Opinion of the European Central Bank of 27 October 2008 at the request of the Spanish State Secretary for Economic Affairs on a draft Order implementing Royal Decree-Law 6/2008 creating the Fund for the acquisition of financial assets and on a draft Basic Agreement of the Fund’s Executive Council (CON/2008/60)
Date: 2008-10-27
Institutions: European Central Bank
Subjects: Spain, auction sale, credit institution, financial stability, short-term financing

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 27 October 2008  

at the request of the Spanish State Secretary for Economic Affairs 

on a draft Order implementing Royal Decree-Law 6/2008 creating the Fund for the acquisition 

of financial assets and on a draft Basic Agreement of the Fund’s Executive Council  

(CON/2008/60) 

Introduction and legal basis 

On  23  October  2008  the  European  Central  Bank  (ECB)  received  a  request  from  the  Spanish  State 

Secretary for Economic Affairs for an opinion on a draft Order implementing Royal Decree-Law 6/2008 

of 10 October creating the Fund for the acquisition of financial assets (hereinafter the ‘draft Order’) and 

on  a  draft  Basic  Agreement  of  the  Fund’s  Executive  Council  (hereinafter  the  ‘draft  Basic  Agreement) 

(hereinafter collectively the ‘draft provisions’).  

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  provisions  relate  to  the  Banco  de  España  and  to  rules  applicable  to 

financial  institutions  that  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 provisions 

The  draft  provisions  will  implement  Royal  Decree-Law  6/2008  by  determining  the  composition  of  the 

Fund’s  Executive  Committee,  creating  a  technical  committee  to  assist  the  Executive  Committee  and 

specifying the eligible assets, the auction procedures, the Banco de España’s role and the validity period 

of these measures.   

2. 

General observations  

2.1  The  ECB  has  issued  an  opinion  on  the  Royal  Decree-Law  creating  the  Fund  (CON/2008/52  of 

17 October  2008)  and  is  now  called  upon  to  comment  on  the  implementing  legislation  to  be 

adopted under such Royal Decree-Law. 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
 
                                                 
2.2 

In line with its views stated in paragraphs 2.3 and 2.4 of CON/2008/52, the ECB welcomes that the 

Fund operations will be subject to an expiry date, namely 31 December 2012, and that auctions will 

be open to all credit institutions registered with the Banco de España and thus also to branches of 
foreign credit institutions in Spain2.  

2.3   Moreover,  in  line  with  paragraph  3.2  of  CON/2008/52,  the  ECB  welcomes  that  the  Banco  de 

España’s role will be limited to acting as government agent and deposit bank and to providing its 

expertise as part of the Technical Committee assisting the Executive Committee. The draft Order 
lays down detailed rules in this respect3, whereby nothing in such rules exceeds the scope defined 

above  of  the  Banco  de  España’s  participation  in  the  Fund.  The  ECB  expects  that  the  practical 

operation  of  the  Fund  under  the  draft  Order  will  not  interfere  with  the  Banco  de  España’s 

institutional and financial independence, as well as its capacity to perform its tasks under the Treaty 

and  the  Statute  of  the  European  System  of  Central  Banks  and  of  the  European  Central  Bank. 

Further, noting that the public character of the Fund is confirmed by the draft Basic Agreement’s 
provisions related, in particular, to the composition of the Fund’s Executive Committee4, the ECB 
reiterates its earlier position5 that the Fund may not benefit from overdraft facilities or any type of 

credit  facility  with  the  Banco  de  España,  in  accordance  with  Article  101  of  the  Treaty  and 
Regulation (EC) No 3603/936. 

3. 

Specific comments 

3.1   Collateral 

The ECB notes that, according to Section 2 of the draft Basic Agreement, for repurchase agreement 

operations conducted by the Fund, the eligibility of the assets for the operations with the Fund will 

be based on the list of the assets eligible as collateral for the Eurosystem’s refinancing operations. 

In  this  respect,  the  ECB  recommends  putting  in  place  a  mechanism  to  exchange  information  in 

order to avoid a risk of double mobilisation of collateral. 

In  the  same  vein,  Section  2  also  provides  that  the  margins  and  haircuts  applied  to  the  assets 

provided as collateral for the repurchase agreement operations will follow the guidelines adopted in 

the  context  of  the  Eurosystem’s  operational  framework.  The  ECB  notes  that  the  Fund  should 

follow the standard of daily margin calls to ensure that the market value of collateral after haircut 

remains adequate to collateralise the loan, in line with the Eurosystem. The prices used to value the 

collateral should also be the same as the prices used by the Eurosystem. 

2  
3  
4  
5  
6  

See Article 5(3) of the draft Order, as well as its Sole Final Provision.   
See Article 7 of the draft Order. 
See Section 2 of the draft Basic Agreement. 
See paragraph 3.3 of Opinion CON/2008/52. 
Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the application of the prohibitions 
referred to in Articles 104 and 104b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1). 

2 

 
                                                 
3.2   Pricing of the operations conducted by the Fund 

The  recent  ECB  Opinion  CON/2008/52  notes  that,  in  line  with  the  declaration  on  a  concerted 
European  action  plan  of  the  euro  area  countries7,  Member  States  have  to  act  in  a  coordinated 

manner  to  avoid  significant  differences  in  national  implementation  from  having  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  to  ensure  consistency  with  the 

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

framework.  As  a  result,  the  ECB  points  out  that  uncoordinated  decisions  among  Member  States 

should be avoided as they may involve a fragmentation of the euro area money market. 

Against this background, it is of utmost importance that the operations conducted by the Fund do 

not  interfere  by  any  means  with  the  signalling  of  the  single  monetary  policy  and/or  with  the 

Eurosystem’s refinancing operations. In this context, a number of observations can be made. 

Regarding  the  repurchase  agreement  operations  conducted  by  the  Fund,  the  ECB  notes  the  loans 

granted against collateral will be based on an auction procedure where the minimum rate for bids 

should not be below the cost of State funding for the corresponding maturity. First, such operations 

should  not  be  conducted  below  the  three-month  maturity  in  order  to  ensure  consistency  with  the 

Eurosystem’s  management  of  liquidity. In  this respect,  the  ECB  welcomes  Section  2 of  the draft 

Basic  Agreement,  which  provides  that  the  refinancing  operations  conducted  by  the  Fund  will  be 

above  12-month  maturity.  Second,  the  Fund’s  operations  must  be  based  on  a  genuine  market-

oriented auction procedure in order to avoid collusive agreement between counterparts. 

Regarding the Fund’s acquisition of assets, the ECB recommends further clarification of the price 

determination of the assets that could be acquired by the Fund. In this respect, the ECB notes that 

the prices at which banks’ assets could be acquired by the Fund should be based on market prices. 

The ECB therefore suggests stating in the draft provisions that the price of the acquisitions by the 

Fund  must  not  interfere  with  the  transmission  of  the  Eurosystem’s  monetary  policy  and  should 

avoid any distortions in asset prices across euro area countries. 

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

Done at Frankfurt am Main, 27 October 2008. 

[signed] 

The Vice-President of the ECB 

Lucas D. PAPADEMOS 

7  

Available on the website of the French Presidency at www.eu2008.fr. 

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