Opinion of the European Central Bank of 2 December 2013 on the prudential supervision of credit institutions and on macro-prudential oversight (CON/2013/82)
Date: 2013-12-02
Institutions: European Central Bank
Subjects: Finland, credit institution, financial stability, financial supervision, foreign-exchange reserves, national law, payment system, supervisory power

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 2 December 2013 

on the prudential supervision of credit institutions and on macro-prudential oversight 

(CON/2013/82) 

Introduction and legal basis 

On 11 October 2013, the European Central Bank (ECB) received a request from the Finnish Ministry of 

Finance for an opinion on a draft law amending the Law on credit institutions and certain other related 

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  third,  fifth  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 Suomen Pankki, payment and 

settlement  systems  and  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  aims  to  implement  Directive  2013/36/EU  of  the  European  Parliament  and  of  the 
Council (hereinafter the ‘Capital Requirements Directive’)2 into Finnish law, as well as effecting 

changes and clarifications to Finnish law made necessary by Regulation (EU) No 575/2013 of the 
European  Parliament  and  of  the  Council3.  The  draft  law  proposes  replacing  the  Law  on  credit 

institutions  with  a  new  law  under  the  same  name  and  amending  its  content  with  regard  to,  inter 

alia,  capital  buffers,  risk  management,  corporate  governance  and  administrative  sanctions,  as 

required  by  the  Capital  Requirements  Directive.  It  also  proposes  amendments  to  several  related 

laws, such as the Law on the Financial Supervisory Authority and the Law on investment services.  

1.2  The draft law further aims to clarify that the Financial Supervisory Authority (FSA) would only be 

responsible  for  those  statutory  tasks  that  have  not  been  conferred  on  the  ECB  under  Council 

1  
2 

3  

OJ L 189, 3.7.1998, p. 42. 
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit 
institutions and the prudential supervision of credit institutions and investment firms (OJ L 176, 27.6.2013, p. 338). 
Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements 
for credit institutions and investment firms (OJ L 176, 27.6.2013, p. 1). 

 
 
 
 
                                                 
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Regulation  (EU)  No  1024/2013  (hereinafter  the  ‘Single  Supervisory  Mechanism  (SSM) 
Regulation’)4. 

1.3  The  draft  law  also  assigns  the  task  of  macro-prudential  oversight  of  the  financial  system  to  the 

FSA.  The  FSA’s  Board  will  make  decisions  concerning  the  institution-specific  countercyclical 

buffer,  minimum  risk  weights  and  loss  given  default  (LGD)  floors  on  exposures  secured  by 

mortgages, as well as concerning the classification of credit institutions for the purposes of the G-
SII5 and O-SII6 buffers. 

1.4  The draft law would slightly amend the rules on information exchange contained in Section 26(4) 

of the Law on Suomen Pankki. Other confidentiality provisions notwithstanding, Suomen Pankki 

would be obliged to immediately notify various other authorities, such as the FSA, the Ministry of 

Finance,  the  Ministry  of  Social  Affairs  and  Health,  any  authorities  responsible  for  the  smooth 

functioning  of  the  financial  markets  of  other  European  Economic  Area  Member  States,  the 

European  Supervisory  Authorities  and  the  European Systemic  Risk  Board  (ESRB)  of  emergency 

situations referred to in Article 18 of Regulation (EU) No 1093/2010 of the European Parliament 
and of the Council7. 

2. 

General observations  

2.1  The proposed changes relate largely to implementation of the Capital Requirements Directive. It is 

important  that  the  transposition  and  application  into  national  law  of  the  Capital  Requirements 

Directive’s micro- and macro-prudential tools and the requirements that fall under the remit of the 

SSM  Regulation  are  implemented  precisely.  This  will  also  increase  the  consistency  in  the 

application of these tools and processes across all participating Member States, thereby helping to 

ensure a level playing field and lowering the risk of regulatory arbitrage. 

3. 

Implementation of the Capital Requirements Directive 

3.1  The ECB notes that the draft law proposes implementing the Capital Requirements Directive into 

Finnish law in accordance with the minimum requirements of that Directive.  

The  capital  conservation  buffer,  which  is  referred  to  in  the  draft  law  as  ‘fixed  additional  own 

funds’,  would  be  2.5 %  according  to  Section  3  of  Chapter  10  of  the  draft  law.  The  institution-

specific  countercyclical  buffer,  which  is  referred  to  in  the  draft  law  as  ‘variable  additional  own 

funds’, would be determined by the FSA’s Board, in accordance with the criteria in Section 5 of 

Chapter 10 of the same law. 

4 

5  
6  
7  

Council  Regulation  (EU)  No  1024/2013  of  15  October  2013  conferring  specific  tasks  on  the  European  Central  Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63). 
G-SII stands for global systemically important institutions. 
O-SII stands for other systemically important institutions. 
Regulation  (EU)  No  1093/2010  of  the  European  Parliament  and  of  the  Council  of  24  November  2010  establishing  a  
European Supervisory Authority (European Banking Authority (OJ L 331, 15.12.2010, p. 12).  

2 

 
 
                                                 
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3.2  The  draft  law  contains  provisions  relating  to  four  macro-prudential  tools,  namely  the 

countercyclical  capital  buffer,  minimum  risk  weights  and  LGD  floors  on  exposures  secured  by 
mortgages8, the G-SII buffer and the O-SII buffer. However, it does not contain provisions on the 

systemic  risk  buffer.  The  ECB  acknowledges  that  the  systemic  risk  buffer  is  optional  and 

understands that the decision not to implement the systemic risk buffer into Finnish law is based on 

an analysis of the current state of the Finnish financial sector and the possible consequences for the 

real  economy  of  its  activation  over  the  course  of  the  current  economic  cycle.  The  systemic  risk 

buffer,  if  implemented  in  national  law,  would  fall  under  the  scope  of  Article  5  of  the  SSM 

Regulation as one of the capital buffers provided for by relevant Union law. Due to the importance 

of both the ECB and national competent authorities or designated authorities having the broadest 

possible  range  of  macro-prudential  tools  at  their  disposal,  the  ECB  would  welcome  the 

implementation  of  a  systemic  risk  buffer  in  order  to  ensure  consistency  of  the  available  macro-

prudential tools and lowering the risk of regulatory arbitrage. 

3.3  The  draft  law  should  at  all  times  be  compatible  with  the  guidelines  of  the  European  Banking 
Authority (EBA)9 on the criteria, e.g. size for identifying O-SIIs. At the same time, from a financial 

stability  and  level  playing  field  perspective,  this  will  ensure  that  similar  criteria  apply  across  all 

Union Member States in the identification of G-SIIs and O-SIIs. 

4.  Macro-prudential oversight 

4.1  The draft law proposes assigning the task of macro-prudential oversight to the FSA. Decisions on 

the  institution-specific  countercyclical  buffer  will  be  made  by  the  FSA’s  Board.  The  Board  is 

composed  of  five  members,  three  of  whom  are  appointed  on  the  basis  of  proposals  by  Suomen 

Pankki,  the Ministry  of  Finance  and  the Ministry  of Social  Affairs  and  Health, respectively. The 

FSA will be required to prepare decisions relating to the institution-specific countercyclical buffer 

in cooperation with Suomen Pankki and the Ministry of Finance, and also to consult them and the 

Ministry of Social Affairs and Health before any decision-making. 

4.2  The  ECB  supports  the  design  of  effective  macro-prudential  policy  frameworks  within  Member 

States,  in  line  with  the  guiding  principles  set  out  in  Recommendation  ESRB/2011/3  of  the 
European  Systemic  Risk  Board10.  Moreover,  the  ECB  considers  that  the  ECB  and  the  national 

central  banks  should  play  a  leading  role  in  macro-prudential  oversight,  given  their  expertise  and 
existing responsibilities in the area of financial stability11. 

8  
9  
10  

11  

Articles 124 and 164 of Regulation (EU) No 575/2013. 

Available on the EBA’s website at www.eba.europa.eu. 
Recommendation  ESRB/2011/3  of  the  European  Systemic  Risk  Board  of  22  December  2011  on  the  macro-prudential 
mandate of national authorities
See  paragraph  2.1  of  Opinion  CON/2013/30  and  paragraph  2.1  of  Opinion  CON/2013/45.  All  ECB  opinions  are 
published on the ECB’s website at www.ecb.europa.eu. 

(OJ C 41, 14.2.2012, p.1). 

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4.3  This opinion is without prejudice to the conclusions of the ESRB’s follow-up assessment, which 

will  be  prepared  pursuant  to  Article  17  of  Regulation  (EU)  No  1092/2010  of  the  European 
Parliament and of the Council12. 

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

Done at Frankfurt am Main, 02 December 2013. 

[signed] 

The President of the ECB 

Mario DRAGHI 

12  

Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union 
macro-prudential  oversight  of  the  financial  system  and  establishing  a  European  Systemic  Risk  Board  (OJ  L  331, 
15.12.2010, p. 1). 

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