Opinion of the European Central Bank of 3 December 2004 at the request of Česká národní banka on a draft law amending the Act on transfers of funds, electronic means of payment and payment systems and certain other laws including the Act on Česká národní banka and the Act on banks (CON/2004/37)
Date: 2004-12-03
Institutions: European Central Bank
Subjects: Czechia, central bank, credit institution, electronic money, financial stability, national law, payment system

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 3 December 2004 

at the request of Česká národní banka 

on a draft law amending the Act on transfers of funds, electronic means of payment and payment 

systems and certain other laws including the Act on Česká národní banka and the Act on banks 

(CON/2004/37) 

1. 

On  5  October  2004,  the  European  Central  Bank  (ECB)  received  a  request  from  Česká  národní 

banka (ČNB) for an opinion on a draft law amending the Act No 124/2002 Coll., on transfers of 

funds,  electronic  means  of  payment  and  payment  systems  (the  Payment  Systems  Act),  as  last 

amended by Act No 257/2004 Coll. (hereinafter the ‘Payment Systems Act’), and, inter alia, the 

Act No 6/1993 Coll. on Česká národní banka, as amended (hereinafter the ‘ČNB Act’) and the Act 

No  21/1992  Coll.,  on  banks,  as  amended  (hereinafter  the  ‘Banking  Act’)  (hereinafter  the  ‘draft 

law’). 

2. 

The ECB’s competence to deliver an opinion is based on the second, third, fifth and sixth indents 

of  Article  2(1)  and  on  Article  2(2)  of  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  law  concerns  means  of  payment,  a  national  central  bank,  payment  and 

settlement systems, rules applicable to financial institutions insofar as they materially influence the 

stability  of  financial  institutions  and  markets  and  an  instrument  of  monetary  policy  of  a  non-

participating  Member  State,  i.e.  minimum  reserve  requirements.  In  accordance  with  the  first 

sentence of Article 17.5 of the Rules of Procedure of the ECB, the Governing Council has adopted 

this opinion. 

3. 

To  implement  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 (hereinafter the ‘E-money Directive’), the draft law provides for the 

creation of electronic money institutions (ELMIs), which will be regulated in the Czech Republic 

pursuant  to  the  Payment  Systems  Act  and,  to  the  extent  not  provided  otherwise  in  the  Payment 

Systems Act, by the Banking Act. The draft law also amends the ČNB Act, providing for ČNB to 

supervise  ELMIs  and  other  issuers  of  electronic  money  and  enabling  ČNB  to  issue  electronic 

money. Finally, the draft law also concerns several items which do not relate to ELMIs, including: 

1  
2  

OJ L 189, 3.7.1998, p. 42. 
OJ L 275, 27.10.2000, p. 39. 

 
 
 
                                                      
(i)  the  insertion  of  provisions  into  the  ČNB  Act  enabling  ČNB  to  adopt  measures  relating  to 

minimum  reserve  requirements;  and  (ii)  an  increase  in  the  penalty  interest  rate  for  breach  of 

minimum reserve requirements.  

4. 

Pursuant to Article 1(2) of Decision 98/415/EC, Member States do not have to consult the ECB on 

the  transposition  of  Community  directives  into  national  law.  The  ČNB  was  not  therefore  legally 

obliged  to  consult  the  ECB  regarding  the  draft  law  in  as  far  as  it  implements  the  E-money 

Directive.  While  the  ECB  notes  that  the  competent  authority  for  verifying  the  transposition  of 

Community  directives  into  national  law  is  the  Commission,  the  ECB  nevertheless  welcomes  the 

opportunity to deliver its opinion on the draft law insofar as its provisions fall under one or more of 

its fields of competence. 

5. 

The ECB notes that electronic money may have significant implications for monetary policy in the 

future.  For  reasons  of  monetary  policy effectiveness  and  taking  into  account  the  need  for  a  level 

playing field, it is important to ensure that price stability, the unit-of-account function of money, 

the efficient functioning of payment systems and confidence in payment instruments are given full 

consideration in the development of this important means of payment.  

6. 

The ECB welcomes the provisions of the draft law pursuant to which ČNB will supervise ELMIs 

and other issuers of electronic money. This is consistent with ČNB’s overall responsibility for the 

supervision  of  credit  institutions.  As  noted  in  paragraph  14  of  ECB  Opinion  CON/2002/1  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,  draft  national  legislation  implementing  the  E-money 

Directive ‘may have implications for the smooth functioning of payment systems and the stability 

of  financial  markets….  [C]entral  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.’ 

7. 

The draft law defines ELMIs. In particular, the Payment Systems Act provides that certain Articles 

of the Banking Act will apply to ELMIs, as appropriate, unless otherwise provided in the Payment 

Systems Act. This means that ELMIs will not require a banking licence to issue electronic money 

in the Czech Republic, but that they will be regulated, as appropriate, unless otherwise provided in 
the  Payment  Systems  Act,  by  certain  Articles  of  the  Banking  Act3.  However,  it  is  not 

unambiguously clear from the draft law that ELMIs will be considered ‘credit institutions’ in the 

Czech Republic, as defined in Article 1(1) of Directive 2000/12/EC (hereinafter the ‘Consolidated 

Banking Directive’), which has been duly implemented into Czech law in the Banking Act.  

3 

The term ‘bank’ here refers to the legal term laid down in Article 1(1) of the Banking Act, which transposes the concept 
of ‘credit institution’ in implementation of Article 1(1) of 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  institutions  (OJ  L  126, 
26.5.2000), as last amended by Directive 2004/39/EC (OJ L 145, 30.4.2004, p. 1). 

2 

                                                      
8. 

As  noted  in  paragraph  11  of  ECB  Opinion  CON/2002/1,  ‘the  ECB  would  like  to  stress  that 

Article 1(4)  of  [the  E-money  Directive]  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 [the E-money Directive]4 that even though the Member States have the option to 

waive  the  application  of  some  or  all  of  the  provisions  of  [the  E-money  Directive]  and  the 

application  of  [the  Consolidated  Banking  Directive],  this  does  not  affect  the  nature  of  the 

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

subparagraph  of  [the  Consolidated  Banking  Directive].  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 Banks’ operations.’ 

9.  While  the  ECB  appreciates  that  it  is  possible  for  the  Czech  legislator  to  ensure  that  all  relevant 

provisions  of  Community law  applicable  to  banks  are  and  will  remain  applicable  to  ELMIs,  it  is 

nonetheless of the opinion that Community law would be consistently applied if Czech law did not 

merely apply certain Articles of the Banking Act to ELMIs, as appropriate, but actually included 

them within the definition of ‘credit institutions’, as defined by the Consolidated Banking Directive 

and duly implemented into Czech law. 

10.  A related issue arises in respect of how the draft law implements the waiver provision laid down in 

Article 8 of the E-money Directive. Article 18a(g) of the Payment Systems Act authorises ‘other 

entities’ [to issue electronic money] ‘on the basis of a permit from Česká národní banka’. Under the 

draft law, the entities affected are clearly intended to be a separate category of entity from either 

ELMIs or banks (Article 18a(d) and Article 18a(a) of the Payment Systems Act respectively). As 

noted in paragraph 7 of ECB Opinion CON/2002/1, ‘according to Article 19.1 of the Statute of the 

European System of Central Banks and of the European Central Bank, the ECB may require credit 

institutions established in the Member States to hold minimum reserves on accounts with the ECB 

and  the  national  central  banks  in  pursuance  of  monetary  policy  objectives.  [The  Consolidated 

Banking Directive] defines electronic money institutions as credit institutions.’ The ECB notes that 

these ‘other entities’ authorised to issue electronic money are potentially subject to ECB minimum 

reserve requirements because Article 2(1) of Regulation ECB/2003/9 of 12 September 2003 on the 
application  of  minimum  reserves5  provides  that  credit  institutions  as  defined  in  the  Consolidated 

Banking  Directive  shall  be  subject  to  reserve  requirements,  without  referring  to  the  relevant 

definitions  under  national  laws.  The  ECB  is  not  generally  in  favour  of  provisions  which  risk 

creating a new type of entity in application of Article 8 of the E-money Directive. The ECB is of 

4  

5  

Common Position (EC) No 8/2000 adopted by the Council on 29 November 1999 with a view to adopting a Directive of 
the  European  Parliament  and  of  the  Council  on  the  taking-up, pursuit  of  and  prudential  supervision  of  the  business  of 
electronic money institutions (OJ C 26, 28.1.2000, p. 1). 
OJ L 250, 2.10.2003. 

3 

                                                      
the opinion that these other entities should also fall within the definition of ‘credit institutions’ as 

provided in the Consolidated Banking Directive and duly implemented into Czech law.  

11.  The  ECB  notes  that  under  the  draft  law,  ČNB  is  one  of  the  entities  given  the  right  to  issue 

electronic  money  pursuant  to  Article 18a  of  the  Payment  Systems  Act.  At  the  same  time 

Article 18b(4) of the Payment Systems Act provides that ČNB should be the supervisory authority 

for  the  activities  of  electronic  money  institutions.  If  ČNB  performed  the  roles  of  both  issuer  of 

electronic  money  and  supervisor  of  ELMIs,  it  would  combine  the  functions  of  service  provider, 

supervisory  authority  and  overseer.  This  would  be  challenging  from  the  point  of  view  of  policy, 

since ČNB would simultaneously regulate and perhaps compete with private issuers of electronic 

money.  To  address  this  situation,  ČNB  would  need  to  formulate  a  clear  policy  as  to  how  these 

activities will be conducted as well as set up a proper organisational framework to deal with it. The 

ECB would suggest that prior to fulfilling such manifold roles, ČNB should adopt and publish its 

policies. 

12.  The draft law specifically excludes ELMIs from being participants in payment systems designated 

under  Directive  98/26/EC  of  the  European  Parliament  and  of  the  Council  of  19  May  1998  on 
settlement  finality  in  payment  and  securities  settlement  systems6  (hereinafter  the  ‘Settlement 

Finality  Directive’  or  ‘SFD’),  although  not  excluding  ELMIs  from  participating  in  payment 

systems as such, since a wider prohibition on ELMIs participating in any payment system would be 

disproportionate  and  could  upset  the  level  playing  field  between  ELMIs  and  banks,  for  example. 

The ECB considers that the question of whether ELMIs can be excluded from participation in SFD-

designated  systems  may  be  due  to  different  opinions  regarding  whether  the  SFD  defines 

‘participants’ to include, together with several other categories, credit institutions, as defined in the 

Consolidated  Banking  Directive,  and  therefore  including  ELMIs.  At  least  one  Member  State  has 

already implemented the E-money Directive in such a manner that ELMIs are not credit institutions 

for these purposes. As a result it is unclear whether ELMIs may participate in a system designated 

under the SFD or not. The potential systemic risk which would be created in these circumstances is 

the  reason  given  for  the  exclusion  of  ELMIs  from  participating  in  such  systems.  The  ECB 

considers  that  this  situation  is  regrettable,  and  that  a  reference  to  credit  institutions  in  national 

legislation should be understood as a reference to credit institutions as defined in the Consolidated 

Banking Directive, and therefore as including ELMIs.  

13.  The ECB takes note of the proposed insertion of Article 26a into the ČNB Act, which enables ČNB 

to  issue  implementing  measures  laying  down  the  rules  for  the  amount  of  required  minimum 

reserves,  their  remuneration  and  the  amount  of  interest  payable  in  case  of  failure  to  maintain 

required  minimum  reserves.  The  ECB  welcomes  these  provisions  as  contributing  to  a  more 

effective minimum reserve system for the purposes of implementing monetary policy in the Czech 

Republic. 

6  

OJ L 166, 11.6.1998, p. 45. 

4 

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

opinion publicly available at their discretion. This opinion will be published on the ECB’s website 

six months after the date of its adoption. 

Done at Frankfurt am Main, 3 December 2004. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

5