EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 22 September 2004  
at the request of Národná banka Slovenska on a dr aft law on supervision of the financial market 
and on amendments to certain laws 
(CON/2004/31) 
 
1. On 5 August 2004, the European Central Bank (E CB) received a request from Národná banka 
Slovenska (NBS) for an opinion on a draft law on  supervision of the financial market and on 
amendments to certain laws (hereinafter the ‘draft law’).  
2. The ECB’s competence to deliver an opinion is based  on 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 European Central Bank 
by national authorities regarding draft legislative provisions1, as the draft law contains provisions 
concerning the Slovak national central bank and rul es applicable to financial institutions that 
materially influence the stability of financial ins titutions and markets. In accordance with the first 
sentence of Article 17.5 of the Rules of Procedur e of the European Central Bank, the Governing 
Council has adopted this opinion. 
3. The main purpose of the draft law is to establish th e legal framework for integrated supervision of 
the financial market by NBS. Under the draft law,  the responsibility of the Slovak Financial Market 
Authority (FMA) for supervision of the non-bankin g financial market (capital markets, insurance 
business and pension schemes) will be transferred to NBS on 1 January 2006. Currently NBS is 
only responsible for the supervision of credit in stitutions. If the proposal goes ahead, the FMA will 
be dissolved on 1 January 2006. 
4. As explained in the reports of the expert commi ssions established by the Slovak Government to 
prepare the draft law2, the existence of a relatively small financial market in the Slovak Republic 
led to the proposal to make a single authority resp onsible for financial market supervision. Various 
options were considered. The decisive reason for a llocating this task to NBS was its independence, 
which is guaranteed by Article 56 of  the Constitution of the Slovak Republic3. Other essential 
reasons taken into consideration were: (i) NBS’s cr edibility; and (ii) the experience of its staff, 
                                                 
1  OJ L 189, 3.7.1998, p. 42. 
2  Four expert commissions have been es tablished under the Financial Market Inte grated Supervision Implementation Plan 
adopted by the Slovak Government pursuant to Resolution No 775 of 21 August 2003. 
3  No 460/1992 Coll. as last amended by  Constitutional Ac t No 323/2004 Coll. 
 
2 acquired in carrying out its current tasks and more  particularly through prudential supervision of 
credit institutions on the basis of Act No 483/2001 Coll. on banks. 
5. As previously stated, NBS is currently responsible  for supervising credit institutions only. The draft 
law will therefore considerably broaden its ex isting supervisory powers. NBS will become the 
competent authority for supervision of the entir e Slovak insurance sector including reinsurance 
companies and of the capitalisation pillar of com pulsory pension insurance (i.e., old age pension 
savings). NBS will also assume all of the FMA’s current powers in the field of capital market 
supervision. It will therefore become the competent authority for supervision of investment firms, stock exchanges, central securiti es depositories, asset management companies and mutual funds. It 
will also be designated as the competent authorit y within the meaning of a number of recently 
adopted Community Directives which have not yet b een transposed into Slovak law, in particular 
the Market Abuse Directive
4, the Prospectus Directive5, the Takeover Bids Directive6 and the 
Markets in Financial Instruments Directive7. NBS’s regulatory powers will also be broadened. Its 
existing power to issue decrees and measures in th e field of banking will be extended to the capital 
market and to the insurance and pensions sectors.  After the reform, NBS will be able to adopt 
implementing regulations: (i) for the capital market and the insurance sector in cooperation with the 
Slovak Ministry of Finance; and (ii) for the pens ion savings sector in cooperation with the Ministry 
of Finance and the Ministry of Labour, Social Affairs and the Family. 
6. The ECB notes that the specific laws governing supe rvision of each financial market sector will be 
amended pursuant to the draft law. The provisions currently conferring supervisory and regulatory 
powers on the FMA will be amended in order to  transfer these powers to NBS. Transitional 
provisions forming part of the amendments to these specific laws expressly indicate that the NBS 
will complete any administrative proceedings started by the FMA. 
7. The ECB notes that the draft law, when adopted, will  establish a structure that is currently unique 
within the European Union by making a national central bank directly and fully responsible for supervision of a Member State’s entire financia l market. The ECB understands that in Member 
States with a relatively small financial mark et, such as the Slovak Republic, there are good 
arguments for concentrating supervisory responsi bilities in the hands of a single authority. The 
ECB welcomes the fact that NBS’s independence, credibility and experience have been considered 
as decisive reasons for the Slovak Government to propose appointing it for this task.  
                                                 
4  Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market 
manipulation (market abuse) (OJ L 96, 12.4.2003, p. 16). 
5  Directive 2003/71/EC of the European Parliament and of  the Council of 4 November 2003 on the prospectus to be 
published when securities are offered to the public or ad mitted to trading and amending Directive 2001/34/EC (OJ L 345, 
31.12.2003, p. 64). 
6  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). 
7  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 Dir ective 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). 
 
3 8. Under Article 14.4 of the Statute of the European System of Central Banks and of the European 
Central Bank, the national central banks may perform  functions other than those specified in the 
Statute unless the Governing Council of the ECB finds, by a majority of two thirds of the votes cast, that these interfere with the objectives and ta sks of the European System of Central Banks 
(ESCB). Such functions are performed on the r esponsibility and liability of the national central 
banks and are not regarded as being pa rt of the functions of the ESCB.  
9. Without prejudice to the Governing Council’s pow ers to take action under Article 14.4 of the 
Statute, the ECB considers that the proposed exte nsion of NBS’s supervisory tasks is compatible 
with its ESCB-related tasks. In particular, the E CB welcomes the fact that the task of performing 
prudential supervision of all fina ncial intermediaries will be allocated to NBS. The proposed 
institutional framework for pruden tial supervision has the potential to cope with increasing cross-
sectoral interlinkages in the financial system. Indeed , the nature and scope of risk in the financial 
sector is widening due to closer links between cred it institutions, insurance companies, investment 
firms and pension funds. The traditional borders  between the banking, securities and insurance 
sectors of the financial market are becoming increasingly blurred, as demonstrated by the emergence of hybrid financial products, the incr eased use of risk transfer instruments and 
distribution agreements between the three s ectors, and the growing role of financial 
conglomerates
8. 
10. The ECB takes note that the draft law is orient ed towards recognising the essential role to be 
played by NBS in safeguarding the stability and credibility of the financial market, as well as in 
protecting clients. While the ECB’s overall assessme nt of this structure is positive, it favours 
recognising in the supervisory framework the clear distinction between the two goals of financial 
stability and investor protection. In particul ar, the draft law should clearly emphasise the 
importance of: (i) the safety and soundness of fina ncial institutions; and (ii) the stability of the 
entire financial system. The micro-prudential appro ach in the draft law could be coupled with a 
macro-prudential dimension, which might result in  more effective monitoring of systemic risk. 
There is a close relationship between prudential co ntrols applied to indivi dual intermediaries and 
the assessment of risks for the financial system as a whole. Therefore, the ECB would welcome it if 
the draft law explicitly recognised, as is the case in the statutes of other Member States’ national central banks, that NBS has the task of contributin g to the stability of the financial system as a 
whole
9. Central banks’ focus on systemic stability m eans that they can better assess not only the 
likelihood and the potential impact  of macro-shocks or disturban ces in domestic and international 
capital markets, but also the operation of common factors affecting the stability of groups of intermediaries. 
                                                 
8  See also paragraph 5 of ECB Opinion CON/2004/16 of 11 May 2004 at the request of the Italian Ministry of Economic 
Affairs and Finance on a draft law on the protection of savings. 
9  Also the current wording of Articles 2(2)(d) and 36( 1) of Act No 566/1992 Coll. on Národná banka Slovenska, as 
amended, refers to the safe op eration of the banking system. 
 
4 11. The draft law provides for an organisational uni t of NBS, established in accordance with NBS’s 
organisational rules and designated as the ‘financia l market supervision unit’ (hereinafter the 
‘supervision unit’) to carry out on and off-site supervision and, as a rule, also to act as the decision-
making body in the first instance. The supervision unit will exercise its tasks under the managerial 
responsibility of the Vice-Governor of NBS, who wi ll also adopt its decisions. § 2(10) of the draft 
law explicitly states that in supervising supervised entities, the supervision unit will act ‘separately, 
independently and impartially, in accordance with the draft law and specific laws’. NBS’s Bank 
Board (hereinafter the ‘Bank Board’) will rule on appeals against the supervision unit’s first 
instance decisions. The supervision unit will be boun d by decisions of the Bank Board and in turn 
by court decisions taken on administrative review of such decisions.  
12. The ECB has examined the provisions of the draft law relating to the supervision unit particularly 
with a view to avoiding ambiguity with regard to  allocation of responsibilities for supervision. The 
ECB understands that the draft law will not est ablish a body responsible for supervision 
functioning autonomously within the framework of NBS. Instead, the aim is  to establish NBS itself 
as the competent authority directly and fully r esponsible for supervision of the entire Slovak 
financial market. This approach implies that  the Bank Board is ultimately responsible for 
supervision. NBS’s internal governance structure shoul d therefore appropriately reflect the fact that 
the exercise of supervisory tasks is under the ultimate control of the Bank Board. Ambiguity in this respect could impinge on NBS’s institutional and fi nancial independence as well as its reputation.  
13. The ECB understands from the explanations provided  by the supporting documents to the draft law 
and by NBS itself that the draft law together  with Act No 566/1992 Coll. on Národná banka 
Slovenska ensure that the Bank Board will have  the power to issue general guidelines on the 
exercise of supervisory tasks by the supervis ion unit as well as to any of NBS’s other business 
units. It also understands that the Bank Board will have access, where necessar y, to all information 
concerning the financial situation of supervised  entities and supervised transactions on the capital 
markets. In addition, the draft law explicitly prov ides that the Bank Board may issue warnings to 
the supervision unit if it fails to commence proceed ings when it is under an obligation to do so, or 
fails to take a decision within the time limit prescr ibed by law. If the supervision unit still fails to 
take a decision in accordance with such a warn ing, the Bank Board may appoint another NBS 
organisational unit to take the decision concerned. 
14. The ECB considers that the proposed system of warnings coupled with the ability to transfer 
decision-making power from the supervision unit to another NBS organisational unit fails to 
recognise the prominent role that the Bank Board s hould play in some situations, particularly in 
crisis situations threatening the stability of the financial system. The proposed system could prove 
too cumbersome in such situations, where importa nt decisions must sometimes be taken rapidly. 
The Bank Board must be in a position to manage su ch situations effectively and efficiently. The 
ECB therefore recommends clarifying in the draft law that the Bank Board will have full power to 
 
5 intervene, if necessary directly , in the decision-making process relating to NBS’s performance of 
its supervisory tasks.  
15. The ECB has also examined the possible impact  of the proposed reform on NBS’s financial 
situation. In this respect, the ECB notes that NB S will no longer have to  fully fund prudential 
supervision of the banking sector. After the reform , supervised credit institutions will be asked to 
contribute to supervision costs in accordance with  the provisions of an NBS decree adopted in 
agreement with the Ministry of Finance. The E CB also notes that supervision of the insurance 
sector and of the capital market has until now been fully  funded by market par ticipants and that this 
financing system will be maintained after the re form. Finally, the ECB notes that the Slovak State 
is liable for all possible claims arising due to da mage caused by activities performed by the FMA in 
the exercise of its supervsiory tasks10. 
16. The ECB would appreciate being provided, for information purposes, with: (i) any proposed 
amendments to the draft law in relation to the i ssues addressed in this opinion; and (ii) a detailed 
description of the proposed organisational scheme and division of supervisory powers both within 
the supervision unit and within NBS as a whole from 1 January 2006.  
17. This opinion will be published on the ECB’s website. 
  Done at Frankfurt am Main, 22 September 2004. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
10  Pursuant to Article 4(1)(c) of Act No 514/2003 Coll. on liab ility for damage caused by di scharge of public authority.