EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 5 November 2010  
on amendments to the legislation on financial collateral arrangements as regards credit claims  
(CON/2010/78) 
 Introduction and legal basis
 
On 23 September 2010 the European Central Bank (ECB) received a request from the Luxembourg 
Ministry of Finance for an opinion on a draft law transposing Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of elec tronic money in stitutions amending Di rectives 2005/60/EC and 
EC/2006/48/EC and repealing Directive 2000/46/EC
1 and Directive 2009/44 /EC of the European 
Parliament and of the Council of 6 May 2009 amending Directive 98/26/EC on settlement finality in payment and securities settlement systems and Directive 2002/47/EC on financial collateral 
arrangements as regards linked systems and credit claims
2 (hereinafter referred to as ‘the draft law’) 
which amends (a) the Law of 10 November 2009 relating to payment services, the business of electronic money and settlement finality in payment and securities settlement systems, (b) the Law of 5 August 2005 on financial collatera l arrangements, (c) the Law of 12 November 2004 relating to the 
fight against money laundering and financing of terrorism, (d) the Law of 5 April 1993 relating to the financial sector and (e) the Law of 23 December 1998 establishing a commission for the supervision of 
the financial sector.  
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 second, fifth and sixt h indents of Article 2(1) of 
Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by 
national authorities regarding draft legislative provisions
3, as the draft law contains provisions on 
means of payment, payment and settlement systems as well as rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. The scope of the draft law goes beyond the transposition of Union directives into national law, so the exception contained in Article 1(2) of Decision 98/415/EC do es not apply. 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  OJ L 267, 10.10.2009, p. 7. 
2  OJ L 146, 10.6.2009, p. 37. 
3  OJ L 189, 3.7.1998, p. 42.  
2 1.  Purpose of the draft law  
In addition to transposing Dir ectives 2009/110/EC and 2009/44/EC, the draft law amends as follows 
Article 5(2)(a) of the Law of 5 August 2005 relating to financial collateral arrangements: ‘Financial instruments that may be transfe rred by entering into an account  may be validly dispossessed: 
(i) by entering into the pledge cont ract if the depositor of these fina ncial instruments is the pledge 
creditor; 
(ii) by an agreement between the pled gor, the pledge creditor and th e depositor or by an agreement 
between the pledgor and the pledge creditor no tified to the depositor according to which the 
depositor will act in accordance with instructions from the pledge creditor concerning these 
financial instruments and without any other agreement by the pledgor; 
(iii) by entering these financial instruments in to an account of the pledge creditor; 
(iv) by entering these financial instruments, withou t indicating the number, onto an account opened 
for a depositor in the name of the pledgor or a person to be agreed acting as a third party holder, the financial instruments having been designated in the depositor’s accounts individually or collectively by reference to the relevant account in which they have been entered as pledged.’
4. 
Article 2(2)(a) in fine of the draft law provides that the ‘dispo ssession [mechanisms] as provided under 
points (ii), (iii) and (iv) shall be considered as a waiver by the depositor of their pledge’s ranking over the same financial instruments unless agreed othe rwise or merely notified to the depositor in 
accordance with point (ii).’.  
 2. The financial collateral arrangem ents as regards credit claims  
2.1 The draft law amends and simplifies the regi me for the creation of collateral arrangements as 
regards credit claims. Under Article 5(3) of the Law of 5 August 2005 on financial collateral arrangements, the creation of a pledge over a credit  claim is only valid and effective against third 
parties upon notificat ion or acceptance by the debtor of the pledged credit claim. Under the draft 
law, a financial collateral arrangement regarding cr edit claims is to be valid and enforceable vis-
à-vis all third parties, provided  that (a) a pledge agreement ha s been entered into between the 
collateral taker and the collateral giver
5 and (b) the said claims have been included in a list of 
claims submitted in writing to the collateral ta ker or by any other legally equivalent manner6. The 
debtor of the pledged credit claims may also waive the right of set-off as well as of any other exceptions in relation to the creditor of the claim provided as collateral and in relation to persons 
to whom the creditor has granted an assignment, pledge or any other mobilisation of the claim. Such waiver will be valid between the parties and against third parties
7.  
                                                 
4  Article 2(2)(a). 
5  Article 2(2)(c). 
6  Article 2(1)(a).  
7  Article 2(1)(c). 
3 2.2 In order to avoid the abovementioned notifi cation or acceptance conditions provided under 
Article 5(3) of the Law of 5 August 2005 on financial collateral arrangements, the Law of 13 July 2007 had introduced, in Article 22(1) of the Organic Statute of the Banque centrale du 
Luxembourg (BCL), a regime for the creation and enforceability of financial collateral 
arrangements as regards claims in  favour of the BCL, either acting on its own behalf or on behalf 
of the ECB or other central banks forming an integral part of the European System of Central Banks, within the context of the credit operations of monetary policy. Under that regime, which was subject to a previous ECB opinion
8, pledges of claims were enforceable vis-à-vis third 
parties as soon as they were entered in a BCL register and made accessible to third parties for 
this purpose.   
2.3 The draft law would significantly simplify the rules on the creat ion, enforcement and 
enforceability of financial collateral arrangement s as regards credit claims and would strengthen 
the overall legal soundness of the relevant mech anism, especially by allowing the debtor to 
waive its right of set-off and any other excep tions. However, the ECB recommends that the 
Luxembourg legislator address the interaction be tween the proposed new regime and the regime 
governing the pledging of claims in favour of the BCL. The ECB understa nds that, in the absence 
of any specific provisions to the contrary, the two regimes would simply co-exist. In the interests 
of transparency and legal certainty, the draft la w should instead extend the possible contractual 
waiver by the debtor of the pledged claim of its right of set-off or any other exception also to any pledge of claims registered on the BCL register.  
 
 
3. Waiver by the depositor of  the ranking of its pledge over the underlyi ng financial 
instruments subject to financial collateral ar rangements in favour  of third parties  
3.1 The draft law also simplifies th e possible conflict of rank between, on the one hand, a depositor9 
and, on the other hand, the pledge creditor in respect of financial instruments that have either been entered into an account of the pledge credit or, or an account opended with a depositor in the 
name of the pledgor, or that are governed by an agreement between the pledgor, the depositor and the pledge creditor. In these cases the deposit or would act in accordan ce with the pledge 
creditor’s instructions in respect  of such instruments. Unless ag reed otherwise, if the depositor 
registers the underlying financial instruments on  a separate account or accepts or notifies the 
agreement entered into between the pledgor and the pledge creditor as regards the management of the account in accordance with the pledge credit or’s instructions, this implies the waiver by 
the depositor of its pledge’s ranking over su ch financial instruments. In this case, the 
Luxembourg legislator would simplify the rules enabling the creation of higher ranking pledges 
                                                
 
8  ECB Opinion CON/2006/56. All ECB opinions are available on the ECB’s website at www.europa.eu.  
9  The concept of depositor, under the draft law, is to be unde rstood, in the light of Article 2 of the Law of 1 August 2001 
on the circulation of securities and other fungible instrument s as encompassing the credit institutions, to be investment 
firms, professional depositories of s ecurities as well as nati onal and international public bodies established in 
Luxembourg and acting in the financial sector.   
4 over such financial instruments10, as the depositor’s consent would now no longer be required in 
this respect.  
3.2 Under Article 18 of the Statute of the European  System of Central Banks and of the European 
Central Bank, credit operations conducted by the national central banks (NCBs) must be based on 
adequate collateral. Moreover, pursuant to Standard  1 of the ‘Standards for the use of EU Securities 
Settlement Systems in ESCB Credit Operations’ the NCBs’ rights in respect of securities held in 
their accounts in securities settlement sy stems must be adequately protected11. In this context, the 
financial instruments serving as collateral for monetary policy purposes are transferred by the BCL’s counterparties either to the account opene d in the name of the BCL with the domestic 
central securities depository (CSD) or, as regards new collateral management products offered by 
the BCL to counterparties, to the account opened in  the counterparties’ names with such CSD. The 
ECB understands that, without prejudice to the ear marking operations that take place on the BCL’s 
books in the first scenario, such transfer will give  effect to the dispossession mechanism described 
in Article 2(2)(a)(iii) of the draft law and will imply the waiver, by the CSD as depositor, of its 
pledge’s ranking over such financial instrument s. The ECB therefore considers that the BCL’s 
rights as first-rank collateral taker will be reinfor ced by the introduction of such provision into 
Luxembourg law. 
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 5 November 2010. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                
 
10  See Article 2(3)(b). 
11  See in this sense paragraph 8 of ECB Opinion CON/2005/12 and paragraph 1 of  ECB Opinion CON/2006/40.