Opinion of the European Central Bank of 15 April 2005 at the request of the Belgian Ministry of Finance on a draft royal decree concerning the status of securities settlement and assimilated institutions (CON/2005/9)
Date: 2005-04-15
Institutions: European Central Bank
Subjects: Belgium, financial stability, financial supervision, national law, payment system, securities

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 15 April 2005 

at the request of the Belgian Ministry of Finance 

on a draft royal decree concerning the status of securities settlement and assimilated institutions  

(CON/2005/9) 

Introduction 

1. 

On  10  February  2005  the  European  Central  Bank  (ECB)  received  a  request  from  the  Belgian 

Ministry  of  Finance  for  an  opinion  on  a  draft  royal  decree  concerning  the  status  of  securities 

settlement and assimilated institutions (hereinafter the ‘draft decree’). 

2. 

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

the  European  Community  and  on  the  fifth  and  sixth  indents  of  Article  2(1)  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, since the draft decree concerns settlement systems and rules 

applicable  to  financial  institutions  in  so  far  as  they  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, the Governing Council has adopted this opinion. 

3. 

The draft decree will implement Article 23 of the Law of 2 August 2002 on the supervision of the 
financial sector and financial services2. It regulates and organises the supervision by the Commissie 

voor  het  Bank,  Financie-  en  Assurantiewezen/Commission  bancaire,  financière  et  des  assurances 

(CBFA) (the Belgian Banking, Finance and Insurance Commission) of: 

(i)  

certain securities settlement institutions that are not credit institutions established in Belgium 

(Article 1(4); hereinafter the ‘securities settlement institutions’); and  

(ii)   certain  institutions  assimilated  with  securities  settlement  institutions  (Article  1(5)),  i.e. 

institutions  established  in  Belgium  the  business  of  which  consists  completely  or  partially  in 

the  operational  management  of  settlement  institutions’  services,  including  where  these 

settlement  institutions  are  credit  institutions  established  in  Belgium  (hereinafter  the 

‘assimilated institutions’).  

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2 

OJ L 189, 3.7.1998, p. 42. 
See in relation to this Law: ECB Opinion CON/2002/13 of 24 April 2002 at the request of the Belgian Ministry of Finance 
on a draft proposal for a law on prudential supervision of the financial sector and financial services. 

 
 
 
                                                           
4. 

The  institutions  covered  by  the  draft  decree  will  be  subject  to  licensing  and  business  operation 

requirements which are largely inspired by the requirements that either currently already apply, or 

will apply in the near future, to credit institutions and investment undertakings. The draft decree is 

without  prejudice  to  oversight  by  the  Nationale  Bank  van  België/Banque  Nationale  de  Belgique 

(NBB) over securities settlement systems. 

General considerations 

5. 

There  is  currently  no  Community  legislation  that  specifically  regulates  or  supervises  institutions 

which  only  provide  settlement  services  in  the  Community.  The  ECB  refers  in  this  context  to  the 

Commission’s Communication entitled ‘Clearing and Settlement in the European Union – The way 
forward’3,  in  which  the  Commission  notes  that,  in  order  to  create  ‘EU  Securities  Clearing  and 

Settlement  Systems  that  are  efficient  and  safe  and  which  ensure  a  level  playing  field  among  the 

different providers of Clearing and Settlement services’, the adoption of ‘a common regulatory and 

supervisory framework that ensures financial stability and investor protection, leading to the mutual 
recognition  of  systems’  needs  to  be  pursued4.  The  Commission  further  notes  that  ‘a  common 

regulatory/supervisory  framework  will  also  create  a  level  playing  field  by  eliminating  the  existing 

disparities as regards access rights and capital requirements between clearing and settlement service 
providers that are licensed as banks and those that are not’5. While the ECB strongly supports the 
Commission’s  intention  to  propose  a  Directive  on  Clearing  and  Settlement6,  it  welcomes  the 

adoption  in  the  meanwhile  of  national  legislation  on  the  regulation  and  supervision  of  securities 

settlement institutions that are not credit institutions. Of course, on the entry into force of any future 

Community  legislation  in  this  area,  national  legislation  such  as  the  draft  decree  will  need  to  be 

aligned  with  Community  legislation.  The  ECB  also  welcomes  the  purpose  of  the  draft  decree  to 

align, to the extent possible, the rules applicable to securities settlement and assimilated institutions 

with the rules applicable to credit institutions. This will facilitate the tasks of supervisors, amongst 

others, as well as limit distortions in the regulatory framework applicable to all these institutions. 

6. 

The  ECB  also  draws  attention  to  the  ‘Standards  for  Securities  Clearing  and  Settlement  in  the 

European  Union’  that  it  published  jointly  with  the  Committee  of  European  Securities  Regulators 
(CESR)7  (hereinafter  the  ‘ESCB-CESR  Standards’). Standard  18 states,  amongst  other  things,  that 

‘entities  providing  securities  clearing  and  settlement  services  should  be  subject  to,  as  a  minimum, 

transparent, consistent and effective regulation and supervision’. Although ‘regulatory, supervisory 

and  oversight  activities  should  have  a  sound  basis,  which  may  or  may  not  be  based  on  statute, 
depending  on  a  country’s  legal  and  institutional  framework’8,  the  ECB  nonetheless  considers 

legislation to be beneficial for reasons of legal certainty and clarity. The ECB therefore welcomes 

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5  
6  
7  
8  

COM(2004) 312 final (hereinafter the ‘2004 Communication’). 
See the 2004 Communication, p. 8. 
See the 2004 Communication, p. 10.  
See the 2004 Communication, p. 11. 
Available on www.ecb.int and www.cesr-eu.org. 
See paragraph 191 of the September 2004 ESCB-CESR report, available on www.ecb.int and www.cesr-eu.org. 

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the draft decree. Of course, once the ESCB-CESR Standards apply, the decree might need to take 

these standards into account.  

7. 

As regards the draft decree’s objective to also regulate and organise the supervision of assimilated 

institutions,  the  ECB  in  Opinion  CON/2004/27  welcomed  the  fact  that  Belgian  law  ‘extends  the 

supervisory regime of the CBFA for settlement institutions … to institutions established in Belgium 

carrying out … operational management services.’ The ECB took particular note that ‘the intention 

is to designate institutions that provide substantial and critical operational and intellectual services to 
settlement  institutions’.  Although  the  ECB  understands  that  the  rules  regarding  assimilated 

institutions are only meant to concern institutions that provide settlement services of substantial and 

critical importance, it could be helpful to explicitly specify this in the draft decree itself. This will 

prevent  legal  uncertainty  as  to  whether  the  draft  decree  applies  to  any  institution  established  in 

Belgium  that  provides  settlement  services,  even  if  these  services  are  not  of  substantial  or  critical 

importance. 

Specific considerations 

8. 

The  draft  decree  defines  securities  settlement  institutions  by  reference  to  the  institutions  in 

Article 23(1) of the Law of 2 August 2002 (except credit institutions established in Belgium). As a 

result  of  this  cross-reference,  the  institutions  referred  to  in  Article  23(1)(5º)  of  the  Law  of 

2 August 2002,  which  are  by  definition  not  established  in  Belgium,  could  arguably  also  be 

considered as being subject to the business operation requirements laid down in Chapter III of the 

draft decree. However, in view of the nature of those business operation requirements which seem to 

be specifically designed for companies incorporated under Belgian law (see e.g. Articles 6 and 11), 

the  ECB  understands  that  this  would  conflict  with  the  draft  decree’s  purpose  to  only  submit 

securities  settlement  institutions  that  are  established  in  Belgium  to  these  requirements.  It  would 

therefore be helpful if Chapter III could specify that the securities settlement institutions covered by 

it are those incorporated under Belgian law, as is expressly provided for in the case of assimilated 

institutions.  

9. 

The ECB welcomes the obligation imposed on the securities settlement and assimilated institutions 

to also comply at all times with financial ratios that the CBFA may establish by regulation so that 

their  solvency  and  liquidity  may  be  supervised  (Article  13).  Furthermore,  the  ECB  notes  with 

interest that the draft decree incorporates, by referring to the Law of 22 March 1993 on the status 

and supervision of credit institutions, several key requirements for all these institutions that already 

apply to credit institutions, including requirements for the CBFA to (i) be notified of any intended 

acquisition or disposal of a holding in such institutions that would directly or indirectly provide at 

least  5%  (or  multiples  thereof)  of  the  capital  or  voting  power;  and  (ii)  approve  mergers  and 

acquisitions  involving  these  institutions;  and  (iii)  be  notified  of  the  establishment  of  foreign 

branches  by  such  institutions,  with  the  possibility  for  the  CBFA  to  oppose  the  intended  activities; 

and (iv) be notified of the institutions’ annual accounts, including on a consolidated basis.  

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10.  The ECB particularly welcomes Article 19, which addresses the eventuality that non-compliance by 

participants in a securities settlement institution with its rules would have a negative impact on this 

institution’s condition, in which case this institution must promptly inform the CBFA thereof, which 

must, in turn, inform the NBB. The ECB is aware of the fact that the draft decree only concerns the 

CBFA’s prudential supervision of securities settlement institutions and that the NBB is responsible 

for  oversight  of  the  securities  settlement  systems  managed  by  these  institutions.  The  ECB 

nonetheless  notes  that  the  Eurosystem  and  the  NBB,  as  an  integral  part  of  the  Eurosystem,  are 

entrusted with the tasks of, amongst others, promoting the smooth operation of payment systems and 

contributing to the stability of the financial system. Article 19 could therefore stress that the CBFA 

should  exchange  with  the  NBB  in  a  timely  fashion  all  relevant  information  that  the  CBFA  has 

received from the institution concerned. This would, for instance, avoid information deficiencies that 

might  occur  in  case  of  uncertainty  as  to  whether  certain  information  concerns  the  institution’s 

condition, thus falling under the CBFA’s supervision, or the system’s condition, thus falling under 

the NBB’s oversight. Of course, this timely information exchange between the CBFA and the NBB 

could be detailed in the arrangements in Article 23(4) of the Law of 2 August 2002.  

11.  The  CBFA’s  prudential  supervision  of  securities  settlement  and  assimilated  institutions  includes 

these institutions’ foreign branches and services (Article 21). Pursuant to Article 48 of the Law of 

22 March 1993, which by reference applies to this supervision (second paragraph of Article 21), the 

CBFA  may,  amongst  other  things:  (i)  carry  out  inspections  at  a  branch  established  in  another 

Member  State  after  prior  notification  of  the  authorities  supervising  the  credit  institutions  in  that 

Member State; and (ii) request these foreign authorities to carry out the inspections. The ECB raises 

the  question  as  to  how  these  provisions  would  apply  in  the  case  of  institutions  that  might  not  be 

credit institutions, given that not all Member States provide for the supervision of such institutions. 

For  the  same  reason,  the draft  decree  could  clarify how  Article  49  of  the  Law  of  22  March  1993, 

which refers in the context of the supervision on a consolidated basis of credit institutions to other 

Member  States’  supervisory  authorities,  would  apply  by  virtue  of  Article  23  to  the  CBFA’s 

supervision on a consolidated basis of groups of securities settlement and assimilated institutions. 

12.  The  ECB  notes  with  interest  that,  as  a  consequence  of  the  application  to  securities  settlement  and 

assimilated institutions of Article 55 of the Law of 22 March 1993 regarding the external audit of 

credit institutions (Article 24 of the draft decree), the CBFA may, at the request of the ECB or the 

NBB,  instruct  the  securities  settlement  and  assimilated  institutions’  auditors  to  confirm  that  the 

information these institutions are obliged to provide to the ECB or the NBB is complete, accurate 

and complies with existing rules. 

13.  By  virtue  of  Article  28  of  the  draft  decree,  Chapters  II  to  V  are  rendered  entirely  applicable  to 

assimilated  institutions  operating  in  Belgium  as  branches  of  foreign  institutions  that  are  not  credit 

institutions.  These  branches  cannot  benefit  from  the  ‘EU-passport’  rules  under  the  Community 

legislation applicable to credit institutions and investment undertakings. As regards the requirement 

that  it  must  be  possible  for  the  CBFA  and  the  institution’s  home  country  authorities  to  exchange 

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information, the wording of Article 28(2º) could clarify that it is not the institution concerned that 

must satisfy this requirement, but rather the legal framework of the jurisdiction where this institution 

is incorporated. As regards branches of foreign institutions, the ECB refers to the September 2004 

ESCB-CESR  Report,  which  states  that  ‘issues  raised  by  the  operation  of  cross-border  systems 

should  be  addressed  in  a  way  that  delivers  regulation/supervision/oversight  consistent  with  each 

relevant authority’s responsibilities and avoids gaps and duplication, and hence unnecessary costs’ 

and  which  recommends  cooperation  between  the  relevant  authorities  ‘in  order  to  minimise  the 
regulatory  burden’9.  The  ECB  refers  in  this  context  also  to  the  future  Community  legislation  on 

settlement and custody, which might contain rules on the regulation and supervision of branches of 

foreign institutions.  

14.  Finally, the CBFA is required to consult the NBB before authorising exceptions to the requirement 

that  securities  settlement  and  assimilated  institutions  have  sufficient  liquidity  at  their  disposal  to 

continue their activities (Article 29). There is no comparable requirement for the CBFA to consult 

the NBB before authorising exceptions to the requirement that securities settlement and assimilated 

institutions  communicate  to  the  CBFA  their  financial  positions  on  a  monthly  basis,  their  detailed 

statement  of  services  (including  financial  data)  on  a  quarterly  basis,  as  well  as  the  relevant 

management  and  audit  reports  (Article  30),  although  this  information  could  also  be  relevant  for 

monitoring these institutions’ observance of Article 29. If, notwithstanding the foregoing, the draft 

decree maintains the absence of prior consultation of the NBB under Article 30, it could be helpful 

for  the  draft  report  to  the  King  to  clarify  the  reason  for  this  divergence  with  respect  to  the 

consultation of the NBB under Article 29.  

15.  This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 15 April 2005. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

9  

See paragraphs 192 and 193 of the September 2004 ESCB-CESR report. 

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