Opinion of the European Central Bank of 25 April 2006 on the Dutch draft law concerning financial sector supervision (CON/2006/20)
Date: 2006-04-25
Institutions: European Central Bank
Subjects: Netherlands, financial stability, financial supervision, national law, payment system

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 25 April 2006 

on the Dutch draft law concerning financial sector supervision 

(CON/2006/20) 

Introduction: background and legal basis 

On 6 May 2004 the European Central Bank (ECB) received a request from the Dutch Ministry of Finance 

for an opinion on the first part of the Voorstel Van Wet op het financieel toezicht (draft law on financial 

sector  supervision)  (hereinafter  the  ‘draft  law’),  which  contained  general  provisions  of  an  institutional 

nature. 

On 7 June 2004 the ECB issued an opinion on the first part of the draft law1 pointing out, inter alia, that 

‘The ECB looks forward to being able to supplement this opinion when it is consulted on the other parts.’ 

On  1  September  2004  the  ECB  received  part  two  of  the  draft  law  for  information  purposes  only.  On 

30 September 2004 the President of the ECB sent  a letter to the  Dutch Minister for Finance requesting 

that the ECB be consulted on part two of the draft law. The Dutch Minister for Finance clarified in a letter 

of 5 November 2004 that, in his opinion, it is not necessary to consult the ECB on the parts of the draft 

law  which  concern  prudential  supervision,  as  well  as  those  concerning  the  conduct  of  business  by 

financial institutions. The Minister did undertake to consult the ECB in the future on the part of the draft 

law which concerns the infrastructure of the financial markets. However, the ECB understands that this 

part is still under preparation. 

The ECB’s competence to deliver an opinion on part two of the draft law is based on Article 105(4) of the 

Treaty  establishing  the  European  Community  and  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  provisions2,  as  the  draft  law  relates  to  a  national  central 

bank  (NCB),  namely  De  Nederlandsche  Bank  (DNB),  payment  and  settlement  systems  and  rules 

applicable  to  financial  institutions  in  so  far  as  they  materially  influence  the  stability  of  financial 

institutions and markets.  

In view of the above, and furthermore considering that the ECB has several comments with respect to the 

current draft law, the ECB has decided to submit this own-initiative opinion. 

1  

2  

ECB  Opinion  CON/2004/21  of  7  June  2004  at  the  request  of  the  Ministry  of  Finance  of  the  Netherlands  on  a  draft 
Financial Sector Supervision Act. 
OJ L 189, 3.7.1998, p. 42. 

 
 
 
                                                 
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. 

1. 

Purpose of the draft law  

1.1  The purpose of the draft law is to establish a legal framework for the introduction of a functional 

model for supervision. 

1.2  The  draft  law  is  divided  into  six  parts.  Part  ‘General  Provisions’;  Part  ‘Market  Access  financial 

companies’;  Part  ‘Prudential  Supervision  on  financial  companies’;  Part  ‘Market  Conduct 

Supervision on financial companies’; Part ‘Market Conduct Supervision on financial markets’; Part 

‘Infrastructure  financial  markets’.  The  first  five  parts  of  the  draft  law  on  Financial  Sector 

Supervision  are  scheduled  to  enter  into force  from  1  January 2007.  The  sixth  part  ‘Infrastructure 

financial markets’ is currently under preparation and is intended that it should enter into force on 

1 January  2008.  The  necessary  transitional  provisions  and  amendments  of  other  laws  will  be 

covered in a separate law implementing the draft law which will be submitted to Parliament in due 

course and will enter into force on 1 January 2007. 

2. 

Comments on the proposed institutional framework 

2.1   The draft law introduces a new functional model on the basis of which DNB will be responsible for 

prudential  supervision  of  the  entire  financial  sector,  whereas  the  Authority  for  Financial  Markets 

(AFM) will be responsible for market conduct supervision and will focus on ensuring orderly and 

transparent  financial  market  processes,  clear  relationships  between  market  entities  and  that 

consumers are treated with due care. 

2.2   As stated above, the ECB has already provided its opinion on an earlier version of part one of the 

draft  law.  The  ECB  is  aware  that  the  draft  law  has  since  been  modified  on  several  occasions 

through  five  memorandums  of  amendments.  Currently  the  sixth  memorandum  of  amendments  is 

under preparation. 

2.3  

In  its  earlier  opinion,  the ECB  commented  on  several  aspects  of  the  draft  law’s  institutional  part 

and  noted  that  some  draft  provisions  did  not  distinguish  between  DNB’s  tasks  relating  to  its 

participation in the European System of Central Banks (ESCB) and its non-ESCB related tasks. As 

a  consequence,  some  of  those  provisions  were  deemed  incompatible  with  the  legal  framework 

established  by  the  Treaty  concerning  NCBs  as  members  of  the  ESCB.  These  incompatibilities 

concerned  parts  of  the  draft  law  dealing  with  the  accountability  of  DNB  and  the  AFM  to  the 

Minister  for  Finance,  the  budgetary  approval  process,  the  amendment  of  DNB’s  statutes  and  the 

exchange  of  information  between  the  Dutch  supervisors  and  the  ECB  and  other  central  banks. 

These comments have not been taken into account in the latest version of the draft law.  

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2.4  As  already  mentioned  in  the  earlier  ECB  opinion3,  the  draft  law  allows  the  Dutch  supervisory 

authorities  to  exchange  confidential  information  with  the  ECB,  a  foreign  central  bank  or  other 

foreign authorities with similar tasks, but only to the extent that this is conducive to fulfilling their 

‘monetary  task’  (Article  1:77(1)(a)  of  the  draft  law).  This  limitation  to  the  ‘monetary  task’  is 

deemed too restrictive as this would not cover the entire set of tasks the Treaty and the Statute of 

the  European  System  of  Central  Banks  and  of  the  European  Central  Bank  conferred  upon  the 

ESCB. Indeed, in addition to its basic task which consists of defining and implementing the single 

monetary policy, the ESCB’s basic tasks also include promoting the smooth operation of payment 
systems4 and contributing 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 system5. 

With regard to the latter function, it is noted that the transmission of supervisory information and 

data, primarily in aggregated form, is necessary for the effectiveness of the central bank’s financial 

stability monitoring and assessment of the conditions of the financial system as a whole as well as 

of the efficacy of its response when a financial crisis occurs. 

2.5  

In order to undertake these and other tasks, the ECB, assisted by the NCBs, collect the necessary 

statistical  information  either  from  the  competent  national  authorities  or  directly  from  economic 
agents6,  while  limiting  the  overall  reporting  burden.  Moreover,  the  ECB  anticipates  that  an 

exchange of such information can serve to further enhance the statistics needed by the ESCB. 

2.6   Therefore, the ECB emphasises the need to insert an explicit provision in the draft law stipulating 

that the exchange of information under Article 1:77(1)(a) applies to all ESCB-related tasks and not 
merely  to  the  monetary  policy  task7,  as  well  as  introducing  the  other  changes  suggested  in  ECB 

Opinion CON/2004/21. 

3. 

Payment and securities settlement systems 

3.1   As  has  already  been  noted,  the  division  of  tasks  under  the  draft  law  implies  that  the  AFM  will 

supervise market conduct of financial institutions, including clearing institutions. Market conduct 

supervision  is  defined  in  the  draft  law  as  ‘promoting  orderly  and  transparent  financial  market 

processes’ (Article 1:8).  

3.2   Payment  systems  fall  under  the  draft  law’s  definition  of  financial  institutions  and  might  also  fall 

under  the  scope  of  the  AFM’s  market  conduct  supervision.  Given  the  similarity  between  the 

concept of market conduct supervision, as defined in the draft law, and the Eurosystem’s statutory 

task  of  ‘promoting  the  smooth  operation  of  payment  systems’  (which  it  performs  through  its 

oversight function), considering Article 25.1 of the ESCB Statute on the ECB role in the area of 

3  
4  
5  
6  
7  

In paragraph 9 of ECB Opinion CON/2004/21, the ECB made a similar recommendation.  
Article 3.1, fourth indent of the Statute. 
Article 3.3 of the Statute. 
See Article 5.1 of the Statute. 
In paragraph 9 of ECB Opinion CON/2004/21, the ECB made a similar recommendation.  

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financial stability and knowing that payment systems and securities settlement systems (SSSs) are 

interlinked,  there  may  be  a  conflict  between  the  responsibilities  of  the  ESCB  and  the 

responsibilities of the AFM, as may be provided for in the future sixth Part ‘Infrastructure financial 

markets’ of the draft law.  

3.3   At the Community level, the general legal basis for the oversight of payment systems is provided 
by the Treaty and the Statute8 with more detailed policies introduced by the Eurosystem’s common 

oversight policy, as defined by the Governing Council. 

3.4  

In the interest of making responsibilities clear, the ECB recommends that the oversight of payment 

systems,  including  market  conduct,  be  explicitly  assigned  to  DNB  in  the  future  sixth  Part  of  the 

draft law, which would be consistent with the participation of DNB in the ESCB. 

3.5   As noted in previous ECB opinions, payment systems and SSSs are interlinked, particularly in view 

of the use of the ‘delivery versus payment’ mechanism, under which settlements of securities and 

transfers of funds take place simultaneously. There is therefore a strong argument in favour of the 

model used in some Member States of integrating the oversight of payment systems and SSSs, and 

for the NCB to perform this function. Settlement of both legs of such transactions should be subject 

to similar safeguards in order to avoid asymmetries, possibly with systemic implications.  

3.6  

In order to safeguard the effectiveness of monetary policy and the overall stability of the financial 

system, the NCBs’ oversight responsibilities mean that they must ensure that SSSs are sufficiently 

protected  against  systemic  disruptions.  The  framework  for  the  NCBs’  conduct  of  this  function, 

although informal, has been effective and successful. A growing number of NCBs see a benefit in 

formalising their oversight role. The majority of NCBs carry out this function on the basis of their 

statutes  without  any  explicit  detailed  legal  provisions.  The  ECB  therefore  also  recommends 

clarifying DNB’s role in the oversight of SSSs.  

4. 

Final institution 

4.1   Another important issue is that non-public banks (or opting-in banks, i.e. banks that do not longer 

fall  within  the  scope  of  the  new  definition  of  ‘bank’  in  the  draft  law,  but  have  opted  in  for  a 

voluntary  bank  permit  on  the  basis  of  Article  2:5  of  the  draft  law)  also  need  to  qualify  as  ‘final 

institutions’ within the meaning of Article 212a of the Dutch Law on bankruptcies and Article 2(b) 
of the Settlement Finality Directive9 in order to be able to participate in payment systems and SSSs.  

4.2   The  ECB  understands  that  the  definition  of  final  institution  in  Article  212a  of  the  Law  on 

bankruptcies will only be aligned with the definition of a bank in Article 1:1 of the draft law once 

the law implementing the draft law – which is now under preparation – is adopted. Furthermore, 

the ECB would like to observe that, from the point of view of a level playing field, it is considered 

8  
9  

Article 105(2) of the Treaty and Articles 3.1 and 22 of the Statute. 
Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and 
securities settlement systems (OJ L 166, 11.6.1998, p. 45). 

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desirable that opting-in banks that hold a voluntary bank permit on the basis of Article 2:5 of the 

draft law, are brought into line with banks that hold a ‘conventional’ bank permit. The ECB would 

also welcome being consulted on this issue. 

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

Done at Frankfurt am Main, 25 April 2006. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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