EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of  15 December 2006 
at the request of the Central Bank of Malta 
concerning amendments to the Central Bank of Malta Act 
(CON/2006/58) 
 
Introduction and legal basis  
On 21 November 2006 the European Central Bank (ECB) received a request from the Central Bank of 
Malta for an opinion on draft amendments to the Cent ral Bank of Malta Act (hereinafter the ‘Act’), to be 
inserted in an existing bill amending the Act1 (hereinafter the ‘bill’). 
The ECB’s competence to de liver an opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third and fourth indent s 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 provisions2, as the amendments relate to the Centra l Bank of Malta (CBM) and the collection, 
compilation and distribution of statistics. 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 amendments 
The main purpose of the draft amendments is to bring the Act into line with the Treaty and the Statute of 
the European System of Central Banks and of the Europ ean Central Bank, in particular with regard to the 
legal integration of the CBM into the Eurosystem. Th e draft amendments concern, inter alia, provisions 
relating to the CBM’s performance of its tasks, the management of foreign reserves, the collection of 
statistical information and administrative penalties. 
 2. General observations 2.1 The ECB welcomes the draft amendments as they seek to address most of the issues raised in the 
ECB’s recently adopted December 2006 Converg ence Report and aim to recognise the ECB’s 
powers in relation to foreign reserve management, financial instruments and statistical obligations. 
                                                     
 
1  The ECB has already commented on the original amendments contained in the bill; see ECB Opinion CON/2006/23 of 
22 May 2006 at the request of the Central Bank of Malta c oncerning a draft law amending th e Central Bank of Malta Act.  
2  OJ L 189, 3.7.1998, p. 42. 
2 2.2 Article 2(2) of the bill provides that the Mini ster for Finance establishes, by notice in the 
Government Gazette, a date for the entry into forc e of the bill or differe nt dates for different 
provisions. The Community has exclusive comp etence in matters relating to economic and 
monetary union, and national legislation should not in any way prejudice the EU Council’s decision regarding the abrogation of the relevant Member State’s derogation and the date on which 
this abrogation takes effect. Thus, for reasons of clarity and legal certainty, it would be advisable 
for the bill clearly to specify that the entry into fo rce of certain provisions is related to the abolition 
of Malta’s derogation. 
2.3 Concerning the references in the Act to the St atute, where applicable it would be advisable to 
complement them with references to the Treaty.  
2.4 For ease of reference, when article numbers are quoted below these do not refer to the bill, but 
rather to the numbering in the Act if it is amende d in accordance with the bill (hereinafter referred 
to as the ‘amended Act’). 
 3. Specific observations Part II ‘Establishment and Conduct of Affairs of Bank’ 3.1 The ECB observes that Article 4 of the amended Act should be adjusted to provide that the CBM 
has to support the general economic policies ‘in’ rather than ‘of’ the Community, in order to 
comply with Article 105(1) of the Treaty.   
3.2 Article 7(1) of the amended Act assigns to th e Board of Directors responsibility ‘for the policy and 
general administration of the affairs and business of  the Bank, except in relation to the functions 
imposed and the exercise of powers conferred on the Bank by or under the Treaty or the Statute’.  However, Article 8(6) of the amended Act states that ‘the Governor shall provide the Board with 
information about the exercise of powers conferre d, upon the Governor or the Bank, by or under 
the Treaty or the Statute’. The relationship between these two provisions is unclear, in particular as regards the functions and powers of the Board of Directors, as well as the scope and implications of 
the Governor’s reporting duty concerning ESCB -related tasks, which tasks are under the 
Governor’s exclusive responsibility. Therefor e, the ECB recommends further clarifying the 
respective powers of the Board of Directors and the Governor concerning ESCB-related tasks. 
3.3 Article 11(1) of the amended Act provides fo r the disqualification, resignation and filling of 
vacancies of the Board of Directors; the latter includes the Governor and the Deputy Governor, pursuant to the definition of ‘director’ in Article 2 of the amended Act. The ECB observes that this 
extends the grounds on which the Governor can be  dismissed from office from those provided for 
in Article 14(2) of the Statute (namely if the Gove rnor no longer fulfils the conditions required for 
the performance of their duties or if they have b een guilty of serious misconduct). For this reason, 
Article 11(1) of the amended Act  should be aligned with the wording of Article 14(2) of the 
3 Statute, as far as the Governor, Deputy Governor and other members of the Board of Directors 
involved in the performance of ESCB-related tasks are concerned. 
3.4 The ECB welcomes Article 17(2) of the amended Act, which expressly provi des that the CBM will 
act in accordance with the ECB’s guidelines and instructions when managing and maintaining 
foreign reserve assets. 
Part III ‘Financial Provisions’ 3.5 Article 20 of the amended Act concerning aud it to a large extent reproduces the wording of 
Article 27 of the Statute. Given the primacy of Comm unity law and for the sake of legal clarity, the 
ECB recommends replacing this with an explic it reference to Article 27 of the Statute. 
3.6 Moreover, regarding Article 21 of the ame nded Act on the CBM’s financial reporting, it is 
recommended to include an explicit reference to Article 26(4) of the Statute in order to recognise 
the Eurosystem’s regime for the fi nancial reporting of  NCBs’ operations. 
Part V ‘Relations with Government’ 3.7 Article 27(1) of the amended Act states that th e CBM is not permitted to grant ‘overdrafts or any 
other type of credit facility to Community institutio ns or bodies or the government or to any public 
undertaking, public authority or government-owned  corporation of any Member State’ or to 
‘directly purchase their debt instruments’. Howeve r, Article 27(1) should fully mirror Article 101 
of the Treaty, to avoid any confusion as to wh ich entities are covered by the monetary financing 
prohibition. It is therefore recommended that Ar ticle 27(1) of the amended Act also includes 
‘bodies governed by public law’, as provided for in Article 101 of the Treaty. 
3.8 Article 29 of the amended Act provides that the CBM shall keep the Minister for Finance informed 
of the CBM’s policy. In its Convergence Reports, the ECB has noted that an express statutory 
obligation for an NCB to consult third parties ex ante provides the latter with a formal mechanism 
to influence the final decision and is therefore incompatible with the Treaty and the Statute. 
However, dialogue between NCBs and third parties,  even when based on statutory obligations to 
provide information and exchange views, is co mpatible with central bank independence provided 
that: (a) this does not result in interference with  the independence of the members of the NCB’s 
decision-making bodies; (b) the special status of Governors in their capacity as members of the 
ECB’s General Council is fully respected; and (c ) confidentiality requirements resulting from the 
Statute are observed. The ECB recommends amendi ng Article 29 of the amended Act in the light 
of the abovementioned requirements. 
Part VII ‘Payment Systems’ 3.9 Concerning Article 34(5) of the amended Act,  on payment systems and the CBM’s related power 
to issue directives, it is recomme nted explicitly to state that this CBM power is exercised in 
accordance with the Treaty, Article 22 of the Statute and any regulations issued under Article 22 of 
the Statute.        
4  
 Part X ‘Currency’ 3.10 Although Articles 42 and 43 of the amended Act make it clear that, once the euro is introduced in 
Malta, euro banknotes and coins will be issued in  compliance with the ESCB legal regime, the 
ECB also suggests inserting an explicit reference to  Article 106 of the Treaty and Article 16 of the 
Statute.  
3.11 Article 51 of the amended Act provides that  the CBM ‘may, acting in accordance with the 
provisions of Decision ECB/2003/4 of 20 Marc h 2003 on the denominations, specifications, 
reproduction, exchange and withdrawal of euro  banknotes, authorise the reproduction of euro 
banknotes or euro coins’. The ECB recommends that an y reference to euro coins in this Article be 
deleted, as Decision ECB/2003/4
3 only applies to euro banknotes. Furthermore, the ECB notes that 
rather than allowing an NCB to authorise a repr oduction of a euro banknote, Article 2(4) of 
Decision ECB/2003/4 provides that an NCB may, in certain cases, provide confirmation that a reproduction of a euro banknote – even if it does not comply with the criteria under which certain reproductions are automatically deemed to be lawful, pursuant to Article 2(3) of Decision 
ECB/2003/4 – is deemed to be lawful  in so far as it cannot be mistaken by the general public for a 
genuine euro banknote. Therefore it is suggested th at Article 51 of the amended Act is adjusted 
accordingly. 
Part XI ‘General’  
3.12 Concerning the publication of reference rates, covered in Article 61 of the amended Act, it is 
suggested to replace the phrase ‘key interest rates of the Eurosystem’ with ‘key interest rates of the 
ECB’. 
                                                     
 
3  OJ L 78, 25.3.2003, p. 16. 
5 3.13 Finally, the ECB suggests deleting Schedule One to the Act, given that the contents of this 
Schedule are all already contained in Annex II to Council Regulation (EC) 2182/2004 of 
6 December 2004 concerning medals a nd tokens similar to euro coins4, which is directly 
applicable. Consequently, Article 55 of the amende d Act needs to be amended: it should contain a 
general reference to Regulation (EC) 2182/200 4, and in accordance with Article 6 of 
Regulation (EC) 2182/2004 it should only establish the sanctions applicable to infringements of the 
Regulation. Article 60 of the amended Act also needs to be adjusted accordingly. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 15 December 2006. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                     
 
4  OJ L 373, 21.12.2004, p. 1.