OPINION OF THE EUROPEAN CENTRAL BANK
at the request of the Finnish Ministry of Finance
on a draft legislative proposal concerning centralisation of book-entry registers at the central
securities depository
(CON/00/08)
1. On 15 March 2000 the European Central Bank (ECB) received a request from the Finnish Ministry
of Finance for an ECB Opinion on a legislative proposal concerning centralisation of book-entryregisters.
2. The ECB’s competence to deliver an opinion is based on Article 2, paragraph 1, fifth indent of the
Council Decision (98/415/EC) of 29 June 1998 on the consultation of the ECB by nationalauthorities regarding draft legislative provisions, as the legislative proposal contains provisionsconcerning securities settlement systems in Finland and thus affecting to some extent the efficiencyand soundness of clearing and payment systems. In accordance with Article 17.5, first sentence, ofthe Rules of Procedure of the European Central Bank, this ECB Opinion has been adopted by theGoverning Council of the ECB.
3. The Finnish book-entry system was created at the beginning of the 1990s as a decentralised system.
There is one central securities depository, the Finnish Central Securities Depository, which aims atensuring the security of operations and readiness to handle all types of book-entries. The FinnishCentral Securities Depository provides centralised services relating to the handling and settlementof book-entries. It keeps an issuer-specific list of holders of equity securities.
Book-entry debt registers have already been centralised at the Finnish Central SecuritiesDepository. However, book-entry equity registers are currently still decentralised to six book-entryregistrars, which maintain book-entry registers containing book-entry accounts as well as lists ofholders of rights and of types of book-entries. Out of the six book-entry equity registers five are run
by private financial institutions and one is run by the Finnish Central Securities Depository.
4. The legislative proposal aims at reforming the Finnish book-entry system such that the present
book-entry equity registers will also be centralised at the Central Securities Depository, which willbecome the only book-entry registrar licensed by the Finnish Ministry of Finance. Thiscentralisation is proposed in order to acquire economies of scale relating to data technology.
Page 2 of 25. The ECB welcomes the legislative proposal to consolidate the registrar function in Finland into one
centralised book-entry system. This measure will increase the safety and efficiency of securitiessettlement and, thereby, contribute to financial stability in Finland. A centralised book-entry systemwill shorten the time needed to settle securities transactions, as information on securities holdings
will be obtained directly from the system, i.e. there will be no need to wait for confirmation from
the registrars. The shortening of the settlement period will also reduce the counterparty risk.
The legislative proposal would also facilitate furt her integration of the Fi nnish secur ities markets
into the euro area as the proposed solution will be in line with the structure of the majority of theeuro area securities settlement systems. However, the ECB wishes to note that it does not havecompetence to analyse the legislative proposal from  the point of view of Community competition
law.
6. The legislative proposal would result in changes in eight different national laws, all of which
concern the Finnish book-entry system. Some provisions in those eight laws relate either toSuomen Pankki or to the ESCB-related tasks of Suomen Pankki. However, the amendmentsproposed do not change the substance of these provisions.
In addition the ECB notes that Section 3 of the Act on the Bank of Finland (214/1998) stipulatesthat Suomen Pankki shall participate in maintain ing the reliability and efficiency of the payment
system and overall financial system and participate in its development. In the opinion of the ECB,this should be understood as including the securities settlement systems in Finland.
7. The ECB notes that the legislative proposal would also change the existing unlimited secondary
liability of the Finnish Central Securities Depository. This liability will be transferred to a specialfund to be financed by the account operators and limited to EUR 25,000 per case of damage.Furthermore the “force majeure” rule will apply. These changes have to be analysed further by theECB when making assessments against the ESCB Standard 1 on legal soundness of linkarrangements allowing for cross-border use of collateral between the Finnish Central SecuritiesDepository and other securities settlement systems for the Eurosystem monetary policy andintraday credit operations.
8. The ECB confirms that it has no objection to this ECB Opinion being made public by the
competent national authorities at their discretion.
Done at Frankfurt am Main on 5 May 2000.
The President of the ECB
[signed]
Willem F. Duisenberg