Opinion of the European Central Bank of 8 March 2010 on amendments to the legal framework on the enhancement of liquidity of the economy in response to the impact of the international financial crisis (CON/2010/21)
Date: 2010-03-08
Institutions: European Central Bank
Subjects: Greece, financial stability, money-market liquidity, national law, share

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 8 March 2010 

on amendments to the legal framework on the enhancement of liquidity of the economy in response 

to the impact of  the international financial crisis 

(CON/2010/21) 

Introduction and legal basis 

On  8  February  2010  the  European  Central  Bank  (ECB)  received  a  request  from  the  Greek  Ministry  of 

Finance  for  an  opinion  on  two  sets  of  draft  legislative  provisions  in  relation  to  the  Law  on  the 

enhancement  of  liquidity  of  the  economy  in  response  to  the  impact  of  the  international  financial  crisis 

(hereinafter the ‘draft provisions’). 

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 provisions relate to a national central bank 

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 provisions 

1.1  The  purpose  of  the  first  set  of  draft  provisions  is  to  extend  to  the  fiscal  year  2009  the  restriction 
imposed by Article 28 of Law 3756/20092 in relation to dividend distribution by banks participating 
in the liquidity enhancement scheme (hereinafter the ‘scheme’) under Article 1 of Law 3723/20083. 

More  specifically,  under  Article  1(3)  of  Law  3723/2008,  the  distribution  of  dividends  to 

shareholders  during  the  period  of  participation  in  the  scheme  may  not  exceed  35%,  which  is  the 
minimum percentage provided for in Article 3(1) of Law 148/19674. Article 28 of Law 3756/2009 

further  stipulates  that  the  distribution  of  dividends  under  Article  1(3)  of  Law  3723/2008  for  the 

fiscal year 2008 is to be restricted to shares only; this restriction is now being extended to dividend 

distribution for the fiscal year 2009. 

1  
2  
3  

4  

OJ L 189, 3.7.1998, p. 42.  
Law on the Dematerialised Securities System, the capital market, tax issues and other matters, FEK A53/31.3.2009. 
Law on the enhancement of liquidity of the economy in response to the impact of the international financial crisis, FEK 
A 250/9.12.2008. 
Law on measures to enhance the capital market, FEK A 173. 

 
 
 
 
                                                 
1.2  The second set of draft provisions aims at introducing arrangements in relation to the repurchase of 

preference shares acquired by the Greek State under the same Article 1 of Law 3723/2008, in order 

for the banks participating in the scheme to exit, when the market and financial circumstances so 

allow,  the  recapitalisation  part  of  the  scheme.  In  particular,  according  to  the  second  set  of  draft 
provisions,  which  replaces  Article  1(1)  second  subparagraph  of  Law  3723/20085,  the  preference 

shares  are  to  be  repurchased  by  the  bank  at  the  issue  price,  five  years  after  their  acquisition  or 

earlier, following approval by the Bank of Greece. After the expiry of the five-year period, if the 

General Assembly of the bank has not decided to repurchase the shares, a cumulative increase in 

the price of 2% per year will be imposed in addition to the annual fixed rate of return that is due to 
the  Greek  State  under  Article  1(3)  of  Law  3723/20086,  by  a  decision  of  the  Minister  of  Finance, 

following a recommendation of the Bank of Greece. 

2.  General observations 

In  its  Opinion  CON/2008/797  the  ECB  expressed  its  views  on  the  arrangements  introduced  by 

Law 3723/2008 to address the impact of the international financial crisis. The ECB’s observations 

made on that occasion also apply, where relevant, to the changes proposed by the draft provisions. 

The ECB notes that both sets of draft provisions are broadly in line with the conclusions adopted at 

the Ecofin Council meeting of 7 October 2008, which highlighted common principles to guide the 
action  of  Member  States8,  and  with  the  ‘Declaration  on  a  concerted  European  action  plan  of  the 
euro area countries’ issued on 12 October 2008 by the Heads of State of the euro area9, confirming 

their commitment to act together in a decisive and comprehensive way to restore confidence in and 

the proper functioning of the financial system, with the aim of restoring appropriate and efficient 

financing conditions for the economy. 

3. 

Specific observations 

The ECB understands, as stated above, that the first set of draft provisions extends the restriction 

imposed  by  Article  28  of  Law  3756/2009  to  dividend  distribution  for  the  fiscal  year  2009. 

Moreover, it understands that the second set of draft provisions removes the current obligation for 

banks  participating  in  the  scheme  to  repurchase  the  preference  shares  within  five  years  of  their 

acquisition. At the same time, the second set of draft provisions introduces an incentive for banks to 

exit the recapitalisation scheme after the expiry of the five-year period by imposing the cumulative 

5  

6  
7  

8  

9  

According to the current text, such preference shares must be repurchased by the bank at the issue price after five years 
or, optionally, earlier and in any case after 1 July 2009, following approval by the Bank of Greece. 
Under Article 1(3), the preference shares carry the right to a fixed rate of return of 10% upon the contributed capital.  
Opinion  of  the  European  Central  Bank  of  27  November  2008  at  the  request  of  the  Greek  Ministry  of  Economy  and 
Finance on a draft law on enhancing liquidity of the economy to address the impact of the international financial crisis 
and  on  a  draft  decision  on  its  implementation.  All  ECB  opinions  are  available  on  the  ECB’s  website  at 
www.ecb.europa.eu. 
See  the  press  release  of  the  2894th  Ecofin  Council  meeting  (13784/08),  available  on  the  Council’s  website  at 
www.consilium.europa.eu. 
The Declaration is available on the former French Presidency’s website at www.ue2008.fr. 

2 

 
 
                                                 
increase described above. In this regard the ECB notes that the second set of draft provisions is in 

line  with  the  recommendations  of  the  Governing  Council  of  the  European  Central  Bank  on  the 

pricing  of  recapitalisations  according  to  which  terms  should  be  set  for  the  redemption  of  the 

instruments used for recapitalisations, either on the basis of a period of time or evolution of market 

conditions, so as to retain the temporary nature of the State’s involvement and discourage financial 
institutions from maintaining such involvement for an extensive period of time10.  

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

Done at Frankfurt am Main, 8 March 2010. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

10  

The recommendations were adopted in 2008 and are available on the ECB’s website at www.ecb.europa.eu. 

3