EN ECB-PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 12 July 2016  
on the exclusion of set- off rights with respect to claims mobilised as collateral with a  central bank  
of the European System of Central Banks  
(CON/2016/ 37) 
 
Introduction and legal basis  
On 10 June 2016 the European Central Bank (ECB) received a request from the French Ministry of 
Finance and Public Accounts  for an opinion on a draft legal provision excluding the exercise of any 
contractual or statutory ri ght to set -off with respect to credit  claim s mobil ised as collateral with a central 
bank of the European System of Central Banks ( ESCB)  (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 and the third , fifth and sixth indent s of Article  2(1) of Council Decision 
98/415/EC1, as the draft law relate s to national central banks , payment and settlement systems, and the 
rules applicable 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 law  
1.1 The purpos e of the draft law is to introduce in French law a specific provision to eliminate set -off 
risks resulting from the acceptance by the Banque de France and other ESCB central banks of 
credit claims as eligible collateral in ESCB monetary policy , intraday cr edit and other credit 
operations.  
1.2 Set-off rights arise in situation s where a debtor has a  legal right to set -off or net its obligations 
towards a creditor by the amount of outstanding claims the debtor has against the creditor , e.g. 
bank deposits . A set-off risk is the risk of loss for the ESCB which  arises when an ESCB central 
bank  enforces  a credit  claim presented as collateral  by a defaulting counterparty  where the credit 
claim mobilised as collateral would  have lost part of its value as a result of  set-off.  
1.3 In order t o eliminate set-off risk the draft law provides  that, notwithstanding any provision or 
stipulation to the co ntrary, no right to set -off may give rise to the extinction, in full or in part, of credit  
claims submitted as collateral t o a central bank that forms part of the ESCB.  
 
                                                 
1  Council Decision 98/415/EC of  29 June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions ( OJ L 189, 3.7.1998, p. 42) . 
ECB -PUBLIC  
 
2 2. General o bservations  
2.1 Credit claims have been accepted as eligible collateral for Eurosystem monetary policy and 
intraday credit  operations since 1 January 20072. The scope for accepting eligible credit clai ms has 
been extended by the additional credit claims (ACC) framework that was implemented in 
December 2011 as a temporary measure. Under the ACC framework  other types of credit claims, 
such as residential mortgages or pools of credit claims , provided they meet certain additional 
specific criteria , qualify as eligible collateral  in certain euro area jurisdi ctions , including France.  
2.2 The ECB considers the draft law’s aim of excluding set-off risks associated with the acceptance of 
credit claims as collateral i n Eurosystem  credit operations as legitima te and fully in line with the 
Statute of the European System of Central Banks and of the European Central Bank (hereinafter 
the ‘Statute of the ESCB’) . Protecting the ESCB against any potential loss arising from the 
acceptance of such collateral is closely linked to the requirement laid down in the second indent of 
Article 18.1 of the Statute of the ESCB,  pursuant to which lending by the ESCB central banks  must 
be based on adequate collateral. In addition,  adequatel y addressing set -off risks also facilitates the 
continued eligibility of credit claims  as eligible collateral in Eurosystem credit operations3, and 
thereby contributes  to the efficiency of the transmission of monetary policy to the real economy .  
2.3 The ECB notes that, in line with the draft law , several other euro area Member States have enacted 
statutory provisions which  exclude set -off risks when credit claims are mobilised as collateral for 
central bank operations. The approach adopted by these Member Stat es differ s as to the scope of  
the parties benefitting from the exclusion. In certain Member States statutory provisions  only 
exclude set-off rights for credit claims mobilised as collateral for operations with the particular 
Member State ’s central bank . Some Member States also have statutory pr ovisions that provide 
protection for  the ECB and other  ESCB central banks. In one Member State, the exclusion of set -
off rights  applies to operations with all Union central banks and any third party to whom a credit 
claim may subsequently be transferred by a central bank4. 
2.4 Against this background, the draft law excludes all  rights to set -off credit  claims mobilised  as 
collateral with an ESCB central bank5. This exclusion is not subject to any additional formalities 
and applies regardless of any  other provisions or stipulations, whether laid down in other legal acts 
or by way of contract . The ECB welcomes the initiative of the French authorities to exclude such 
                                                 
2  See ‘Decisions taken by the Governing Council of the ECB (in addition to decisions setting interes t rates)’ for                
July 2005 and the related ECB press release of 22 July 2005 entitled ‘Eurosystem collateral framework: Inclusion of 
non-marketable assets in the Single List’, available on the ECB’s website at www.ecb. europa.eu . 
3  In 2008 the European Commission noted that the possible exercise of set -off rights by the debtor of the credit claim 
provided as collateral could discourage the use of credit claims as collateral. This is because ‘ the collateral can as 
such disappear if the debtor exercises set -off right vis -à-vis the creditors of the credit claim and vis -à-vis persons to 
which the creditors assigned, pledged or otherwise mobilised the credit claim as collateral. ’ See ‘Commission staff 
working document accompanying the Proposal for a D irective of the European Parliament and of the Council 
amending the Settlement Finality Directive and the Financial Collateral Directive –  Impact Assessment’ , April 2008, 
available on Eur -lex website at www.eur -lex.europa.eu.  
4  See the Law on the Autonomy of Banco de España, sixth additional provision, paragraph (4)(e) introduced by the 
Royal Decree- Law 2/2012 on the reorganisation of the financial sector.  
5  The ECB notes that the legal technique used for the mobilisation of credit claims with the Banque de France is the 
title transfer financial collateral arrangement under Article L.211- 38 of the French monetary and financial code 
(COMOFI). Under Article L.211- 38 of the COMOFI the constitution and opposability of such title transfers are not 
subject to any particular formality.  
ECB -PUBLIC  
 
3 set-off risk s6. In, particular, t he ECB welcomes the broad s cope of application of the draft law and 
the fact that its provisions will apply to credit claims mobilised as collateral in operations with all 
ESCB central bank s.  
2.5 However, t he ECB considers  that in order to increase the effectiveness of the protection a gainst 
set-off rights , the draft law should also apply to any third party purchas ing credit claim s from an 
ESCB centra l bank.  In fact , in the event  of a default of a central bank’s counterparty, the collateral 
represented by the credit claim s, would have t o be enforced. The central bank  enforcing the 
collateral as the legal owner of the credit claim s, might decide to hold the credit claim s in its 
portfolio or sell them  to a third party. I f the credit claims are sold to a third party , the ESCB central 
banks would only be fully protected against the set -off risk if the protection afforded to ESCB 
central banks was transferred together with the credit claim s to the third -party purchaser. 
Otherwise the applicable set -off rights m ight continue to affect the value  at which the ESCB central 
banks could sell the credit claim s. In this respect, t he ECB suggests  that in order to ensure full 
effectiveness of the draft law when a central bank want s to sell its credit claim s to a third party, the 
draft law should explicit ly extend the protection against set -off rights to third -party purchasers .   
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main,  12 July 2016.  
 
[signed]  
 The President of the ECB  
Mario DRAGHI  
                                                 
6  The ECB already noted in its response to the Commission’s Green Paper on establishing a capital market union 
(CMU),  that while set -off rights can currently be validly waived by debtors pursuant to the Financial Collateral 
Directi ve (FCD), the divergence in the transposition and interpretation of the FCD greatly undermines the underlying 
rationale of protecting collateral takers of  this provision, which could be mitigated if set -off were fully excluded with 
respect to credit claims  mobilised as collateral with central banks . See ‘Building a Capital Markets Union – 
Eurosystem contribution to the European Commission’s Green Paper ’, p. 24, available on the ECB’s website at  
www.ecb.europa.eu.