Opinion of the European Central Bank of 14 July 2009 on the State recapitalisation scheme (CON/2009/58)
Date: 2009-07-14
Institutions: European Central Bank
Subjects: State aid, Sweden, capital increase, financial institution, financial stability, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 14 July 2009 

on the State recapitalisation scheme 

(CON/2009/58) 

Introduction and legal basis 

On  30 June  2009  the  European  Central  Bank  (ECB)  received  a  request  from  the  Swedish  Ministry  of 

Finance  for  an  opinion  on  a  draft  ordinance  (hereinafter  the  ‘amending  ordinance’)  amending  the 

Ordinance  on  capital  contributions  to  solvent  banks  and  others  (SFS  2009:46)  (hereinafter  the 

‘Ordinance’). 

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  amending  ordinance  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.  

Background 

1.1  On  16 February  2009  the  ECB  received  a  request  from  the  Swedish  Ministry  of  Finance  for  an 

opinion on a draft of the Ordinance, which entered into force on 17 February 2009. Because of the 

late consultation by the Swedish Ministry of Finance, the ECB did not issue an opinion. 

1.2  Furthermore, the ECB established that the Ordinance fell within the scope of the second indent of 

Article 105(4) of the Treaty and the sixth indent of Article 2(1) of Council Decision 98/415/EC and 

reminded  the  Swedish  authorities  of  their  obligation  to  consult  the  ECB  on  draft  legislation  at  a 

stage in the legislative process that allows sufficient time to take into account its views. 

2. 

Purpose of the Ordinance  

When the Ordinance was adopted, the Swedish Ministry of Finance stated in a memo accompanying the 

proposal  that  the  main  aim  was  to  guarantee  that  Swedish  companies  would  have  continued  access  to 

1  

OJ L 189, 3.7.1998, p. 42. 

 
 
 
 
 
                                                 
finance. Due to the shock to global credit markets and its transmission into the national financial system, 

a  lack  of  capital  and  credit  had  emerged  in  Sweden.  This  threatened  to  undermine  the  financing  of 

companies of all sizes, an effect that could have stifled economic activity as a whole. 

3.  

Purpose of the amending ordinance 

The  amending  ordinance’s  purpose  is  to  extend  the  validity  of  the  Ordinance  by  six  months,  from 

17 August 2009 until 17 February 2010. 

4. 

General observations 

4.1  Due to the late consultation by the Swedish Ministry of Finance in February, the ECB has not until 

now  provided  an  opinion  on  the  Ordinance  itself.  Moreover,  as  the  ECB  has  issued  a  number  of 

opinions at the request of the competent authorities of various Member States on national measures 

adopted in response to the global financial crisis, the consulting authority is invited to consider the 

relevant observations made in the ECB’s recent opinions on similar draft legislative provisions in 
other Member States2. 

4.2  The  ECB  also  draws  the  consulting  authority’s  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 to 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 

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 Opinion CON/2009/12. 
See Brussels European Council of 15 to 16 October 2008, paragraph 3 of the Presidency Conclusions. 

2 

 
 
                                                 
 
 
 
 
 
 
further coordination at European Union level7. 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 and the parameters of and limitations to the exercise by the authorities of their powers when 

deciding whether to apply such aid measures. 

4.3  The  ECB  further  notes  that  recapitalisation  measures  in  the  Member  States  should  aim  to 

strengthen the capital position of fundamentally sound financial institutions in order to improve the 

functioning and stability of the banking system and ensure the proper financing of the economy. In 

particular, there should be a consistent approach to defining the conditions for recapitalisations and 

the pricing of the instruments intended to provide Tier 1 capital to financial institutions. The ECB 

underlines the importance of appropriate pricing for recapitalisations with a view to enhancing the 

stability of the financial system, facilitating a return to normal market conditions, and ensuring a 

level playing-field and the proper financing of the economy.  

4.4  Against this background, recommendations were issued by the Governing Council on the pricing of 

recapitalisations on 20 November 2008. The ECB highlights that the pricing conditions for capital 

support  should  be  risk-based  and  market-oriented,  determined  on  the  basis  of  the  costs  of  a 

corresponding  guarantee  in  the  market  by  taking  into  consideration  the  specific  risk  of  both  the 

specific instrument chosen for injecting capital and the institution concerned. Specific features of 

the instruments for capital injections (such as preference shares) should be appropriately chosen so 

that, while encouraging an early end to the State’s capital support of banks, they should not result 

in  an  excessive  increase  in  the  cost  of  capital.  In  line  with  the  Declaration,  the  ECB  also 

emphasises  that  harmonisation  regarding  the  expiry  of  national  financial  support  schemes 

throughout  the  EU,  and  in  particular  within  the  euro  area,  is  of  crucial  importance,  including  in 

relation  to  State  capital  investments  in  financial  institutions.  Finally,  the  ECB  notes  that  the 

Declaration clearly draws attention to the need for any national support scheme to be temporary in 

nature, even if it may be extended or renewed. The ECB therefore recommends including specific 
provisions on time limits when stabilisation aid measures are adopted9. 

7  

8  
9  

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 Opinion CON/2009/18. 
See paragraph 3.3 of Opinion CON/2008/76 or paragraph 2.3 of Opinion CON/2009/6. 

3 

 
                                                 
5. 

Specific observations 

The ECB notes that, in a  decision dated 10 February 2009 taken under the Treaty’s State aid rules, the 
European Commission approved this Swedish recapitalisation scheme10. The scheme was found to be in 

line with the Commission’s guidance on support measures for banks during the financial crisis, since the 

measures were limited in time and required a significant proportion of private investment alongside the 

State  intervention.  The  Commission  concluded  that  the  scheme  was  an  adequate  means  to  remedy  a 

serious  disturbance  of  the  Swedish  economy  and,  as  such,  was  compatible  with  Article  87(3)(b)  of  the 

Treaty. 

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

Done at Frankfurt am Main, 14 July 2009. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

10  

State  Aid  Case  No N 69/2009; 
decision 
http://ec.europa.eu/competition/state_aid/register/. 

available 

on 

the  European  Commission’s  website 

at 

4