Opinion of the European Central Bank of 14 February 2014 on the status and supervision of credit institutions (CON/2014/17)
Date: 2014-02-14
Institutions: European Central Bank
Subjects: Belgium, EU banking union, banking supervision, central bank, credit institution, financial stability, national law, payment system

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 14 February 2014 

on the status and supervision of credit institutions  

(CON/2014/17) 

Introduction and legal basis 

On 3 January 2014, the European Central Bank (ECB) received a request from the Belgian Minister for 

Finance for an opinion on a draft law on the status and supervision of credit institutions (hereinafter the 

‘first  draft  law’)  and  a  draft  law  on  various  related  provisions  (hereinafter  the  ‘second  draft  law’).  The 

ECB  has  been  asked  to  deliver  its  opinion  within  one  month  so  that  the  opinion  can  be  taken  into 

consideration before the draft law is submitted to the Belgian Parliament. 

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 19981, since the first and second draft laws relate to the Nationale Bank 

van België/Banque Nationale de Belgique (NBB), 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 first draft law replaces the Law of 22 March 1993 on the legal status and supervision of credit 

institutions with a new law under the same name, and introduces several important changes. Firstly, 
it implements Directive 2013/36/EU of the European Parliament and of the Council2 into Belgian 

law  made  necessary  by 
to  and  clarifications  of  Belgian 
law  and  effects  changes 
Regulation (EU) No  575/2013  of  the  European  Parliament  and  the  Council3.  Secondly,  the  first 

draft  law  adapts  the  legal  framework  for  the  supervision  of  credit  institutions  in  the  light  of  the 

participation  of  the  NBB  in  the  Single  Supervisory  Mechanism  (SSM),  governed  by  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).  

 
 
 
 
                                                 
ECB-PUBLIC 

Regulation (EU) No 1024/20134. Thirdly, in accordance with the Structural Reforms Report of the 
NBB5,  issued  pursuant  to  the  Final  Report  of  the  High-level  Expert  Group  on  reforming  the 
structure of the EU banking sector6, the first draft law contains provisions ensuring the separation 

of the activities of credit institutions by reference to the level of risk posed to investors’ deposits. 

Anticipating the adoption of the European Commission’s Proposal for a directive on the recovery 
and resolution of credit institutions and investment firms7 (hereinafter the ‘proposed BRRD’), the 

first  draft  law  also  contains  comprehensive  rules  on  the  resolution  and  recovery  of  credit 

institutions.  It  also  takes  into  account  the  outcome  of  the  Financial  Sector  Assessment  Program 

(FSAP) conducted by the International Monetary Fund in Belgium, which recommended specific 

changes intended to ensure the overall compliance of the first draft law with the Core Principles for 
Effective  Banking  Supervision8.  In  addition  to  pursuing  the  abovementioned  objectives,  the  first 

draft law implements the recommendations issued by the parliamentary committees established by 

the Belgian Parliament following the financial crisis with a view to restoring investor confidence in 
the stability of the financial and banking system9.  

1.2  The main purpose of the second draft law is to amend various items of Belgian legislation that are 

directly impacted by the first draft law. In particular, the second draft law amends the Organic Law 
of  the  NBB10  by  providing  for  the  establishment  of  a  resolution  board  within  the  NBB,  the 

disclosure of legal acts and decisions taken by the NBB in implementing Directive 2013/36/EU and 

the  amendment  of  the  procedures  followed  by  the  NBB  in  imposing  administrative  fines.  The 

second  draft  law  also  assigns  to  the  NBB  the  task  of  identifying  critical  infrastructures  in  the 
financial  sector,  in  accordance  with  Council  Directive  2008/114/EC11.  In  this  capacity,  the  NBB 

already  monitors  compliance  with  the  Belgian  rules  implementing  Directive  2008/114/EC, 

including  the  Law  of  1  July  2011  on  the  security  and  protection  of  critical  infrastructures 

(hereinafter  the  ‘Belgian  law  on  critical  infrastructures’)  and  may  for  this  purpose  use  any 

information  in  its  possession  in  the  context  of  its  responsibilities  for  banking  supervision  and 

oversight. 

4  

5  
6  
7  

8  
9  

10  
11  

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).  
‘Réformes bancaires structurelles en Belgique: rapport final’, July 2013, available on the NBB website at www.nbb.be. 
2 October 2012, available on the European Commission’s website at www.ec.europa.eu. 
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 (COM(2012) 280 final).  
Available on the Bank for International Settlements’ website at www.bis.org.  
‘Accord  de  Gouvernement  1  décembre  2011’,  available  on 
www.premier.fgov.be, especially Section 2.4.3, p. 115 and following.  
Law of 22 February 1998 establishing the Organic Law of the NBB. 
Council  Directive  2008/114/EC  of  8  December  2008  on  the  identification  and  designation  of  European  critical 
infrastructures and the assessment of the need to improve their protection (OJ L 345, 23.12.2008, p. 75).  

the  Belgian  Prime  Minister’s  website  at 

2 

 
                                                 
ECB-PUBLIC 

2.   General observations 

2.1  The  ECB  welcomes  the  first  draft  law,  which  consolidates  within  one  clear,  concise  and  well-

structured  legal  act  all  the  relevant  provisions  relating  to  credit  institutions.  It  implements 

Directive 2013/36/EU,  reflects  the  participation  of  the  NBB  in  the  SSM  and  anticipates  the 

adoption of the proposed BRRD.  

2.2  The  ECB  nevertheless  recommends  that  the  Belgian  authorities  closely  monitor  any  further  EU 

legal developments in the areas covered by the draft laws, including the anticipated adoption of the 

proposed BRRD and the Proposal for a regulation of the European Parliament and of the Council 
on  structural  measures  improving  the  resilience  of  EU  credit  institutions12  (hereinafter  the 

‘proposed Structural Measures Regulation’), and amend the draft laws accordingly.  

3.   New tasks entrusted to the NBB  

3.1 

In  line  with  the  ‘twin  peaks  model’  introduced  in  Belgium  by  the  Law  of  2  July  201013  and  the 
Royal Decree of 3 March 201114, the first draft law makes the NBB, which is already the sole entity 

responsible  for  the  financial  sector’s  micro-  and  macro-prudential  stability,  the  national  authority 

responsible for implementing Directive 2013/36/EU and the SSM. In addition, the second draft law 

establishes a resolution board within the NBB. Furthermore, the NBB will also act as the relevant 

authority  for  the  purposes  of  the  Belgian  law  on  critical  infrastructures.  In  line  with  its  previous 
opinions15, the ECB welcomes the further integration of the financial institutional framework within 

the  NBB,  which  will  enhance  the  ability  of  the  NBB  to  ensure  financial  stability  and  prevent  or 

mitigate systemic risks.  

3.2. 

In the interest of transparency, the ECB recommends that the NBB be given a more formal mandate 

in  the  field  of  banking  recovery  and  reform,  which  could  be  achieved  by  means  of  a  separate 

provision  in Chapter  II  of  the  Organic  Law  of  the  NBB  (‘missions  and  operations’).  In  line  with 

Article 8(a) of the proposed BRRD, such a provision should also limit the liability of the NBB and 

its staff in the course of carrying out the relevant tasks.   

3.3  From  an  operational  and  financial  point  of  view,  any  new  task  allocated  to  an  NCB  should  not 

affect its ability to discharge its ESCB-related tasks. Financial independence, which is an element 

of the principle of central bank independence referred to in Article 130 of the Treaty, requires that 

an  NCB  must  have  sufficient  means  to  carry  out  its  national  tasks  as  well  as  its  ESCB-  or 

Eurosystem-related  tasks.  Such  financial  independence  is  assessed  in  terms  of  whether  any  third 

party is able to exercise either direct or indirect influence over an NCB task and whether the NCB 

12  
13  

14  
15  

COM(2014) 43 final.  
The  ECB  commented  on  an  early  draft  of  the  Law  of  2  July  2010  in  Opinion  CON/2010/7.  All  ECB  opinions  are 
published on the ECB’s website at www.ecb.europa.eu. 
The ECB commented on an early draft of the Royal Decree of 3 March 2011 in Opinion CON/2011/5. 
Opinion CON/2013/56.  

3 

 
                                                 
ECB-PUBLIC 

is able to fulfil its mandate, both operationally in terms of manpower, and financially in terms of 

appropriate financial resources.  

3.4  The ECB welcomes the fact that the second draft law16 extends the existing mechanism of expense 
recovery set out in the Royal Decree of 17 July 201217 to the expenses incurred by the NBB in the 

context  of  Directive  2013/36/EU  and  the  SSM.  The  ECB  also  welcomes  Article  272  of  the  first 

draft  law,  which  authorises  the  NBB  to  recover  ‘any  reasonable  expenses  properly  incurred  in 

connection  with  the  use  of  the  resolution  tools  or  powers’.  Such  recovery  may  be  made  directly 

from  the  institution  under  resolution,  or  indirectly  from  other  institutions  involved  in  the 

implementation of such resolution tools, and is protected by a statutory lien on all movable assets of 

the  institution  under  resolution.  Article  245(2)  of  the  first  draft  law  expressly  provides  that  the 

valuation  fees  payable  to  experts  must  be  ‘reasonable  expenses  properly  incurred  in  connection 

with the use of the resolution tools or powers’. However, the ECB would welcome the introduction 

of a more general provision, similar to Article 12bis(4) of the Organic Law of the NBB relating to 

banking supervision, allowing the NBB to recoup all costs associated with the exercise of this new 

mandate. 

3.5 

It is noted that the new mandate of the NBB to monitor due compliance with Belgian law on critical 

infrastructures  will  be  exercised  in  respect  of  financial  institutions  that  are  already  subject  to  the 

supervisory powers of the NBB. In accordance with the first and second paragraphs of Article 12 of 

the Royal Decree of 17 July 2012, the expenses of the NBB incurred in the exercise of this mandate 

shall be reimbursed in full by the institutions so supervised, which means that no issue of financial 

independence will arise.  

4.  

Implementation of Directive 2013/36/EU  

The ECB welcomes the fact that the first draft law implements the optional provisions of Directive 

2013/36/EU, in particular the systemic risk buffer, thereby providing the NBB and ECB with the 

broadest  possible  range  of  prudential  tools.  The  first  draft  law  also  requires  credit  institutions  to 
submit any proposed strategic decision to the competent supervisory authority for prior approval18, 

and  promotes  the  use  of  internal  risk  assessment  methods.  By  these  means,  the  first  draft  law 

contributes  to  consistency  in  the  implementation  of  these  tools  and  this  process  across  all 

participating Member States, thereby helping to ensure a level playing field and lowering the risk of 

regulatory  arbitrage.  These  aims  will  be  further  promoted  by  precise  implementation  of  the 

transposition  into  and  application  under  national  law  of  the  micro-  and  macro-prudential  tools 

16  
17  

18  

See the amendments contained in the second draft law to Article 12bis, first paragraph of the Organic Law of the NBB. 
Royal  Decree  of  17  July  2012  on  covering  the  operating  expenses  of  the  NBB  in  connection  with  the  supervision  on 
financial institutions. 
Article 77 of the first draft law.  

4 

 
 
                                                 
          
ECB-PUBLIC 

contained in Directive 2013/36/EU and the requirements falling under the remit of Regulation (EU) 
No 1024/201319.  

5. 

Participation of the NBB in the SSM  

5.1  Regulation  (EU)  No  1024/2013  allocates  the  competences  and  powers  in  respect  of  the  macro-

prudential  supervision  of  credit  institutions  between  the  ECB  and  the  national  competent 

authorities.  The  first  draft  law  seeks  to  reflect,  for  the  sake  of  transparency,  the  set  of  regulatory 

tools at the ECB’s disposal to perform its micro- and macro-prudential competences, irrespective of 

whether such tools are extensively described in Regulation (EU) No 1024/2013, and hence common 

to all participating Member States; or are those only available to the national authorities, and hence 

specific to Belgium. For this purpose, given that it is impossible at this stage to determine whether 

the  national  authority  or  the  ECB  is  competent  to  exercise  certain  prerogatives  or  take  specific 

measures,  the  first  draft  law  refers  to  ‘the  supervisory  authority’,  defined  in  Article  3(4)  as  ‘the 

NBB  or  the  ECB,  depending  on  the  allocation  of  competences  provided  for  or  stipulated  in 

accordance with Regulation (EU) No 1024/2013 in the field of supervision of credit institutions’. 
Transitional  provisions20  also  lay  down,  with  effect  from  4 November  2014,  a  more  precise 

allocation of competences between the NBB and the ECB as regards the licensing process, changes 

in  the  structure  of  the  capital  of  credit  institutions,  the  withdrawal  of  licences  and  exceptional 

recovery measures.  

5.2  The ECB welcomes this legislative approach, which aims to provide the public with comprehensive 

information  on  the  set  of  tools  available  to  the  NBB  and/or  the  ECB,  depending  on  the  area  and 

timing of supervision, and also welcomes the fact that this approach is appropriately documented in 

the  explanatory  memorandum  to  the  first  draft  law.  The  ECB  notes  that  in  the  event  of 

inconsistencies EU legislation prevails over national law.  

6. 

Introduction of parts of the BRRD  

6.1  The first draft law implements into Belgian law the provisions of the proposed BRRD relating to 

recovery  plans,  resolution  plans,  resolution  instruments  (including  the  sale  of  business  tool,  the 

bridge  institution  tool  and  the  asset  separation  tool),  as  well  as  safeguards  and  procedural 

requirements.   

6.2  However, some of the provisions of the proposed BRRD have not been implemented at this stage 

and some existing provisions in Belgian law may need to be amended once the proposed BRRD is 

adopted.  The  ECB  trusts  that  the  Belgian  authorities  will  monitor  EU  legal  developments  in  this 

regard and amend the first draft law in a timely manner.  

19  
20  

CON/2013/82, Section 2.1. 
See the first draft law, Article 390 onwards.  

5 

 
 
                                                 
ECB-PUBLIC 

6.3  Without  prejudice  to  the  above,  the  ECB  notes  that  in  Article  245(1)(7),  the  application  of 

resolution instruments should be without prejudice to the equal treatment of creditors of the same 

rank, which is stricter than the corresponding Article 29(1)(e), which refers to the equal treatment 

of creditors of the same class. In order to ensure a broader application of the former provision, it 

should be aligned with the relevant provision in the proposed BRRD.  

7.  

Separation of activities 

7.1 

In  line  with  the  recommendation  of the  NBB  in  its  Structural  Reforms  Report,  the  first  draft  law 

imposes  on  credit  institutions  that  collect  deposits  or  issue  securities  governed  by  the  Belgian 

deposit protection scheme a mandatory separation of their activities related to trading on their own 
account21. Credit institutions must conduct own-account trading activities via a separate legal entity 

unless  such  activities  exclusively  relate  to  the  provision  to  clients  of  investment  and  auxiliary 

services,  market-making  activities,  activities  for  the  hedging  of  risk  for  credit  institutions,  sound 

and  prudent  management  of  the  liquid  assets  of  credit  institutions  and  the  purchase  and  sale  of 
financial  instruments  acquired  as  long-term  holdings22  and  are  carried  out  in  accordance  with 
certain governance, internal control and reporting requirements23 24. 

7.2  This  measure,  the  very  purpose  of  which  is  to  protect  the  deposits,  seeks  to  reduce  the  overall 

exposure of credit institutions to trading activities and encourage such institutions to focus on their 

core activities, thereby also simplifying their resolution in the event of financial difficulties. To this 
end, the Belgian authorities had already adjusted the financial stability contribution25 in accordance 
with  the  level  of  risk  of  the  assets  held  by  Belgian  credit  institutions26.  Moreover,  following  a 

recommendation made in its Structural Reforms Report, the NBB had already imposed additional 

own  funds  requirements  on  credit  institutions,  which  shall  be  amended  in  order  to  ensure  its 

compatibility with Directive 2013/36/EU. The same report also urged the immediate introduction in 

Belgium of the abovementioned separation of own-account trading activities in the absence of any 

structural reform at EU level. However, it also recommended that such measures be reviewed in the 
event of any such structural reform at EU level27.  

7.3  The  proposed  Structural  Measures  Regulation  contains  a  provision  to  the  effect  that  proprietary 

trading in financial instruments and commodities be conducted through a separate legal entity. This 

provision would apply to credit institutions deemed to be of ‘global systemic importance’ in terms 

of the significance of their total assets (more than EUR 30 billion for three consecutive years) and 

their  total  trading  assets  and  liabilities  (more  than  EUR  70  billion  or  10  per  cent  of  their  total 

21  
22  
23  
24  
25  
26  
27  

Article 119 of the first draft law.  
Article 121(1) to (5) of the first draft law.  
Article 122 of the first draft law.  
Article 128 of the first draft law.  
See the Law of 28 December 2011 on the financial stability contribution.  
See Opinion CON/2013/13. 
See the NBB Structural Reforms Report, p. 17, Section 4 in fine.  

6 

 
                                                 
ECB-PUBLIC 

assets).  Proprietary  trading  is  defined  narrowly  as  the  taking  of  positions  for  making  a  profit  for 

own  account,  without  any  connection  to  client  activity  or  hedging  the  entity’s  risk,  thereby 

excluding  cash  management.  Article  21(1)  of  the  proposed  Structural  Measures  Regulation 

provides  that  the  Commission  may  grant  a  derogation  from  this  prohibition  to  a  credit  institution 

that  is  subject  to  primary  legislation  adopted  by  29  January  2014,  provided  that  the  Commission 

declares such legislation to be compatible with the proposed Structural Measures Regulation. 

7.4 

In view of the above, the ECB trusts that the Belgian authorities will closely monitor the evolution 

of  the  proposed  Structural  Measures  Regulation  and  consider  whether  it  would  be  appropriate  to 

immediately impose requirements on the separation of own-account trading activities on all Belgian 

credit  institutions,  irrespective  of  the  thresholds  described  in  the  proposed  Structural  Measures 
Regulation. As highlighted in previous ECB opinions28, given that these measures primarily address 

internationally  active  credit  institutions,  the  ECB  considers  coordination  and  consistency  to  be 

important at Union level, in order to avoid regulatory arbitrage and to ensure a level playing field.  

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

Done at Frankfurt am Main, 14 February 2014. 

[signed] 

The President of the ECB 

Mario DRAGHI  

28  

Opinions CON/2012/106 and CON/2013/28. 

7