Opinion of the European Central Bank of 1 February 2013 on a State guarantee covering certain commitments of subsidiaries of Dexia SA (CON/2013/8)
Date: 2013-02-01
Institutions: European Central Bank
Subjects: France, State aid, financial institution, financial stability, guarantee, national law, subsidiary

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 1 February 2013 

on a State guarantee covering certain commitments of subsidiaries of Dexia SA 

(CON/2013/8) 

Introduction and legal basis 

On 14 December 2012, the European Central Bank (ECB) received a request from the French Ministry of 

Economy and Finance for an opinion on a draft finance law for 2012 granting a State guarantee covering 

certain loans granted to Dexia SA and Dexia Crédit Local SA (hereinafter the ‘draft law’). 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  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 amends Article 4 of the Finance (Amendment) Law for 2011 (Law No 2011-1416 of 

2 November 2011) on which the ECB has been consulted (CON/2011/85) and which authorised the 

Minister for the Economy and Finance to grant in return for payment a State guarantee, jointly with 

the Belgian and Luxembourg States, for financing raised or issued by Dexia SA and Dexia Crédit 

Local SA before 31 December 2021. The current maximum ceiling of liabilities guaranteed by the 

three States is EUR 90 billion of which 36.5% is borne by France; that is a  share of EUR 32.85 

billion.  

As  the  main  features  of  the  guarantee  scheme  set  up  at  that  time  remain  unchanged,  Opinion 

CON/2011/85  still  applies  and  is  therefore  reiterated  by  the  ECB  for  the  purpose  of  the  current 

opinion. 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                 
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1.2  

In the context of the gradual break-up of the Dexia Group and further to the agreement reached by 

the  Belgian,  French  and  Luxembourg  Governments  on  8  November  2012  leading  to  the 

recapitalisation of Dexia SA, the draft law would now modify the guarantee scheme set up by the 

Finance  (Amendment)  Law  for  2011  (Law  No  2011-1416  of  2  November  2011)  to  specify  the 

financing guarantee and to modify France’s share in the guarantee and the amount of its ceiling.   

Article 4 of the draft law clarifies the financing guarantee in four aspects:  

(a) 

it  introduces  the  concept  of  ‘qualified  investor’  which  includes  direct  and  indirect 

subsidiaries of Dexia SA or of Dexia Crédit Local SA;  

(b) 

it  clarifies  that  ‘guarantee’  includes  the  principal,  interest,  costs  and  accessories  of  the 

guaranteed financing, bonds and securities;  

(c) 

it specifies the regime for foreign currency issues2; 

(d) 

it  increases  the  amount  of  the  maximum  ceiling  on  liabilities  guaranteed  by  France  which 

may not exceed 45.59 % of the total amount guaranteed by the three States.  

The scope of the guarantee would first be extended to commitments taken by the subsidiaries of the 

Dexia  Group.  The  Dexia  Group  intends  to  issue,  via  its  US  subsidiaries,  guaranteed  bonds 

denominated in euro and US dollars which would be placed with US investors, given the limited 

interest of European investors for these instruments amid the European sovereign bond crisis.    

The draft law clarifies that the commitments covered by the guarantee can take the form of loans, 

bonds  and  debt  securities.  It  also  specifies  that  the  amount  of  the  principal  of  the  liabilities 

guaranteed may not exceed the ceiling of EUR 38.76 billion, taking into account the euro exchange 

value at the time the State guarantee is granted, of the financing, bonds or securities in US dollars, 

Canadian dollars, pounds sterling, yen and Swiss francs. 

The allocation of the total amount of the guarantee, which would now amount to EUR 85 billion 

instead  of  EUR  90  billion,  among  Belgium,  France  and  Luxembourg,  would  be  adapted.  France 

would now guarantee 45.59% of such amount, namely EUR 38.76 billion instead of the previous 

EUR 32.85 billion, which corresponded to 36.5% of EUR 90 billion. 

The guarantee – which would still be payable under the Finance (Amendment) Law for 2011 (Law 

No 2011-1416 of 2 November 2011) – will apply unless provided otherwise by agreements entered 

into  by  the  Minister  for  the  Economy  and  Finance.  This  change  creates  more  flexibility  in 

enforcing the guarantee, which may be called preventively to avoid a default at maturity or without 

mentioning the precise amounts due and payable on a specific date, such modalities being difficult 

to meet when the guaranteed securities are held within a securities settlement system.   

1.3  The  provisions  of  the  Finance  (Amendment)  Law  for  2011  on  the  duration  of  the  guarantee  that 
covers  all  commitments  taken  on  by  31  December  20213,  the  requirement  of  remuneration  to  be 

2  

In 2011 and 2012, the funding in foreign currencies represented up to 45% of Dexia issues. See Sénat preparatory work, 
report 203 by Mr François Marc. 

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paid by the Dexia Group and the powers of the Minister for the Economy and Finance to take the 

implementation measures remain unchanged. 

2.   Breach of the consultation obligation  

The  ECB  received  the  request  from  the  French  Ministry  of  the  Economy  and  Finance  for  an  urgent 

consultation on the draft law on 14 December 2012. The legislative process had started in Parliament on 

14 November 2012. The consultation request specified that the French authorities would like to receive 

the  ECB’s  opinion  ‘as  quickly  as  possible  and  in  any  case  before  17  December  2012’.  The  French 
Parliament adopted the draft law at its 19 December 2012 session4. 

According to Article 4 of Decision 98/415/EC, 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 examine the draft legislative provisions and adopt its opinion. 

Pursuant  to  Article  3(4)  of  Decision  98/415/EC,  Member  States  are  obliged  to  suspend  the  process  for 

adoption of the draft legislative provision pending submission of the ECB’s opinion to allow the relevant 

national authorities to meaningfully deliberate the ECB’s opinion prior to adoption of the provisions. 

In this respect, the ECB stresses that even cases of particular urgency do not relieve national authorities 

from  their  duty  to  consult  the  ECB  and  to  allow  sufficient  time  to  take  into  account  its  views  in 

accordance  with  Decision  98/415/EC.  The  French  authorities  should  have  consulted  the  ECB  earlier  or 

postponed  the  final  vote  on  the  draft  law  until  such  time  that  would  have  allowed  for  a  proper 

consultation with the ECB, as well as due consideration of the ECB’s opinion. The ECB would appreciate 

the Ministry honouring its obligation to consult the ECB in due time in the future. 

3.  

Specific observations 

3.1  The ECB welcomes the coordinated efforts by Belgium, France and Luxembourg in the context of 

the reorganisation of the Dexia Group. It notes with satisfaction that the draft law mainly purports 

to achieve greater consistency in the concepts used under Belgian, French and Luxembourg law to 

describe the scope, nature and modalities of the guarantee extended to the Dexia Group. This would 

contribute to improving the legal certainty and a level playing field in the three Member States as 

regards the implementation of the guarantee.  

3.2  The  ECB  understands  that  the  extension  of  the  guarantee  scheme  to    bonds  and  debt  securities 

would benefit issues of such instruments by the subsidiaries of Dexia SA and Dexia Crédit Local 

SA. As a consequence, and provided that these measures are necessary to limit the scale or effects 

of a sudden crisis in the financial markets or a serious threat of systemic risk, a State guarantee may 

3   
4  

Article 4 of Finance Amendment Law for 2011 (Law No 2011-1416 of 2 November 2011). 
The  law  was  published  on  29  December  2012  in  the  Journal  Officiel.  Finance  (Amendment)  Law  for  2012  (Law 
No 2012-1510 of 29 December 2012).  

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therefore  be  issued  under  French  law  for  the  benefit  of  such  subsidiaries,  even  though  they  are 

located in foreign countries. When determining which subsidiary would effectively benefit from the 

guarantee  and  agreeing  with  the  Dexia  Group  its  specific  terms  and  conditions,  including  the 

remuneration,  the  Minister  for  the  Economy  and  Finance  would  nevertheless  need  to  abide  by 

Union  competition  and  State  aid  rules.  The  Minister  would  also  need  to  follow  the  principles 
identified  in  previous  ECB  opinions5,  namely  that  government  guarantees  should  (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. 

3.3  The ECB notes, however, that one of the objectives of the extension of the guarantee is to enable 

the issuance of bonds denominated in euro, US dollars, Canadian dollars, pounds sterling, Japanese 

yen  or  Swiss  francs  for  placement  with  foreign  institutional  investors.  Should  the  underlying 

instruments not be issued and held within the euro area, these instruments would therefore not be 

eligible  for  monetary  policy  purposes  in  view  of  Article  1(2)  of  Guideline  ECB/2012/18  of  2 

August 2012 on additional temporary measures relating to Eurosystem refinancing operations and 
eligibility of collateral6. 

3.4  For instruments issued and held within the euro area, the quantitative restriction provided by Article 

5 of Guideline ECB/2012/18 would apply. In both cases, the ECB welcomes  that the issuance of 

these guaranteed bonds would not affect the conduct and implementation of monetary policy in the 

euro area.  

3.5  For  the  sake  of  transparency,  the  ECB  recommends  specifying  in  the  draft  law  the  subsidiaries 

which  will  be  covered  by  and  benefit  from  such  guarantees.  A  general  reference  to  any  direct  or 

indirect subsidiaries of Dexia SA or Dexia Crédit Local SA might be misleading at a time when, in 

the course of the restructuring of the group, some of the subsidiaries are sold while others are in the 

process of resolution or liquidation.  

3.6  The ECB understands that the guarantees provided to the Dexia Group could develop their effect 

until  31  December  2031.  The  draft  law  could  clarify  whether  the  need  for  such  guarantees  may 

change in view of transposition in 2015 of the proposal for a directive of the European Parliament 

and of the Council establishing a framework for the  recovery and resolution of credit institutions 

and  investment  firms  and  amending  Council  Directives  77/91/EEC  and  82/891/EC,  Directives 

2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC and 2001/35/EC and Regulation 
(EU)  No  1093/20107.  This  Directive  could  provide  additional  tools  also  for  the  resolution  of  the 

Dexia Group. 

5  
6  
7  

CON/2011/79, paragraph 3, CON/2012/85, paragraph 2.2 and CON/2012/4, paragraph 3.  
OJ L 218, 15.8.2012, p. 20. 
COM(2012) 280/3. 

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

Done at Frankfurt am Main, 1 February 2013. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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