Opinion of the European Central Bank at the request of the Ministry of Finance of the Netherlands on a draft legislative proposal concerning the protection of credit institutions and other financial institutions against liabilities resulting from the closure of payment and security settlement systems on 31 December 1999 (CON/99/13)
Date: 1999-09-14
Institutions: European Central Bank
Subjects: Netherlands, credit institution, electronic banking, national law, payment system

OPINION OF THE EUROPEAN CENTRAL BANK

At the request of the Ministry of Finance of the Netherlands on a draft legislative proposal

concerning the protection of credit institutions and other financial institutions against liabilities

resulting from the closure of payment and security settlement systems on 31 December 1999

(CON/99/13)

1.  On  23  August  1999  the  European  Central  Bank  (ECB)  received  a  request  from  the  Ministry  of

Finance  of  the  Netherlands  on  a  draft  legislative  proposal  concerning  the  protection  of  credit

institutions and other financial institutions against liabilities resulting from the closure of payment

and security settlement systems on 31 December 1999.

2.  The ECB’s competence to deliver an opinion is based on Article 105 (4), second  indent,  of  the

Treaty establishing the European Community and Article 2 (1), fifth and sixth indents, of Council

Decision (EC) No. 98/415 of 29 June 1998 on the consultation of the European Central Bank by

national  authorities  regarding  draft  legislative  provisions,  as  the  legislative  proposal  deals  with

payment systems and settlement systems, as well as with the stability of financial institutions and

markets.  In  accordance  with  Article  17.5,  first  sentence,  of  the  Rules  of  Procedure  of  the

European Central Bank, this opinion has been adopted by the Governing Council of the ECB.

3.  Following the conclusions of the informal meeting of the ECOFIN Council of Ministers on 16 to

18 April 1999 on ways of dealing with possible problems during the changeover to the year 2000,

the Ministry of Finance of the Netherlands has prepared a draft legislative decree. This draft takes

as  given  that  the  TARGET  payment  system  of  the  ESCB  and  TOP,  the  national  giro  gross

payment  system  of  De  Nederlandsche  Bank  N.V.,  will  be  closed  on  31  December  1999.  Other

payment systems and security settlement systems linked to TARGET and TOP will also be closed

on  31  December  1999.  These  closures  might  have  legal  consequences  for  credit  and  other

financial institutions participating in payment or security settlement systems as obligations due on

31 December 1999 cannot be performed. The obligations concern instructions given by clients to

credit and other financial institutions, as well as obligations of the said institutions themselves to

transfer money or securities by way of payment or security settlement systems on 31 December

1999.

4.  The  draft  legislative  provisions  address  these  legal  consequences  by  holding  credit  and  other

financial institutions harmless from failure to transfer money or securities via payment or security

settlement  systems  on  31  December  1999.  Specifically,  Section  1  of  the  draft  legislative

provisions  clarifies  that  the  transfer  of  money  or  securities  by  credit  institutions  and  other

financial institutions on 30 December 1999, instead of on 31 December 1999, is neither a breach

of  contract,  nor  a  wrongful  act  on  the  part  of  the  clients,  credit  institutions  and  other  financial

institutions involved.  This protection means, for transactions governed by Dutch law, that neither

the clients, nor the credit institutions and other financial institutions are liable for possible losses

suffered  by  creditors  on  account  of  this  earlier  performance.  Contractual  parties  are,  of  course,

free to agree on other solutions inter se. The draft legislative provisions will enter into force on

the day after the date of publication. According to Section 2 of the draft, the legislative provisions

will, however, apply retroactively as from 30 December 1999 in the event of it entering into force

on a later date.

5.  The  ECB  welcomes  the  effort  made  by  the  authorities  of  the  Netherlands  to  reduce  the  legal

uncertainty  which  might  result  under  Dutch  law  from  the  closure  of  payment  and  securities

settlement  systems  on  31  December  1999.  The  legislative  proposal  takes  into  account  the

communiqué  of  the  central  bank  governors,  endorsed  by  ECOFIN  ministers  at  their  informal

meeting in Dresden on 17 April 1999, which urged the Member States to take appropriate means

ensuring that the performance of any contractual obligations of credit institutions or other agents

in  the  financial  markets  shall  neither  become  due  nor  enforceable  on  31  December  1999.  The

ECB also notes that in shifting the performance of the said obligations to 30 December 1999, the

draft  legislative  provisions  limit  the  number  of  transactions  on  the  first  days  of  the  year  2000.

This  is  in  line  with  internationally  given  advice.  In  doing  so,  the  ECB  finds  that  the  draft

legislative  provisions  could  contribute  to  maintaining  the  stability  of  financial  institutions  and

markets during the changeover to the year 2000.

6.  The  ECB  has  one  drafting  comment  regarding  the  draft  legislative  proposal.  In  its  opinion,  the

words  “Section  212  A,  sub  a  of  the  Insolvency  Act”  in  the  fifth  line  of  Section  1,  paragraph  2

should read: “Section 212 A, sub b of the Insolvency Act”.

7.  The ECB confirms that it has no objections to this ECB Opinion being made public by competent

national authorities at their discretion.

Done at Frankfurt am Main on 14 September 1999.

The President of the ECB

[signed]

Willem F. Duisenberg