Opinion of the European Central Bank of 22 December 2011 on amendments to the resolution regime for credit institutions (CON/2011/107)
Date: 2011-12-22
Institutions: European Central Bank
Subjects: Greece, capital transfer, credit institution, financial stability, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 22 December 2011 

on amendments to the resolution regime for credit institutions 

(CON/2011/107) 

Introduction and legal basis 

On 15 December 2011, the European Central Bank (ECB) received a request from the Greek Ministry of 
Finance for an opinion on a draft provision amending Law 3601/20071 (hereinafter the ‘draft provision’).  

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  ECB  by  national  authorities  regarding 
draft  legislative  provisions2,  as  the  draft  provision  relates  to  the  Bank  of  Greece  (BoG)  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 ECB, 

the Governing Council has adopted this opinion. 

1.  

Purpose of the draft provision  

The draft provision will accelerate the procedure for transferring assets from a credit institution to another 
under Article 63D(4)3 of Law 3601/2007 in urgent cases. It provides that in urgent cases the procedure for 

submitting offers, the determination of the remuneration to be paid to the transferee credit institution and 

the transfer will be based on a temporary assessment by the BoG. Immediately thereafter, the BoG will 

entrust external auditors with the preparation of assessment reports. Within two months from the transfer 

of assets under Article 63D(1), the BoG will determine the remuneration to be paid, taking into account 

the assessment reports, the current market conditions and the need to ensure the smooth operation of the 
financial system4. Any discrepancies between the two valuations will be funded by the Resolution Branch 

of the Hellenic Deposit and Investment Guarantee Fund, in accordance with Article 63D(13).  

1  
2  
3  

4  

FEK A 178/1.8.2007. 
OJ L 189, 3.7.1998, p. 42.  
If  the  offers  submitted are  considered  unattractive, the  BoG  will  transfer assets to  a  transitional credit  institution  to  be 
established for this purpose under Article 63E or put the credit institution under special liquidation in accordance with 
Article 68.  
See the second sentence of Article 63D(4). 

 
 
 
 
 
                                                 
ECB-PUBLIC 

2. 

General observations 

2.1  The  draft  provision  will  take  the  form  of  a  legislation  adopted  under  Article  44  of  the  Greek 

Constitution by Greece’s President, on a proposal by the Cabinet. Under this urgent procedure, the 

draft provision would need to be submitted to Parliament for ratification within 40 days and ratified 

within  three  months  of  submission.  The  draft  provision  enters  into  force  immediately  after 

publication and has the same effect as a law. Thus, the ECB should be consulted in due time prior 

to entry into force. More generally, internal administrative procedures should be in place to ensure 

the  timely  consultation  of  the  ECB,  and  the  ECB  should  be  consulted  at  an  appropriate  point  in 
time in the event of amendments during the legislative procedure5. 

2.2  The draft provision amends Article 63D(4) of the Law on banking, introduced by Law 4021/2011. 

Law 4021/2011 established a comprehensive bank resolution framework as a structural benchmark 
under the EU/IMF support programme6. In addition to safely resolving ailing institutions, the bank 

resolution framework aims at averting severe systemic disruption and undue taxpayer exposure to 

loss. The ECB understands that the objective of the draft provision is to facilitate the exercise by 

the BoG, in urgent cases only, of its resolution powers relevant to the transfer of the assets of an 

ailing institution, in accordance with Article 63D. 

3.  

Specific observations  

3.1  The  ECB  acknowledges  the  importance  of  enhancing  the  BoG’s  role,  as  a  resolution  authority, 

under Law 4021/2011, and the significance of safeguarding its ability to take, in a timely manner 

and without undue delay, the necessary resolution measures in relation to ailing credit institutions. 

While understanding the need for the BoG to have the necessary flexibility to efficiently exercise 

its resolution powers under Article 63D(4), the ECB notes that neither the draft provision nor its 

explanatory memorandum specify the conditions or criteria for activating the procedure laid down 

in the draft provision.  

3.2  Concerning  the  proposed  modification  of  the  external  auditors’  role  in  the  valuation  procedure 

under  Article  63D  of  Law  3601/2007,  for  the  purposes  of  the  current  valuation  procedure,  ‘the 

Bank of Greece will take into account, but should not be bound by, the auditors’ reports as part of 
the  external  valuation  process’7.  If  the  BoG  activates  the  emergency  procedure  under  the  draft 

provision,  thus  dispensing  with  the  external  auditors’  ex  ante  valuation,  a  risk  of  discrepancies 

could arise between its own valuation and the ex post external auditors’ valuation. This risk could 

5  
6 

7  

ECB Opinion CON/2010/58. All ECB Opinions are available on the ECB’s website at www.ecb.europa.eu. 
See the Economic Adjustment Programme for Greece – Fourth Review available on the European Commission’s website 
at: http://ec.europa.eu/economy_finance/publications/occasional_paper/2011/op82_en.htm. In particular, paragraph 12 of 
annexed Memorandum of Economic and Financial Policies iterates the need, in the context of ongoing initiatives at the 
EU level, to strengthen the resolution framework for problem banks and to allow timely and effective intervention and 
resolution consistent with EU Treaty rules and international sound practices. In this context, a broad set of tools will be 
prepared to ensure that a resolution regime for financial institutions is put into place to safeguard financial stability and 
ensure effective depositor protection. 
See also ECB Opinion CON/2011/72. 

2 

  
                                                 
ECB-PUBLIC 

inter alia affect the funding gaps to be financed by the Resolution Branch of the Hellenic Deposit 

and Investment Guarantee Fund, according to Article 63D(13) of Law 3601/2007. 

3.3  Therefore,  the  BoG  should  carefully  consider  the  criteria  it  would  propose  for  its  preliminary 

valuation, to mitigate the risk of any discrepancies between the preliminary and final valuations, as 

such discrepancies may, inter alia, lead to outflows of taxpayers’ money. In this regard, the ECB 

understands  that  the  procedure  provided  for  in  the  draft  provision  will  only  be  activated  as  a 

measure of last recourse in emergency situations only.  

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

Done at Frankfurt am Main, 22 December 2011. 

[signed] 

The President of the ECB 

Mario DRAGHI 

3