Opinion of the European Central Bank of 25 November 1999 at the request of the Ministry of Finance of the Grand Duchy of Luxembourg on a draft legislative proposal concerning the contractual obligations of the financial sector which are due on 31 December 1999 (CON/99/17)
Date: 1999-11-25
Institutions: European Central Bank
Subjects: Luxembourg, deadline for payment, financial stability, financial year, national law, payment system

OPINION OF THE EUROPEAN CENTRAL BANK

of 25 November 1999

at the request of the Ministry of Finance of the Grand Duchy of Luxembourg 

on a draft legislative proposal concerning the contractual obligations of the financial sector 

which are due on 31 December 1999

(CON/99/17)

1.  On 26 October 1999 the European Central Bank (ECB) received a request from the Ministry of

Finance of the Grand Duchy of Luxembourg for an ECB Opinion on a draft legislative proposal

concerning  the  contractual  obligations  of  the  financial  sector  which  are  due  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  the

Council Decision of 29 June 1998 on the consultation of the European Central Bank by national

authorities  regarding  draft  legislative  provisions  (98/415/EC),  as  the  legislative  proposal  deals

with  payment  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  ECB  Opinion  has  been  adopted  by  the  Governing  Council  of  the

ECB.

3.  Following  the  conclusions  of  the  informal  meeting  of  the  ECOFIN  Council  on  16  to  18  April

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

Ministry of Finance has prepared a draft legislative proposal. The purpose of this draft legislative

proposal  is  to  facilitate  the  transition  to  the  year  2000  for  the  financial  sector.  The  scope  of

application  of  the  draft  legislative  proposal  is  broadly  defined.  The  obligations  covered  by  the

draft legislative proposal include obligations of the financial sector, as well as of other obligors

which  use  financial  intermediaries,  falling  due  on  31 December  1999.  The  draft  legislative

proposal takes into consideration the fact that TARGET will be closed on 31 December 1999 in

order to facilitate the end-of-year activities of the financial sector in relation to the transition to

the year 2000.

4.  In order to address these legal consequences, the draft legislative proposal stipulates that principal

and  accessory  contractual  obligations  of  the  financial  sector  falling  due  on  31  December  1999

shall be performed on 30 December 1999. In addition, Article 1, section 2, of the draft legislative

proposal clarifies that other obligors whose contractual obligations are performed by means of a

financial  institution  shall  not  be  in  breach  of  contract  because  such  obligations  cannot  be

performed on 31 December 1999. Such obligors may discharge their responsibilities on the first

working  day  after  31 December  1999.  This  protection  means,  for  transactions  subject  to  the

legislation  of  Luxembourg,  that  neither  the  clients,  the  credit  institutions  nor  other  financial

intermediaries  shall  be  liable  for  possible  losses  suffered  by  creditors  on  account  of  this  late

performance. Contractual parties are, however, free to agree on other solutions inter se. First, the

draft  legislative  proposal  declares  valid  those  contracts  concluded  by  counterparties  to  execute

performances  due  on  31 December  1999  on  a  day  other  than  30 December  1999.  Second,

counterparties may, after the introduction of the legislative proposal, opt to maintain 31 December

1999 as a performance day, provided that the financial intermediary which is to be used consents

to such performance. 

5.  The  ECB  welcomes  the  effort  made  by  the  authorities  of  the  Grand  Duchy  of  Luxembourg  to

reduce  the  legal  uncertainty  which  might  result,  under  the  legislation  of  Luxembourg,  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”,  issued  after  the  informal  meeting  in  Dresden  on

17 April  1999,  which  urged  the  Member  States  to  take  appropriate  measures  to  ensure  that  the

performance of any contractual obligations  of  credit  institutions  or  other  agents  in  the  financial

markets shall neither become due nor be enforceable on 31 December 1999. The ECB also notes

that by shifting the performance of the said obligations to 30 December 1999, the draft legislative

proposal limits the number of transactions in the first week of the year 2000. This is in line with

international advice. In doing so, the ECB finds that the draft legislative proposal could contribute

to maintaining the stability of financial institutions and markets during the changeover to the year

2000.  

6.  Banque  centrale  du  Luxembourg  has  one  comment  suggesting  that  with  respect  to  overnight

credits the settlement date be postponed until 3 January 2000.  The ECB has no objection to that

suggestion.

 
7.  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 25 November 1999.

The President of the ECB

[signed by C. Noyer]

Willem F. Duisenberg