Opinion of the European Central Bank of 11 December 2006 at the request of the Luxembourg Ministry of Finance on a draft law on markets in financial instruments (CON/2006/56)
Date: 2006-12-11
Institutions: European Central Bank
Subjects: Luxembourg, balance of payments, bank deposit, exchange of information, financial instrument, financial statistics, foreign-exchange reserves, loan, monetary policy, payment system

EN 

OPINION OF THE EUROPEAN CENTRAL BANK  

of 11 December 2006 

at the request of the Luxembourg Ministry of Finance  

on a draft law on markets in financial instruments 

(CON/2006/56) 

Introduction and legal basis  

On 26 October 2006 the European Central Bank (ECB) received a request from the Luxembourg Ministry of 

Finance for an opinion on a draft law on markets in financial instruments (hereinafter the ‘draft law’). 

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

Community  and  on  the  third,  fourth  and  fifth  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, as the draft law relates to a national central bank (NCB), to the collection, compilation 

and dissemination of monetary, financial, banking, payment systems and balance of payments statistics and to 

payment  and  settlement  systems.  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  While  the  main  purpose  of  the  draft  law  is  to  transpose  Directive  2004/39/EC  of  the  European 

Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council 

Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the 
Council and repealing Council Directive 93/22/EEC2, it also amends the Law of 23 December 1998 on 

the  monetary  status  of  the  Grand  Duchy  of  Luxembourg  (hereinafter  the  ‘BCL  law’)  in  respect  of 

(a) the use of claims as securities for loans granted by the Banque centrale du Luxembourg (BCL); and 

(b) the protection of the accounts held with the BCL in the context of common monetary or exchanges 

policies; and (c) the exchange of information required in the European System of Central Bank (ESCB) 

context with the Commission de surveillance du secteur financier (Commission for Supervision of the 

Financial  Sector,  hereinafter  the  ‘CSSF’),  the  Commissariat  aux  assurances  (Insurance  Commission) 

1  
2  

OJ L 189, 3.7.1998, p. 42. 
OJ L 145, 30.4.2004, p. 1.   

 
 
 
 
                                                 
and the Service central de la statistique et des études économiques (Central Service for Statistics and 

Economic Studies (STATEC)). 

1.2 

In accordance with the consultation request by the Ministry of Finance of Luxembourg, this opinion is 

limited to Article 172 of the draft law, which exclusively contains the changes to be made to the BCL 

Law, without relating to the transposition of Directive 2004/39/EC.  

2. 

The use of claims as security for loans granted by the BCL  

2.1  Article  172  of  the  draft  law  introduces  an  Article  22-1  in  the  BCL  Law  which  creates  a  specific sui 

generis method of perfection and enforceability for pledges of claims as security for loans granted by 
the BCL3. The draft law creates a register where pledges of claims in favour of the BCL are recorded, 

which is kept, organised and made accessible to third parties according to rules to be laid down by the 

BCL.  The  sole  entry  in  the  register  of  a  pledge  on  a  claim  in  favour  of  the  BCL  renders  the  pledge 

effective  against  all  third  parties  and  ensures  that  the  BCL’s  rights  in  respect  of  such  claim  have 

priority over any other rights created in favour of third parties after such entry. If a third party receives 

a payment from the debtor of a claim previously pledged to the BCL through an entry in the registry 

this  third  party  must  transfer  the  amount  to  the  BCL.  In  addition,  no  set-off  may  have  the  effect  of 

undermining the security in favour of the BCL in respect of its claims. 

2.2  The ECB welcomes this new provision as it will facilitate the use of credit claims as security for BCL 

loans, in line with the single list of eligible collateral for the Eurosystem’s credit operations, which will 
include credit claims from 1 January 20074. The ECB understands that without this special regime, the 

creation of a pledge on a credit claim would be governed by Article 5(3) of the Law of 5 August 2005 

on financial collateral arrangements, under which the creation of a pledge over a credit claim is only 

valid and effective against third parties on notification to or acceptance by the debtor of the pledged 

credit claim. Under the new regime, such notification to the debtor would no longer be required, since 

the sole entry in the register would ensure that the pledge is valid and effective against ‘third parties’, 

including the debtor.  

2.3  The  ECB  understands  from  the  new  Article  22-1(3)  and  (4)  that  credit  claims  may  be  pledged  by 

means  of  an  entry  into  the  register  only  in  favour  of  the  BCL  and  that  Article  5(3)  of  the  Law  of 

5 August  2005  remains  applicable  to  pledging  of  credit  claims  to  any  other  entity  falling  within  the 

ambit of the latter law. While the draft law provides for the precedence of the BCL’s security interest 

over  any  subsequent  security  interest  concerning  the  pledged  claims,  it  does  not  specifically  address 

3  

4  

For a similar legal provision see also ECB Opinion CON/2006/40 of 3 August 2006 at the request of the Belgian Ministry of 
Finance on a draft law amending the Organic Statute of the National Bank van België/Banque Nationale de Belgique. 
See Decisions taken by the Governing Council of the ECB (in addition to decisions setting interest rates) July 2005 and the 
related  press  release  of  22  July  2005  entitled  ‘Eurosystem  collateral  framework;  Inclusion  of  non-marketable  assets  in  the 
Single List’, available on the ECB’s website at www.ecb.int. 

2 

 
                                                 
the potential conflict which may arise between the BCL’s security interest resulting from an entry into 

the register and a third party’s security interest resulting from the prior application of Article 5(3) of 

the Law of 5 August 2005. Unless the Luxembourg legislator intends to grant an absolute priority to 

the BCL, on entry in the registry of the pledge over credit claims, regardless of the date of such entry, 

which, for reasons of legal clarity should be expressly spelled out in the draft law, such conflict would 

be solved  by application of the rule ‘prior tempore potior iure’. Consequently, the prior pledge created 

by application of the Law of 5 August 2005 would prevail over the BCL’s pledge. Therefore, the ECB 

would  encourage  the  BCL  to  obtain  assurance  from  the  debtor  or  from  the  credit  institution/pledgor 

that the claim subject to an entry into the BCL register has not been previously pledged in favour of a 

third party.  

2.4  Concerning the draft law’s scope of application, the ECB understands that it is only applicable where 

the BCL uses such credit claims as security for the loans it grants itself. The ECB would recommend 

also encompassing situations where the BCL is acting as agent for other Eurosystem central banks for 

the cross-border collateralisation of credit claims in the framework of Eurosystem credit operations.  

3. 

The immunity from seizure for accounts held with the BCL in the context of common monetary 

or exchange policies 

3.1  Article 172 of the draft law provides for the insertion in the BCL Law of an Article 27-1 containing 

two paragraphs. 

3.2  The first paragraph takes over the substance of the former Article 4(4) of the BCL Law and grants a 

lien to the BCL, the ECB and other NCBs forming an integral part of the ESCB over the assets held by 

the debtor ‘either with the central bank or with a system for the settlement of securities transactions or 

with another counterparty in Luxembourg’ and which guarantees ‘the claims deriving from operations 

in  the  context  of  common  monetary  or  exchange  policies’,  such  lien  having  ‘the  same  rank  as  the 

pledgee’s charge’. 

3.3  The second paragraph, which is new, provides: ‘No account with the central bank intended to be used 

in  the  context  of  monetary  or  exchange  policies  may  be  subjected  to  any  seizure,  sequestration  or 

blocking order’. As the euro is increasingly used as an international reserve currency and in line with 
recent  changes  made  to  the  laws  of  other  Member  States5,  the  ECB  would  recommend  that  this 

provision clarifies in an unambiguous manner the protection usually granted to foreign reserves held by 

the  BCL  by  inserting  the  words  “as  well  as  of  the  management  of  foreign  reserves  assets  held  for 

foreign central banks or foreign States’ after ‘no account with the Central Bank intended to be used in 

the context of common monetary or exchange policies’. 

5  

For  instance,  Article  L.153-1  inserted  in  the  French  Monetary  and  Financial  Code  by  Act  No  2005-842  of  26  July  2005; 
Article  22.a of Banka Slovenije’s Statute; seventh Additional  Provision added to  the Law 13/1994 on  the autonomy of  the 
Banco de España (Banco de España’s Statute) by Law 22/2005 of 18 November 2005. 

3 

 
                                                 
4. 

Exchange  of  information  between  BCL,  the  CSSF,  STATEC  and  the  Commissariat  aux 

assurances  

4.1  Article 33 of the draft law currently provides that breaches by the BCL’s agents and auditors of their 

professional  secrecy  may  be  criminally  sanctioned.  Article  33(2)  authorises  nonetheless  the 

communication of  information between the  BCL  and  the CSSF, such communication being however 

‘without prejudice to the rules of professional secrecy applicable to the ESCB’. Article 172(d) of the 

draft law amends this provision in the two following respects. First, it no longer refers to the rules of 

professional secrecy applicable to the ESCB. Second, the BCL may now exchange information ‘to the 

extent necessary for the performance of its tasks’ not only with the CSSF, but also with the insurance 

commission and the STATEC ‘subject to reciprocity’. 

4.2  The ECB generally welcomes the possibility for information to be exchanged between the BCL and the 

authorities  supervising  financial  institutions  and  insurance  undertakings,  as  well  as  other  authorities 

compiling  national  statistics  and  contributing  to  European  statistics.  These  authorities’  tasks  are 

increasingly complementary and a proper exchange of information among them undoubtedly benefits 

all, not only by limiting the administrative burden but also by promoting an efficient performance of 

their  respective  tasks  and  in  the  interest  of  financial  stability  in  general.  For  the  sake  of  clarity,  the 

ECB recommends that the draft law continues to refer to the rules of professional secrecy applicable to 

the  ESCB.  In  the  area  of  statistics,  the  confidentiality  regime  is  ensured  by  Council  Regulation 
2533/98/EC6  

4.3  Finally,  the  ECB  understands  that  reciprocity  does  not  apply  to  individual  data  exchange  between 

authorities  in  view  of  their  differing  tasks,  but  instead  implies  the  existence  of  a  general  bilateral 

exchange of information.   

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

Done at Frankfurt am Main, 11 December 2006. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

6  

Council  Regulation  2533/98/EC  of  23  November  1998  concerning  the  collection  of  statistical  information  by  the  ECB 
(OJ L 318, 27.11.1998, p. 8). 

4