EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 9 February 2009 
at the request of the Latvian Ministry of Finance  
on a draft regulation on fair compensati on granted to a bank or its shareholders 
(CON/2009/11) 
 Introduction and legal basis
 
On 5 February 2009 the European Central Bank (ECB) received a request from the Latvian Ministry of 
Finance for an opinion on a draft regulation establishing procedures for determining the amount, offer and 
payment of fair compensation granted to a bank or its shareholders (hereinafter the ‘draft regulation’).  
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the sixth 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 provisions1, as the draft regulation relates to rules app licable to financial institutions insofar as 
they materially influence 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 regulation The main objective of the draft regulation is to lay down procedures according to which the Latvian 
Cabinet of Ministers calculates the amount of compensa tion to be paid to banks that are being taken over 
by the State or to those banks’ shareholders. The draf t regulation also provides for procedures for offering 
and paying compensation. 
 2. General observations 
2.1 The legal basis for the adoption of the draf t regulation is the Law on bank takeovers of 
18 December 2008
2 on which the ECB was consulted, albeit after its adoption. As a consequence, 
the ECB’s views could not be dul y taken into account in the Latvian legislative process.   
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  Published in Latvijas V ēstnesis , 202 (3986) on 30 December 2008. 
2 2.2 In this context, the ECB notes that the recap italisation measures considered in Member States are 
aimed at strengthening the capital position of fundame ntally sound financial in stitutions, in order to 
improve the functioning and stability of the banking system and to ensure the proper financing of 
the economy.  
In line with the ‘Declaration on a concerted European action plan of  the euro area countries’ issued 
by the Heads of State of the euro area on 12 October 2008 (hereinafter the ‘Declaration’)3, the ECB 
has highlighted in its opinions that close coordi nation at the EU level of Government measures 
intended to alleviate tensions in the fi nancial markets is of crucial importance4. This coordinated 
approach includes initiatives aime d at ensuring appropriate liquidity, facilitating the funding of 
banks by various means, providing additional cap ital resources to financial institutions and 
recapitalising distressed banks.  
In line with the Declaration, the ECB emphasise s that the support measures brought in by Member 
States should be temporary in nature and that th e duration of such measures should be harmonised 
throughout the EU. 
Furthermore, and in line with previous ECB opinions5, it should be ensured that such measures are 
in accordance with the requirements of Community competition law, in particular State aid rules, 
and that the State’s role as shareholder is limited in time6. 
2.3 In the absence of further details, the ECB has no observations on the specific provisions of the draft 
regulation. It notes, however, that pricing conditi ons for compensation granted should be risk-based 
and market-oriented, as they should not lead to di fferences in the treatment of financial institutions. 
 
                                                 
3  The Declaration is available on the French Presidency’s website at www.ue2008.fr. 
4  See the Recommendations of the Governing Council of the Eu ropean Central Bank on the pr icing of reca pitalisations 
issued on 20 November 2008, available on the ECB’s website at www.ecb.europa.eu. See also ECB Opinion 
CON/2008/79 of 27 November 2008 at the request of the Greek  Ministry of Economy and Finance on a draft law on 
enhancing liquidity of the economy to address the impact of the international financial cris is and on a draft decision on its 
implementation, as well as ECB Opinion CON/2009/3 of 8 Ja nuary 2009 at the request of the Slovenian Ministry of 
Finance on a draft decree laying down crit eria and conditions for th e implementation of  State capital investments and for 
the conversion of State claims in to capital shares under Article 81.a  of the Law on public finance. 
5  See e.g. paragraph 3.8 of ECB Opinion CON/2008/68 of 13 N ovember 2008 at the request of the Finnish Ministry of 
Finance on a draft government proposal for laws amending the Law on the Government Guarantee Fund and the Law on 
credit institutions. 
6 See ‘Communication from the Commission – The application of St ate aid rules to measures ta ken in relation to financial 
institutions in the context of the curre nt global financial crisis’ (OJ C 208 of  25.10.2008, p. 8). Also ‘Communication 
from the Commission – The recapitalisation of financial institutions  in the current financial crisis: limitation of aid to the 
minimum necessary and safeguards agains t undue distortions of competition’, ava ilable on the Commission’s website at 
www.ec.europa.eu. 
3 This opinion will be published on the ECB’s website.  
  Done at Frankfurt am Main, 11 February 2009. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET