Opinion of the European Central Bank of 18 March 2002 at the request of the Danish Financial Supervisory Authority on a draft act amending the Financial Services Act and other financial Acts (CON/2002/10)
Date: 2002-03-18
Institutions: European Central Bank
Subjects: Denmark, financial stability, financial supervision, national law, securities

EN

OPINION OF THE EUROPEAN CENTRAL BANK

of 18 March 2002

at the request of the Danish Financial Supervisory Authority on a draft act

amending the Financial Services Act and other financial Acts

(CON/2002/10)

1. 

On  22  February  2002  the  European  Central  Bank  (ECB)  received  a  request  via  Danmarks

Nationalbank from the Finanstilsynet (Danish Financial Supervisory Authority) on behalf of the

Økonomi- og Erhvervsministeriet (Ministry of Economics and Business Affairs) for an opinion

on  a  draft  act  amending  the  Lov  om  finansiel  virksomhed  (Financial  Services  Act)  and  other

financial Acts (hereinafter referred to as 'the draft act').

2. 

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

establishing  the  European  Community  and  the  third  and  sixth  indents  concerning  national

central banks and the stability of financial institutions and markets of Article 2(1) of the Council

Decision  98/415/EC  of  29 June  1998  on  the  consultation  of  the  European  Central  Bank  by

national  authorities  regarding  draft  legislative  provisions1,  as  the  draft  act,  amongst  others,

contains provisions concerning the supervision of company pension funds, demarcation of the

powers to issue rules on best practices for securities traders, and the legal position of creditors

of  bonds  and  currency  swaps  issued  and  entered  into  by  Danish  Ship  Finance  (Danmarks

Skibskreditfond) in case of the latter's insolvency. Some of the provisions of the draft act will

also apply to Danmarks Nationalbank. In accordance with the first sentence of Article 17.5 of

the Rules of Procedure of the European Central Bank, the Governing Council of the ECB has

adopted this opinion.

3. 

In December 2000 the ECB was consulted on the draft Lov om finansiel virksomhed (Financial

Services  Act)  (CON/00/32).  The  intention  of  the  draft  was  to  ensure  simplification  and

increased consistency of the financial services legislation. On that occasion the ECB welcomed

the intention to further review at a later stage the financial services legislation which is now one

of  the  intentions  of  the  draft  act.  Likewise,  the  ECB  also  on  this  occasion  welcomes  the

1 

OJ L 189, 3.7.1998, p. 42.

                                                     
intention to continue the legal reform work with further harmonisation and codification, as well

as restructuring of legislation. 

4. 

The draft act ensures that the rules on best practices for securities traders are further harmonised

and intends to remove overlapping of the powers of the relevant Danish authorities in this field.

As  regards the  calculation  of solvency  ratios,  the  draft  act amends  the definition  of  capital  in

line  with  international  agreements  reached  within  the  Basel  Committee.  The  draft  act  also

ensures that bonds issued by Danish Ship Finance obtain the same preferential position in case

of insolvency as that currently enjoyed by bonds issued by mortgage credit institutions. Finally,

the draft act contains several amendments to other financial laws of minor importance for the

ECB.  To  the  extent  that  the  draft  act  implements  directives  such  as  Council  Directive

93/22/EEC of 10 May 1993 on investment services in the securities field2, as last amended by

Directive 2000/64/EC of the European Parliament and the Council3, and 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  institutions4,  as  last  amended  by  Directive  2000/28/EC5,  the

Danish  authorities  are  not  obliged  to  consult  the  ECB,  in  accordance  with  Article  1(2)  of

Council Decision 98/415/EC.

5. 

The draft act ensures in Section 1(9)-(10) demarcation of the competence to issue rules on best

practices  for  securities  traders.  Det  Finansielle  Virksomhedsråd  (Financial  Services  Council),

which  is  empowered  to  take  decisions  regarding  supervisory  matters  of  general  public

importance  and  provides  advice  to  the  Danish  Financial  Supervisory  Authority  on  issuing

regulations, will have the exclusive power to issue rules on best practices applying in general to

financial services equivalent to the power to issue rules on best practices specifically in the field

of securities trading held by the Fondsrådet (Securities Council), which operates to ensure the

smooth  functioning  of  the  Danish  securities  market  and  compliance  with  the  lov  om

værdipapirhandel  (Securities  Trading  Act).  As  a  consequence,  the  Forbrugerombudsmanden

(Consumer Ombudsman) will no longer be empowered to issue such rules, but will be able to

attend  without  the  right  to  vote  the  meetings  of  the  Financial  Services  Council  when  cases

concerning  best  practices  are  discussed.  The  ECB  welcomes  these  efforts  for  a  clear

demarcation of authority and thus greater legal certainty.

6. 

In  Opinion  CON/00/32  the  ECB  mentioned  that  in  adopting  the  rules  on  best  practices,

particular attention might be paid to their convergence with respective rules of other countries

so  as  to  ensure  high  standards  in  business  practices.  In  addition,  close  cooperation  with  the

respective rule-making authorities of other Member States was encouraged by the ECB in order

to achieve a high degree of convergence of practices throughout the Community. In this respect

2
3
4
5

OJ L 141, 11.6.1993, p. 27.
OJ L 290, 17.11.2000, p. 27.
OJ L 126, 26.5.2000, p. 1.
OJ L 275, 27.10.2000, p. 37.

2

                                                     
it is noted that the provisions on best practice in the draft act are based on the principles on best

practices issued by the International Organisation of Securities Commissions (IOSCO). 

7. 

It  is  noted  that  although  Danmarks  Nationalbank  is  not  a  securities  trader,  the  provisions

governing  such  traders  apply  to  it,  however,  with  the  exemptions  required  due  to  the  special

nature of the central bank. 

8. 

The  ECB  welcomes  the  amendments  to  the  definition  of  own  funds  when  calculating  the

solvency ratio, which are intended, first, to simplify the regulations and, secondly, to increase

access by institutions to funding sources. On the former, the rules on capital adequacy will be

simplified  by  the  repeal  of  the  existing  but  unused  provision  according  to  which  subordinate

capital with a short maturity is part of the solvency  statement.  On  the  latter,  the  possibility  is

introduced  of  raising  capital  in  a  foreign  currency,  which  receives  supervisory  recognition  in

calculating  the  solvency  ratio.  Improved  market  access  will  tend  to  improve  the  solvency  of

banks and thus will, with due regard to the quality of the funds, contribute to the stability of the

financial  system.  The  ECB  notes,  however,  that  the  general  remarks  in  the  draft  act  refer  to

guidance from the Basel Committee. Given the focus and scope of application of the Financial

Services Act, a reference to the relevant EU directive appears desirable. 

9. 

It is noted that Section 4(12) of the draft act repeals the lov om tilsyn med firmapensionskasser

(Act on Supervision of Company Pension Funds) but that equivalent provisions are inserted in

the  Financial  Services  Act  and  lov  om  forsikringsvirksomhed  (Insurance  Services  Act)  as  a

further step towards harmonisation of regulation of the financial markets. 

10.  Section 16(1)-(2) of the draft act is intended to ensure that bonds issued by Danish Ship Finance

can continue to be considered as being financially sound. The objective of Danish Ship Finance

is to finance ships. Most loans are granted in US dollars and funded through bond issues. These

bonds  will  obtain  the  same  preferential  treatment  in  case  of  insolvency  as  bonds  issued  by

mortgage  credit  institutions,  which  is  better  than  would  be  the  case  according  to  the  general

applicable  provision  under  the  konkursloven  (Insolvency  Act).  The  ECB  has  no  objections  to

the proposed amendment. It is noted that such bonds, denominated in Danish kroner, are eligible

as  collateral  for  ECB  intraday  credit  to  Danmarks  Nationalbank  and  also  to  three  national

central banks of the Eurosystem. 

3

11.  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 18 March 2002.

The President of the ECB

[signed]

Willem F. DUISENBERG

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