Opinion of the European Central Bank of 8 October 2008 at the request of the Belgian Ministry of Finance on a preliminary draft law on measures promoting financial stability and in particular establishing a State guarantee for the provision of credit in the context of financial stability (CON/2008/46)
Date: 2008-10-08
Institutions: European Central Bank
Subjects: Belgium, State aid, financial stability, guarantee, monetary policy, national law, payment system

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 8 October 2008 

at the request of the Belgian Ministry of Finance 

on a preliminary draft law on measures promoting financial stability and in particular 

establishing a State guarantee for the provision of credit in the context of financial stability 

(CON/2008/46) 

Introduction and legal basis 

On 3 October 2008 the European Central Bank (ECB) received a request from the Nationale Bank van 

België/Banque Nationale de Belgique (NBB), acting on behalf of the Belgian Ministry of Finance, for an 

opinion  on  a  preliminary  draft  law  on  measures  promoting  financial  stability  and  in  particular 

establishing a State guarantee for the provision of credit in the context of financial stability (hereinafter 

the  ‘draft  law’).  Given  the  current  turbulence  in  the  international  financial  markets,  the  consulting 

authority has requested the ECB to provide its opinion urgently to allow the draft law to be adopted as 

quickly as possible. 

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

European Community and on the third 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  provisions1,  as  the  draft  law  relates  to  the  NBB  and  to  the  rules  applicable  to  financial 

institutions  insofar  as  they  materially  influence  the  stability  of  financial  institutions  and  markets.  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  draft  law  is  motivated  by  the  current  financial  market  crisis  and  by  the  willingness  of  the 

Belgian  authorities  to  reinforce  the  means  available  to  them  to  take  measures  with  a  view  to 
preserving confidence in the national financial system2. First, the draft law introduces into Belgian 
law  a  legal  basis  empowering  the  King3  (hereinafter  the  ‘Belgian  executive’)  to  take  any  urgent 
measures  with  a  view  to  preserving  the  stability  of  the  financial  system4.  The  Belgian  executive 

may, after consulting the Financial Stability Committee, take any measure to preserve the stability 

1  
2  
3  
4  

OJ L 189, 3.7.1998, p. 42.  
See the explanatory memorandum to the draft law, p. 1. 
The reference to the King is understood as a reference to the Belgian Government. 
Article  2  of  the  draft  law,  introducing  a  new  Article  117bis  into  the  Law  of  2  August  2002  on  the  supervision  of  the 
financial sector and on financial services.  

 
 
 
 
                                                 
of the financial system in the event of a sudden financial market crisis or of a serious threat of a 

systemic  crisis,  including  temporary  derogations  from  certain  prudential  laws  applicable  to  the 
financial sector5. Second, the draft law establishes a State guarantee covering the NBB for credits 
extended in the context of the NBB’s contribution to financial stability under its organic law6 and 

provides  to  this  end  that  ‘the  State  shall  …  guarantee  to  the  [NBB]  the  repayment  of  any  credit 

granted in the context of its contribution to the stability of the financial system and shall guarantee 
the [NBB] against any loss due to any transaction necessary in this respect’7. This provision of the 

draft  law  would  enter  into  force  retroactively,  on  28 September  2008.  The  Belgian  authorities 

consider  this  retroactivity  justified  by  the  circumstance  that  it  is  ‘indispensable  to  safeguarding 

financial stability that the [NBB] [was] able to grant emergency liquidity with a State guarantee on 
29 September 2008’8.  

1.2  The  draft  law  aims  at  remedying  certain  ambiguities  in  the  NBB  Law  created  by  the  distinction 

made currently in the structure of the NBB Law  between tasks that are within the domain of the 

European System of Central Banks (ESCB) and tasks which are not, which the draft law proposes 
should no longer be made9. In this context, the draft law clarifies for instance that the lien granted 
to  the  NBB  under  the  NBB  Law10  is  not  limited  to  the  NBB’s  claims  arising  from  credit 

transactions carried out in the context of its ESCB-related tasks but also applies in the context of its 
non ESCB-related tasks11. 

2.  General observations 

2.1  The application of the special powers granted to the Belgian executive under the draft law with a 
view  to  preserving  the  stability  of  the  financial  system  requires  the  adoption  of  royal  decrees12. 

Although the ECB understands that, under the draft law, these draft royal decrees are intended to be 

adopted under a ‘fast-track’ procedure and will not for instance require the opinion of the Belgian 

Council of State, this does not prejudice the duty to consult the ECB under Article 105(4) of the 

Treaty on such draft royal decrees, should they fall within the ECB’s advisory competences.  

2.2  As already mentioned in a recent ECB opinion on another draft national law relating to emergency 
measures arising out of the current financial turmoil13, the ECB is of the view that it is important 

5  

6  

7  
8 
9  

10 

11  
12  
13  

The laws concerned, as listed in Article 2 of the draft law, are as follows: (i) the Law of 22 March 1993 on the status and 
supervision  of  credit  institutions;  (ii)  the  Law  of  6 April  1995  on  the  status  and  supervision  of  investment  firms;  and 
(iii) the Law of 2 August 2002 on the supervision of the financial sector and on financial services. 
See Article 12 of the Law of 22 February 1998 establishing the organic statute of the Nationale Bank van België/Banque 
Nationale de Belgique (hereinafter the ‘NBB Law’). 
Article 6 of the draft law amending Article 9 of the NBB Law.  
See the commentary on Article 12 in the explanatory memorandum to the draft law, p. 7. 
See  especially  Articles  3  and  Articles  8  to  11  of  the  draft  law  concerning  the  structure  of  the  NBB  Law,  as  well  as 
Article 7 of the draft law. 
Under Article 7, first subparagraph, of the NBB Law, ‘[the NBB]’s claims arising from credit transactions shall entail a 
preferential  claim  on  all  securities  which  the  debtor  holds  in  an  account  with  the  [NBB]  or  in  its  securities  clearing 
system as his own assets.’ 
Article 2bis of the draft law. 
Proposed Article 117bis, second paragraph of the Law of 2 August 2002. 
See  ECB  Opinion  CON/2008/44  of  3  October  2008  at  the  request  of  the  Irish  Minister  for  Finance  on  a  draft  Credit 
Institutions (Financial Support) Bill 2008. 

2 

                                                 
for national authorities to seek to coordinate their responses to the current financial situation with 

their EU partners. As a general matter, the ECB wishes to underline the importance it attaches to 

ensuring  that  the  draft  law,  and  any  subsequent  royal  decrees,  fully  comply  with  the  relevant 

provisions of Community law, including State aid rules.  

3. 

Provision of emergency liquidity assistance by national central banks 

3.1  One  of  the  specific  tools  available  to  central  banks  in  a  crisis  situation  is  the  provision  of 
emergency  liquidity  assistance  to  individual  banks14.  This  tool  consists  of  liquidity  assistance 

provided by central bank in exceptional circumstances and on a case-by-case basis to temporarily 

illiquid but solvent institutions.  

3.2  The extension of emergency liquidity assistance falls within the NBB’s task of contributing to the 

stability of the financial system, which is set out in Article 12 of the NBB Law.  Under the draft 

law, the State must guarantee to the NBB the repayment of any credit granted in the context of its 

contribution to the stability of the financial system and must guarantee the NBB against any loss 

due  to  any  transaction  necessary  in  this  respect.  The  ECB  notes  that,  in  the  explanatory 

memorandum to the draft law, the particular responsibility of the NBB in the event of a crisis is 

highlighted since, as the lender of last resort in the national financial system, it must evaluate if it is 

going  to  assist  banks  in  difficulty  by  providing  emergency  liquidity.  It  is  also  pointed  out  that 

providing such emergency liquidity is an autonomous decision that the NBB must be in a position 
to take in exceptional circumstances and complete independence15. 

3.3  As expressed in a recent opinion regarding another draft national law addressing the provision of 
emergency liquidity assistance by a Eurosystem central bank16, the ECB is of the view in this case 

that the draft law should unequivocally ensure the NBB’s independence to decide on the provision 

of emergency liquidity assistance. To this end, the draft law should stipulate that the same degree 

of independence is granted to the NBB as regards the provision of emergency liquidity assistance 
as with respect to the performance of its ESCB-related tasks17. 

3.4  The  ECB  notes  that,  except  as  regards  tasks  and  transactions  within  the  domain  of  the  ESCB, 

Article 22(1) and 22(2) of the NBB Law provide for the possibility for the Minister of Finance (or 

their representative) to suspend and/or oppose transactions, measures and/or decisions adopted by 

the NBB which are contrary to the NBB Law, the NBB’s statutes or the interests of the State. In 

this context and in view of the need to ensure the NBB’s full independence in providing emergency 

liquidity  assistance,  the  ECB  would  like  to  take  the  opportunity  of  this  consultation  to  draw  the 

attention of the Belgian authorities to the need to clarify these provisions, for instance by expressly 

excluding Article 12 of the NBB law from their scope.  

14  
15  
16  

17  

See the ECB Financial Stability Review, December 2006, pp.171-172 and the ECB’s Annual Report 1999, p. 98. 
See the explanatory memorandum to the draft law, p. 2. 
See  ECB  Opinion  CON/2008/42  of  10  September  2008  at  the  request  of  the  Banque  centrale  du  Luxembourg  on 
amendments to the draft law improving the legislative framework for Luxembourg as a financial centre and amending the 
Law of 23 December 1998 on monetary status and on the Banque centrale du Luxembourg, paragraphs 4.9 to 4.11. 
Alternatively,  a  reference  to  the  same  level  of  independence  as  provided  for  in  Article  108  of  the  Treaty  could  be 
considered (see ECB Opinion CON/2008/42, paragraph 4.11, footnote 20). 

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4. 

State guarantee and the prohibition on monetary financing 

4.1  The monetary financing prohibition, as defined in Article 101 of the Treaty, is essential to ensure 

that the primary objective of monetary policy, namely to maintain price stability, is not impeded. 

Therefore, the prohibition must be interpreted extensively in order to ensure its strict application. It 

is noted that, under Article 237(d) of the Treaty, the ECB is entrusted with the task of monitoring 
the compliance of the NCBs with the prohibition on monetary financing18 and, as pointed out in a 

recent opinion, it is important, in the case of emergency liquidity assistance supported by a State 

guarantee, to provide for appropriate legal safeguards in terms of central bank independence and 
compliance with the monetary financing prohibition19.  

4.2  The provision of emergency liquidity assistance is a central bank function, which consists in giving 

support in exceptional circumstances and on a case-by-case basis to temporarily illiquid but solvent 
credit  institutions20.  However,  it  is  the  ECB’s  view  that  ‘national  legislation  foreseeing  the 

financing by NCBs of credit institutions other than in connection with central banking tasks (such 

as  monetary  policy,  payment  systems  or  temporary  liquidity  support  operations),  in  particular  to 

support  insolvent  credit  and/or  other  financial  institutions,  is  incompatible  with  the  monetary 
financing prohibition’21. In this respect the ECB notes the clarification contained in the explanatory 

memorandum to the draft law, which states that a central bank extension of financial support to an 
insolvent  financial  institution  must  be  considered  as  a  form  of  prohibited  monetary  financing22. 

The  ECB  is  of  the  view  that  this  clarification  should  be  contained  in  the  draft  law  itself.  In  the 

same vein, it would be advisable to introduce into the draft law a direct reference to the prohibition 
on monetary financing as defined in Community law or alternatively to Article 101 of the Treaty23. 

4.3  Under the draft law, the State must guarantee to the NBB the repayment of any credit granted in 

the context of the NBB’s contribution to the stability of the financial system and it must guarantee 

the NBB against any loss due to any transaction necessary in this respect. In order for emergency 

liquidity assistance provided with a State guarantee as collateral, as provided for in the draft law, to 

comply  with  the  monetary  financing  prohibition,  the  following  criteria  should  be  met.  First,  as 

regards  the  need  for  the  NBB  to  independently  exercise  full  discretion  regarding  the  decision 

whether  to  extend  emergency  liquidity  assistance,  the  ECB  notes  that  the  NBB  will  take  its 

decision fully independently, see however paragraphs 3.3 and 3.4, and that, while the NBB and the 

Commissie voor het Bank-, Financie- en Assurantiewezen/Commission Bancaire, Financière et des 

Assurances must inform the Minister for Finance in the event of a crisis endangering the financial 

18  
19  

20  
21  

22  
23  

See Article 237(d) of the Treaty. 
Since 2006, the ECB’s Convergence Report has included an assessment of the compatibility of national legislation with 
the monetary financing prohibition. 
See ECB Opinion CON/2008/42, footnote 16. 
See the ECB’s Convergence Report May 2006, p. 68; the Convergence Report December 2006, p. 30; the Convergence 
Report May 2007, p. 22 and the Convergence Report May 2008, p. 24, all of which are available on the ECB’s website at 
www.ecb.europa.eu. 
See the explanatory memorandum to the draft law, p .3. 
ECB Opinion CON/2008/42, paragraph 4.11. 

4 

                                                 
sector,  the  State  guarantee  is  nevertheless  granted  ex  ante  under  the  draft  law24  and  provided 

automatically  without  the  need  for  any  prior  agreement  of  the  Minister  for  Finance.  Second,  it 

should be ensured that the credit provided by the NBB is as short term as possible. The ECB would 

welcome any clarification in this regard, at least in the explanatory memorandum to the draft law. 

Third, there must be systemic stability aspects at stake. In the present case, the ECB understands 

that  the  granting  of  the  above  credit  would  be  part  of  the  NBB’s  statutory  contribution  to  the 

stability  of  the  financial  system.  Fourth,  there  must  be  no  doubts  as  to  the  legal  validity  and 

enforceability of the State guarantee under Belgian law. In this respect, the ECB welcomes the fact 

that the establishment of the State guarantee is enshrined in the draft law. Fifth, there must be no 

doubts as to the economic adequacy of the State guarantee, which should cover both principal and 

interest  on  the  loans,  thus  fully  preserving  the  financial  independence  of  the  NBB.  The  State 

guarantee in this case is very broad since it covers any losses related to any operations necessary in 

the context of the NBB’s contribution to financial stability. 

5. 

Financial stability and exceptional derogations from supervisory rules 

Under the draft law, the Belgian executive may take any measure to preserve the stability of the financial 

system in the event of a sudden financial market crisis or of a serious threat of a systemic crisis, including 
temporary derogations from the supervisory rules applicable to the financial sector25. The ECB is of the 

view that this broad provision might be further clarified with a view to enhancing legal certainty and to 

ensuring its compatibility with Community law. Moreover, and as mentioned above, measures which are 

adopted  with  the  aim  of  safeguarding  financial  stability  should  involve  cooperation  with  the  relevant 

authorities of the Member States, in line with applicable Community legislation and the arrangements in 

place,  such  as  the  Memorandum  of  Understanding  on  cooperation  between  the  financial  supervisory 

authorities,  central  banks  and  finance  ministries  of  the  European  Union  on  cross-border  financial 
stability26. The ECB would also favour the adoption of common policy solutions at the European level on 

these  issues  rather  than  uncoordinated  national  legislative  initiatives.  The  ECB  is  of  the  opinion  that 

national law should expressly include this need for coordination at the European level. 

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

Done at Frankfurt am Main, 8 October 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

24  
25  

26  

See the explanatory memorandum to the draft law, p. 4. 
See Article 2 of the draft law. The laws concerned are the following: (i) the Law of 22 March 1993 on the status and 
supervision  of  credit  institutions;  (ii)  the  Law  of  6 April  1995  on  the  status  and  supervision  of  investment  firms;  and 
(iii) the Law of 2 August 2002 on the supervision of the financial sector and on financial services. 
As published on the ECB website, www.ecb.europa.eu. 

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