Opinion of the European Central Bank of 25 February 2011 on amendments to the legislation on the deposit guarantee fund (CON/2011/15)
Date: 2011-02-25
Institutions: European Central Bank
Subjects: EU banking union, Romania, bank deposit, credit institution, financial stability, investment company, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 25 February 2011  

on amendments to the legislation on the deposit guarantee fund  

(CON/2011/15) 

Introduction and legal basis 

On  28  January  2011  the  European  Central  Bank  (ECB)  received  two  requests  from  Banca  Naţională  a 

României  (BNR),  for  an  opinion  on  a  draft  Government  Emergency  Ordinance  amending  and 

supplementing  Government  Ordinance  No  39/1996  on  the  setting  up  and  operation  of  the  deposit 
guarantee fund in the banking system1 (hereinafter the ‘first draft ordinance’) and on a draft Government 

Emergency Ordinance amending and supplementing Government Emergency Ordinance No 99/2006 on 
credit institutions and capital adequacy2 (hereinafter the ‘second draft ordinance’).  

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 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 provisions3, as the draft ordinances relate to rules applicable to the 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 ordinances 

1.1   The first draft ordinance  

Government Ordinance (GO) No 39/1996 is the main Romanian legislation regulating the activity 

of the deposit guarantee fund in the banking system (hereinafter ‘the Fund’), which is the Romanian 

deposit  guarantee  scheme.  Its  purpose  is  to  guarantee  deposits  and  to  pay  compensation  to 
depositors for covered deposits held with credit institutions and declared unavailable4. The aim of 

the first draft ordinance is to:  

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4  

Republished in Monitorul Oficial al României, Part One, No 587 of 19 August 2010. 
Published in Monitorul Oficial al României, Part One, No 1027 of 27 December 2006. 
OJ L 189, 3.7.1998, p. 42.  
According to Article 2(3)(c)(i) of GO No 39/1996 an ‘unavailable deposit’ is a deposit that is due and payable but has not 
been paid by a credit institution, where either: 

 
 
 
 
                                                 
(a) 

enable the use of the Fund’s financial resources to finance, including through the issuance of 
guarantees, transactions involving the transfer of covered deposits5. This would be possible 
in the context of the restructuring measures adopted in the special administration procedure6, 

but  only  if  the  amount  to  be  paid  by  the  Fund  is  smaller  than  the  direct  payment  of 

compensation for covered deposits. The amounts related to this financing would be recorded 
as a debt of the credit institution from which the covered deposits are transferred;  

(b) 

extend the possible lending by the Government to the Fund to the situation where the Fund 

finances (including through the issuance of guarantees) transactions involving a transfer of 

covered deposits;  

(c) 

establish that the Fund’s claims on the credit institution in distress and related to the transfer 

of  covered  deposits  are  compensated  from  the  patrimony  of  the  credit  institution.  These 

claims have the same position in the payment order as the Fund’s claims resulting from the 

payment of compensation to covered depositors; 

(d)  make  any  decision  on  the  use  of  the  Fund's  financial  resources  to  finance  transactions 

involving the transfer of covered deposits subject to BNR’s prior approval; 

(e) 

exclude own capital from the uncovered liabilities taken into account for the calculation of 

the  contribution  to  another  fund,  that  is  the  Special  Fund  created  for  payment  of 

compensations  to  persons  negatively  affected  by  the  measures  implemented  during  the 
special  administration  procedure7.  The  purpose  of  this  exclusion  is  to  prevent  the  negative 

treatment of credit institutions which have a prominent equity support from shareholders.  

1.2.   The second draft ordinance  

1.2.1  Government  Emergency  Ordinance  (GEO)  No  99/2006  is  the  main  legislation  regulating  the 

activity  of  credit  institutions  and  financial  investment  companies  in  Romania.  The  second  draft 
ordinance  is  designed  to  amend  in  GEO  No  99/2006  the  special  administration  procedure 8 

applicable  to  credit  institutions  in  distress  in  order  to  facilitate  the  proposed  changes  to  GO  No 

39/1996.  In  relation  to  restructuring  measures  involving  a  transfer  of  deposits  it  establishes  the 

following: 

(a) 

the need for an adequate financial standing of the credit institution which is the beneficiary 

of  the  assets  sale,  deposits  transfer,  purchase  of  assets  with  assumption  of  liabilities 

transactions (‘P&A transactions’) or merger/split-up; 

(a) 

(b) 

BNR  has  determined  that the  credit  institution concerned appears  to  be  unable  to  repay the  deposit  and  has  no 
immediate prospect of being able to do so; 
a  court  has  ordered  the  opening  of  a  bankruptcy  procedure  with  regard  to  the  credit  institution,  before  BNR 
findings as referred to in point (i) are provided. 

Article 1(2) of the first draft ordinance. 
Such restructuring measures as the transfer of covered deposits are already foreseen in Article 24012 of GEO No 99/2006; 
see also Article 24014 of GEO No 99/2006. 
According to Article 24021 of GEO No 99/2006.  
The ECB was consulted on the regulation of the special administration procedure. Opinion CON/2010/12 is available on 
the ECB’s website at www.ecb.europa.eu. 

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(b) 

the  criteria  for  receiving  information  by  the  credit  institutions  interested  in  participating  in 

the implementation of restructuring measures; 

(c) 

the mechanism for P&A transactions, which consists of a tender-like procedure based on the 

best price offered by an eligible credit institution;  

(d) 

in the case of partial P&A transactions, the transfer of covered deposits has priority; it can be 

concluded  only  if  all  covered  deposits  are  transferred  and  the  eligible  assets  have  a  high 
degree of liquidity and/or are of good quality9; 

1.2.2  By adopting restructuring measures, the credit institution’s creditors may not be in a less favourable 

position than if the measures had not been implemented and the credit institution had gone directly 

into liquidation. 

1.2.3. In  the  case  of  restructuring  measures  consisting  of  transactions  involving  the  transfer  of  deposits 

placed  with  a  credit  institution  under  special  administration,  BNR  withdraws  the  authorisation  of 

that credit institution on the date when the contract related to the relevant transaction takes effect 

and, if necessary, will notify the competent court for the initiation of bankruptcy proceedings.  

2. 

General observations  

2.1  According  to  BNR,  the  amendments  in  the  draft  ordinances  are  the  subject  of  the  structural 
benchmarks of the Stand-by Arrangement between Romania and the International Monetary Fund10 

and their entry into force is envisaged for 15 March 2011. In view thereof, the consulting authority 

invokes reasons of extreme urgency and asks the ECB to deliver its opinion by 25 February 2011 to 

enable  the  Romanian  legislator  to  take  the  ECB’s  opinion  into  account,  before  deciding  on  the 

substance of the draft ordinances. The ECB would like to draw the consulting authority’s attention 

to  the  fact  that  according  to  Article  4,  second  sentence  of  Decision  98/415/EC  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 the required language versions 

and  which  also  enables  the  relevant  national  authorities  to  take  the  ECB’s  opinion  into 

consideration before the provisions are adopted.   

2.2  The  ECB  also  notes  the  ongoing  work  in  the  Union  to  establish  a  harmonised  Union  crisis 

management  and  resolution  framework  for  the  financial  sector  which  covers,  inter  alia,  similar 

areas as those covered by the draft ordinances. While the Romanian framework seems to be in line 
with  the  Ecofin  Council's  recent  conclusions  on  crisis  management 11 ,  it  may  require  further 

9  
10  
11  

To be determined by BNR regulations. 
According to the Letters of Intent of 9 September 2010 and 22 December 2010. 
Council conclusions on crisis prevention, management and resolution – Ecofin Council meeting of 7 December 2010. 

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adaptations,  depending  on  the  final  outcome  of  the  Union  framework  and  the  recast  of  Directive 
94/19/EC of the European Parliament and of the Council on deposit-guarantee schemes12. 

3. 

Specific observations 

3.1  The  ECB  has  previously  expressed  its  view13 that  further  efforts  could  be  devoted  to  identifying 

additional tasks that could be delegated to deposit guarantee schemes. Using the financial resources 

of a deposit guarantee scheme to facilitate the transfer of covered deposits or a P&A transaction is 

an example of such possible tasks that,  if properly designed, could contribute to improving crisis 

management  preparedness  and  thereby  financial  stability.  Nonetheless,  given  the  limited  size  of 

deposit guarantee schemes, provisions that aim to safeguard the core functions of these funds (i.e. 

payout  of  covered  deposits)  are  important.  Against  this  backdrop,  the  ECB  welcomes  that, 

according  to  the  draft  ordinances  (a)  the  resources  of  the  Fund  can  only  be  used  to  finance  such 

transfers if this is less costly than the direct payment of covered deposits; and (b) in the case of a 

P&A transaction, all guaranteed deposits have to be transferred. However, the ECB also identifies 

some areas in the proposed legal acts, described below, that may require further consideration.  

3.2  The ECB notes that some important aspects of the mechanism intended to be implemented through 

the draft ordinances are not clearly regulated, inter alia: (a) the legal regime for guarantees to be 

issued by the Fund, in order to facilitate the implementation of a restructuring measure consisting of 

operations that involve the transfer of deposits; (b) the cost of the transfer of covered deposits; and 

(c) the debt of the credit institution from which the covered deposits are transferred, as referred to 

in paragraph 1.1(a). 

In order to foster the stability of financial institutions and the market and to have a clear legal basis 

for the Fund, as well as for reasons of legal certainty, the ECB recommends a clear regulation of 

these issues.  

3.3  The  ECB  appreciates  that  any  decision  on  the  use  of  the  Fund’s  financial  resources  to  finance 

transactions  involving  the  transfer  of  covered  deposits  is  subject  to  BNR’s  approval  and  hence 

recognises BNR’s expertise in this context. However, 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  Treaty  and  the  Statute  of  the 
European System of Central Banks and of the European Central Bank14.  

12    OJ L 135, 31.5.1994, p. 5. 
13  

See  ‘The  Eurosystem’s  stance  on  the  Commission’s  consultation  document  on  the  review  of  Directive  94/19/EC  on 
deposit-guarantee schemes’, 13 August 2009 and ‘Commission Communication on “An EU Framework for Cross-Border 
Crisis  Management  in  the  Banking  Sector”:  Eurosystem’s  reply  to  the  public  consultation’,  4  February  2010  (both 
published on the ECB’s website at www.ecb.europa.eu). 
See paragraph 3.7 of Opinion CON/2008/68 and paragraph 3.3 of Opinion CON/2009/51. 

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

Done at Frankfurt am Main, 25 February 2011. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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