EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
22 May 2012 
on the recapitalisation and resolution fram ework for credit institutions in Greece 
(CON/2012/39) 
 Introduction and legal basis
 
On 11 April 2012, the European Central Bank (ECB) received a request from the Greek Ministry of 
Finance for an opinion on a set of draft provision s on urgent issues for the recapitalisation of credit 
institutions in Greece, and on 19 April 2012 the ECB received a revised version of part of such draft provisions (hereinafter the ‘original draft pr ovisions’). On 30 April 2012, the ECB received a 
supplementary consultation request from the Greek Ministry of Finance on provisions governing the 
bridge recapitalisation of credit institutions in Greec e (hereinafter the ‘supplementary draft provisions’). 
The original draft provisions
1 and the supplementary draft provisi ons were enacted under the emergency 
legislative procedure provided for in Article 44 of  the Greek Constitution and entered into force on 
19 April 20122 and 30 April 20123, respectively. 
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 th e consultation of the ECB by national authorities regarding draft 
legislative provisions, as the draft provisions relate to the Bank of Greece and to rules applicable to financial institutions insofar as they materially influe nce 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 provisions 
1.1  The draft provisions amend the Greek legal fra mework for the recapitalisation and resolution of 
credit institutions
4. In particular, Article 1 of the origin al draft provisions amends Law 3864/20105 
on the Hellenic Financial Stability Fund (hereinafter  the ‘Law on the HFSF’) and Article 2 of the 
                                                 
1  With the exception of the provisions  of Article 3, as discussed in para graphs 1.1, 1.4 and section 6.   
2  FEK A 94/19.4.2012. 
3  FEK A 103/30.4.2012. 
4  For previous ECB Opinions on amendments to the legal framework on recapitalisation and resolution of credit 
institutions in Greece see in particular CON/2011/72, CON/2012/14 and CON/2012/25. All ECB opinions are published 
on the ECB’s website at www.ecb.europa.eu. 
5  FEK A 119/21.7.2010. 
ECB-PUBLIC  
2 original draft provisions amends Law 3601/20076 (hereinafter the ‘Law on banking’) and Law 
3556/20077. In addition, Article 3, submitted as a distin ct set of the original draft provisions, 
introduces taxation and accounting arrangements pert aining to the participation of credit 
institutions in the Greek debt restructuring. The supplementary draft provisions further amend 
Article 6 of the Law on the HFSF.  
1.2 Amendments to the Law on the HFSF   
 According to the explanatory memorandum, Article 1 of the original draft provisions introduces the 
amendments necessary to: (i) in crease the capital of the Hellenic Financial Stability Fund (HFSF) 
to € 50 billion in the context of the second economic adjustment programme for Greece; (ii) include in the HFSF’s assets, in ad dition to cash, capital in the form  of European Financial Stability 
Facility (EFSF) notes or other financial instruments issued or approved by the EFSF, which are to be held with an account in the Bank of Greece’ s system for monitoring transactions in book-entry 
securities, with the Bank of Greece acting as a cu stodian; (iii) extend the period within which a 
credit institution’s viability under the business pl an should be ensured, no longer taking into 
account profitability; (iv) enable the HFSF, followi ng a decision by the Bank of Greece, to provide 
to credit institutions eligible for recapitalisati on a certification committing the HFSF to participate 
in the credit institution’ s capital increase once certain conditions are met
8 and, in such cases, to 
enable the HFSF, until completion of the capital increase, to have direct  access to the credit 
institution’s economic data, to conduct due diligen ce controls and to appoint representatives on its 
Board of Directors with specific powers; (v) to in clude in the recapitalisation tools, in addition to 
the existing common shares and contingent conve rtible bonds, other convertible financial 
instruments; (vi) to facilitate recapitalisation by  repealing the restriction on non-transferability of 
the HFSF’s shares to third parties and on their tradin g on regulated markets; (vii) to ensure, in view 
of the HFSF’s participation in the share capital of cr edit institutions, that its financial statements are 
published after those of the latter institutions; and (viii) enable the HFSF to provide guarantees to 
the credit institutions being recapitalised in order to enhance confidence in the domestic financial 
system.  
 The supplementary draft provisions introduce th e amendments necessary to enable the HFSF to 
provide bridge recapitalisation to credit institutions  and to authorise the Minister for Finance, 
following an opinion by the HFSF, to issue deci sions further specifying corporate governance 
issues for the period before the completion of the bridge recapitalisation undertaken.  
1.3 Amendments to the Law on banking and to Law 3556/2007  
 According to the explanatory memorandum, Article 2 of the original draft provisions introduces the 
amendments necessary to: (i) facilitate the immediat e implementation of transfer orders issued as a 
resolution measure by the Bank of Greece unde r Article 63D(2) of the Law on banking, by 
                                                 
6  FE Κ A 178/1.8.2007. 
7  FEK A 91/30.4.2007 
8  See Article 1(2)(b) of the original draft provisions. 
ECB-PUBLIC  
3 providing that where the transfer order amounts to a concentration of undertakings the procedure 
will not be suspended but will be conducted as normal, unless the Greek Competition Commission, 
which has to be notified, decides otherwise; to a void uncertainty and ensure the efficiency of the 
procedure, the deadline for such decision is shorte ned; (ii) authorise the Minister for Finance to 
extend the time within which issuers of securities li sted in regulated market s are obliged to publish 
the relevant annual financial stat ements in accordance with law. 
1.4 Draft provisions on taxation and accounting issues  
 According to the explanatory memorandum, Article 3 of the original draft provisions, referred to in 
paragraph 1.1 above, mainly aims to address the problem of adequate regulatory capital of credit 
institutions participating in the Greek debt exch ange, taking into account the envisaged Union legal 
framework on capital adequacy of credit institutions and investment firms which will incorporate 
the Basel III rules. In particular, according to the explanatory memorandum, the tax benefit that will arise for the credit institutions participating in the Greek debt restructuring from writing down 
the debit difference resulting from such participatio n, as defined in Article 3, will not depend on 
their future profitability and, thus, will not be deducted from their basic regulatory capital. 
Therefore, the need for additional capital outflow from shareholders and eventually from the State 
to credit institutions would be considerably curta iled resulting in no additional charge to the public 
debt. 
 2. General observations  
 As stated in the introduction, the ECB received th e original draft provisions on 11 and 19 April and 
it received the supplementary draft provisions on 30 April. The original and the supplementary 
draft provisions were enacted under the emergency le gislative procedure provided for in Article 44 
of the Greek Constitution
9, and they came into force on 19 April 2012 and 30 April 2012, 
respectively. The ECB underlines that it should be c onsulted in due time prior to entry into force. 
More generally, internal administrative proce dures should be in place to ensure the timely 
consultation of the ECB, and the ECB should be c onsulted at an appropriate point in time in the 
event of amendments during the legislative procedure.  
 3. Procedure for the activation of the HFSF and bridge recapitalisation 
3.1 Article 1(2)(a) of the original draft provisions  amends Article 6(2)(a) of the Law on the HFSF to 
the effect that the required business plan accompa nying a credit institution’s request for capital 
support must demonstrate how the said institution is to  ensure viability ‘within three to five years’. 
The ECB understands that this prolongation from thr ee years to a maximum of five years aims to 
                                                 
9  This provides for the issuance of a specific act by the President of the Hellenic Republic, acting on a proposal by the 
Cabinet. Within 40 days from issuance the act is submitted to Parliament for ratification within another three months. It 
enters into force upon publication in  the national Government Gazette. 
ECB-PUBLIC  
4 facilitate a longer term strategy of the business plan, which is welcome. The ECB also understands 
that this prolongation does not interfere with th e maximum duration of four years of the HFSF’s 
investment in a credit institution where it has full voting rights10.  
3.2 According to the new Article 6(8) of the Law on the HFSF, introduced by Article 1(2)(b) of the 
original draft provisions, upon a decision by the Bank of Greece the HFSF will provide a credit institution, which the Bank of Gr eece has assessed as viable and which has submitted a request for 
capital support under Article 6(2) of such Law, w ith a certification committing it to participate in 
the said institution’s share capital increase pursuan t to Article 7 of the Law for the amount 
determined by the Bank of Greece, without follow ing the procedure laid down in Article 6(3) 
thereof
11. The above commitment will not apply wher e the license of the credit institution is 
withdrawn for any reason or a procedure for such withdrawal is launched before the procedure for 
the capital increase has commenced.  
3.3 Furthermore, according to the new Article 6(9) of the Law on the HFSF, introduced by Article 
1(2)(b) of the original draft provisions, where th e HFSF provides the abovementioned certification,  
for the period until the completion of the relevant  capital increase the HFSF: (a) will appoint up to 
two representatives to the Board of Directors of the credit institution, who will have the powers 
referred to in Article 10(3) of the Law on the HFSF12 and will recommend to the Board of Directors 
the measures necessary for safeguarding the HFSF’s interests and supervise their implementation; 
and (b) may request from the credit institution any data and information it considers necessary for 
fulfilling its purpose and may carry out special a udits (due diligence) and exercise its rights 
according to Article 11 of the Law on the HFSF. Ar ticle 6(9) of the Law on the HFSF is further 
supplemented by the supplementary draft provisions  specifying that the HFSF will have the same 
rights if it has paid in advance the contribution refe rred to in paragraph 3.4 below in the context of 
the bridge recapitalisation.  
3.4 Finally, according to the new Article 6(10) of the Law on the HFSF, introduced by the 
supplementary draft provisions, the HFSF, in view of its participation in a future share capital 
increase of a credit institution that the Bank of Gr eece has considered to be viable, will pay in 
advance its entire contribution to the capital increase or part of such contribution and up to the 
                                                 
10  See Article 8, in conj unction with Article 7a, of the Law on the HFSF. 
11  According to Article 1(2)(b) of the draft provisions, the H FSF shall grant this certificati on provided that (a) the business 
plan of the credit institution has been assessed as viable and credible by the Bank of Greece, (b) the above request, also 
notified to the European Commission, has been approved by the Bank of Greece and that (c) the Bank of Greece has 
considered that granting such certification is necessary bo th for the credit institution to continue operating without 
impediments (going concern) and to meet the capital adequacy requirements in accordance with  the decisions of the Bank 
of Greece, and for maintaining the financial stability of the Greek banking system. 
12  Namely: (a) to call the general meeting of shareholders; (b) to veto any decision of the Board of Directors either on 
distribution of dividends and bonus policy for the Chairman, Managing Director and the othe r members of the Board, as 
well as for the general managers and th eir deputies, or where the decision in question could serious ly compromise the 
interests of depositors, or impair the credit institution’s liquidity or solvency or its overall sound and smooth operation; 
(c) to request an adjournment of any meeting of the credit institution’s Board for three (3) business days, until 
instructions are given by the HFSF’s Executive Council, follo wing consultation with the Ba nk of Greece. Such right may 
be exercised by the end of the meeting of the credit institu tion’s Board; (d) the right to request that the Board be 
convened; (e) the right to approve the Economic Director. In exercising his rights, the HFSF’s  representative in the Board 
of Directors shall respect the cr edit institution’s business autonomy. 
ECB-PUBLIC  
5 amount determined by the Bank of Greece, following a decision of the latter, provided that: (i) the 
credit institution has submitted a request for capita l support, accompanied by a business plan and a 
detailed time plan; (ii) the request has been approved by the Bank of Greece and notified to the 
European Commission and the business plan has been assessed by the Bank of Greece as viable and 
reliable; (iii) the Bank of Greece considers that th e prepayment of the contribution is necessary in 
order for the credit institution to comply with th e relevant capital adequacy requirements and to 
maintain access to Eurosystem monetary policy opera tions, and in order to ensure the stability of 
the Greek banking system; and (iv) the credit in stitution has concluded a subscription agreement 
with the HFSF and the EFSF. The prepaid contributi on will be deposited in an account of the credit 
institution held with the Bank of Greece exclusivel y for the purpose of the HFSF’s participation in 
the capital increase and will be released upon certifi cation of payment of the capital in accordance 
with Greek company law provisions13. Pending its release for the completion of the capital increase, 
the contribution may be used exclusively for the purpose of ensuring liquidity through repurchase transactions with market counterparties and/or through the ECB or the Bank of Greece within the Eurosystem. If the HFSF’s contribution to the capital increase is lower than the amount prepaid, or 
if the capital increase does not take place, the HFSF will have a claim for a refund of the excess amount or the entire amount, as the case may be, at an interest rate determined by the Minister of Finance following a proposal of the Bank of Greece and the HFSF. If the cred it institution’s license 
is withdrawn before the completion of the capital increase and a transitional credit institution (TCI) 
is established under Article 63E of the Law on ba nking, the EFSF notes which have been provided 
as the HFSF’s prepaid contribution will constitu te assets of the TCI. The abovementioned 
procedure set out in the new Article 6(10) of th e Law on the HFSF will apply following a decision 
of the Bank of Greece published in the Government  Gazette, prior to which the consent of the 
European Commission, the ECB and the EFSF must be obtained
 14. 
3.5 In relation to the new Article 6(9) of the Law on the HFSF, as introduced by the original draft 
provisions and further amended by the supplemen tary draft provisions, the ECB notes that, as 
already highlighted in previous opinions15, the HFSF’s responsibilities need to be clearly defined, to 
ensure that the HFSF does not inadvertently inte rfere with the powers of the Bank of Greece as 
supervisory and resolution authority and as guarantor  of the stability of the financial system. The 
documentation for the second economic adjustment programme for Greece explicitly calls for the 
need to ‘clarify the procedures and respons ibilities for the valuation of assets and liabilities’16 and 
                                                 
13  Under Article 11(2) of Codified Law 2190/ 1920, in each case of capital  increase the payment or not  of the capital must be 
certified by the Board of Directors within one month from e xpiry of the deadline for paying the amount of the increase. 
Certification of payment is not required if the capital increase does not take place through new contributions. 
14  Furthermore, according to such Article 6(10) a Cabinet decision to be issued following an opinion by the HFSF will 
determine: (i) the more detailed terms of the subscription agreement, (ii) the more detailed terms ensuring the EFSF’s 
rights, as set out in the Loan Facility Agreement dated 15 March 2012, the draft of which was approved by Article 1 of 
Law 4046/2012 (FEK A 28/14/2/2012), and (iii) any necessary issue for the implementation of such Article 6(10) of the 
Law on the HFSF. 
15  See Opinion CON/2012/14, paragraph 2.2. 
16  See section 18 of the Memorandum of  Economic and Financial Policies (MEFP)  in ‘The Second Economic Adjustment 
Programme for Greece’, March 2012 
ECB-PUBLIC  
6 entrusts the assessment of credit institutions’ viab ility and capital raising plans to the Bank of 
Greece17, as also reflected in the new Article 6(8) of  the Law on the HFSF. The ECB notes that this 
clear allocation of responsibilities could be jeopard ised if the HFSF was to be enabled to conduct 
special audits (due diligence) prior to recapita lising a credit institution. In particular, the 
involvement of the HFSF in conducting such audits without any clarification as to the consequences 
of such audits for the recapitalisation procedure could result in interference with the competence of 
the Bank of Greece. The resulting uncertainty and po tential delays in the recapitalisation procedure 
would undermine the whole purpose of the new Arti cle 6(8) of the Law on the HFSF, which is to 
enable the Bank of Greece to promptly respond to the recapitalisation needs of a credit institution it 
has assessed as being viable, by immediately providi ng a solution to ensure such credit institution’s 
(bridge) capital adequacy18. 
3.6 In relation to the new Article 6(10) of the Law on the HFSF, introduced by the supplementary draft 
provisions governing the bridge recapitalisation, the ECB highlights that for financial stability 
reasons it is very important to ensure that  the advance deposit by the HFSF of EFSF notes will 
result in an increase in the capital of the benefici ary credit institution. In  this respect, the ECB 
considers that the basic purpose of the bridge r ecapitalisation is to ensure  an increase in the loss-
absorbing capital of a beneficiary credit institution.  Indeed, the extent to which the recapitalisation 
scheme can achieve this central objective is closel y linked to the treatment of the EFSF notes in the 
event of the beneficiary credit institution’s insolvency prior to  the conclusion of the bridge 
recapitalisation. In determining whether this object ive has been achieved the views of the Bank of 
Greece, as supervisor of Greek-licensed credit in stitutions, will be of central importance. In the 
light of the above considerations, the ECB expects that the bridge recapitalisation will be finalised 
shortly . 
3.7 As to the scope of the restrictions on the be neficiary credit institutions to only use the EFSF notes 
in repurchase operations and/or as eligible colla teral for borrowing from the Eurosystem for the 
period prior to the conclusion of the recapitalisati on procedure, the ECB notes that it will be for the 
Eurosystem to define the eligibility criteria for assets to be used in Eurosystem operations.   
3.8 Finally, in relation to the requirement introduced  by the new Article 6(10) of the Law on the HFSF 
that the recapitalisation procedure set out therein is  to be based on a decision of the Bank of Greece 
after having obtained the consent of the European Commission, the ECB and the EFSF, the ECB notes that it is not for a national legislator to confer upon the ECB decision-making powers such as 
that provided for in Article 6(10) above. Beside s, the involvement of the ECB in the process 
leading up to the recapitalisation of Greek banks w ould not be in line with the need to ensure a 
clear role of the Bank of Greece as the domes tic supervisory and resolution authority and as 
                                                                                                                                                             
 (http://ec.europa.eu/economy_finance/publications/occasiona l_paper/2012/pdf/ocp94_en.pdf); also as Annex V to Law 
4046/2012 (FEK A 28/14.2.2012). 
17  See section 17 of the MEFP. 
18  The above considerations also  apply in relation to the bridge recapitalisa tion procedure provided for in the new Article 
6(10) of the Law on the HFSF, introduced by the supplementary draft provisions. 
ECB-PUBLIC  
7 guarantor of the stability of the financial system , as suggested in paragraph 3.5 above. The ECB 
therefore does not consider itself bound by this provi sion. Pursuant to Article 127(6) of the Treaty, 
the Council of the European Union, acting by means of regulations, may unanimously confer 
specific tasks upon the ECB concerning policies rela ting to the prudential supervision of credit 
institutions. In addition, Article 127(5) of the Treaty provides that the ESCB contributes to the smooth conduct of policies pursued by competent authorities relating to the prudential supervision 
of credit institutions; however, the consent requi red by Article 6(10) above goes beyond the scope 
of the ESCB’s competence under Article 127(5). 
  
4. Means of provision of capital support  
Article 1(3) of the original draft provisions amends Ar ticle 7(1) of the Law on the HFSF to the effect that 
capital support to be provided under such Law by the HFSF’s participation in the capital increase of a 
credit institution will be effected through the issuan ce of common shares or contingent convertible 
securities or other convertible financial instruments. The ECB welcomes that the original draft provisions 
extend the types of instruments that can be used as recapitalisation tools.    
 5. Provision of guarantee by the HFSF  
5.1 Article 1(6) of the original draft provisions am ends the last sentence of Article 16C(6) of the Law 
on the HFSF to enable the HFSF to provide gua rantees to the credit institutions eligible for 
recapitalisation under Article 2(1) of the said Law and to grant security over its assets for the purposes of performing its obligations under such guarantee. Any necessary detail for the 
implementation of such paragraph may be laid down by a decision of the Minister for Finance   
5.2 The ECB notes that the abovementioned Article 1( 6) would extend the manda te and scope of action 
of the HFSF by turning it into a potential guara ntor of credit institutions’ exposures, thereby 
strengthening their financial state. This provision does not set out the conditions for providing such 
guarantees and the rationale behind it. The explan atory memorandum also makes no reference to 
the conditions to be met for the activation of such guarantees and their assessment, as well as 
regarding the implications and the underlying reasoning
19. Moreover, the fact that  Article 1(6) 
provides for a ministerial decision to regulate ‘a ny necessary detail for the implementation’ does 
not provide the necessary clarity and legal cer tainty, as the decision would only address the 
implementation of the provision and not the c onditions for the activation of the guarantees. 
Furthermore, the explicit objective of the HFSF is  to maintain the stability of the Greek banking 
system by strengthening the capital adequacy of credit institutions20. This can only be convincingly 
achieved by providing Greek cred it institutions with a solid, fu lly loss-absorbing capital base, 
which gives a clear signal to the market that th e Greek banking sector is healthy and viable. The 
                                                 
19  It merely states that the objective would be to ‘to boost confid ence in the Greek financial system’. 
20  See Article 2 of the Law on the HFSF. 
ECB-PUBLIC  
8 possibility to guarantee the exposures of the credit institutions instead of recapitalising them 
directly does not seem to be transparent and convi ncing in achieving this objective of the HFSF.  
  6. Income tax and related issues  
6.1 Article 3, submitted as a distinct set of the or iginal draft provisions, stipulates that the debit 
difference to be borne by credit institutions  participating in the Greek debt exchange
21 will be 
deducted from the gross income in thirty equal-amo unt annual instalments, starting from the year in 
which the exchange took place. Furthermore, it stipulates that where (i) the annual tax profits of such credit institutions (before deduction of the a nnual debit difference and after setting off against 
tax losses of previous years carried over) do not su ffice to write down the annual debit difference, 
or (ii) annual tax losses occur, the income tax corresponding to the part of such annual debit 
difference not written down will, to the extent not covered by annual profits, automatically amount 
to a final and cleared claim of the beneficiary cr edit institution against the State; such claim is 
generated at the time when the beneficiary submits its income tax return and is set off against its 
income tax of the subsequent years until it is repa id in full. At the same time, the abovementioned 
Article 3 provides that the claim is subject to a prescription period of thirty years from its generation.  
6.2 The ECB notes that this particular provision, while submitted as part of the original draft 
provisions, adopted on 19 April 2012, has thus far not been adopted by the Greek authorities. In 
terms of its substance and purported objectives, the ECB is of the view that there is need for further 
clarification of such provision and its individual el ements by the national legislator. In particular, 
the provision in its current form is not clear as to  whether the claim of the credit institution against 
the State will depend on the credit institution’s futu re profitability or not. In this respect, the 
explanatory memorandum states that the tax benefit for credit institutions participating in the Greek 
debt restructuring will not depend on their future pr ofitability; accordingly, the provision refers to a 
final and cleared claim of the beneficiary credit ins titution against the State. However, it is not clear 
how this interacts with the provisions stipulating that the claim will be set off against the income 
tax of the subsequent years, that the debit diffe rence to be borne by credit institutions will be 
deducted from the gross income in thirty equal-am ount annual instalments and, most importantly, 
that the claim will be subject to a 30-year prescr iption period. In relati on to the above, the ECB 
notes that in the event that a given credit institutio n is not profitable for a number of years, the fact 
that such tax credit may result in lower capita l needs – to fulfil the regulatory requirements 
following participation in the Greek debt restructuring
22– may be an issue from a financial stability 
                                                 
21  According to such Article 3, the debit difference is defined as the difference between the acquisition cost for the 
exchanged Greek Treasury bonds and corporate bonds guarant eed by the Greek State and the face value of the bonds 
given in exchange, provided that the legal entity has not already set off the relevant devaluation loss, nor will it do so in 
the future.  
22  Private sector involvement in the Greek debt restructuring wa s agreed by the Heads of State or Government of the euro 
area Member States. See Euro Summit Stat ement, Brussels, 26 October 2011, availa ble on the website of the Council of 
the European Union at www.consilium.europa.eu.   
ECB-PUBLIC  
9 perspective. The ECB would require clarification of the above in order to be able to meaningfully 
assess such an arrangement in the c ontext of a consultation procedure .  
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 22 May 2012. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI