Opinion of the European Central Bank of 11 December 2012 on financial legislation (CON/2012/104)
Date: 2012-12-11
Institutions: European Central Bank
Subjects: Denmark, financial institution, financial legislation, financial stability, financial supervision, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 11 December 2012 

on financial legislation 

(CON/2012/104) 

Introduction and legal basis 

On 5 November 2012, the European Central Bank (ECB) received a request from the Danish Financial 

Supervisory  Authority  (FSA)  (Finanstilsynet)  for  an  opinion  on  a  draft  law  amending  the  Law  on 

financial business, the Law on securities trading, the Law on payment services and electronic money, the 

Law on measures to prevent money laundering and financing of terrorism, the Law on equal treatment of 

men and women in connection with insurance, pension and similar financial services and various other 

laws (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 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, as the draft law 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 law 

1.1  The draft law introduces a number of amendments to the financial legislation. These are intended to 

enhance the supervision of financial institutions, ensure effective enforcement in cases of breach of 

the financial legislation, and strengthen the financial sector overall. The draft law also provides for 
the establishment of a national Systemic Risk Board2 to exercise macro-prudential oversight, and 

provides for the implementation in national law of certain European Union legislation. 

1.2  Enhancing financial supervision and ensuring efficient enforcement 

In order to enhance financial supervision and ensure efficient enforcement   where there is a breach 

of  the  financial  legislation,  the  draft  law  amends  the  financial  legislation,  inter  alia,  as  set  out 

below.  

1  
2  

OJ L 189, 3.7.1998, p. 42. 
See Section 1(30) of the draft law. 

 
 
 
 
                                                 
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(a)   The draft law extends the current reporting obligations laid down in section 75 of the Law on 

financial business to financial holding companies regarding matters of material significance 
to the continued operation of their subsidiaries3. 

(b)  

It  allows  the  FSA  to  exchange  confidential  information  with  the  public  prosecutor  and  the 

police  at  an  earlier  stage  than  is  currently  possible,  i.e.  before  it  has  been  established  that 

there are reasonable grounds for suspecting that a legal or natural person has committed an 
offence covered by the Criminal Code or the supervision legislation4. 

(c)  

It provides that the FSA may publish the outcomes of (i) cases  referred by the FSA to the 

police for investigation, (ii) cases which conclude with the imposition of an administrative 

fine,  and  (iii)  orders  by  the  FSA  that  a  financial  institution  shall  correct  misleading 
information which it has published about itself5. 

(d)  

It provides that the FSA may enter into agreements to perform, for payment, certain kinds of 

tasks for public authorities, state institutions and other similar bodies, if the performance of 
such tasks contributes to financial stability6. 

(e)  

It  introduces  a  new  approach  to  the  enforcement  of  solvency  requirements,  including  the 

possibility  for  the  FSA  to  impose  certain  measures  on  financial  institutions  in  order  to 
enhance the capital position of such institutions7. 

1.3  Measures to strengthen the financial sector 

In order to strengthen the individual financial institutions and the financial sector overall, as well as 

facilitate further consolidation, the draft law also provides for the measures set out below. 

(a)   The scope of loans raised by financial institutions which have been granted a licence to issue 

covered  bonds  is  widened  so  that  loans  may  also  be  used  to  strengthen  these  institutions’ 
solvency ratios8. 

(b)   New  rules  are  established  regarding  mergers  between  savings  banks,  cooperative  savings 

banks, mutual insurance companies and limited companies in order to facilitate consolidation 
of  the  financial  sector9.  In  order  to  ensure  the  independence  of  the  board  of  directors  in 

savings bank trusts or cooperative savings bank trusts, the appointment of members of board 
of directors of such trusts10 is made more transparent. 

(c)   The FSA is made responsible for supervising the procedures used by financial institutions to 

establish  benchmark  interest  rates.  The  aim  of  this  measure  is  to  restore  confidence  in  the 

3 
4  
5  

6  
7 
8  
9  
10  

See new Section 75(4) of the Law on financial business, as inserted by  Section 1(7) of the draft law. 
See new wording of Section 354(6) of the Law on financial business, as inserted by Section 1(39) of the draft law. 
See Section 1(43) and (46), Section 2(33), Section 3(4), Section 4(9), Section 5(6), Section 8(3), Section 11(5), Section 
12(2), Section 13(2), Section 14(4) and Section 15(2) of the draft law. 
See new Section 344(5) of the Law on financial business, as inserted by Section 1(33) of the draft law. 
See new Section 225(2) of the Law on financial business, as inserted by Section 1(23) of the draft law. 
See new wording of Section 152(b) of the Law on financial business, as inserted by Section 1(18) of the draft law. 
See new wording of Section 205 of the Law on financial business, as inserted by Section 1(19) of the draft law. 
See new wording of Section 209(2) of the Law on financial business, as inserted by Section 1(21) of the draft law. 

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Copenhagen Interbank Offered Rate (CIBOR) and ensure enhanced control over the setting 
of CIBOR and other relevant benchmark rates11. 

1.4  Establishment of a national Systemic Risk Board 

The draft law provides for the establishment of a national macro-prudential Systemic Risk Board 

competent to adopt and communicate observations, warnings and recommendations to the relevant 
public authorities, the government and the public regarding systemic risks in the financial area12. 

These warnings and recommendations will primarily be addressed to the FSA, but those relating to 

legislation  will  be  addressed  to  the  Government.  The  Systemic  Risk  Board  may  be  consulted  on 
warnings and recommendations issued by the European Systemic Risk Board (ESRB)13. 

The  Systemic  Risk  Board  will  comprise  two  representatives  from  Danmarks  Nationalbank,  two 

from  the  FSA,  one  from  each  of  the  three  economic  ministries,  and  three  independent  experts 

nominated by the Ministry of Business Affairs and Growth following consultation with Danmarks 
Nationalbank14.  The  Governor  of  the  Board  of  Danmarks  Nationalbank  will  chair  the  Systemic 
Risk Board15. 

The Systemic Risk Board's decisions will be adopted by simple majority. However, representatives 

from  the  FSA  and  the  ministries  have  no  voting  rights  with  regard  to  decisions  on  observations, 
recommendations  and  warnings  to  be  addressed  to  the  Government16.  These  observations, 

recommendations  and  warnings  are  to  be  made  public  unless  the  Systemic  Risk  Board  takes  the 
view that confidentiality is necessary to safeguard financial stability17. The recipients of a warning 

or a recommendation shall be obliged within three months of receipt to publicly notify the Board as 
regards the measures which will be taken or explain any non-action18. 

The FSA, the relevant ministries and Danmarks Nationalbank shall be obliged to exchange relevant 

information  and  documentation  on  request  of  the  Systemic  Risk  Board,  including  confidential 

statistical  information  obtained  by  Danmarks  Nationalbank,  if  the  Board  assesses  that  such 
information is necessary for it to fulfil its tasks19. 

2. 

General observations 

2.1  The  ECB  welcomes  the  proposed  amendments  to  the  Danish  financial  legislation,  which provide 

for enhanced supervision and enforcement and the overall strengthening of the financial sector. 

2.2  Taking  into  account  the  need  for  appropriate  action  to  address  the  possible  systemic  impact  of 

failing  cross-border  institutions,  the  ECB  highlights  that  the  domestic  legal  framework  for  crisis 

11  
12  
13  
14  
15  
16  
17  
18  
19  

See new Section 343(s) and (t) of the Law on financial business, as inserted by Section 1(31) of the draft law. 
See new Section 343(s) of the Law on financial business, as inserted by Section 1(30) of the draft law. 
See new Section 343(s)(3) of the Law on financial business. 
See new Section 343(s)(1) of the Law on financial business. 
See new Section 343(s)(1)of the Law on financial business. 
See new Section 343(s)(5) of the Law on financial business. 
See new Section 343(s)(6) of the Law on financial business. 
See new Section 343(s)(7) and (8) of the Law on financial business. 
See new Section 343(s)(9) of the Law on financial business. 

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management may need to be further adapted to reflect future regulatory initiatives at Union level20. 

In particular, the ECB urges that any initiatives undertaken by the competent national authorities to 

restore confidence in the financial markets be coordinated with other Member States and the Union 

institutions in a spirit of close cooperation, with a view to implementing common principles. 

3. 

Enhancing financial supervision and ensuring efficient enforcement 

3.1  The  financial  crisis  has  shown  the  importance  of  having  effective  and  efficient  supervision  and 

enforcement  mechanisms  in  place  with  regard  to  the  financial  system.  The  ECB  welcomes 

measures  that  strengthen  the  powers  of  competent  authorities  to  intervene  when  the  stability  of 

either individual financial institutions or the financial system as a whole is at risk. In this context, 

the  draft  law  enhances  the  FSA’s  capacity  to  respond  in  a  timely  and  effective  manner  to 

difficulties  that  solvent  financial  institutions  face  by  imposing  early  intervention  measures  upon 

them in order to enhance their capital position. 

3.2  The  ECB  also  notes  the  proposed  measures  to  facilitate  information-sharing  and  cooperation 

between  competent  authorities  and  the  increased  openness  regarding  the  work  of  the  FSA  which 

aims  to  bring  about  greater  transparency  as  well  as  efficient  supervision  and  enforcement  in  the 

financial area. When considering measures aimed at achieving increased openness and information-
sharing, it is however necessary to ensure that confidential information is adequately protected21. 

4.  Measures to strengthen the financial sector 

The  ECB  supports  the  measures  proposed  to  strengthen  the  solvency  ratio  via  loans  raised  by 

financial  institutions  which  have  been  granted  a  licence  to  issue  covered  bonds.  Widening  the 

scope  for  loans  raised  gives  financial  institutions  greater  flexibility  and  may  thus  contribute  to 

maintaining a well-functioning mortgage-credit sector. However, the ECB notes that where junior 
covered bonds are used in the cover pool this should only be within the same banking group22. 

The  ECB  welcomes  initiatives  to  restore  confidence  in  benchmark  interest  rates  and  emphasises 

that  proposals  to  reform  such  benchmark  interest  rates  should  be  coordinated  at  Union  level  to 

ensure  consistency  and  a  level  playing  field.  In  this  regard,  the  ECB  notes  the  Eurosystem's 

response to the European Commission’s public consultation on the regulation of indices, published 
on 14 November 201223. While the Eurosystem’s recommendations focus on the strengthening of 

governance  relating  to  Euribor  calculations,  they  may  also  serve  as  guidelines  for  the  regulation 

and  supervision  of  other  systemically  important  indices.  Such  guidelines  would  include  ensuring 

that the membership of the boards of the rate-setting bodies and the relevant steering committees 

20  

21  
22  
23  

See  the  proposal  for  a  directive  of  the  European  Parliament  and  of  the  Council  on  the  access  to  the  activity  of  credit 
institutions and the prudential supervision of credit institutions and investment firms and amending Directive 2002/87/EC 
of  the  European  Parliament  and  of  the  Council  on  the  supplementary  supervision  of  credit  institutions,  insurance 
undertakings and investment firms in a financial conglomerate (COM(2011) 453 final) and the proposal for a regulation 
of  the  European  Parliament  and  of  the  Council  on  prudential  requirements  for  credit  institutions  and  investment  firms 
(COM(2011) 452 final). 
See Opinion CON/2011/5, paragraph 3.10. 
See Opinion CON/2012/5. 
See the Eurosystem's response of 14 November 2012 to the European Commission's public consultation on the regulation 
of indices, available on the ECB's website www.ecb.europa.eu. 

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are sufficiently diverse to reflect the public nature of the rates, that entities independent of the rate-

setting  bodies  perform  substantive  checks  of  the  rates,  and  that  the  banks’  rate-submission 

processes are subject to mandatory audits. 

5. 

Establishment of a national Systemic Risk Board 

5.1   The ECB welcomes the proposed amendments, which provide for  the  establishment  of  a  national 
Systemic  Risk  Board  as  a  national  macro-prudential  authority24.  It  supports  the  proposed 

institutional framework for national macro-prudential oversight in which Danmarks Nationalbank 

is  represented  and  acts  as  chair.  The  ECB  understands  that  pursuant  to  the  explanatory 

memorandum  of  the  draft  law  Danmarks  Nationalbank’s  central  bank  independence  will  not  be 
affected by its involvement in the Systemic Risk Board25. In this respect, the ECB notes that the 

secretariat  services  for  the  Systemic  Risk  Board  will  be  provided  by  Danmarks  Nationalbank  in 

conjunction with other authorities. The ECB recommends that measures are taken to ensure that the 
increased use of resources by Danmarks Nationalbank does not affect its financial independence26. 

5.2  The draft law provides that the Systemic Risk Board and Danmarks Nationalbank may exchange 

information insofar as the Systemic Risk Board needs this information to carry out its tasks. The 

ECB  notes  that  national  provisions  establishing  national  macro-prudential  authorities  should  be 

consistent  with  Union  law  provisions  which  regulate  the  exchange  of  supervisory  and  statistical 
information27 and establish the ESRB as a Union body responsible for macro-prudential oversight 
of the financial system within the Union28. In this context, the ECB is of the view that the draft law 

should  expressly  mandate  the  Systemic  Risk  Board  to  exchange  information  with  other  macro-

prudential  authorities,  central  banks  and  the  ESRB,  particularly  on  actions  taken  to  address 
systemic risks at national level29. 

24  
25  
26  

27  

28  
29  

See Opinion CON/2012/55. 
See paragraph 2.6.3 of the explanatory memorandum of the draft law. 
See  the  ECB’s  Convergence  Report,  May  2012,  p.  25.  All  ECB  documents  are  available  on  the  ECB’s  website  at 
www.ecb.europa.eu. 
See paragraph 2.2.6 of Opinion CON/2010/7. See Article 12 of Directive 2002/87/EC of the European Parliament and of 
the  Council  of  16  December  2002  on  the  supplementary  supervision  of  credit  institutions,  insurance  undertakings  and 
investment  firms  in  a  financial  conglomerate  and  amending  Council  Directives  73/239/EEC,  79/267/EEC,  92/49/EEC, 
92/96/EEC,  93/6/EEC,  93/22/EEC,  98/78/EC  and  2000/12/EC  (OJ  L  35,  11.2.2003,  p.  1),  Article  58(5)  of  Directive 
2004/39/EC  of  the  European  Parliament  and  of  the  Council  of  21  April  2004  on  markets  in  financial  instruments 
amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of 
the Council and repealing Council Directive 93/22/EEC (OJ L 145, 30.4.2004, p. 1), Article 49 of Directive 2006/48/EC 
of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of 
credit institutions (OJ L 177, 30.6.2006, p. 1), Article 70 of the Directive 2009/138/EC of the European Parliament and of 
the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency 
II) (OJ L 335, 17.12.2009, p. 1) and Article 1(4) of Regulation (EU) No 1092/2010; see also Article 57(a) of the proposal 
for a directive of the European Parliament and of the Council on the access to the activity of credit institutions and the 
prudential supervision of credit institutions and investment firms and amending Directive 2002/87/EC of the European 
Parliament  and  of  the  Council  on  the  supplementary  supervision  of  credit  institutions,  insurance  undertakings  and 
investment firms in a financial conglomerate (COM(2011) 453 final). 
See Article 3(1) of Regulation EU (No) 1092/2010. 
See  Opinion  CON/2012/55,  paragraph  4.1.  See  also  Article  57(a)  of  the  proposal  for  a  directive  of  the  European 
Parliament and of the Council on the access to the activity of credit institutions and the prudential supervision of credit 
institutions and investment firms and amending Directive 2002/87/EC of the European Parliament and of the Council on 
the  supplementary  supervision  of  credit  institutions,  insurance  undertakings  and  investment  firms  in  a  financial 
conglomerate (COM(2011) 453 final). 

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5.3  Lastly,  actions  taken  by  national  macro-prudential  authorities  should  not  conflict  with  but  rather 
complement ESRB actions taken at Union level30. The ECB recommends that the draft law ensures 

that the Systemic Risk Board liaises closely with the ESRB and informs it of all actions taken to 

address  systemic  risks  at  national  level  and  that  it  also  ensures  that,  if  significant  cross-border 

effects are anticipated, the Systemic Risk Board notifies the ESRB of this prior to the issuance or 

the publication of its warnings and recommendations. 

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

Done at Frankfurt am Main, 11 December 2012. 

[signed] 

The President of the ECB 

Mario DRAGHI 

30  

See Opinion CON/2012/55, paragraph 4.2. 

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