Opinion of the European Central Bank of 15 December 2006 at the request of the Central Bank of Malta concerning amendments to the Central Bank of Malta Act (CON/2006/58)
Date: 2006-12-15
Institutions: European Central Bank
Subjects: Eurosystem, Malta, board of directors, central bank, euro, foreign-exchange reserves, paper money, payment system, public sector, statistics

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of  15 December 2006 

at the request of the Central Bank of Malta 

concerning amendments to the Central Bank of Malta Act 

(CON/2006/58) 

Introduction and legal basis 

On 21 November 2006 the European Central Bank (ECB) received a request from the Central Bank of 

Malta for an opinion on draft amendments to the Central Bank of Malta Act (hereinafter the ‘Act’), to be 
inserted in an existing bill amending the Act1 (hereinafter the ‘bill’). 

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

European Community and the third and fourth 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 amendments relate to the Central Bank of Malta (CBM) and the collection, 

compilation and distribution of statistics. 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 amendments 

The main purpose of the draft amendments is to bring the Act into line with the Treaty and the Statute of 

the European System of Central Banks and of the European Central Bank, in particular with regard to the 

legal integration of the CBM into the Eurosystem. The draft amendments concern, inter alia, provisions 

relating  to  the  CBM’s  performance  of  its  tasks,  the  management  of  foreign  reserves,  the  collection  of 

statistical information and administrative penalties. 

2. 

General observations 

2.1  The ECB welcomes the draft amendments as they seek to address most of the issues raised in the 

ECB’s  recently  adopted  December  2006  Convergence  Report  and  aim  to  recognise  the  ECB’s 

powers in relation to foreign reserve management, financial instruments and statistical obligations. 

1  

2  

The ECB has already commented on the original amendments contained in the bill; see ECB Opinion CON/2006/23 of 
22 May 2006 at the request of the Central Bank of Malta concerning a draft law amending the Central Bank of Malta Act. 
OJ L 189, 3.7.1998, p. 42. 

 
 
 
 
 
                                                      
2.2  Article  2(2)  of  the  bill  provides  that  the  Minister  for  Finance  establishes,  by  notice  in  the 

Government  Gazette,  a  date  for  the  entry  into  force  of  the  bill  or  different  dates  for  different 

provisions.  The  Community  has  exclusive  competence  in  matters  relating  to  economic  and 

monetary  union,  and  national  legislation  should  not  in  any  way  prejudice  the  EU  Council’s 

decision regarding the abrogation of the relevant Member State’s derogation and the date on which 

this abrogation takes effect. Thus, for reasons of clarity and legal certainty, it would be advisable 

for the bill clearly to specify that the entry into force of certain provisions is related to the abolition 

of Malta’s derogation. 

2.3  Concerning  the  references  in  the  Act  to  the  Statute,  where  applicable  it  would  be  advisable  to 

complement them with references to the Treaty.  

2.4  For  ease  of  reference,  when  article  numbers  are  quoted  below  these  do  not  refer  to  the  bill,  but 

rather to the numbering in the Act if it is amended in accordance with the bill (hereinafter referred 

to as the ‘amended Act’). 

3. 

Specific observations 

Part II ‘Establishment and Conduct of Affairs of Bank’ 

3.1  The ECB observes that Article 4 of the amended Act should be adjusted to provide that the CBM 

has  to  support  the  general  economic  policies  ‘in’  rather  than  ‘of’  the  Community,  in  order  to 

comply with Article 105(1) of the Treaty.   

3.2  Article 7(1) of the amended Act assigns to the Board of Directors responsibility ‘for the policy and 

general administration of the affairs and business of the Bank, except in relation to the functions 

imposed and the exercise of powers conferred on the Bank by or under the Treaty or the Statute’.  

However, Article 8(6) of the amended Act states that ‘the Governor shall provide the Board with 

information about the exercise of powers conferred, upon the Governor or the Bank, by or under 

the Treaty or the Statute’. The relationship between these two provisions is unclear, in particular as 

regards the functions and powers of the Board of Directors, as well as the scope and implications of 

the  Governor’s  reporting  duty  concerning  ESCB-related  tasks,  which  tasks  are  under  the 

Governor’s  exclusive  responsibility.  Therefore,  the  ECB  recommends  further  clarifying  the 

respective powers of the Board of Directors and the Governor concerning ESCB-related tasks. 

3.3  Article  11(1)  of  the  amended  Act  provides  for  the  disqualification,  resignation  and  filling  of 

vacancies  of  the  Board  of  Directors;  the  latter  includes  the  Governor  and  the  Deputy  Governor, 

pursuant to the definition of ‘director’ in Article 2 of the amended Act. The ECB observes that this 

extends the grounds on which the Governor can be dismissed from office from those provided for 

in Article 14(2) of the Statute (namely if the Governor no longer fulfils the conditions required for 

the performance of their duties or if they have been guilty of serious misconduct). For this reason, 

Article  11(1)  of  the  amended  Act  should  be  aligned  with  the  wording  of  Article  14(2)  of  the 

2 

 
Statute,  as  far  as  the  Governor,  Deputy  Governor  and  other  members  of  the  Board  of  Directors 

involved in the performance of ESCB-related tasks are concerned. 

3.4  The ECB welcomes Article 17(2) of the amended Act, which expressly provides that the CBM will 

act  in  accordance  with  the  ECB’s  guidelines  and  instructions  when  managing  and  maintaining 

foreign reserve assets. 

Part III ‘Financial Provisions’ 

3.5  Article  20  of  the  amended  Act  concerning  audit  to  a  large  extent  reproduces  the  wording  of 

Article 27 of the Statute. Given the primacy of Community law and for the sake of legal clarity, the 

ECB recommends replacing this with an explicit reference to Article 27 of the Statute. 

3.6  Moreover,  regarding  Article  21  of  the  amended  Act  on  the  CBM’s  financial  reporting,  it  is 

recommended to include an explicit reference to Article 26(4) of the Statute in order to recognise 

the Eurosystem’s regime for the financial reporting of NCBs’ operations. 

Part V ‘Relations with Government’ 

3.7  Article 27(1) of the amended Act states that the CBM is not permitted to grant ‘overdrafts or any 

other type of credit facility to Community institutions or bodies or the government or to any public 

undertaking,  public  authority  or  government-owned  corporation  of  any  Member  State’  or  to 

‘directly purchase their debt instruments’. However, Article 27(1) should fully mirror Article 101 

of the Treaty, to avoid any confusion as to which entities are covered by the monetary financing 

prohibition.  It  is  therefore  recommended  that  Article  27(1)  of  the  amended  Act  also  includes 

‘bodies governed by public law’, as provided for in Article 101 of the Treaty. 

3.8  Article 29 of the amended Act provides that the CBM shall keep the Minister for Finance informed 

of  the  CBM’s  policy.  In  its  Convergence  Reports,  the  ECB  has  noted  that  an  express  statutory 

obligation for an NCB to consult third parties ex ante provides the latter with a formal mechanism 

to  influence  the  final  decision  and  is  therefore  incompatible  with  the  Treaty  and  the  Statute. 

However, dialogue between NCBs and third parties, even when based on statutory obligations to 

provide information and exchange views, is compatible with central bank independence provided 

that:  (a)  this does  not  result  in  interference  with  the  independence  of  the  members  of  the  NCB’s 

decision-making  bodies;  (b)  the  special  status  of  Governors  in  their  capacity  as  members  of  the 

ECB’s General Council is fully respected; and (c) confidentiality requirements resulting from the 

Statute are observed. The ECB recommends amending Article 29 of the amended Act in the light 

of the abovementioned requirements. 

Part VII ‘Payment Systems’ 

3.9  Concerning Article 34(5) of the amended Act, on payment systems and the CBM’s related power 

to  issue  directives,  it  is  recommented  explicitly  to  state  that  this  CBM  power  is  exercised  in 

accordance with the Treaty, Article 22 of the Statute and any regulations issued under Article 22 of 

the Statute.        

3 

Part X ‘Currency’ 

3.10  Although Articles 42 and 43 of the amended Act make it clear that, once the euro is introduced in 

Malta,  euro  banknotes  and  coins  will  be  issued  in  compliance  with  the  ESCB  legal  regime,  the 

ECB also suggests inserting an explicit reference to Article 106 of the Treaty and Article 16 of the 

Statute. 

3.11  Article  51  of  the  amended  Act  provides  that  the  CBM  ‘may,  acting  in  accordance  with  the 

provisions  of  Decision  ECB/2003/4  of  20  March  2003  on  the  denominations,  specifications, 

reproduction,  exchange  and  withdrawal  of  euro  banknotes,  authorise  the  reproduction  of  euro 

banknotes or euro coins’. The ECB recommends that any reference to euro coins in this Article be 
deleted, as Decision ECB/2003/43 only applies to euro banknotes. Furthermore, the ECB notes that 

rather  than  allowing  an  NCB  to  authorise  a  reproduction  of  a  euro  banknote,  Article  2(4)  of 

Decision  ECB/2003/4  provides  that  an  NCB  may,  in  certain  cases,  provide  confirmation  that  a 

reproduction of a euro banknote – even if it does not comply with the criteria under which certain 

reproductions  are  automatically  deemed  to  be  lawful,  pursuant  to  Article  2(3)  of  Decision 

ECB/2003/4 – is deemed to be lawful in so far as it cannot be mistaken by the general public for a 

genuine  euro  banknote.  Therefore  it  is  suggested  that  Article  51  of  the  amended  Act  is  adjusted 

accordingly. 

Part XI ‘General’ 

3.12  Concerning  the  publication  of  reference  rates,  covered  in  Article  61  of  the  amended  Act,  it  is 

suggested to replace the phrase ‘key interest rates of the Eurosystem’ with ‘key interest rates of the 

ECB’. 

3  

OJ L 78, 25.3.2003, p. 16. 

4 

 
 
                                                      
3.13  Finally,  the  ECB  suggests  deleting  Schedule  One  to  the  Act,  given  that  the  contents  of  this 

Schedule  are  all  already  contained  in  Annex  II  to  Council  Regulation  (EC)  2182/2004  of 
6 December  2004  concerning  medals  and  tokens  similar  to  euro  coins4,  which  is  directly 

applicable. Consequently, Article 55 of the amended Act needs to be amended: it should contain a 

general  reference  to  Regulation  (EC)  2182/2004,  and  in  accordance  with  Article  6  of 

Regulation (EC) 2182/2004 it should only establish the sanctions applicable to infringements of the 

Regulation. Article 60 of the amended Act also needs to be adjusted accordingly. 

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

Done at Frankfurt am Main, 15 December 2006. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

4  

OJ L 373, 21.12.2004, p. 1. 

5