Opinion of the European Central Bank of 12 February 2013 on deposit taking and securities account management by the Treasury (CON/2013/12)
Date: 2013-02-12
Institutions: European Central Bank
Subjects: Hungary, Treasury, banking supervision, competence of the institution, credit institution, financial stability, national law, securities

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 12 February 2013 

on deposit taking and securities account management by the Treasury 

(CON/2013/12) 

Introduction and legal basis  

On 21 January 2013, the European Central Bank (ECB) received a request from the Hungarian Ministry 

for  the  National  Economy  for  an  opinion  on  the  draft  law  amending  several  laws  implementing 

Government Resolution 1101/2012 (IV. 5.) on measures necessary to increase the stock of government 

debt held by households (hereinafter ‘the Government Resolution’). 

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 concerns 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  

The draft law amends several laws as follows. 

(i) 

The Law on credit institutions and financial enterprises2 to enable the Hungarian Treasury to accept 

deposits. These amendments will, inter alia, provide for: 

(a) 

the  conditions  for  the  Hungarian  Financial  Supervisory  Authority  (HFSA)  to  grant  and 

revoke a licence for the Treasury to accept deposits and manage securities accounts; 

(b) 

(c) 

the Treasury to join the Hungarian Deposit Insurance Fund;  

the  Treasury  providing  information  on  its  activities,  similarly  to  credit  institutions,  to  the 

relevant authorities; 

(d) 

the  Treasury  to  be  subject  to  the  supervision  of  the  HFSA,  which  will  have  the  power  to 

impose sanctions on the Treasury should it not meet the statutory requirements for accepting 

deposits and managing securities accounts.  

1  
2  

OJ L 189, 3.7.1998, p. 42. 
Law CXII of 1996. 

 
 
 
 
                                                           
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(ii)  The Law on preventing and combating money laundering and terrorist financing3 to ensure that the 

Treasury is subject to the same requirements in combating money laundering as any other financial 

institution. 

(iii)  Several  laws  governing  specific  employment  relationships  (laws  on  the  officers  of  the  armed 
forces4,  the  civil  servants5,  the  public  servants6  and  the  Labour  Code7)  to  enable  public  service 

employees to give a standing order to their employers to transfer a specific amount of their salaries 

monthly  to  a  securities  account  held  at  the  Treasury  for  the  purposes  of  purchasing  government 

securities. In the understanding of the ECB, the standing order would be voluntary, revocable and 

subject  to  automatic  revocation  on  termination  of  the  employment  relationship.  The  draft  law 

prohibits  public  sector  employers  from  charging  employees  for  making  the  transfers  to  the 

Treasury. 

The  draft  law  will  enter  into  force  on  1  April  2013.  The  Treasury  would  be  subject  to  a  licensing 

procedure  and  significant  restructuring  of its  activities  and institutional  set-up  for  its new  tasks.  In  this 

respect, the draft law does not specify when the Treasury would start providing these new services to the 

public and to public service employees. 

2.   General observations 

2.1 

Scope of the consultation 

The ECB assesses only the broader implications of the draft law for financial stability and for the 

financial soundness of the proposed new Treasury activities. Given that the draft law is part of a 

wider  legislative  framework  mentioned  in  paragraph  5,  on  which  the  ECB  has  no  further 

information,  a  comprehensive  assessment  of  the  detailed  rules  for  entrusting  the  Treasury  with 

deposit taking and securities account management is beyond the scope of this opinion. However, 

the ECB has to be consulted on all additional elements of this wider legislative framework which 

fall  within  its  competence  under  Article  2  of  Decision  98/415/EC,  also  with  a  view  to 

Article 127(5)  of  the  Treaty,  which  provides  that  the  European  System  of  Central  Banks 

contributes to the smooth conduct of policies pursued by the competent authorities relating to the 

prudential supervision of credit institutions and the stability of the financial system. 

2.2  Appropriate time to consult the ECB 

The  ECB  received  the  request  from  the  Ministry  for  the  National  Economy  for  an  urgent 

consultation on the draft law on 21 January 2013, requesting the ECB’s opinion to be adopted by 

11 February 2013.  

3  
4  
5  
6  
7  

Law CXXXVI of 2007. 
Law XLIII of 1996. 
Law CXCIX of 2011. 
Law XXXIII of 1992. 
Law I of 2012. 

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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. 

Following from the wording of 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 consider the ECB’s opinion prior 

to adoption of the provisions.  

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

national authorities from their duty to consult the ECB at an appropriate stage in legislative process 

that allows sufficient time for (i) the ECB to examine the draft legislative provisions and adopt its 

opinion, and (ii) the national authorities to take into account the ECB’s views in accordance with 

Decision 98/415/EC. Therefore, the ECB would appreciate the Ministry honouring its obligation to 

consult the ECB in due time in the future.  

3. 

Prohibition on monetary financing 

Article 123(1) of the Treaty prohibits overdraft facilities or any other type of credit facility with the ECB 

or  the  national  central  banks  of  the  Member  States  in  favour  of  Union  institutions,  bodies,  offices  or 

agencies, central governments, regional, local or other public authorities, other bodies governed by public 

law, or public undertakings of Member States, and the purchase of debt instruments directly from them by 

the  ECB  or  national  central  banks.  This  prohibition  prevents  central  banks  from  providing  overdraft 

facilities  or  any  other  type  of  credit  facility  to  the  public  sector,  including  any  financing  of  the  public 

sector’s obligations vis-à-vis third parties.  

The  ECB  understands  that  the  Treasury  will  not  become  a  credit  institution.  Therefore,  provided  the 

ECB’s understanding is correct and the Treasury will remain part of the public sector within the meaning 

of  Article  123  of  the  Treaty,  and  will  not  be  an  eligible  counterparty  for  central  bank  refinancing 

operations, the ECB has no monetary financing concerns at this stage of the legislation. 

4. 

Impact of the draft law on financial institutions 

Though intended to facilitate households’ access to the government bond market, the draft law gives the 

Treasury broader powers to act as a deposit-taking institution. The draft law does not explicitly preclude 

the  Treasury  from  offering  ATM  withdrawals  and  bank  transfers,  or  using  the  float  on  household 

accounts  held  with  it,  i.e.  any  portion  of  the  transferred  funds  that  is  not  immediately  invested  in 

government securities, to temporarily finance the deficit.  

Deposit-taking would place the Treasury, a public institution, in direct competition with banks, which are 

operated as for-profit commercial entities. Unless the unit of the Treasury entrusted with deposit services 

to households is completely ring-fenced from the rest of the Treasury functions, and is subjected to the 

same regulatory, supervisory and tax burden as commercial banks, the Treasury will have an advantage 

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over  commercial  banks  in  attracting  deposits.  This  could  distort  competition  in  the  banking  sector  and 

potentially lead funds currently available to banks to be diverted to direct financing of the Government. 

The resultant reduced lending capacity of banks would further limit corporations’ and households’ access 

to credit, potentially undercutting economic growth. In addition, any associated loss of net interest and fee 

income by banks will lower their profitability. 

Therefore,  the  ECB  recommends  that  a  comprehensive  impact  study  of  the  draft  law  on  the  financial 

sector,  with  input  from  affected  parties  such  as  banks  and  investment  firms,  is  carried  out  prior  to 

submitting  the  draft  law  to  Parliament.  Based  on  the  findings,  steps  should  be  taken  to  minimise  the 

potential adverse impacts of such measures on financial stability and the economy. 

5. 

Suitability of the Treasury to carry out the new tasks 

In general, it is possible for the State as a shareholder to own credit institutions carrying out semi-public 

functions  while  operating  under  general  market  conditions,  with  the  shareholder  bearing  all  the 

consequences of the credit institution carrying out its functions at a profit or at a loss. However, the draft 

law does not follow this approach. 

An entity entrusted with the new tasks set out in the draft law should also be provided with the expertise, 

structural set-up and financial resources necessary to carry out these functions. The draft law entails no 

such provisions. The ECB is aware of that the draft law is part of a planned broader legislative framework 

to implement the Government Resolution. As managing deposit and securities accounts for the public are 

not core tasks for a budgetary institution, the Government Resolution foresees the amendment of several 

legal  acts,  and  also  provides  for  several  agreements  to  enable  the  Treasury  to,  inter  alia,  develop  its 

information  technology  infrastructure  and  obtain  new  offices  for  the  public  to  access.  Furthermore,  it 

provides for the Government Debt Management Agency to change its practice relating to the maturity of 

government bonds intended for households, the possibility to involve the Hungarian Postal Services and 

its  offices  for  the  public  to  open  accounts  with  the  Treasury,  and,  similarly,  the  possibility  to  involve 

government public service offices for this purpose. However, the ECB has no further information on any 

of the additional draft laws and arrangements necessary to implement the Government Resolution. 

The  envisioned  new  tasks  must  not  interfere  with  the  proper  functioning  of  the  core  Treasury  tasks  or 

with sound practices of public debt management. More specifically, a possible shortening of government 

debt  maturities  would  tend  to  increase  short-term  fiscal  vulnerabilities  due  to  higher  rollover  risks.  As 

regards the provisions of the Government Resolution creating a wider framework for the draft law, the 

ECB  notes  that  any  changes  in  the  Government  Debt  Management  Agency’s  practice  relating  to  the 

maturity of government bonds should minimise fiscal risks. 

Also with respect to the observations below, the ECB is of the view that an entity operating as a credit 

institution  rather  than  a  budgetary  institution  should  provide  for  a  more  transparent  and  prudent 

operational framework for the fulfilment of these tasks.  

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6. 

Effectiveness of the safeguards assigned to the new activities of the Treasury 

The  draft  law  introduces  safeguards  for  the  lawfulness  of  the  Treasury’s  new  deposit-taking  activities. 

Deposit-taking  by  the  Treasury  would  in  effect  result  in  the  Treasury  operating  as  a  bank,  so  such 

activities would be subject to regular banking supervision. As both the Treasury and the HFSA are public 

institutions  run  by  the  State,  it  must  be  ensured  that  the  Treasury  is  properly  supervised  and  that  the 

HFSA’s micro-prudential supervision treats the Treasury equally to other credit institutions.  

7. 

Provision of information on deposit taking liabilities to the national central bank 

The  ECB  supports  the  provision  of  information  by  the  Treasury  on  deposit  taking  liabilities  to  the 

national central bank, as they may be regarded as central government deposit liabilities with a monetary 

character.  The  ECB  directs  the  national  authorities  to  Article  6  and  Part  3  of  Annex  III  to  Guideline 
ECB/2007/9 of 1 August 2007 on monetary, financial institutions and market statistics8. 

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

Done at Frankfurt am Main, 12 February 2013.  

[signed] 

The President of the ECB 

Mario DRAGHI 

8  

OJ L 341, 27.12.2007, p. 1. 

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