EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 21 November 2008 
at the request of the Belgian Ministry of Finance 
on a draft royal decree on the guarantee for cert ain risks assumed by financial institutions 
(CON/2008/74) 
 Introduction and legal basis
 
On 17 November 2008 the European Central Bank (ECB)  received a request from the Nationale Bank van 
België/Banque Nationale de Belgique  (NBB), acting on behalf of the Belgian Ministry of Finance, for an 
opinion on a draft royal decree on the guarantee fo r certain risks assumed by financial institutions 
(hereinafter the ‘draft royal decree’). Given the curre nt turbulence in the financial markets and the need 
for firm intervention by the authorities involved, the consulting authority has requested the ECB to 
provide its opinion as a matter of extreme urgency to allow the swift adoption of the draft royal decree.  
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and on the sixth indent of Article 2(1) of Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Ce ntral Bank by national authorities regarding draft 
legislative provisions
1, as the draft royal decree relates to rules a pplicable 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 royal decree  
1.1 The draft royal decree is motivated by the curre nt financial market crisis and by the Belgian 
authorities’ wish to preserve the stab ility of the Belgian financial system
2. The draft royal decree 
aims to complete the system for granting the gu arantee of the Belgian State for liabilities entered 
into by financial institutions , which was established by the Royal Decree of 16 October 20083 and 
has the same legal basis4.  
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  See the first recital of the draft royal decree.  
3  See in relation to the Royal Decree of 16 October 2008, ECB Opinion CON/2008/50 of 17 October 2008 at the request of 
the Belgian Ministry of Finance on a dr aft royal decree adopted under Article 117 bis of the Law of 2 August 2002 on the 
supervision of the financial sector and on financial servi ces. All ECB opinions are available on the ECB website at 
www.ecb.europa.eu. 
4  i.e. Article 117 bis and 117 ter of the Law of 2 August 2002 on the supervisi on of the financial sector and on financial 
services. On this provision, see pa ragraph 2.1 of ECB Opinion CON/2008/50 and paragraph 1.1 of ECB Opinion 
CON/2008/61 of 28 October 2008 at the request of the Belgian Minister for Finance on a draft royal decree implementing 
the Law of 15 October 2008 on measures promoting financial stab ility and in particular establishing a State guarantee for 
2 1.2 More specifically, the purpose of the draft royal decree is to avoid liquidity outflows5. The need for 
the draft royal decree was triggered in particular  by the commitments taken by certain financial 
institutions towards third parties under which, in th e event the financial institutions or an entity in 
their group being downgraded, the third parties c oncerned may demand cash or other collateral or 
alternatively early repayment6.  
1.3 In this context, the draft royal decree empower s the Belgian Minister of Finance to grant a State 
guarantee7 to cover liabilities entered into by cred it institutions, financial holding companies 
(financiële holdings/compagnies financières ) or mixed financial holding companies ( gemengde 
financiële holdings/compagnies financières mixtes ; hereinafter together the ‘beneficiary entities’)8, 
provided that: (i) the liabilities covered are commit ments aiming at covering losses or a risk of 
losses on financial assets held by subsidiaries of a beneficiary entity, and (ii) these commitments 
and the State guarantee can therefore contribute to avoiding the beneficiary entity or its subsidiaries from being exposed to a serious need for additional liquidity, due in particular to a downgrading of 
their rating
9. The decision to grant a State guarantee would be subject to the conditions that: (i) the 
beneficiary takes measures aimed at supporting its fi nancial situation, its solvency and its liquidity, 
or commits itself to taking such measures; and (ii)  the granting of the guarantee is justified in the 
interests of the Belgian economy and by the need to protect all depositors10. Under the draft royal 
degree the Minister for Finance would be empowered to lay down further detailed rules and conditions for a State guarantee, including setting its ceiling, specifying the remuneration to be paid 
for granting the guarantee, and any other detail ed rule to ensure compliance with the two 
abovementioned conditions
11. The State guarantee would not be granted by means of a Ministerial 
Decree, but would be established by an agreement which would also define its detailed rules and 
conditions. 
                                                                                                                                                             
the provision of credit in the context of financial stability, in relation to the protection of  deposits and life insurance and  
amending the Law of 2 August 2002 on th e supervision of the financial se ctor and on financial services.  
5  See the Report to the King which precedes the draft royal decree. 
6  See the Report to the King which precedes the draft royal decree. 
7  See Article 1 of the draft royal decree. 
8  The ECB understands that mixed financial holding companies are covered by the draft royal decree in so far as they fall 
within the concept of financial undertakings belonging to a group over which the Commissie voor het Bank-, Financie- en 
Assurantiewezen/Commi ssion bancaire, financière et des assurances  exercises consolidated supervision referred to in 
Article 117ter of the Law of 2 August 2002. 
9  See Article 2 of the draft royal decree. Despite the apparent inconsistency between the recital of the draft royal decree 
and Article 2 of the draft royal decree, it is understood that the main objective of the draft royal decree is to avoid the 
guaranteed entity or its subsidiaries from being exposed to a ‘serious need for ad ditional liquidity’ and not exclusively to 
avoid ‘the risks of downgrading certain financial institutions’.  
10  See Article 3 of the draft royal decree. Article 3 of the Royal Decree of 16 October 2008 lays down similar conditions. 
11  See Article 4 of the draft royal decree. Article 4 of th e Royal Decree of 16 October 2008 contains a similar provision. 
3 2.  General observations 
The ECB has already opined on several elements of  the general rescue package put in place by the 
Belgian authorities in response to the curre nt turbulence in the financial markets12. In this respect, the 
ECB underlines that all the comments and recommendations made in ECB Opinion CON/2008/50 apply equally to the draft royal decree. In particular, th e ECB first reiterates that arrangements which may be 
seen as providing preferential treatment to specified cr edit institutions should be avoided, as well as its 
recommendation to clarify in the draft royal decree or in the report to the King that the State guarantee 
will be granted to the beneficiary entities in accordan ce with the requirements of EC competition law and 
State aid rules. In this context, it should be ensured that the beneficiary institution(s) will not be unfairly 
advantaged by making undue use of their guaranteed status
13. Second, the ECB also notes the importance 
of ensuring the harmonisation of the price determinati on of such a guarantee within the euro area and the 
EU, where a level playing field is of essence. While the ECB understands that the conditions and the price 
of the State guarantee provided for in the draft royal decree will be determined on a case-by-case basis, it 
is important that the price should be risk-based and ma rket-oriented, i.e. determined on the basis of the 
cost of obtaining a corresponding guarantee in the market. This point should be clarified in the draft royal decree. Third, the ECB also wishes to  stress in this context that since the Minister for Finance’s decision 
to grant the State guarantee is, inter alia , subject to the condition that the beneficiary has taken or has 
committed itself to taking all measures which are useful to  support its financial situ ation, its solvency and 
its liquidity
14, proper coordination with the supervisory authority will have to be ensured. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 21 November 2008. 
 
[signed] 
 
The Vice-President of the ECB 
Lucas D. PAPADEMOS 
                                                 
12  The ECB has already been consulted by the Belgian authoriti es on three other draft legislative provisions adopted in this 
context: (i) ECB Opinion CON/2008/46 of 8 October 2008 at the request of the Belgian Ministry of Finance on a 
preliminary draft law on measures  promoting financial stability  and in particular establishing a State guarantee for the 
provision of credit in the context of financial stabilit y; (ii) ECB Opinion CON/2008/50; and (iii) ECB Opinion 
CON/2008/61 of 28 October 2008 at the request of the Belgian Minister for Finance on a draft royal decree implementing 
the Law of 15 October 2008 on measures promoting financial stab ility and in particular establishing a State guarantee for 
the provision of credit in the context of financial stability, in relation to the protection of  deposits and life insurance and  
amending the Law of 2 August 2002 on th e supervision of the financial se ctor and on financial services.  
13  See ECB Opinion CON/2008/50, paragraph 3.1. 
14  See Article 3 of the draft royal decree.