Opinion of the European Central Bank of 20 July 2011 on crisis intervention measures for financial institutions in difficulty (CON/2011/60)
Date: 2011-07-20
Institutions: European Central Bank
Subjects: Netherlands, company in difficulties, financial institution, financial stability, financial supervision, monetary crisis, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 20 July 2011 

on crisis intervention measures for financial institutions in difficulty 

(CON/2011/60) 

Introduction and legal basis 

On  19  April  2011,  the  European  Central  Bank  (ECB)  received  a  request  from  the  Dutch  Minister  for 

Finance for an opinion on the draft law on crisis intervention measures (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 De Nederlandsche Bank (DNB) 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 introduces, inter alia, a number of amendments to the Law on financial supervision. 

In particular, it grants new powers to DNB and the Minister for Finance to intervene in situations 
where an institution2 faces financial difficulty3 or where there is a serious and immediate risk to the 

stability of the financial system caused by an institution in difficulty.  

1.2  Pursuant  to  the  draft  law,  DNB  may  prepare  a  plan  for  the  partial  or  total  transfer  of  the  shares, 
and/or assets and liabilities, including deposits, of an institution in difficulty to a private purchaser4. 

The  plan  becomes  effective  upon  the  district  court’s  approval.  Transfers  and  related  measures  do 

not trigger the rights of the contracting parties of a credit institution to exercise early termination, 
set off and netting5. 

1.3  Furthermore,  the  draft  law  grants  the  Minister  for  Finance  the  power  to  take  ‘special  measures 

related to the stability of the financial system’. Accordingly, the Minister may expropriate the assets 

of  an  institution  in  difficulty  for  the  purpose  of  stabilising  the  financial  system.  The  draft  law 

1  
2  
3  
4  

5  

OJ L 189, 3.7.1998, p. 42. 
Under the draft law, an ‘institution’ refers to credit institutions and insurance companies. 
Defined in the new Article 3:159a(g), in conjunction with the new Article 3:159b, of the Law on financial supervision. 
The new Section 3.5.4A of the Law on financial supervision. Pursuant to the new Article 3:159f of the Law on financial 
supervision, the State cannot be the purchaser. 
The new Article 3:267f of the Law on financial supervision. 

 
 
 
 
                                                 
ECB-PUBLIC 

provides  for a  right  of  indemnification  for  such  action, based  on  the  actual  value  of  the  assets  or 

securities  seized.  The  value  will  be  determined  by  estimating  the  market  price  at  the  time  of  the 
expropriation, less the amount of any financial support6. 

1.4 

In addition to the amendments to the Law on financial supervision, the draft law amends the Law 
on bankruptcy7, the Civil Code8, the Law on general administration9 and the Law on securities bank 
giro transactions10. 

2.  General observations 

2.1 

In line with its previous opinions, the ECB emphasises that, when adopting measures to deal with a 

financial crisis, Member States should act in a coordinated manner to avoid significant differences 

in  national  implementation,  which  could  have  a  counterproductive  effect  and  cause  distortions  in 

global  financial  markets.  Moreover,  it  is  crucial  to  ensure  consistency  with  the  Eurosystem’s 
operational framework and liquidity management11. Against this background, any national measure 

should ensure a sufficiently level playing field within the euro area, which is of key importance to 

maintaining the integrity of the euro area financial system. 

2.2  The  ECB  supports  the  plans  put  forward  by  the  European  Commission  to  develop  a  crisis 

management  and  resolution  framework  for  Union  financial  institutions.  The  Union  clearly  needs 

better  tools  with  well-designed  triggers  to  tackle  problems  faced  by  financial  institutions  more 

effectively.  National  regimes  should  be  as  harmonised  as  possible  and  there  should  be  better 

coordination between Member States in crisis situations. In particular, the ECB shares the view that 

the overriding policy objective of the new Union regime should be to allow any institution to fail in 

a way that safeguards the stability of the Union financial system as a whole and minimises public 

costs and economic disruptions. 

3. 

The role of DNB and measures taken 

3.1  The ECB understands that the tasks allocated to DNB under the draft law do not interfere with the 

performance  of  any  of  DNB’s  Eurosystem-related  tasks  provided  for  by  the  Treaty  and  do  not 
prejudice the financial means necessary for carrying out DNB’s Eurosystem-related tasks12.  

3.2  Any involvement of DNB and its Governor in the application of measures to strengthen financial 

stability  must  be  compatible  with  the  Treaty  and  consequently  with  DNB’s  institutional  and 

financial  independence,  as  well  as  with  the  Governor’s  personal  independence  to  safeguard  the 

6  
7  
8  
9  
10  
11  

12  

The new Article 6:8 and 6:9 of the Law on financial supervision. 
Article II of the draft law. 
Article III of the draft law. 
Article IV of the draft law. 
Article V of the draft law. 
See  paragraph  2.1.1  of  Opinion  CON/2009/  54.  All  ECB  Opinions  are  published  on  the  ECB’s  website  at 
www.ecb.europa.eu. 
The ECB’s Convergence Report May 2010, p. 22. 

2 

 
 
                                                 
ECB-PUBLIC 

proper  performance  of  their  tasks  under  the  Treaty  and  the  Statute  of  the  European  System  of 
Central Banks and of the European Central Bank13.  

3.3   The  draft  law  defines  ‘transitional  institution’  as  an  institution  whose  role  is  to  purchase,  on  a  

temporary  basis,  deposit  agreements,  assets  or  liabilities  (other  than  pursuant  to  deposit 

agreements),  and  shares  of  an  institution  in  difficulty.  The  draft  law  does  not  specify  who  is 

responsible  for  setting  up  a  transitional  institution  or  the  procedure  to  be  used.  Moreover,  it  is 

unclear under which circumstances a transitional institution would play a role. Under the draft law, 

the  new  Article  3:159f(2)  of  the  Law  on  financial  supervision  provides  that  ‘Rules  can  be 

established  by  general  administrative  regulation  with  respect  to  the  transfer  to  a  transitional 

institution’, but does not offer an explanation regarding the transitional institution itself. The ECB 

would welcome clarification with respect to these open issues, as without clear specifications, the 

transitional  institutions  cannot  serve  as  effective  tools  and  their  function  and  design  cannot  be 

coordinated among the Member States. It should also be made clear how the transitional institutions 
relate to the ‘bridge bank tool’ discussed at Union level14. 

4.   Prohibition of monetary financing and financing of resolution measures 

4.1 

It is important to safeguard compliance with the monetary financing prohibition under Article 123 

of  the  Treaty.  This  prohibition  of  monetary  financing  is  designed  to  prevent  central  banks  from 

providing overdraft facilities or any other type of credit facility to the public sector, which includes 

any financing of the public sector’s obligations vis-à-vis third parties. The draft law provides for 
the  possibility  for  DNB  to  furnish  an amount  for  the  transfer  of  deposit  agreements15  and  allows 
DNB  to  subsequently  recover  such  amount  from  credit  institutions16.  The  ECB  notes  that  the 

amount that DNB may provide for the transfer of deposit agreements under the draft law may not 
exceed the total amount of the guaranteed deposits held by an institution in difficulty17. It should be 

explicitly spelled out that a transfer of a deposit agreement may only be financed by funds from the 

deposit guarantee scheme. From this perspective, the ECB notes that the draft law does not change 

in substance the regime currently in force, envisaging that the Dutch deposit guarantee scheme is 

financed  by  advance  payments  from  DNB,  with  a  collection  of  contributions  from  credit 

institutions at a later point in time. 

4.2  Advance payments by DNB in the context of the operation of the Dutch deposit guarantee scheme 

are  generally  considered  incompatible  with  the  monetary  financing  prohibition  and  legislation  is 

required  to  make  the  deposit  guarantee  scheme  compliant  with  the  monetary  financing 

13 
14  

15  
16  
17  

See paragraph 3.1.4 of Opinion CON/2009/93. 
See  the  Commission’s  consultation  document  ‘Technical  details  of  a  possible  EU  framework  for  bank  recovery  and 
resolution’,  p.  52,  available  at  http://ec.europa.eu  (hereinafter  the  ‘Commission’s  consultation  on  crisis  resolution’).  A 
‘bridge bank’ is an institution or other legal person that is wholly owned by one or more public authority. 
New Article 3:159g(1) of the Law on financial supervision. 
New Article 3:159l of the Law on financial supervision. 
The new Article 3:159g(2) of the Law on financial supervision. 

3 

 
                                                 
 
ECB-PUBLIC 

prohibition18.  The  ECB  understands  that  a  law  is  being  prepared  that  will  provide  for  ex  ante 

funding  as  regards  the  deposit  guarantee  scheme.  Until  such  legislation  is  in  place,  advance 

payments  by  DNB  and  the  resulting  claims  for  DNB  in  relation  to  the  transfer  of  deposit 

agreements,  even  though  financed  ex  post  by  contributions  from  credit  institutions,  would  in 

principle not be compatible with the prohibition of monetary financing.  

4.3  Also from a financial stability perspective, the ECB calls for the relevant authorities to set up an ex 
ante  funding  scheme  for  institutions  in  the  deposit  guarantee  scheme19,  which  would  have,  inter 

alia,  the  advantage  of  greater  reliability  and  availability.  It  would  avoid  the  risk  of  being  an 

additional  strain  on  the  banking  sector  in  times  of  crisis.  An  ex  ante  funding scheme  should  also 

include the possibility to call upon the private sector for additional financial support, as it cannot be 

excluded that in a crisis situation, pre-collected funds from the industry may be insufficient and that 

supplementary use of public funds may be necessary. This principle of ex post recovery from the 

private sector should promote additional market discipline and address the risk of moral hazard. 

5.  

Shareholder rights 

5.1  Under  the  draft  law,  the  transfer  plan  prepared  by  DNB  may  provide  for  the  transfer  of  deposit 

agreements,  assets  and  liabilities,  and  shares  from  the  institution  in  difficulty  to  a  private  sector 

purchaser.  

5.2  The draft law20 sets out the procedure for the transfer of shares from an institution in difficulty to a 

private sector purchaser, according to which consent or cooperation on the part of the shareholders 

is  not  required.  The  new  Article  3:159q(c)  of  the  Law  on  financial  supervision  requires  that  a 

transfer plan include the price the purchaser is willing to pay and the reason that price is considered 

reasonable for the shares.  

5.3 

In  order  to  strike  the  right  balance  between  the  need  for  prompt  and  effective  action  by  the 

authorities  on  the  one  hand  and  the  preservation  of  shareholders’  property  rights  on  the  other, 

safeguards need to be put in place to render such a procedure compatible with the right to property, 
as guaranteed in Article 17 of the Charter of Fundamental Rights of the European Union21. In this 

respect, the  ECB notes that the draft law  and in particular the new  Article 3:159u of the Law on 

financial  supervision,  provides  for  such  safeguards.  Given  the  importance  of  timely  and  effective 

crisis management, inclusion of an ex ante hearing of large shareholders is undesirable and the new 
Article 3:159t of the Law on financial supervision should be amended accordingly22. 

18  
19  

20  
21  

22  

See ECB Annual Report 2010, p. 120. See also the ECB’s convergence report, May 2010, p. 25. 
An introduction of partial ex ante funding arrangements for the deposit guarantee schemes is also considered crucial from 
a financial stability perspective, as already stated in Opinion CON/2011/12. 
New Articles 3:159p to 3:159r of the Law on financial supervision. 
See  also  the  ESCB’s  contribution  to  the  Commission’s  consultation  document  ‘Technical  details  of  a  possible  EU 
framework for bank recovery and resolution’, p. 3, available at http://ec.europa.eu (hereinafter the ‘ESCB’s response to 
Commission’s consultation’). 
New Article 3:159t of the Law on financial supervision provides for the possibility for shareholders, holding more than 
10% of the shares, to be heard by the district court ex ante, before the court approves the transfer plan and pronounces 
that the transfer agreements may proceed. The shareholders may challenge DNB’s assessment that the trigger conditions 

4 

 
                                                 
ECB-PUBLIC 

6. 

Close-out netting and set off rights 

6.1  The  new  Article  3:267f  of  the  Law  on  financial  supervision  provides  that  measures  taken  in  the 

context of a transfer are not considered trigger events for early termination, set off or netting rights. 

In  this  respect,  as  stated  in  recommendation  9  of  the  Report  and  Recommendations  of  the  Basel 
Committee on Banking Supervision’s Cross-border Bank Resolution Group (CBRG)23, ‘the ability 

of  relevant  [national]  authorities  to  impose  a  brief  delay  on  the  exercise  of  early  termination  and 

netting  rights  would  maximise  the  possibility  of  transfer  to  a  sound  company,  a  bridge  bank  or 

another  public  entity  provided  that:  the  period  of  time  during  which  the  authorities  can  delay 

immediate operation of contractual early termination rights pending a transfer is clearly defined and 

limited,  after  which  full  termination  and  close-out  rights  would  be  available  for  all  financial 

contracts not transferred to a solvent transferee’.  

6.2  The ECB notes that a solution aligned with the CBRG recommendations has been contemplated as 
part of the proposed Union framework on crisis resolution24. The response of the European System 

of Central Banks (ESCB) to the Commission’s consultation, states that it ‘supports the proposal to 

give the resolution authority the legal power to temporarily delay the exercise by any party of close-

out netting rights under a netting agreement with the institution in difficulty to complete a transfer 

of  certain  financial  markets  contracts  to  another  sound  company,  a  bridge  bank  or  other  public 
entity’25. Until this recommendation is incorporated into Union law, due regard needs to be paid to 

ensuring  compliance with resolution  measures  introduced into  the  national  legislation  of  the 

Member  States  with  the relevant  elements  of  the  existing  Union  legal  framework,  as  specified 

below. 

6.3  Against  this  background,  the  ECB  notes  that  the  rejection  of  counterparties’  close-out  netting  or 
other rights following a ‘measure’26 should not jeopardise rights protected under financial collateral 

arrangements,  as  defined  in  Article  2(1)(a)  of  Directive  2002/47/EC  of  the  European  Parliament 
and  of  the  Council  of  6  June  2002  on  financial  collateral  arrangements27  as  well  as  further  rules 

specified in Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 
on  the  reorganisation  and  winding  up  of  credit  institutions28  and  Directive  1998/26/EC  of  the 

European  Parliament  and  of  the  Council  of  19  May  1998  on  settlement  finality  in  payment  and 
securities settlement systems29. 

justifying the intervention are met and the adequateness of the price for the shares. Furthermore, new Article 3:159u of 
the Law on financial supervision provides for the possibility for those shareholders the district court did not hear ex ante, 
to oppose the court decision approving the transfer plan ex post. 
Report  and  recommendations  of  the  Cross-border  Bank  Resolution  Group,  March  2010,  available  on  the  Bank  for 
International Settlement’s website at www.bis.org. 
See the Commission’s consultation on crisis resolution, p. 64. 
See the ESCB’s response to the Commission’s consultation, p.12. 
As defined in the new Article 3:267e of the Law on financial supervision. 
OJ L 168, 27.6.2002, p. 43. 
OJ L 125, 5.5.2001, p. 15. 
OJ L 166, 11.6.1998, p. 45. 

23  

24  
25  
26  
27  
28  
29  

5 

                                                                                                                                                             
 
ECB-PUBLIC 

6.3.1  Article  7(1)(b)  of  Directive  2002/47/EC  requires  Member  States  to  ensure  that  for  a  financial 

collateral  arrangement,  a  close-out  netting  provision  can  take  effect  in  accordance  with  its  terms 

notwithstanding  the  commencement  or  continuation  of  winding-up  proceedings,  reorganisation 

measures  or  any  other  type  of  judicial  proceeding,  attachment,  assignment  or  other  disposition 

concerning such rights. Until draft amendments to Union law related to the preparation of a Union 

crisis management framework are adopted, the above rules should continue to be fully implemented 
in  national  legislation.  As  specified  in  the  explanatory  memorandum  to  the  draft  law30,  the  ECB 

understands  that  the  exclusion  of  ‘financial  collateral  arrangements’  from  the  operation  of  new 

Article 3:267f of the Law on financial supervision, as introduced in paragraph 4(b) of this Article, 

is intended to achieve this result. 

6.3.2  Article 25 of Directive 2001/24/EC provides that netting agreements are governed by the law of the 

contract which governs such agreements. Following the new Article 3:267d of the Law on financial 

supervision  this  section  ‘applies  to  agreements  …  regardless  of  the  law  that  governs  the 

agreement’. The ECB notes that the master agreements on which close-out netting rights are based 

are  often  concluded  by  Dutch  credit  institutions  under  the  laws  of  other  jurisdictions  such  as 

England or New York. It is unclear under Union law whether the proposed stay could be enforced 

against  a  Dutch  credit  institution  that  has  entered  into  a  netting  agreement  governed  by  English, 

New York or other third country’s laws. In view of these legal uncertainties, any statutory powers 

to  impose  a  temporary  stay  on  such  contracts  or  a  rejection  of  counterparties’  close-out  netting 

rights should be coordinated closely at Union level. 

6.3.3  Article 9 of Directive 1998/26/EC protects rights to collateral security to which the central banks 

and participants in the systems are entitled within the scope of this Directive. As specified  in the 
explanatory memorandum to the draft law31, the ECB understands that the new Article 3:267f (4)(a) 

of  the  Law  on  financial  supervision  is  intended  to  maintain  this  protection  in  that  it  will  exclude 

from  the  operation  of  Article  3:267f  ‘a  right  to  which  a  central  bank  or,  in  connection  with 

participation  in  a  system  as  referred  to  in  Article  212a,  part  b,  of  the  Bankruptcy  Act,  another 

institution that participates in the system is entitled pursuant to a legal relationship as referred in the 

first paragraph of [Article 3:267f]’. 

7.  Measures to ensure the stability of the financial system, including the right of expropriation 

7.1  A  new  Part  6  of  the  Law  on  financial  supervision  establishes  a  special  expropriation  regime  to 

ensure stability of the financial system, which specifies that the Dutch Expropriation Act will not be 
applicable32. The ECB notes that the new Article 6:1(1) of the Law on financial supervision gives 

the Minister for Finance the power to ‘take immediate measures’ without specifying which kind of 

measures are covered by this power. In this respect, the draft law should specify if those ‘immediate 

30  
31  
32  

See comments on the new Article 3:267f of the Law on financial supervision. 
See comments on Article 3:267f. of the Law on financial supervision. 
See the new Article 6:2(7) of the Law on financial supervision. 

6 

 
                                                 
ECB-PUBLIC 

measures’  cover  other  measures  besides  expropriation  and,  if  this  is  the  case,  it  should  clearly 

define the scope of these other measures. 

7.2  The power of the Minister to expropriate assets of an institution in difficulty is laid down in the new 

Article 6:2 of the Law on financial supervision. The ECB highlights that expropriation is a severe 

measure with far-reaching effects on market participants. For this reason, expropriation by the State 

in relation to institutions in difficulty should remain a tool for use in clearly defined and exceptional 

circumstances. The new Article 6:2(1) specifies that the expropriation can take place if the Minister 

‘is of the opinion that the stability of that system is coming into serious and immediate risk by the 

situation  of  an  institution  domiciled  in  the  Netherlands’.  It  should  be  made  clear  that  such 

expropriation  is  a  last  resort  measure  and  can  only  take  place  if  there  is  no  other  less  intrusive, 

equally effective measure available. 

7.3 

It is very important that indemnification for an expropriation provides for a transparent valuation of 

the assets, which adequately reflects market conditions. The new Articles 6:8 and 6:9 of the Law on 

financial supervision provide that the value will be determined by estimating the market price at the 

time  of  the  expropriation,  less  the  amount  of  any  financial  support.  The  ECB  welcomes  that  the 

new Article 6:9(2) provides for a discount of any public financial support previously received by an 

institution.  Moreover,  the  ECB  understands  that  expropriation  under  the  draft  law  will  ultimately 

not amount to a bailout or state aid. 

7.4  Any  State’s  role  taken  with  respect  to  an  institution  should  be  clearly  limited  in  time33.  It  is 

therefore important to have an adequate exit strategy in place. The new Article 6:1(3) of the Law on 

financial  supervision,  which  provides  that  the  Minister  ‘will  determine  the  period  of  those 

measures’ and that he ‘can extend this period by a separate decision’, is not clear enough in order to 

limit  the  time  of  expropriation  and  to  define  a  clear  exit  strategy.  In  this  respect,  the  draft  law 

should contain clearer and more detailed provisions. 

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

Done at Frankfurt am Main, 20 July 2011. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

33  

See also paragraphs 3.2.1 and 3.2.6 of Opinion CON 2009/24 and paragraph 3.3 of Opinion CON/2009/6. 

7