Opinion of the European Central Bank of 7 January 2010 on certain measures concerning banking and financial regulation (CON/2010/3)
Date: 2010-01-07
Institutions: European Central Bank
Subjects: European Systemic Risk Board, France, financial regulation, financial risk, financial stability, monetary policy, supervisory body

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 7 January 2010  

on certain measures concerning banking and financial regulation 

(CON/2010/3) 

Introduction and legal basis 

On 8 December 2009 the European Central Bank (ECB) received a request from the French Ministry for 

Economic  Affairs,  Industry  and  Employment  for  an  opinion  on  certain  provisions  of  a  banking  and 

financial regulation draft law relating to the establishment of the Financial Regulation and Systemic Risk 

Council (hereinafter the ‘FRSR’), the regime for covered bonds and an amendment to a provision of the 

French Monetary and Financial Code relating to the Banque de France (hereinafter the ‘draft law’). 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning of  the  European  Union  and  the  third  and  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  the  Banque  de  France  and  to  rules 

applicable to financial institutions insofar as they materially influence the stability of financial institutions 

and markets. In addition, the Eurosystem shall contribute to the smooth conduct of policies relating to the 

prudential supervision of credit institutions and the stability of the financial system under Article 127(5) 

of  the  Treaty.  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 FRSR will replace the panel of financial sector supervisory authorities2. It is composed of the 

Governor of the Banque de France, the President of the Prudential Supervisory Authority assisted 

by  the  Vice-president,  the  President  of  the  Financial  Market  Authority  and  the  President  of  the 
Accounting Standards Authority or their deputies3; the FRSR is chaired by the Minister for Finance 

or his representative. 

In  addition  to  playing  a  coordinating  role,  the  FRSR  is  entrusted  with  tasks  relating  to  macro-

prudential supervision and financial stability and international and European standards that apply to 

1  
2  
3  

OJ L 189, 3.7.1998, p. 42. 
Article L.631-2 of the French Monetary and Financial Code. 
Article L.631-2 of the French Monetary and Financial Code as proposed by the draft law. 

 
 
 
 
                                                 
the  financial  sector.  The  FRSR’s  tasks  are  to:  (i)  foster  cooperation  and  the  exchange  of 

information  between  the  institutions  represented  by  its  members;  (ii)  examine  French  financial 

sector and market status reports from a macro-prudential point of view and evaluate systemic risks 

inherent in it, taking account of the opinions and recommendations of the European Systemic Risk 

Board (ESRB); (iii) facilitate cooperation on and coordination of work in relation to international 

and European standards applicable to the financial sector, and with the power to issue opinions or 
position  statements  when  necessary4.  The  FRSR  performs  such  tasks  without  prejudice  to  the 

remits of the institutions represented by its members. The FRSR meets at least three times a year, 

upon the proposal of one of its members. In the performance of its tasks, the FRSR  may consult 

representatives of credit institutions, investment companies, insurance companies, mutual societies 
and welfare institutions5. 

1.2  The draft law defines a new category of covered bonds, ‘home bonds’, in addition to the mortgage 

bonds. Under the draft law, companies issuing home bonds and mortgage bonds, i.e. the housing 

finance companies or the mortgage companies, may subscribe to, acquire or hold their own bonds 

for  the  sole  purpose  of  using  them  to  collateralise  Banque  de  France  credit  operations  in 

accordance  with  the  procedures  and  terms  laid  down  by  the  Banque  de  France  for  its  monetary 

policy  and  intraday  credit  operations,  where  the  company  is  unable  to  cover  all  its  liquidity 

requirements  using  other  means  at  its  disposal.  The  draft  law  provides  for  the  conditions  under 

which such transactions are to be conducted. Compliance with these conditions will be certified by 
a specific auditor, who will also have to draft a report for the Prudential Supervisory Authority6. 

1.3  The  draft  law  amends  a  provision  of  the  French  Monetary  and  Financial  Code7  relating  to  the 

Banque de France, in order to allow the Banque de France to also disclose to insurance companies 

that are authorised to engage in credit insurance transactions in France information it holds on the 

financial situation of any enterprise. Such disclosure may only be made once the Banque de France 

has established how this information will be provided and established the disclosure obligations of 

the  companies.  Currently,  the  Banque  de  France  may  only  disclose  such  information  to  other 

central banks and institutions that carry out duties similar to those of the Banque de France, and to 

credit  and  financial  institutions.  The  ECB  understands  that  access  to  information  held  by  the 

Banque de France on the financial situations of enterprises is granted to insurance companies that 

are authorised to engage in credit insurance transactions in France, in order to allow them to better 

manage  the  inter-enterprise  credit  risk,  and  that  this  new  provision  is  aimed  at  developing  credit 

insurance for small and medium- sized enterprises. 

4  
5  
6  
7  

Article L.631-2-1 of the French Monetary and Financial Code as proposed by the draft law. 
Article L.631-2-2 of the French Monetary and Financial Code as proposed by the draft law. 
Article L.515-32-1 of the French Monetary and Financial Code as proposed by the draft law. 
Article L. 144-1 of the French Monetary and Financial Code. 

2 

 
                                                 
2. 

Establishment of the FRSR 

2.1  The  establishment  of  national  financial  stability  committees  can  enhance  the  ability  of  national 

central banks and supervisory authorities to contribute analytical support to the European Systemic 

Risk  Board  (ESRB).  The  tasks  performed  by  these  committees  should  complement  the  activities 

performed  by  the  ESRB,  therefore  it  is  particularly  important  to  develop  appropriate  synergies. 

However, it is necessary to avoid such national committees being entrusted with tasks and powers 

that potentially conflict with those of the ESRB, and which may undermine the effectiveness of the 

newly-established  European  macro-prudential  supervisory  body.  Moreover,  the  legal  frameworks 

of these committees should appropriately reflect the roles of central banks, should not constrain the 

independence of the governors of the central banks or unduly affect the quality and impartiality of 

their  contributions  as  members  of  the  ESRB.  Lastly,  in  view  of  the  importance  of  ensuring  the 

effectiveness  of  macro-prudential  supervisory  arrangements  at  the  EU  level,  it  is  essential  to 

safeguard  the  ability  of  the  ESRB  to  perform  its  tasks  independently  and  to  guarantee  an 

authoritative and  effective  channel  for  transmitting  the  warnings  and  recommendations  issued  by 

the ESRB. 

2.2  The ECB welcomes the emphasis in the draft law on the complementary nature of the FRSR and 

ESRB  tasks,  and  particularly  since  it  expressly  provides  that  the  FRSR  will  take  account  of  the 

ESRB’s  opinions  and  recommendations  when  performing  its  macro-prudential  supervision  and 

financial stability related tasks, moreover the scope of latter being expressly limited to the French 

financial sector and markets. The ECB draws attention to the importance of clarifying the FRSR’s 

organisational  rules  at  an  early  stage  to  ensure  that  the  role  of  the  central  bank  is  appropriately 

reflected and that the independence of the Governor of the Banque de France, as well as the quality 

and impartiality of his contribution as a future member of the ESRB, is not affected. 

2.3  The  Memorandum  of  Understanding  on  cooperation  between  Financial  Supervisory  Authorities, 

Central  banks  and  Finance  Ministries  of  the  European  Union  on  cross-border  financial  stability 
(MoU) that entered into force on 1 June 20088 provides for the establishment in each Member State 

of  a  domestic  standing  group,  i.e.  a  national  level  group  consisting  of  the  financial  supervisory 

authorities,  central  banks  and  finance  ministries,  with  the  objective  of  enhancing  preparedness 

under normal market conditions and facilitating the management and resolution of financial crises. 

Following  the  conclusion  of  the  MoU,  the  French  authorities  designated  the  panel  of  financial 

sector supervisory authorities as the national domestic standing group (part of its general mandate, 

laid down in 2005, is to facilitate exchanges of information and the coordination of the control of 

financial groups). For legal certainty purposes, the related tasks, i.e. ‘enhance preparedness under 

normal market conditions and facilitate the management and resolution of a financial crisis’, could 

be included in the list of tasks entrusted to the FRSR, as detailed in the draft law. 

8  

See Council conclusions of 9 October 2007.  

3 

 
                                                 
3. 

Using  home  bonds  as  collateral  for  the  Banque  de  France’s  monetary  policy  and  intraday 

credit operations 

With  respect  to  the  provisions  of  the  draft  law  for  the  use  of  home  bonds  as  collateral  with  the 

Banque  de  France,  ‘in  accordance  with  the  procedures  and  terms  laid  down  by  [the  Banque  de 

France] for its monetary policy and intraday credit operations,’ the ECB reiterates that it remains at 

the  sole  discretion  of  the  Eurosystem  to  determine  the  conditions  of  eligibility  for  the  use  of 

covered  bonds  or  other  assets  as  collateral  and  the  acceptance  of  specific  assets  as  collateral  for 

monetary  policy  and  intraday  credit  operations.  Moreover,  the  draft  law  should  expressly  clarify 

that  the  procedures  and  terms  laid  down  by  the  Banque  de  France  for  its  monetary  policy  and 

intraday credit operations provide for the consistent implementation of the guidelines of the ECB’s 

Governing Council. The draft law could for instance refer to ‘the procedures and terms laid down 

by  [the  Banque  de  France]  for  its  monetary  policy and  intraday credit  operations  pursuant  to  the 

guidelines of the ECB’s Governing Council’. 

4.   Disclosure  of  information  held  by  the  Banque  de  France  on  the  financial  situations  of 

enterprises 

With  regard  to  the  possibility  for  the  Banque  de  France  to  disclose  information  it  holds  on  the 
financial  situation  of  any  enterprise9,  the  ECB  stresses  the  need  to  ensure  that  the  financial 

independence of the Banque de France is not endangered as the  result of any liability that might 

arise from the disclosure of such information. 

5. 

The appropriate time to consult the ECB 

5.1 

In  cases  of  particular  urgency  that  do  not  allow  for  a  normal  consultation  period,  the  consulting 

authority may indicate urgency in the consultation request and ask for a shorter time limit for the 

ECB’s  opinion  to  be  adopted.  This  does  not  prejudice  the  national  authorities’  duty  under 

Article 127(4) and 282(5) of the Treaty to consult the ECB on national draft legislative provisions 

falling within its fields of competence in due course of the national legislative process. The second 

sentence  of  Article  4  of  Decision  98/415/EC  states  that  the  ECB  must  be  consulted  ‘at  an 

appropriate stage’ in the legislative process. This implies that the consultation should take place at 

a  point  in  the  legislative  process  that  affords  the  ECB  sufficient  time  to  examine  the  draft 

legislative  provisions  and  to  adopt  its  opinion  in  all  required  language  versions,  and  which  also 

enables  the  relevant  national  authorities  to  take  the  ECB’s  opinion  into  consideration  before  the 

provisions are adopted. In this respect, as noted by the Court of Justice, the obligation to consult the 

ECB under the Treaty is intended ‘essentially to ensure that the legislature adopts the act only when 

the body has been heard which, by virtue of the specific functions that it exercises in the [Union] 

9  

To be extended under the draft law to insurance companies that are authorised to engage in credit insurance transactions 
in France. 

4 

 
 
                                                 
framework  in  the  area  concerned  and  by  virtue  of  the  high  degree  of  expertise  that  it  enjoys,  is 
particularly well placed to play a useful role in the legislative process envisaged’10. Given that the 

consulting authority set the ECB an extremely short time limit within which to submit its opinion 

and  that  the  only  reason  given  was  that  the  consulting  authority  had  established  a  very  tight 

timetable, the ECB considers that the minimum consultation period of one month provided for in 

Article 3(1) of Decision 98/415/EC applies. 

5.2  According  to  Article  3(4)  of  Decision  98/415/EC,  Member  States  are  obliged  to  suspend  the 

process  for  the  adoption  of  draft  legislative  provision  pending  submission  of  the  ECB’s  opinion. 

This means that the adopting authority must have a real opportunity to consider the ECB’s opinion 

in  a  meaningful  manner  prior  to  taking  its  decision  on  the  substance.  The  ECB  also  emphasises 

that, in accordance with Article 4 of Decision 98/415/EC, the opinion received from the ECB has to 

be brought to the knowledge of the adopting authority  if the latter is an authority other than that 

which has prepared the legislative provisions concerned. 

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

Done at Frankfurt am Main, 7 January 2010. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

10  

Case C-11/00 Commission of the European Communities v European Central Bank [2003] ECR I-7147, paragraphs 110 
and 111. 

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