Opinion of the European Central Bank of 29 April 2014 on the legal framework for the recapitalisation through the HFSF of credit institutions in Greece (CON/2014/29)
Date: 2014-04-29
Institutions: European Central Bank
Subjects: Greece, State aid, capital increase, credit institution, financial intervention, financial stability, national law, public institution

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 29 April 2014  

on the legal framework for the recapitalisation through the HFSF of credit institutions in Greece 

(CON/2014/29) 

Introduction and legal basis 

On  24  Μarch  2014  the  European  Central  Bank  (ECB)  received  a  request  from  the  Greek  Ministry  of 

Finance  for  an  opinion  on  legislative  provisions  amending  Law  3864/2010  on  the  establishment  of  the 
Hellenic  Financial  Stability  Fund1  (HFSF)  (hereinafter  the  ‘draft  provisions’).  On  30  March  2014,  in 

accordance with an expedited parliamentary procedure, the Greek Parliament adopted the draft provisions 

as part of the law entitled ‘Measures for the support and growth of the Greek economy in the context of 
implementation of Law 4046/2012 and other provisions’2. 

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  and  sixth  indents  of  Article 2(1)  of  Council 
Decision 98/415/EC3,  as  the  draft  provisions  relate  to  the  Bank  of  Greece  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 provisions 

1.1  The  purpose  of  the  draft  provisions  is  to  reform  the  legal  framework  governing  the  provision  of 

capital  support  to  credit  institutions  in  Greece  through  the  HFSF,  with  a  view  to  maintaining 

financial  stability  in  the  banking  sector  in  Greece  for  the  sake  of  the  public  interest,  following 

restructuring of that sector in recent years. Furthermore, the draft provisions aim to align that legal 

framework  with  the  guidance  set  out  in  the  Communication  from  the  Commission  on  the 

application, from 1 August 2013, of State aid rules to support measures in favour of banks in the 
context of the financial crisis4 (hereinafter the ‘Banking Communication’). 

1.2  The proposed reform concerns mainly: (a) the objective of the HFSF and the rules and principles 

governing  its  function;  (b)  the  circumstances  in  which  the  HFSF  can  provide  support;  (c)  the 

1  
2 
3  

4  

FEK A 119/21.7.2010. 
FEK A 85/7.4.2014. 
Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
Communication from the Commission on the application, from 1 August 2013, of State aid rules to support measures in 
favour of banks in the context of the financial crisis (‘Banking Communication’), OJ C 216, 30.7.2013, p. 1. 

 
 
 
 
                                                 
ECB-PUBLIC 

adoption  of  mandatory  measures  aimed  at  reducing  the  capital  needs  of  credit  institutions 

requesting  capital  support  from  the  HFSF,  in  line  with  the  Banking  Communication;  (d)  the 

procedure  and  conditions  for  the  provision  of  capital  support  to  credit  institutions  through  the 

subscription by the HFSF for shares or other contingent convertible bonds; (e) the exercise of the 

shareholding  rights  of  the  HFSF  in  credit  institutions  to  which  it  has  provided  capital  support; 

(f) the procedure and conditions for the disposal of the HFSF’s holding in credit institutions; and 

(g) rules on the corporate governance and operation of the HFSF.  

1.3  The draft provisions clarify that the objective of the HFSF is to contribute to the maintenance of the 
stability  of  the  Greek  banking  system  for  the  sake  of  the  public  interest5.  The  draft  provisions 

expressly  provide  that  the  HFSF  shall  act  in  line  with  the  commitments  of  Greece  under  Law 

4046/2012  on  the  approval  of  the  draft  financing  agreements  between  the  European  Financial 

Stability  Fund,  the  Hellenic  Republic  and  the  Bank  of  Greece  and  of  the  draft  Memorandum  of 

Understanding between the Hellenic Republic, the European Commission and the Bank of Greece 

and  other  provisions  of  utmost  importance  for  reducing  the  public  debt  and  saving  the  national 
economy6  7.  The  draft  provisions  specify  that,  with  a  view  to  achieving  its  objective,  the  HFSF 

exercises  the  following  main  tasks:  (a)  it  provides  capital  support  to  credit  institutions  and  to 

transitional  credit  institutions  under  terms  and  conditions  which  take  account  of  rules  on  the 

prudent management of its assets; (b) it monitors and assesses the compliance of credit institutions 

with  their  restructuring  plans,  safeguarding  their  business  autonomy,  their  operation  on  market 

terms and increasing private sector participation in such credit institutions in a transparent manner 

and  in  accordance  with  the  State  aid  rules  of  the  Union;  (c)  it  exercises  its  shareholder  rights  in 

credit  institutions  to  which  it  has  provided  capital  support  in  compliance  with  the  rules  on  the 

prudent management of its assets and in line with the State aid rules of the Union; (d) it disposes of 

financial instruments issued by the credit institutions in which it has a holding in accordance with 

the specific requirements set out in the draft provisions; and (e) it exercises its rights in transitional 

credit institutions in accordance with the specific requirements set out in the Law on the HFSF and 
the Law on Banking (Law 3601/20078)9. The draft provisions state that monitoring and supervision 

of tasks performed by bodies responsible for the special liquidation of credit institutions do not fall 
within the functions of the HFSF10.  

1.4   The  procedure  to  activate  support  by  the  HFSF  is  redefined  in  line  with  the  Banking 

Communication.  A  credit  institution  assessed  and  deemed  as  viable  by  the  Bank  of  Greece  may 

request capital support from the HFSF for an amount not exceeding its capital needs as identified 
by the Bank of Greece11. The request must be accompanied by a restructuring plan and a letter from 

5  
6  
7  
8  
9  
10  
11  

See draft Article 2(1). 
FEK A 28/14.12.2012. 
See draft Article 2(1). 
FEK A 178/1.8.2007. 
See draft Article 2(2). 
See draft Article 2(3). 
See draft Article 6(1). 

2 

                                                 
ECB-PUBLIC 

the Bank of Greece determining the capital needs of the relevant credit institution and confirming 

that the credit institution, subject to meeting its capital needs, is viable. Credit institutions that have 

already  received  capital  support  from  the  HFSF  are  required  to  submit  an  amended  restructuring 

plan.  The  restructuring  plan  must  set  out  voluntary  measures  to  be  undertaken  by  the  credit 

institution  in  order  to  raise  capital  or  mitigate  its  capital  needs.  These  measures  may  include  the 

retention of earnings, the implementation of a share  capital increase, the voluntary conversion of 

subordinated  debt  instruments  into  Tier  1  capital  instruments  and  the  compilation  of  a  list  of 

instruments  that  may  be  subject,  where  necessary,  to  mandatory  measures  aimed  at  reducing  the 
credit institution’s capital needs12. Following consultation with the Bank of Greece, the HFSF may 

request  amendments  to  the  restructuring  plan.  The  provision  of  HFSF  support  is  conditional  on 

European Commission approval of the restructuring plan and, where necessary, the implementation 

of  mandatory  measures  aimed  at  reducing  the  credit  institution’s  capital  needs,  in  line  with  the 
Banking Communication13.  

1.5   To  reduce  the  use  of  public  funds  in  support  of  credit  institutions  to  a  minimum,  the  draft 

provisions authorise the Cabinet of Ministers to enforce, following a recommendation by the Bank 

of  Greece,  mandatory  measures  aimed  at  allocating  the  capital  needs  of  credit  institutions 

requesting capital support from the HFSF to their capital holders and subordinated creditors in line 

with the Banking Communication (hereinafter the ‘mandatory measures’). Such measures shall be 

adopted where: (a) the voluntary measures set out in the credit institution’s restructuring plan are 

insufficient  to  address  its  total  capital  needs  as  determined  by  the  Bank  of  Greece;  and  (b)  the 

liquidation or resolution of the credit institution concerned, which would be required under Greek 

law were the institution unable to restore its capital position, could result in serious disturbances to 
the economy with adverse effects upon the public14. The mandatory measures may include, under 

the  specific  conditions  set  out  in  the  draft  provisions:  (a)  a  reduction  in  the  nominal  value  of 

common shares, following a decision of the credit institution’s competent body; (b) a reduction in 

the  nominal  value  of  preference  shares  and  other  Tier  1  liabilities;  and  (c)  the  conversion  of 

preference  shares,  other  Tier  1  liabilities  and  subordinated  liabilities  into  Tier  1  capital 
instruments15.  The  mandatory  measures  may  apply  also  to  subordinated  liabilities  of  the  credit 

institution concerned that stem from agreements it has concluded with third entities included in its 

consolidated financial statements (guarantees for the issue of debt or equity instruments and credit 
arrangements)16. The draft provisions allow the authorities, subject to the approval of the European 

Commission,  not  to  enforce  mandatory  measures  where  their  implementation  would  endanger 

financial  stability  or  lead  to  disproportionate  results.  The  draft  provisions  require  that,  following 

the  implementation  of  mandatory  measures,  the  financial  position  of  the  capital  holders  or 

subordinated  creditors  affected  should  not  be  worse  than  it  would  be  were  the  credit  institution 

12  
13  
14  
15  
16  

See draft Article 6(1)(b). 
See draft Article 6(4). 
See draft Article 6a(1). 
See draft Article 6a(2). 
See draft Article 6a(3). 

3 

                                                 
ECB-PUBLIC 

placed 

into 

liquidation 

(‘no-creditor-worse-off-than-in-insolvency’  principle)17.  The  draft 

provisions  set  out  publication  requirements  in  relation  to  the  implementation  of  mandatory 
measures18. A  Cabinet act  will set out the necessary details for the implementation of mandatory 
measures of this kind19.  

1.6   The draft provisions clarify that the HFSF may provide capital support to credit institutions only to 

the  extent  that  their  capital  needs,  as  determined  by  the  Bank  of  Greece,  remain  uncovered 

following  the  application  of  voluntary  and  mandatory  measures  aimed  at  reducing  such  and 
following  any  participation  of  private  sector  investors20.  The  HFSF  shall  provide  capital  support 

through the subscription of shares or contingent convertible bonds or other convertible instruments 
issued in the context of a capital increase21. The subscription price for  these instruments shall be 

determined by a decision of the General Council of the HFSF on the basis of two valuation reports 

prepared by independent financial advisers. New shares in the relevant credit institution offered to 

the private sector in the context of the same issuance shall have an offer price no lower than the 

subscription price for the HFSF. In contrast, the offer price may be lower than the price at which 

the HFSF previously subscribed for shares in the credit institution or lower than the current stock 
market price22. The independent financial advisers shall be requested to take account of all relevant 

information, including any available asset quality review and stress test results, as well as market 

conditions. A summary of the elements and methodology used by the advisers will be published on 
the HFSF’s website within 10 days of completion of the transactions23.  

1.7  According  to  the  draft  provisions,  the  HFSF  shall  be  entitled  to  exercise  without  limitations  the 

voting rights attached to the common  shares it  acquires in the  context of the provision of capital 
support  to  credit  institutions24.  The  draft  provisions  specify  certain  cases  where  the  HFSF  may 

exercise its voting rights only in relation to decisions amending the bylaws of the credit institution, 
including  decisions  concerning  capital  increase,  merger,  extension  of  duration  and  dissolution25. 

The  draft  provisions  introduce  certain  amendments  regarding  the  notification  of  information 

relating  to  shareholding  and  voting  rights  in  credit  institutions  to  which  the  HFSF  has  provided 

capital  support,  in  accordance  with  Law  3556/2007  on  transparency  requirements  for  companies 
with stock listed on a regulated market26 27.  

17  
18  
19  
20  
21  
22  
23  
24  
25  
26  

27  

See draft Article 6a(8). 
See draft Article 6a(10). 
See draft Article 6a(11). 
See draft Article 7(1). 
See draft Article 7(2). 
See draft Article 7(5)(a). 
See draft Article 7(5)(b). 
See draft Article 7a(1). 
See draft Article 7a(2). 
FEK Α 91/30.4.2007. Law 3556/2007 implements Directive 2004/109/EC of the European Parliament and of the Council 
of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose 
securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, p. 
38).  
See draft Article 7a(6). 

4 

                                                 
ECB-PUBLIC 

1.8   The draft provisions specify that the HFSF shall decide on how to dispose of its shareholding in a 

credit  institution  to  which  it  has  provided  capital  support  within  five  years  of  acquiring  that 

holding. The relevant decision shall be taken by the General Council of the HFSF on the basis of a 

report  prepared  by  a  financial  expert,  accompanied  by  a  comprehensive  time  schedule  for  the 
disposal.  The  disposal  shall  be  carried  out  in  compliance  with  the  objectives  of  the  HFSF28.  The 

HFSF  may  sell  its  shares  to  the  market  or  to  specific  investors  or  groups  of  investors  through 

different procedures, including through an open tender procedure, the exchange of shares for cash 
or other securities and book building29. The disposal price, which may be lower than the price at 

which the shares were acquired by the HFSF or their current market price, shall be determined by 
the General Council of the HFSF on the basis of two valuation reports of independent advisers30.  

With regard to the exchange and adjustment of warrants issued by the HFSF, a Cabinet act shall 

determine  the  methodology  to  adjust  their  terms  and  conditions  in  the  case  of  corporate  actions 

consisting  of  a  split,  a  reverse  split  and  a  share  capital  increase  without  abolition  of  pre-emptive 
rights31. In the latter case, the draft provisions allow for an adjustment only as regards the price and 

only up to the amount of the proceeds realised from the sale of pre-emption rights of the HFSF. 

1.9  The draft provisions amend certain rules relating to the corporate governance and operation of the 

HFSF. These amendments include in particular: (a) an increase in the number of the independent 
members  of  the  General  Council  of  the  HFSF  from  five  to  seven32;  (b)  strengthening  of  the 
eligibility  criteria  for  members  of  the  governing  bodies  of  the  HFSF33;  (c)  broadening  of  the 

limitations to which the members of the governing bodies of the HFSF are subject when taking up 
a  position  subsequent  to  their  employment  at  the  HFSF34;  and  (d)  further  specification  of  the 
liability of the members of the governing bodies of the HFSF35.  

2. 

Appropriate time to consult the ECB  

2.1  According to Article 4 of Decision 98/415/EC, the ECB must be consulted at an appropriate stage 

in  the  legislative  process  enabling  the  consulting  authority  to  take  the  ECB’s  opinion  into 

consideration before the draft provisions are adopted. This requires, in turn, that the ECB should 

have sufficient time to adopt its opinion. 

2.2.  The  ECB  notes  that,  in  this  case,  the  consultation  request  was  submitted  a  few  days  before  the 

adoption  of  the  draft  provisions  into  law.  As  the  ECB  appreciates  this  urgency,  the  observations 

made in this opinion are limited to what is considered strictly necessary, having regard to the fact 

28  
29  
30  
31  
32  
33  
34  
35  

See draft Article 8(1). 
See draft Article 8(2) and (3). 
See draft Article 8(4). 
See draft Article 8(6). 
See draft Article 4(2). 
See draft Article 4(6) and (7). 
See draft Article 16C(3). 
See draft Article 16C(4). 

5 

 
                                                 
ECB-PUBLIC 

that the draft provisions have already been voted into law and entered into force.  

3. 

General observations  

3.1  The ECB welcomes the reform of the legal framework governing the operation of the HFSF and 

the  recapitalisation  of  credit  institutions,  which  aims  at  safeguarding  the  stability  of  the  Greek 
banking  system  for  the  sake  of  the  public  interest36.    In  the  context  of  the  current  economic  and 

financial  crisis,  the  proposed  reform  should  generally  contribute  to  reducing  the  amount  of  State 

aid  that  the  beneficiary  credit  institutions  may  require  and  to  safeguarding  and  protecting 

taxpayers’ interests more effectively. 

3.2  The ECB wishes to emphasise the importance it attaches to the stabilisation of the financial system 

in Greece, such that the latter may resume lending to the real economy and support growth, while 

also restoring a sustainable broad-based funding model. The timely and efficient recapitalisation of 

Greece’s  financial  system  is  crucial  to  the  achievement  of  this  objective.  Furthermore,  the  ECB 

reiterates  that  it  is  equally  essential  to  ensure  that  the  amended  recapitalisation  framework  will 

allow  credit  institutions  to  benefit  from  capital  support  provided  by  the  HFSF  only  after  having 

fully  exhausted  all  possibilities  to  generate  capital  through  mitigating  measures  (such  as 

divestments) and through private capital-raising. This will enable the HFSF to maintain significant 

State resources as a safety net against the challenges that Greek banks continue to face as a result of 

the recession and the problems of some borrowers to service their debt obligations, to the benefit of 

the  financial  system,  the  economy  and  the  public  at  large.  Without  prejudice  to  these  general 

observations, the ECB has the following specific observations to make.  

4. 

Objective and operation of the HFSF 

4.1  The  ECB  welcomes  the  clarification  that  the  objective  of  the  HFSF  is  to  contribute  to  the 

maintenance of the stability of the Greek banking system, for the sake of the public interest, and 

that  the  HFSF  shall  act  in  line  with  the  commitments  of  Greece  under  the  second  economic 

adjustment  programme  for  Greece.  Moreover,  the  ECB  welcomes  the  specification  of  the  tasks 

conferred  upon  the  HFSF  for  the  fulfilment  of  this  objective,  and  the  principles  governing  the 

performance of these tasks. Of particular importance is the requirement that, in exercising its tasks, 

the HFSF shall take account of rules on the prudent management of its assets. The prudent use and 

management  of  the  assets  of  the  HFSF  is  crucial  from  a  financial  stability  perspective,  as  these 

assets include both the holdings of the HFSF in credit institutions that have benefited from HFSF 

support and the capital of the HFSF, paid in by the Greek Government with funds raised from the 

European Union and International Monetary Fund (IMF) financial assistance for Greece. The ECB 

supports  the  financial  sector  strategy  set  out  in  the  Memorandum  of  Economic  and  Financial 

36  

In relation to the development of the relevant legal framework, the ECB refers to its previous relevant opinions. See in 
particular  opinions  CON/2010/54,  CON/2011/72,  CON/2012/14,  CON/2012/25,  CON/2012/39,  CON/2012/90, 
CON/2013/17 and CON/2013/38. All ECB opinions are available on the ECB website at www.ecb.europa.eu. 

6 

 
 
                                                 
ECB-PUBLIC 

Policies37  and  the  recent  statement  on  Greece  by  the  Eurogroup  to  strengthen  Greek  banks  by 
meeting ‘capital needs swiftly first and foremost from private investors’38. Private capital injections 

should help to strengthen the  management, efficiency and solvency of Greek  banks, thereby also 

contributing to the prudent use and management of the existing assets of the HFSF. 

4.2  The ECB notes that the draft provisions increase the number of members of the General Council of 

the HFSF, other than the representative of the Ministry of Finance and the person appointed by the 

Bank  of  Greece,  from  five  to  seven,  and  understands  that  this  amendment  aims  at  increasing  the 

participation of persons with international experience in banking matters in the governing bodies of 

the HFSF. As regards the role of the person appointed by the Bank of Greece, the ECB notes that 

as a full voting member of the General Council of the HFSF, the Bank of Greece appointee might 

be required to take a position on issues falling outside the tasks and responsibilities of the Bank of 

Greece  as  national  supervisory  authority.  This  might  give  rise  to  perceived  conflicts  of  interest, 

such as in connection with business decisions relating to the exercise of the shareholding rights of 

the HFSF. The ECB considers that the role of the person appointed by the Bank of Greece could be 

usefully transformed into that of a representative of the Bank of Greece without voting rights, who 

would act in an observer capacity, and who would, in practice, be called to provide input only from 

a prudential supervisory perspective. 

5. 

Procedure and conditions for the provision of capital support by the HFSF 

5.1  Circumstances in which the HFSF may provide support 

5.1.1  The ECB welcomes the fact that, under the draft provisions, only credit institutions that have been 

assessed and deemed viable by the Bank of Greece are deemed eligible to receive support from the 

HFSF.  In  addition,  it  welcomes  the  fact  that  the  draft  provisions  require  credit  institutions 

requesting  capital  support  to  submit  a  restructuring  plan  setting  out  the  measures  that  they  will 

undertake  in order  to  raise  capital  from  private  resources  or  mitigate  their  capital  needs,  so  as  to 

minimise  State  aid  support.  These  safeguards  are  necessary  to  ensure  that  the  provision  of  State 

support will strengthen the capital position of fundamentally sound financial institutions in order to 

improve the functioning and stability of the banking system and to foster an adequate flow of credit 

to the economy. 

5.1.2  The  ECB  is  of  the  view  that  the  Bank  of  Greece,  as  the  national  supervisory  authority,  is  the 

institution best  placed  to:  (a)  assess  whether  there  is  a  residual  shortfall  in  capital;  (b)  assess  the 

viability of credit institutions facing capital shortfalls, taking into consideration their restructuring 

plans  also  including  measures  relating  to  voluntary  liability  management;  and  (c)  instruct  credit 

institutions  that  have  been  deemed  viable,  subject  to  meeting  their  capital  needs,  to  submit  a 

request for capital support to the HFSF. 

37  
38  

Annex V to Law No 4046/2012, as revised from time to time (FEK A 28/14.12.2012).  
See 
April 
on 
http://www.eurozone.europa.eu/newsroom/news/2014/04/eurogroup-statement-on-greece/.  

Eurogroup 

statement 

Greece 

of 

1 

2014, 

available 

at: 

7 

 
                                                 
ECB-PUBLIC 

5.1.3  The ECB notes that the implementation of HFSF support is further conditional on the adoption of 

mandatory  measures  aimed  at  allocating  any  residual  capital  needs,  following  the  adoption  of 

voluntary  measures,  to  capital  holders  and  subordinated  creditors  of  the  credit  institution 

concerned,  in  compliance  with  the  Banking  Communication.  The  ECB  understands  that  the 

relevant  measures  aim  to  address  public  interest  considerations  and  in  particular:  (a)  the  need  to 

ensure  that  the  use  of  public  funds  remains  at  the  minimum  necessary;  (b)  the  need  to  prevent 

serious disturbances to the economy with adverse effects upon the public that in certain cases could 

result  from  the  liquidation  or  resolution  of  the  credit  institution  concerned;  and  (c)  the  need  to 

protect the integrity of the single market and ensure a level playing field as well as the State’s fiscal 
strength39. 

5.1.4  The ECB notes that the Banking Communication requires the adoption of mandatory measures of 

the  kind  specified  in  the  draft  provisions,  provided  that  fundamental  rights  are  respected  and 
financial stability is not put at risk40. In this regard, adherence to the ‘no-creditor-worse-off-than-in-

insolvency’  principle  established  in  the  draft  provisions  will  be  crucial.  Furthermore,  the  ECB 

welcomes  the  fact  that  the  draft  provisions  refer  explicitly  to  the  public  interest  considerations 

which underpin the adoption of mandatory measures and allow also for exceptions to the adoption 

of mandatory measures, where their implementation would endanger financial stability or lead to 

disproportionate results.   

5.1.5  The  ECB  notes  that  the  draft  provisions  include  among  the  instruments  that  may  be  subject  to 

mandatory measures subordinated liabilities of the credit institution concerned that stem from the 

provision of guarantees to third entities or from credit arrangements with such entities. The ECB 

understands that these provisions will only be relevant in the event that the guarantee is activated. 

Implementation  of  mandatory  measures  in  relation  to  obligations  of  that  kind  requires  further 

specification. 

5.2  Provision of capital support and pricing of recapitalisation instruments 

5.2.1  The ECB welcomes the fact that, under the draft provisions, the HFSF shall provide capital support 

only for the purpose of covering the capital shortfall determined by the Bank of Greece and only to 

the  extent  that  the  shortfall  remains  uncovered  following  the  application  of  voluntary  and 

mandatory mitigating measures and the participation of private sector investors. This provision is 

necessary  to  enable  the  HFSF  to  adequately  fulfil  its  objective  to  maintain  the  stability  of  the 

financial system, for the sake of the public interest. 

5.2.2  According  to  the  draft  provisions,  the  decision  by  the  HFSF  determining  the  price  for  its 

subscription of common shares will take account of its objectives along with the prevailing market 

conditions. These principles, which require the HFSF, alongside other aims, to take account of the 

rules  on  the  prudent  management  of  its  assets,  will  enable  the  HFSF  to  ensure  the  appropriate 

39  
40  

See ECB opinion CON/2013/87, paragraph 3.1 et seq. 
According to paragraph 19 of the Banking Communication, all capital generating measures should be exhausted before 
the State may recapitalise a credit institution, provided that fundamental rights are respected and financial stability is not 
put at risk. 

8 

                                                 
ECB-PUBLIC 

pricing  of  recapitalisations  with  State  support,  thus  avoiding  the  situation  that  private  investors 

prepared to inject capital in line with prevailing market conditions are crowded out as a result of 

the HFSF setting a price that is too high. The ECB emphasises the importance of ensuring that the 

valuations  provided  to  the  HFSF  by  independent  financial  advisers  take  account  of  all  pertinent 

information and are subject to all necessary transparency requirements. The reference to that effect 

in the draft provisions will provide an additional safeguard to promote financial stability.  

5.2.3  The  provision  of  capital  support  by  the  HFSF  under  the  draft  provisions  will  be  subject  to  the 

assessment  and  control  of  the  European  Commission  in  accordance  with  the  State  aid  rules  laid 

down in the Treaty. In particular, the European Commission’s role will contribute to ensuring that 

the recapitalisation of credit institutions with capital support from the HFSF will not result in the 

granting  of  State  aid  which  distorts  or  threatens  to  distort  competition  by  favouring  certain 

undertakings. 

6. 

Disposal of the HFSF’s shareholding in credit institutions 

6.1  The  draft  law  contains  detailed  provisions  governing  the  disposal  of  the  HFSF’s  shareholding  in 

credit  institutions.  These  provisions  aim  at  setting  out  clear  rules  and  principles  to  guide  the 

HFSF’s  decision-making  process  with  regard  to  increasing  private  sector  participation  in  credit 

institutions in which the HFSF holds shares. The ECB considers that the relevant provisions will 

promote  the  re-privatisation  of  Greek  banks  and  thus  the  operation  of  the  credit  institutions 

concerned  on  market  terms,  thereby  facilitating  the  return  to  normal  market  conditions  and 

ensuring the proper financing of the Greek economy. 

6.2  The  ECB  notes  that,  according  to  the  draft  provisions,  the  disposal  price  may  be  lower  than  the 

price  at  which  the  shares  were  acquired  by  the  HFSF  or  their  current  market  price.  The  ECB 

welcomes the fact that, when determining the disposal price, the HFSF will be required to act in 

compliance  with  its  objective,  as  specified  under  the  draft  provisions.  Furthermore,  the  ECB 

considers  it  important  that  the  rules  concerning  the  information  to  be  taken  into  account  by  the 

independent financial advisers and the transparency requirements concerning the elements and  

9 

 
ECB-PUBLIC 

methodology used by those advisers also apply in relation to the determination of the disposal price. In 

this connection, it is also noted that disposal of HFSF shareholdings in credit institutions will be subject 

to the State aid rules.  

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

Done at Frankfurt am Main, 29 April 2014. 

[signed] 

The President of the ECB 

Mario DRAGHI 

10