Amended proposal for a COUNCIL REGULATION (EC) specifying definitions for the application of the prohibitions of privileged access referred to in article 104a of the Treaty
Date: 1993-11-22
Institutions: European Commission
Subjects: central bank, credit institution, financial institution, financial market, financing method, indebtedness, legal basis, market access, monetary policy, privilege, public sector

,  COMMISSION OF THE EUROPEAN  COMMUNITIES 

f 

COM(93) 617 final - SYN 466 - 467 

Brussels, 22 November 1993 

1  * ,^/iff 
™  I  " i 

SECONDARY LEGISLATION FOR THE SECOND STAGE 
OF ECONOMIC AND MONETARY UNION 

' { • 4 jJ 

Wît-

Amended proposal for a 
COUNCIL REGULATION (EC) 
specifying definitions for the application of the prohibitions 
referred to in articles 104 and 104B(1) of the Treaty 

SYN 466 

Amended proposal for a 
COUNCIL REGULATION (EC) 
specifying definitions for the application of the prohibition of 
privileged access referred to in article  104a of the Treaty 

SYN 467 

Amended proposal for a 
COUNCIL REGULATION (EC) 
on the application of the Protocol on the excessive deficit procedure 
annexed to the Treaty establishing the European Community 

mm 

i l i ïl 

B 
im 

Amended proposal for a 
COUNCIL DECISION 
on the statistical data to be used for the determination of the key  for 
the financial  resources of the European Monetary Institute 

Amended proposal for a 
COUNCIL DECISION 
on the consultation of the European Monetary Institute by the authorities 
of the Member States on draft legislative provisions 

(presented by the Commission pursuant to Article  189 A (2) of the EC-Treaty) 

Ést'ï 

v. 

Explanatory Memorandum, 

Following an invitation from the European Council held on 21  and 22 June  1993  at 
Copenhagen the  Commission transmitted draft proposals for secondary legislation for 
the second stage of Economic and Monetary Union to the Council and the European 
Parliament in July and September (docs. COM(93)371 final - SYN 466 - SYN 467 of 
22.7.93 and  COM(93)436 final of 22.9.93). 

These draft proposals were  confirmed  as formai  proposals  of  the Commission with 
effect from 1 November  1993  by  letters from Vice-President Christophersen to  the 
President of the Council and  the President of the European Parliament, 

The European Parliament has delivered its opinion on  16 November.  Subsequently, 
the  Commission has  accepted  a number of  amendments  proposed  by  the European 
Parliament  which  are  incorporated  in  the  present  amended  proposals.  The 
Commission has also taken account of work done in the Council. 

- p >-

Amended proposal  for a 
COUNCIL REGULADQNIEC) 
specifying  definitions  for the application of the prohibitions 
referred  to in articles  104 and  104B(1) of the Treaty 

SYN466 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and 
Article 104B(2) thereof, 

in  particular 

Having regard to the proposal from the Commission (*), 

In co-operation with the European Parliament (*), 

Whereas  Articles  104  and  104B(1)  of  the  Treaty  are  directly  applicable;  whereas  the  terms 
featuring in Articles  104 and  104B(1) may be specified,  if necessary; 

Whereas the terms  "overdraft  facilities"  and  "other types of credit  facility"  used  in Article 104 of 
the  Treaty  should  be  defined,  particularly  with  reference  to  the  treatment  of  claims  existing  at 
1 January 1994; 

Whereas it is desirable that the national central banks participating  in the third  stage of Economic 
and  Monetary  Union  should  enter  such  Union  having  on  their  balance  sheets  claims  negotiable 
under market  conditions,  in particular to give the required flexibility to the monetary policy of the 
European System of Central Banks and to permit a standard contribution from the various national 
central  banks  participating  in  monetary  union  to  the  monetary  income  to  be  distributed  among 
them; 

Whereas the  central  banks which,  after  1  January  1994,  still  hold  claims  against the  public  sector 
which  are non-negotiable  or are subject  to  conditions which  are not  market  conditions  should  be 
authorized  subsequently  to  convert  such  claims  into  negotiable  fixed-maturity  securities  under 
market conditions; 

Whereas  paragraph  11  of the  Protocol  on  certain  provisions  relating  to  the  United  Kingdom  of 
Great  Britain  and  Northern  Ireland  stipulates  that  the  Government  of  the  United  Kingdom  may 
maintain  its  "ways  and  means"  facility  with  the  Bank  of  England  if  and  so  long  as  the 

*  The initial draft  proposal  (COM(93)371  final  - SYN466  - SYN 467  of  22.7.93  was  confirmed  as  a forma! proposa! with 
.  effect  from  1.11.1993 

OJ  C 
(t) 
(%)  OJ  C 

a nd 

D e c i s i on 

of 

( n ot  y et  p u b l i s h ed 

in 

t he  O f f i c i al 

J o u r n a l ). 

United Kingdom does not move to the third stage; whereas it is appropriate to  make provision  for 
the conversion of the amount of this facility  into marketable debt at a fixed  maturity and on market 
terms if the United Kingdom moves to stage three of EMU; 

Whereas the Protocol  on Portugal  lays down that  "Portugal  is hereby  authorized  to  maintain  the 
facility  afforded  to  the  Autonomous  Regions  of  the  Azores  and  Madeira  to  benefit  from  an 
interest-free  credit  facility  with  the  Banco  de  Portugal  under  the  terms  established  by  existing 
Portuguese law"; and that  "Portugal commits itself to pursue its best endeavours in order to put an 
end to the abovementioned facility as soon as possible"; 

Whereas Member States must take appropriate measures to ensure that the prohibitions referred  to 
in  Article  104  of  the  Treaty  are  applied  effectively  and  fully;  whereas,  in  particular,  purchases 
made on the secondary market must not be used to circumvent the objective of that Article; 

Whereas,  within the limits laid down in this Regulation,  the direct  acquisition  by the  central  bank 
of  one  Member State  of  marketable  debt  instruments  issued  by  the  public  sector  of  another 
Member State  does not  help to  shield  the public  sector  from  the discipline of market  mechanisms 
where such purchases are conducted for the sole purpose of managing foreign  exchange reserves; 

Whereas, notwithstanding the role assigned to the Commission  under  Article  169 of the Treaty, it 
is for the European Monetary Institute and, thereafter,  for the European Central Bank,  pursuant to 
Article  109F(9)  and  Article  180  of the  Treaty,  to  ensure  that  national  central  banks  honour  the 
obligations laid down by the Treaty; 

Whereas  intra-day  credits  by  the  central  banks  may  assist  the  smooth  operation  of  payment 
systems  and  whereas,  therefore,  intra-day  credits  in  the  public  sector  are  compatible  with  the 
objectives of Article  104 of the Treaty, provided that no extension to the following  day is possible; 

Whereas  the  function  of  fiscal  agent  exercised  by  the  central  banks  should  not  be  impeded; 
whereas,  even  if  clearing  by  the  central  banks  of  cheques  issued  by  third  parties  for  the  public 
sector's  account  may  occasionally  involve  a  credit,  Article  104  of  the  Treaty  should  not  be 
regarded  as prohibiting such operations, provided that they do not result  overall in a credit  for the 
public sector; 

Whereas the holding by the  central banks of coins issued  by the public  sector  and  credited  to  the 
public sector constitutes an interest-free  form  of credit for the public sector; whereas,  however,  if 
only limited  amounts are involved, this practice does not interfere  with the principle of Article 104 
of  the  Treaty  and  whereas,  therefore,  in  view  of  the  difficulties  which  would  arise  from  total 
prohibition  of  this  form  of  credit,  if  may  be  permitted  within  the  limits  laid  down  in  this 

Regulation; 

Whereas,  following  unification,  the  Federal  Republic  of  Germany  has  particular  difficulty  in 

complying  with  the  limit  set  on  such  assets;  whereas  it  is appropriate  in  those  circumstances  to 

authorize a higher percentage for a limited period; 

Whereas  the financing  by the central  banks of obligations  falling  upon  the  public  sector  vis-à-vis 
the  International  Monetary  Fund  or  resulting  from  the  implementation  of  the  medium-term 
financial assistance facility set up within the Community results in foreign claims which have all the 
characteristics of reserve assets; whereas it is, therefore,  appropriate to authorize them; 

Whereas  public  undertakings  are  covered  by the  prohibition  in  Article  104  and  Article  104B(1); 
in  Commission  Directive 80/723/EEC  of  25 June  1980  on  the 
whereas  they  are  defined 
transparency of financial  relations between Member States and public undertakings (  ), 

(  )  OJ  L  195,  29.7.1980,  p.  35.  Directive  as  last  amended  by  Commission 

Directive 93/84/EEC  (OJ L 254, 12.10.1993, p. 16). 

HAS ADOPTED THIS REGULATION: 

1.  For the purposes of Article  104 of the Treaty: 

Article 1 

(a)  "overdraft  facilities"  means any  provision  of funds  to  the  public  sector  resulting  or  likely  to 

result in a debit balance; 

(b)  "other type of credit facility" means 

(i) 

the  public  sector  existing  at  1  January  1994,  except 

any  claim  against 
fixed-maturity  claims acquired before that date, 
any financing of the public sector's obligations vis-à-vis third parties, 

(ii) 
(iii)  without  prejudice  to  Article  104(2)  of  the  Treaty,  any  transaction  with  the  public 

for 

sector resulting or likely to result in a claim against that  sector. 

2.  The following  shall not be regarded  as "debt instruments" within the meaning of Article  104 of 
the  Treaty:  securities  acquired  from  the  public  sector  to  ensure  the  conversion  into  negotiable 
fixed-maturity  securities under market conditions  of: 

-  fixed-maturity  claims  acquired  before  1  January  1994  which  are  not  negotiable  or  not  under 
market  conditions,  provided  that  the maturity  of the  securities  is not  subsequent  to  that  of the 
aforementioned  claims; 

-  the  amount  of  the  "ways  and  means"  facility  maintained  by  the  United Kingdom  Government 
with  the Bank  of England  until the date, if any, on  which  the  United Kingdom  moves to  Stage 
Three of EMU. 

Article 2 

1.  During  Stage  Two  of EMU,  purchases  by the  national  central  bank  of  one  Member  State  of 
marketable  debt  instruments  issued  by  the  public  sector  of  another  Member  State  shall  not  be 
considered  direct  purchases  within  the  meaning  of  Article  104  of the  Treaty,  provided  that  such 
purchases are conducted for the sole purpose of managing foreign  exchange reserves. 

2.  During  Stage  Three  of  EMU,  the  following  purchases  conducted  for  the  sole  purpose  of 
managing foreign  exchange reserves shall not be considered  direct purchases within the meaning of 
Article  104 of the Treaty: 

-  purchases  by the  national  central  bank  of  a  Member  State  not  participating  in  Stage Three  of 
EMU,  from  the  public  sector  of  another  Member State,  of  marketable  debt  instruments  of the 
latter; 

-  purchases  by  the  European  Central  Bank  or  the  national  central  bank  of  a  Member  State 
participating in Stage Three of EMU, from the public sector of a Member State not  participating 
in Stage Three, of marketable debt instruments of the latter. 

Article 3 

For  the  purposes  of  this  Regulation,  "public  sector"  means  Community  institutions  or  bodies, 
central  governments,  regional,  local  or  other  public  authorities,  other  bodies  governed  by  public 
law or public undertakings of Member States. 

"National  central  banks"  means  the  central  banks  of  the  Member States  and  the  Luxembourg 
Monetary Institute. 

Article 4 

Intra-day  credits  by  the  ECB  or  the  national  central  banks  to  the  public  sector  shall  not  be 
considered  as a credit  facility  within the meaning of Article  104 of the Treaty,  provided  that  they 
remain limited to the day and that no extension is possible. 

Article 5 

Where the European  Central Bank or the national central banks receive from  the public sector,  for 
collection, cheques issued by third parties and credit the public sector's account  before  the drawee 
bank has been debited, this operation  shall not be considered  as a credit  facility  within the meaning 
of Article  104 of the Treaty  if a fixed  period  of time corresponding  to  the  normal  period  for  the 
collection  of cheques by the central bank of the Member State concerned  has elapsed  since receipt 
of the  cheque,  provided  that  any float which  may  arise  is  exceptional,  is  of  a  small  amount  and 
averages out in the short term. 

Article 6 

The  holding  by  the  European  Central  Bank  or  the  national  central  banks  of  coins  issued  by  the 
public sector  and  credited  to the public  sector  shall not  be regarded  as a credit  facility  within  the 
meaning of Article  104 of the Treaty where the amount  of these assets remains at less than  10% of 
the coins in circulation. 

Until 31 December  1996, this figure shall be  15% for Germany. 

Article 7 

The  financing  by  the  European  Central  Bank  or  the  national  central  banks  of  obligations  falling 
upon  the  public  sector  vis-à-vis  the  International  Monetary  Fund  or  resulting  from  the 
implementation  of  the  medium-term  financial  assistance  facility  set  up  by  Regulation  (EEC) 
No  1969/88 (*) shall not be regarded  as a credit  facility  within the  meaning  of Article  104 of the 
Treaty. 

Article 8 

1.  For  the  purposes  of  Articles  104  and  104b(l)  of  the  Treaty,  "public  undertaking"  shall  be 
defined  as any undertaking over which the public authorities  may directly  or  indirectly  exercise a 
dominant  influence  by virtue  of  their  ownership  of  it,  their  financial  participation  therein  or  the 
rules which govern it. 

A  dominant  influence  on  the  part  of  the  public  authorities  shall  be  presumed  when  these 
authorities, directly or indirectly in relation to an undertaking: 

(a)  hold the major part of the undertaking's subscribed capital; 

(b)  control the majority  of the votes attaching to shares issued by the undertaking; or 

(c)  can appoint  more than half of the members of the undertaking's administrative,  managerial or 

supervisory body. 

2.  For the purposes of Articles  104 and  104b(l) of the Treaty, the European Central Bank and the 
national central banks do not form part of the public sector. 

This Regulation  shall enter into force on  1  January  1994. 

Article 9 

This Regulation shall be binding in its entirety and directly applicable in all Member States 

Done at Brussels, 

For the Council 
The President 

(  )  Council  Regulation 

f a c i l i ty 
b a l a n c es  of  payments  (OJ  L  178,  8.7.1988,  p.  1 ). 

providing  medium-term 

(EEC)  No  1969/88  of  24  June  1988  e s t a b l i s h i ng  a  s i n g le 
for  Member  S t a t e s' 

a s s i s t a n ce 

f i n a n c i al 

-1 

Amended proposal  for a 
COUNCIL REGULATION (EC) 
specifying  definitions  for the application of the prohibition  of 
privileged  access referred to in article  104a of the Treaty 

SYN 467 

THE COUNCIL OF THE EUROPEAN  UNION 

Having regard to the Treaty establishing the European  Community,  and in particular  Article  104a(2) 
thereof, 

Having regard to the proposal from the Commission  ('), 

In co-operation with the European Parliament (*), 

Whereas the prohibition  of privileged  access to financial  institutions,  as laid down  in Article  104a of 
the  Treaty,  forms  an  essential  element  of  the  submission  of  the  public  sector  in  its  financing 
operations  to  the  discipline  of  the  market  mechanism  and  so  makes  a  contribution  to  the 
strengthening  of budgetary  discipline; whereas,  moreover,  it  places  the  Member States  on  an  equal 
footing  as regards public sector access to financial  institutions; 

Whereas the Council must specify  definitions  for the application of such prohibition; 

Whereas  the  Member States  and  the  Community  must  act  with  due  regard  for  the  principle  of  an 
open market economy in which there is free competition; 

Whereas,  in particular,  this Regulation  cannot  affect  the methods for  organizing  markets  complying 
with that principle; 

Whereas this Regulation  does not  seek to interfere  with any operation  of public financial institutions 
complying with the same principle; 

Whereas  Article  104a  of  the  Treaty  prohibits  measures  establishing  privileged  access;  whereas  the 
types  of  acts  concerned  by  this  prohibition  should  be  specified;  whereas  the  commitments  freely 
made  by financial institutions  in  the  framework  of  contractual  relations  unquestionably  cannot  be 
affected; 

* 

the  initial  draft  proposal  (Doc.(93)371  final  - SYN 466-SYN467  of  22.7.93)  was  confirmed  as 
formal  proposal  with  effect  from  1.11.1993. 

( *)  OJ  c 
(/L) OJ  C 

Journal). 

and  Decision 

of 

(not  yet  published  in  the  Official 

S 

Whereas  the  same  Article  provides  that  prudential  considerations  may  justify  departure  from  the 

principle  of  this  prohibition;  whereas  laws,  regulations  or  administrative  actions  may  not,  however, 

under the cover of prudential  consideration, be used to establish disguised  privileged  access; 

Whereas  public  undertakings  are  covered  by  the  same  prohibition;  whereas  they  are  defined  in 

Commission  Directive  80/723/EEC  of  25  June  1980  on  the  transparency  of  financial  relations 

between the Member States and public undertakings, (  ); 

Whereas,  for  reasons  of  monetary  policy, financial institutions  and,  in  particular,  credit  institutions 

may be obliged  to hold claims against the European Central Bank and/or national central banks; 

Whereas  the  European  Central  Bank  and  national  central  banks  may  not,  as  public  authorities,  take 

measures  establishing, privileged  access;  whereas  the  rules  on  mobilization  or  pledging  of  debt 

instruments enacted by the European Central Bank or by national central banks must not be used as a 

means of circumventing the prohibition of privileged access; 

Whereas, in order to avoid any circumvention of the prohibition,  the definitions  in Community  law  of 

the various  types  of  financial  institution  should  be  supplemented  by  a reference  to  those  institutions 

engaging  in financial activities which have not yet been  harmonized  at Community  level,  such  as,  for 

instance,  branches  of third-country  establishments,  holding  and factoring  companies,  unco-ordinated 

undertakings  for  collective  investment  in transferable  securities  (UCITS),  institutions  for  retirement 

provision,  etc., 

( 

)  OJ  L  1 9 5, 
93/84/EBC 
(OJ  L  2 5 4,  1 2 . 1 0 . 1 9 9 3,  p.  1 6 ). 

2 9 . 7 . 1 9 8 0, 

p. 

3 5. 

as 

l a st 

amended 

by  Commission  D i r e c t i ve 

HAS ADOPTED  THIS  REGULATION: 

Article 1 

1.  For the purposes of Article  104a of the Treaty,  "any measure  establishing  privileged  access" shall 

be  defined  as  any  law,  regulation  or  any  other  binding  legal  instrument  adopted  in  the  exercise  of 

public authority which: 

- 

obliges  financial  institutions  to  acquire  or  to  hold  liabilities  of  Community  institutions  or 

bodies,  central  governments,  regional,  local  or other  public  authorities,  other  bodies  governed 

by  public  law  or  public  undertakings  of  Member States  (hereinafter  referred  to  as  "public 

sector"), or 

- 

confers  tax  advantages  which  may  benefit  only  financial  institutions  or  financial  advantages 

which  do  not  comply  with  the  principles  of  a  market  economy,  in  order  to  encourage  the 

acquiring or the holding by those institutions of such liabilities. 

2.  Privileged  access shall not be regarded as being established by those measures which give rise to: 

- 

obligations  for  funding  social  housing  under  special  terms  such  as,  inter  alia,  an  obligation  to 

centralize  funds  with  public  financial  institutions,  when  the  funding  terms  prevailing  for  the 

public sector are identical to those for funding  of the same nature granted to  private  borrowers 

for the same purposes; 

- 

the obligation  to centralize funds  with  a public credit  institution,  insofar  as such  a constraint  is 

an  integral  part,  as  at  1 January  1994,  of  the  organization  of  a  particular  network  of  credit 

institutions  or  of  specific  savings  arrangements  designed  for  households  and  intended  to 

provide the whole  of the network  or the specific  arrangements with financial  security.  The use 

of  such  centralized  funds  must  be  determined  by  the  management  bodies  of  the  public  credit 

institution  concerned  and  comply  with  the  principle  of  a market  economy  where  there  is  free 

competition; 

- 

obligations  to finance the repair of disaster  damage,  provided  that  the  conditions  for  financing 

repairs  are not  more favourable  when  damage  is  sustained  by the  public  sector  than  when  it  is 

sustained  by the private sector. 

Article  2 

For  the  purposes  of  Article  104a  of  the  Treaty,  "prudential  considerations"  shall  be  those  which 

underlie national  laws, regulations or administrative actions based  on,  or consistent  with,  EC law and 
r  Ac 

designed  to  promote  the  soundness  of financial institutions  so  as  to  strengthen  the  stability  of  the 

financial  system as a whole and the protection of the customers of those institutions. 

Article 3 

1.  For  the  purposes  of  Article  104a  of  the  Treaty,  "public  undertaking"  shall  be  defined  as  any 

undertaking  over  which  the  State  or  other  regional  or  local  authorities  may  exercise  directly  or 

indirectly  a dominant  influence  by virtue  of their ownership  of  it,  their financial participation  therein 

or the rules which govern it. 

A dominant  influence  on the part of the State or other regional  or local  authorities shall  be  presumed 

when these authorities,  directly or indirectly in relation to an undertaking: 

(a) 

(b) 

(c) 

hold the major part of the undertaking's subscribed  capital; 

control  the majority of the votes attaching to  shares issued by the undertaking; or 

can  appoint  more  than half of the  members  of  the  undertaking's  administrative,  managerial  or 

supervisory body. 

2.  Without  prejudice  to  their  obligation  as  public  authorities  not  to  take  measures  establishing 

privileged  access  within  the  meaning  of  Article  104a  of  the  Treaty,  the  European  Central  Bank  and 

the  national  central  banks  and  shall  not,  for  the  purposes  of  this  Article,  be  considered  as  forming 

part of the public sector. 

3.  "National  central  banks"  means  the  central  banks  of  the  Member  States  and  the  Luxembourg 

Monetary Institute. 

Article 4 

1.  For the purposes of Article  104a of the Treaty,  "financial  institutions" means: 

- 

credit institutions as defined  in the first indent of Article  1 of Directive 77/780/EEC (  ), 

insurance undertakings as defined  in Article  1, point (a) of Directive 92/49/EEC (  ), 

assurance undertakings as defined  in Article  1, point (a) of Directive 92/96/EEC  (*), 

(  )  Council  Directive  77/780/EEC  of  12  December  1977  on  the  co-ordination  of 
the  laws,  regulations  and  administrative  provisions  relating  to  the  taking 
up  and  pursuit  of  the  business  of  credit  institutions  (OJ  L  322, 
17.12.1977,  p.  30).  Directive  last  amended  by  Directive  89/646/EEC  (OJ  L 
386, 30.12.1989, p. 1 ). 

(  )  Council  Directive  92/49/EEC  of  18 June  1992  on  the  co-ordination  of  laws, 
regulations  and  administrative  provisions  relating  to  direct  insurance 
other  than  life  insurance  (third  Directive  on  insurance  other  than  life 
insurance)  (OJ L 228, 11.8.1992, p. 1 ). 

- 

UCITS as defined in Article 1(2) of Directive 85/611/EEC (*), 
investment firms as defined in Article 1(2) of Directive 93/22/EEC (*), 
other undertakings the activities of which are simitar to those of the undertakings referred to in 
the previous indents or the principal activity of which is to acquire holdings of financial  assets 
or to transform financial claims. 

2.  The following institutions do not form part of the financial institutions defined in paragraph  1 : 

the European Central Bank and national central banks, 
Post Office financial services when they form part of the general government sector defined in 
accordance with the European  System of Integrated  Economic  Accounts  or when their main 
activity is to act as the financial agent of government, and 
the institutions which are part of the general government sector defined in accordance with the 
European  System  of  Integrated  Economic  Accounts  or  the  liabilities  of  which  correspond 
completely to a public debt. 

This Regulation shall enter into force on 1  January 1994. 

Articles 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the Council 
The President 

(  )  Council  Directive  92/96/EEC  of  10  November  1992  on  the  co-ordination  of 
laws,  regulations  and  administrative  provisions  relating  to  direct  life 
assurance  (3rd Directive on life insurance)(OJ  L 360, 9.12.1992, p. 1). 
(  )  Council  Directive  85/611/EEC  of  20  December  1985  on  the  co-ordination  of 
laws,  regulations  and  administrative  provisions  relating  to  undertakings 
for  collective  investment  in  transferable  securities  (UCITS)(OJ  L  375, 
31.12.1985,  p.  3 ).  Directive  amended  by  Directive  88/220/EEC  (OJ  L  100, 
19.4.1988, p. 31). 

(  )  Council  Directive  93/22/EEC  of  10  May  1993  on  investment  services  in  the 

securities  field  (OJ L 141, 11.6.1993, p. 27). 

At  _a 

Amended proposal  for a 
COUNCIL HfiGULATON  (EC) 
on the application  of the Protocol  on the excessive deficit  procedure 
annexed to the Treaty  establishing  the European Community 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular  the  third 
subparagraph  of Article  104c( 14) thereof, 

Having regard to the proposal from the Commission (*), 

Having regard to the Opinion of the European Parliament (*), 

Whereas the definitions  of "government",  "deficit"  and  "investment" are laid down  in the Protocol 
on the excessive  deficit  procedure  by reference  to  the  European  System  of  Integrated  Economic 
Accounts  (ESA) (');  whereas  precise  definitions  referring  to  the  classification  codes  of  ESA  are 
required;  whereas  these  definitions  may  be  subject  to  revision  in  the  context  of  the  necessary 
harmonization  of  national  statistics  or  for  other  reasons;  whereas  any  revision  of  ESA  will  be 
decided  by the  Council  in  accordance  with  the  rules  on  competence  and  procedure  laid  down in 
the Treaty; 

Whereas  the  definition  of  "debt"  laid  down  in  the  Protocol  on  the  excessive  deficit  procedure 
needs to be amplified  by a reference to the classification  codes of ESA; 

Whereas  Council  Directive 89/130/EEC,  Euratom  of  13 February  1989  on  the  harmonization  of 
the  compilation  of  gross  national  product  at  market  prices (*)  provides  an  adequate,  detailed 
definition  of gross domestic product at market prices; 

Whereas,  under  the terms of the Protocol  on the  excessive  deficit  procedure,  the  Commission  is 
required to provide the statistical data to be used in that procedure; 

Whereas  detailed  rules  are  required  to  organize  the  prompt  and  regular  reporting  by  the 
Member States  to  the  Commission  of their  planned  and  actual  deficits  and  of  the  levels  of their 
debt; 

The initial  draft  proposal  (Doc.(93)371 final - SYN 466-SYN 467 of 22.7.93) was confirmed  as formal  proposal  with 
effect  from  1.11.1993. 

(I)OJC 
(v)  Opinion delivered  on 
(  ^Statistical Office  of the  European Communities, European System of Integrated Economic Accounts ESA, second  edition. 
O O J L 4 9,  21.2.19X9, p. 26. 

(not yet published  in the Official  Journal). 

4f 

Whereas,  pursuant  to  Article  104c(2)  and  (3)  of  the  Treaty,  the  Commission  is  to  monitor  the 
development  of the budgetary  situation and of the stock  of government  debt in the Member  States 
and  to  examine  compliance  with  budgetary  discipline  on  the  basis  of  criteria  relating  to 
government  deficit  and  government  debt;  whereas,  if  a  Member  State  does  not  fulfil  the 
requirements  under  one  or  both  criteria,  the  Commission  must  take  into  account  all  relevant 
factors; whereas the Commission has to examine whether there is a risk of an excessive  deficit  in a 
Member State, 

Af 

HAS ADOPTED THIS REGULATION: 

Section 1 

Definitions 

Article 1 

1.  For the purposes of the Protocol  on the excessive deficit  procedure  and of this Regulation,  the 
terms  given  in  the  following  paragraphs  are  defined  according  to  the  European  System  of 
Integrated Economic Accounts (ESA).  The codes in brackets refer to ESA, second edition. 

2.  "Government"  means the sector of general government  (S60), that is central government (S61), 
local  government  (S62)  and  social  security  funds  (S63),  to  the  exclusion  of  commercial 
operations, as defined  in ESA. 

The  exclusion  of  commercial  operations  means  that  the  sector  of  general  government  (S60) 
comprises only institutional units producing non-market services as their main activity. 

3.  "Government  deficit  (surplus)"  means  the  net  borrowing  (net  lending)  (N5)  of  the  sector  of 
general government  (S60), as defined  in ESA.  The interest comprised  in the government  deficit  is 
the sum of interest (R41), as defined  in ESA. 

4.  "Government  investment"  means  the  gross  fixed  capital  formation  (P41)  of  the  sector  of 
general government  (S60), as defined  in ESA. 

5.  "Government  debt"  means the total  gross debt  at  nominal  value  outstanding  at  the  end  of the 
year  of  the  sector  of  general  government  (S60),  with  the  exception  of  those  liabilities  the 
corresponding  financial  assets of which are held by the sector of general government  (S60). 

Government  debt  is constituted  by the liabilities of general government  in the following  categories: 
Currency and Deposits (F20 and F30), Bills and Short-term Bonds (F40), Long-term Bonds (F50), 
Other Short-term Loans (F79) and Other Medium and Long-term Loans (F89) as defined  in ESA. 

The nominal value of a liability outstanding at the end of the year is the face value. 

The  nominal  value  of  an  index-linked  liability  corresponds  to  its  face  value  adjusted  by  the 
index-related  capital uplift  accrued to the end of the year. 

Liabilities  denominated  in  foreign  currencies  shall  be  converted  into  the  national  currency  at  the 
representative market exchange rate prevailing on the last working day of each year. 

<U 

Article 2 

Gross  domestic  product  means gross  domestic  product  at  market  prices  (GDPmp),  as  defined  in 
Article 2 of Directive 89/130/EEC, Euratom. 

Article 3 

1.  Planned  government  deficit  figures  mean  the  figures  established  for  the  current  year  by  the 
Member States consistent with the most recent decisions of their budgetary authorities. 

2.  Actual  government  deficit  and  government  debt  level  figures  mean  estimated,  provisional, 
half-finalized  or final results for a past year. 

Section 2 

Rules and coverage of reporting 

Article 4 

1.  As from  the beginning  of  1994, Member States  shall  report  to  the  Commission  their  planned 
and  actual  government  deficits  and  levels of government  debt  twice  a year,  the first time  before 
1 March of the current year (year n) and the second time before  1 September of year n, 

2.  Before  1  March of year n, Member States: 

- 

shall  report  to  the  Commission  their  planned  government  deficit  for  year n,  an  up-to-date 
estimate of their actual government  deficit  for year n-1 and their actual government  deficits 
for years n-2, n-3 and n-4; 

shall  simultaneously  provide  the  Commission  for  years n,  n-1  and  n-2  with  their 
corresponding  public  accounts  budget  deficits  according  to  the  definition  which  is  given 
most  prominence  nationally  and  with  the figures which  explain  the  transition  between  this 
public  accounts  budget  deficit  and  their  government  deficit.  The  figures  explaining  this 
transition  which are provided to  the  Commission  shall include,  in particular,  the figures  for 
net borrowing of the subsectors S61, S62 and S63; 

- 

shall  report  to the  Commission their  estimate  of the level  of actual  government  debt  at  the 
end of year n-1 and their levels of actual government debt for years n-2, n-3 
and n-4; 

- 

shall  simultaneously  provide  the Commission  for  years n-1  and  n-2  with  the figures which 

It 

explain  the  contributions  of  their  government  deficit  and  the  other  relevant  factors 
contributing to the variation in the level of their government debt. 

3.  Before  1 September of year n, Member States shall report to the Commission: 

- 

- 

their updated  planned  government  deficit  for year n and their actual government  deficits  for 
years n-1,  n-2,  n-3  and n-4  and  shall  comply with the  requirements  of the  second  indent  of 
paragraph 2; 

their actual level of government  debt for years n-1,  n-2, n-3 and n-4, and  shall comply with 
the requirements of the fourth  indent of paragraph 2. 

4.  The figures  for the planned government  deficit  reported  to the Commission  in accordance with 
paragraphs 2 and 3 shall be expressed in national currency and in budget years. 

The  figures  for  actual  government  deficit  and  actual  government  debt  level  reported  to  the 
Commission  in accordance with paragraphs 2 and 3 shall be  expressed  in national  currency  and in 
calendar years, with the exception  of the updated  estimates for  year  n-1,  which  may be expressed 
in budget years. 

Where  the  budget  year  differs  from  the  calendar  year,  Member States  shall  also  report  to  the 
Commission their figures for  actual government  deficit  and actual government  debt level in budget 
years for the two budget years preceding the current budget year. 

Article 5 

Member States  shall,  in  accordance  with  the  procedures  laid  down  in  Article 4(1),  (2)  and (3), 
provide the Commission with the figures for their government  investment  expenditure and  interest 
expenditure. 

Article 6 

Member States  shall  provide  the  Commission  with  a forecast  of their  gross  domestic  product  for 
year n and the actual amount of their gross domestic product for years n-1, n-2, n-3 and n-4, under 
the same liming conditions as those indicated in Article 4(1). 

Article 7 

In the event of a revision of ESA  to be decided on by the Council in accordance with the rules on 
competence  and procedure  laid  down  in  the  Treaty,  the  Commission  shall  introduce  the  new 

\t 

references to ESA into Articles  1  and 4. 

This Regulation shall enter into force on 1  January 1994. 

Article 8 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the Council 

The President 

/fl  _ao 

Amended proposal  for a 
COUNCIL DECISION 
on the statistical  data to be used for the determination of the key for 
the financial  resources of the European Monetary Institute 

THE COUNCIL OF THE EUROPEAN  UNION, 

Having regard  to the Treaty  establishing the European  Community,  and  in particular  Article 16.1 
and  16.2 of the Protocol  on the Statute of the European Monetary Institute annexed thereto, 

Having regard to the proposal from the Commission (  ), 

Having regard to the Opinion of the European Parliament  (fy, 

Having regard to the opinion of the Committee of Governors, 

Having regard to the opinion of the Monetary Committee, 

Whereas the European Monetary Institute, hereinafter  referred  to as "EMI", will be established  on 
1 January  1994; 

Whereas the EMI will be endowed with its own resources; 

Whereas the size of the resources of the EMI will be determined by the Council of the EMI; 

Whereas the resources  of the EMI will be provided  out  of contributions  by national  central  banks 
in accordance with the key referred  to in Article 16.2 of the Protocol on the Statute of the EMI; 

Whereas the key for  the financial  resources  of the EMI will be determined  before  the  start  of the 
second stage; 

Whereas  the  statistical  data  to  be used  for  the  determination  of  the  key  will  be  provided  by the 
Commission in accordance with the rules adopted by the Council; 

Whereas the rules adopted  by the Council in this Decision  do not  constitute  a precedent  for  other 
legal acts which the Council could adopt in other areas; 

The  initial  draft  proposal  (Doc.(93)371  final  -  SYN  4 66  -  SYN  4 67  of  2 2 . 7 . 9 3)  was  confirmed  as  formal  proposal  with 
effect  from  1 . 1 1 . 1 9 9 3. 
)  O J  C 

( 
(fJ)  Opinion  delivered  on 
Official  Journal). 

(not  yet  published  in  the 

2/1 

Whereas the nature of and sources for the data to be used and the method of calculation of the key 
must be defined; 

Whereas  Council  Directive  89/130/EEC,  Euratom  of  13 February  1989  on the  harmonization  of 
the  compilation  of  gross  national  product  at  market  prices ()  introduces  a  procedure  for  the 
adoption by Member States of data on the gross domestic product at market prices, whereas the 
member States shall take all the necessary measures to ensure that these data ae forwarded  to the 
Commission. 

(1)  OJ  L  4 9,  2 1 . 2 . 1 9 8 9,  p.  26 

HAS DECIDED AS FOLLOWS: 

Article 1 

The statistical data to be used for the determination of the key for the contributions by the national 
central  banks  to  the  financial  resources  of  the  EMI  shall  be  provided  by  the  Commission  in 
accordance with the rules laid down in the following Articles. 

Article 2 

Population  and  Gross  Domestic  Product  at  market  prices,  hereinafter  referred  to  as  "GDP mp", 
shall  be  defined  according  to  the  European  System  of  Integrated  Economic  Accounts  (ESA)  in 
force.  GDP mp shall mean GDP mp as defined  in Article 2 of Directive 89/130/EEC, Euratom. 

Article 3 

The data  on  population  shall be taken  for  the year  1992.  The  mean  of the  total  population  over 
the course of the year shall be used in accordance with the ESA recommendation. 

Article 4 

The data on GDP mp shall be taken for each of the years  1987 to  1991.  The data on GDP mp for 
each Member State shall be expressed  in the national currency at current prices. 

The data on population  shall be collected by the Commission (Eurostat) from Member States. 

Article 5 

Article 6 

The  data  on  GDP  mp  for  the  years  1988  to  1991  shall  result  from  the  application  of 
Directive 89/130/EEC,  Euratom.  The  data  for  1987  shall  be  collected  by  the  Commission 
(Eurostat)  from  Member  States, which shall make them  consistent  with  the  1988 to  1991 data on 
GDP mp. 

*i 

Article 7 

1.  The share of a Member  State in the population  of the Community  shall be  its share  in the sum 
of the population  of the Member  States, expressed  as a percentage. 

2.  The GDP mp data for  each year and each Member  State expressed  in national  currencies  shall 
be converted  into figures  expressed  in ecus.  The exchange rate used  for  this purpose  shall be the 
average of the exchange rates for  all working days in a year.  The daily exchange rate shall be the 
rate  calculated  by  the  Commission  and  published  in  the  "C"  series  of  the  Official  Journal  of  the 
European Communities. 

3.  The  share  of  a Member  State in GDP  mp of the  Community  shall  be  its  share  in the  sum  of 
GDP mp of the Member States over five years, expressed as a percentage. 

Article 8 

The weighting of a national central bank in the key shall be the arithmetic mean of the shares of the 
Member State concerned in the population and in the GDP mp of the Community. 

Article 9 

The various steps of calculation  shall use sufficient  digits to ensure their accuracy.  The weighting 
of national central banks in the key shall be expressed to four decimal places. 

Article 10 

The data referred  to in this Decision  shall be communicated by the Commission to the Committee 
of Governors of the Central Banks of the Member States before  1  January  1994. 

Done at Brussels, 

For the Council 

The President 

M  -  ^ 

Amended proposal  for a 
POTINCTL DECISION 
on the consultation of the European Monetary Institute by the authorities 
of the Member States on draft  legislative provisions 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard  to the Treaty establishing the European Community,  and  in particular  Article  109F(6) 
thereof,  and  Article 5(3) of the Protocol  on the Statute of the European Monetary  Institute annexed 
to this Treaty, 

Having regard to the proposal from  the Commission (  ), 

Having regard to the Opinion of the European Parliament (*), 

Having regard to the opinion of the Committee of Governors, 

Whereas  the  European  Monetary  Institute,  hereafter  referred  to  as  "EMI",  is  to  be  established  on 
1 January  1994; 

Whereas the Treaty stipulates that the authorities of the Member States shall consult the EMI on any 
draft  legislative provision within its field of competence; whereas it is for the Council to set the limits 
and the conditions of such consultation; 

Whereas  this  obligation  on  the  authorities  of  the  Member States  to  consult  the  EMI  shall  not 
prejudice  the  responsibility  of  national  authorities  for  the  matters  which  are  the  subject  of  such 
provisions; 

Whereas this Decision  does not  concern  decisions taken by national  authorities  in the  context  of the 
implementation of monetary policy; 

Whereas  consultation  of  the  EMI  must  not  unduly  lengthen  procedures  for  adopting  legislative 
provisions  in  the  Member States;  whereas  the  time  limits  within  which  the  EMI  must  deliver  its 
opinion  must,  nevertheless,  enable  it  to  examine  the  texts  referred  to  it  with  the  required  care; 
whereas,  in  duly justified  cases  of  extreme  urgency,  for  example  on  account  of  market  sensitivity, 
Member States  may  set  a  time  limit  of  less  than  one  month;  whereas,  in  these  cases  particularly, 
dialogue between the national authorities and the EMI should enable the interests of both to be taken 
into account, 

The  initial  draft  proposal  (doc.  (93)  436  final  of  22.09.1993  was  confirmed  as a formal 

proposal  with  effect  from  1.11.1 993. 

i1)  OJ  c 

u 

HAS ADOPTED THIS DECISION: 

Article 1 

1.  The  authorities  of  the  Member States  shall  consult  the  EMI  on  any  draft  legislative  provision 
within its field of competence pursuant to Article  109F of the Treaty and in particular on: 

-  currency legislation, the status of the ecu and means of payment; 

-  the status and powers of national central banks and the instruments of monetary policy; 

-  the  collection,  compilation  and  dissemination  of  monetary,  financial,  banking  and  balance  of 

payments statistics; 

-  clearing and payment systems, in particular for cross-border transactions; 

-  rules  applicable  to  financial  institutions  insofar  as  they  influence  the  stability  of  financial 

institutions and markets. 

2.  The  EMI  shall,  immediately  on  receipt  of  any  draft  legislative  provision,  notify  the  consulting 
authority if,  in its opinion, such provision is within its field of competence. 

Article 2 

1.  "Draft  legislative  provisions"  shall  mean  any  such  provisions  which  are  legally  binding  and  of 
general  applicability  in  the  territory  of  a  Member State,  which  lay  down  rules  for  an  indefinite 
number of cases and which are addressed to an indefinite number of natural or legal persons. 

2.  Draft  legislative  provisions within the meaning  of paragraph  1 shall  not  include  draft  provisions 
the  exclusive  purpose  of  which  is  the  transposition  of  Community  Directives  into  the  law  of 
Member States. 

Article 3 

Each  Member State  shall  take  the  measures  necessary  to  ensure  effective  compliance  with  this 
Decision.  To that  end,  it shall ensure that the EMI  is consulted  at an appropriate  stage enabling the 
authority initiating the draft  legislative provision to have the EMI's opinion before  taking its decision 
on  the  substance  and  that  the  opinion  received  from  the  EMI  is brought  to  the  knowledge  of  the 
adopting  authority  if  the  latter  is  an  authority  other  than  that  which  has  prepared  the  legislative 
provisions concerned. 

«? 

Article 4 

The  authorities  of  the  Member  States  preparing  a  legislative  provision  may,  if  they  consider  it 
necessary,  set the EMI a time limit for the submission of its opinion which may not be less than  one 
month from  the  date on which  the President  of the EMI  receives notification  to  this effect,  save in 
case of extreme urgency.  Upon expiry of the time limit, the absence of an opinion  shall not  prevent 
further  action.  Should  the  opinion  of the  EMI be  received  after  the  time  limit,  the Member  States 
shall,  nevertheless,  ensure  that  it  is  brought  to  the  knowledge  of  the  authorities  referred  to  in 
Article 3. 

This Decision is addressed to the Member States. 

Article 5 

Done at Brussels, 

For the Council 

The President 

ÎS 

uivt(9b) 617 tinai 

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