Opinion of the European Central Bank of 1 July 2015 on recovery and resolution in the financial market (CON/2015/22)
Date: 2015-07-01
Institutions: European Central Bank
Subjects: Czechia, banking supervision, central bank, credit institution, economic stabilisation, financial intervention, financial stability, money, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 1 July 2015 

on recovery and resolution in the financial market 

(CON/2015/22) 

Introduction and legal basis 

On  27  March  2015  the  European  Central  Bank  (ECB)  received  a  request  from  the  Czech  Ministry  of 

Finance (MoF) for an opinion on a draft law on recovery and resolution in the financial market (hereinafter 
the  ‘draft  law’)  and  on  a  draft  law  amending  certain  laws  connected  with  the  adoption  of  the  draft  law1 

(hereinafter the ‘draft amending law’; together with the draft law, the ‘draft laws’). The MoF asked for the 

adoption  of  the  ECB’s  opinion  on  an  urgent  basis  within  one  month  in  line  with  Article  3  of  Council 
Decision 98/415/EC of 29 June 19982. 

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  (the  ‘Treaty’)  and  the  third  and  sixth  indents  of  Article  2(1)  of 

Decision 98/415/EC,  as  the  draft  laws  relate  to  Česká  národní  banka  (ČNB)  and  rules  applicable  to 

financial institutions insofar as they materially influence the stability of financial institutions and markets. 

For  elements  of  the  draft  laws  the  exclusive  purpose  of  which  is  the  implementation  of  Union  law,  the 

ECB’s competence to deliver an opinion is based on Article 25.1 of the Statute of the European System of 

Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). 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  purpose  of  the  draft  laws  is  to  implement  into  Czech  law  Directive  2014/59/EU  of  the 

European  Parliament  and  of  the  Council  (the  Bank  Recovery  and  Resolution  Directive,  or 
‘BRRD’)3, thereby providing a legal framework for the recovery and resolution of certain types of 

entities  participating  in  the  financial  markets,  including  credit  institutions,  investment  firms,  and 

1  

2  

3  

Draft  law  on  recovery  measures  and  resolution  of  crisis  in  the  financial  markets  (Navrh  zakona  o  ozdravnych 
postupech  a  reseni  krize  na  financnim  trhu)  and  draft  law  amending  certain  other  laws  in  connection  with  the 
adoption  of  that  law  (Navrh  zakona  kterym  se  meni  nektere  zakony  v  souvislosti  s  prijetim  zakona  o  ozdravnych 
postupech  a  reseni  krize  na  financnim  trhu).  The  versions  of  the  draft  laws  provided  by  the  MoF  were  its  draft 
proposals of 19 March 2015 after conclusion of an inter-ministerial consultation. 
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). 
Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for 
the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, 
and  Directives  2001/24/EC,  2002/47/EC,  2004/25/EC,  2005/56/EC,  2007/36/EC,  2011/35/EU,  2012/30/EU  and 
2013/36/EU,  and  Regulations  (EU)  No  1093/2010  and  (EU)  No  648/2012,  of  the  European  Parliament  and  of  the 
Council (OJ L 173, 12.6.2014, p. 190). 

 
 
 
 
                                                 
financial  holding  companies  that  have  their  head  office  in  the  Czech  Republic  (hereinafter 
‘obliged entities’)4.  

1.2 

The draft law regulates plans and procedures for the recovery and resolution of obliged entities at 

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both individual and group level, the status and powers of the competent supervisory authority and 

resolution authority, and the procedures under which they may intervene in distressed entities or 
subject them to resolution measures in the event that they are failing or likely to fail5. The main 

provisions of the draft law dealing with resolution tasks are as follows. 

  ČNB,  which  is  the  competent  authority  for  supervising  the  Czech  financial  markets,  is 

designated  as  the  resolution  authority  and  ČNB’s  tasks  are  broadened  to  include  taking 
specified recovery and resolution measures in respect of obliged entities6. 

  ČNB is further required to ensure the operational independence of its resolution unit, which 

has been set up within ČNB by an internal regulation. 

 

To resolve a financial crisis situation at an obliged entity, ČNB may apply a number of ‘crisis 
resolution measures’7. These measures include, besides the resolution tools provided for by 
the  BRRD8,  direct  administration,  which  entails  ČNB  taking  control  of  an  institution  for  an 

undefined  period  by  suspending  the  functions  of  its  statutory  and  supervisory  organs  and 
taking decisions in their stead, either by itself or through a ČNB-appointed employee9. 

 

In general, ČNB may exercise its resolution powers without limitation or approval. However, 

ČNB  may  only  apply  a  crisis  resolution  measure  or  order  a  capital  write-down  or  debt 

conversion upon the prior approval of the MoF if the proposed action either: (a) requires the 

use of resources from public funds, provides for the introduction of a State guarantee, or the 

use  of  a  bridge  institution  or  an  asset  management  entity;  or  (b)  requires  the  use  of 

resources from the Fund for Crisis Resolution (hereinafter the ‘Resolution Fund’) or from the 

Deposit Guarantee Scheme (hereinafter the ‘Scheme’) amounting to more than 60% of their 
available assets10. 

  ČNB is authorised to collect any expenses properly incurred due to the taking of resolution 
actions  from  obliged  entities  and  other  prescribed  persons11,  and  preferential  ranking  in 

insolvency  is  accorded  to  such  claims  and  to  claims  arising  from  loans  made  by  ČNB  to 
obliged entities12. 

4  
5  
6  
7  
8  
9  
10  
11  
12  

See Article 2 of the draft law, which defines the obliged entities in accordance with the definitions in Article 2 BRRD. 

Articles 1 and 4 of the draft law. 
Article 5 and Part Six of the draft law. 
Part Six, Title II of the draft law. 
Articles 35 and 37 of the BRRD. 
Article 81 of the draft law. 

Article 214(1) of the draft law. 
Article 165(1) and (2) of the draft law. 

For the purposes of Article 168 of Law No182/2006 Coll. on Insolvency. The draft amending law sets out the order of 
preference of creditor claims, including, for example, the claims of covered depositors and those of the Scheme, but 
without making reference to the preferential claims of ČNB. See the proposed new Article 374 of Law No168/2006 
Coll. on insolvency. 

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 

The  State  is  expressly  required  to  pay  ČNB’s  properly  incurred  expenses  in  carrying  out 

certain  early  intervention  and  resolution  related  tasks,  if  the  obliged  entity  does  not  have 
sufficient assets from which to make payment13. 

1.3 

The draft law also lays down arrangements for financing the cost of resolution and minimising the 

need for State financing of resolution measures. In particular, the draft law: 

 

establishes  the  Resolution  Fund  for  the  financing  of  resolution  measures,  to  which 

institutions  established  in  the  Czech  Republic  and  Czech  branches  of  institutions 
established in non-Member States are required to contribute14, and sets out the sources of 

its funding and how those funds may be used; 

 

sets up the Guarantee System for the Financial Market (GSFM), a separate legal entity, to 
administer in its own name the Resolution Fund and the existing Scheme15. GSFM is a sui 
generis  entity16  and  is  expressly  stated  not  to  be  a  State  fund  under  Czech  law17.  The 

Resolution Fund and the Scheme are not legal entities but separate accounting units, with 

separate sources of financing. The financial resources of each fund are ring-fenced by law 

and  are  required  to  be  used  exclusively  for  the  legally  prescribed  purposes  of  that  fund. 
The funds do not belong to the GSFM18. Thus, the claims of creditors of either fund arising 

from performance of the fund’s functions may only be met from the assets of that fund; 

 

provides  for  the  governance  of  the  GSFM  through  a  five-person  Supervisory  Council 

whose  members  are  appointed  and  dismissed  by  the  MoF.  The  Supervisory  Council  is 

composed of two members nominated by the MoF, two members nominated by ČNB and 
one member nominated by the Czech Banking Association19; 

 

requires the GSFM, ČNB and the MoF to cooperate closely in carrying out their respective 
tasks and activities including any exchange of information20. 

1.4  

The draft law makes a number of consequential amendments to related laws, including:  

 

to  provide  that  in  the  event  that  the  Scheme  does  not  have  sufficient  available  financial 

resources and this situation could affect the stability of the financial markets ČNB may, on 

application,  provide  it  with  a  short-term  loan  for  a  maximum  period  of  three  months, 

guaranteed by government bonds or other State-guaranteed securities that are held by the 
Scheme21;  

13  

14  
15  
16  
17  

18  
19  
20  
21  

For example, under Article 41(6) of the draft law for the costs of putting an institution under temporary administration, 
under Article 47(3) for the costs of valuation of the institution prior to resolution, and under Article 81(5) for the costs 
of direct administration. 
Article 195 et seq. of the draft law (Part 9, Title II). 
Article 185 et seq. of the draft law (Part 9, Title I). 
Article 185 et seq. of the draft law. 
I.e. within the meaning of Czech National Council Law No 576/1990 Coll. on the rules for financial management of 
the budgetary funds of the Czech Republic and of municipalities in the Czech Republic. 
Article 185(5) of the draft law. 
Part Nine, Articles 185-188 of the draft law. 

Article 194 of the draft law. 
See new Article 33a which will be inserted into Law No 6/1993 Coll. On ČNB, and new Article 41a(4), which will be 
inserted into Law No 21/1992 Coll. on banks. 

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 

to specify that such loans and repayable financial assistance from ČNB form an additional 
source of funding for the Scheme’s contributory fund22. 

2. 

General observations 

2.1 

The ECB welcomes the draft laws, as they strengthen the tools and procedures available to ČNB 

for  carrying  out  effective  preventive  measures,  early  intervention  and  effective  resolution  in  line 

with the common framework of intervention powers, rules and procedures laid down in the BRRD. 

2.2  

The ECB stresses, however, that it does not opine on whether the draft laws effectively discharge 

the obligations of the Czech Republic to implement the BRRD in Czech law, but rather on those 

provisions that may impact on the role and tasks of ČNB as a central bank and as a member of 

the European System of Central Banks (ESCB). 

2.3 

The ECB underlines that, in the context of a proposed conferral of tasks on an ESCB member, it 

is  necessary  to  assess  such  conferral  against  the  prohibition  of  monetary  financing  under 

Article 123 of the Treaty. The ECB has developed the following guidance, in the form of general 

and  specific  considerations,  on  the  basis  of  which  the  ECB  may  decide  whether  a  new  task 

conferred on an ESCB national central bank (NCB) is to be considered a central banking task or 

a government task for the purposes of the monetary financing prohibition. 

2.3.1  General considerations 

First, the systematic categorisation of tasks assigned to NCBs as central banking or government 

tasks applies to genuinely new tasks that did not exist in the past or did not form an integral part 

of  the  central  banking  tasks  already  assigned  to  the  NCB  in  the  past.  In  recognition  of  the 

different  Member  States’  legal  frameworks,  central  banking  traditions  and  national  set-ups,  the 

tasks  currently  discharged  by  an  NCB  as  central  banking  tasks  are  not  reviewed  and  re-

categorised, but may be reassessed if they are subject to legislative amendments of substance. 

Second,  the  principle  of  financial  independence  requires  that  the  Member  States  may  not  put 

their NCBs in a position where they have insufficient financial resources to carry out their ESCB- 

or Eurosystem-related tasks, as applicable.  

Third, central banking tasks comprise in particular those tasks that are related to the tasks listed 

in Article 127(2), (5) and (6) of the Treaty. 

Fourth, new tasks conferred on an NCB which are atypical of NCBs’ tasks, or which are clearly 

discharged on behalf of and in the exclusive interest of the government or of other public entities, 

should  be  considered  as  government  tasks.  In  that  context,  a  distinction  should  be  drawn 

between  liquidity-  and  solvency-related  tasks  of  NCBs.  While,  for  purposes  of  the  monetary 

financing  prohibition, solvency support  is a  government task, liquidity-related  tasks, the ultimate 

objective of which are to finance the economy, are central banking tasks. 

2.3.2  Specific considerations 

Resolution tasks discharged by central banks are considered central banking tasks provided that 
they  do  not  undermine  an  NCB’s  independence  in  accordance  with  Article  130  of  the  Treaty23. 

22  

Pursuant to amendments to be made to Article 41a(4) of Law No 21/1992 Coll. on banks. 

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However,  the  discharge  of  these  tasks  by  central  banks  may  not  extend  to  the  financing  of 

resolution funds or other resolution financial arrangements as these are government tasks. This 

is without prejudice to the following: (i) the possibility that central banks may provide short-term 
financing  to  deposit  guarantee  schemes  under  certain  conditions24  and  (ii)  the  possibility  that 

NCBs may provide emergency liquidity assistance to solvent credit institutions. 

An important criterion for qualifying a  new task as a government task is therefore the impact of 

the  task  on  the  institutional,  financial  and  personal  independence  of  the  NCB.  In  particular,  the 

following should be taken into account. 

First,  it  should  be  assessed  whether  the  performance  of  the  new  task  creates  inadequately 

addressed  conflicts  of  interests  with  existing  central  banking  tasks,  and  does  not  necessarily 

complement those existing central banking tasks. If a conflict of interest arises between existing 

and new tasks, there should be sufficient mitigation in place to adequately address that conflict. 

Complementarity between the new task and existing central banking tasks should not, however, 

be interpreted extensively, so as to lead to the creation of an indefinite chain of ancillary tasks. 

Complementarity should also be examined from the point of view of the financing of those tasks. 

Second, it should be  assessed whether  without  new financial resources the  performance  of the 

new  task  is  disproportionate  to  the  financial  or  organisational  capacity  of  the  NCB  and  may 

negatively impact on its capacity to properly perform existing central banking tasks. 

Third,  it  should  be  assessed  whether  the  performance  of  the  new  task  does  not  fit  into  the 

institutional  set-up  of  the  NCB  in  the  light  of  central  bank  independence  and  accountability 

considerations. 

Fourth,  it  should  be  assessed  whether  the  performance  of  the  new  task  harbours  substantial 

financial risks. 

Fifth, it should  be assessed  whether the  performance of the new task exposes the members of 

the  NCB’s  decision-making  bodies  to  political  risks  which  are  disproportionate  and  may  also 

impact  on  their  personal  independence  and,  in  particular,  the  guarantee  of  the  term  of  office 

under Article 14.2 of the ESCB Statute. 

2.3.3  Any  final  assessment  on  the  qualification  of  a  task  given  to  an  NCB  as  either  falling  within  the 

scope of a central banking task or a government task will be guided by the objective of ensuring 

the consistent application of the prohibition of monetary financing within the Eurosystem and the 

ESCB to the extent that it applies to its members. 

3. 

Specific observations 

3.1 

ČNB’s role in providing temporary liquidity to the GSFM 

3.1.1  ČNB will be authorised to provide under certain conditions a temporary (for up to three months) 
State-guaranteed  loan  to  the  Scheme’s  contributory  fund25.  Although  it  is  not  stated  expressly, 

23      This position departs from the one set out in Opinions CON/2015/3 and CON/2015/2. All ECB opinions are available 

24  
25  

on the ECB website at www.ecb.europa.eu. 
See the ECB’s 2014 Convergence Report, p. 30. 
In  this  regard,  see  paragraph  1.3  and  footnote  21  for  references  to  the  proposed  amendments  to  Law  No  6/1993 
Coll. on ČNB and to Law No 21/1992 Coll. on banks. 

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the ECB understands that an application for such a temporary or ‘bridging’ loan would come from 

the GSFM as administrator of the Scheme and that, if approved by ČNB in its sole discretion, the 
temporary  loan  would  be  provided  under  a  contract  between  ČNB  and  the  GSFM  as  debtor26. 

The draft law does not stipulate further the material terms and conditions (e.g. pricing terms) of 

any such loan. 

3.1.2  The  ECB  underlines  that  national  legislation  which  provides  for  the  financing  by  an  NCB  of  a 

national  deposit  guarantee  scheme  for  credit  institutions  will  only  be  compatible  with  the 

monetary  financing  prohibition  if  such  financing  is  short-term,  addresses  urgent  situations, 

systemic  stability  issues  are  at  stake  and  decisions  are  made  in  the  NCB’s  discretion.  To  this 

end, inserting references to Article 123 of the Treaty in national legislation should be considered. 

When exercising its discretion to grant a loan, the NCB must ensure that it is not in effect taking 

over a government task. In particular, central bank support for deposit guarantee schemes should 
not amount to a systematic ‘pre-funding’ operation27. 

3.1.3  The ECB notes that the condition that the temporary loan or other repayable financial assistance 

provided  by  ČNB must address an urgent situation  is not expressly contained  in the draft laws. 

Even if such funding is discretionary, temporary and in the interests of financial stability, it should 

be stipulated that the funding may be granted only in demonstrably urgent cases in order to be 

compatible with the monetary financing prohibition. 

3.1.4 

It  is  clear  that  the  draft  laws  do  not  authorise  ČNB  to  provide  any  loan  or  financing  under  any 

circumstance  to  the  Resolution  Fund.  The  provision  of  such  financing  to  the  Resolution  Fund 

would  constitute  a  government  task,  and  any  such  loan  or  financing  by  ČNB  would  therefore 
breach the prohibition of monetary financing under the Treaty28. 

3.2 

Conferral of resolution tasks on ČNB 

The  draft  law  designates  ČNB  as  the  resolution  authority,  broadening  its  responsibilities  to 

include  placing  obliged  entities  under  resolution  and  taking  resolution  measures  in  respect  of 
such  entities29.    By  virtue  of  this  designation,  ČNB  carries  out  resolution  tasks    and  exercises 

resolution  powers.  As  emphasised  above,  carrying  out  these  resolution  tasks  does  not  require 

ČNB to provide any financing to the Resolution Fund. 

In the light of the guidance set out in paragraph 2.3, it must be assessed carefully whether ČNB’s 

new  tasks  and  responsibilities  in  this  field  could  constitute  a  breach  of  the  monetary  financing 

prohibition. 

3.2.1  New tasks 

The  ECB  notes  that  whilst  ČNB  has  had  for  many  years  powerful  tools  to  intervene  in,  and  if 

necessary  take  control  of  distressed  financial  institutions  which  pose  a  risk  to  financial  stability, 

principally in the form of the enforced administration regime, the draft law introduces specific, new 

resolution tools, such as bail-in and the bridge institution and asset management vehicle, which in 

26  
27  
28  
29  

Article 187(2)(c) of the draft law. 

See the ECB’s 2014 Convergence report, p. 30. 
Ibid. 

Article 5 and Chapter VI (Crisis resolution at obliged entities) of the draft law. 

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their  proposed  form  do  not  currently  exist  in  Czech  law,  as  well  as  expanded  ancillary  powers 

which did not exist as separate resolution measures or powers in the past. The ECB notes that 

the  draft  laws  introduce  substantial  legislative  amendments  to  ČNB’s  existing  resolution-related 

tasks that are currently categorised as central banking tasks and should therefore be assessed in 

the light of the monetary financing prohibition. 

3.2.2  Principle of financial independence  

The principle of financial independence requires NCBs to have sufficient means to carry out not 

only  their  ESCB-related  tasks  from  an  operational  and  financial  point  of  view,  but  also  their 
national  tasks30.  In  this  regard  the  ECB  notes  that  the  draft  law  authorises  ČNB  to  recover  its 

expenses  and  costs  demonstrably  incurred  in  carrying  out  resolution  measures  from  the 
institutions  concerned  by  such  measures31.  The  ECB  welcomes  the  provisions  of  the  draft  law 

concerning the financing of ČNB’s new resolution tasks.  

Furthermore,  the  ECB  notes  that  ČNB’s  Board  is  required,  before  deciding  to  take  a  resolution 

measure, to obtain the prior approval of the MoF in a broad range of circumstances, often when 

the realisation of the measure  would require the use of public funds or if the use of such funds 
would become more likely due to substantial outflows from the Scheme or the Resolution Fund32. 

It is important that ČNB’s Board, as the decision-making body responsible for performing ČNB’s 

ESCB-related tasks, should have ultimate control over any decision related to a resolution matter 
that could affect ČNB’s financial independence33. 

3.2.3  Links to tasks listed in Article 127(2), (5) and (6) of the Treaty  

Administrative  resolution  tasks  are  considered  tasks  related  to  the  tasks  referred  to  in 

Article 127(5) of the Treaty, based on the understanding that administrative resolution tasks and 

supervisory  tasks  complement  each  other,  particularly  where  an  NCB  has  a  mandate  for  the 

stability  of  the  financial  system  or  where,  as  in  this  case,  the  designated  resolution  authority 

already carries out integrated supervision of the financial markets. 

3.2.4  Atypical tasks 

A number of Member States have conferred on their NCBs a significant role in the resolution of 

financial  institutions,  whether  as  the  resolution  authority  or  as  a  competent  authority  in  the 

decision-making process for resolution. The ECB has generally welcomed the allocation of such 

tasks to NCBs provided they do not interfere financially and operationally with the performance of 
the NCB’s ESCB-related  tasks34. The resolution  tasks of an NCB can therefore be regarded as 

being  tasks  not  atypical  of  a  central  bank,  particularly  if,  as  in  the  case  of  ČNB,  it  has  a  long-
established statutory responsibility for financial stability35. 

30  
31  
32  
33  
34  

35  

See the ECB’s 2014 Convergence Report, p. 25. 
Article 165 of the draft law. 
See footnote 10 above. 

See paragraph 3.3 of Opinion CON/2015/2. 
See,  e.g.,  Opinion  CON/201/14/60,  paragraph  4.1;  Opinion  CON/2013/73,  paragraph  2.1;  Opinion  CON/2011/72, 
paragraph 2.3; Opinion CON/2011/83 paragraph 2.2; Opinion CON/2011/39, paragraph 2.2. See further in the U.K. 
the role of the Bank of England in the Special Resolution Regime under the Banking Act 2009. 
Article 2 of Law No 6/1993 Coll. on ČNB. See also in regard to the competence of ČNB’s Board, Article 214(2) of the 
draft law. 

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3.2.5  Discharge of tasks on behalf of and in the exclusive interest of the Government or of other public 

entities 

Whilst ČNB is designated as the sole resolution authority and takes resolution measures acting 

as  an  administrative  authority  in  the  exercise  of  public  functions  in  its  own  name,  and  not  on 

behalf  of  any  other  authority,  as  noted  in  paragraph  3.2.2  above,  ČNB’s  Board  is  required  in 

some  cases,  before  deciding  to  take  a  resolution  measure,  to  obtain  the  prior  approval  of  the 

MoF. ČNB also has to closely cooperate with the MoF in its resolution role. There is no indication 

that  in  discharging  its  resolution  function  ČNB  acts  exclusively  in  the  interests  of  the  MoF  or 

another public entity. 

3.2.6  Extent to which conflicts of interests with existing ČNB tasks are addressed 

3.2.6.1  The ECB has repeatedly noted36 that, in line with the  BRRD37, staff involved in carrying out the 

functions of a resolution authority in accordance with the Directive must be structurally separate 

and subject to separate reporting lines from the staff involved in carrying out prudential banking 
supervision tasks pursuant to applicable EU legal acts38 or  with regard to the other functions of 

the  relevant  authority.  The  ECB  observes  that  the  BRRD  ‘exceptionally’  allows  one  authority  to 

carry  out  both  resolution  and  supervisory  functions  on  the  condition  that  adequate  structural 

arrangements are put in place in order to ensure operational independence and to avoid conflicts 

of  interest  between  that  authority’s  resolution  function  and  its  other  functions.  For  example,  the 

BRRD  envisages  structural  separation  being  achieved  by  keeping  the  reporting  lines  for  staff 

involved in carrying out resolution tasks separate from those used by staff involved in supervision 
activities39. 

3.2.6.2  Pursuant  to  the  draft  law,  ČNB  is  required  to  ensure  the  operational  and  organisational 

independence of the department carrying out resolution functions and its staff to ensure there is 

no conflict of interest and to provide for the separation of tasks relating to the resolution function 
from ČNB’s other tasks40. The draft law states that ČNB, as resolution authority, will apply crisis 

resolution  measures  ‘separately  from  its  other  tasks’.  These  provisions  aim  to  ensure  that: 

(a) under the future regime there is a separation of resolution and supervision functions within a 

single resolution and supervision authority, and (b) the resolution function will have equal access 

to any necessary information available to the supervisory function, and vice versa. Furthermore, 

within  ČNB,  the  Board,  rather  than  the  head  of  the  resolution  unit,  will  take  all  significant 

resolution decisions where either public funds or systemic risk are involved, with the exception of 

the  exercise  of  the  government  stabilisation  tool.  The  ECB  welcomes  these  provisions,  as  they 

appear to adequately address potential conflicts of interests between resolution and ČNB’s other 

36  

37  
38  

39  
40  

For example see Opinion CON/2015/2, paragraph 4.3, Opinion CON/2015/3, paragraphs 5.1 and 5.2, and Opinion 
CON/2014/67, paragraph 3.3. 

See the second subparagraph of Article 3(3) of Directive 2014/59/EU. 
See  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  and  amending  Regulation  (EU)  No  648/2012  (OJ  L  176, 
27.6.2013, p. 1), and Directive No. 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, 
amending  Directive  2002/87/EC  and  repealing  Directives  2006/48/EC  and  2006/49/EC  (OJ  L  176,  27.6.2013, 
p. 338). 
See Opinion CON/2014/67, paragraph 3.1.  

Article 5(1) and (2) of the draft law. See also page 73 of the explanatory memorandum to the draft law. 

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tasks and functions. The ECB would be interested in being provided in advance, for information, 

the future internal rules implementing these provisions. 

3.2.7  Extent  to  which  the  performance  of  tasks  is  proportionate  to  ČNB’s  financial  and  operational 

capacity and its ability to perform its ESCB-related tasks. 

As noted above, in order to remain financially independent, NCBs must have sufficient means to 

carry  out  not  only  their  ESCB-related  tasks  from  an  operational  and  financial  point  of  view,  but 

also  their  national  tasks.  In  this  regard  the  ECB  welcomes  the  fact  that  ČNB  may  recover  the 

expenses incurred in carrying out resolution measures from the institutions concerned. The ECB 

notes, however, that the administrative start-up and operational costs of the resolution unit will be 

borne by ČNB’s own budget. 

3.2.8  Extent to which the performance of tasks fits into ČNB’s institutional set-up in the light of central 

bank independence and accountability considerations 

As  noted  above,  in  a  broad  range  of  circumstances,  typically  when  public  funds  are  required, 

ČNB may only apply a resolution measure or order a capital write-down or debt conversion upon 

the prior approval of the MoF. ČNB has a duty to closely cooperate with the MoF, particularly in 

the  foregoing  cases,  and  it  is  generally  required  to  grant  the  MoF  and  its  duly-authorised 

employees  access  to  all  documents  and  information  relating  to  resolution  measures  or  a  write-
down of capital instruments41. The ECB considers that the broadened resolution tasks that ČNB 

will  assume  under  the  draft  law  entail  much  closer  cooperation  with  the  MoF  when  fiscal  funds 

are at stake than for the exercise of its supervisory or other functions. 

3.2.9  Extent to which the performance of tasks harbours substantial financial risks 

3.2.9.1  The  draft  laws  do  not  contain  provisions  excluding  or  limiting  the  liability  of  ČNB  as  resolution 

authority for any negligent act or omission or other breach of any legal obligation when applying 

the  resolution  tools  or  exercising  resolution  powers.  This  is  in  marked  contrast  to  the  explicit 
exclusion of liability of publicly-owned resolution vehicles – for example, the bridge institution42 – 

for any damage to shareholders or creditors of the obliged entity resulting from the application of 

crisis resolution measures.  

3.2.9.2  The ECB understands43 that the State is primarily liable for any damage caused by an unlawful 

decision or improper administrative action by a legal entity or person in the course of exercising 

public  authority  on  the  State’s  behalf.  The  carrying  out  of  resolution  and  supervision  functions 

clearly  constitutes  the  exercise  of  a  public  authority.  For  this  purpose  the  entity  or  person 

exercising  public  authority  in  this  situation  could  be  the  State  (or  any  organisational  unit  of  the 

State), ČNB, or any other person provided it has separate legal personality.  

3.2.9.3  Furthermore,  the  ECB  understands  that  ČNB  shall  indemnify  the  MoF  where  the  State  is  held 
liable  for  any  breach  of  ČNB’s  legal  obligations  when  applying  the  resolution  framework44.  The 

ECB  understands  that  this  right  of  indemnification  would  apply  even  if  ČNB  had  obtained  prior 

41  
42  
43  
44  

Articles 214 and 215 of the draft law. 

Article 96(2) of the draft law. 
Pursuant to Law No 82/1998 Coll. on State liability. 

See Articles 16-18 of Law No. 82/1998 Coll. on State liability. 

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approval from the MoF for the improper resolution measure, in which case the MoF will de facto 

(if not de jure) operate as a joint resolution authority alongside ČNB. Against this backdrop, the 

ECB  notes  that,  under  the  prohibition  of  monetary  financing  laid  down  in  the  Treaty,  national 

legislation  may  not  require  an  NCB  to  finance  the  public  sector’s  obligations  vis-à-vis  third 
parties45. The ECB understands that as a matter of Czech law the liability of ČNB for breaches of 

obligations  under  the  resolution  framework  and  to  indemnify  the  MoF  would  only  extend  to  its 

own administrative acts. The ECB considers that it would be useful to explicitly clarify this point in 

the draft laws, given that potential liability issues represent substantial financial risks for ČNB. 

3.2.10  Conclusion 

The  ECB  considers  that  there  are  grounds  for  regarding  ČNB’s  expanded  resolution  tasks  as 

central  banking  tasks,  in  the  sense  that they  complement  ČNB’s  existing  supervisory  functions. 

The  fact  that  ČNB  will  be  authorised  to  recover  its  resolution-related  expenses  from  the 

institutions concerned should also contain the impact on its financial capacity of assuming those 

tasks, whilst the start-up and running costs will be absorbed by ČNB’s budget. However, the ECB 

considers that the draft laws potentially create significant financial risks for ČNB because they do 

not  limit  its  liability  as  the  resolution  authority  for  negligent  or  improper  acts.  Also,  it  would  be 

useful to explicitly clarify that ČNB’s obligation (under current state liability law) to indemnify the 

MoF  for  any  damages  and  costs  the  State  has  to  pay  to  third  parties  extends  only  to  its  own 

administrative acts. Moreover, it is not obvious why ČNB should assume the sole burden of those 

potential liabilities when the draft law requires ČNB to obtain prior approval from the MoF before 

taking resolution actions in a broad range of circumstances. 

3.3  

The MoF’s role in resolutions 

In  requiring  ČNB  as  the  resolution  authority  to  obtain  the  MoF’s  prior  approval  before  taking 

resolution actions in a broad range of circumstances, the question arises whether the MoF may 

be  considered  to  be  a  second  resolution  authority  alongside  ČNB.  The  consulting  authority  is 

invited to consider if its prior approval is more appropriately limited to exceptional cases in which 

the resolution measures have a direct fiscal impact or systemic implications, in order to avoid it 

de facto operating as a joint resolution authority alongside ČNB, which would require the MoF to 

ensure operational independence of its resolution function. 

3.4  

Resolution planning 

The  draft  law  stipulates  that  resolution  plans  must  neither  assume  the  granting  of  emergency 

liquidity assistance by ČNB as the central bank nor the use of public resources except the use of 
the resources of the Resolution Fund and the Scheme46. It also provides that recovery plans must 

not  assume  the  granting  of  public  support  or  rely  on  granting  of  loans  or  entry  into  other 
transactions by the obliged entity preparing the plan with ČNB47. While these provisions appear to 

be in line with the requirements of the BRRD, the ECB emphasises that they do not in any way 

affect the competence of central banks to decide independently and in their full discretion on the 

provision  of  central  bank  liquidity  to  solvent  institutions,  both  through  standard  monetary  policy 

45  

See the ECB’s 2014 Convergence Report, p. 29. 

10 

                                                 
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operations  and  emergency  liquidity  assistance,  within  the  limits  imposed  by  the  monetary 
financing prohibition under the Treaty48. 

3.5 

Comparative status of ČNB’s preferential and secured claims in insolvency 

Finally, regarding the provisions of the draft law on preferential claims of ČNB in respect of loans 

provided to institutions and other obliged entities as well as claims arising from expenses properly 
incurred by ČNB in carrying out resolution tasks49, the ECB would invite the consulting authority 

to  consider  further  amending  the  draft  law,  as  well  as  the  Law  on  Insolvency,  in  order  to 

comprehensively  clarify  the  status  and  ranking  of  preferential  unsecured  claims  of  ČNB  in  the 

insolvency of an obliged entity, also in relation to the unsecured claims of other creditors. 

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

Done at Frankfurt am Main, 1 July 2015. 

[signed] 

The President of the ECB 

Mario DRAGHI 

46  
47   
48  
49  

Article 16(4) of the draft law. 

Article 8(3) of the draft law. 
See paragraph 3.2 of Opinion CON/2012/99 and paragraph 3.3 of Opinion CON/2014/67. 

Article 165(4) of the draft law and Article 168 of Law No 168/2006 Coll. on Insolvency. 

11