Opinion of the European Central Bank of 31 May 2001 at the request of the Spanish Ministry of the Economy on a draft law introducing amendments to several laws governing the Spanish financial market (CON/2001/12)
Date: 2001-05-31
Institutions: European Central Bank
Subjects: Eurosystem, Spain, central bank, credit institution, electronic money, financial stability, financial supervision, information security, payment system, securities

EN

OPINION OF THE EUROPEAN CENTRAL BANK

of 31 May 2001

at the request of the Spanish Ministry of the Economy on a draft law introducing

amendments to several laws governing the Spanish financial market

(CON/2001/12)

1. 

On  23  April  2001  the  European  Central  Bank  (ECB)  received  a  request  from  the  Spanish

Secretary  of  State  of  the  Economy,  Energy  and  Small  and  Medium-sized  Enterprises  for  an

opinion on a draft law amending several legal acts pertaining to the financial legal framework

(hereinafter the “Draft Law”).

2. 

The  competence  of  the  ECB  to  deliver  an  opinion  on  the  Draft  Law  does  not  extend  to  the

entire content of the Draft Law, but is confined to certain areas: securities settlement systems

(Article 1, fourth additional provision,  and  first  and  second  transitory  provisions  of  the  Draft

Law), collateral for Eurosystem operations (Articles 11, 12 and 15 of the Draft Law), electronic

money  (Article  19  of  the  Draft  Law),  the  prudential  supervision  of  credit  institutions

(Article 30  of  the  Draft  Law)  and  provisions  affecting  the  powers  of  the  Banco  de  España

(Chapter  Six  on  the  Centre  for  Risk  Information,  and  the  Abrogating  Provision  of  the  Draft

Law).  The  enumeration  of  the  above  areas  is  based  on  the  third,  fifth  and  sixth  indents  of

Article 2(1) of Council Decision 98/415/EC of 29 June 1998 on the consultation of the ECB by
national authorities regarding draft legislative provisions1. In addition, according to Article 1(2)

of  the  said  Council  Decision,  the  ECB  does  not  need  to  be  consulted  on  draft  legislative

provisions which serve the sole purpose of transposing Community Directives into the law of

Member  States.  However,  when  such  consultation  is  effected  on  a  voluntary  basis  on  a  topic

closely related to ESCB tasks, the ECB is ready to provide its opinion; this is the case in this

consultation  with  regard  to  the  provisions  relating  to  electronic  money.  Articles  of  the  Draft

Law  other  than  those  listed  above  fall  outside  the  advisory  competence  of  the  ECB.  In

accordance  with  the  first  sentence  of  Article  17.5  of  the  Rules  of  Procedure  of  the  European

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

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OJ L 189, 3.7.1998, p. 42.

3. 

The  ECB  welcomes  the  legislative  methodology  chosen  to  address  various  needs  for  the

modernisation and enhancement  of  financial  regulation  in  Spain.  The  use  of  a  horizontal  law

which  addresses  various  requirements  to  upgrade  existing  legislation  is  a  method  which  has

been used by several Member States to cope with the pace of development of financial markets.

Changes  in  such  markets  in  Europe  follow  the  introduction  of  the  euro  and  the  consequent

tendency to replace national markets by the euro market, the globalisation of financial markets,

the impact of new technology, and other factors. Since the evolution of such markets will in all

likelihood  continue,  perhaps  at  an  even  greater  pace,  regular  legislative  adaptation  of  the

overall financial legal framework seems to be the best legislative technique for such a period of

change. 

4. 

Article 1 of the Draft Law is aimed at providing a legal basis for the incorporation as a société

anonyme  of  the  central  depository  services  and  at  unifying  in  one  single  central  securities

settlement system the various systems existing for the settlement of different kinds of securities.

The  ECB  welcomes  all  measures  aimed  at  fostering  the  consolidation  of  euro  securities

settlement systems and thus the overall objective of the proposed reform. Within the context of

this general support, the ECB would, however, make the following comments.

(a) 

The  regime  which  the  Draft  Law  establishes  appears  to  grant  to  the  resulting

consolidated  system  (“la  Sociedad  de  Sistemas”)  exclusive  central  register  rights  for

securities admitted to trading; (i) on the public debt market; and (ii) on national stock

exchanges. For  the  regional  stock  exchanges  and  for  securities  being  traded  over-the-

counter,  other  alternatives  are  permitted.  The  ECB  understands  that  such  exclusive

rights  are  limited  to  the  primary  or  central  registry  function  to  be  performed  by  the

Sociedad  de  Sistemas,  as  previously  performed  by  two  securities  settlement  systems,

which qualify as a “public function” under Spanish Law, and notes that (i) there are no

exclusivity  rights  for  secondary  registers  which  may  be  managed  on  a  free-market

basis;  and  (ii)  foreign  participation  in  the  capital  of  the  Sociedad  de  Sistemas  is

permitted. Following  the  introduction  of  the  euro,  the  ECB  favours  the  integration  of

European financial markets and notes that the Explanatory Memorandum of the Draft

Law reflects the aim of such integration and justifies the Draft Law on the basis of the

implications of such integration. It thus appears important that national laws do not lend

support to a perpetuation of national fragmentation of such markets, but rather allow for

such integration. The ECB welcomes the legislative proposal to consolidate the central

registry  function  in  Spain  into  one  main  system,  under  terms  which  will  increase  the

safety  and  efficiency  of  securities  settlement  and  thereby  contribute  to  financial

stability  in  Spain.  The  legislative  proposal  paves  the  way  for  future  processes  of

integration of Spanish securities markets with others in the euro area, as the proposed

scheme  is  more  in  line  with  the  structure  of  the  majority  of  euro  area  securities

settlement  systems.  The  ECB  notes  that  the  process  of  consolidation  of  securities

settlement systems in Spain is not completed with the Draft Law, and that autonomous

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regional systems continue. Such continued domestic  fragmentation  does  not  serve  the

cause of enhanced efficiency of post-trading structures. 

(b) 

The  Draft  Law  allows  the  Ministry  of  the  Economy  to  authorise  and  to  regulate  the

establishment of one or, exceptionally, several central counterparties for the securities

markets.  The  ECB  welcomes  this  possibility  because  central  counterparties,  when

properly  regulated,  enhance  the  efficiency  of  the  securities  markets.  However,  some

comments are necessary: 

(cid:1)  The Draft Law subjects the provision of  central  counterparty  services  in  Spain  to

government  authorisation.  Such  government  authorisation  has  the  function  of

ensuring  that  central  counterparty  services  are  properly  regulated  and  supervised,

but  should  not  be  seen  as  a  mechanism  to  impede  the  provision  of  central

counterparty services by other central counterparties incorporated in the EU, when

properly regulated and supervised, on a cross-border or remote  basis.  Once  more,

domestic  legislation  should  not  perpetuate  the  fragmentation  of  financial  markets

following the introduction of the euro. 

(cid:1)  Central  counterparties  have  a  pivotal  role  with  regard  to  the  stability  of  financial

markets; they operate at the centre of trading, and should be able to cope with the

failures of market participants  in  order  to  avoid  systemic  risks.  The  solvency  and

liquidity  of  central  counterparties  need  to  be  ensured;  they  should  be  supervised

and  have  access  to  central  bank  liquidity  and  to  real-time  payment  systems.  The

ECB  recalls  that,  in  choosing  whether  to  establish  a  central  counterparty,  CPSS-

IOSCO  Recommendation  4  should  always  be  followed,  according  to  which  a

central counterparty, where introduced, should be subject to a rigorous requirement

to  control  the  risks  it  assumes.  Within  the  regime  to  be  adopted  for  a  central

counterparty,  it  may  be  worth  considering  the  advantages  of  requiring  any  new

central  counterparty  to  adopt  the  form  of  a  credit  institution  which  satisfies  such

requirements, in which case such a basic criterion may be established in the Draft

Law, rather than leaving it to ministerial regulation. 

(cid:1)  The Draft Law attributes the supervision of the central counterparty to the National

Securities Market Commission and to the Banco de España, without specifying the

respective  competences.  In  this  regard,  it  is  necessary  to  recall  that,  following

CPSS-IOSCO Recommendation 18, (i) central  counterparties should be subject to

public  regulation  and  oversight;  (ii)  the  responsibilities  and  objectives  of  the

securities  regulator  and  the  central  bank  with  respect  to  the  central  counterparty

should  be  clearly  defined;  (iii)  their  roles  and  major  policies  should  be  publicly

disclosed; and (iv) they should have the ability and the resources to perform their

responsibilities,  including  assessing  and  promoting  the  implementation  of  these

CPSS-IOSCO Recommendations. In taking account of the above, it should be borne

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in  mind  that  the  solvency  risks,  liquidity  risks,  access  to  RTGS  and  the  resulting

systemic  risks  imply  that  central  banks  have  a  direct  interest  in  the  good

functioning  and  supervision  of  central  counterparties.  The  ECB  would  therefore

advise that CPSS-IOSCO Recommendation 18, as stated above, be duly followed.

5. 

The Draft Law modifies Article 36(7)(b) of the Securities Market Law in order to allow loans

of securities only if the securities are the property of the lender. The ECB considers that such a

provision  prohibits  on-lending  activities  and  thus  introduces  an  important  limitation  to  the

securities  loan  market.  In  this  regard,  it  should  also  be  recalled  that  CPSS-IOSCO

Recommendation  5  affirms  that  securities  lending  and  borrowing  should  be  encouraged  as  a

method for expediting the settlement of securities transactions  and  that  barriers  which  inhibit

the practice of lending securities for this purpose should be removed.

6. 

Article  12  introduces  a  sixth  additional  provision  to  Law  13/1994  on  the  Autonomy  of  the

Banco  de  España  which  establishes  the  legal  regime  for  collateral  for  ESCB  operations.  The

ECB  welcomes  the  proposal,  which  is  aimed  at  simplifying  the  formalities  required  for  the

creation  and  enforcement  of  the  collateral,  including  cash  collateral;  this  proposal  provides  a

legal basis for margin maintenance and top-up provisions, and for assigning bank loans under

simplified  formal  requirements.  While  those  reforms  improve  the  existing  regime,  one

observation  may  be  made:  the  regime  for  assigning  bank  loans  seems  to  continue  to  require

cumbersome  formalities;  namely,  paper  form,  registration  with  two  public  registries  and

handover of the loan contract. The ECB would favour, if legally possible, further simplification

of such a procedure with an enhanced use of computerised systems.

7. 

Article 12 further introduces a seventh additional provision to  Law  13/1994  on  the  Banco  de

España which provides for collateral for Treasury cash management operations. This provision

supplements  the  introduction  in  Article  11  of  the  Draft  Law  of  a  Treasury  power  to  perform

repo and loan operations in the management of its liquidity. Article 12 provides for a specific

procedure for the execution of pledges in favour of the Treasury of collateral placed with the

Banco de España by credit institutions in the context of monetary policy operations, following

which the relevant assets would be re-attached as collateral for the Banco de España once the

obligations of the Treasury have been discharged. The ECB welcomes the proposed procedure

for the collateralisation of the temporary transfers to credit institutions of the liquidity balances

until  now  held  by  the  Treasury  with  the  Banco  de  España,  optimising  the  use  of  available

collateral.  

8. 

Article  13  introduces  a  new  kind  of  security:  the  “cédulas  territoriales”.  These  are  securities

issued  by  credit  institutions  and  backed  by  claims  on  public  administrations.  The  ECB

welcomes such innovation, which is aimed at introducing a new and sound instrument for the

capital markets, in line with similar instruments successfully existing in other Member States,

and which will contribute to increasing the volume of collateral available in Spain. 

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9. 

Article 15 of the Draft Law modifies the tenth additional provision of Law 37/1998 amending

the Securities Market Law of 1988, which provided for the legal validity and enforceability of

the  close-out  and  netting  provisions  included  in  the  standard  documentation  of  the  repo

markets, securities loans and other trading in securities. The new wording satisfies the need for

clarity arising from the current provision and is thus welcomed. 

10.  Article  19  of  the  Draft  Law  relates  to  electronic  money  (e-money).  The  ECB  understands

Article 19 of the Draft Law as aiming principally at implementing Directive 2000/28/EC of the

European Parliament and of the Council of 18 September 2000 amending Directive 2000/12/EC
relating to the taking-up and pursuit of the business of credit institutions2 (of which the latter is

referred to as “the Banking Directive”) and Directive 2000/46/EC of the European Parliament

and  of  the  Council  of  18  September  2000  on  the  taking-up,  pursuit  of  and  prudential
supervision  of  the  business  of  electronic  money  institutions3  (“the  E-money  Directive”).  The

ECB would like to make the following comments:

(cid:1)  According  to  Article  19(5),  the  Ministry  of  the  Economy,  following  a  report  from  the

Banco de España, will be in charge of authorising the creation of e-money institutions. The

control  and  inspection  of  all  e-money  institutions  and  their  registration  on  the  register

created for this purpose will be incumbent upon the Banco de España. The ECB welcomes

the powers therefore conferred upon the Banco de España. In this respect, the ECB would

like  to  emphasise  the  interest  of  the  Eurosystem  in  e-money.  This  interest  stems  from

monetary policy concerns and the primary objective of maintaining price stability, as well

as from the Eurosystem’s role in contributing to the smooth conduct of policies pursued by

the competent authorities in relation to the prudential supervision of credit institutions and

the stability of the financial system. This interest also relates to the Eurosystem’s basic task

of promoting the smooth operation of payment systems as stated in Article 105 (2)4 of the

Treaty and Article 3.15 of the Statute of the ESCB. These provisions provide the legal basis

for the oversight activities of the Eurosystem. As part of its oversight task, the Eurosystem

pursues the objectives of soundness and efficiency of e-money schemes and pays specific

attention to their technical security, in order to ensure confidence in the currency. Against

this general background, the ECB suggests that the competence of the Banco de España, as

stated in Article 19 of the Draft Law, be extended to the functioning and security of the e-

money schemes themselves, as distinct from the e-money institutions. 

(cid:1)  Article 19(7) of the Draft Law implements Article 8 of the E-money Directive, according to

which  Member  States  may  allow  their  competent  authorities  to  waive  the  application  of

some or all provisions of the same Directive and of the Banking Directive. The paragraph

2 
3
4 
5 

OJ L 275, 27.10.2000, p.37.
OJ L 275, 27.10.2000, p. 39
“The basic tasks to be carried out through the ESCB shall be: […] to promote the smooth operation of payment systems.”
“In accordance with Article 105 (2) of the Treaty, the basic tasks to be carried out through the ESCB shall be: […] to
promote the smooth operation of payment systems.”

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provides for a waiver with regard to the e-money institutions specified more specifically in

Article 8(1)(b) of the E-money Directive. Paragraph 7 covers the cases where the e-money

issued  by  this  institution  is  accepted  as  a  means  of  payment  only  by  a  subsidiary  of  the

institution performing operational or other auxiliary functions relating to e-money issued or

distributed by the institution, by any parent undertaking or by any other subsidiary of that

parent undertaking. Paragraph 7 states that such e-money institutions may be exempt from

the application of the provisions of this Law and the norms developing it “according to the

procedure to be determined by the Government”. As indicated above, the development of e-

money  raises  issues  relating  to  monetary  policy,  payment  systems  oversight  and  the

prudential  supervision  of  financial  intermediaries.  In  order  for  the  regulatory  framework

currently being implemented in the EU to provide adequate safeguards, the ECB regards it

as  important  that  the  waiving  of  regulatory  requirements  under  Article  8  of  the  E-money

Directive  be  implemented  into  the  national  legislation  with  prudence  and  in  a  restrictive

manner. In this respect, the ECB would recommend, inter alia, that the national legislation

should  not  grant  the  possibility  of  waiving  Article  3  of  the  E-money  Directive  on

redeemability.

(cid:1)  Finally, the  last  sub-paragraph  of  Article  8(1)  of  the  E-money  Directive  states  that  “[t]he

underlying  contractual  arrangements  must  provide  that  electronic  storage  device  at  the

disposal of bearers for the purpose of making payments is subject to a maximum storage

amount of not more than EUR 150.” The ECB notes that this protective provision of the E-

money Directive, which applies when a national authority implements the possibility of a

waiver under Article 8, is not stated in the Draft Law.

11.  Article 30 of the Draft Law authorises the Banco de España, acting as a prudential supervisor of

credit institutions (and the Securities Commission with respect to investment firms), to entrust

to external auditors the performance of specific supervisory tasks in certain cases of complex

groups, the international activity of credit institutions, as well as in other cases. Such external

auditors are roughly equivalent to bank inspectors of the Banco de España in the execution of

such  tasks.  The  ECB  welcomes  such  a  possibility  for  an  enhanced  prudential  supervision

capacity on the part of the Banco de España, namely in the current climate in which a surge of

conglomerates  in  the  context  of  the  internationalisation  of  financial  markets  is  giving  a  new

dimension to the supervision function. 

12.  Chapter  Six  of  the  Draft  Law  establishes  a  revised  regime  for  the  Central  Risk  Information

system (CRI) of the Banco de España. The ECB generally welcomes the proposed regime, in

particular as regards the aims, inter alia, of facilitating the use of information stored in the CRI

for supervisory purposes and enhancing supervisory co-operation on a cross-border basis, both

with  authorities  of  other  Member  States  and  third  countries.  The  ECB  further  welcomes  the

proposed Article 43, which will enhance the possibilities for co-operation between the CRI and

central credit registers based in other countries. The proposed Article 43 will allow the CRI to

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exchange  information  on  relevant  borrowers  on  a  cross-border  basis,  within  a  regime  of

reciprocity  and  on  terms  to  be  determined  by  the  Banco  de  España.  This  possibility  will  be

particularly  relevant  for  those  EU  Member  States  which  operate  central  credit  registers  of  a

similar nature, and with similar functions, to the CRI. Such information-sharing will, however,

only  be  possible  if  the  recipient  central  credit  register  or  a  reporting  institution  is  subject  to

rules  on  the  use  of  data,  confidentiality  and  data  protection  which  are  comparable  to  those

stipulated  in  Spanish  law.  The  ECB  expects  that  practical  solutions  will  be  elaborated  in  the

ongoing co-operation among central credit registers in the EU. 

13.  The  Abrogatory  Provision  of  the  Draft  Law  abrogates  Article  15.3  of  Law  13/1994  on  the

Autonomy of the Banco de España. This Article 15.3 refers to the regime for those banknotes

withdrawn from circulation but not yet returned to the Banco de España. The abrogation allows

the ECB to establish the regime which will apply to  such  banknotes  in  a  harmonised  manner

throughout  the  Eurosystem,  namely  within  the  forthcoming  cash  changeover.  The  proposed

abrogation is thus most welcome. 

14.  The ECB confirms that it has no objection to the publication of this opinion by the competent

national authorities at their discretion.

Done at Frankfurt am Main on 31 May 2001.

The President of the ECB

[signed]

Willem F. DUISENBERG

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