Opinion of the European Central Bank of 27 May 2009 on strengthening Banca Naţională a României’s remedial powers in relation to credit institutions in distress (CON/2009/48)
Date: 2009-05-27
Institutions: European Central Bank
Subjects: Romania, banking supervision, central bank, company in difficulties, credit institution, financial intervention, financial stability, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 27 May 2009 

on strengthening Banca Naţională a României’s remedial powers 

in relation to credit institutions in distress 

(CON/2009/48) 

Introduction and legal basis 

On 19 May 2009 the European Central Bank (ECB) received a request from Banca Naţională a României 

(BNR) for an opinion on a draft law approving Government Emergency Ordinance No 25/2009 amending 

Government  Emergency  Ordinance  No  99/2006  on  credit  institutions  and  capital  adequacy  (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 third and the 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  law  relates  to  BNR  and  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 

1.1  The draft law aims to strengthen BNR’s remedial powers by expressly allowing it, after assessing 

the  financial  condition  of  a  credit  institution  in  distress,  to  request  significant  shareholders  to 

financially support the credit institution, and/or to prohibit or limit profit distributions by the credit 

institution until its financial condition has been restored. Under the draft law, BNR is empowered: 

(a)  

to  require  significant  shareholders  of  a  credit  institution  in  distress  to  provide  necessary 

financial  support  to  it  either:  (i)  by  increasing  its  share  capital;  or  (ii)  by  providing 

subordinated loans that can be converted into ordinary share capital, also at BNR’s request;  

(b)  

to prohibit or limit distribution of profits until the credit institution’s financial condition has 

been restored; and 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                 
(c)  

to decide that voting rights for shareholders who do not comply with the request to provide 

additional financial support to the credit institution will be suspended. 

1.2  Under the Romanian constitutional procedure, the draft law is adopted for the purpose of approving 

Government  Emergency  Ordinance  No  25/2009  (GEO  No  25/2009),  which  amended  and 

supplemented  Government  Emergency  Ordinance  No  99/2006  on  credit  institutions  and  capital 

adequacy  (GEO  No  99/2006).  GEO  No  99/2006  is  the  main  piece  of  legislation  regulating  the 

activity  of  credit  institutions  and  financial  investment  companies  in  Romania,  as  well  as  their 

prudential supervision and the supervision of payment systems and settlement systems for financial 

instruments.  The  draft  law  forms  part  of  the  legislative  measures  to  be  adopted  by  Romania,  as 

agreed  during  recent  negotiations  between  the  Romanian  Government,  on  the  one  hand,  and  the 

International Monetary Fund, the World Bank and the European Union, on the other. 

2. 

General observations  

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

invites the Romanian authorities to take into account the relevant observations made in its recent 

opinions on similar draft legislative provisions in other Member States. 

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 emphasises 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. 

Moreover, measures taken by competent national authorities in relation to financial institutions in 

the context of the current global financial crisis have been the object of further coordination at EU 

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. 
See the Presidency Conclusions of Brussels European Council of 15 to 16 October 2008, paragraph 3. 

2 

 
                                                 
level7. In particular, the ECB wishes to draw the consulting authority’s attention to the European 

Council Declaration that Member States’ actions ‘will be designed in order to avoid any distortion 

in  the  level  playing  field’,  which  is  a  crucial  element  for  the  integration  of  European  financial 
markets. As a general remark in this context, the ECB, in line with its previous opinions8, notes the 

importance of putting a transparent and predictable framework in place by defining the terms and 

conditions for financial institutions to have recourse to it. 

2.3  The ECB was not consulted on GEO No 25/2009. Although there is no requirement to consult the 

ECB on the transposition of Community directives into national law, provided that the transposing 

provisions have no impact on matters falling within the ECB’s fields of competence other than the 

transposition of the directives, the ECB has on a limited number of occasions encouraged national 

authorities  to  consult  it  on  draft  legislative  provisions  transposing  Community  directives  of 

particular interest to the European System of Central Banks. 

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

given in its opinions and by the EU institutions and other institutions in this regard, the ECB has 

the following specific observations on the draft law. 

3. 

Specific observations 

Extension of regulatory and supervisory powers of BNR 

3.1  The  ECB  understands  that  the  draft  law  will  complete  the  current  Romanian  legal  framework 

concerning  credit  institutions  and  will  allow  BNR  to  take  timely  action  to  prevent  a  credit 

institution’s  financial  condition  from  deteriorating  and  so  contributing  to  financial  stability.  The 

relevant  provisions  of  the  draft  law  will  accordingly  enforce  BNR’s  obligation  to  prevent  the 

capital of a credit institution from falling below the required threshold and will introduce a private 

sector  resolution  option  as  the  first  choice  for  dealing  with  a  credit  institution  in  distress,  before 

other measures such as State aid are considered necessary. 

3.2  While the ECB appreciates that the draft law recognises BNR’s expertise in this context, the ECB 

restates its view that the functions to be performed by BNR to aid the stabilisation measures to be 

carried  out  must  be  conducted  in  a  manner  that  is  fully  compatible  with  BNR’s  institutional  and 

financial independence and that safeguards the proper performance of its existing tasks under the 

7  

8  

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  270,  25.10.2008,  p.  8);  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  (OJ  C  10,  15.1.2009,  p.  2);  
Recommendations of the Governing Council of the European Central Bank on government guarantees for bank debt and 
Recommendations of the Governing Council of the European Central Bank on the pricing of recapitalisations, both latter 
documents available on the ECB’s website at www.ecb.europa.eu.  
See paragraph 3.1.2 of ECB Opinion CON/2009/18. 

3 

 
 
                                                 
Treaty  and  the  Statute  of  the  European  System  of  Central  Banks  and  of  the  European  Central 
Bank9.  

According  to  the  explanatory  memorandum  to  the  draft  law,  a  key  objective  of  the  amendments 

will  be  to  strengthen  BNR’s  remedial  powers  with  new  provisions  as  stated  in  paragraph  1.1, 
above.  In  this  context  and  in  line  with  its  previous  opinions10,  the  ECB  reminds  the  Romanian 

authorities  that  the  functions  performed  by  BNR  must  fully  comply  with  the  provisions  of 

Article 101  of  the  Treaty  and  of  Council  Regulation  (EC)  No  3603/93  of  13  December  1993 

specifying  definitions  for  the  application  of  the  prohibitions  referred  to  in  Article  101  of  the 
Treaty11.  

3.3  As regards the extension of BNR’s regulatory and supervisory powers, the ECB notes the changes 

to the Romanian legislative framework for financial institutions and underlines that ‘Member States 

may  not  put  their  national  central  banks  in  a  position  where  they  have  insufficient  financial 
resources to carry out their ESCB or Eurosystem-related tasks, as applicable’12. Moreover, the ECB 

expects  that  when  BNR’s  tasks  are  extended,  care  will  be  taken  to  ensure  that  it  has  sufficient 

financial  and  personnel  resources  both  in  terms  of  quantity  and  quality  to  carry  out  all  its  tasks, 
and, in particular, that its capacity to carry out ESCB-related tasks will not be affected13. 

Measures concerning the share capital of credit institutions and shareholders’ voting rights 

3.4.  As  already  noted  in  paragraph  1.1  above,  the  draft  law  gives  BNR  certain  additional  remedial 

supervisory powers, in particular to require significant shareholders to sustain a credit institution in 

distress by increasing its share capital or by providing it with loans that are eligible to be included 
in its own funds14. Pursuant to Article 230(3) of GEO No 99/2006, as inserted by Article I, point 3, 

of the draft law, BNR may decide to suspend the exercise of shareholders’ voting rights if they fail 

to  comply  with  the  abovementioned  measures.  Finally,  Article  230(3)  of  GEO  No  99/2006  also 

provides  for  the  applicability  of  Article  230(2)  thereof,  which  refers,  in  turn,  to  Article  232.  As 

stated in the explanatory memorandum to the draft law and pursuant to the latter provisions, those 

shareholders who fail to comply with a request to provide additional financial support to the credit 

institution, and whose voting rights have therefore been suspended, will not be allowed to purchase 

new  shares  in  that  credit  institution  and  will  be  required  to  sell  their  participation  within  three 

months.  In  case  of  failure  to  comply,  BNR  will  order  the  credit  institution  to  cancel  the  shares 

involved and to issue and sell new shares bearing the same number. The money raised from the sale 

will be made available to the original shareholder, after deduction of costs related to the sale. 

9  
10  
11  
12  
13  
14 

See paragraph 3.7 of ECB Opinion CON/2008/68. 
See, e.g., paragraph 3.2 of ECB Opinion CON/2008/52. 
OJ L 332, 31.12.1993, p. 1. 
See e.g. the ECB’s Convergence Report 2007, p. 19, available on www.ecb.europa.eu. 
See paragraph 3.2 of ECB Opinion CON/2007/17. 
See Article 227(2) of GEO No 99/2006, as inserted by Article I, point 2, of the draft law. 

4 

                                                 
3.5  The  ECB  expects  that  the  above  provisions  will  comply  with  all  applicable  domestic  company, 

civil, property and constitutional laws and also international public and human rights law. The ECB 

also expects that the provisions will be implemented in compliance with the Community company 
law  framework15.  The  abovementioned  measures  should  also  be  proportionate  to  the  situation 

addressed.  In  all  cases,  suspension  of  the  exercise  of  voting  rights,  compulsory  sale  and 

compulsory cancellation of shares, which are severe measures with far-reaching effects on market 

participants,  should  remain  a  tool  of  last  resort  for  use  in  clearly  defined  and  emergency 
circumstances only, when less severe measures would be inadequate16. 

3.6  To improve legal certainty, which is especially important in such situations, the ECB considers that 

BNR’s new powers should be further defined and clarified, specifying the actual conditions under 

which each power will be used objectively and transparently. In this context, the ECB would like to 

point  out  that  the  conditions  triggering  the  application  of  BNR’s  new  powers  are  not  yet  clearly 

defined, since the draft law only states that the relevant measures can be adopted ‘if a depreciating 

trend  in  relation  to  prudential  and  financial  performance  indicators  is  detected’.  The  ECB  also 

notes  that  BNR’s  power  to  suspend  shareholders’  voting  rights  and  to  order  the  sale  and  the 

cancellation  of  their  shares  if  the  shareholders  fail  to  comply  with  a  request  to  sustain  the  credit 

institution  financially  by  increasing  its  share  capital,  provide  loans  or  prohibit  and  restrict  profit 

distributions,  appears  not  to  be  subject  to  clear  and  predictable  limits  and  conditions.  To 

summarise,  therefore,  the  ECB  stresses  that  the  draft  law,  or  the  necessary  implementing 

provisions, should specifically provide for the actual conditions under which the new measures will 

be used. 

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

Done at Frankfurt am Main, 27 May 2009. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

15  

16  

See, in particular, the Second Council Directive 77/91/EEC of 13 December 1976 on coordination of safeguards which, 
for  the  protection  of  the  interests  of  members  and  others,  are  required  by  Member  States  of  companies  within  the 
meaning  of  the  second  paragraph  of  Article  58  of  the  Treaty,  in  respect  of  the  formation  of  public  limited  liability 
companies  and  the  maintenance  and  alteration  of  their  capital,  with  a  view  to  making  such  safeguards  equivalent 
(OJ L 26, 31.1.1977, p. 1). 
See, by analogy, paragraph 3.2.2 of ECB Opinion CON/2009/24, referring to expropriation measures. 

5