EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
9 July 2010 
on the establishment of the Financial Stability Fund 
(CON/2010/54) 
 Introduction and legal basis
 
On 29 June 2010 the European Central Bank (ECB) received a request from the Greek Ministry of 
Finance for an opinion on a draft law on the establishm ent of the Financial Stability Fund (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 the consultation of the E CB by national authorities regarding 
draft legislative provisions1, as the draft law relates to the Bank of Greece (BoG) and to rules applicable 
to financial institutions insofar as they materially influence the stability of financial institutions and 
markets. In accordance with the firs t sentence of Article 17.5 of the Rules of Procedure of the ECB, the 
Governing Council has adopted this opinion. 
 1.  Purpose of the draft law 
1.1 Context and objective  
1.1.1 The establishment of the Financia l Stability Fund (FSF) implements Council 
Decision 2010/320/EC of 10 May 2010 addressed to  Greece with a view to reinforcing and 
deepening fiscal surveillance and giving notice to Greece to take measures fo r the deficit reduction 
judged necessary to remedy the situation of excessive deficit
2. In particular, Article 2(1)(p) 
prescribes the establishment by Greece of ‘an inde pendent financial stability fund to deal with 
potential capital shortfalls and preserve the soundness of the financial sector, by providing equity 
support to banks as needed’. Furthermore, as clarif ied in recital 6 of the Loan Facility Agreement3 
concluded on 8 May 2010 between certain euro ar ea Member States as lenders and the Hellenic 
Republic as borrower, the support granted to the bo rrower is made dependent on its complying with 
measures consistent with Decision 2010/320/EU and laid down, inter alia , in the Memorandum of 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  OJ L 145, 11.6.2010, p. 6. 
3  Available at http://www. hellenicparl iament.gr. 
2 Understanding on specific economic policy conditionality4 of 3 May 20105. In this respect the 
establishment of the FSF is also foreseen in the Memorandum as part of a set of measures to be 
implemented by the end of June 2010. 
1.1.2 According to the explanatory memorandum to th e draft law, the establishment of the FSF aims at 
maintaining the stability of the Greek banking system  by means of recapitalisation of Greek credit 
institutions in the light of the paramount impor tance of the banking sector in general economic 
activity. The FSF will thus provide a safety net to credit institutions that may be unable to meet 
their capital requirements under the applicable legisl ation. Finally, the FSF will facilitate strategic 
decision-making in restructuring the Greek banking system to allow it to accomplish its function in 
financing and developing the Greek economy.  
1.2 Main features  
 Legal nature, purpose and capital  
1.2.1 The FSF will be governed by private law. It w ill enjoy administrative a nd financial independence 
and operate purely in accordance with  private economic activity standards6. Its purpose will be to 
safeguard the stability of the Greek banking system by strengthening the capital adequacy of credit 
institutions, including credit institutions that are subsidiaries of foreign credit institutions and 
operate in Greece following authorisation by the BoG7. The Greek State will gradually pay up and 
incorporate into securities its capital of EUR 10 billi on not transferable before expiry of the FSF’s 
duration8. The Minister for Finance will gradually deposit capital stemming from the financial 
support mechanism to Greece by virtue of Law 3845/2010 in a special interest-bearing account held with the BoG for the purpose of the draft law
9.  
Eligibility for recapitalisation  
1.2.2 Under Article 2(1) of the draft law, credit institu tions authorised by the BoG will be eligible for 
recapitalisation by the FSF. These include authorised cr edit institutions that are subsidiaries of legal 
entities with a registered offi ce abroad, including the branch es of authorised Greek credit 
institutions operating abroad.  
                                                 
4  The Memorandum is annexed as Annex IV to Law 3845/ 2010 on the measures implementing the support mechanism for 
the Greek economy by the euro area Member States and the International Monetary Fund (FEK Α 65 / 6.5.2010).  
5  Moreover, according to recital 8 of the Loan Facility Agreemen t, the release of loans subseque nt to the first loan will be 
conditional on the lenders deciding favourably following verifi cation that the implementation of the economic policy of 
the borrower complies with the adjustment programme or any other conditions laid down in the Decision 2010/320/EC. 
See also Article 3(5)(c) of the Agreement. 
6  See Article 1. 
7  See Article 2. The FSF will manage its capital and assets and exercise the rights deriving from its shareholder capacity 
with a view to preserving the value of such assets, minimisi ng risks to Greek taxpayers and preventing competition in the 
banking sector from being hampered or distorted; moreover, the liquidi ty support provided under Law 3723/2008 (FEK 
A 250) or as part of the operations of  the Eurosystem and/or the BoG will no t fall within the purpose of the FSF. 
8  See Article 3(1). 
9  See Article 3(2). Such deposits will be remunerated at a rate not more or less than the following: (1) the rate applicable to  
the Eurosystem main refinancing operations; (2) the Eurosyst em deposit facility rate; and (3) the EONIA rate. Moreover, 
under Article 3(4), the FSF’s capital and cash may only be invested  in such deposits; any other type of investment will be 
prohibited and the FSF may not enter into lending arra ngements or issue bonds or  other commerc ial paper. 
3  Board of Directors and staff  
1.2.3 The FSF’s Board of Directors (hereinafter the ‘Board’) will have full in dependence in any matter 
relating to the FSF’s administration, operations, ass et management, identification and pursuit of its 
objectives10. Its three executive members will be the Pr esident and two Vice-Presidents, and two of 
the four non-executive members shall be ex officio  members, namely the Secretary General of the 
Ministry of Finance and the Director of the BoG’ s Financial Stability Department. The Minister for 
Finance, after proposal by the BoG’s Governor, w ill appoint all Board members for a term of five 
years, renewable until 30 June 201711. One representative from each of the European Commission 
and the ECB will be invited to participate in the Board’s meetings without the right to vote12. Board 
members may not be employed by credit institutions for a period of two years after their term of 
office has ended for any reason whatever13. 
1.2.4 Its staff must be freely recruited by the Bo ard under private employment contracts for a fixed 
renewable term. The secondment of civil servants from other Greek authorities is also possible 
subject to a decision by the relevant Minister or  an act to be adopted by the BoG’s Governor, 
following a request by the Board’s President14.   
Activation of the FSF  
1.2.5 Under Article 6(1) of the draft law, a credit institution complying with Pillar 2 capital 
requirements15 may apply to the FSF for recapitalisation, following an instruction from the BoG or 
on its own initiative, provided that the followi ng conditions are both met: (a) on the basis of 
conservative assumptions by the BoG that there is  a well-founded risk that the credit institution 
may not be able to continue to comply with such  Pillar 2 requirements; and (b) the credit institution 
has failed to increase its own funds with the par ticipation of its existing or new shareholders.  
1.2.6 Furthermore, under Article 6(2) of the draft la w, the BoG may also instruct a credit institution to 
apply to the FSF for recapitalisation, if the cred it institution does not comply with either Pillar 116 
or 2 capital requirements and, at the same time, it has failed to increase its own funds with the 
participation of its existing or new shareholders. In these cases, if the credit institution does not 
                                                 
10  See Article 4(1) and Article 4(2)(e). In the performance of their duties Board members will enjoy full independence, may 
not seek or receive instructions from the Greek State or an y other government body or official and may not be subject to 
any influence. Likewise, the Greek St ate and the abovementioned government b odies and officials must refrain from 
giving any instructions to the FSF. 
11  See Article 4(2)(b). 
12  See Article 4(2)(c). 
13  See Article 16(3). The same prohibition will apply to the FSF’ s staff for a period of six months from termination of their 
employment contract. 
14  See Article 5. 
15  See Article 28 of Law 3601/2007 (FEK A 178 / 1.8.2007) and the BoG’s Governor’s act 2595/20.8.2007 (FEK B 1748 / 
31.8.2007). 
16  See Article 27 of Law 3601/2007. 
4 apply for recapitalisation to the FSF, the BoG will either appoint a Commissioner17 or withdraw the 
credit institution’s authorisation18, or may require removal of th e credit institution’s management19.  
1.2.7 The credit institution’s request  for recapitalisation may be submitted to the FSF within one month 
from receipt of a BoG instruction and must be a ccompanied by: (a) a business plan specifying the 
amount of the required capital injection and detailin g the measures that the credit institution intends 
to take to safeguard and strengthen its solvency as soon as possible20; and (b) a detailed timetable 
for the implementation of the measures, stating th e estimated time by which the credit institution 
should be able to repurchase the preference shares re ferred to in Article 7 of the draft law. If the 
FSF grants the capital injection requested, in accordan ce with Article 6(6) of the draft law, it will 
draw up jointly with the credit institution a detaile d restructuring plan or amend any plan already 
submitted to the European Commission, in accordan ce with the applicable Union State aid rules 
and European Commission practices21. 
 Recapitalisation procedure, issuance of shares and related issues  
1.2.8 The capital injection will be granted through th e FSF’s participation in an increase of the credit 
institution’s share capital by  issuing preference shares22, except if the credit institution fails to meet 
Pillar 1 capital requirements23, where the capital increase will be carried out by issuing ordinary 
shares to the FSF. The share issue price must reflect the estimated fair value or market price 
disregarding any actual or potential support by the Greek State, the FSF or the BoG outside the framework of Eurosystem operations
24. The preference shares must be redeemed in their entirety 
by the credit institution after five years or earlier, on approval by the BoG, at a price to be set at the 
highest between the original issu e price (plus accrued and unpaid dividends) and the price at the 
time of the decision to convoke the General Meetin g of Shareholders for the purposes of the share 
                                                 
17  Under Article 63(2) of Law 3601/2007. Prior to the Commissioner’s appointment, the BoG will communicate in 
writing to the credit institution the verified breach. From the co mmunication of such appointment to the credit institution, 
any act related to the credit institution’s management will  be null and void unless approved by the Commissioner. Within 
the time limit specified by the BoG, the Commissioner must report to it on the capital adequacy and the overall financial condition and the administrative and organi sational structure of the credit institution. If the BoG, on the basis of other 
data and information available to it, judges that the credit institution’s ope rations cannot continue under the current 
management, it will decide to assign its management to the Commissioner. The Commissioner will be subject to the 
BoG’s control and supervision. The BoG will decide on the fees  and overall costs to be paid by the credit institution. The 
BoG may replace or terminate the mandate of the Commissioner . 
18  Under Article 8 of Law 3601/2007. 
19  Under Article 5(10)(c)(i) of Law 3601/2007. 
20  e.g. by increasing its capital and/or restoring its prof itability through cost-cutting, reducing risks or receiving support 
from other companies of its group, etc. The plan may also incl ude any prospects of a merger or absorption, or a transfer 
of its activities or units to another credit institu tion or financial organisation (see Article 6(4)(a)). 
21  See Article 6(7) to 6(9) also providing for the period for implementation of the restructuri ng plan and the monitoring and 
assessment of such implementation.  
22  See Article 7(1). 
23  See Article 6(2)(b). 
24  See Article 7(3). For the purposes of determining the issue pr ice, account must be taken of the average of the valuations 
provided by two independent audit firms using commonly acce pted methodologies and criteria. Such audit firms will be 
appointed by the FSF and the credit institution. In the event of  a deviation of more than 10% between the two valuations, 
a third independent audit firm, appointed jointly by the Mini ster for Finance and the BoG’s Governor, will determine the 
final price. The appointment of the audi t firms should also include deadlines fo r their evaluation compatible with the 
submitted business plan’s timing. In any event, the Union St ate aid rules and European Commission practices for similar 
valuations must also be observed. 
5 redemption25. If five years have lapsed and the redemp tion of the preference shares by the credit 
institution has not been completed, an annual cumulative surcharge of 2% will be imposed on 
annual compensation payable by the credit institutio n as provided for in Article 10(2) of the draft 
law26.  
1.2.9 The preference shares will be converted into or dinary transferable shares by a decision of the FSF, 
following a proposal by the BoG, in accordance with Article 9 of the draft law. Moreover, such 
preference shares may neither be transferable by th e FSF to third parties nor tradable on a regulated 
market until the end of the FSF’s duration27. They will, inter alia , confer on the FSF the right to 
participate in the credit institution’s Board of Directors with a representative as an additional 
member28. In this respect, the FSF ’s representative may, in particular: (a) call a General Meeting of 
Shareholders within the time limits provided29; and (b) veto any decision by the credit institution’s 
Board of Directors: (i) regarding the distribu tion of dividends and the remuneration policy in 
relation to the credit institution’ s senior executives; or (ii) wher e the decision in question could 
jeopardise the interests of depositors, or serious ly impair the credit institution’s liquidity or 
solvency or its overall sound and smooth operation.  Moreover, the FSF’s representative will attend 
the General Meeting of ordinary sh areholders and have a right to veto any resolution on the issues 
referred to above30.  
1.2.10 The FSF may request, even prior to the request fo r its activation, all releva nt data and information 
from credit institutions through the BoG,  as well as on-site inspections  to be carried out by the BoG 
with the participation of a FSF represen tative, expert or external auditor31. 
 Financial results and statemen ts, auditing and other provisions  
1.2.11The FSF will establish unrealised revaluation r eserve accounts in accordance with the International 
Financial Reporting Standards (IFRS)32. Moreover, provision is made for: (1) the approval of the 
FSF’s annual financial statements prepared in ac cordance with the IFRS and their submission, 
together with other relevant reports, to the Gr eek authorities and the European Commission, the 
ECB and the IMF; (2) regular financial audits a nd ad hoc audits, the outcome of which must be 
submitted to the Greek Parliament; (3) a comprehe nsive internal audit mechanism; and (4) FSF 
immunities33.  
                                                 
25  See Article 8(1). Partial redemption will not be permitted. The BoG will only approve redemptions that do not jeopardise 
the credit institution’s solvency and financial stability. 
26  See Article 8(2). 
27  See Article 10(1). 
28  See Article 10(3). 
29  See Article 7(2). 
30  See Article 10(5). 
31  See Article 11. 
32  See Article 12. 
33  See Articles 13 to 15. 
6 2. General observations 
2.1 The ECB welcomes the establishment of the FSF as  a means to improve the safety net for the 
Greek banking system during an economic downturn wh ich could have adverse implications for the 
asset quality of Greek credit institutions. Moreover, it takes note that the FSF is part of a broader set of measures under the Memorandum and its design therefore takes into account the other characteristics of the Programme plan
34. The ECB appreciates that the FSF’s mandate is clearly 
defined. At the same time, the ECB welcomes the FSF’s role in facilitating strategic decision-
making in terms of restructuring the Greek banking  system and thus allowing it to continue its 
function in extending credit to the Greek economy.  
2.2 The ECB welcomes the scope of the draft law c overing subsidiaries operating in Greece of credit 
institutions having their registered office abroad  as well as branches operating abroad of Greek 
credit institutions. Moreover, the draft law do es not discriminate between credit institutions 
established in Greece in accordance with the Declaration of Paris35, which states that Member 
States’ actions taken to facilitate the funding of  banks ‘will be designed in order to avoid any 
distortion in the level playing field’, a crucial elem ent for the integration of the financial markets in 
Europe. The ECB also welcomes the FSF’s finite life, ending on 30 June 2017. Despite its 
relatively long tenure, this is in line with earlier ECB opinions underscoring the need for any national support scheme to be temporary in natu re, even if it may be extended or renewed
36. The 
ECB also appreciates the clarification in Article 2 of the draft law according to which the liquidity 
provision by the BoG in the context of the Eurosy stem’s refinancing operati ons will not fall within 
the FSF’s purpose, hence respecti ng the Eurosystem’s exclusive competence under Article 127(2) 
of the Treaty as regards the implementation of the single monetary policy. 
2.3 The ECB welcomes the close link between the activ ation of the FSF and the supervisory process 
under Law 3601/2007 on banking an d the relevant Basel rules. Taken in conjunction with the 
BoG’s supervisory powers over credit institutio ns under Law 3601/2007, the draft law should 
ensure that the capital adequacy requirements of  credit institutions are properly maintained. In 
particular, the ECB endorses the need, at the firs t instance, for the recommendation by the BoG for 
the credit institution to apply to the FSF for a cap ital injection to be based on a forward-looking 
assessment using conservative assumptions under the Pillar II review process. The ECB notes that 
                                                 
34  In accordance with Article 1(3) of Law 3845/2010, Anne x III (Memorandum on economic and financial policy) and 
Annex IV (Memorandum of Understanding on specific economi c policy conditionality) are jointly referred to as the 
‘Programme plan’. The Ministry of Fi nance drew up the Programme plan with the European Commission, the ECB and 
the IMF, to implement the support mech anism in accordance with the Statements reproduced in Annexes I and II to 
Law 3845/2010 (Statement by the Heads of  State and Government of the euro area of 25 March 2010 and Statement on 
the support to Greece by euro area Member States of 11 April 2010). 
35  The Declaration issued by the Heads of State of the euro area on 12 October 2008. The text of the Declaration is available 
on the former French Presidency’s website at www.ue2008.fr. 
36  See paragraph 3.3 in Opinion CON/2009/62. All EC B opinions are available on the ECB’s website at 
www.ecb.europa.eu. 
7 any recourse to the FSF may occur only after the cr edit institution can show that it has failed to 
increase its own funds with the participa tion of its existing or new shareholders37.  
2.4 The strong sanctions, including the possibility of  appointing a Commissioner or requiring removal 
of the management, or even withdrawing the bank ing licence, are to be imposed by the BoG on a 
credit institution which, despite a recommenda tion by the BoG based on a forward-looking 
assessment, fails to enhance its solvency position and whose capital subsequently falls below the 
relevant Pillar I or II limits. Such rules, in c onjunction with the quantitative targets for activating 
the FSF, are essential to allow the Bo G to exercise its supervisory powers in safeguarding financial 
stability.   
2.5 The ECB appreciates that any request by a cr edit institution for recapitalisation must be 
accompanied by a business plan and a detailed timeta ble for its implementation, even before the 
submission of the restructuring plan to be drawn up in line with the requirements of the European 
Commission in the context of Union State aid ru les and European Commission practices. The ECB 
notes that these mandatory rules go in the directi on of ensuring that the recapitalised institutions 
will be subject to a proper viability assessment and w ill not be unfairly advantaged by recourse to 
the FSF, which is in line with earlier ECB opinions38.  
2.6 The ECB notes that the requirement for the prici ng of the preference shares to be issued or 
redeemed by the credit institution in exchange for recapitalisation funds, as well as the pricing 
applied in conversion of the preference shares to  ordinary shares on a decision by the FSF, must 
reflect the fair value or market price. As in its  previous opinions, the ECB stresses the importance 
of appropriate pricing for recapitalisations to enha nce the stability of the financial system, facilitate 
the return to normal market conditions, ensure a le vel playing field and the proper financing of the 
economy39. The ECB welcomes the time limit of five year s for the repurchase of the shares, as this 
significantly contributes to the temporary nature of  the FSF support. The ECB also appreciates the 
need for the BoG to approve any redemption of shares, also taking into account the possible implications for financial stability.  
2.7 The ECB welcomes the FSF’s extens ive powers over the management and shareholders of the 
credit institutions receiving capital support
40. In particular, and in addition to the abovementioned 
requirements for the nature and pricing of any cap ital injection, these rules ensure that existing 
shareholders bear the due consequences of the intervention, in line with previous ECB opinions41. 
The ECB appreciates that the FSF will have access to  all relevant data a nd information from the 
credit institutions through the BoG, even prior to the submission of a request for its activation, as 
                                                 
37  See Article 6(1)(b) and Article 6(2)(b). 
38  See paragraph 3.3 in Opinion CON/2008/57. 
39  See paragraph 3.2 in Opinion CON/2009/62. 
40  See Article 10(3) and 10(5) on the rights attached to the preference shares.  
41  See paragraph 2.2 in Opinion CON/2008/52. 
8 well as on-site inspections. Such access should be su bject to the same confidentiality requirements 
imposed on the BoG with respect to information from the credit institutions42. 
2.8 The ECB welcomes the establishment of the FSF as an entity with its own decision-making powers 
independent of its founder, the Greek State. U nder the draft law the FSF will be governed and 
managed by a Board, which will be its supr eme decision making body and will enjoy full 
independence in deciding on any issue concerni ng the FSF’s administration, operation, asset 
management, identification and pursuit of its obj ectives. The ECB understa nds that as regards 
corporate governance, the FSF’s Board as the FSF’ s supreme decision-maki ng body will have the 
powers that would be assigned to the Board of Directors and to the General Meeting of shareholders were the entity to be a joint st ock company. This decision-making autonomy should 
enable the FSF to decide on recapitalising particul ar credit institutions independently of outside 
influence. Moreover, the President of the Board will  represent the FSF in its relations with judicial 
authorities, other bodies and third parties
43. 
3. Specific observations  Role of Governor of Bank of Greece in appointing the FSF Board members
 
3.1 The ECB notes that all seven members of the Bo ard are to be appointed by a decision of the 
Minister for Finance on a proposal by the BoG’s Governor44. The formal appointment of members 
of the Board by the Minister for Finance is importa nt to ensure the democr atic legitimacy of the 
FSF, whose capital is provided by the Greek State45.That being the case, the ECB notes that the 
BoG’s Governor will have an initiating role in the appointment procedure, having the power to 
select five Board members following a public call for expressions of interest46.The ECB considers 
that this enhanced role in the appointment proce dure is important in view of the BoG’s prudential 
supervision role and the stability of the financial system.  
 Presence of ECB observer in FSF Board meetings  
3.2 The ECB supports the draft law’s requirement for an observer from the ECB to be invited to 
participate in the Board’s meetings47. To facilitate participation by the ECB and Commission 
                                                 
42  See Article 11(1)(a).  
43  See Article 4(3). 
44  Other Member States have set up domes tic funds to recapitalise and restructure ba nks. Some of these funds have a similar 
procedure for appointing most of the members of the fund’ s decision-making body on a proposal by the national central 
bank. For example, in the case of the Spanish Fund fo r Orderly Bank Restructuring (FROB) set up under the Royal 
Decree Law 9/2009 of 26 June 2009, Article 3 provides that the Minister for Econom ic Affairs and Finance appoints all 
members of the Governing Committee, the FROB’s decision -making body, with five of the eight members to be 
proposed by the Banco de España. The remaining three memb ers are representatives of the bank deposit guarantee funds 
for each of the three Spanish banking sectors. Se e ECB Opinions CON/2008/52,  CON/2008/57 and CON/2009/62. 
45  Also, the Board assures the FSF’s accountability to the Greek legislature and the State authorities by having to report 
periodically on its activities to the Minist er for Finance and the BoG, and to provi de detailed information to them through 
its President on request. The Board must al so submit bi-annual reports to the Greek Parliament notified to the Ministry of 
Finance, the European Commission, the ECB and the International Monetary F und, as well as to the BoG. See 
Article 4(9). 
46  See Article 4(2)A. 
47  Article 4(2)C. 
9 observers in the Board’s meetings, it would be he lpful if the draft law could clarify that all 
documents going to the Board will be  made available in English.  
 Impact of FSF account at the BoG on implementation of Eurosystem monetary policy  
3.3 The recourse to a BoG deposit account for the investment of the FSF’s capital provides a stable 
solution. This does not necessarily raise difficulties for the implementation of the single monetary 
policy provided that even infrequent account movements are known in advance and therefore included in liquidity forecasts .    
 Prohibition on monetary financing
 
3.4 As regards the monetary financing prohibition la id down in Article 123 of the Treaty, as the FSF’s 
capital is to be issued in the form of securities th at are wholly owned by the Greek State, the FSF 
should be considered as a ‘public undertaking of a Member State’ w ithin the meaning of 
Article 123(1) of the Treaty and Article 8 of Council Regulation (EC) 3603/93 of 
13 December 1993 specifying definitions for the a pplication of the prohibitions referred to in 
Articles 104 and 104b(1) of the Treaty48. Under the draft law the FSF may not enter into any loan 
agreement or issue bonds or commercial paper49. Accordingly there will be no question of the FSF 
being involved in any borrowing from the ECB, the BoG or any other ESCB central bank so that the monetary financing prohibition will not be breached.  
3.5 Furthermore, to comply with the monetary fina ncing prohibition, it is essential to specify that the 
remuneration of the account held by the FSF at the BoG will reflect market parameters. In 
particular, it is important to correlate the deposits ’ remuneration rate with their maturity. Past ECB 
opinions
50 have noted that the prohibition on monetary  financing by central banks of government 
activities is independent of its form, e.g. loan s or direct, non-reimbursable funding to the public 
sector. Interest payments above market rates constitute a de facto advanced distribution of profits. 
This, in turn, implies a de facto intra-year credit, contrary to the objective of the monetary financing 
prohibition. Therefore, the remuneration for pu blic entity deposits should not go beyond the 
remuneration applied to a similar deposit made by a market counterparty. If the remuneration 
mechanism for deposits of public entities allows pub lic sector entities to systematically steer the 
remuneration by a national central bank at a rate a bove the rate at which a similar deposit would be 
remunerated by a market counterparty, this w ould contravene the objectives of the monetary 
financing prohibition under the Treaty. It may al so have undesired signalling effects. Given the 
purpose of the FSF’s financial resources held at the BoG, their maturity is very short term to be 
quickly available. The interest rate at which th e BoG should remunerate deposits made by the FSF 
should be at a rate equivalent to, or in a range, th e highest and lowest points of which will be set by 
(1) the Eurosystem deposit facility rate and (2) the Euro Overnight Index Average (EONIA) rate. 
The reference to the rate applicable to the Eu rosystem main refinancing rate (MRO) should be 
                                                 
48  OJ L 332, 31.12.1993, p. 1. 
49  Article 3(4). 
50  See in particular ECB Opinions CON/2008/10 and CON/2009/69. 
10 removed as this rate would norma lly be positioned within the range  defined above, but it might, in 
exceptional circumstances, exceed the EONIA rate. 
3.6 The ECB notes the draft law expressly provides that the remuneration of the Board members and 
staff salaries will be payable from the FSF’s budget51. As the FSF will be financially independent52 
and will draw up its own financial statements53, this implies that it will be responsible for its 
operating costs. Thus there should not be any cause for the FSF to resort to central bank resources to finance any of its operations. 
 Earmarking of FSF capital
 
3.7 Article 3(1) provides that the FSF’s capita l ‘stem[s]…..from the EU/IMF financial support 
mechanism to Greece by virtue of Law 3845/2010’. There may be a need to clarify this in a non-legislative act instead of in the draft law.  
Conflicts of interest
 
3.8 The ECB considers that the draft law already deals with most of the situations where Board 
members’ private interests could conflict with those of the FSF. Nevertheless there are still a 
number of technical details that could be usefully clarified.  
3.9 First, as regards the second sentence of Article 4( 2)(E), the draft law is ambiguous as to whether the 
BoG officials may not be subject to the incomp atibility requirements for Board members in sub-
paragraph E. This second sentence is understood to mean only that the holding of any office with 
the BoG by a Board member may not be considered  incompatible with that person’s status as a 
Board member. If this is what is intended, this should be specified in a separate clause and the 
words ‘with the exception of officials coming from the BoG’ at the end of the second sentence of 
Article 4(2)(E) should be deleted. Otherwise, th e current wording could mean that the direct 
shareholding of BoG officials in credit instituti ons would not be covered by the incompatibility 
requirements in sub-paragraph E.  
3.10 Second, the fifth sentence of Article 4(2)(E) should clarify that Board members should be obliged 
not only to disclose any possible conflict of intere st, but also to abstain in any relevant Board 
resolution where a matter is on the agenda in whic h they have an actual or possible conflict of 
interest.  
3.11 Third, it is important to clarify that the members of the Board and the staff may not use confidential 
price sensitive market information to which they have access by reason of their position at the FSF 
to carry out private transactions for thei r or their relatives’ private benefit.  
3.12 Fourth, in Article 16(3), consider ation could be given to whether the cooling off period of six 
months following the end of the contract s hould only apply to senior professional staff. 
                                                 
51  Article 4(2)(B) and Article 5(1). 
52  Article 1. 
53  Article 13. 
11  Definition of credit institutions  
3.13 It is understood that the refere nce to ‘subsidiaries of credit institu tions having their registered office 
abroad’ in Article 2, and concerning the types of institutions eligible for a capital injection by the 
FSF to strengthen their capital adequacy, is inte nded to refer to subsidiaries which are themselves 
credit institutions authorised by the BoG operating in Greece, and not any other type of authorised 
financial institution. This part of the provision could be made clearer for the sake of legal certainty.  
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 9 July 2010. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET