Opinion of the European Central Bank of 15 April 2008 at the request of the Luxembourg Minister for the Treasury and the Budget on a draft law improving the legislative framework for Luxembourg as a financial centre and on a draft law relating to social insurance contributions (CON/2008/17)
Date: 2008-04-15
Institutions: European Central Bank
Subjects: Luxembourg, capital increase, central bank, foreign-exchange reserves, national law, pension scheme

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 15 April 2008  

at the request of the Luxembourg Minister for the Treasury and the Budget  

on a draft law improving the legislative framework for Luxembourg as a financial centre and 

on a draft law relating to social insurance contributions 

(CON/2008/17) 

Introduction and legal basis 

On  12  February  2008  the  European  Central  Bank  (ECB)  received  a  request  from  the  Luxembourg 

Minister  for  the  Treasury  and  the  Budget  for  an  opinion  on  a  draft  law  improving  the  legislative 

framework  for  Luxembourg  as  a  financial  centre  and  amending  the  provisions  on  bonds  in  the  Law  of 

5 April 1993 on the financial sector, as amended, the Law of 15 June 2004 on the company investing in 

risk capital, the Law of 23 December 1998 creating a commission for the prudential supervision of the 

financial sector, as amended, and the Law of 23 December 1998 on monetary status and on the Banque 

centrale du Luxembourg, as amended (hereinafter referred to as ‘the first draft law’).  

On 20 February 2008, the ECB received a second request from the Luxembourg Minister for the Treasury 

and the Budget for an opinion on a draft law amending the Law of 28 July 2000 on the coordination of the 

statutory  pension  schemes,  as  amended,  the  Code  of  social  insurance  contributions,  the  Law  of 

26 May 1954 governing State agents’ pensions, as amended, the Law of 27 August 1977 on the status of 

agents entering into the service of international institutions, as amended, the Law of 3 August 1998 on the 

special  pension  schemes  for  the  communes’  State  agents  as  well  as  for  the  agents  of  the  Luxembourg 

national railway company, as amended and the Law of 23 December 1998 on monetary status and on the 

Banque centrale du Luxembourg, as amended (hereinafter referred to as ‘the second draft law’).  

In view of the convergence between the provisions contained in the first and second draft laws amending 

the rules governing the pension scheme of the agents of the Banque centrale du Luxembourg (BCL), the 

following opinion addresses both draft laws. 

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

European Community and the third indent 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 both draft laws amend the BCL’s role as a pension agency. In addition, the first draft law 

contains provisions on the increase of the BCL’s capital, its national regulatory powers and the rules it 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
                                                 
applies  to  minimum  reserves.  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. 

Purposes of the first and second draft laws 

The first draft law modernises the legislative framework for Luxembourg as a financial centre. For this 

purpose, it amends the rules governing banks issuing bonds, the Law relating to the investment company 

in risk capital (SICAR), the Commission de surveillance du secteur financier (CSSF) as well as the Law 

of  23  December  1998  on  the  BCL  (hereinafter  the  ‘Law  on  the  BCL’).  More  particularly,  the  BCL’s 

capital may be increased by incorporating reserves, following a proposal by the BCL, under a grand-ducal 

regulation. In addition, the imposition by the BCL of minimum reserve requirements, which is currently 

presented as an option, will become an obligation. Furthermore, the first draft law will confer on the BCL 

a  general  regulatory  power.  Finally,  the  first  draft  law  will  authorise  the  BCL  to  have  recourse  to  the 

decision-making bodies and services of the Luxembourg pension agencies. This latter amendment has to 

be  read  in  conjunction  with  the  amendments  contained  in  the  second  draft  law.  In  order  to  remedy  the 

practical problems encountered in the day-to-day management of the BCL pension’s fund which had been 

designed separately from the other Luxembourg pension agencies, the second draft law brings the BCL 

into the scope of the Law of 28 July 2000 on the coordination of statutory pension schemes. In addition, 

the second draft law organises the financial transfers to be operated between the BCL’s pension fund and 

the  other  pension  agencies,  if  a  State  or  private  agent  transfers  from  or  to  the  BCL.  This  opinion 

concentrates on the aspects of the draft laws concerning the BCL and its powers.  

2. 

Provisions on the BCL’s capital increase  

2.1  By virtue of the draft law, the BCL’s capital, which currently amounts to EUR 25 million, may be 

increased by incorporating reserves on a proposal by the BCL under a grand-ducal regulation. The 

BCL’s  capital  could  therefore  be  periodically  rebalanced,  by  incorporating  reserves,  without 

resorting  to  the  legislator,  the  latter’s  intervention  being  however  maintained  for  an  increase  in 

capital through new funds. 

2.2  The ECB notes that although the reinforcement of BCL’s financial position had been presented as 
priority during the legislative works leading to the adoption of the Law on the BCL in 19982, the 
BCL had advised at that time3 that the capital of EUR 25 million would be insufficient to cover its 

costs  and  operations.  The  BCL  had  therefore  proposed  increasing  its  capital  to  EUR  150  million 

and  providing  for  the  creation  of  a  general  reserve  fund,  to  which  the  net  profits  of  its  activities 

would  be  transferred,  up  to  a  limit  equal  to  100%  of  the  capital  (as  such  is  the  case  under 

Article 33(1)(a)  of  the  Statute  of  the  European  System  of  Central  Banks  and  of  the  European 

Central Bank (hereinafter the ‘ESCB Statute’)). The BCL’s proposal has been partially followed. 

2  

3  

Report of the Commission des Finances et du Budget (Luxembourg’s Commission of Finances and Budget, 10.12.1998) 
on draft law No 4468/07, p. 2. 
See  the  opinion  addressed  to  the  President  of  the  Luxembourg  Chamber  of  deputies  on  6  November  1998,  draft  law 
4468/2, 4469/2, ordinary session 1998/99. 

2 

 
 
                                                 
Article 31 of the Law on the BCL provides for the creation of a general reserve fund and the BCL’s 

duty to transfer into it its profits, so long as the total of the capital and the reserve fund falls short of 

the total of its assets which do not yield freely-available income, after deducting liabilities which 

form the direct counterpart to such assets. 

2.3 

In this perspective, the ECB welcomes the possibility offered to the BCL to increase its capital by 

incorporating  reserves,  which  will  indirectly  contribute  to  reinforcing  its  financial  position.  The 

ECB  would,  nevertheless,  recommend  that  it  should  be  verified  whether  the  BCL’s  capital,  as 

increased by incorporating such reserves, would be sufficient to effectively perform all its tasks and 

cover  properly  its  administrative  and  operational  expenses,  as  they  have  evolved  since  its 

establishment.  

3. 

Provisions on minimum reserves  

3.1  By virtue of Article 23 of the Law on the BCL, the Central Bank is the custodian of sums which the 

professionals of the financial sector may if necessary be required to deposit by virtue of monetary 

control measures, in particular under the terms of Article 19 of the Protocol on the Statute of the 

European System of Central Banks and of the European Central Bank. The draft law substitutes the 

words  ‘shall  be  required  to  deposit’  for  the  current  wording  ‘may  if  necessary  be  required  to 

deposit’,  hence  transforming  an  option  into  an  obligation.  The  preparatory  work  advises  in  this 

respect that ‘the terms proposed to be replaced in this area, having been appropriate in 1998, are no 

longer  [appropriate]  since  compulsory  reserves  have  become  a  common  ECB  monetary  policy 

instrument’. 

3.2 

It  should  be  recalled  that,  under  Article  19.1  of  the  ESCB  Statute,  the  ECB  ‘may  require’  credit 

institutions to hold minimum reserves on accounts with the ECB and national central banks (NCBs) 

in  pursuance  of  monetary  policy  objectives.  Pursuant  to  Article  2  of  Council  Regulation  (EC) 

No 2531/98  of  23  November  1998  concerning  the  application  of  minimum  reserves  by  the 
European  Central  Bank4,  which  is  binding  erga  omnes,  ‘the  ECB  may,  on  a  non-discriminatory 

basis,  exempt  institutions  from  minimum  reserves  in  accordance  with  criteria  established  by  the 

ECB’. In addition, Article 2 of Regulation ECB/2003/9 of 12 September 2003 on the application of 
minimum  reserves5,  which  is  also  applicable  erga  omnes,  lists  the  categories  of  institutions  that 

‘shall  be  subject’  to  reserve  requirements  and  specifies  that  the  ECB  ‘may  exempt’  certain 

institutions from these requirements. Furthermore, Article 6 provides that an institution ‘shall hold 

its  minimum  reserves  on  one  or  more  reserve  accounts  with  the  national  central  bank  in  each 

participating Member State in which it has an establishment, in relation to its reserve base in the 

corresponding  Member  State’.  In  line  with  the  provisions  referred  to  above,  the  ECB  would, 

4  
5  

OJ L 318, 27.11.1998, p. 1. 
OJ L 250, 2.10.2003, p. 10. 

3 

 
                                                 
however,  recommend  replacing  the  words  ‘financial  sector  professionals’6  by  ‘credit  institutions’ 

and deleting the word ‘in particular’ before ‘under the terms of Article 19 of the ESCB Statute’, 

which gives the false impression that the BCL could impose minimum reserves.  

4. 

Provisions on regulatory powers  

4.1  Article 34 of the Law on the BCL provides that 'the Executive Board shall be authorised, within the 

framework  of  the  tasks  of  the  ESCB,  to  enforce  ECB  decisions  and  to  implement  the  sanctions 

imposed by the ECB’. By virtue of the first draft law and based on the new Article 108bis of the 
Luxembourg constitution7, Article 34 would now contain a second paragraph, conferring regulatory 

powers  on  the  BCL  ‘within  the  limits  imposed  by  its  competences  and  tasks’,  the  corresponding 

regulations being published in the Mémorial.  

4.2  The ECB very much welcomes this amendment to the Law on the BCL, which will allow the latter 

to  effectively  enforce  ECB  legal  acts.  Prior  to  examining  how  such  regulatory  powers  would,  in 

practice, be implemented, the ECB wishes to stress that, for the sake of efficiency, this regulatory 

power  should  be  combined  with  a  sanctioning  power,  which  forms  an  integral  part  of  regulatory 
power and ensures due compliance with the regulatory requirements8. Such sanctioning power, at 

the national level, would, nevertheless, be without prejudice to the ECB’s sanctioning power. The 

types of infractions and sanctions, as well as the procedure leading to the imposition and review of 

such  sanctions,  should,  however,  be  set  forth  in  a  law.  In  addition,  for  the  sake  of  flexibility,  it 

could  also  be  appropriate  for  the  draft  law  to  expressly  authorise  the  BCL  to  continue  adopting 

circulars,  if  deemed  more  appropriate  to  leverage  its  moral  suasion  rather  than  its  regulatory 

powers.   

4.3  The  BCL’s  regulatory  power,  potentially  combined  with  a  sanctioning  power,  is  especially 

welcome  in  the  collection,  compilation  and  reporting  of  statistical  data.  The  ECB  notes  that  in 

particular, the BCL will especially be able to implement Guideline ECB/2004/15 of 16 July 2004 

on  the  statistical  reporting  requirements  of  the  European  Central  Bank  in  the  field  of  balance  of 
payments and international investment position statistics, and the international reserves template9, 

Guideline  ECB/2002/7  of  21 November 2002  of  the  European  Central  Bank  on  the  statistical 

6  

7  

8  

9  

According to national law (Article 1.27 read in conjunction with Article 1.28 and Article 13.1 of the Law of 5 April 1993 
on  the  financial  sector),  the  term  ‘financial  sector  professional’  covers  credit  institutions  as  well  as  natural  and  legal 
persons which exercise, under certain conditions, financial sector activities, including those of investment firms.  
‘La loi peut créer des établissements publics, dotés de la personnalité civile, dont elle détermine l’organisation et l’objet. 
Dans la limite de leur spécialité le pouvoir de prendre des règlements peut leur être accordé par la loi qui peut en outre 
soumettre ces règlements à l’approbation de l’autorité de tutelle ou même en prévoir l’annulation ou la suspension en cas 
d’illégalité, sans préjudice des attributions des tribunaux judiciaires ou administratifs.’ [unofficial translation: ‘the Law 
may establish public institutions, endowed with legal personality, for which it determines the organisation and purpose. 
Within the limit of their specialisations, these institutions may be conferred a regulatory power by the Law, which may, 
in addition, require the approval of the supervisory authority or even provide for the invalidity or suspension in case of 
breach of law, without prejudice to the jurisdiction of the judicial or administrative courts’]. 
See in this sense, ECB Opinion CON/2002/23 of 18 September 2002 at the request of the Finnish Ministry of Finance on 
a draft proposal concerning a revision of the Act on Financial Supervision Authority. 
OJ L 354, 30.11.2004, p. 34. Guideline as amended by Guideline ECB/2007/3 (OJ L 159, 20.6.2007, p. 48). 

4 

 
                                                 
reporting requirements in the field of quarterly financial accounts10 and Guideline ECB/2005/5 of 

17 February 2005 on the statistical reporting requirements of the European Central Bank and the 

procedures for exchanging statistical information within the European System of Central Banks in 
the field of government finance statistics11. The Luxembourg Government’s grant of a regulatory 

power to the BCL is, however, without prejudice to the overall obligation of the Grand-Duchy of 
Luxembourg  to  cooperate  with  the  BCL12  to  ensure  an  effective  allocation  of  work  between  the 

BCL  and  the  national  statistics  institute  (STATEC)  and  avoid  overlaps  or  inconsistencies  in  the 

reporting requirements imposed on economic agents. For this latter purpose, cooperation between 

the STATEC and the BCL similar to that organised for the collection of the balance of payments 

statistics by the Law of 28 June 2000 might be considered. 

4.4  Regulatory  powers,  possibly  combined  with  a  sanctioning  power,  would  also  be  very  much 

welcome in the field of financial stability and in particular with resepect to payment and securities 

settlement  systems,  payment  instruments  and  e-money  schemes.  Under  the  current  Law  on  the 

BCL,  the  BCL  has  been  empowered  to  oversee  the  systems  falling  within  the  scope  of  the 

Settlement  Finality  Directive,  as  implemented  by  the  Luxembourg  Law  of  12  January  2001 

amending  the  Law  of  5  April  1993  on  the  financial  sector,  as  amended,  provided  that  the  BCL 
participates in such systems13. 

The BCL’s new regulatory power would apply in particular to Clearstream Banking Luxembourg, 

as  a  securities  settlement  system,  and  TARGET2-LU,  as  a  payment  system.  The  BCL’s  new 

regulatory power should, however, not be limited to these systems. It should be recalled, however, 

that Article 105(2) of the Treaty and Article 3.1 of the Statute include as a basic Eurosystem central 

bank  task  the  promotion  of  the  smooth  operation  of  ‘payment  systems’.  Further,  according  to 

Article  22,  the  ECB  and  NCBs  may  provide  facilities,  and  the  ECB  may  make  regulations,  to 

ensure  efficient  and  sound  clearing  and  payment  systems  within  the  Community  and  other 

countries. 

These Articles provide a legal basis for the oversight activities generally performed at NCB level, 

in  line  with  the  common  oversight  policy  defined  for  the  Eurosystem  by  the  ECB’s  Governing 

Council.  It  is  also  understood  that  in  its  capacity  of  promoting  the  smooth  operation  of  payment 

systems,  the  Eurosystem  is  keen  on  gathering  information  related  to  new  developments  in 

connection  with  payments.  Furthermore,  the  Governing  Council’s  policy  statement  regarding  the 
‘Role of the Eurosystem in the field of payment systems oversight’14 confirms that the scope of the 

Eurosystem’s oversight competence embraces also systems such as e-money schemes and payment 

instruments.  To  allow  the  BCL  to  duly  comply  with  the  Governing  Council’s  common  oversight 

policy, it would be advisable to bring all systems, regardless of whether they are protected by the 

10  
11  
12  
13  
14  

OJ L 334, 11.12.2002, p. 24. Guideline as last amended by Guideline ECB/2007/13 (OJ L 311, 29.11.2007, p. 47). 
OJ L 109, 29.4.2005, p. 81. Guideline as last amended by Guideline ECB/2007/14 (OJ L 311, 29.11.2007, p. 49). 
Article 5 of the ESCB Statute.  
Articles 34-3 and 47-1 of the Law of 5 April 1993 on the financial sector, as amended.  
The 2000 Governing Council’s policy statement is available on the ECB’s website at www.ecb.europa.eu. 

5 

 
                                                 
Settlement Finality Directive, as well as payment instruments, under the BCL’s regulatory powers 
as far as its oversight function is concerned15. To support this extension of the scope of application 

of the regulatory powers, the provisions of the Law on the BCL relating to its competencies should 

be  redrafted  accordingly.  In  particular,  the  amendment  should  provide  for  an  express  legislative 

recognition  of  the  BCL’s  role  in  financial  stability. The  BCL  would  thus  be  able  to  monitor  and 
assess the financial system in Luxembourg16. 

4.5  The ECB finally notes that granting the BCL a regulatory power would allow it to replace with a 

regulation the contractual framework of its general terms and conditions for the implementation of 

monetary  policy  operations.  When  combined  with  a  sanctioning  power,  such  regulation  would 

allow the BCL to impose sanctions, subject to judicial review, thereby avoiding the uncertainties 

associated in Luxembourg with the imposition of sanctions by contractual means.  

5. 

Provisions on the pension scheme of BCL’s agents  

5.1  Under Article 14 of the Law on the BCL, the pension benefits of BCL’s agents are determined by 

their status and financed by the BCL pension fund. Such a fund, which is financed by a pure system 

of  capitalisation  partly  by  statutory  deductions  from  agents’  salaries,  partly  by  the  BCL’s 

contributions,  has,  however,  been  designed  separately  from  the  other  Luxembourg  pension 

agencies. Consequently, practical difficulties have arisen in the day-to-day management of pension 

benefits of BCL’s agents, especially if they transfer from or to other private or public institutions to 

or from the BCL, as well as if invalidity of a BCL agent for the purpose of an invalidity pension 

must be declared. These practical difficulties are addressed in both the first and second draft law. 

Article V(2) of the first draft law provides that the BCL ‘may have recourse to the decision-making 

bodies and services of the pension agencies following the pension regime of the agent in question.’ 

Article 1 of the second draft law also brings the BCL into the scope of the Law of 28 July 2000 on 

the  coordination  of  statutory  pension  schemes.  Furthermore,  it  acknowledges  the  specificity  of 

BCL’s agents in respect of pensions so that if a State agent transfers to the BCL, the corresponding 

administration  pays  into  the  BCL’s  pension  fund  the  necessary  amount  to  subsequently  finance 

pension  benefits  arising  from  State  service  previously  performed.  In  the  opposite  situation,  i.e.  a 

BCL  agent  moving  to  another  administration  or  the  private  sector,  the  BCL  will  transfer  its 

contribution to the other relevant scheme or body under such scheme.  

5.2  As a rule, the regime governing the staff of central banks should not impair the ability of the latter 

to employ and retain the qualified staff necessary for the performance of the tasks conferred on it 
by  the  Treaty,  the  ESCB  Statute  and  national  legislation  in  an  independent  manner17.  Hence,  the 

15  

16  

17  

See in this sense, ECB Opinion CON/2003/22 of 15 October 2003 at the request of the Finnish Ministry of Finance on a 
draft government proposal to amend the Suomen Pankki and other related acts, particularly paragraph 18.  
See ECB Opinion CON/2007/33 of 5 November 2007 at the request of the Austrian Ministry of Finance on a draft law 
amending the Law on banking, the Law on savings banks, the Law on the Financial Market Supervisory Authority and 
the Law on the Oesterreichische Nationalbank, particularly paragraph 2.2.1. 
See  ECB  Opinion  CON/2008/9  of  21  February  2008  at  the  request  of  the  German  Ministry  of  Finance  on  a  draft  law 
amending the Law on Deutsche Bundesbank.  

6 

 
                                                 
ECB very much welcomes these amendments, which will facilitate the management by the BCL of 

its agents’ pension benefits, also if transferring from or to the private or public sector. Ideally, the 

efficiency achieved at national level in this latter respect should be transposed at cross-border level. 

For the sake of efficiency and transparency, the practical modalities of the cooperation between the 

BCL and the pension agencies should be set forth in a cooperation agreement or regulation. Proper 
attention should be paid, in this last respect, to adequately protect the BCL’s independence18.  

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

Done at Frankfurt am Main, 15 April 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

18  

ECB Opinion CON/2008/13 of 19 March 2008 on a draft law concerning the reform of the Greek social security system. 

7