Opinion of the European Central Bank of 17 October 2008 at the request of the Belgian Ministry of Finance on a draft royal decree adopted under Article 117bis of the Law of 2 August 2002 on the supervision of the financial sector and on financial services (CON/2008/50)
Date: 2008-10-17
Institutions: European Central Bank
Subjects: Belgium, State aid, financial stability, financial supervision, guarantee, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 17 October 2008 

at the request of the Belgian Ministry of Finance 

on a draft royal decree adopted under Article 117bis of the Law of 2 August 2002 on the 

supervision of the financial sector and on financial services 

(CON/2008/50) 

Introduction and legal basis 

On 14 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  draft  royal  decree  adopted  under  Article  117bis  of  the  Law  of  2  August  2002  on  the 

supervision  of  the  financial  sector  and  on  financial  services  (hereinafter  the  ‘draft  royal  decree’). 

Considering that the draft royal decree is indispensable to preserving the stability of the Belgian financial 

system and that any delay in its adoption or publication would be detrimental to its effectiveness and its 

objective of strengthening the market’s confidence  in the measures announced, the consulting authority 

has requested the ECB to provide its opinion as a matter of extreme urgency.  

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

European Community and on the sixth 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  the  draft  royal  decree  relates  to  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 royal decree 

1.1  The  draft  royal  decree  is  motivated  by  the  current  financial  market  crisis  and  by  the  Belgian 
authorities’ wish to preserve the stability of the Belgian financial system2. The legal basis for the 

draft royal decree is to be found in Article 117bis of the Law of 2 August 2002 on the supervision 
of the financial sector and on financial services3.  

1  
2  
3  

OJ L 189, 3.7.1998, p. 42.  
See the first recital of the draft royal decree. 
See also paragraph 2.1. 

 
 
 
 
                                                 
1.2  The draft royal decree would empower the Belgian Minister of Finance to grant a State guarantee4 

to cover liabilities entered into by credit institutions and/or financial holding companies (financiële 

holding/compagnies  financières)  (hereinafter  the  ‘beneficiaries’)  incorporated  under  Belgian  law 

vis-à-vis  other  credit  institutions  (and/or  professional  counterparts  belonging  to  the  categories 
identified by the Minister of Finance5) between 9 October 2008 and 31 October 2009, provided that 
such liabilities mature at the latest on 31 October 20116.  

The decision to grant a State guarantee would be subject to the conditions that: (i) the beneficiary 

takes measures aimed at supporting its financial situation, its solvency and its liquidity (or commits 

itself to taking such measures); and (ii) the granting of the guarantee is justified in the interests of 
the  Belgian  economy  and  by  the  protection  of  all  depositors7.  The  Minister  of  Finance  would  be 

empowered to lay down further modalities and conditions for a State guarantee, including setting its 

ceiling,  specifying  the  remuneration  to  be  paid  for  the  granting  of  the  guarantee,  and  any  other 
modality  aimed  at  ensuring  compliance  with  the  two  abovementioned  conditions8.  Moreover, 

beneficiaries  would  only  be  entitled  to  invoke  a  State  guarantee  granted  to  them  if  they  prove: 

(i) that  it  is  not  possible  for  them  to  meet  the  liabilities  covered  by  the  State  guarantee  at  their 

maturity;  and  (ii)  that  the  enforcement  of  the  State  guarantee  is  necessary  to  ensure  their 
continuity9. The Minister of Finance would be entitled to terminate a State guarantee at any time, 

without prior notice or compensation, if the conditions for granting the guarantee were no longer 
met10. The draft royal decree would enter into force retroactively, on 9 October 200811.  

2.   General observations 

2.1  As mentioned above, the legal basis for the draft royal decree is to be found in Article 117bis of the 

Law of 2 August 2002 on the supervision of the financial sector and on financial services. The ECB 

was  recently  consulted  on  an  early  version  of  Article  117bis  and  stressed  in  its  Opinion 

CON/2008/46  that  this  broad  provision  needed  ‘to  be  further  clarified  with  a  view  to  enhancing 
legal certainty and to ensuring its compatibility with Community law’12. The final version of Article 

117bis, as the ECB understands has been adopted by the Belgian Parliament on 15 October 2008, 
provides that the King may, after consulting the Financial Stability Committee13, in the event of a 

sudden crisis on the financial markets or a serious threat of systemic crisis, and in order to limit the 

4  
5  
6  
7  
8  
9  
10  
11  
12  

13  

See Article 1 of the draft royal decree. 
It is noted that the term ‘professional counterparts’ is not defined in the draft royal decree. 
See Article 2 of the draft royal decree. 
See Article 3 of the draft royal decree. 
See Article 4, first paragraph, of the draft royal decree. 
See Article 4, second paragraph, of the draft royal decree. 
See Article 4, third paragraph, of the draft royal decree. 
See Article 5 of the draft royal decree. 
Opinion CON/2008/46 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,  see  in  particular  paragraph  5.  All  ECB  opinions  are  available  on  the  ECB  website  at 
www.ecb.europa.eu/ecb/legal/opinions/html/index.en.html 
The  Financial  Stability  Committee  comprises  the  members  of  the  Management  Committee  of  the  Commissie  voor  het 
Bank-, Financie- en Assurantiewezen/Commission Bancaire, Financière et des Assurances and of the Board of Directors 
of the NBB, and is chaired by the Governor of the NBB (Article 117(3) of the Law of 2 August 2002). 

2 

 
                                                 
scale  or  effects  thereof:  (i)  adopt  regulations  which  may  complement  or  derogate  from  certain 
supervisory  laws  in  the  financial  sector14;  and  (ii)  establish,  by  decree  deliberated  within  the 

Council  of  Ministers,  a  system  to  grant  a  State  guarantee  for  liabilities  entered  into  by  the 
supervised institutions as further identified by such a decree15. The ECB welcomes the amendment 

made to Article 117bis since it clarifies the scope of the powers given to the King with regard to 

complementary or derogatory measures in the case of financial crisis. In this respect, the ECB notes 

that the reference to the possibility for the King to take ‘any measure’ to preserve the stability of the 

financial system has been deleted. Without prejudice to the comments made below on the substance 

of the draft royal decree, the ECB welcomes the introduction of an explicit legal basis in the law for 

the granting of a State guarantee. 

2.2  The  ECB  notes  that  there  is  an  ongoing  discussion  at  both  the  international  and  European  levels 

with a view to coordinating the many diverse actions of countries aimed at preserving confidence 

and stability in the international financial markets. The following common principles to guide the 

actions of Member States were agreed at the Ecofin meeting on 7 October 2008: (i) interventions 

should  be  timely  and  the  support  should  in  principle  be  temporary;  (ii)  the  interests  of  taxpayers 

should  be  protected;  (iii)  existing  shareholders  should  bear  the  due  consequences  of  the 

intervention; (iv) the government should be in a position to bring about a change of management; 

(v) management should not retain undue benefits; (vi) governments may have, inter alia, the power 

to intervene with regard to remuneration; (vii) legitimate interest of competitors must be protected, 
in particular through the State aid rules; and (viii) negative spill-over effects should be avoided16. 

Moreover,  the  ECB  notes  that  on  12  October  2008  the  Heads  of  State  of  the  euro  area  issued  a 
‘Declaration  on  a  concerted  European  action  plan  of  the  euro  area  countries’17,  in  which  they 

confirmed  their  commitment  to  act  together  in  a  decisive  and  comprehensive  manner  to  restore 

confidence in and proper functioning of the financial system, with the aim of restoring appropriate 

and  efficient  financing  conditions  for  the  economy.  They  agreed  on  common  principles  to  be 

followed  by  governments,  central  banks  and  supervisors  in  the  euro  area  and  the  EU  to  avoid 

national measures which could adversely affect the functioning of the single market and the other 

Member  States.  This  coordinated  approach  includes  initiatives  aimed  at:  ensuring  appropriate 

liquidity;  facilitating  the  funding  of  banks  through  various  means;  providing  additional  capital 

resources to financial institutions; and recapitalisation of distressed banks. Against this background, 

the  ECB  highlights  that  all  of  the  initiatives  put  in  place  by  national  governments  to  restore 

confidence in financial markets should be aimed at implementing such common principles, in the 

spirit of close cooperation with other Member States and EU institutions.    

14  
15 
16  

17  

New Article 117bis (1) of the Law of 2 August 2002. 
New Article 117bis (2) of the Law of 2 August 2002. 
See 
www.consilium.europa.eu. 
See the declaration of 12 October 2008, available on the French Presidency’s website at www.ue2008.fr. 

the  2894th  Council  meeting  (13784/08),  available  on 

the  press  release  of 

the  Council  website  at 

3 

                                                 
2.3  On a general note, the ECB would like to underline that the draft royal decree defines in very broad 
terms:  (i)  the  possible  beneficiaries  of  a  State  guarantee18;  (ii)  the  type  of  liabilities  that  can  be 
covered19; as well as (iii) the modalities and conditions which can be imposed on the beneficiaries 
by the Minister of Finance20. The draft royal decree therefore leaves a wide margin of discretion to 

the Minister of Finance in his decision whether to grant a State guarantee and in specifying further 

the modalities and conditions for granting the guarantee. In this respect, the ECB recommends that 

the  draft  royal  decree  (in  its  recitals)  or  the  report  to  the  King  relating  to  it  should  refer  to  the 

abovementioned Declaration and specify that the draft royal decree, as  well as  any implementing 

measure  and/or  decision,  are  adopted  in  the  context  and  should  be  read  in  the  light  of  the  said 

Declaration. 

2.4  The ECB underlines that the recommendations made  in this opinion in relation to the draft royal 

decree  should  be  read  together  with  the  recommendations  previously  made  by  the  ECB  in  its 
Opinion  CON/2008/4621.  In  this  respect,  the  ECB  recalls  more  specifically  the  importance  it 

attaches to coordinated responses from national authorities and to the compliance of the draft royal 

decree,  as  well  as  any  implementing  measure  and/or  decision,  with  Community  law,  including 
State  aid  rules22.  The  ECB  also  wishes  to  draw  the  consulting  authority’s  attention  to  the  recent 

ECB opinions issued at the request of other Member States, in which the ECB has commented on 
legislative  proposals  sharing  some  of  the  features  of  the  draft  royal  decree23.  It  is  the  ECB’s 

intention  to  facilitate  coordination  of  the  various  national  efforts  addressing  the  current  financial 

situation,  inter  alia  through  timely  adoption  and  publication  of  ECB  opinions  on  such  national 

legislative proposals. 

3.  

Specific comments 

3.1  Selection of the beneficiary institutions 

The ECB reiterates the stance taken in its Opinion CON/2008/44, according to which arrangements 

which  may  be  seen  as  providing  preferential  treatment  to  specified  credit  institutions  should  be 
avoided24. In the present case, the Minister of Finance may decide to guarantee the liabilities of any 

credit  institution  or  financial  holding  company  incorporated  under  Belgian  law  provided  that  it 
complies  with  the  conditions  outlined  in  the  draft  royal  decree25.  The  ECB  would  recommend 

clarifying  in  the  draft  royal  decree  or  in  the  report  to  the  King  that  the  State  guarantee  will  be 

18  

19  

20  
21  
22  
23  

24  
25  

I.e.  credit  institutions  and/or  financial  holding  companies  incorporated  under  Belgian  law  which  have  taken,  or  have 
committed  themselves  to  taking,  all  measures  which  are  useful  in  order  to  support  their  financial  situation,  their 
solvability and their liquidity (see Articles 2 and 3 of the draft royal decree). 
I.e. liabilities entered into vis-à-vis other credit institutions and/or professional counterparts belonging to the categories 
identified by the Minister of Finance, provided that they have been entered into between 9 October 2008 and 31 October 
2009 and mature at the latest on 31 October 2011; see Article 2 of the draft royal decree. 
On these modalities, see paragraph 1.2, concerning Article 4 of the draft royal decree. 
Opinion CON/2008/46. 
Opinion CON/2008/46, in particular paragraphs 2 and 5. 
See  Opinion  CON/2008/48  of  15  October  2008  at  the  request  of  the  Irish  Minister  for  Finance  on  a  draft  Credit 
Institutions (Financial Support) Scheme 2008. 
See Opinion CON/2008/44, paragraph 2.3. 
For these conditions, see paragraph 1.2. 

4 

 
                                                 
granted to these entities in accordance with the requirements of EC competition law and State aid 

rules.  In  this  context,  it  should  be  ensured  that  the  beneficiary  institution(s)  will  not  be  unfairly 
advantaged by making undue use of their guaranteed status26.  

3.2  Types of liabilities covered by the guarantee 

The  ECB  understands  that  the  draft  royal  decree  does  not  define  what  is  encompassed  by 

‘liabilities’  (verbintenissen/engagements)  eligible  to  be  covered  by  a  State  guarantee.  In  this 

respect,  the  Belgian  authorities  publicly  announced  before  the  present  consultation  that  such 

liabilities would encompass all of the financing raised by a beneficiary institution in order to obtain 

refinancing  from  credit  institutions  and  institutional  counterparties  and  would  cover  instruments 

such  as  bonds  and  debt  securities  issued  by  the  beneficiary  to  institutional  investors,  as  well  as 

interbank  deposits,  fiduciary  deposits,  deposits  of  central  banks,  deposits  of  institutions, 

commercial  paper,  certificates  of  deposits  and  medium-term  notes,  provided  that  they  were 

contracted or renewed by the beneficiary institution between 9 October 2008 and 31 October 2009 
and that they mature before 31 October 201127.  

The ECB also notes that, in line with the abovementioned Declaration, Member States have to act 

in coordinated manner to avoid significant differences in national implementation which could have 

a counter-productive effect, creating distortions in global banking markets. The euro area Heads of 

State also acknowledged the need to work in cooperation with the ECB so as to ensure consistency 

with  the  management  of  liquidity  by  the  Eurosystem  and  compatibility  with  the  operational 

framework  of  the  Eurosystem.  Against  this  background,  the  ECB  notes  that  uncoordinated 

decisions among Member States should be avoided as they may involve a fragmentation of the euro 

area money market. In this context, the ECB would make a number of observations. First, it is the 

ECB’s view that the extension of the State guarantee to cover interbank deposits should be avoided. 

This could entail a substantial distortion in the various national segments of the euro area money 

market  by  potentially  increasing  short-term  debt  issuance  activity  across  Member  States  and 

therefore  impairing  the  implementation  of  the  single  monetary  policy,  which  is  an  exclusive 
competence  of  the  Eurosystem  under  Article  105(2)  of  the  Treaty28.  Second,  it appears  crucial  to 

ensure the harmonisation of the price determination of such a guarantee within the euro area and the 

EU where a level playing field is of essence. The ECB should be involved in such concertation and 

coordination, and would welcome this being explicitly foreseen in any subsequent legislation. 

3.3 

Involvement of supervisory authorities 

The  ECB  notes  that  the  Minister  of  Finance’s  decision  to  grant  the  State  guarantee  is,  inter  alia, 

subject  to  the  condition  that  the  beneficiary  has  taken  (or  has  committed  itself  to  taking)  all 
measures which are useful in order to support its financial situation, its solvency and its liquidity29. 

26  
27  

28  
29  

See for example Opinion CON/2008/48, paragraph 3.4. 
See the press release of 10 October 2008 issued by the Secretariat of the Belgian Deputy Prime Minister and Minister of 
Finance. 
See also Opinion CON/2008/48, in particular paragraph 3.7. 
See Article 3 of the draft royal decree. 

5 

 
 
                                                 
In this respect, the ECB notes that proper coordination with the supervisory authority will have to 

be ensured. 

3.4  Relationship with the preservation of the stability of the financial system 

As  mentioned  above,  the  draft  royal  decree  is  in  particular  motivated  by  the  Belgian  authorities’ 
wish  to  preserve  the  stability  of  the  Belgian  financial  system30.  However,  under  the  draft  royal 

decree, the Minister of Finance’s decision to grant a State guarantee is subject to the condition that 

the  granting  of  the  guarantee  is  justified  ‘in  the  interest  of  the  Belgian  economy  and  by  the 
protection of all depositors’31. In addition, the ECB notes that, in its final version, Article 117bis of 

the  Law  of  2  August  2002  empowers  the  King  to  establish  the  State  guarantee  ‘in  the  event  of  a 

sudden crisis on the financial markets or of a serious threat of systemic crisis, and in order to limit 

the  scale  or  effects  thereof’.  Therefore,  the  ECB  recommends  that  this  apparent  discrepancy  is 

clarified in the draft royal decree. 

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

Done at Frankfurt am Main, 17 October 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

30  
31  

See paragraph 1.1 and the reference to the first recital of the draft royal decree. 
See Article 3 of the draft royal decree. 

6