Opinion of the European Central Bank of 13 October 2011 on a State guarantee covering certain loans granted to Dexia SA and Dexia Crédit Local SA (CON/2011/79)
Date: 2011-10-13
Institutions: European Central Bank
Subjects: Belgium, State aid, aid for restructuring, financial institution, financial stability, guarantee, loan, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 13 October 2011 

on a State guarantee covering certain loans granted to Dexia SA and Dexia Crédit Local SA 

(CON/2011/79) 

Introduction and legal basis 

On 12 October 2011, the European Central Bank (ECB) received a request from the Nationale Bank van 

België/Banque Nationale de Belgique (NBB), acting on behalf of the Belgian Ministry of Finance, for an 

opinion on a draft royal decree granting a State guarantee covering certain loans granted to Dexia SA and 

Dexia  Crédit  Local  SA  (hereinafter  the  ‘draft  royal  decree’).  The  ECB  was  requested  to  deliver  an 

opinion under extremely urgent circumstances. 

The ECB’s competence to deliver an opinion is based on Article 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  provisions1,  since  the  draft  royal  decree  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.  

Purpose of the draft royal decree 

1.1   Article 36/24 §1 of the Law of 22 February 1998 establishing the Organic Statute of the Nationale 
Bank van België/Banque Nationale de Belgique2 empowers the King, on advice from the NBB, to 

adopt certain measures, including notably the establishment of a system to grant a State guarantee 

covering liabilities entered into by certain supervised institutions or covering certain claims held by 

1  
2  

OJ L 189, 3.7.1998, p. 42.  
This provision was originally adopted as Article 117bis of the Law of 2 August 2002 on the supervision of the financial 
sector and on financial services, whose substance was transferred to the Law of 22 February 1998 NBB in the context of 
the  recent  reform  of  the  Belgian  supervisory  architecture.  The  ECB  issued  the  following  two  opinions  on  this  reform: 
CON/2010/7  and  CON/2011/5.  ECB  Opinion  CON/2008/50,  paragraph  2.1  commented  on  an  early  draft  of  the 
empowering clause. All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 

 
 
 
 
                                                 
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these  institutions3  in  the  event  of  a  sudden  crisis  in  the  financial  markets  or  a  serious  threat  of  a 
systemic crisis and, if the measures are taken, to limit the scale or effects thereof4.  

The draft royal decree is based on this empowering provision and is motivated by the need, given 

the current turbulence in the international financial markets, to take certain measures to safeguard 

the stability of and confidence in the Belgian financial system. These measures consist in the setting 

up  of  a  guarantee  scheme  covering  particular  loans  of  certain  entities  of  the  Dexia  group  in  the 
context of the group’s restructuring5.   

1.2   Under  the  draft  royal  decree,  the  Belgian  State  will  guarantee  loans  granted  to  Dexia  SA  and/or 
Dexia Crédit Local SA by other credit institutions or professional counterparts6, up to a maximum 
principal  amount  of  EUR  54 450 000 0007.  The  guarantee  will  only  apply  for  loans  issued  until 
31 December 2021 at the latest and having a maturity of maximum 10 years8. The guarantee will be 
payable at first demand9 and its remuneration is to be determined by the Minister for Finance10. 

The entry into force of the State guarantee will be conditional on the Minister for Finance entering 

into  one  or  several  agreement  specifying  certain  aspects  of  the  arrangement,  notably:  (i)  the 
identification of the guaranteed loans11; (ii) Dexia SA and Dexia Crédit Local SA’s undertaking to 

pay  the  remuneration  agreed  for  the  guarantee  and  to  implement  any  measure  aimed  at  restoring 
their solvability deemed useful by the Minister for Finance12; (iii) the duration of the guarantee and 
events causing the guarantee to expire13 14. 

2.   General observations  

It  is  important  to  ensure  that  the  draft  royal  decree  and  any  subsequent  implementing  measures  fully 

comply  with  the  relevant  provisions  of  Union  law,  including  competition  and  State  aid  rules.  In  this 

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See in particular Article 36/24, §1, 2° of the Law of 22 February 1998. 
Belgium  has  consulted  the  ECB  on  seven  other  draft  legislative  provisions  adopted  in  this  context:  (i)  Opinion 
CON/2008/46;  (ii)  Opinion  CON/2008/50;  (iii)  Opinion  CON/2008/61;  (iv)  Opinion  CON/2008/74;  (v)  Opinion 
CON/2009/25; (vi) CON/2009/29 and (vii) CON/2009/73. 
See the references to the safeguard of the stability of the Belgian financial system in recital 3 of the draft royal decree.  
Article 1 of the draft royal decree.  
Article  2  of  the  draft  royal  decree.  In  addition  to  the  principal,  the  guarantee  also  covers  interests  and  ancillary  costs, 
which are not subject to the EUR 54 450 000 000 ceiling. 
Article 2 of the draft royal decree. The categories of ‘professional counterparts’ that are eligible for the guarantee are to 
be identified by the Minister for Finance in a further contract or regulation. 
Article 3 of the draft royal decree. The eligible beneficiaries will need to provide a precise justification of the amounts 
concerned and declare that these amounts are payable and unpaid. 
Article 4 of the draft royal decree. 
Article 5, 1° of the draft royal decree.  
Article 5, 3° and Article 5, 4° of the draft royal decree. 
Article 5, 5° of the draft royal decree. 
The following will also need to be specified in the agreements : (i) whether the guarantee is assignable (Article 5, 6° of 
the draft royal decree); (ii) the arrangements ensuring subrogation and compensation of the Belgian State in the event of a 
call on the guarantees, and any possible related security (Article 5, 7° of the draft royal decree); (iii) the arrangements for 
informing the State of the development of the guaranteed loans (Article 5, 8° of the draft royal decree; (iv) the pay out 
deadlines (Article 5, 9° of the draft royal decree), as well as (v) any other provision deemed useful by the Minister for 
Finance (Article 5, 10° of the draft royal decree). 

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respect, it is essential that Member States comply with the guidance given by the European Commission 

in  its  communications  on the  application  of  State  aid  rules  to  support  measures  in  favour  of  banks  and 
government guarantee schemes covering bank debt15, including with regard to the temporary nature of the 

acceptability  of  such  aid  measures  and  the  necessity  for  credit  institutions  receiving  State  support  to 

submit a restructuring plan. 

3. 

Interaction of the draft royal decree with the monetary policy of the euro area  

The draft royal decree does not define the type of liabilities falling within the meaning of ‘loans’ under 

Article 1 of the draft royal decree since they will be defined in the agreement(s) referred to in Article 5 of 

the draft royal Decree. In this respect, the ECB makes the following observations.  

First,  it  reminds  the  consulting  authority  that  government  guarantees  for  bank  debt  should,  when 

practically  implemented:  (i)  address  the  funding  problems  of  liquidity-constrained  solvent  banks  by 

improving  the  functioning  of  the  market  for  bank  debt  of  longer-term  maturity;  (ii)  preserve  the  level 

playing field among financial institutions and avoid market distortions; and (iii) ensure consistency in the 

management of Eurosystem liquidity. In this vein, government guarantees on short-term bank debt with a 
maturity of three to 12 months may be provided to revitalise the short-term bank debt market16. In this 

regard, the ECB reiterates that granting government guarantees for bank debt with a maturity of less than 
three months should be avoided to the extent possible17.  

Second, it is also stressed that it is of the utmost importance that support operations conducted by national 

authorities do not in any way affect the conduct and the implementation of monetary policy in the euro 
area18.  In  this  context,  the  ECB  reiterates  its  view  that  the  extension  of  the  State  guarantee  to  cover 
interbank deposits should be avoided19, as this could entail substantial distortion in the various national 

segments of the euro area money market by potentially increasing short-term debt issuance activity across 

Member  States  and  therefore  impairing  the  implementation  of  the  single  monetary  policy,  which  is  an 
exclusive  competence  of  the  Eurosystem  under  Article  127(2)  of  the  Treaty20.  It  could  also  affect  the 

15  

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20  

See  notably  the  Communication  from  the  Commission  on  the  application,  from  1  January  2011,  of  State  aid  rules  to 
support  measures  in  favour  of  banks  in  the  context  of  the  financial  crisis,  (OJ  C  329,  7.12.2010,  p.  7);  the  DG 
Competition  Staff  Working  Document  -  The  application  of  State  aid  rules  to  government  guarantee  schemes  covering 
bank  debt  to  be  issued  after  30  June  2011,  published  on  the  Commission’s  website  at  www.ec.europa.eu;  the 
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); the Eurosystem’s Guiding 
principles for bank asset support schemes, 25 February 2009; and Commission Communication of 25 February 2009 on 
the  treatment  of  impaired  assets  in  the  Community  banking  sector  (OJ  C  72,  26.3.2009,  p.  1).  See  furthermore  in  this 
context  the  Recommendations  of  the  Governing  Council  of  the  European  Central  Bank  on  government  guarantees  for 
bank debt, 20 October 2008. 
CON/2009/73, paragraph 3.1, CON/2009/12, paragraph 3.3, CON/2009/49, paragraph 3.9. 
CON/2009/92, paragraph 3.5. 
CON/2009/73, paragraph 3.1, CON/2009/12, paragraph 3.2, CON/2009/92, paragraph 3.5 . 
CON/2009/73,  paragraph  3.1,  CON/2009/49,  paragraph  3.9,  CON/2008/50,  paragraph  3.2,  CON/2009/12,  paragraph 
3.3.2. 
CON/2009/73,  paragraph  3.1,  CON/2009/49,  paragraph  3.9,  CON/2009/12,  paragraph  3.3.2  and  CON/2008/48, 
paragraph 3.7. 

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transmission of monetary policy decisions21 and make it difficult to maintain the necessary level playing 

field in the euro area between the financial institutions benefiting from the State guarantee and those not 

benefiting.  

4.   Temporary nature of the scheme  

Also in line with the guidance given by the Commission on 30 June 201122, the ECB notes the need for 
national support measures to be temporary in nature23. It is understood that the support scheme covers a 

time period of up to 20 years, as the loans covered  by the guarantee  may be issued until 31 December 

2021  at  the  latest  and  may  be  for  a  maximum  duration  of  10  years,  and  thus  could  be  considered  of  a 

longer-term rather than temporary nature.  

5.   Pricing of the guarantee 

As  for  Article  4  of  the  draft  royal  decree,  the  ECB  underlines  that,  for  the  Minister  of  Finance  to 

determine the remuneration due to the State for the guarantee, the pricing formula recommended by the 

Governing Council on 20 October 2008 should be taken into consideration. This was also supported by 

the Commission in its guidance related to the application of State aid rules to government guarantees of 

2011. 

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

Done at Frankfurt am Main, 13 October 2011. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

21  
22  

23  

CON/2009/73, paragraph 3.1, CON/2009/12, paragraph 3.3.2, CON/2009/49, paragraph 3.9. 
DG Competition Staff Working Document - The application of State aid rules to government guarantee schemes covering 
bank debt to be issued after 30 June 2011, published on the Commission’s website at www.ec.europa.eu. 
CON/2009/73, paragraph 3.2, CON/2009/24, paragraph 3.1, CON/2009/54, paragraph 2.5.2. 

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