EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 17 June 2010 
on a draft law relating to the restructuring of th e Central Bank and Financial Services Authority of 
Ireland 
(CON/2010/48) 
 
Introduction and legal basis  
On 7 April 2010, the Governing Council of the Eu ropean Central Bank (ECB) adopted an opinion1 
(hereinafter the ‘draft heads opinion’) on draft heads, relating to a proposed draft law on the restructuring of the Central Bank and Financial Services Author ity of Ireland (CBFSAI). The purpose of the draft 
heads was to provide a framework pursuant to which the draft law would be prepared. The draft heads 
and the draft law implement a decision of the Irish G overnment of 16 June 2009 approving the reform of 
the internal structures of the CBFSAI
2.  
On 9 April 2010, the ECB received a request from th e Irish Minister for Finance (hereinafter the 
‘Minister’) for an opinion relating to the abovemen tioned draft law, entitled the ‘Central Bank Reform 
Bill 2010’ (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 (TFEU) and the thir d 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 provisions3, as the draft law relates to the CBFSAI. In accordance with the first 
sentence of Article 17.5 of the Rules of Procedure of  the European Central Bank, the Governing Council 
has adopted this opinion.  
 1. Purpose of the draft law  
The purpose of the draft law is to provide for the re form of the internal structures of the CBFSAI, in 
particular the Irish financial regulatory structures. Th e draft law implements this restructuring by way of 
various amendments to the Irish Central Bank Acts  1942 to 1998 (hereinafter the ‘CBAs’). The ECB 
welcomes the fact that the draft law follows the form and content of the draft heads  
                                                      
1   Opinion CON/2010/30.  
2  See Opinion CON/2009/89, paragraph 2. 1.1, which specifically anticipated the present proposed reform. All ECB 
opinions are published on  the ECB’s website at www.ecb.europa.eu. 
3  OJ L 189, 3.7.1998, p. 42. 
 
2 2. General observations  
Consolidation of Ireland’s CBAs and reform of supervision in Ireland The ECB reaffirms its general observations set out in pa ragraphs 2.1 and 2.2 of the draft heads opinion, in 
relation to (a) the consolidation of Ireland’s CBAs; and (b) the reform of supervision in Ireland. In 
particular, the ECB points out that the current CBAs are not consolidated and that a consolidation is 
urgently needed. 
 3. Specific observations   
3.1 Central bank  independence   
As stated in the draft heads opinion, the ECB had a number of reservations as regards whether the 
draft heads ensure full independence for Ireland’ s central bank (hereinafter the ‘Bank’) in 
compliance with (a) the central bank independence prin ciple; and (b) the role of the central bank as 
part of the European System of Central Banks (ESCB), including the principle that, when it is entrusted with ESCB-related tasks as well as with other tasks, the latter should not interfere with 
the ESCB’s tasks. More particularly, the ECB stat ed that the Bank must be a fully independent 
institution with a precisely defined mandate. As re gards ESCB-related tasks and their performance, 
the Governor, the Bank, the Commission and its i ndividual members must all be independent and 
must not seek or take instructions from the G overnment as far as those tasks are concerned
4. The 
ECB called for stringent respect of the Bank’s indepe ndence in the draft law and for clarification of 
the roles of the Governor and the Commission. In this regard, the ECB welcomes the fact that the 
draft law retains Section 19A(2) of the Central Bank Act (CBA) 1942 which provides that the Governor has sole responsibility for the performan ce of ESCB-related tasks. However, the ECB 
notes that this provision contradicts other provisi ons of the draft law whereby the Commission is 
entrusted with ESCB-related tasks (see details in paragraph 3.1.3 of this opinion). Therefore, the 
ECB reiterates its comment that the new set-up must clarify the roles of the Commission and the Governor. 
Furthermore, the ECB welcomes the draft law’s insertion of subsections (1A) and (1B) after 
subsection (1) of Section 6 of the CBA 1942, whic h is intended to underline the independence of 
the Bank, the Governor and the Commission, as required by the TFEU and the Statute of the European System of Central Banks and of the Eur opean Central Bank (hereinafter the ‘Statute of 
the ESCB’). While the ECB agrees with the clear in tention of these insertions, it remains to be seen 
whether in practice they will be able to ensure  that the Bank and the members of its decision-
making bodies will be fully independent with a view to their ESCB-related tasks. In any event, the 
ECB recommends that subsection (1A) should be fu rther strengthened in order to make clear that, 
where any provision of the CBAs could involve a contradiction of the independence principle, the 
                                                      
4  See the ECB Convergence Report of May 2008, pp. 17-18. 
 
3 independence principle is to have supremacy. An y contradictory provision of the CBAs is to be 
interpreted with due regard to that overriding principle. The ECB welcomes the more substantive 
nature of subsection (1B) and recommends that it should be further enhanced, along the following 
lines. According to its current formulation, onl y the Bank, the Governor and the Commission are 
protected from being directed or required by any pe rson or authority to act in a manner inconsistent 
with the TFEU and the Treaty on Eu ropean Union (TEU) (hereinafter the ‘Treaties’) or the Statute 
of the ESCB. The ECB recommends that this protection should also extend to any individual member of the Commission, either an ex officio  member or a member appointed by the Minister, 
who may be concerned in the performance of ES CB-related tasks. Subsection (1B) should also 
specifically provide that no member of the Commissi on shall seek to influence or give instructions 
to the Governor in his capacity as the sole member of the Commission responsible for the 
performance of the Bank’s ESCB-related tasks. In addition, the ECB understands that the provision 
encompasses instructions from both national and fore ign institutions in line wi th Article 130 of the 
TFEU and Article 7 of the Statute of the ESCB. Fo r legal certainty reasons, this provision should 
be brought fully in line with Article 130 of the TFEU and Article 7 of the Statute of the ESCB
5.  
In addition, the ECB notes that at the same time the new subsections (3) and (5) of Section 6A of 
the CBA 1942 indicate that for the Bank’s no n-ESCB-related tasks the Commission and the 
Governor must comply with the requests for a consultation or information of the Minister for Finance. In this context, to ensure that th e Bank and members of its decision-making bodies are 
fully independent in the performance of their ESCB-related tasks
6, the Governor should have the 
explicit competence to organise the ESCB-related tasks in such a way that they are performed in an 
independent manner7.  
On the assumption that the above recommendations  are followed, the ECB makes the following 
additional specific comments regarding the draft law:  
3.1.1 The draft law does not affect the current S ection 6A(1) of the CBA 1942, which states that the 
primary objective of the Bank is to maintain price stability. A substituted Section 6A(2) of the 
CBA 1942 lists the other objectives of the Bank, which were referred to in the draft heads opinion as the ‘secondary objectives’ of the Bank. The ECB st ated in the draft heads opinion that the draft 
law should provide that the Bank’s secondary objectives should be expressed to be without 
prejudice to its primary objective, as set out in Articles 127(1) and 282(2) of the TFEU and Article 2 of the Statute of the ESCB. Furthermore, the ECB stated that the draft law should provide that the secondary objectives must be consistent  and not interfere with the Bank’s obligation 
pursuant to Section 6A(6) to support the general economic policies of the European Union with a 
view to contributing to the achievement of the objec tives of that Union as laid down in Article 3 of 
                                                      
5  Similarly, see, for example, the ECB Conve rgence Report of May 2008, pp. 229, 236 and 246. 
6  Under Article 127(5) of the  TFEU, one of the tasks of the ESCB is to c ontribute to the smooth conduct of policies 
relating to the prudential supervision of credit inst itutions and the stability of the financial system. 
7  See also paragraph 3.1 of Opinion CON/2010/30; in partic ular: ‘Although the draft heads provide for an independent 
governor solely responsible for the ESCB -related tasks, the Governor may not be  seen in isolation from the central 
banking structure’. 
 
4 the TFEU, which is itself an objective expressed to be without prejudice to the primary objective of 
maintaining price stability. As these comments do not appear to have been addressed, the ECB 
restates its remarks in respect of  Section 6A(2). In addition, the ECB notes that Section 6A(1) of 
the CBA 1942 seems to limit the primary objectiv e of the central bank to the context of 
performance of its ESCB-related tasks. In line with  the ECB’s comments in this paragraph, Section 
6A(1) of the CBA 1942 should ensure that the objec tive of price stability is an objective of the 
Bank in the performance of any of its tasks, ESCB-related or non-ESCB-related. 
3.1.2 The substituted Section 6A(2)(e) of the CBA 1942 provides that one of the Bank’s other objectives 
will be ‘the discharge of such other functions and powers as are conferred on it by law’. The ECB 
reminded the consulting authority in the draft h eads opinion that the Bank’s functions must be 
performed in a manner that is fully compatible w ith the Treaties and the Statute of the ESCB. This 
substituted Section 6A(2)(e) has to be considered together with subsection (10) of the substituted 
Section 5A, which states that the Bank is required to perform its functions and exercise its powers 
in a manner consistent with the Treaties and the Statute of the ESCB, For legal certainty reasons, 
the ECB continues to recommend that the draft law clarifies that the Bank’s objective to discharge 
‘such other functions and powers as are conferred on it by law’ is subject to the requirements of the 
Treaties and the Statute of the ESCB and that pr actical precautions ensure that they are not 
compromised.  
3.1.3 The substituted Sections 18B(1) and 18B(2)  of the CBA 1942 provide that, except as expressly 
provided otherwise by the CBA 1942, the affairs and activities of the Bank shall be managed and 
controlled by the Commission. Although Section 19A(2), which provides that the Governor is solely responsible for the performance of ESCB-re lated tasks, is retained along with subsection 
(10) of the substituted Section 5A and even on the assumption that the recommendations specified 
in paragraph 3.1 above are implemented, the ECB is not satisfied that its comments in the draft 
heads opinion as regards the interaction between (a ) the Commission’s management and control of 
the Bank’s affairs and activities; and (b) the Gove rnor’s sole responsibility for the performance of 
the Bank’s objectives relating to ESCB-related tasks,  have been adequately addressed and, thus, the 
ECB would like to reiterate these comments as follows.   
The substituted Section 18B(3) provides that the Commission shall ensure the proper exercise and 
discharge by the Bank of the power s and functions conferred on it by, inter alia , the substituted 
Section 5A ( General functions and powers of the Bank ). This appears to include clearly  ESCB-
related tasks such as, for example, in the substituted Section 5A(1)(b), (c), (g) and (h). In this sense, 
Article 6.1 of the Statute of the ESCB provides that in the field of international cooperation 
involving tasks entrusted to the Eurosystem, the ECB decides how the ESCB is represented. To the 
extent that the substituted Section 5A(1)(b) and (c) allow the central bank to participate in 
international monetary institutions, the draft law should make such participation subject to the 
ECB’s approval in accordance with Article 6.2 of the Statute of the ESCB. Also, the collection of 
statistical information, which is provided for in the substituted Section 5A(1 )(g) and (h), is related 
 
5 to the performance of ESCB-related tasks and, accord ing to Article 5.1 of the Statute of the ESCB, 
in order to undertake such task s, the ECB is assisted by the na tional central banks (NCBs) in the 
collection of necessary statistical information. In this regard, the ECB’s powers in this field should 
be recognised. 
Therefore, the draft law contains provisions  whereby the Commission is responsible for clearly  
ESCB-related tasks and this is in direct conflict with the requirement for the Governor to be the 
sole authority with responsibility for such t asks which clearly underscores the observations in 
paragraph 3.1. 
3.1.4 Head 8 of the draft heads stated that ‘subject to  certain exceptions, the functions and powers … of 
the Governor (excluding ESCB functions) … are to be  transferred to the Bank’. In its draft heads 
opinion, the ECB stated that it was unclear whic h of the Governor’s functions and powers were 
intended to be transferred to the Bank. The draf t law does not appear to have implemented this 
element of draft head 8 and therefore, assuming that this is not reintroduced, the ECB has no 
further concerns in this regard. 
3.1.5 Subsection (11) of the substituted Section 5A of  the CBA 1942 states that the bank shall perform 
its functions and exercise its powers in a way that  is consistent with (a) the orderly and proper 
functioning of financial markets; and (b) the pr udential supervision of providers of financial 
services. This subsection has to be considered t ogether with subsection (10) of the substituted 
Section 5A. For legal certainty reasons, the ECB continues to recommend that subsection (11) is 
clarified with regard to the scope of the functions  covered by it, and its reference to ESCB-related 
tasks.   
3.1.6 Head 17 of the draft heads stated that the draft law would provide that the Governor would assign 
the Heads of Function their responsibilities. Accord ing to the new Section 23A inserted in the CBA 
1942 by the draft law, it is the Commission which will assign the Heads of Function their responsibilities. The ECB notes that, pursuant to the new Section 32A(1), it is the Governor who will propose a plan of assignment of responsibility fo r specified powers and functions of the Bank 
to, inter alia , the Heads of Function. The ECB furthe r notes that, pursuant to the new Section 
32A(3), the Heads of Function are accountable to the Governor for the performance of an assigned 
function (although they may also be accountable to  any other person specified for the purpose in 
the assignment). However, the ECB recommends a clarification regarding the Head of Central Banking with regard to Subsection (4) of Section 23D to ensure that the Minister for Finance cannot use powers under this rule to compromise independence in the performance of ESCB-related tasks. It would like to point out that, to th e extent that the power of the Governor to assign 
responsibilities under the new Section 32A(1) concer ns ESCB-related tasks, the draft law should 
ensure that the Governor exercises this power independently. 
3.1.7 Head 13 of the draft heads stated that certain pr ovisions relating to membership of the Commission 
were to be the same in the draft law as those that  currently apply to the board of the CBSFAI. In its 
draft heads opinion, the ECB recommended that in the event of any conflict between the conditions 
 
6 applicable to all members of the Commission and th ose applicable to the Governor, the Governor 
should be bound by the provisions applying specifically to him or her. In relation to the provisions 
of the draft law in this regard, the ECB is satisfi ed that no such conflict arises and it has no further 
concerns in this regard. 
3.1.8 The draft law retains without modification the current Section 19(6) and (7) of the CBA 1942 
which provide for the automatic termination of offi ce of the Governor for various reasons including 
bankruptcy, imprisonment or holding shares in a financial institution. The draft law also retains the current Section 21 of the CBA 1942
8. This section allows for the Governor’s removal from office 
on grounds of permanent incapacity due to ill-hea lth and for one or more specified grounds of 
serious misconduct. In its draft heads opinion, the ECB stated that, in order to ensure compliance 
with the conditions for dismissal of a Governor in Article 14.2 of the Statute of the ESCB, Sections 
19 and 21 need to reflect the language used in that  Article which states that a Governor ‘may be 
relieved from office only if he no longer fulfils th e conditions required for the performance of his 
duties or if he has been guilty of serious misc onduct’. As the draft law does not appear to have 
addressed these specific recommendations, th e ECB would like to restate them.  
3.1.9 As regards the Heads of Function, draft head 18 ma de it clear that the draft law would provide that 
the current Chief Executive of the Irish Financia l Services Regulatory Authority (IFSRA) would be 
the first Head of Financial Regulation and that hi s first term would run for the remainder of his 
contract with the IFSRA. In its draft heads opinion, the ECB recommended that the draft law 
should have similar clarity as regards the position of  Head of Central Banking, as draft head 18(3) 
simply stated that ‘there should be a transition arrangement for the present Director General of the Bank’. The ECB notes that the draft law does not ap pear to contain a transitional arrangement for 
the current Director General of the Bank. The ECB welcomes the clear provision in the draft law whereby the office of Director General of the Ba nk is replaced by the office of Head of Central 
Banking, and welcomes the retention of Secti on 22A of the CBA 1942, whereby the Head of 
Central Banking will now carry out the Govern or’s ESCB-related tasks whenever: (a) the 
Governor is unable to carry out those responsib ilities because of absence, ill-health or any other 
reason; or (b) the office of Governor is vacant.  In this regard, the draft law should expressly 
provide that the current Director General of the Bank will remain to see out his full term of office. 
In addition, the ECB restates its reminder to th e consulting authority from the draft heads opinion 
that, in the context of personal independence, the same safeguards for personal independence 
(minimum term of office, grounds for dismissal, security of tenure, right of judicial review, 
safeguards against conflicts of interests) provide d for the Governor must apply equally to all 
members of NCB decision-making bodies who are involved in the performance of ESCB-related 
                                                      
8  With one small amendment, however, to Section 21(2) of the CBA 1942, i nvolving the deletion of the words ‘if the other 
members have passed a unanimous resolution requesting the President to remove the Governor from office’. The effect is 
that the Government may ask the Presiden t to remove the Governor for stated se rious misconduct on its own initiative.   
 
7 tasks9 and in particular to those who may substitute  the Governor. The new Section 25 of the CBA 
1942 does not seem to reflect this aspect.  
3.1.10  Draft head 18 stated that the draft law would provide  that the Governor would be able to engage in 
other remunerative employment with the consent of the Commission. In its draft heads opinion, the 
ECB stated that the draft law should provide for saf eguards against conflicts of interest that could 
jeopardise the personal independence of the Gove rnor. As stated in the ECB Convergence Report 
of May 2008, ‘as a matter of principle, membersh ip of a decision-making body involved in the 
performance of ESCB-related tasks is incompatible with the exercise of other functions that might 
create a conflict of interest. In particular, members of such decision-making bodies may not hold an office or have an interest that may influe nce their activities, whet her through office in the 
executive or legislative branches of the state or in regional or local administrations, or through involvement in a business organisation’
10. The draft law does not appear to have implemented this 
element of draft head 18 in respect of the Gover nor. In this regard, the ECB welcomes the retention 
of Section 19(6) and (7) of the CBA 1942 which prot ect against conflicts of interest. However, it 
recommends that the draft law state more clearly the precise conditions which create a conflict of interest for the Governor. This also applies to all members of the Commission who are involved in the performance of ESCB-related tasks and in partic ular to those who may substitute the Governor. 
3.1.11  The new Section 32B of the CBA 1942 provides that the Bank shall prepare and submit to the 
Minister at specified intervals a strategic plan specifying the Bank’s objectives, activities, policies, 
strategies and policies for the relevant period.  The ECB notes that, pursuant to the new Section 
32B(5), the Minister shall have any such plan la id before the Houses of the Oireachtas (the Irish 
Parliament).
 The ECB recommends that the new Section 32B should contain a safeguard for the 
observance of the Bank’s independence, in respect of the preparation, approval and implementation of any such strategic plan.   
3.1.12  The draft law provides in the new Section 32C of the CBA 1942 that the Bank is to prepare an 
annual estimate of income from levies, subven tion from the Bank and any other income and 
expenditure in relation to financial regulation. This is to be submitte d to the Minister not later than 
two months before the end of each financial year . It is unclear from the draft law whether the 
Minister’s approval is required, as was explic itly foreseen in draft head 23, although such a 
requirement for approval may be implicit in the new Section 32C.  
In its draft heads opinion, the ECB stated that, wh ere third parties and particularly the government 
are in a position, directly or indirectly, to exerci se influence on the determination of the budget of 
an NCB, the relevant statutory pr ovisions should contain a safeguard clause to ensure that this does 
not impede the proper performance of the NCB’s ESCB-related tasks
11. The ECB recommended 
                                                      
9  See Opinions CON/2004/16 , CON/2004/35, CON/2006/32, CON/2006/44  and CON/2007/6. See also the comments 
made at paragraph 3.1 above in re lation to central bank independence. 
10 See the ECB Convergence Report of May 2008, p. 20. 
11 As noted in the 1998 European Monetary Institute Conver gence Report, and reiterated in paragraph 8 of Opinion 
CON/2002/16. 
 
8 that the Governor should be granted an exp licit right to oppose any funding and budgetary 
decisions in respect of financial regulation which could cause such impediments. In this regard, the 
ECB notes and welcomes the drafts law’s inclusi on of the strengthened substituted Section 19B in 
the CBA 1942. This provides for the Governor’s fi nal determination of budgetary or funding issues 
being considered by the Commission , which in the Governor’s opin ion have implications for the 
independence of the Bank or the Governor’s performance of the functions conferred on the 
Governor and the Bank by or under the Treaties and the Statute of the ESCB. In order to avoid any 
possible ambiguity, the ECB recommends that the substituted Section 19B is extended to encompass budgetary and funding issues being considered by the Minister  in this regard. In 
addition, Section 19B should provide that the Co mmission is obliged to ensure that the Bank has 
the financial means necessary for car rying out its ESCB-related tasks.  
In addition, the draft law should make clear that  Section 19B should take precedence over the new 
Section 32C.   
3.1.13  The new Section 32F(4) of the CBA 1942 provides that  any claims on, or liabilities to, the ECB are 
to be treated as assets or liabilities of the genera l fund or any other fund the Minister establishes by 
order for that purpose. The ECB would welcome clarif ication as to what is intended by this rule.  
3.1.14  The new Section 32G(1) of the CBA 1942 provides th at the Bank shall pay its surplus income as 
and when determined into the Exchequer and ma y, at any time pending such determination, pay 
into the Exchequer such sums on account of su rplus income as may be agreed between the 
Minister and the Bank. Also, the new Section 32G (2) provides for the powers of the Minister to 
make regulations providing for the periodic dete rmination of the Bank’s surplus income and in 
particular regulations regarding reserves and othe r financial buffers and re gulations providing for 
any matter arising from the implementation of Ch apters VI (financial provisions of the ESCB), 
VIII (amendment of the Statute and complementar y legislation), and IX  (transitional provisions 
and other provisions for the ESCB) of the Statute of the ESCB. The ECB reminds the consulting authority that any transfers of financial resources by  an NCB to a Member State’s budget, either in 
the form of a profit distribution scheme or in any equivalent form, need to comply with the limitations imposed in this respect by the TFEU, in  particular with the principle of central bank 
independence and the prohibition on monetary  financing under Articles 130 and 123 thereof
12. In 
the absence of precise provisions in an NCB statute of how profits are allocated, the decision on 
allocation of profits should be taken by  the NCB’s decision-making bodies on professional 
grounds, and should not be subject to the discretion of third parties unless there is an express safeguard clause stating that this is without prejudice to the financial means necessary for carrying out the NCB’s tasks related to the ESCB
13. Moreover, compliance with the principle of central 
bank independence under Article 130 of the TFEU in cludes a requirement to  ensure the central 
bank’s financial independence. To ensure such  compliance, the Member States should establish 
                                                      
12 Concerning the prohibition on monetary financing, see paragraph 3.2 below. 
13 See paragraph 2.2(b) of Opinion CON/2009/29 and p. 21 of the ECB Convergence Report of May 2008. 
 
9 legal frameworks for NCB profit distributions which allow for an arm’s length assessment of the 
financial needs of the relevant NCB to be a ppropriately taken into account. Such assessments 
should be based on the professional judgement of  the relevant NCB’s independent decision-
making body rather than on the financial needs of  the State, so that the NCB does not become 
dependent for its finances on the government , the parliament or any other third party14. The 
principle of central bank independence requires that no third party should be able to exercise direct 
or indirect influence, over the performance of the NCB’s tasks, or over its ability, both 
operationally in terms of manpower, and financially in terms of appr opriate financial resources, to 
fulfil its mandate, i.e. to perform its national task s, to meet its international obligations and to 
properly cover its administra tive and operational expenses15. Profits may be distributed to the State 
budget only after any accumulated losses from previ ous years have been covered and financial 
provisions deemed necessary to safeguard the real value of the NCB’s capital and assets have been created. Indeed, it is of the utmost importance to allow a sufficient provision of reserves to allow the NCB to face possible losses without lessening its  financial means to implement the monetary 
policy of the Union. Similarly, the NCB must also be free to independently create financial 
provisions to safeguard the real value of its cap ital and assets. Furthermore, Articles 28.1 and 30.4 
of the Statute of the ESCB provide for calls on the NCBs to make cont ributions to the ECB’s 
capital and to make transfers of foreign reserves.  The principle of financial independence requires 
that compliance with these provisions leaves an NCB’s ability to perform its functions 
unimpaired
16.  
In respect of the new Section 32G(3), the ECB not es that the same safeguards are to apply as do 
currently, in that the Minister must have regard  to the functions imposed and the powers conferred 
on the Bank by the Treaties and the Statute of the ESCB. As stated in paragraph 3.1.12 above, it appears that the current safeguards do not sufficien tly secure the Governor’s final determination of 
budgetary or funding issues contained in the s ubstituted Section 19B. There may be conflicts 
between the substituted Section 19B and the new Section 32G, or another provision of the CBAs
17, 
which cast a doubt over the Governor’s right of fina l determination of budge tary or funding issues 
and could have implications for the Bank’s in dependence or the performance of ESCB-related 
tasks. In this respect, the draft law should make clear that Section 19B should take precedence over 
the new Section 32G.  
3.1.15  The draft law provides in a new Section 32H of  the CBA 1942 that where it appears to the 
Commission that the proceeds from levies and fees imposed in respect of financial regulation are likely to be insufficient to enable the Bank to properly perform its regulatory functions, the Bank may provide additional funds to subsidise the shor tfall. The new Section 32H(3) and (4) contains 
                                                      
14 Ibid. 
15 Ibid and see the ECB Convergence Report of May 2008, p. 20. 
16 See the ECB Convergence Report of May 2008, p. 20. 
17 See also Section 32H(3) and (4) (discussed in paragraph 3.1.15 below) of the CBA 1942.    
 
10 the same safeguards as currently apply18: (a) the Minister is competent to approve such 
subsidisation; (b) the Minister must consult the Governor before deciding thereon; the latter may 
express his opinion thereon, in so far as it could a ffect (i) the Bank’s performance of its obligations 
with respect to promoting the State’s financial stability; and (ii) the performance of the Bank’s 
functions in its capacity as a member of the ESCB;  and (c) the Minister must have regard to the 
functions and powers of the Bank under the Treatie s and the Statute of the ESCB when approving 
such subsidisation. As stated in paragraph 3.1. 14 above, it appears that the current safeguards do 
not sufficiently secure the Governor’s final determ ination of budgetary or funding issues contained 
in the substituted Section 19B. The ECB restates its recommendations at paragraph 3.1.14 in this 
regard.   
3.1.16  The draft law provides in the new Section 32I of the CBA 1942 for the Bank’s preparation of 
annual accounts. Section 32I(3) provides that the form of statement of accounts must be approved 
by the Minister after consulting the Bank. In its draft heads opinion, the ECB stated that the draft 
law should reflect the Bank’s obligation to comply  with the Eurosystem’s regime for financial 
reporting of the Bank’s operations pursuant to Article 26 of the Statute of the ESCB. In line with its convergence reports, the ECB also stated that  the power of the Comptroller and the Auditor 
General to audit the Bank’s accounts (provided for in the draft law as the new Section 32I(5) of the 
CBA 1942) should be expressed to be without pr ejudice to the audit by the Bank’s external 
auditors. As the draft law does not appear to have addressed these specific recommendations, the ECB restates its remarks in this regard.   
3.2 Monetary financing   
3.2.1 According to the draft law, the National Consum er Agency (NCA) will assume the previous role of 
the Consumer Director of providing information to consumers in relation to financial services. The 
draft law provides in its Section 6 for arrange ments in respect of Bank employees who may be 
seconded or transferred to the NCA in order to impl ement the transfer of that function. According 
to the draft heads, provision was to be made in the draft law for the preservation of the rights of any seconded staff who had contributed to a central ba nk superannuation scheme up until transfer to the 
NCA. The ECB repeats its recommendation containe d in the draft heads opinion in this respect, 
namely that in order to ensure full compliance with the prohibition on monetary financing under 
Article 123 TFEU
19 the draft law should clarify that no Bank resources will be applied towards the 
payment of pensions, or any ot her remuneration, in respect of Bank staff, once seconded or 
transferred to the NCA, other than solely in r espect of ensuring the rights and entitlements already 
accrued by those Bank staff up to the time of secondment or transfer.  
                                                      
18 See the current Secti on 33L of the CBA 1942. 
19  The monetary financing prohibition as laid down in Article 123 TFEU is further clarified in Council Regulation EC (No) 
3603/93 of 13 December 1993 specifying definitions for the applic ation of prohibitions in Article 104 and 104b(1) of the 
Treaty [establishing the European Community] [now Article s 123 and 125 TFEU], OJ L 332,  31.12.1993, p. 1, according 
to which overdraft facilities or any other type of credit facilit y with the ECB or the NCBs of Member States in favour of 
Community institutions or bodies, central governments, region al, local or other public au thorities, other bodies governed 
by public law, or public under takings of Member States are prohibited, as  is any purchase dir ectly from these public 
sector entities by the ECB or  NCBs of debt instruments. 
 
11 3.2.2 As set out above at paragraph 3.1.14, the ne w Section 32G(1) of the CBA 1942 provides that the 
Bank shall pay its surplus income as and when dete rmined into the Exchequer and may, at any time 
pending such determination, pay into the Exche quer such sums on account of surplus income as 
may be agreed between the Minister and the Bank.  The ECB reminds the consulting authority that 
any such transfers of financial resources by an N CB to a Member State’s budget, either in the form 
of a profit distribution scheme or in any equivale nt form, need to comply with the limitations 
imposed in this respect by the TFEU, in particular with the prohibition on monetary financing under Article 123 thereof. More specifically, in or der to comply with this prohibition, it is of 
crucial importance that the distribution of profits  does not imply advances on future or provisional 
profits but is rather the result only of profits th at are fully realised, accounted for and audited, 
which in turn requires due calculation of profits a nd losses. Otherwise, such distribution of profits 
may result in advance profit distribution to the St ate, which would constitute credit to the public 
sector in breach of the mo netary financ ing prohibition
20. Thus, in order to ensure that the schedule 
for distribution of the Bank’s profits to the Exchequer complies with the monetary financing prohibition, in full or through instalments, it may not imply advances on future or provisional 
profits but only result in annual profit distribut ions that are fully realised, accounted for and 
audited, which in turn requires due calculation of profits and losses for the relevant reporting 
period
21.  
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 17 June  2010. 
 
[signed] 
 
The Vice-President of the ECB 
Vítor CONSTÂNCIO
 
                                                      
20  See e.g., paragraph 3.3 of Opinion CON/2008/82, paragraph 2.4 of Opinion CON/2009/26, and paragraph 2.4 of Opinion 
CON/2009/53.   
21 See paragraph 2.2(b) of Opinion CON/2009/59.