EN ECB-PUBLIC  
 
 
 OPINION OF THE EUROPEAN CENTRAL BANK 
of 17 October 2011  
on changes of rules applicable to mortgage and municipal bonds 
(CON/2011/81) 
 
Introduction and legal basis  
On 21 September 2011 the European Central Bank (ECB) received a request from the Slovenian Ministry 
of Finance for an opinion on a draft law amending the Law on mortgage and municipal bonds (hereinafter 
the ‘draft law’ and the ‘Law’, respectively). 
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 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 law contains rules applicable  to financial institutions insofar as they 
materially influence the stability of financial ins titutions 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.  Purposes of the draft law 
The main purposes of the draft law are: (a) to facilitate issuance of mortgage and municipal bonds by 
banks, for instance, by extending the pool of u nderlying assets for municipal bonds to debt securities 
issued by the State or local authorities
2; and (b) to ensure better protection of bonds holders’ claims, for 
instance, by requiring that the present value of underl ying assets at all times exceeds the present value of 
liabilities under mortgage bonds by at least 2%3 and that the underlying assets’ reserves are created4. The 
draft law also makes several editorial changes to the Law. 
 
                                                      
1  OJ L 189, 3.7.1998, p. 42.  
2  Article 2 of the draft law am ending Article 5 of the Law.  
3  Article 9 of the draft law amending Article 22(2) of the Law. 
4  Article 10 of the draft law inserting new Article 22.a in the Law. 
ECB-PUBLIC 
2 2. General observation 
The ECB broadly welcomes the draft law which should  achieve the intended purposes of the draft law.  
 3. Specific comments The consultation duty regarding draft secondary legislation 3.1 Pursuant to the draft law, municipa l bonds are covered by underlying assets including,  inter alia,  
loans extended to legal entities not governed by public  law if the State or local authority guarantees 
for such entities’ liabilities under such loans without limitations. These guarantees must ensure 
irrevocable and unconditional fulfilment of the de btor’s obligations on the creditor’s first demand
5. 
Banka Slovenije will set out more detailed conditi ons that must be fulfilled for such guarantees 
within one month from the entry into force of the draft law6. The consultation duty under the Treaty 
covers all types of legally binding provisions, in cluding secondary legislation. Given the objectives 
of Decision 98/415/EC, an opinion should only  be sought from the ECB on draft secondary 
legislation which implements primary legislation falling within the ECB’s fields of competence if 
the subject matter is closely related to the ECB’s tasks and if the impact on areas within the ECB’s 
fields of competence is different from that resulting from the primary legislation itself7. If this is 
the case with the abovementioned Banka Slovenije ’s secondary legislation, it should also be 
submitted to the ECB for an opinion. 
Application of the net present value principle 3.2 In accordance with Article 22(2) of the Law as amended by Article 9 of the draft law, underlying 
assets and liabilities arising from mortgage bonds must at all times also match under the net present value principle, whereby the present value of underlying assets must exceed the present value of 
liabilities arising from mortgage bonds by at least 2%. If the intention of this provision is to simply 
compare the present value of underlying assets with the present value of liabilities, it is not appropriate to refer to the net present value princi ple which is used, for in stance, to compare the 
present value of future cash flows with the in itial investment in the context of assessing the 
financial advantage of an investment. 
Eligibility for Eurosystem credit operations 3.3 New Article 22.a of the Law inserted by Article 10 of the draft law provides that the issuer must at 
all times ensure underlying assets’ reserves in the form of certain substitute underlying assets 
complying with the eligibility criteria of the Eu ropean System of Central Banks. This provision 
could be improved by referring more accurately  to the eligibility criteria for collateral in 
Eurosystem credit operations to follow the wording of Article 18.1 of the Statute of the European 
                                                     
 
5  Article 5(3) and (6) of the Law as amended or, resp ectively, introduced by Article 2 of the draft law. 
6  Article 5(6) of the Law as introduced by Article 2 of the draft law, and Article 20 of the draft law. 
7  Guide to consultation of the European Central Bank by natio nal authorities regarding draft legislative provisions, p. 14. 
ECB-PUBLIC 
3 System of Central Banks and of the European Ce ntral Bank. Article 20 of the Law should also be 
brought in line.   
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 17 October 2011. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET