Opinion of the European Central Bank of 3 November 2005 at the request of the Belgian Ministry of Finance on a draft law abolishing bearer securities and a draft royal decree concerning dematerialised corporate securities (CON/2005/43)
Date: 2005-11-03
Institutions: European Central Bank
Subjects: Belgium, financial stability, issue of securities, national law, securities

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 3 November 2005 

at the request of the Belgian Ministry of Finance  

on a draft law abolishing bearer securities and a draft royal decree concerning dematerialised 

corporate securities 

(CON/2005/43) 

1. 

On 18 July 2005 the European Central Bank (ECB) received a request from the Belgian Ministry of 

Finance for an opinion on a draft law abolishing bearer securities (hereinafter the ‘draft law’) and a 

draft royal decree concerning dematerialised corporate securities (hereinafter the ‘draft decree’). 

2. 

The ECB’s competence to deliver an opinion is, for both the draft law and the draft decree, based 

on Article 105(4) of the Treaty establishing the European Community and 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 European Central Bank by national authorities regarding draft legislative provisions1, since: 

- 

the  draft  law:  (i)  abolishes  bearer  securities,  inter  alia  to  enhance  the  protection  of  the 

integrity  of  the  financial  system  against  possible  abuses;  (ii)  modernises  the  Belgian  legal 

framework regarding the holding of dematerialised corporate securities and the settlement of 

transactions  therein;  and  (iii)  changes  the  regime  applicable  to  certain  types  of  collateral 

provided to the Nationale Bank van België/Banque Nationale de Belgique (NBB).  

- 

the  draft  decree  designates  and  imposes  certain  requirements  on  the  entities  that  are 

authorised  to  hold  dematerialised  corporate  securities  accounts,  and  designates  the  entities 

that are authorised to settle transactions in such securities, with the NBB being a designated 

entity in both cases (although only for corporate bonds in the latter case). 

3. 

The  first  objective  of  the  draft  law  is  to  abolish  bearer  securities  (e.g.  corporate  and  public  debt 

securities) through a gradual phasing-out of such securities. Under current Belgian law, securities 

are  issued  in  registered,  bearer  or  dematerialised  form,  such  forms  being  mutually  exclusive.  In 

summary,  the  abolition  is  effected  through  the  prohibition  of  new  issuances  of  bearer  securities 

from 1 January 2008 onwards and through the conversion of existing bearer securities into either 

registered or dematerialised securities by 1 January 2014. The abolition applies to bearer securities 
issued by Belgian issuers. Subject to restrictions regarding their physical delivery2, certain bearer 

1  
2  

OJ L 189, 3.7.1998, p. 42. 
Article 4 of the draft law. 

 
 
 
                                                           
securities (e.g. commercial paper or corporate bonds) that are exclusively issued outside Belgium 
or are governed by foreign law do not fall within the scope of this abolition3. Moreover, since the 

draft  law  applies  only  to  bearer  securities  issued  by entities  incorporated  under  Belgian  law,  and 

since there is no limitation on the categories of securities that may be issued under Belgian law, the 

draft  law  does  not  prevent  foreign  entities  from  issuing  certain  categories  of  bearer  securities  in 

Belgium  under  Belgian  law,  subject  only  to  the  restriction  that  such  securities  are  not  physically 
deliverable in Belgium4. 

4. 

The  ECB  notes  that  the  revised  Forty  Recommendations  of  the  Financial  Action  Task  Force  on 
Money Laundering5 (hereinafter the ‘FATF Recommendations’), setting out international standards 

for  safeguarding  the  integrity  of  the  financial  system,  emphasise  the  importance  of  customer 
identification and specifically refer to the risks associated with bearer securities6. Furthermore, the 

effective  implementation  of  FATF  Recommendation  5  (‘financial  institutions  should  undertake 

customer  due  diligence  measures,  including  identifying  and  verifying  the  identity  of  their 

customers’) might also be of relevance in this context. Under Belgian law the holders of registered 

and dematerialised securities can be easily identified, which is, for instance, useful in the context of 

payments  made  in  relation  to  securities,  e.g.  dividends  or  redemptions,  and  for  ascertaining  the 

capital  ownership  of  legal  persons,  including  financial  institutions.  A  regime  under  which  only 

registered  or  dematerialised  securities  can  be  issued  might  contribute  to  the  protection  of  the 

integrity  of  the  financial  system,  and  could  therefore  be  an  important  factor  in  safeguarding  that 

system’s stability. The ECB therefore welcomes the first objective of the draft law. Furthermore, 
the ECB notes that the abolition of bearer securities could assist the compilation of statistical data7, 

since  statistical  authorities  in  Member  States  are  also  often  unable  to  identify  the  ultimate 

beneficial owners of bearer securities. In addition, the ECB underlines the usefulness, including for 

statistical  purposes,  of  systematically  allocating  a  unique  and  official  identification  number, 

preferably  the  International  Securities  Identification  Number  (ISIN,  which  respects  ISO 

Standard 6166), to securities issued. 

5. 

The second objective of the draft law is to modernise the current legal framework, laid down in the 

Belgian  Companies  Code  (Wetboek  van  Vennootschappen/Code  des  Sociétés),  regarding 

dematerialised  and,  to  a  lesser  extent,  registered  securities  (e.g.  shares,  bonds  and  subscription 

rights)  issued  by  a  naamloze  vennootschap/société  anonyme  (NV/SA)  or  a  commanditaire 

vennootschap  op  aandelen/société  en  commandite  par  actions  (Comm.VA/SCA)  incorporated 

under Belgian law. Under the draft law, dematerialised corporate securities may be held not only 

with authorised account holders, as is already currently provided for in the Companies Code, but 

3  
4  
5  
6  
7  

Last two indents of Article 2, 1º of the draft law. 
Article 4 of the draft law. 
June 2003; available on the FATF’s website (www.fatf-gafi.org). 
See in particular FATF Recommendation 33; see also the explanatory memorandum to the draft law, pp. 2 and 3. 
See Article 5 of the Statute of the European System of Central Banks and of the European Central Bank. 

2 

                                                           
also  directly  with  securities  settlement  institutions8.  Pursuant  to  the  draft  law9,  the  draft  decree 

designates  which  securities  settlement  institutions  are  authorised  to  maintain  dematerialised 

corporate  securities  (‘assurer  la  conservation  des  titres  dématérialisés’)  and  settle  transactions 

therein.  The  ECB  notes  that  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 the securities settlement institutions that are authorised to 

settle transactions in dematerialised corporate securities is already provided for in Article 23, §2 of 

the  Law  of  2  August  2002  on  the  supervision  of  the  financial  sector  and  on  financial  services. 

However, contrary to what the Companies Code currently provides, the draft law explicitly charges 

these  securities  settlement  institutions  with  the  task  of  maintaining  dematerialised  corporate 

securities  in  addition  to  the  task  of  settling  transactions  therein.  The  ECB  understands  that  the 

CBFA’s prudential supervision under Article 23, §2 also encompasses these maintenance activities 

of the securities settlement institutions.  

6. 

The  draft  law10  inserts  a  new  provision11  into  the  Companies  Code,  which  allows  authorised 

account holders of dematerialised corporate securities to act as the ultimate depository or custodian 

(i.e.  without  having  to  deposit  these  securities  with  a  securities  settlement  institution),  provided 

that: (i) these securities are not listed on a regulated market; (ii) the account owner has agreed to 

this ultimate holding; and (iii) the entire volume of a particular securities issuance is booked with 

the  issuer  in  the  name  of  one  account  holder  only.  The  ECB  understands  that  the  NBB  may 

exercise its system oversight in respect of the securities holdings falling under this new provision 

pursuant to Article 8 of the Organic Law on the Nationale Bank van België/Banque Nationale de 

Belgique,  for  instance  if  such  holdings  are,  as  a  result,  inter  alia,  of  their  nature  and  volume,  of 

systemic importance. The NBB’s ability to exercise such oversight is important in view of the role 

played by central banks in the oversight of securities settlement systems. 

7. 

Finally,  the  draft  law12  abolishes  two  Belgian  statutory  provisions  that  prohibit  and  provide 

criminal  sanctions  for:  (i)  participation  in  a  general  meeting  vote  by  registering  as  an  owner  of 

securities  which  do  not,  in  reality,  belong  to  the  participant;  and  (ii)  the  delivery  of  securities  in 

order to allow such participation. The rationale for this abolition is to resolve the legal uncertainty 

surrounding participation in a general meeting vote with registered shares and bonds that are held 
through an intermediary13. The ECB takes note of this aspect of the draft law, the aim of which is 

to enhance the efficiency and legal soundness of intermediated book-entry securities. 

8  
9  
10  
11  
12  
13  

Article 20, §1 of the draft law. 
Article 20, §2 of the draft law. 
Article 22 of the draft law. 
Article 475ter. 
Article 32 of the draft law. 
See pp. 23 and 24 of the explanatory memorandum. 

3 

                                                           
8. 

Another  objective  of  the  draft  law  is  to  amend  two  existing  legal  provisions  that  particularly 
concern  the  NBB.  First,  the  draft  law14  extends  the  application  of  the  simplified  enforcement 
procedure  laid  down  in  Belgian  law15  in  relation  to  in  rem  collateral  arrangements  and  loans  for 

financial instruments, to claims (schuldvorderingen/créances) provided to the NBB as collateral in 

the framework of the NBB’s credit operations. The ECB welcomes this new provision, which will 

become particularly relevant when the NBB has to accept large quantities of claims, including bank 

loans, as adequate collateral within the framework of the Eurosystem’s monetary policy operations. 

The  ECB  refers  in  this  context  to  the  introduction  of  a  single  list  of  eligible  collateral  for  such 
operations, which will from 1 January 2007 include bank loans16. Second, the ECB also welcomes 
another  provision  of  the  draft  law17,  which  changes  the  current  reference  to  ‘cash  or  financial 
instruments’  as  the  assets  underlying  ‘collateral’  within  the  meaning  of  the  Belgian  law18 

implementing Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 
on  settlement  finality  in  payment  and  securities  settlement  systems19  (hereinafter  the  ‘Settlement 

Finality Directive’) with a new reference to ‘all realisable assets (including cash and claims)’. This 
broader  reference  is  in  line  with  Article  2(m)  of  the  Settlement  Finality  Directive.  Unlike  the 

current  reference,  it  also  encompasses  assets  such  as  bills  of  exchange,  promissory  notes  and 

claims, so that these assets may also benefit from the protection of the Settlement Finality Directive 

and  the  Law  of  28  April  1999  if  they  are  provided  as  collateral  within  payment  and  securities 

settlement systems. 

9. 

The ECB has no comments on the draft decree. 

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

Done at Frankfurt am Main, 3 November 2005. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

14  

15  
16  

17  
18  

19  

Article 37 of the draft law, inserting a new provision into the Organic Law on the Nationale Bank van België/Banque 
Nationale de Belgique. 
Article 8 of the Law of 15 December 2004 on financial collateral and various tax provisions. 
See,  for  example, the ECB  press  release  of  22  July  2005  entitled  ‘Eurosystem  collateral  framework:  Inclusion  of  non-
marketable assets in the Single List’ (available at www.ecb.int). 
Article 39 of the draft law. 
Article  8,  §3  of  the  Law  of  28  April  1999  implementing  Directive  98/26/EC  on  settlement  finality  in  payment  and 
securities settlement systems. 
OJ L 166, 11.6.1998, p. 45. 

4