Opinion of the European Central Bank of 9 February 2009 at the request of the Latvian Ministry of Finance on a draft regulation on fair compensation granted to a bank or its shareholders (CON/2009/11)
Date: 2009-02-09
Institutions: European Central Bank
Subjects: Latvia, bank, financial stability, indemnification, national law, shareholder

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 9 February 2009 

at the request of the Latvian Ministry of Finance  

on a draft regulation on fair compensation granted to a bank or its shareholders 

(CON/2009/11) 

Introduction and legal basis 

On 5 February 2009 the European Central Bank (ECB) received a request from the Latvian Ministry of 

Finance for an opinion on a draft regulation establishing procedures for determining the amount, offer and 

payment of fair compensation granted to a bank or its shareholders (hereinafter the ‘draft regulation’).  

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

European  Community  and  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 regulation 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 regulation 

The  main  objective  of  the  draft  regulation  is  to  lay  down  procedures  according  to  which  the  Latvian 

Cabinet of Ministers calculates the amount of compensation to be paid to banks that are being taken over 

by the State or to those banks’ shareholders. The draft regulation also provides for procedures for offering 

and paying compensation. 

2.  General observations 

2.1  The  legal  basis  for  the  adoption  of  the  draft  regulation  is  the  Law  on  bank  takeovers  of 
18 December 20082 on which the ECB was consulted, albeit after its adoption. As a consequence, 

the ECB’s views could not be duly taken into account in the Latvian legislative process.   

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2  

OJ L 189, 3.7.1998, p. 42.  
Published in Latvijas Vēstnesis, 202 (3986) on 30 December 2008. 

 
 
 
 
 
                                                 
2.2 

In this context, the ECB notes that the recapitalisation measures considered in Member States are 

aimed at strengthening the capital position of fundamentally sound financial institutions, in order to 

improve the functioning and stability of the banking system and to ensure the proper financing of 

the economy.  

In line with the ‘Declaration on a concerted European action plan of the euro area countries’ issued 
by the Heads of State of the euro area on 12 October 2008 (hereinafter the ‘Declaration’)3, the ECB 

has  highlighted  in  its  opinions  that  close  coordination  at  the  EU  level  of  Government  measures 
intended  to  alleviate  tensions  in  the  financial  markets  is  of  crucial  importance4.  This  coordinated 

approach  includes  initiatives  aimed  at  ensuring  appropriate  liquidity,  facilitating  the  funding  of 

banks  by  various  means,  providing  additional  capital  resources  to  financial  institutions  and 

recapitalising distressed banks.  

In line with the Declaration, the ECB emphasises that the support measures brought in by Member 

States should be temporary in nature and that the duration of such measures should be harmonised 

throughout the EU. 

Furthermore, and in line with previous ECB opinions5, it should be ensured that such measures are 

in accordance with the requirements of Community competition law, in particular State aid rules, 
and that the State’s role as shareholder is limited in time6. 

2.3 

In the absence of further details, the ECB has no observations on the specific provisions of the draft 

regulation. It notes, however, that pricing conditions for compensation granted should be risk-based 

and market-oriented, as they should not lead to differences in the treatment of financial institutions. 

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4  

5  

6 

The Declaration is available on the French Presidency’s website at www.ue2008.fr. 
See  the  Recommendations  of  the  Governing  Council  of  the  European  Central  Bank  on  the  pricing  of  recapitalisations 
issued  on  20  November  2008,  available  on  the  ECB’s  website  at  www.ecb.europa.eu.  See  also  ECB  Opinion 
CON/2008/79  of  27  November  2008  at  the  request  of  the  Greek  Ministry  of  Economy  and  Finance  on  a  draft  law  on 
enhancing liquidity of the economy to address the impact of the international financial crisis and on a draft decision on its 
implementation,  as  well  as  ECB  Opinion  CON/2009/3  of  8  January  2009  at  the  request  of  the  Slovenian  Ministry  of 
Finance on a draft decree laying down criteria and conditions for the implementation of State capital investments and for 
the conversion of State claims into capital shares under Article 81.a of the Law on public finance. 
See  e.g.  paragraph  3.8  of  ECB  Opinion  CON/2008/68  of  13  November  2008  at  the  request  of  the  Finnish  Ministry  of 
Finance on a draft government proposal for laws amending the Law on the Government Guarantee Fund and the Law on 
credit institutions. 
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’  (OJ  C  208  of  25.10.2008,  p.  8). Also  ‘Communication 
from the Commission – The recapitalisation of financial institutions in the current financial crisis: limitation of aid to the 
minimum necessary and safeguards against undue distortions of competition’, available on the Commission’s website at 
www.ec.europa.eu. 

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

Done at Frankfurt am Main, 11 February 2009. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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