Opinion of the European Central Bank of 13 November 2008 at the request of the Spanish Ministry for Economic Affairs and Finance on a draft order implementing Royal Decree-Law 7/2008 authorising State guarantees (CON/2008/67)
Date: 2008-11-13
Institutions: European Central Bank
Subjects: EU action, Spain, debt, euro area, financial institution, financial stability, support mechanism

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 13 November 2008  

at the request of the Spanish Ministry for Economic Affairs and Finance 

on a draft order implementing Royal Decree-Law 7/2008 authorising State guarantees  

(CON/2008/67) 

Introduction and legal basis 

On 11 November 2008 the European Central Bank (ECB) received a request from the Spanish Ministry 

for  Economic  Affairs  and  Finance  for  an  opinion  on  a  draft  order  implementing  Royal  Decree-

Law 7/2008 of 13 October adopting urgent financial and economic measures in relation to the concerted 

European  action  plan  for  the  euro  area  countries,  in  particular  Article  1  authorising  State  guarantees 

(hereinafter the ‘draft order’).  

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 order 

The  draft  order  will  implement  Article  1  of  Royal  Decree-Law  7/2008  by  laying  down  rules  on  the 

conditions  for  the  guarantees,  the  eligibility  of  institutions  and  operations,  the  applicable  fees  and  the 

requesting and granting procedures.   

2. 

General observations  

The ECB adopted Opinion CON/2008/52 of 17 October 2008 on Royal Decree-Law 7/2008 and is now 

consulted  on its  implementing  legislation.  In  this  context,  the  ECB  notes  that  the  observations  made  in 

Opinion CON/2008/52 also apply to this draft order. 

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OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
 
                                                 
3. 

Specific comments 

3.1   Eligibility for support 

The ECB welcomes that Article 2 of the draft order is in line with the Commission’s guidance on 
compliance  by  the  financial  sector  support  schemes  with  State  aid  rules2,  in  particular  with  the 

eligibility  criteria  that  all  institutions  incorporated  in  the  Member  State  concerned,  including 

subsidiaries,  with  significant  activities  in  that  Member  State,  should  be  covered  by  the  scheme. 

However, the ECB notes that there are no provisions ensuring that the beneficiary institutions will 

not  be  unfairly  advantaged  by  making  undue  use  of  their  guaranteed  status  to  engage  in  a 

heightened level of activities which create market distortions and facilitate abnormal balance sheet 
growth3.  In  this  regard,  the  ECB  reiterates  the  importance  of  establishing  appropriate  safeguards 

such  as  limits  to  marketing  of  financial  products  or to  expansion of  activities  on  the basis  of  the 

State guarantees. 

3.2  Pricing 

The  ECB  welcomes  that  Article  4  of  the  draft  order,  in  line  with  paragraph 3.4  of  ECB  Opinion 

CON/2008/52, recognises the need for harmonising pricing with the ECB’s involvement. The ECB 

appreciates that the draft order’s Annex on pricing of the State guarantee is broadly in line with the 

Eurosystem’s  recommendations  on  government  guarantees  on  bank  debt.  In  particular,  it  is 

important to ensure that the price of the State guarantee is risk-based and market-oriented in that it 

is determined on the basis of the costs of a corresponding guarantee in the market. However, for 

legal  certainty  reasons,  the  ECB  recommends  deleting  the  specific  reference  to  the  Eurosystem’s 

recommendations on government guarantees on bank debt, which is not a legal act and is subject to 

revision. Finally, the ECB reiterates that it is crucial to ensure the harmonisation and coordination 

of the price determination of State guarantees within the European Union, given that a level playing 

field is of essence. 

3.3  Relationship with the single monetary policy  

As  stated  in  previous  opinions,  the  ECB  considers  that  extending  State  guarantees  to  interbank 

deposits  should  be  avoided,  as  it  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. 

Therefore,  the  ECB  welcomes  that,  according  to  Article  3(b)  of  the  draft  order,  no  interbank 

deposits may be covered by State guarantees.  

2  

3  

See ‘Communication from the Commission – The application of State aid rules to measures taken in relation to financial 
institutions  in  the  context  of  the  current  global  financial  crisis’  of  13  October  2008,  available  on  the  Commission’s 
website at www.ec.europa.eu (hereinafter the ‘Commission Guidance’). 
See point 27 of the Commission Guidance; see, e.g. paragraph 3.4 of ECB 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. 

2 

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

Done at Frankfurt am Main, 13 November 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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