Opinion of the European Central Bank of 31 October 2011 on stabilisation measures and bridge banks (CON/2011/86)
Date: 2011-10-31
Institutions: European Central Bank
Subjects: EU banking union, Romania, company in difficulties, credit institution, financial stability, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 31 October 2011  

on stabilisation measures and bridge banks 

(CON/2011/86) 

Introduction and legal basis 

On  20  October  2011,  the  European  Central  Bank  (ECB)  received  a  request  from  Banca  Naţională  a 

României (BNR) for an opinion on a draft government emergency ordinance amending and supplementing 

Government  Emergency  Ordinance  No  99/2006  on  credit  institutions  and  capital  adequacy  (GEO  No 
99/2006)1 and Government Ordinance No 39/1996 on the setting up and operation of the deposit guarantee 
fund in the banking system (GO No 39/1996)2 (hereinafter the ‘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  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 provisions3, as the draft ordinance relates to BNR and 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 ordinance 

1.1   The draft ordinance will provide the supervisory authority with the tools to manage financial stability 

threats posed by the deterioration of the financial situation of authorised credit institutions or of the 

group to which they belong. To this end, it will introduce a set of stabilisation measures for the credit 

institution in distress, in addition to the special administration procedure already applicable.  

1.2  Amendments to GEO No 99/2006 

The draft ordinance will introduce the following stabilisation measures in the legal framework for 

credit institutions and financial investment companies in Romania:  

1  
2  
3  

Published in Monitorul Oficial al României, Part One, No 1027, 27.12.2006. 
Republished in Monitorul Oficial al României, Part One, No 587, 19.8.2010. 
OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                 
ECB-PUBLIC 

(a) 

the total or partial transfer of assets and liabilities of a credit institution to one or more eligible 

institutions;  

(b) 

the appointment of the Bank Deposit Guarantee Fund (BDGF) as a delegated administrator 
and shareholder of the credit institution4, by increasing that credit institution’s share capital 

and subscribing to the new shares issued by the BDGF. The shares acquired by the BDGF 

must be sold within two years following the date of acquisition; 

(c) 

the transfer of assets and liabilities of a credit institution to a bridge bank, established for this 

purpose, if measures (a) and (b) cannot be applied or if their application does not ensure the 

removal of the threat to financial stability. 

The BDGF, which is a public law legal entity5, provides the financing for the stabilisation measures: 

first, from the resources of the Bank Resolution Fund and, then, if those resources have been used up, 

from its own resources. Such financing may not exceed a level by which the coverage degree of the 

BDGF’s exposure decreases below the limit of 0.5% of the total value of the guaranteed deposits. 

Where  the  BDGF’s  resources  are  insufficient,  the  difference  is  provided  by  loans  granted  by  the 

Ministry of Public Finance to the BDGF within 15 banking days from receipt of the request from the 

BDGF. A government decision will regulate the loan. 

The bridge bank is established and operates for up to two years - unless extended for serious reasons 

- according to the legislation applicable to the credit institutions and is subject to BNR’s prudential 

supervision. The stated purpose of the bridge bank is to ensure the prudent continuous provision of 

banking services related to the assets and liabilities taken over in view of its subsequent sale to an 

eligible third party purchaser. The bridge bank subrogates to the rights and obligations arising from 

agreements entered into by the credit institution from which the transfer was made. The bridge bank 

is sold on the basis of BNR’s decision by: (a) selling shares, or (b) selling assets with assumption of 

liabilities. 

1.3  Amendments to GO No 39/1996 

The  legal  framework  for  the  Romanian  Deposit  Guarantee  Scheme  is  also  amended  to  foster  the 

stabilisation measures and its new competences: the BDGF may become the delegated administrator 

and shareholder of a credit institution which is subject to a stabilisation measure; where a bridge bank 

is created, the BDGF is its sole shareholder and exercises the tasks of the supervisory committee. In 

these cases, the BDGF finances the stabilisation measures with BNR’s prior approval. 

The draft ordinance also modifies the regime for the special fund initially created for compensating 

persons  negatively  affected  by  the  measures  implemented  during  the  special  administration 

procedure. This Fund is renamed the Bank Resolution Fund and it may also finance the stabilisation 

measures.  

4  
5  

Article 2545 to be inserted in GEO No 99/2006. 
Article 1(2) of GO No 39/1996. 

2 

                                                 
ECB-PUBLIC 

2. 

General observations  

2.1  The amendments in the draft ordinance are part of Romania’s commitments in the Letter of Intent of 

14 September  2011  in  the  context  of  the  Stand-by  Arrangement  between  Romania  and  the 

International  Monetary  Fund  and  the  European  Union;  their  entry  into  force  is  envisaged  for  31 

October  2011.  The  consulting  authority  therefore  invokes  extreme  urgency  and  asks  the  ECB  to 

deliver its opinion by 26 October 2011 to enable the Romanian legislator to take the ECB’s opinion 

into account. The ECB draws the consulting authority’s attention to the second sentence of Article 4 

of Decision 98/415/EC according to which 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 carefully 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  Furthermore, the ECB notes that the draft ordinance will need to be reviewed in the light of the future 

Union regulatory framework on bank recovery and resolution, in particular with regard to resolution 

tools and resolution authorities’ powers, and of the forthcoming recast Directive on deposit guarantee 

schemes. 

3. 

Specific observations 

3.1  The ECB welcomes the introduction of a bridge bank as a stabilisation measure, with the specific 

purpose  of  transferring  to  it  the  assets  and  liabilities  of  a  troubled  credit  institution  in  the 

circumstances set out by the draft law. As regards the period of two years for the existence of the 
bridge bank6, the ECB considers that BNR should have the power to extend this period if it deems 

necessary. In that case, the ECB considers that it is not sufficient that this decision will be taken ‘for 

serious reasons…in order to ensure continuity of banking services’. In the interest of legal certainty 

and in keeping with the interim nature of the bridge bank as a resolution tool, the grounds on which 

BNR may decide to extend the bridge bank should be set out precisely; such grounds may include a 

continuing  risk  to  financial  stability  or  the  fact  that  negotiations  with  a  purchaser  are  not  yet 

completed.  

3.2   The  draft  ordinance  provides  that  ‘After  the  transfer,  the  BDGF  shall  appoint  an  authorised 

independent  expert  to  assess  the  quality  of  assets  taken  over  by  the  bridge  bank,  to  calculate, 

according  to  the  applicable  accounting  regulations,  the  fair  value  of  the  transferred  assets  and 
liabilities and the total value of the transfer’7. It is important for the draft law to express clearly that 

any  State  or  central  bank  financial  assistance  provided  or  potentially  to  be  provided,  apart  from 

ordinary market operations on the usual terms, will be deducted from the calculation of the fair value 

of the transferred assets and liabilities.   

6  
7  

New Article 2546 of GEO No 99/2006. 
New Article 25411(5) of GEO No 99/2006.  

3 

 
                                                 
ECB-PUBLIC 

3.3   Funding of resolution measures by the Bank Resolution Fund and by the BDGF 

The purpose of the Bank Resolution Fund (BRF), which is based on the former Special Fund, needs 

to be clarified. The new BRF appears to support compensation of ‘persons prejudiced by measures 

taken’ both at an early intervention and resolution phase. In addition the BRF’s financial resources 
may  be  used  to  finance  the  stabilisation  measures8  but  the  draft  ordinance  does  not  specify 

unambiguously when and how such financing will be triggered. Furthermore, the respective roles of 

the  BRF  and  the  BDGF  in  financing  the  stabilisation  measures  are  not  sufficiently  clear  and  the 

relationship between the BRF and the BDGF needs to be clarified. 

Directive  94/19/EC  of  the  European  Parliament  and  of  the  Council  of  30  May  1994  on 
deposit-guarantee schemes9 requires that deposit-guarantee schemes (DGSs) should be in a position 
to  pay  duly  verified  claims  by  depositors  in  the  periods  specified  by  this  Directive10  which  also 

implies  that  the  DGSs  should  have  adequate  financial  means  at  their  disposal  to  realise  this 
objective11. Generally, the ECB considers that, to avoid confusing the deposit guarantee role of the 

BDGF  and  the  resolution  role  of  the  BRF,  it  would  be  more  appropriate  for  the  BRF’s  financial 
resources12, rather than the BDGF’s resources, to be used to finance the stabilisation measures and to 

capitalise  the  bridge  bank.  In  any  case,  the  BDGF’s  financial  resources  available  for  paying 

guaranteed  deposits  should  be  ring-fenced  and,  if  necessary,  only  used  to  cover  the  part  of  the 
resolution cost that indirectly ensures the depositors’ protection13. In resolution, the amount paid by 
the BDGF for the financing of stabilisation measures14 should therefore be limited to the amount of 
guaranteed deposits transferred to a private sector purchaser or a bridge bank15. This is crucial to 

ensure that the objective of the deposit guarantee scheme is fully respected. In the same vein, the 

BDGF’s  involvement  as  shareholder  and  administrator  of  the  ailing  or  bridge  bank  should  be 

reconsidered and the BRF should instead assume this role. 

The ECB considers it very important for a satisfactory level of funds to be collected ex ante from the 

financial sector for the deposit guarantee and the resolution fund, given the countercyclical nature of 

such pre-collected funds. The ECB welcomes the special supplementary contributions ex post as a 

complement to the ex ante funding regime for the BDGF and the BRF where BNR considers the 

financial resources accumulated in the BDGF and in the BRF to be insufficient to ensure payments 

due.  

8  
9  
10  
11  

12  
13  

14  
15  

Article 58(1)1 to be inserted in GO No 39/1996. 
OJ L 135, 31.5.1994, p. 5. 
See Article 10(1) of the Directive 94/19/EC. 
See recital (23) of Directive 94/19/EC specifying that financing capacity of DGSs must be in proportion to their liabilities; 
see also paragraph 2.5 of ECB Opinion CON/2007/26. 
Article 60 of GO No 39/1996. 
See ESCB contribution to the Commission’s public consultation on the technical details of a possible EU framework for 
bank recovery and resolution, p. 18. All ECB documents are available on the ECB’s website at www.ecb.europa.eu. 
Section 2 Article 2541 to be inserted in GEO No 99/2006. 
This is not the case in the draft ordinance. See Section 2 Article 2542(1) to be inserted in GEO No 99/2006 and Article 9(2) 
of GO No 39/1996 to be amended. 

4 

 
 
 
                                                 
ECB-PUBLIC 

3.4  Central bank independence 

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

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

recognises BNR’s expertise. The ECB restates its view that the functions to be performed by BNR to 

assist  stabilisation  measures  must  be  conducted  in  a  manner  that  is  fully  compatible  with  BNR’s 

institutional and financial independence which safeguards the proper performance of its tasks under 

the Treaty and the Statute of the European System of Central Banks and of the European Central 
Bank16. 

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

Done at Frankfurt am Main, 31 October 2011. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

16  

See paragraph 3.7 of Opinion CON/2008/68 and paragraph 3.3 of Opinion CON/2009/51. 

5