Opinion of the European Central Bank of 15 April 2009 on certain amendments to the Law on banks in connection with the financial markets crisis (CON/2009/34)
Date: 2009-04-15
Institutions: European Central Bank
Subjects: Czechia, bank, capital increase, company in difficulties, financial stability, monetary crisis, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 15 April 2009  

on certain amendments to the Law on banks  

in connection with the financial markets crisis   

(CON/2009/34) 

Introduction and legal basis 

On  8  April  2009  the  European  Central  Bank  (ECB)  received  a  request  from  the  Czech  Ministry  of 

Finance for an opinion on a draft law amending Law No 21/1992 Coll. on banks (hereinafter the ‘draft 

law’). 

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 law 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 law 

The draft law is a preventive  measure in response to  the turbulent situation on the financial  markets in 

connection  with  the  global  financial  crisis.  The  main  purpose  of  the  draft  law  is  to  establish  a  legal 

framework which would facilitate increasing a distressed bank’s capital or the transfer of its business or 

liabilities to a sound institution. The proposed changes include: (i) a state-owned special purpose bank, 

i.e.  a  bridge  bank,  may  be  established  for  the  purpose  of  acquiring  and  operating  the  business  of  a 

distressed bank. This is considered necessary in the event that at the relevant time there would be no bank 

on the market willing to take over the business of a distressed bank; (ii) special rules are laid down for the 

increase of a bank’s capital in the event that the purpose of such increase is to comply with regulatory 

capital requirements. The objective is to ensure the fastest possible supply of real money to a distressed 

bank while maintaining maximum transparency and fairness when increasing a bank’s capital under such 

circumstances; (iii) Česká národní banka (CNB), the integrated financial market supervisor, is provided 

with a special regulatory instrument (a measure of general application) for a limited period in the event 

the banking or financial system is threatened. By means of this measure it would be possible to mitigate 

certain  regulatory  requirements,  prohibit  certain  types  of  operations  or  increase  reporting  frequency; 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                 
(iv) the applicable regime governing the takeover of a debt based on an agreement with the debtor is, in 

the  context  of  conservatorship,  modified  so  that  the consent  of  creditors  to  the  takeover  of  a  distressed 

bank’s obligations by another bank will not be necessary. Given its importance, such transaction will be 

subject to the prior consent of CNB, which will be given only if the person taking over the debts ensures 

the proper and smooth continuation of the relationships with clients relating to the debts taken over; and 

(v)  the  purchase  price  for  the  sale  of  the  business  of  a  bank  under  conservatorship  must  be  based  on  a 

valuation prepared by a CNB-appointed valuator. To this end, basic valuation principles and procedures 

are provided for in the draft law.   

2. 

General observations  

2.1  The ECB has issued a number of opinions at the request of the competent Member State authorities 
on  national  measures  adopted  in  response  to  the  global  financial  crisis2.  The  ECB  invites  the 

Ministry of Finance to take into account the relevant observations made in its recent opinions on 

similar  draft  legislative  provisions  in  other  Member  States,  some  of  which  are  repeated  again 

below. 

2.2  The  ECB  also  draws  attention  to  the  guidance  provided  by  the  Ecofin  Council  to  the  Member 
States in the conclusions of its Meeting of 7 October 20083 as well as the Declaration issued by the 
Heads of State of the euro area on 12 October 2008 (hereinafter the ‘Declaration’)4. In particular, 

the  ECB  stresses  that  any  initiatives  put  in  place  by  the  competent  national  authorities  to  restore 

confidence  in  the  financial  markets  should  be  coordinated  and  should  aim  to  implement  the 

common principles in question, in a spirit of close cooperation with other Member States and the 
Community  institutions5.  The  principles  contained  in  the  Declaration  as  well  as  the  conclusions 
raised by the Ecofin Council were endorsed by the European Council of 15 and 16 October 20086. 

2.3  With  these  general  observations  in  mind,  and  against  the  background  of  the  guidance  previously 

given  by  the  ECB  and  the  Community  institutions  in  this  regard,  the  ECB  has  the  following 

observations on the draft law. 

2  
3  

4  

5  

6   

All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 
See ‘Immediate Responses to Financial Turmoil’, Ecofin Council Conclusions of 7 October 2008, available on the former 
French  Presidency’s  website  at  www.ue2008.fr.  The  Ecofin  Council  recommended  that:  (i)  interventions  should  be 
timely and the support should in principle be temporary; (ii) the interests of taxpayers should be protected; (iii) existing 
shareholders should bear the due consequences of the intervention; (iv) the Government should be in a position to bring 
about a change of management; (v) management should not retain undue benefits; (vi) governments may have, inter alia, 
the power to intervene in remuneration; (vii) legitimate interests of competitors must be protected, in particular through 
the State aid rules; and (viii) negative spill-over effects should be avoided.  
The text of the Declaration is available on the former French Presidency’s website at www.ue2008.fr. The Member States 
agreed  to:  (i)  ensure  appropriate  liquidity  conditions  for  financial  institutions;  (ii)  facilitate  the  funding  of  banks; 
(iii) provide  financial  institutions  with  additional  capital  resources  to  continue  to  ensure  the  proper  financing  of  the 
economy;  (iv)  allow  for  an  efficient  recapitalisation  of  distressed  banks;  (v)  ensure  sufficient  flexibility  in  the 
implementation of accounting rules; and (vi) enhance cooperation procedures among European countries. 
See  ECB  Opinion  CON/2009/12  of  9  February  2009  at  the  request  of  the  Cypriot  Ministry  of  Finance  on  a  draft  law 
amending the Laws of 2002 and 2004 on the management of revenues and expenditure and on the accounting system of 
the Republic and other related matters. 
See Brussels European Council of 15 to 16 October 2008, paragraph 3 of the Presidency Conclusions. 

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3. 

Specific observations 

Valuation 

3.1  Article  29b(1)  of  the  draft  law  provides  that  where  the  business  of  a  bank  placed  into 

conservatorship is being sold, the purchase price must be based on a valuation drawn up according 

to the situation on the date the contract comes into effect. Article 29b(2) and (3) of the draft law set 

out certain requirements concerning such valuation. In particular, the valuation is to be drawn up 

impartially,  thoroughly,  without  unnecessary  delay,  with  due  professional  care  and  in  accordance 
with  generally  accepted  procedures  in  the  field  of  valuation  of  businesses  and  other  property7. 

Finally, Article 29c(8) of the draft law states that when a part of the business of a bank placed into 

conservatorship is being sold, the provisions of Articles 29b and 29c will apply mutatis mutandis. 

In this context, insofar as public measures of relief for impaired assets may be implemented within 

the framework of Articles 29b and 29c of the draft law, the ECB would like to draw attention to the 
Eurosystem’s  Guiding  principles  for  bank  asset  support  schemes  of  25  February  20098  and  the 

Commission  Communication  of  25  February  2009  on  the  treatment  of  impaired  assets  in  the 
Community banking sector9, which provide important guidance, inter alia, as regards valuation.  

The temporary nature of state involvement 

3.2  Article 16(5) of the draft law provides for the establishment of a bridge bank. Under this provision, 

a  bank’s business may be transferred to a State owned joint-stock company that fulfils the statutory 
 minimum capital requirements10. If CNB grants its prior consent to the sale of the business, it will 

concurrently issue a licence to the bridge bank that is identical in scope to the licence held by the 

bank  transferring  the  business.  According  to  the  explanatory  memorandum  to  the  draft  law,  the 

acquisition  and  operation  of  a  distressed  bank’s  business  by  a  bridge  bank  would,  as  rule,  be 

temporary and would cater for situations where, at the relevant time, there would be no bank on the 

market willing to take over the distressed bank’s business. The ECB welcomes the introduction in 

the  draft  law  of  the  possibility  to  address  a  crisis  situation  through  the  transfer  of  a  distressed 

bank’s business to a bridge bank. Such reorganisation mechanism is in line with similar procedures 

introduced  in  other  countries  to  rescue  distressed  banks.  However,  in  this  context,  the  ECB 

reiterates  the  importance  of  ensuring  that  the  State’s  involvement  is  limited  in  time  to  the  extent 

deemed necessary for the success of the reorganisation measure. 

Prohibition or restriction on transfers of funds 

3.3  The  ECB  understands  that  the  draft  law  introduces  the  possibility  for  CNB  to  prohibit  or  restrict 

certain  permitted  activities,  the  execution  of  certain  transactions,  the  transfer  of  funds  or  other 

transactions  of  a  bank  or  a  foreign  bank  branch  by  a  measure  of  general  application  issued  in 

7  
8  
9 
10  

See Article 29b(2).  
Available on the ECB’s website at www.ecb.europa.eu. 
Available on the Commission’s website at ec.europa.eu. 
According to the explanatory memorandum to the draft law, a bridge bank may acquire a business by means of a contract 
made directly with the concerned bank (through a decision of its General Meeting) or from the conservator during the 
period of conservatorship of the bank.  

3 

                                                 
accordance with Article 26bb. The ECB notes that prohibiting or restricting the transfer of funds or 

other transactions of foreign bank branches could impair the possibility for foreign banks to manage 

their  liquidity.  Therefore,  the  ECB  recommends  that  the  draft  law  require  CNB  to  coordinate  its 

actions  with  the  home  authorities  of  the  foreign  branches  concerned.  Moreover,  should  such 

measures  concern  branches  of  Member  State  banks,  Community  law  obligations,  requiring  in 

particular  the  provision  of  information  to  the  Commission  and  the  concerned  Member  States, 

should be duly complied with. 

Role of the central bank 

3.4  The ECB expects that CNB’s involvement in the procedures provided for in the draft law will not 

go  beyond  the  proper  performance  of  its  existing  tasks  and  that  it  will  comply  fully  with  the 

prohibition on monetary financing laid down in Article 101(1) of the Treaty, read in conjunction 

with  Council  Regulation  (EC)  No  3603/93  of  13  December  1993  specifying  definitions  for  the 

application of the prohibitions referred to in Articles 104 [now 101] and 104b(1) [now 103(1)] of 

the Treaty. 

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

Done at Frankfurt am Main, 15 April 2009. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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