Opinion of the European Central Bank of 10 April 2013 on the Deposit Guarantee Fund (CON/2013/25)
Date: 2013-04-10
Institutions: European Central Bank
Subjects: Spain, bank deposit, credit institution, financial stability, guarantee, national law, public institution

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 10 April 2013 

on the Deposit Guarantee Fund 

(CON/2013/25) 

Introduction and legal basis 

On 20 March 2013, the European Central Bank (ECB) received a request from the Spanish Secretary of 

State for Economic Affairs and Business Support for an opinion on a draft Royal Decree-Law amending 

Royal  Decree-Law  21/2012  of  13  July  2012  on  liquidity  measures  for  the  general  government  and  the 
financial sector1 (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 provisions2, 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  Role of the Deposit Guarantee Fund 

The draft law specifies the measures that the Deposit Guarantee Fund (DGF), in addition to its core 

role of protecting insured deposits, may take to facilitate the implementation of the Union financial 

assistance programme to recapitalise Spanish credit institutions. Pursuant to the draft law, the DGF 

may: (a) provide guarantees in the context of the financial assistance programme; (b) subscribe or 

purchase shares not listed on an official market and issued by nationalised credit institutions and 

credit institutions subject to restructuring or resolution processes in the context of the subordinated 

liability  exercises  and  actions  to  manage  subordinated  debt  and  hybrid  capital  instruments; 

(c) subscribe  shares  or  subordinated  debt  issued  by  the  Spanish  impaired  assets  scheme,  i.e.  the 

Asset Management Company for Assets Resulting from Bank Restructuring (the SAREB). 

1  
2  

Boletín Oficial del Estado No 168 of 14 July 2012. 

OJ L 189, 3.7.1998, p. 42. 

 
 
 
 
                                                 
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1.2  Maximum cost to the DGF 

The  cost  of  such  measures  must  be  less  than  the  cost  the  DGF  would  have  incurred  if,  at  the 

beginning  of  the  relevant  restructuring  or  resolution  process,  it  would  have  paid  the  amounts 

covered by it. 

1.3  Extraordinary contribution to the DGF 

In order to bolster the assets of the DGF, the draft law provides that the annual contribution to be 

made  by  member  institutions  based  on  their  deposits  at  31  December  2012  be  subject  to  an 

extraordinary, one-off increase of an additional 0.3 %, which will be paid in two instalments: two 

fifths  of the  total  increase will  be  paid  within 20  business  days  of  31  December  2013,  while the 

remaining three fifths will be paid within a maximum period of seven years starting from 2014 and 

subject to a payment schedule to be adopted by the DGF’s Steering Committee. Notwithstanding 

such payment schedule, the amount corresponding to the second instalment will be recorded as the 

DGF’s assets on the date of payment of the first instalment. 

1.4  Exemptions 

Regarding  the  first instalment,  the  DGF’s  Steering  Committee  may,  by  a  favourable  vote  of two 

thirds of its members, decide: (a) to exempt member institutions which are nationalised or subject 

to  a  restructuring  or  resolution  process  from  paying  all  of  the  first  instalment;  (b)  to  grant  an 

exemption  of  up  to  50 %  of  that  instalment  to  member  institutions  with  a  calculation  base  not 

exceeding  EUR 5  billion;  (c)  to  grant  an  exemption  of  up  to  30 %  of  the  amounts  invested  by 

31 December 2013 by member institutions in the subscription or purchase of shares or subordinated 

debt  instruments  issued  by  the  SAREB.  For  each  member  institution,  the  total  of  the  deductions 

provided for in points (b) and (c) may not exceed 90 % of the amount that the institution should 

have paid in accordance with the deposits held at 31 December 2012. 

2. 

Compatibility with Union legislation 

2.1  The draft law specifies the financial support measures the DGF may take in addition to its core role 

of protecting insured deposits in line with Directive 94/19/EC of the European Parliament and of 
the Council of 30 May 1994 on deposit-guarantee schemes3. As previously pointed out, the ECB 

supports rules which provide that the available financial means of deposit guarantee schemes may 

be  used  to  finance  resolution,  as  this  allows  for  synergies  between  such  schemes  and  resolution 

financing, but considers it of the utmost importance that this does not compromise in any way the 
core function of deposit guarantee schemes in protecting insured deposits4. Furthermore, in seeking 

to  achieve  any  of  its  statutory  objectives,  the  DGF  should  choose  the  least  costly  measure.  The 

3  

4  

OJ  L  135,  31.5.1994,  p.  5.  See  the  European  Commission’s  proposal  COM(2010)  368  final,  which  recasts  Directive 
94/19/EC. 
See  paragraph  8.2  of  ECB  Opinion  CON/2012/99  of  29  November  2012  on  a  proposal  for  a  directive  establishing  a 
framework for recovery and resolution of credit institutions and investment firms. All ECB opinions are published on the 
ECB’s website at www.ecb.europa.eu. 

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ECB welcomes the rule requiring that costs of the DGF’s involvement in restructuring should be 

lower than the costs of potential pay-outs of deposit guarantees and expects that this rule will be 

implemented in a transparent manner, allowing for verification of the compliance with this rule in 

practice. 

2.2  To fulfil its core role of protecting insured deposits in the event of bank insolvency, the DGF needs 

to  be  able  to  rely  on  a  highly  liquid  asset  structure.  The  ECB  views  the  envisaged  purchase  of 

equity shares in non-listed banks as conflicting with that prudential principle and would therefore 

caution against amending the investment rules applying to the DGF that allow such purchases. As 

the  draft  law  is  an  amendment  of  the  Fifth  Additional  Provision  of  RDL  21/2012,  which 

specifically  deals  with  the  measures  to  be  adopted  in  the  context  of  the  European  financial 

assistance  programme,  the  ECB  understands  that  the  envisaged  purchases  would  take  place  in 

relation to the DGF’s temporary involvement in the resolution of ailing banks. Moreover, the ECB 
points  to  the  on-going  review  of  Directive  94/19/EC5,  which  may  introduce  rules  concerning 

deposit-guarantee scheme investment policies. This may result in the need to amend in the future 

Royal  Decree-Law  21/2012,  in  particular  with  regard  to  the  categories  of  securities  in  which the 

DGF is allowed to invest. 

2.3  The  arrangements  introduced  by  the  draft  law  may  need  to  be  assessed  from  the  perspective  of 

State aid rules. 

3. 

Compatibility with financial-sector policy conditionality framework 

3.1  The DGF’s powers under the draft law need to respect the requirement under the Memorandum of 
Understanding  on  Financial-Sector  Policy  Conditionality6  (hereinafter  the  ‘MoU’)  of  minimising 

the taxpayer’s burden. In this respect, the ECB understands that State resources will not be used to 

finance the DGF’s new capabilities (see paragraph 1.3 above). The measures to be taken need to 

carefully  weigh  the  benefits  (i.e.  the  potential  positive  contribution  to  the  value  of  the  Fund  for 

Orderly Bank Restructuring’s shareholding in banks, as well as the mitigation of the potential risk 

of litigation by certain categories of creditors or shareholders of non-listed banks) against the costs, 

in  particular  the  reduced  tax  revenue  for  the  State  resulting  from  lower  financial  results  of  the 

banks  owing  to  the  extraordinary  contributions  to  the  DGF.  In  addition,  it  should  be  assessed 

whether the DGF’s limited funds would be best used for the benefit of retail investors or instead for 

other  financial  stability  purposes,  such  as  replenishing  the  DGF  and  thereby  reinforcing  market 

confidence in its ability to carry out its core role. Finally, due consideration needs to be given to the 

alternative that banks could rebuild their capital buffers instead of contributing funds to the DGS. 

5  
6   

See COM(2010) 368 final. 
Available on the Commission’s website at www.ec.europa.eu. 

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3.2  Furthermore,  the  principles  of  burden  sharing  as  agreed  in  the  MoU  need  to  be  respected7.  It  is 

essential that the price paid by the DGF for the equity shares to be acquired from retail investors in 

the context of the subordinated liability exercises be fair. In the absence of a quoted price, the price 

needs  to  be  the  inferred  market  price,  i.e.  using  the  economic  valuation  of  the  banks  only  as  a 

starting point, so that investors in listed banks would not be disadvantaged. In this respect, the ECB 

notes that the  final  version  of  the  law expressly  requires that  (i) the  purchase  price  be  no  higher 

than the market value of the shares; (ii) it should comply with Union rules on State aid; and (iii) the 

DGF is requested to commission an independent expert report to determine such market value.  

4. 

Extraordinary contribution and exemptions 

As  regards  banks  that  have  directly  invested  in  the  SAREB,  the  business  plan  underlying  the  SAREB 

envisages  a  reasonable  return  to  investors,  therefore  there  is  no  need  to  exempt  banks  that  decided  on 

business grounds to invest in the SAREB from the extraordinary contributions to the DGS. 

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

Done at Frankfurt am Main, 10 April 2013. 

[signed] 

The President of the ECB 

Mario DRAGHI 

7  

MoU, Paragraph 17 states that ‘Steps will be taken to minimise the cost to taxpayers of bank restructuring’. Paragraph 18 
states  that  ‘These  amendments  should  also  include  provisions  allowing  that  holders  of  hybrid  capital  instruments  and 
subordinated debt fully participate in the SLEs’. Finally, paragraph 19 states the following: ‘For non-viable banks, SLEs 
will also need to be used to the full extent to minimise the cost for the taxpayer’. 

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