration, 
under Article 47(3) for the costs of valuation of the institution prior to resolution, and under Article 81(5) for the costs 
of direct administration. 
14  Article 195 et seq. of the draft law (Part 9, Title II). 
15  Article 185 et seq. of the draft law (Part 9, Title I). 
16  Article 185 et seq. of the draft law. 
17  I.e. within the meaning of Czech National Council Law No 576/1990 Coll. on the rules for financial management of 
the budgetary funds of the Czech Republic a nd of municipalities in the Czech Republic. 
18  Article 185(5) of the draft law. 
19  Part Nine, Articles 185-188 of the draft law. 
20  Article 194 of the draft law. 
21  See new Article 33a which will be inserted into Law No 6/1993 Coll. On ČNB, and new Article 41a(4), which will be 
inserted into Law No 21/1992 Coll. on banks. 
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4  to specify that such loans and repayable financial assistance from ČNB form an additional 
source of funding for the Scheme’s contributory fund22. 
 
2. General observations 2.1 The ECB welcomes the draft laws, as they strengthen the tools and procedures available to ČNB 
for carrying out effective preventive measures, early intervention and effective resolution in line 
with the common framework of intervention powers, rules and procedures laid down in the BRRD. 
2.2  The ECB stresses, however, that it does not opine on whether the draft laws effectively discharge 
the obligations of the Czech Republic to implement the BRRD in Czech law, but rather on those 
provisions that may impact on the role and tasks of ČNB as a central bank and as a member of 
the European System of Central Banks (ESCB). 
2.3 The ECB underlines that, in the context of a proposed conferral of tasks on an ESCB member, it 
is necessary to assess such conferral against the prohibition of monetary financing under 
Article 123 of the Treaty. The ECB has developed t he following guidance, in the form of general 
and specific considerations, on the basis of which the ECB may decide whether a new task 
conferred on an ESCB national central bank (NCB) is to be considered a central banking task or a government task for the purposes of the monetary financing prohibition. 
2.3.1 General considerations  
First, the systematic categorisation of tasks assigned to NCBs as central banking or government 
tasks applies to genuinely new tasks that did not exist in the past or did not form an integral part 
of the central banking tasks already assigned to the NCB in the past. In recognition of the different Member States’ legal frameworks, central banking traditions and national set-ups, the 
tasks currently discharged by an NCB as central banking tasks are not reviewed and re-categorised, but may be reassessed if they are subject to legislative amendments of substance. 
Second , the principle of financial independence requires that the Member States may not put 
their NCBs in a position where they have insufficient financial resources to carry out their ESCB- or Eurosystem-related tasks, as applicable.  
Third , central banking tasks comprise in particular those tasks that are related to the tasks listed 
in Article 127(2), (5) and (6) of the Treaty. 
Fourth , new tasks conferred on an NCB which are atyp ical of NCBs’ tasks, or which are clearly 
discharged on behalf of and in the exclusive interest of the government or of other public entities, 
should be considered as government tasks. In that context, a distinction should be drawn 
between liquidity- and solvency-related tasks of NCBs. While, for purposes of the monetary financing prohibition, solvency support is a government task, liquidity-related tasks, the ultimate 
objective of which are to finance the economy, are central banking tasks. 
2.3.2  Specific considerations  
Resolution tasks discharged by central banks are considered central banking tasks provided that 
they do not undermine an NCB’s independence in accordance with Article 130 of the Treaty
23. 
                                                 
22  Pursuant to amendments to be made to Article 41a(4) of Law No 21/1992 Coll. on banks. 
ECB-PUBLIC  
5 However, the discharge of these tasks by central banks may not extend to the financing of 
resolution funds or other resolution financial arrangements as these are government tasks. This is without prejudice to the following: (i) the po ssibility that central banks may provide short-term 
financing to deposit guarantee schemes under certain conditions
24 and (ii) the possibility that 
NCBs may provide emergency liquidity assistance to solvent credit institutions. 
An important criterion for qualifying a new task as a government task is therefore the impact of 
the task on the institutional, financial and personal independence of the NCB. In particular, the 
following should be taken into account. 
First, it should be assessed whether the performance of the new task creates inadequately 
addressed conflicts of interests with existing central banking tasks, and does not necessarily 
complement those existing central banking tasks. If a conflict of interest arises between existing and new tasks, there should be sufficient mitigation  in place to adequately address that conflict. 
Complementarity between the new task and existi ng central banking tasks should not, however, 
be interpreted extensively, so as to lead to the creation of an indefinite chain of ancillary tasks. 
Complementarity should also be examined from the point of view of the financing of those tasks. 
Second , it should be assessed whether without new financial resources the performance of the 
new task is disproportionate to the financial or organisational capacity of the NCB and may 
negatively impact on its capacity to properly perform existing central banking tasks. 
Third , it should be assessed whether the performance of the new task does not fit into the 
institutional set-up of the NCB in the light of central bank independence and accountability 
considerations. 
Fourth, it should be assessed whether the performan ce of the new task harbours substantial 
financial risks. 
Fifth, it should be assessed whether the performance of the new task exposes the members of 
the NCB’s decision-making bodies to political risks which are disproportionate and may also 
impact on their personal independence and, in part icular, the guarantee of the term of office 
under Article 14.2 of the ESCB Statute. 
2.3.3 Any final assessment on the qualification of a task given to an NCB as either falling within the 
scope of a central banking task or  a government task will be guided by the objective of ensuring 
the consistent application of the prohibition of  monetary financing within the Eurosystem and the 
ESCB to the extent that it applies to its members. 
 
3. Specific observations 3.1 ČNB’s role in providing temporary liquidity to the GSFM  
3.1.1 ČNB will be authorised to provide under certain c onditions a temporary (for up to three months) 
State-guaranteed loan to the Scheme’s contributory fund
25. Although it is not stated expressly, 
                                                                                                                                                             
23     This position departs from the one set out in Opinio ns CON/2015/3 and CON/2015/2. All ECB opinions are available 
on the ECB website at www.ecb.europa.eu. 
24  See the ECB’s 2014 Convergence Report, p. 30. 25  In this regard, see paragraph 1.3 and footnote 21 for references to the proposed amendments to Law No 6/1993 
Coll. on ČNB and to Law No 21/1992 Coll. on banks. 
ECB-PUBLIC  
6 the ECB understands that an application for such a temporary or ‘bridging’ loan would come from 
the GSFM as administrator of the Scheme and that, if approved by ČNB in its sole discretion, the 
temporary loan would be provided under a contract between ČNB and the GSFM as debtor26. 
The draft law does not stipulate further the material terms and conditions (e.g. pricing terms) of any such loan. 
3.1.2 The ECB underlines that national legislation which provides for the financing by an NCB of a 
national deposit guarantee scheme for credit in stitutions will only be compatible with the 
monetary financing prohibition if such financing is short-term, addresses urgent situations, 
systemic stability issues are at stake and decisions are made in the NCB’s discretion. To this 
end, inserting references to Article 123 of the Treaty in national legislation should be considered. 
When exercising its discretion to grant a loan, the NCB must ensure that it is not in effect taking over a government task. In particular, central bank support for deposit guarantee schemes should 
not amount to a systematic ‘pre-funding’ operation
27. 
3.1.3 The ECB notes that the condition that the temp orary loan or other repayable financial assistance 
provided by ČNB must address an urgent situation is not expressly contained in the draft laws. 
Even if such funding is discretionary, temporary and in the interests of financial stability, it should be stipulated that the funding may be granted only in demonstrably urgent cases in order to be 
compatible with the monetary financing prohibition. 
3.1.4 It is clear that the draft laws do not authorise ČNB to provide any loan or financing under any 
circumstance to the Resolution Fund. The prov ision of such financing to the Resolution Fund 
would constitute a government task, and any such loan or financing by ČNB would therefore 
breach the prohibition of monetary financing under the Treaty
28. 
3.2 Conferral of resolution tasks on ČNB 
The draft law designates ČNB as the resolution authority, broadening its responsibilities to 
include placing obliged entities under resolution and taking resolution measures in respect of 
such entities29.  By virtue of this designation, ČNB carries out resolution tasks  and exercises 
resolution powers. As emphasised above, carryi ng out these resolution tasks does not require 
ČNB to provide any financing to the Resolution Fund. 
In the light of the guidance set out in paragraph 2.3, it must be assessed carefully whether ČNB’s 
new tasks and responsibilities in this field coul d constitute a breach of the monetary financing 
prohibition. 
3.2.1 New tasks 
The ECB notes that whilst ČNB has had for many years powerful tools to intervene in, and if 
necessary take control of distressed financial inst itutions which pose a risk to financial stability, 
principally in the form of the enforced administration regime, the draft law introduces specific, new resolution tools, such as bail-in and the bridge institution and asset management vehicle, which in 
                                                 
26  Article 187(2)(c) of the draft law. 
27  See the ECB’s 2014 Convergence report, p. 30.  
28  Ibid. 
29  Article 5 and Chapter VI ( Crisis resolution at obliged entities ) of the draft law. 
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7 their proposed form do not currently exist in Czech law, as well as expanded ancillary powers 
which did not exist as separate resolution measures or powers in the past. The ECB notes that the draft laws introduce substantial legislative amendments to ČNB’s existing resolution-related 
tasks that are currently categorised as central banking tasks and should therefore be assessed in the light of the monetary financing prohibition. 
3.2.2 Principle of financial independence  
The principle of financial independence requires NCBs to have sufficient means to carry out not 
only their ESCB-related tasks from an operational and financial point of view, but also their 
national tasks
30. In this regard the ECB notes that the draft law authorises ČNB to recover its 
expenses and costs demonstrably incurred in carrying out resolution measures from the 
institutions concerned by such measures31. The ECB welcomes the provisions of the draft law 
concerning the financing of ČNB’s new resolution tasks.  
Furthermore, the ECB notes that ČNB’s Board is required, before deciding to take a resolution 
measure, to obtain the prior approval of the MoF in a broad range of circumstances, often when the realisation of the measure would require the use of public funds or if the use of such funds 
would become more likely due to substantial outflows from the Scheme or the Resolution Fund
32. 
It is important that ČNB’s Board, as the decision-making body responsible for performing ČNB’s 
ESCB-related tasks, should have ultimate control over any decision related to a resolution matter 
that could affect ČNB’s financial independence33. 
3.2.3 Links to tasks listed in Article 127(2), (5) and (6) of the Treaty  
Administrative resolution tasks are considered tasks related to the tasks referred to in 
Article 127(5) of the Treaty, based on the understanding that administrative resolution tasks and 
supervisory tasks complement each other, particularly where an NCB has a mandate for the stability of the financial system or where, as in this case, the designated resolution authority 
already carries out integrated supervision of the financial markets. 
3.2.4 Atypical tasks 
A number of Member States have conferred on their NCBs a significant role in the resolution of 
financial institutions, whether as the resolution authority or as a competent authority in the decision-making process for resolution. The ECB has generally welcomed the allocation of such 
tasks to NCBs provided they do not interfere financially and operationally with the performance of 
the NCB’s ESCB-related tasks
34. The resolution tasks of an NCB can therefore be regarded as 
being tasks not atypical of a central bank, particularly if, as in the case of ČNB, it has a long-
established statutory responsibility for financial stability35. 
                                                 
30  See the ECB’s 2014 Convergence Report, p. 25. 
31  Article 165 of the draft law. 
32  See footnote 10 above. 
33  See paragraph 3.3 of Opinion CON/2015/2. 
34  See, e.g., Opinion CON/201/14/60, paragraph 4.1; Opinion CON/2013/73, paragraph 2.1; Opinion CON/2011/72, 
paragraph 2.3; Opinion CON/2011/83 paragraph 2.2; Opinion CON/2011/39, paragraph 2.2. See further in the U.K. 
the role of the Bank of England in the Special Resolution Regime under the Banking Act 2009. 
35  Article 2 of Law No 6/1993 Coll. on ČNB. See also in regard to the competence of ČNB’s Board, Article 214(2) of the 
draft law. 
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8 3.2.5 Discharge of tasks on behalf of and in the exclusive interest of the Government or of other public 
entities 
Whilst ČNB is designated as the sole resolution authority and takes resolution measures acting 
as an administrative authority in the exercise of public functions in its own name, and not on behalf of any other authority, as noted in paragraph 3.2.2 above, ČNB’s Board is required in 
some cases, before deciding to take a resolution measure, to obtain the prior approval of the 
MoF. ČNB also has to closely cooperate with the MoF in its resolution role. There is no indication 
that in discharging its resolution function ČNB acts exclusively in the interests of the MoF or 
another public entity. 
3.2.6 Extent to which conflicts of interests with existing ČNB tasks are addressed 
3.2.6.1 The ECB has repeatedly noted
36 that, in line with the BRRD37, staff involved in carrying out the 
functions of a resolution authority in accordance with the Directive must be structurally separate 
and subject to separate reporting lines from the staff involved in carrying out prudential banking 
supervision tasks pursuant to applicable EU legal acts38 or with regard to the other functions of 
the relevant authority. The ECB observes that the BRRD ‘exceptionally’ allows one authority to 
carry out both resolution and supervisory functions on the condition that adequate structural arrangements are put in place in order to ensure operational independence and to avoid conflicts 
of interest between that authority’s resolution function and its other functions. For example, the 
BRRD envisages structural separation being achieved by keeping the reporting lines for staff 
involved in carrying out resolution tasks separate from those used by staff involved in supervision 
activities
39. 
3.2.6.2 Pursuant to the draft law, ČNB is required to ensure the operational and organisational 
independence of the department carrying out reso lution functions and its staff to ensure there is 
no conflict of interest and to provide for the s eparation of tasks relating to the resolution function 
from ČNB’s other tasks40. The draft law states that ČNB, as resolution authority, will apply crisis 
resolution measures ‘separately fr om its other tasks’. These provisions aim to ensure that: 
(a) under the future regime there is a separation of resolution and supervision functions within a 
single resolution and supervision authority, and (b) the resolution function will have equal access 
to any necessary information available to the supervisory function, and vice versa. Furthermore, 
within ČNB, the Board, rather than the head of the resolution unit, will take all significant 
resolution decisions where either public funds or systemic risk are involved, with the exception of 
the exercise of the government stabilisation tool . The ECB welcomes these provisions, as they 
appear to adequately address potential conflicts of interests between resolution and ČNB’s other 
                                                 
36  For example see Opinion CON/2015/2, paragraph 4.3, Opinion CON/2015/3, paragraphs 5.1 and 5.2, and Opinion 
CON/2014/67, paragraph 3.3. 
37  See the second subparagraph of Article 3(3) of Directive 2014/59/EU. 
38  See 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), and Directive No. 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on 
access to the activity of credit institutions and the prudenti al supervision of credit institutions and investment firms, 
amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, 
p. 338). 
39  See Opinion CON/2014/67, paragraph 3.1.  
40  Article 5(1) and (2) of the draft law. See also page 73 of the explanatory memorandum to the draft law. 
ECB-PUBLIC  
9 tasks and functions. The ECB would be interested in being provided in advance, for information, 
the future internal rules im plementing these provisions. 
3.2.7 Extent to which the performance of tasks is proportionate to ČNB’s financial and operational 
capacity and its ability to perform its ESCB-related tasks. 
As noted above, in order to remain financially independent, NCBs must have sufficient means to 
carry out not only their ESCB-related tasks from an operational and financial point of view, but 
also their national tasks. In this regard the ECB welcomes the fact that ČNB may recover the 
expenses incurred in carrying out resolution measures from the institutions concerned. The ECB 
notes, however, that the administrative start-up and operational costs of the resolution unit will be borne by ČNB’s own budget. 
3.2.8 Extent to which the perform ance of tasks fits into ČNB’s institutional set-up in the light of central 
bank independence and accoun tability considerations 
As noted above, in a broad range of circumstances, typically when public funds are required, 
ČNB may only apply a resolution measure or order a capital write-down or debt conversion upon 
the prior approval of the MoF. ČNB has a duty to closely cooperate with the MoF, particularly in 
the foregoing cases, and it is generally required to grant the MoF and its duly-authorised employees access to all documents and information relating to resolution measures or a write-
down of capital instruments
41. The ECB considers that the broadened resolution tasks that ČNB 
will assume under the draft law entail much closer cooperation with the MoF when fiscal funds 
are at stake than for the exercise of its supervisory or other functions. 
3.2.9 Extent to which the performance of tasks harbours substantial financial risks 
3.2.9.1 The draft laws do not contain provis ions excluding or limiting the liability of ČNB as resolution 
authority for any negligent act or omission or othe r breach of any legal obligation when applying 
the resolution tools or exercising resolution powers. This is in marked contrast to the explicit 
exclusion of liability of publicly-owned resolution vehicles – for example, the bridge institution42 – 
for any damage to shareholders or creditors of the obliged entity resulting from the application of 
crisis resolution measures.  
3.2.9.2  The ECB understands43 that the State is primarily liable for any damage caused by an unlawful 
decision or improper administrative action by a legal entity or person in the course of exercising 
public authority on the State’s behalf. The carrying out of resolution and supervision functions 
clearly constitutes the exercise of a public authority. For this purpose the entity or person 
exercising public authority in this situation could be the State (or any organisational unit of the 
State), ČNB, or any other person provided it has separate legal personality.  
3.2.9.3  Furthermore, the ECB understands that ČNB shall indemnify the MoF where the State is held 
liable for any breach of ČNB’s legal obligations when applying the resolution framework44. The 
ECB understands that this right of indemnification would apply even if ČNB had obtained prior 
                                                 
41  Articles 214 and 215 of the draft law. 
42  Article 96(2) of the draft law. 
43  Pursuant to Law No 82/1998 Coll. on State liability. 
44  See Articles 16-18 of Law No. 82/1998 Coll. on State liability. 
ECB-PUBLIC  
10 approval from the MoF for the improper resolution measure, in which case the MoF will de facto 
(if not de jure) operate as a joint resolution authority alongside ČNB. Against this backdrop, the 
ECB notes that, under the prohibition of monetary financing laid down in the Treaty, national 
legislation may not require an NCB to finance the public sector’s obligations vis-à-vis third parties
45. The ECB understands that as a ma tter of Czech law the liability of ČNB for breaches of 
obligations under the resolution framework and to indemnify the MoF would only extend to its 
own administrative acts. The ECB considers that it would be useful to explicitly clarify this point in 
the draft laws, given that potential liability issues represent substantial financial risks for ČNB. 
3.2.10 Conclusion 
The ECB considers that there are grounds for regarding ČNB’s expanded resolution tasks as 
central banking tasks, in the sense that they complement ČNB’s existing supervisory functions. 
The fact that ČNB will be authorised to recover its resolution-related expenses from the 
institutions concerned should also contain the impact on its financial capacity of assuming those 
tasks, whilst the start-up and running costs will be absorbed by ČNB’s budget. However, the ECB 
considers that the draft laws potentially create significant financial risks for ČNB because they do 
not limit its liability as the resolution authority for negligent or improper acts. Also, it would be 
useful to explicitly clarify that ČNB’s obligation (under current stat e liability law) to indemnify the 
MoF for any damages and costs the State has to pay to third parties extends only to its own 
administrative acts. Moreover, it is not obvious why ČNB should assume the sole burden of those 
potential liabilities when the draft law requires ČNB to obtain prior approval from the MoF before 
taking resolution actions in a broad range of circumstances. 
3.3  The MoF’s role in resolutions 
In requiring ČNB as the resolution authority to obtain the MoF’s prior approval before taking 
resolution actions in a broad range of circumstances, the question arises whether the MoF may 
be considered to be a second resolution authority alongside ČNB. The consulting authority is 
invited to consider if its prior approval is more  appropriately limited to exceptional cases in which 
the resolution measures have a direct fiscal impact or systemic implications, in order to avoid it 
de facto operating as a joint resolution authority alongside ČNB, which would require the MoF to 
ensure operational independence of its resolution function. 
3.4  Resolution planning  
The draft law stipulates that resolution plans must neither assume the granting of emergency 
liquidity assistance by ČNB as the central bank nor the use of public resources except the use of 
the resources of the Resolution Fund and the Scheme46. It also provides that recovery plans must 
not assume the granting of public support or rely on granting of loans or entry into other 
transactions by the obliged entity preparing the plan with ČNB47. While these provisions appear to 
be in line with the requirements of the BRRD, the ECB emphasises that they do not in any way 
affect the competence of central banks to decide in dependently and in their full discretion on the 
provision of central bank liquidity to solvent institutions, both through standard monetary policy 
                                                 
45  See the ECB’s 2014 Convergence Report, p. 29. 
ECB-PUBLIC  
11 operations and emergency liquidity assistance, within the limits imposed by the monetary 
financing prohibition under the Treaty48. 
3.5 Comparative status of ČNB’s preferential and secured claims in insolvency 
Finally, regarding the provisions of the draft law on preferential claims of ČNB in respect of loans 
provided to institutions and other obliged entities as well as claims arising from expenses properly 
incurred by ČNB in carrying out resolution tasks49, the ECB would invite the consulting authority 
to consider further amending the draft law, as well as the Law on Insolvency, in order to 
comprehensively clarify the status and ranking of preferential unsecured claims of ČNB in the 
insolvency of an obliged entity, also in relation to the unsecured claims of other creditors. 
  
This opinion will be published on the ECB’s website. 
  
Done at Frankfurt am Main, 1 July 2015.  
[signed] 
 The President of the ECB 
Mario DRAGHI 
                                                                                                                                                             
46  Article 16(4) of the draft law. 
47   Article 8(3) of the draft law. 
48  See paragraph 3.2 of Opinion CON/2012/99 and paragraph 3.3 of Opinion CON/2014/67. 
49  Article 165(4) of the draft law and Article 168 of Law No 168/2006 Coll. on Insolvency.