EN
OPINION OF THE EUROPEAN CENTRAL BANK
of 31 May 2001
at the request of the Spanish  Ministry of the Economy on a draft law introducing
amendments to several laws govern ing the Spanish financial market
(CON/2001/12)
1. On 23 April 2001 the European Central Bank (ECB) received a request from the Spanish
Secretary of State of the Ec onomy, Energy and Small and Medium-sized Enterprises for an
opinion on a draft law amending several legal acts pertaining to the financial legal framework
(hereinafter the Draft Law).
2. The competence of the ECB to deliver an opi nion on the Draft Law does not extend to the
entire content of the Draft Law, but is confined  to certain areas: securities settlement systems
(Article 1, fourth additional provision, and first and second transitory provisions of the Draft
Law), collateral for Eurosystem operations (Ar ticles 11, 12 and 15 of the Draft Law), electronic
money (Article 19 of the Draft Law), the prudential supervision of credit institutions(Article 30 of the Draft Law) and provisions  affecting the powers of the Banco de España
(Chapter Six on the Centre for Risk Informa tion, and the Abrogating Provision of the Draft
Law). The enumeration of the above areas is based on the third, fift h and sixth indents of
Article 2(1) of Council Decisi on 98/415/EC of 29 June 1998 on th e consultation of the ECB by
national authorities regarding draft legislative provisions
1. In addition, according to Article 1(2)
of the said Council Decision, the ECB does not need to be consulted on draft legislative
provisions which serve the sole purpose of transposing Community Directives into the law ofMember States. However, when such consultati on is effected on a vol untary basis on a topic
closely related to ESCB tasks, the ECB is ready to provide its opinion; this is the case in this
consultation with regard to the provisions rela ting to electronic money. Articles of the Draft
Law other than those listed above fall outside the advisory competence of the ECB. Inaccordance with the first sentence of Article 17.5 of the Rules of Procedure of the European
Central Bank, this Opinion has been adopt ed by the Governing Council of the ECB.
1OJ L 189, 3.7.1998, p. 42.
23. The ECB welcomes the legislative methodology chosen to address various needs for the
modernisation and enhancement of financial re gulation in Spain. The use of a horizontal law
which addresses various requirements to upgrade  existing legislation is a method which has
been used by several Member States to cope with the pace of development of financial markets.Changes in such markets in Europe follow th e introduction of the euro and the consequent
tendency to replace national markets by the euro market, the globalisation of financial markets,the impact of new technology, and other factors. Since the evolution of such markets will in all
likelihood continue, perhaps at an even greater  pace, regular legislative adaptation of the
overall financial legal framework seems to be th e best legislative technique for such a period of
change. 
4. Article 1 of the Draft Law is aimed at providing a legal basis for the incorporation as a société
anonyme of the central depository services and at unifying in one single central securities
settlement system the various systems existing for the settlement of different kinds of securities.
The ECB welcomes all measures aimed at fost ering the consolidation of euro securities
settlement systems and thus the overall objective of the proposed reform. Within the context ofthis general support, the ECB would, however, make the following comments.
(a) The regime which the Draft Law establis hes appears to grant to the resulting
consolidated system ( la Sociedad de Sistemas ) exclusive central register rights for
securities admitted to trading; (i) on the pub lic debt market; and (ii) on national stock
exchanges. For the regional stock exchanges and for securities being traded over-the-
counter, other alternatives are permitted. The ECB understands that such exclusiverights are limited to the primary or central registry function to be performed by the
Sociedad de Sistemas, as previously performed by two securities settlement systems,which qualify as a public function under Span ish Law, and notes that (i) there are no
exclusivity rights for secondary registers which may be managed on a free-marketbasis; and (ii) foreign participation in the capital of the Sociedad de Sistemas is
permitted. Following the introduction of the euro, the ECB favours the integration ofEuropean financial markets and notes that  the Explanatory Memorandum of the Draft
Law reflects the aim of such integration and justifies the Draft Law on the basis of theimplications of such integration. It thus a ppears important that national laws do not lend
support to a perpetuation of national fragmenta tion of such markets, but rather allow for
such integration. The ECB welcomes the legislative proposal to consolidate the centralregistry function in Spain into one main system, under terms which will increase thesafety and efficiency of securities settle ment and thereby contribute to financial
stability in Spain. The legislative proposal  paves the way for future processes of
integration of Spanish securities markets with  others in the euro area, as the proposed
scheme is more in line with the structur e of the majority of euro area securities
settlement systems. The ECB notes that th e process of consolidation of securities
settlement systems in Spain is not completed with the Draft Law, and that autonomous
3regional systems continue. Such continued domestic fragmentation does not serve the
cause of enhanced efficiency  of post-trading structures. 
(b) The Draft Law allows the Ministry of the Economy to authorise and to regulate the
establishment of one or, exceptionally, severa l central counterparties for the securities
markets. The ECB welcomes this possib ility because central counterparties, when
properly regulated, enhance the efficiency of the securities markets. However, some
comments are necessary: 
/g45 The Draft Law subjects the provision of cen tral counterparty services in Spain to
government authorisation. Such govern ment authorisation has the function of
ensuring that central counterparty servi ces are properly regulated and supervised,
but should not be seen as a mechanis m to impede the provision of central
counterparty services by other central c ounterparties incorporated in the EU, when
properly regulated and supervised, on a cross-border or remote basis. Once more,domestic legislation should not perpetuate  the fragmentation of financial markets
following the introduction of the euro. 
/g45 Central counterparties have a pivotal role with regard to the stability of financial
markets; they operate at the centre of trad ing, and should be able to cope with the
failures of market participants in order to  avoid systemic risks. The solvency and
liquidity of central counterparties need to  be ensured; they should be supervised
and have access to central bank liquidity and to real-time payment systems. TheECB recalls that, in choosing whether to establish a central counterparty, CPSS-IOSCO Recommendation 4 should always be followed, according to which acentral counterparty, where introduced, shoul d be subject to a rigorous requirement
to control the risks it assumes. Within the regime to be adopted for a central
counterparty, it may be worth considerin g the advantages of requiring any new
central counterparty to adopt the form of  a credit institution which satisfies such
requirements, in which case such a basic criterion may be established in the DraftLaw, rather than leaving it to ministerial regulation. 
/g45 The Draft Law attributes the supervision of  the central counterparty to the National
Securities Market Commission and to the Banco de España, without specifying therespective competences. In this regard, it is necessary to recall that, following
CPSS-IOSCO Recommendation 18, (i) central counterparties should be subject to
public regulation and oversight; (ii) the responsibilities and objectives of thesecurities regulator and the central bank with respect to the central counterparty
should be clearly defined; (iii) their roles and major policies should be publiclydisclosed; and (iv) they should have the ability and the resources to perform theirresponsibilities, including assessing and promoting the implementation of theseCPSS-IOSCO Recommendations. In taking acc ount of the above, it should be borne
4in mind that the solvency risks, liquid ity risks, access to RTGS and the resulting
systemic risks imply that central bank s have a direct interest in the good
functioning and supervision of central counterparties. The ECB would therefore
advise that CPSS-IOSCO Recommendation 18, as stated above, be duly followed.
5. The Draft Law modifies Article 36(7)(b) of the Securities Market Law in order to allow loans
of securities only if the securities are the propert y of the lender. The ECB considers that such a
provision prohibits on-lending activities and t hus introduces an important limitation to the
securities loan market. In this regard, it should also be recalled that CPSS-IOSCORecommendation 5 affirms that securities lending  and borrowing should be encouraged as a
method for expediting the settlement of securities transactions and that barriers which inhibit
the practice of lending securities for this purpose should be removed.
6. Article 12 introduces a sixth additional prov ision to Law 13/1994 on the Autonomy of the
Banco de España which establishes the legal regime for collateral for ESCB operations. TheECB welcomes the proposal, which is aimed at simplifying the formalities required for thecreation and enforcement of the collateral, incl uding cash collateral; this proposal provides a
legal basis for margin maintenance and top-up provisions, and for assigning bank loans undersimplified formal requirements. While those reforms improve the existing regime, oneobservation may be made: the regime for assigning bank loans seems to continue to requirecumbersome formalities; namely, paper form, registration with two public registries and
handover of the loan contract. Th e ECB would favour, if legally possible, further simplification
of such a procedure with an enha nced use of computerised systems.
7. Article 12 further introduces a seventh add itional provision to Law 13/1994 on the Banco de
España which provides for collateral for Treasury cash management operations. This provisionsupplements the introduction in Article 11 of th e Draft Law of a Treasury power to perform
repo and loan operations in the management of its liquidity. Article 12 provides for a specific
procedure for the execution of pledges in favour  of the Treasury of collateral placed with the
Banco de España by credit institutions in the context of monetary policy operations, followingwhich the relevant assets would be re-attached as collateral for the Banco de España once the
obligations of the Treasury have been discha rged. The ECB welcomes the proposed procedure
for the collateralisation of the temporary transfer s to credit institutions of  the liquidity balances
until now held by the Treasury with the Banco de España, optimising the use of availablecollateral.  
8. Article 13 introduces a new kind of security: th e cédulas territoriales. These are securities
issued by credit institutions and backed by  claims on public administrations. The ECB
welcomes such innovation, which is aimed at introducing a new and sound instrument for the
capital markets, in line with si milar instruments successfully ex isting in other Member States,
and which will contribute to increasing the volume of collateral available in Spain. 
59. Article 15 of the Draft Law modifies the te nth additional provisi on of Law 37/1998 amending
the Securities Market Law of 1988, which provid ed for the legal validity and enforceability of
the close-out and netting provisions included in the standard documentation of the repo
markets, securities loans and other trading in s ecurities. The new wording satisfies the need for
clarity arising from the current provision and is thus welcomed. 
10. Article 19 of the Draft Law relates to el ectronic money (e-money). The ECB understands
Article 19 of the Draft Law as aiming principally at implemen ting Directive 2000/28/EC of the
European Parliament and of the Council of  18 September 2000 amendi ng Directive 2000/12/EC
relating to the taking-up and pursuit of the business of credit institutions2 (of which the latter is
referred to as the Banking Directive) and Directive 2000/46/EC of th e European Parliament
and of the Council of 18 September 2000 on the taking-up, pursuit of and prudentialsupervision of the business of electronic money institutions
3 (the E-money Directive). The
ECB would like to make the following comments:
/g45 According to Article 19(5), the Ministry of  the Economy, following a report from the
Banco de España, will be in charge of authorising the creation of e-money institutions. Thecontrol and inspection of all e-money institutions and their registration on the registercreated for this purpose will be incumbent upon the Banco de España. The ECB welcomesthe powers therefore conferred upon the Banco de  España. In this respect, the ECB would
like to emphasise the interest of the Eurosy stem in e-money. This interest stems from
monetary policy concerns and the primary objective of maintaining price stability, as wellas from the Eurosystems role in contributin g to the smooth conduct of policies pursued by
the competent authorities in relation to the pr udential supervision of credit institutions and
the stability of the financial system. This intere st also relates to the Eurosystems basic task
of promoting the smooth operation of paymen t systems as stated in Article 105 (2)
4 of the
Treaty and Article 3.15 of the Statute of the ESCB. These provisions provide the legal basis
for the oversight activities of the Eurosystem. As part of its oversight task, the Eurosystempursues the objectives of soundness and efficien cy of e-money schemes and pays specific
attention to their technical security, in order to ensure confidence in the currency. Against
this general background, the ECB suggests that the competence of the Banco de España, asstated in Article 19 of the Draft Law, be exte nded to the functioning and security of the e-
money schemes themselves, as distinct from the e-money institutions. 
/g45 Article 19(7) of the Draft Law implements Article 8 of the E-money Directive, according to
which Member States may allow their compet ent authorities to waive the application of
some or all provisions of the same Directiv e and of the Banking Directive. The paragraph
2 OJ L 275, 27.10.2000, p.37.
3OJ L 275, 27.10.2000, p. 39
4 The basic tasks to be carried out through the ESCB shall be: [] to promote the smooth operation of payment systems.
5 In accordance with Article 105 (2) of the Treaty, the basic tasks to be carried out through the ESCB shall be: [] to
promote the smooth operation of payment systems.
6provides for a waiver with regard to the e- money institutions specified more specifically in
Article 8(1)(b) of the E-money Directive. Paragraph 7 covers the cases where the e-moneyissued by this institution is accepted as a m eans of payment only by a subsidiary of the
institution performing operational or other auxiliary functions relating to e-money issued ordistributed by the institution, by any parent unde rtaking or by any other subsidiary of that
parent undertaking. Paragraph 7 states that such e-money institutions may be exempt from
the application of the provisions of this Law and the norms developing it  according to the
procedure to be determined by the Government . As indicated above, the development of e-
money raises issues relating to monetary policy, payment systems oversight and theprudential supervision of financial intermedia ries. In order for the regulatory framework
currently being implemented in the EU to pr ovide adequate safeguards, the ECB regards it
as important that the waiving of regulatory requirements under Article 8 of the E-moneyDirective be implemented into the national le gislation with prudence and in a restrictive
manner. In this respect, the ECB would recommend, inter alia , that the national legislation
should not grant the possibility of waiving Article 3 of the E-money Directive onredeemability.
/g45 Finally, the last sub-paragraph of Article 8( 1) of the E-money Directive states that [ t]he
underlying contractual a rrangements must provide that el ectronic storage device at the
disposal of bearers for the purpose of maki ng payments is subject to a maximum storage
amount of not mo re than EUR 150.  The ECB notes that this pr otective provision of the E-
money Directive, which applies when a nationa l authority implements the possibility of a
waiver under Article 8, is not  stated in the Draft Law.
11. Article 30 of the Draft Law author ises the Banco de España, acting as a prudential supervisor of
credit institutions (and the Securities Commission with  respect to investment firms), to entrust
to external auditors the perform ance of specific supervisory tasks in certain cases of complex
groups, the international activity of credit institu tions, as well as in other cases. Such external
auditors are roughly equivalent to bank inspect ors of the Banco de España in the execution of
such tasks. The ECB welcomes such a possib ility for an enhanced prudential supervision
capacity on the part of the Banco de España, namely in the current climate in which a surge ofconglomerates in the context of the internationa lisation of financial markets is giving a new
dimension to the supervision function. 
12. Chapter Six of the Draft Law establishes a revi sed regime for the Central Risk Information
system (CRI) of the Banco de España. The ECB generally welcomes the proposed regime, inparticular as regards the aims, inter alia , of facilitating the use of information stored in the CRI
for supervisory purposes and enhancing supervis ory co-operation on a cross-border basis, both
with authorities of other Member States and third countries. The ECB further welcomes the
proposed Article 43, which will enhance the possi bilities for co-operation between the CRI and
central credit registers based in other countries. The proposed Article 43 will allow the CRI to
7exchange information on relevant borrowers on a cross-border basis, within a regime of
reciprocity and on terms to be determined by the Banco de España. This possibility will beparticularly relevant for those EU Member Stat es which operate central credit registers of a
similar nature, and with similar functions, to the CRI. Such information-sharing will, however,
only be possible if the recipient central credit register or a reporting institution is subject to
rules on the use of data, confidentiality and data protection which are comparable to thosestipulated in Spanish law. The ECB expects that  practical solutions will be elaborated in the
ongoing co-operation among central  credit registers in the EU. 
13. The Abrogatory Provision of the Draft La w abrogates Article 15.3 of Law 13/1994 on the
Autonomy of the Banco de España. This Article  15.3 refers to the regime for those banknotes
withdrawn from circulation but not  yet returned to the Banco de España. The abrogation allows
the ECB to establish the regime which will apply to such banknotes in a harmonised mannerthroughout the Eurosystem, namely within the forthcoming cash changeover. The proposed
abrogation is thus most welcome. 
14. The ECB confirms that it has no objection to th e publication of this opinion by the competent
national authorities at their discretion.
Done at Frankfurt am Main on 31 May 2001.
The President of the ECB
[signed]
Willem F. DUISENBERG