Opinion of the European Central Bank of 4 January 2002 at the request of the Finnish Ministry of Finance on a draft proposal concerning the revision of the Credit Institution Act (CON/2002/1)
Date: 2002-01-04
Institutions: European Central Bank
Subjects: Finland, credit institution, financial stability, financial supervision, money, national law, payment system

EN

OPINION OF THE EUROPEAN CENTRAL BANK

of 4 January 2002

at the request of the Finnish Ministry of Finance

on a draft proposal concerning the revision of the Credit Institution Act

(CON/2002/1)

1.

On 21 May 2001 the European Central Bank (ECB) received a request from the Finnish Ministry of

Finance  for  an  opinion  on  a  draft  Government  proposal  concerning  the  revision  of  the  Finnish

Credit Institution Act (hereinafter referred to as the “proposal”). The revision concerns in particular

(i) credit  institutions  specialising  in  the  issuance  of  electronic  money  and  transfer  of  payments;

(ii) providing  companies  other  than  credit  institutions  with  the  right  to  receive  refundable  funds

from the public; and (iii) using an agent or other outsourcing of banking services. 

2. 

The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing

the European Community (hereinafter referred to as the “Treaty”) and on the second, 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,  as  the  proposal  contains

provisions concerning means of payment, payment and settlement systems and rules applicable to

financial  institutions  which  could  materially  influence  the  stability  of  financial  institutions  and

markets.  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. 

3. 

The proposal is intended to ensure that the Finnish legislation concerning the core banking services

is updated with regard to the technological developments enabling the use of different means in the

provision of these services. It also intends to ensure that banking services are widely available in all

parts  of  Finland  in  spite  of  the  different  reorganisation  measures  in  the  banking  sector.  The

intentions of the proposal will be attained by three different means. First, the proposal introduces

into  the  Finnish  Credit  Institution  Act  (luottolaitostoiminnasta  annettu  laki  1607/1993)  new

provisions relating to the credit institutions specialising in the issuance of electronic money and/or

in transfer of payments. Secondly, the proposal provides, under  certain conditions,  a  right  for  all

limited liability companies and cooperatives, which are not credit institutions, (hereinafter referred

to  as  the  “other  companies”)  to  receive  into  so-called  “client  accounts”  funds  from  the  public

1 

OJ L 189, 3.7.1998, p. 42.

                                                     
refundable on demand as well as to issue electronic money to a certain limited extent. Thus all of

the other companies regardless of their field of business activity would be provided with a right to

receive  funds  into  these  client  accounts  and  to  issue  electronic  money  for  limited  purposes.

According to the proposal, even though the intention is to provide retail businesses and chains with

a right to receive funds into client accounts this right would not be restricted to retail business and

therefore companies providing other services would also be able to provide such client accounts.

Thirdly, the proposal gives credit institutions as well as investment service companies the right to

carry out business through an agent.

4. 

Regarding the first means of attaining the intentions of the proposal, the proposal would widen the

scope of application of the Finnish Credit Institution Act in such a way that transfer of payments

and  issuance  of  electronic  money  would  both  be  considered  as  activities  of  a  credit  institution.

According  to  the  proposal,  since  both  the  transfer  of  payments  and  the  issuance  of  electronic

money are activities that are based on the receipt of funds from the public and investment of these

funds  on  a  short-term  basis,  they  should  both  be  regulated  according  to  the  same  principles.

Therefore, the proposal provides rules on a new type of credit institution, a “payment transaction

society”, the activities of which would be limited to general transfer of payments and the issuance

of  electronic  money.  The  ECB  notes  that  these  rules  are  intended  to  implement  into  Finnish

legislation  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 institutions2. The ECB would like to recall that, although the competent authority

for verifying the implementation of Community directives into national law is the Commission, it

nevertheless appreciates the opportunity to comment  on  such draft national legislative  provisions

when they concern its field of competence. 

5. 

The ECB notes this widening of the scope of application of the Finnish Credit Institution Act and

the  application  of  the  provisions  of  Directive  2000/46/EC  to  payment  transaction  societies  in

Finland. In this regard, the ECB observes that according to Article 1(5)(a) of Directive 2000/46/EC

the business activities of electronic money institutions other than the issuing of electronic money

shall be restricted to the provision of closely related financial and non-financial services such as the

administering of electronic money by the performance of operational and other ancillary functions

related to its issuance, and the issuing and administering of other means of payment. According to

the  proposal  the  business  activities  of  a  payment  transaction  society  can  be  the  following:

(i) obtaining refundable assets other than deposits from the public and other acquisitions of funds;

(ii) payment transactions in general and other payment  traffic; (iii)  issuance of  electronic  money,

associated  data  processing  and  the  storing  of  data  on  an  electronic  device  on  behalf  of  another

company;  and  (iv)  currency  exchange.  Taking  into  account  the  above-mentioned  restrictions  in

Directive 2000/46/EC, the ECB submits that some further thought may be required regarding the

2

OJ L 275, 27.10.2000, p. 39.

2

                                                     
compatibility  of  the  activity  of  currency  exchange  with  the  activities  that  electronic  money

institutions are allowed to engage in under this Directive. The prudential framework established in

Directive 2000/46/EC in order to safeguard the financial integrity and stability of electronic money

institutions  might  not  fully  take  into  account  the  risks  involved  in  the  activity  of  currency

exchange. Therefore the ECB considers that, at least, the activity of currency exchange should be

clearly separated from the activity of issuing electronic money. This would better comply with the

intention  of  Directive  2000/46/EC,  namely  achieving  a  balance  between  a  less  cumbersome

prudential  supervisory  regime  applying  to  electronic  money  institutions  and,  on  the  other  hand,

limitations on the types of activities of these institutions.

6.  Moreover,  the  ECB  would  like  to  point  out  that  the  explanatory  memorandum  of  the  proposal,

which  contains  the  government’s  interpretation  of  the  proposed  legislative  provisions,  introduces

an  additional  limitation  regarding  the  definition  of  electronic  money  in  Finland,  namely  that  the

electronic device in which the value is stored has to be given to a customer. This limitation would

in principle exclude electronic money schemes with centralised accounting from the definition of

electronic  money.  The  approach  in  the  proposal  is  therefore  not  technology-neutral,  and  since

Directive 2000/46/EC does not explicitly provide for such a limitation, the ECB submits that this

additional  limitation  in  the  explanatory  memorandum  should  be  reconsidered  (see  also

paragraph 13 below).

7. 

Furthermore,  the  ECB  would  like  to  recall  that  according  to  Article  19.1  of  the  Statute  of  the

European System of Central Banks and of the European Central Bank (hereinafter referred to as the

“Statute”)  the  ECB  may  require  credit  institutions  established  in  the  Member  States  to  hold

minimum reserves on accounts with the ECB and national central banks in pursuance of monetary

policy  objectives.  Directive  2000/12/EC  of  the  European  Parliament  and  of  the  Council  of

20 March 2000  relating  to  the  taking  up  and  pursuit  of  the  business  of  credit  institutions3,  as

amended  by  Directive  2000/28/EC4,  defines  electronic  money  institutions  as  credit  institutions.

Thus 

the  minimum  reserve  requirements  imposed  on  credit 

institutions  by  Regulation

ECB/1998/15  of  1 December 1998  on  the  application  of  minimum  reserves5,  as  amended  by

Regulation  ECB/2000/86,  also  apply  to  electronic  money  institutions  and  in  view  of  the  present

proposal, to the payment transactions societies in Finland.

Furthermore  the  statistical  reporting  requirements  imposed  on  monetary  financial  institutions  by

Regulation  ECB/1998/16  of  1 December  1998  concerning  the  consolidated  balance  sheet  of  the

3 
4 
5
6

OJ L 126, 26.5.2000, p. 1.
OJ L 275, 27.10.2000, p. 37.
OJ L 356, 30.12.1998, p. 1.
OJ L 229, 9.9.2000, p. 34.

3

                                                     
monetary financial institutions sector7, as amended by Regulation ECB/2000/88, are also applicable

to payment transaction societies in Finland.

As  the  ECB  stated  in  its  opinion  (CON/98/56)9  on  the  proposal  for  Directive  2000/46/EC,  the

possibility  for  the  ECB  to  impose  minimum  reserve  requirements  and  statistical  reporting

requirements on all issuers of electronic money is crucial, in particular given the need to ensure that

the ECB’s monetary policy instruments and procedures are prepared in case of a substantial growth

in electronic money, which may have a material impact on monetary policy.

8. 

Regarding  the  second  means  of  attaining  the  intentions  of  the  proposal,  the  ECB  notes  that

according to the legislation in force in Finland only the so-called “deposit banks” have a right to

receive  deposits  from  the  public.  The  differences  between  a  deposit  and  other  repayable  funds

received from the public as well as between the operation of a deposit bank and the operation of

other types of credit institution are more pronounced in Finnish legislation than in the Community

banking directives. The Community directives do not provide specific rules regarding the operation

of a deposit bank.  

The proposal would retain the existing exclusive right of “deposit banks” in Finland to receive a

deposit, but the other companies, as defined in paragraph 3 above, would have a right to receive

funds from the public into “client accounts”. This new right would also include the right to issue

electronic money under certain restrictions and limitations (see paragraphs  9 and  10  below). The

term  “deposit”  would  therefore  be  redefined  in  the  Finnish  Credit  Institution  Act  to  cover  only

funds received by a deposit bank. It would therefore not cover the repayable funds received by the

other companies. In the case of insolvency a deposit can be reimbursed from the Finnish Deposit

Guarantee  Fund.  However,  the  other  companies  cannot  participate  in  the  Finnish  Deposit

Guarantee  Scheme  and  therefore  the  funds  held  on  a  client  account  would  have  to  be  seen  as

investments  carrying  risk  because  they  are  not  covered  by  this  Scheme.  In  addition,  such  other

companies are not subject to solvency or other requirements applicable to credit institutions.

9. 

According to the proposal, if the repayable funds held on such a client account, or electronic money

issued by such other companies, can only be used as payment for goods or services provided by the

company itself, this would not be considered as an activity of a credit institution and therefore the

Finnish Credit Institution Act would not apply. Nevertheless, according to the proposal the right to

receive  funds  into  such  a  client  account  would  be  subject  to  a  ceiling  of  EUR  3 000  per  client.

Correspondingly,  with  regard  to  the  issuance  of  electronic  money,  the  electronic  storage  device

would be subject to a maximum storage amount of EUR 150. Furthermore, the funds from a client

account could also be withdrawn as cash.

7 

8
9 

OJ L 356, 30.12.1998, p. 7.  Regulation ECB/1998/16 has  been  repealed by  Regulation  ECB/2001/13  of 22  November
2001 concerning the consolidated balance sheet of the monetary financial institutions sector, which will enter into force
on 1 January 2002 (OJ L 333, 17.12.2001, p 1).
OJ L 229, 9.9.2000, p. 34.
OJ C 189, 6.7.1999, p. 7.

4

                                                     
10.  The ECB notes that the proposal intends to make full use of the possibility provided for in Article 8

of  Directive  2000/46/EC  to  waive  the  application  of  the  provisions  of  this  Directive  and

Directive 2000/12/EC  in  cases  where  electronic  money,  issued  by  a  company  other  than  a  credit

institution, is accepted as a means of payment by another company belonging to the same group as

the  issuing  company.  In  the  proposal  such  a  group  is  either  a  group  as  defined  in  the  Finnish

Accounting  Act  (kirjanpitolaki  1336/1997)  or  a  group  of  undertakings  which  can  be  clearly

distinguished by their location or their close financial or business relationship. The application of

the waiver has been extended in the proposal to cover also the funds held on the above-mentioned

client  accounts.  According  to  the  proposal,  in  such  cases  the  Finnish  Financial  Supervision

Authority (FSA) would have the right to decide that a credit institution authorisation is not needed

for such a company. In these cases a ceiling of EUR 3 000 per client would also be applied to the

funds  received  into  the  client  account  and,  regarding  the  issuance  of  electronic  money,  the

electronic storage device would be subject to a maximum storage amount of EUR 150. 

The waiver in Article 8 of Directive 2000/46/EC provides a derogation from the main rules of the

Directive which are intended to ensure sound and prudent operation and in particular the financial

integrity  of  electronic  money  institutions.  In  the  interest  of  smooth  functioning  of  the  payments

systems as well as for monetary policy reasons in general, the ECB would have welcomed a more

restrictive use of the waiver.

11. 

In  addition,  the  ECB  notes  that  according  to  the  proposal  the  other  companies  which  issue

electronic money and benefit from the waiver would not be regarded as credit institutions. In this

respect  the  ECB  would  like  to  stress  that  Article  1(4)  of  Directive  2000/46/EC  provides  that

Member States shall prohibit persons or undertakings that are not credit institutions from carrying

on  the  business  of  issuing  electronic  money.  Furthermore,  the  Council  of  the  European  Union

stated in its common position concerning the proposal for Directive 2000/46/EC10 that even though

the  Member  States  have  the  option  to  waive  the  application  of  some  or  all  of  the  provisions  of

Directive 2000/46/EC and the application of Directive 2000/12/EC, this does not affect the nature

of the institutions concerned; they remain credit institutions, as defined in Article 1, point 1, first

subparagraph  of  Directive  2000/12/EC.  In  addition,  according  to  the  common  position,  the

competence of monetary authorities to impose minimum reserve requirements is not affected. The

question of which types of institution are regarded as credit institutions is important for the ECB

notably  in  the  context  of  the  European  System  of  Central  Bank’s  operations.  In  this  context  the

ECB recalls that competence with regard to credit institutions’ access to central banks’ payments

systems  as  well  as  to  the  standing  facilities  as  instruments  of  the  monetary  policy  of  the

Community lies with it.   

12.  Moreover,  the  ECB  notes  that  the  explanatory  memorandum  of  the  proposal  considers  that  the

maximum storage amount of EUR 150 is only meant to be applied to electronic money which is

10 

Common Position of the Council with a view to adopting Directive 2000/46/EC, OJ C 26, 28.1.2000, p. 9.

5

                                                     
stored on an electronic device given to the customer. From this it follows that the storage limit of

EUR 150  laid  down  in  Article  8(1)  of  Directive  2000/46/EC  would  not  be  applied  to  electronic

money  schemes  with  centralised  accounting.  Furthermore,  according  to  the  explanatory

memorandum, if the amount of electronic money given to the customer was tracked customer-by-

customer  within  an  accounting  system  of  the  issuer,  the  maximum  amount  of  electronic  money

would  be  the  customer  specific  limit  of  EUR  3 000  in  a  client  account.  The  ECB  recalls  that

Directive 2000/46/EC requires that when electronic money is issued under the waiver the storage

device should be subject to the maximum storage amount of EUR 150, irrespective of whether the

storage device has been given to the customer or whether any centralised features are in place for

tracking  the  amount  of  electronic  money  given  to  the  customer.  Therefore,  the  ECB  would

welcome an amendment to the proposal extending the application of the storage limit of EUR 150

to all electronic money issued under the waiver irrespective of whether electronic money has been

given to the customer or whether centralised tracking facilities are in place.

13.  Regarding  the  third  means  of  achieving  the  intentions  of  the  proposal,  the  ECB  notes  that  the

legislation in force in Finland does not provide rules on banking services provided via an agent or

on other outsourcing of operations, even though in practice this has been possible. According to the

proposal a credit institution or an investment service company would have the right to use an agent

in  its  business  operations.  For  example,  loan  or  other  financing  agreements  between  a  credit

institution and its client as well as agreements relating to the provision of investment services could

be carried out via an agent. The provisions of the proposal concerning the use of an agent would

also apply to other types of outsourcing that could be relevant to the risk management and internal

control of a credit institution. An example of outsourcing of operations that are significant to the

stability of a  credit institution  would  be  the  outsourcing  of  operations  concerning  the  analysis  of

information relevant to the risk management of a bank.

According  to  the  proposal,  when  passing  on  its  business  to  be  managed  by  an  agent,  the  credit

institution or investment service company shall ensure that it obtains continuously from the agent

the  information  necessary  for  the  supervision  of  its  operations,  risk  management  and  internal

control.  Furthermore,  it  shall  be  ensured  that  this  information  is  passed  on  to  the  FSA.  A  credit

institution or investment service company must notify the FSA before passing on the business to be

managed by an agent. The FSA may prohibit the use of an agent or other type of outsourcing if it

considers that this endangers the risk management and internal control of the credit institution.

14.  The proposal as a whole may have implications for the smooth functioning of  payments  systems

and the stability of the financial markets. The ECB notes that the Treaty and the Statute entrust the

Eurosystem11 and Suomen Pankki, as its component member, with, inter alia, the task of payment

systems oversight in order to promote the smooth operation of payment systems and thus contribute

11 

The Eurosystem comprises the ECB and the national central banks of the Member States that have adopted the euro as
their single currency.

6

                                                     
to  financial  stability.  The  ECB  and  national  central  banks  of  the  Eurosystem  may  also  provide

facilities, and the ECB may make regulations, to ensure efficient and sound clearing and payment

systems  within  the  Community  and  with  other  countries.  Moreover,  the  Treaty  and  the  Statute

provide  that  the  Eurosystem  shall  contribute  to  the  smooth  conduct  of  policies  pursued  by  the

competent authorities relating to the prudential supervision of credit institutions and the stability of

the  financial  system.  Therefore,  the  ECB  would  welcome  the  introduction  into  the  proposal  of

provisions concerning adequate means and procedures for informing Suomen Pankki of any issue

that may have such implications.

The ECB would furthermore like to draw attention to the fact that central banks’ traditional focus

on  systemic  risk,  together  with  their  knowledge  of  money  and  securities  markets  and  market

infrastructures and their function in the oversight of payment and settlement systems, places them

in  a  unique  position  to  identify  threats  to  the  stability  of  the  financial  system.  In  this  context,

information  sharing  with  Suomen  Pankki,  as  a  component  member  of  the  Eurosystem,  will

contribute to the monitoring and pursuit of systemic stability in the Community.

15. 

In addition the ECB observes that according to the proposal the provisions on the receipt of funds

from  the  public  are  without  prejudice  to  the  right  of  Suomen  Pankki  to  receive  funds  from  the

public.  Directive  2000/46/EC  shall  not  apply  to  the  institutions  referred  to  in  Article  2(3)  of

Directive 2000/12/EC, which in turn excludes the central banks of Member States from its scope of

application. Therefore, the  ECB  would  welcome  a  provision  stating  that rules  on the issuance  of

electronic  money  are  also  without  prejudice  to  the  right  of  Suomen  Pankki  to  issue  electronic

money.

16.  The  ECB  confirms  that  it  has  no  objection  to  the  competent  national  authorities  making  this

opinion publicly available at their discretion.

Done at Frankfurt am Main on 4 January 2002.

The President of the ECB

[signed]

Willem F. DUISENBERG

7