Opinion of the European Central Bank of 21 November 2008 at the request of the Belgian Ministry of Finance on a draft royal decree on the guarantee for certain risks assumed by financial institutions (CON/2008/74)
Date: 2008-11-21
Institutions: European Central Bank
Subjects: Belgium, credit guarantee, financial institution, financial stability, liquidity control

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 21 November 2008 

at the request of the Belgian Ministry of Finance 

on a draft royal decree on the guarantee for certain risks assumed by financial institutions 

(CON/2008/74) 

Introduction and legal basis 

On 17 November 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  on  the  guarantee  for  certain  risks  assumed  by  financial  institutions 

(hereinafter the ‘draft royal decree’). Given the current turbulence in the financial markets and the need 

for  firm  intervention  by  the  authorities  involved,  the  consulting  authority  has  requested  the  ECB  to 

provide its opinion as a matter of extreme urgency to allow the swift adoption of the draft royal decree.  

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 draft royal decree 

aims to complete the system for granting the guarantee of the Belgian State for liabilities entered 
into by financial institutions, which was established by the Royal Decree of 16 October 20083 and 
has the same legal basis4.  

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OJ L 189, 3.7.1998, p. 42.  
See the first recital of the draft royal decree.  
See in relation to the Royal Decree of 16 October 2008, ECB Opinion CON/2008/50 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.  All  ECB  opinions  are  available  on  the  ECB  website  at 
www.ecb.europa.eu. 
i.e.  Article  117bis  and  117ter  of  the  Law  of  2 August  2002  on  the  supervision  of  the  financial  sector  and  on  financial 
services.  On  this  provision,  see  paragraph  2.1  of  ECB  Opinion  CON/2008/50  and  paragraph 1.1  of  ECB  Opinion 
CON/2008/61 of 28 October 2008 at the request of the Belgian Minister for Finance on a draft royal decree implementing 
the Law of 15 October 2008 on measures promoting financial stability and in particular establishing a State guarantee for 

 
 
 
 
                                                 
1.2  More specifically, the purpose of the draft royal decree is to avoid liquidity outflows5. The need for 

the  draft  royal  decree  was  triggered  in  particular  by  the  commitments  taken  by  certain  financial 

institutions towards third parties under which, in the event the financial institutions or an entity in 

their group being downgraded, the third parties concerned may demand cash or other collateral or 
alternatively early repayment6.  

1.3 

In  this  context,  the  draft  royal  decree  empowers  the  Belgian  Minister  of  Finance  to  grant  a  State 
guarantee7  to  cover  liabilities  entered  into  by  credit  institutions,  financial  holding  companies 

(financiële  holdings/compagnies  financières)  or  mixed  financial  holding  companies  (gemengde 
financiële holdings/compagnies financières mixtes; hereinafter together the ‘beneficiary entities’)8, 

provided  that:  (i)  the  liabilities  covered  are  commitments  aiming  at  covering  losses  or  a  risk  of 

losses  on  financial  assets  held  by  subsidiaries  of  a  beneficiary  entity,  and  (ii)  these  commitments 

and the State guarantee can therefore contribute to avoiding the beneficiary entity or its subsidiaries 

from being exposed to a serious need for additional liquidity, due in particular to a downgrading of 
their rating9. 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 need to protect all depositors10. Under the draft royal 

degree  the  Minister  for  Finance  would  be  empowered  to  lay  down  further  detailed  rules  and 

conditions for a State guarantee, including setting its ceiling, specifying the remuneration to be paid 

for  granting  the  guarantee,  and  any  other  detailed  rule  to  ensure  compliance  with  the  two 
abovementioned conditions11. The State guarantee would not be granted by means of a Ministerial 

Decree, but would be established by an agreement which would also define its detailed rules and 

conditions. 

the provision of credit in the context of financial stability, in relation to the protection of deposits and life insurance and 
amending the Law of 2 August 2002 on the supervision of the financial sector and on financial services.  

See the Report to the King which precedes the draft royal decree. 
See the Report to the King which precedes the draft royal decree. 
See Article 1 of the draft royal decree. 
The ECB understands that mixed financial holding companies are covered by the draft royal decree in so far as they fall 
within the concept of financial undertakings belonging to a group over which the Commissie voor het Bank-, Financie- en 
Assurantiewezen/Commission  bancaire,  financière  et  des  assurances  exercises  consolidated  supervision  referred  to  in 
Article 117ter of the Law of 2 August 2002. 
See Article 2 of the draft royal decree. Despite the apparent inconsistency between the recital of the draft royal decree 
and Article 2 of the draft royal decree, it is understood that the main objective of the draft royal decree is to avoid the 
guaranteed entity or its subsidiaries from being exposed to a ‘serious need for additional liquidity’ and not exclusively to 
avoid ‘the risks of downgrading certain financial institutions’.  
See Article 3 of the draft royal decree. Article 3 of the Royal Decree of 16 October 2008 lays down similar conditions. 
See Article 4 of the draft royal decree. Article 4 of the Royal Decree of 16 October 2008 contains a similar provision. 

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2.   General observations 

The  ECB  has  already  opined  on  several  elements  of  the  general  rescue  package  put  in  place  by  the 
Belgian  authorities  in  response  to  the  current  turbulence  in  the  financial  markets12.  In  this  respect,  the 

ECB underlines that all the comments and recommendations made in ECB Opinion CON/2008/50 apply 

equally to the draft royal decree. In particular, the ECB first reiterates that arrangements which may be 

seen as providing preferential treatment to specified credit institutions should be avoided, as well as its 

recommendation to clarify in the draft royal decree or in the report to the King that the State guarantee 

will be granted to the beneficiary 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 status13. Second, the ECB also notes the importance 

of ensuring 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. While the ECB understands that the conditions and the price 

of the State guarantee provided for in the draft royal decree will be determined on a case-by-case basis, it 

is important that the price should be risk-based and market-oriented, i.e. determined on the basis of the 

cost of obtaining a corresponding guarantee in the market. This point should be clarified in the draft royal 

decree. Third, the ECB also wishes to stress in this context that since the Minister for 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 to support its financial situation, its solvency and 
its liquidity14, proper coordination with the supervisory authority will have to be ensured. 

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

Done at Frankfurt am Main, 21 November 2008. 

[signed] 

The Vice-President of the ECB 

Lucas D. PAPADEMOS 

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The ECB has already been consulted by the Belgian authorities on three other draft legislative provisions adopted in this 
context:  (i)  ECB  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;  (ii)  ECB  Opinion  CON/2008/50;  and  (iii)  ECB  Opinion 
CON/2008/61 of 28 October 2008 at the request of the Belgian Minister for Finance on a draft royal decree implementing 
the Law of 15 October 2008 on measures promoting financial stability and in particular establishing a State guarantee for 
the provision of credit in the context of financial stability, in relation to the protection of deposits and life insurance and 
amending the Law of 2 August 2002 on the supervision of the financial sector and on financial services.  
See ECB Opinion CON/2008/50, paragraph 3.1. 
See Article 3 of the draft royal decree. 

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