Opinion of the European Central Bank of 19 March 2008 at the request of the Belgian Ministry of Finance on a draft royal decree amending the Royal Decree of 10 December 2008 on the guarantee for certain risks assumed by financial institutions (CON/2009/25)
Date: 2009-03-19
Institutions: European Central Bank
Subjects: Belgium, State aid, financial institution, financial stability, guarantee, national law, subsidiary

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 19 March 2008 

at the request of the Belgian Ministry of Finance 

on a draft royal decree amending the Royal Decree of 10 December 2008 on the guarantee for 

certain risks assumed by financial institutions 

(CON/2009/25) 

Introduction and legal basis 

On  11  March  2009  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 amending the Royal Decree of 10 December 2008 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 extends the scope of the Royal Decree of 10 December 2008, on which the 
ECB  previously  opined2.  The  Royal  Decree  of  10  December  2008  completes  the  system  for 
granting the guarantee of the Belgian State for liabilities entered into by financial institutions3 by 

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OJ L 189, 3.7.1998, p. 42.  
See ECB Opinion CON/2008/74 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. All ECB opinions are available on the ECB 
website at www.ecb.europa.eu.  
This  system  was  established  by  the  Royal  Decree  of  16  October  2008  (see  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), which is based on Articles 
117bis and 117ter of the Law of 2 August 2002 on the supervision of the financial sector and on financial services (see 

 
 
 
 
                                                 
establishing a State guarantee aimed at avoiding that the entity whose commitments are guaranteed, 

or a subsidiary thereof, will be exposed to a serious need for additional liquidity, due inter alia to a 
downgrading of their rating4.  

1.2  Overall,  the  draft  royal  decree  does  not  substantially  alter  the  scheme  set  up  under  the  Royal 
Decree of 10 December 20085. Instead, it is limited to extending the scope of the scheme so that 

not only commitments to cover losses or a risk of losses on financial assets held by a guaranteed 
entity’s  subsidiaries  may be  guaranteed6,  but  also  in  certain  circumstances  an  undertaking by  the 
guaranteed entity to buy financial assets held by its subsidiaries7. The report to the King explains 

that  considering  that  an  entity’s  liquidity  position  is,  in  addition  to  the  risk  of  default  on  its 

portfolio, another element taken into account in determining its rating, it might be necessary for a 

parent company to undertake to buy its subsidiary’s assets in certain circumstances (i.e. to grant the 

subsidiary a put option over the assets) in order to generate sufficient liquidity for the subsidiary 

and therefore uphold the latter’s rating, which in turn will avoid liquidity outflows.  

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  markets8.  The  ECB  underlines 

that all the comments and recommendations made in its Opinions CON/2008/74 and CON/2008/50 apply 

equally to the draft royal decree.  

In particular, the ECB wishes to stress that it is important for national authorities to seek to coordinate 

their responses to the current financial situation with their European Union partners. This is in line with 

the Declaration of 12 October 2008 made at the summit of the euro area Member States in Paris, which 

on these provisions 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; 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 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). 
The draft royal decree is also based on Article 117bis of the Law of 2 August 2002.  
Concerning the reasons behind the adoption of the Royal Decree of 10 December 2008, see ECB Opinion CON/2008/74, 
in particular paragraph 1.2.  
The  draft  royal  decree  does  not  modify:  (i)  the  list  of  entities  whose  commitments  can  be  guaranteed,  i.e.  credit 
institutions,  financial  holding  companies  (financiële  holdings/compagnies  financières)  or  mixed  financial  holding 
companies (gemengde financiële holdings/compagnies financières mixtes), hereinafter together the ‘guaranteed entities’; 
(ii)  the  condition  that  these  entities  must  take  measures  aimed  at  supporting  their  financial  situation,  solvency  and 
liquidity, or commit to taking such measure; (iii) the requirement that the guaranteed commitments or the guarantee itself 
can contribute to avoiding the guaranteed entity or its subsidiaries from being exposed to a serious need for additional 
liquidity, due inter alia to a downgrading of their rating; and (iv) the requirement that the granting of the guarantee is 
justified  in  the  interests  of  the  Belgian  economy  and  by  the  need  to  protect  all  depositors.  The  power  granted  to  the 
Belgian Minister for Finance to determine the other detailed rules and conditions of the guarantee, including its ceiling 
and its price, also remain unaffected by the draft royal decree. See further ECB Opinion CON/2008/74, paragraph 1.3. 
Article 2 of the Royal Decree of 10 December 2008; see ECB Opinion CON/2008/74, paragraph 1.3. 
Article 1 of the draft royal decree, amending Article 2 of the Royal Decree of 10 December 2008. 
The ECB has been consulted by the Belgian authorities on five other draft legislative provisions adopted in this context: 
(i)  ECB  Opinion  CON/2008/46;  (ii)  ECB  Opinion  CON/2008/50;  (iii)  ECB  Opinion  CON/2008/61;  (iv)  ECB  Opinion 
CON/2008/74; and (v) ECB Opinion CON/2008/91. 

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stressed  the  need  for  the  Member  States  to  ‘act  in  a  united  manner  and  avoid  that  national  measures 
adversely affect the functioning of the single market and the other member States’9. 

The  ECB  also  reminds  the  consulting  authority  of  the  importance  of  ensuring  the  harmonisation  of  the 

price  determination  of  such  a  guarantee  within  the  euro  area  and  the  EU,  and  that  the  price  of  such 

guarantee should be risk-based and market-oriented, i.e. determined on the basis of the cost of obtaining a 

corresponding guarantee in the market. In this respect, the ECB recommends to apply, mutatis mutandis, 
the  practice  set  out  in  its  Recommendations  on  government  guarantees  for  bank  debt10.  Hence,  the 

extension of the scope of the State guarantee under the draft royal decree must be appropriately reflected 

in the price determination of the State guarantee. 

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

Done at Frankfurt am Main, 19 March 2009. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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10  

See the Declaration of 12 October 2008, available on the website of the French Presidency, www.ue2008.fr. 
See the Recommendations of the Governing Council of the European Central Bank on government guarantees for bank 
debt, issued on 20 October 2008, available on the ECB’s website at www.ecb.europa.eu. 

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