Opinion of the European Central Bank of 2 May 2014 on the resolution of crises in the financial markets (CON/2014/31)
Date: 2014-05-02
Institutions: European Central Bank
Subjects: EU banking union, Finland, bank deposit, credit institution, financial stability, financial supervision, guarantee, investment company, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 2 May 2014 

on the resolution of crises in the financial markets 

(CON/2014/31) 

Introduction and legal basis 

On 27 March 2014, the European Central Bank (ECB) received a request from the Finnish Ministry of 

Finance for an opinion on a draft law on the resolution of credit institutions and investment firms, a draft 

law  on  the  Financial  Crisis  Resolution  Authority  and  several  related  draft  laws  (hereinafter  ‘the  draft 

laws’). 

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/EC1,  as  the  draft  laws  relate  to  Suomen  Pankki  and  to  rules  applicable  to  financial  institutions 

insofar  as  they  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 laws 

1.1  The  main  purpose  of  the  draft  laws  is  to  introduce  legislative  changes  in  Finland  relating  to  the 

Banking  Union  and  in  particular  to  implement  the  proposed  Bank  Recovery  and  Resolution 
Directive2  (BRRD)  and  the  proposed  recast  Deposit  Guarantee  Scheme  Directive3  (DGSD).  The 

draft laws foresee the establishment of a new Resolution Authority and a new Deposit Guarantee 

and  Resolution  Fund,  while  the  Financial  Supervisory  Authority  (i.e.  the  national  competent 

authority  for  banking  supervision)  will  be  given  new  ex-ante  powers.  Law  No  379/1992  on  the 

Government  Guarantee  Fund,  which  concerns  public  assistance,  and  Law  No  986/2012  on  the 

temporary bank levy would both be repealed. The funds raised by the bank levy will be transferred 

to the proposed Deposit Guarantee and Resolution Fund, which would be a fund outside the central 

government budget and managed by the Resolution Authority and, from 2016 onwards, could be 

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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). 
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). 
Proposal  for  a  directive  …/…/EU  of  the  European  Parliament  and  of  the  Council  on  Deposit  Guarantee  Schemes 
(COM (2010) 368 final). 

 
 
 
 
                                                 
 
 
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transferred to the Single Resolution Fund of the Member States participating in the Banking Union. 

It is intended that the draft laws will enter into force on 1 January 2015. 

1.2  The  Resolution  Authority,  the  Ministry  of  Finance,  the  Financial  Supervisory  Authority  and 

Suomen Pankki would be required to cooperate in the planning and preparation of crisis resolution 

measures outlined in the draft law on the resolution of credit institutions and investment firms, as 

well  as  in  monitoring  the  decisions  made.  In  addition  to  the  general  duty  to  cooperate,  the  draft 

laws  propose  that  the  Resolution  Authority  will  be  required  to  decide,  in  cooperation  with  the 

Financial Supervisory Authority and Suomen Pankki, whether payments are to be made from the 

Deposit Guarantee and Resolution Fund. The draft laws also contain several provisions concerning 

the  duty  of  the  Resolution  Authority,  the  Financial  Supervisory  Authority  and  the  Ministry  of 

Finance  to  request  Suomen  Pankki’s  opinion  prior  to  making  decisions  and  to  notify  Suomen 

Pankki  of  the  decisions  made.  In  addition,  both  the  Resolution  Authority  and  Suomen  Pankki 

would  have  the  duty  to  share  with  each  other,  without  delay,  any  data  in  their  possession 

concerning: (a) matters that may have a significant impact on the stability of the financial markets 

or  otherwise  on  the  development  of  the  financial  markets;  and  (b)  matters  that  may  result  in 

significant  disruption  to  the  operation  of  the  financial  system  or  to  the  continuation  of  the 

operations of a credit institution or investment firm. 

1.3  Moreover,  the  Resolution  Authority  would  have  an  Advisory  Committee  consisting  of 

representatives appointed by the Ministry of Finance on the proposals of the Resolution Authority, 

Suomen Pankki and the Financial Supervisory Authority. The Advisory Committee would have the 

task to ensure cooperation and communication between the said authorities.  

1.4  Although  Suomen  Pankki  would  have  a  predominantly  cooperative  and  consultative  role  in  the 

resolution of credit institutions and investment firms, the draft laws propose that in a crisis situation 

the  Resolution  Authority’s  staff  could  be  increased  through  the  temporary  secondment  of  civil 

servants from the Ministry of Finance, Suomen Pankki or the Financial Supervisory Authority. A 

decision  to  second  a  civil  servant  would  require  the  consent  of  the  civil  servant  in  question  and 

would  be  made  by  the  Government,  on  the  proposal  of  the  Director  General  of  the  Resolution 

Authority, after hearing the employer of the civil servant in question.  

2. 

General observations 

The ECB notes that the Finnish authorities have decided in advance of the adoption of the BRRD and the 

DGSD to transpose provisions which they consider to be close to finalisation. The ECB understands that, 

once the BRRD is adopted, the framework established under the draft laws will be reviewed in order to 

ensure full consistency with any further developments at Union level.  

The ECB also notes that, whereas the draft laws take due account of the forthcoming Regulation on the 

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Single  Resolution  Mechanism  (SRM)4  and  are  intended  to  enter  into  force  at  the  same  time  as  that 

Regulation, there is a need to ensure consistency during the period after which the ECB has assumed its 
tasks  under  Council  Regulation  (EU)  No  1024/20135  but  before  all  of  the  provisions  of  the  proposed 

SRM  Regulation  are  applicable  (i.e.  1  January  2016).  Hence,  where  appropriate,  the  draft  laws  should 

refer to the competent authority as including the ECB and not just the Financial Supervisory Authority. 

3. 

The Resolution Authority’s competence  

The  ECB  notes  that,  once  the  SRM  Regulation  is  applicable,  the  Resolution  Authority  will  only  be 

responsible  for  those  institutions  which  are  not  under  direct  ECB  supervision  and  are  not  cross-border 

institutions.  However,  it  will  not  be  limited  in its tasks  to  such  institutions.  According  to  the  proposed 

SRM  Regulation,  the  Resolution  Authority  is  to  assist  the  Single  Resolution  Board  (hereinafter  ‘the 

Board’)  in  resolution  planning  and  in  preparing  resolution  decisions  for  banks  under  the  Board’s 

responsibility.  The  Resolution  Authority  will  also  assist  in  the  implementation  of  a  resolution  scheme 

established by the Board by exercising resolution powers and tools in relation to the entities in question. It 

is important that the Resolution Authority has adequate resources for its tasks, especially considering that, 

at times, there may be a lot of work to be done in a limited time frame and sometimes at short notice.  

4. 

Suomen Pankki’s involvement  

The ECB understands that the tasks allocated to Suomen Pankki by the draft laws do not interfere with 

the performance of its Eurosystem-related tasks under the Treaty and do not prejudice the financial means 

necessary to carry out those tasks. Any involvement of Suomen Pankki or the members of its decision-

making  bodies  in  measures  to  strengthen  financial  stability  must  be  compatible  with  the  Treaty  and, 

consequently,  with  Suomen  Pankki’s  institutional  and  financial  independence  and  the  personal 

independence of the members of its decision-making bodies safeguarding the proper performance of their 

tasks  under  the  Treaty  and  the  Statute  of  the  European  System  of  Central  Banks  and  of  the  European 
Central Bank6.  

The  ECB  welcomes  the  tasks  allocated  to  Suomen  Pankki  under  the  draft  laws,  which  are  broadly 

consistent with its financial stability role.  

The ECB notes, as regards the secondment of Suomen Pankki staff to the Resolution Authority, that the 

draft laws require the consent of the civil servant concerned but that the employer will only be heard. The 

draft laws should also require Suomen Pankki’s consent in order to respect the principle of central bank 

independence,  in  particular  the  principle  of  financial  independence.  One  aspect  of  the  principle  of 

financial independence is the autonomy of a national central bank (NCB) in staff matters which means, 

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Proposal  for  a  regulation  of  the  European  Parliament  and  of  the  Council  establishing  uniform  rules  and  a  uniform 
procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution 
Mechanism and a Single Bank Resolution Fund (COM (2013) 520 final). 
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).  
See  Protocol  (No  4)  on  the  Statute  of  the  European  System  of  Central  Banks  and  of  the  European  Central  Bank 
(OJ C 326, 26.10.2012, p. 230). 

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inter alia, that an NCB may not be put into a position where it has limited control or no control over its 
staff, or where the Government of a Member State can influence its policy on staff matters7. 

5.   The ECB’s involvement as regards significant credit institutions 

The  draft  law  on  the  resolution  of  credit  institutions  and  investment  firms  foresees  arrangements  for 

cooperation between the Financial Crisis Resolution Bureau (i.e. the national resolution authority) and the 

Financial  Supervisory  Authority  in  a  number  of  circumstances.  For  instance,  if  the  Financial  Crisis 

Resolution  Bureau  considers  that  the  preconditions  for  placing  an  institution  under  resolution 

management have been met, it is to take a decision to place the institution under resolution management 

after hearing the Financial Supervisory Authority on the matter (or after having received a notice from the 
Financial Supervisory Authority8). The ECB understands that the Financial Crisis Resolution Bureau will 

be competent for the resolution and planning of  the resolution of institutions that do not fall within the 

scope of the proposed SRM Regulation. As a consequence, the Financial Supervisory Authority should 

only  be  heard  in  respect  of  institutions  that  are  not  directly  supervised  by  the  ECB.  In  this  regard,  the 

ECB  notes  that  it  will  assume  the  supervisory  tasks  conferred  on  it  by  Council  Regulation 

(EU) No 1024/2013  on  4  November  2014.  However,  not  all  of  the  provisions  of  the  proposed  SRM 

Regulation  will  apply  on  its  planned  date  of  entry  in  force;  certain  provisions  will  only  apply  as  of 

1 January 2016. Therefore, there is a need to take into account the period between the date when the ECB 

assumes the direct supervision of credit institutions and the date of full application of the proposed SRM 

Regulation,  as  during  this  period  elements  of  the  draft  law  will  apply  to  credit  institutions  under  ECB 

supervision.  In  this  period,  the  Financial  Crisis  Resolution  Bureau  should  closely  cooperate  with  the 

competent authority, including the ECB. 

Pursuant to Chapter 16, Article 2 of the draft law on the resolution of credit institutions and investment 

firms,  the  Ministry  of  Finance  is  to  request  an  opinion  from  both  Suomen  Pankki  and  the  Financial 

Supervisory Authority before placing limits on the operations of credit institutions. The ECB understands  

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See, for example, the ECB’s Convergence Report 2013, p. 27. 
See Chapter 11, Article 5a, paragraph 4, of the proposed Law on credit institutions. 

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that this is without prejudice to the cooperation to be undertaken with the ECB, as competent authority, 

once the ECB assumes its supervisory powers on 4 November 2014. 

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

Done at Frankfurt am Main, 2 May 2014. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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