Opinion of the European Central Bank of 22 May 2006 at the request of the Slovenian Ministry of Justice on a draft law amending the Law on financial collateral (CON/2006/24)
Date: 2006-05-22
Institutions: European Central Bank
Subjects: Slovenia, financial legislation, financial stability, guarantee, national law, payment system

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 22 May 2006 

at the request of the Slovenian Ministry of Justice 

on a draft law amending the Law on financial collateral 

(CON/2006/24) 

Introduction and legal basis 

On 13 April 2006 the European Central Bank (ECB) received a request from the Slovenian Ministry of 

Justice  for  an  opinion  on  a  draft  law  amending  the  Law  on  financial  collateral  (hereinafter  the  ‘draft 

law’). 

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)  and  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  relates  to  payment  and  settlement 

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

financial  institutions  and  markets,  and  instruments  of  monetary  policy.  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 

The main objectives of the draft law are: (i) to introduce into the Law on financial collateral2 (hereinafter 

the ‘Law’) the concept of a ‘maximum pledge’ with respect to the provision of financial collateral; and 

(ii) to implement Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on 
financial collateral arrangements (hereinafter the ‘Collateral Directive’)3. 

2.  General observations 

2.1 

In general terms, the ECB welcomes the proposed amendments as the draft law addresses matters 

that  are  directly  relevant  to  the  Eurosystem’s  core  fields  of  competence  and  will  have  an  impact 

1  
2  

3  

OJ L 189, 3.7.1998, p. 42.  
Zakon o finančnem zavarovanju, adopted on 22 April 2004, published in the Official Gazette of the Republic of Slovenia 
No 47/04. 
OJ L 168, 27.6.2002, p. 43. 

 
 
 
 
 
                                                      
both on the efficient and safe use of financial collateral arrangements in EU financial markets and 

the  Eurosystem’s  credit  operations.  As  the  Law  applies,  inter  alia,  to  financial  collateral 

arrangements  concluded  by  national  central  banks  of  Member  States  and  the  ECB  with  their 

counterparties,  the  new  provisions  should  give  additional  support  to  the  conduct  of  credit 

operations with Banka Slovenije’s domestic counterparties, as well as operations in the context of 

the  correspondent  central  banking  model.  In  this  respect,  the  introduction  of  the  concept  of  a 

‘maximum  pledge’  (as  defined  in  Article  1  of  the  draft  law)  will  allow  collateral  providers  to 

provide collateral up to a defined amount or, in case the maximum amount is not stipulated, up to 

the  full  value  of  the  pledged  financial  instrument  in  relation  to  one  or  several  claims  in  a  legal 

relationship without the need to do so separately for each individual claim. 

2.2  Articles  2,  3  and  4  of  the  draft  law  would  further  clarify  the  implementation  of  the  Collateral 

Directive in Slovenia. In this respect, the ECB notes the following proposed changes: (a) the draft 

law specifies for the avoidance of doubt that, among other rights arising under a financial collateral 

contract, the right to enforce collateral also remains valid even after an insolvency procedure has 

been opened against a collateral provider or collateral taker: such a procedure should therefore not 

represent an obstacle to the swift and unimpeded realisation of collateral (in line with Article 8 of 

the Collateral Directive); (b) the validity of a close-out netting agreement is expressly extended to 

cases of judicial and other attachment to fully meet the requirement laid down in Article 7 of the 

Collateral Directive; and (c) the law applicable to financial collateral provided by way of entry of a 

transfer as collateral or pledge in the register of financial instruments is stated to be the law of the 

country of the register (see Article 9 of the Collateral Directive). 

3.  Maximum pledge 

3.1.  The  new  concept  of  ‘maximum  pledge’  should  facilitate  the  provision  of  collateral,  as  it  enables 

collateral  providers  to  provide  collateral  up  to  a  defined  amount  for  several  claims  in  a  legal 

relationship  without  having  to  do  so  separately  for  each  individual  claim.  It  is  noted  that  a 

‘maximum  pledge’  may  only  be  established  in  relation  to  financial  instruments  entered  in  the 

official register, thereby ensuring transparency of established collateral rights. In this context, the 

ECB  refers  to  Article  3  of  the  Collateral  Directive  and  would  like  to  reiterate  its  position  that 

‘simple and reliable methods of collateralisation, which include efficient enforcement methods, are 

of fundamental interest to the Eurosystem, as they help, inter alia, to ensure the smooth functioning 
of the Eurosystem’s single monetary policy’4.  

3.2.  As  regards  the  presumption  contained  in  the  last  sentence  of  Article  7.a(1)  of  the  draft  law,  the 

ECB suggests that the wording ‘it shall be deemed that the financial instrument fully guarantees the 

4  

See  paragraph  12  of  ECB  Opinion  CON/2005/12  of  25  May  2005  at  the  request  of  the  Ministry  of  Finance  of 
Luxembourg on a draft law on financial collateral arrangements; available on the ECB’s website at www.ecb.int.  

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secured  claims’  should  be  made  clearer  by  providing  that,  in  such  case,  it  is  deemed  that  the 

financial instrument is fully available to guarantee the secured claims. 

4. 

Implementation of the Collateral Directive  

4.1.  The  ECB  notes  that  the  definition  of  ‘financial  instruments’  in  Article  3  of  the  Law  reflects  the 
wording used in the Collateral Directive. The ECB has consistently maintained5 that the scope of 

national  implementation  of  the  Collateral  Directive  should  cover  all  types  of  assets  eligible  for 

Eurosystem credit operations. This is particularly relevant with regard to credit claims in the form 

of bank credits. In 2005, the Governing Council of the ECB approved a unified regime for the use 

of  bank  credits  from  all  euro  area  countries  as  collateral  for  Eurosystem  credit  operations 

from 2007. It is therefore of crucial importance to the Eurosystem that credit claims can be handled 

safely  and  smoothly  both  domestically  and  on  a  cross-border  basis.  In  this  context,  pursuant  to 
Article 22.d of the Law on Banka Slovenije6, credit claims provided as collateral by means of an 

entry in the register of financial assets  to be established and  maintained by Banka Slovenije will 

fully benefit from the regime established by the Law. This regime would thus ensure, inter alia, the 

validity of an assignment for security purposes or simplified enforcement of bank credits. 

4.2.  The ECB welcomes the provision inserted into Article 11 of the Law, which  makes it  clear that, 

among other rights arising under a financial collateral contract, the right to enforce collateral also 

remains valid even after an insolvency procedure has been opened against the collateral provider or 

collateral taker. The ECB suggests that this provision could be made even clearer by stating that the 

relevant methods of enforcement are those listed in point 9 of Article 3 of the Law, and that such 

methods are without prejudice to close-out netting as provided for under Article 12 of the Law. 

4.3.  Pursuant  to  Article  12  of  the  Law,  the  validity  of  a  close-out  netting  agreement  is  expressly 

extended  to  cover  cases  of  judicial  and  other  attachment  to  meet  the  requirement  laid  down  in 

Article  7  of  the  Collateral  Directive.  If  considered  appropriate,  the  application  of  this  provision 

could  be  extended  further  to  cover  certain  insolvency-like  proceedings,  such  as  regulatory 

moratoria. 

4.4.  The draft law proposes a revised Article 15, which contains a conflict-of-law provision regarding 

the determination of the applicable law in relation to securities provided as collateral by means of 

an entry in a financial instruments register. It is acknowledged that this provision is consistent with 

Article 9 of the Collateral Directive. However, the ECB suggests introducing an additional general 

conflict-of-law  provision,  which  would  determine  the  applicable  law  in  cases  where  financial 

5 

6  

See paragraph 10 of ECB Opinion CON/2001/13 of 13 June 2001 at the request of the Council of the European Union 
concerning a proposal for a Directive of the European Parliament and of the Council on financial collateral arrangements, 
paragraph 6 of ECB Opinion CON/2003/11 of 26 June 2003 at the request of Austrian Federal Ministry of Justice on a 
draft  federal  law  implementing  Directive  2002/47/EC  on  financial  collateral  arrangements,  and  paragraph  15  of  ECB 
Opinion CON/2005/12. The opinions are available on the ECB’s website at www.ecb.int. 
Zakon o Banki Slovenije, adopted on 19 June 2002 and last amended on 30 March 2006; published in the Official Gazette 
of the Republic of Slovenia, Nos 58/02, 85/02 and 39/06. 

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instruments are held on securities accounts outside a register or a central securities depository. This 

additional provision would cover situations where financial instruments are provided as collateral 

by  way  of  an  entry  on  a  securities  account  held  with  a  financial  intermediary  (e.g.  a  credit 

institution),  whereby  the  applicable  law  is  determined  by  the  jurisdiction  of  the  place  of  the 

relevant securities account in accordance with Article 9 of the Collateral Directive.  

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

Done at Frankfurt am Main, 22 May 2006. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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