Opinion of the European Central Bank of 29 October 2008 at the request of the Swedish Ministry of Finance on a draft ordinance on State guarantees for banks etc. (CON/2008/62)
Date: 2008-10-29
Institutions: European Central Bank
Subjects: Sweden, credit guarantee, credit institution, economic support, financial stability

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 29 October 2008 

at the request of the Swedish Ministry of Finance on a draft ordinance  

on State guarantees for banks etc. 

(CON/2008/62) 

Introduction and legal basis 

On 27 October 2008 the European Central Bank (ECB) received a request from the Swedish Ministry of 

Finance  for  an  opinion  on  a  draft  ordinance  on  State  guarantees  for  banks  etc.  (hereinafter  the  ‘draft 

ordinance’). 

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 ordinance 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 ordinance 

The draft ordinance implements the Law on State aid to credit institutions (hereinafter the ‘Law’)2. The 

draft ordinance provides for the granting of aid, in the form of State guarantees for debt obligations, to 

banking companies, savings banks, members’ banks and credit market companies, within the framework 

of the Law. It specifies which credit institutions are eligible for receiving the guarantees and the scope of 

the  guarantee  commitment.  It  also  sets  out  the  terms  and  conditions  under  which  the  National  Debt 

Office, which is responsible for taking decisions on the aid, will carry out its tasks. 

1  
2  

OJ L 189, 3.7.1998, p. 42.  
See  ECB  Opinion  CON/2008/59  of  24  October  2008  at  the  request  of  the  Swedish  Ministry  of  Finance  on  a  draft 
proposal on stabilising measures for the Swedish financial system. 

 
 
 
 
 
                                                 
2.  General observations 

2.1  Valuation and scope of the State guarantee 

2.1.1  In accordance with the ‘Declaration on a concerted European action plan of the euro area countries’ 
of 12 October 2008 by the Heads of State of the euro area (hereinafter the ‘Declaration’)3 and as 

endorsed by the European Council on 16 October 2008, Member States have to act in a coordinated 

manner  to  avoid  significant  differences  in  national  implementation  that  could  have  a  counter-

productive effect, creating distortions in global banking markets. 

2.1.2  According  to  Sections  2,  4,  6  and  7  of  the  draft  ordinance,  the  State  guarantees  are  only  to  be 

provided for bank debt issuance, defined as debt with a maturity of more than three months but less 

than five years, which thereby excludes interbank deposits from the scope of the State guarantees. 

The  ECB  welcomes  such  arrangements  for  granting  government  guarantees  on  bank  debt  and 

considers  that  the  proposed  arrangements  in  their  practical  implementation  should  aim  at: 

(i) addressing  the  funding  problems  of  liquidity-constrained  solvent  banks  by  improving  the 

functioning of the market for bank debt of longer-term maturity; (ii) preserving the level-playing-

field  among  financial  institutions  and  avoiding  market  distortions;  and  (iii)  ensuring  consistency 

with the management of liquidity by Sveriges Riksbank. 

2.1.3  As  regards  the  price  to  be  charged  for  granting  a  guarantee  according  to  Section 13  of  the  draft 

ordinance, the ECB notes that the price for the guarantee will be risk-based and determined on the 

basis of the costs of a corresponding guarantee under normal market conditions. In this respect, for 

the  sake  of  transparency,  a  further  more  precise  indication  should  be  given  on  the  method  to  be 

used  to  calculate  the  charges.  In  the  same  vein,  it  is  also  noted  that  the  draft  ordinance  should 

provide for potential cases where no market price is available for the risk of some assets. Moreover, 

the  ECB  would  remind  the  Swedish  authorities  that  it  is  of  crucial  importance  to  ensure 

harmonisation  of  the  price  for  such  guarantees  within  the  EU  where  a  level-playing-field  is 

essential. 

2.2 

Involvement of the central bank 

The  ECB  notes  that  according  to  Section  8  of  the  draft  ordinance,  Sveriges  Riksbank  and  the 

Financial  Supervisory  Authority  will  be  consulted  on  matters  concerning  aid,  which  includes 

regulations  issued  by  the  National  Debt  Office  under  the  draft  ordinance.  The  ECB  understands 

that this function will be performed without prejudice to Sveriges Riksbank’s independence and in 

compliance with Treaty provisions.  

2.3  Conditions of support 

2.3.1  The  support  in  the  form  of  State  guarantees  provided  to  credit  institutions  is  made  subject  to  a 

number  of  conditions  specified  in  Sections 10  and  11  of  the  draft  ordinance,  which  are  aimed  at 

ensuring  that,  inter  alia,  (i)  the  public  authorities  have  at  their  disposal  appropriate  powers  to 

3  

The Declaration is available on the French Presidency’s website at www.ue2008.fr. 

2 

                                                 
supervise and monitor the use of the provided State guarantee, and (ii) the provided State guarantee 

is not used by the supported credit institution to expand its operations as a result of the support it 

received.  The  ECB  considers  that  such  measures  are  in  accordance  with  the  principles  of  the 

Declaration,  in  particular  the  need  to  avoid  any  possible  abuse  of  the  provided  support  at  the 
expense of entities not benefiting from the support arrangements4.   

2.3.2  The  ECB  further  notes  that,  under  Section  15  of  the  draft  ordinance,  institutions  applying  for  a 

State  guarantee  will  provide  the  National  Debt  Office  with  information  needed  to  operate  the 

support  scheme.  In  this  regard,  the  ECB  reiterates  that  the  general  principles  of  secrecy  and 

confidentiality of information provided by financial institutions should be adequately safeguarded. 

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

Done at Frankfurt am Main, 29 October 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

4  

See paragraph 3.1 of Opinion CON/2008/59. 

3