Opinion of the European Central Bank of 19 March 2013 on the recapitalisation of credit institutions (CON/2013/19)
Date: 2013-03-19
Institutions: European Central Bank
Subjects: Portugal, State aid, capital increase, credit institution, financial stability, money, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 19 March 2013 

on the recapitalisation of credit institutions 

(CON/2013/19) 

Introduction and legal basis 

On  7  and  13  February  2013,  the  European  Central  Bank  (ECB)  received  separate  requests  from  the 

Portuguese Minister of State and for Finance and the President of the Portuguese Parliament, respectively, 

for  an  opinion  on  a  draft  law  (hereinafter  the  ‘draft  law’)  amending  Law  No  63-A/2008  of 

24 November 2008  establishing  measures  to  strengthen  the  financial  soundness  of  credit  institutions 

(hereinafter the ‘Law on recapitalisation’). Given that the subject matter of both consultations is the same, 

the ECB has decided to consider both requests together and issue one opinion. 

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  on  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 provisions1, as the draft law relates to the Banco de Portugal 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 European Central Bank, the Governing Council has adopted this opinion. 

1.  

Purpose of the draft law 

1.1  The  draft law introduces  changes  to  the  Law  on recapitalisation,  as  amended  and  republished  by 
Law  No  4/2012  of  11  January  2012,  on  which  the  ECB  adopted  its  Opinion  CON/2011/952  on 

22 November 2011. The Law on recapitalisation was one of the actions considered necessary under 

the  Economic  Adjustment  Programme  for  Portugal,  with  a  view  to  restoring  confidence  in  the 

banking  sector  and  financial  stability  in  the  economy.  It  aims  at  reinforcing  the  resilience  of  the 

banking  sector  by  establishing  the  conditions  and  procedures  for  providing  temporary  public 

support to viable credit institutions having their head office in Portugal. 

1.2  The Portuguese Government undertook, under section 2.15 of the Memorandum of Understanding 

on  Specific  Economic  Policy  Conditionality,  to  propose  amendments  to  the  legal  framework 

governing access to public capital in order to (a) allow the State, under strict circumstances and in 

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2  

OJ L 189, 3.7.1998, p. 42. 
All ECB’s opinions are published on the ECB’s website at www.ecb.europa.eu. 

 
 
 
 
                                                           
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accordance  with  State  Aid  rules,  to  exercise  control  over  a  credit  institution,  and  (b)  impose 

mandatory recapitalisations with recourse to public funding. 

1.3 

In view thereof, the draft law aims mainly at: 

(i) 

lifting the prohibition under Article 2(2) of the Law on recapitalisation on the State acquiring 

control of a credit institution by exercising voting rights, and 

(ii) 

allowing mandatory recapitalisation of credit institutions by the State on a proposal from the 

Banco de Portugal. 

In addition, the draft law aims at: 

(iii)   reducing  the  requirements  for  shareholders  meetings  convened  specifically  to  decide  on 

amendments to the articles of association necessary for a recapitalisation operation under the 

law, 

(iv)   prohibiting  the  acquisition  of  State  shares  by  new  or  existing  shareholders  during  the 

investment period if there is a materially relevant breach of the recapitalisation plan, and 

(v) 

improving the procedures for credit institutions to access public funds and State guarantees. 

2.  Mandatory recapitalisation 

2.1 

Interaction of mandatory recapitalisation with the resolution framework 

The  ECB  welcomes  that  the  amended  law  will  empower  the  Banco  de  Portugal  to  propose  the 

mandatory  recapitalisation  of  viable  credit  institutions,  if  this  is  necessary  to  preserve  financial 

stability. The ECB believes that the Banco de Portugal is best placed to assess and propose such 
recapitalisation, as it is required to have carried out a viability assessment3 and to have evaluated 

the  overall  circumstances  justifying  intervention  with  public  funds  in  a  given  credit  institution 

including,  notably,  the  expected  return  to  the  State from  the  investment  in line with  Union  State 

Aid rules and the terms and conditions of public disinvestment. Nonetheless, the ECB underlines 

that  recapitalisation  of  distressed  credit  institutions  with  public  funds  should  be  a  temporary 
measure4 and, as such, it may not resolve the difficulties of the benefiting credit institution in the 

longer  term.  In  particular,  it  is  important  that  such  State  intervention  (a)  should  not  be  used  to 

circumvent the application of the resolution framework and (b) ensures the least costly approach to 

resolving financial difficulties of distressed credit institutions, whilst safeguarding public funds as 
much as possible5. The Banco de Portugal should, in the case of any credit institution which does 

not  achieve  the  required  capital  ratios  by  its  own  efforts,  assess  whether  the  conditions  for 

triggering the resolution framework, which explicitly states that shareholders and creditors should 

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4  

5  

See proposed Article 16(5). 
See Communication from the Commission — “The recapitalisation of financial institutions in the current financial crisis: 
limitation of aid to the minimum necessary and safeguards against undue distortions of competition”, point 11 (OJ C 10, 
15.1.2009, p. 2). 
See, in particular, Opinion CON/2013/3, paragraph 6. 

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first bear the losses6, have been fulfilled. A mandatory recapitalisation by the State may be found to 

be a viable option pursuant to that assessment, in order to prevent the failure of the credit institution 

in question, so that its entry into resolution may not be required. 

2.2 

Shareholder rights 

The  ECB  welcomes  the  fact  that  the  draft  law  allows  for  an  effective  intervention  in  a  credit 

institution by the State, by means of the exercise of the proprietary right to vote its shares even if 

this means the State will acquire control of the institution. This will foster the State’s influence in 

the  institution  concerned  with  the  aim  of  preserving  financial  stability  and  thus  protecting  the 
public interest7. However, as far as mandatory recapitalisation under Article 16 of the draft law is 

concerned, any overriding of shareholder rights would require careful consideration in the light of 

shareholder  rights  protected  under  Union  company  law  directives.  In  this  respect,  the  ECB 

underlines  that      such  overriding  of  shareholder rights  might  be  considered,  as a  measure  of  last 

resort, if systemic and financial stability are at stake. 

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

Done at Frankfurt am Main, 19 March 2013. 

[signed] 

The President of the ECB 

Mario DRAGHI 

6  

7  

See  Article  145B(1)  of  the  Legal  Framework  of  Credit  Institutions  and  Financial  Companies  (Decree-Law298/92  of 
31 December 1992). 
See Opinion CON/2011/72, paragraph 6.1. 

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