Opinion of the European Central Bank of 31 October 2016 on the reorganisation of the duties of the Federal Agency for Financial Market Stabilisation and the implementation of the EBA guidelines on sound remuneration policies (CON/2016/53)
Date: 2016-10-31
Institutions: European Central Bank
Subjects: Germany, banking supervision, credit institution, financial stability, management audit, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 31 October 2016  

on the reorganisation of the duties of the Federal Agency for Financial Market Stabilisation and 

the implementation of the EBA guidelines on sound remuneration policies 

(CON/2016/53) 

Introduction and legal basis 

On  29  August  2016  the  European  Central  Bank  (ECB)  received  a  request  from  the  German  Federal 

Ministry of Finance for an opinion on a draft law concerning the reorganisation of the duties of the Federal 

Agency for Financial Market Stabilisation (hereinafter the ‘draft law’). 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the sixth indent of Article 2(1) of Council Decision 98/415/EC1, as 

the  draft  law  relates  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 law 

1.1  The  draft  law  is  aimed,  inter  alia,  at  introducing  further  legal  clarity  to  the  statutory  subordination 

provisions. In particular, the draft law confers on the Federal Ministry of Finance the competence to 

issue regulations further specifying the features of structured debt and money market instruments 

that will be excluded from statutory subordination and will thus rank alongside operating liabilities 
such as corporate deposits and certain claims under derivative transactions2.  

1.2  The  draft  law  contains  several  provisions  to  refine  the  implementation  of  certain  aspects  of 
Directive  2013/36/EU  of  the  European  Parliament  and  of  the  Council3  and  to  implement  the 
European  Banking  Authority  (EBA)  Guidelines4  on  prudential  rules  in  relation  to  remuneration  in 

credit institutions. Taking a stricter approach than envisaged by the EBA Guidelines, the draft law 

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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). 
See Section 46f (6) and (7) of the Law on banking. 

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,  amending  Directive 
2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338). 
EBA Guidelines on the remuneration benchmarking exercise of 16 July 2014 (EBA/GL/2014/08) and EBA Guidelines 
on sound remuneration policies under Articles 74(3) and 75(2) of Directive 2013/36/EU and disclosures under Article 
450 of Regulation (EU) No 575/2013 of 27 June 2016 (EBA/GL/2015/22). 

 
 
 
 
 
 
                                                 
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prohibits  any  payment  of  variable  remuneration  to  members  of  the  administrative  or  supervisory 

boards  of  credit  institutions.  Further,  the  draft  law  gives  the  Federal  Ministry  of  Finance  the 

competence to issue a regulation specifying (i) the requirements and the procedure for shareholder 
approval to raise the ratio between fixed and variable annual remuneration5 and (ii) the calculation 

of the ratio between variable and fixed remuneration, especially with regard to discounting factors 

when determining the underlying cash value of the variable remuneration.  

2. 

Specific observations 

2.1  Measures to enhance legal clarity in the application of the bail-in tool 

2.1.1  In  the  absence  of  a  Union  framework,  the  ECB  supports  the  approach  taken  in  the  draft  law  to 

provide legal clarity by promoting the specification of the types of instruments that will be excluded 

from  statutory  subordination  in  the  creditor  hierarchy,  which  will  be  relevant  for  bail-in  and 

resolution  purposes.  As  set  out  in  the  provisions  on  statutory  subordination  adopted  last  year, 

certain  structured  debt  instruments  as  well  as  money  market  instruments  are  exempt  from  such 

subordination  due  to  their  complexity  and  potential  impact  on  financial  stability.  This  exemption 

recognises the importance of having straightforward subordinated instruments, which carry a lower 

contagion risk to ensure that a bail-in can be achieved in an effective manner and that it is legally 

certain. So far, non-binding guidance has been issued by the national authorities on the treatment 
of  certain  types  of  structured  debt  instruments  for  purposes  of  statutory  subordination6.  The 

delegation of authority in the draft law enables the Ministry of Finance to issue legally binding rules 

and therefore promotes the legal clarity and certainty of instruments subject to and exempt from the 

statutory subordination arrangements.  

2.1.2  National  and  Union  laws  offer  several  definitions  of  money  market  instruments7.  However,  these 

definitions were established for purposes other than to define subordinated instruments suitable for 
bail-in8,  and  some  are  rather  broad  in  nature9.  The  application  of  the  bail-in  tool  requires  a  clear 

identification  of  subordinated  instruments  to  eliminate  or  minimise  any  ambiguities  that  could 

complicate the identification of instruments subject to bail-in, to protect investors from being subject 

to  unforeseen  bail-in  measures,  and  to  improve  legal  certainty  for  affected  creditors  in  bank 

insolvency  proceedings.  In  view  of  the  particular  importance  of  the  money  markets  for  the 

implementation  of  Eurosystem  monetary  policy  operations,  the  ECB  would  appreciate  being 

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See Article 94(1)(g)(ii) of Directive 2013/36/EU. 
See  Joint  Paper  of  BaFin,  Bundesbank  and  FMSA  of  3  June  2016,  ‘Gemeinsame  Auslegungshilfe  zur 
insolvenzrechtlichen Behandlung bestimmter Verbindlichkeiten von CRR-Instituten nach § 46f Abs. 5-7 KWG n.F.’. 
See for example § 1(11) sentence 2 of the Law on banking, which stipulates that money market instruments are ‘all 
types of receivables that are normally traded on the money market, with the exception of payment instruments’. This 
shall include instruments with a maturity of up to twelve months (see BaFin Merkblatt für Finanzinstrumente of July 
2013).  
See  §  194  of  the  Capital  Investment  Act  (Kapitalanlagegesetzbuch)  which  sets  out  very  detailed  requirements  as 
regards money market instruments, for investor protection purposes, which may be acquired by UCITS funds.  
Union law definitions refer to ‘instruments normally dealt in on the money market’, which partly list generic examples 
like  treasury  and  local  authority  bills,  certificates  of  deposit,  commercial  papers,  medium-term  notes  and  bankers’ 
acceptances, see for example recital 36 of Directive 2009/65/EC of the European Parliament and of the Council of 
13  July  2009  on  the  coordination  of  laws,  regulations  and  administrative  provisions  relating  to  undertakings  for 
collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32). 

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consulted  on  any  future  draft  legal  act  specifying  particular  money  market  and  debt  instruments 

that will be excluded from subordination in the creditor hierarchy in bank insolvency proceedings, 

as such legal definitions could have an impact on the wider development of the money markets. 

2.2 

Implementation of prudential rules on remuneration 

The  implementation  measures  regarding  prudential  rules  for  variable  remuneration  do  not  raise 

specific concerns as regards their substance. However, banking legislation adopted by the Member 

States  after  the  establishment  of  the  Single  Supervisory  Mechanism  (SSM)  should  facilitate  the 

exercise  by  the  ECB  of  its  responsibilities  within  the  SSM  including  its  capacity  to  enhance  the 

consistency of the supervision of credit institutions across the SSM. Member States should refrain 

from  setting  obstacles  both  to  uniform  supervisory  practice  and  to  the  exercise  of  supervisory 
discretion by the ECB within the SSM10. 

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

Done at Frankfurt am Main, 31 October 2016. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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Also see ECB Opinion of 2 September 2015 on bank resolution (CON/2015/31), paragraphs 3.1.2. to 3.1.8.  

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