Opinion of the European Central Bank of 17 November 2016 on the conferral of powers on the Central Bank of Ireland to assess competition in the market for mortgage loans and to issue lenders with directions on variable interest rates (CON/2016/54)
Date: 2016-11-17
Institutions: European Central Bank
Subjects: Ireland, banking supervision, competition, financial stability, interest, monetary policy, national law, real estate credit

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 17 November 2016  

on the conferral of powers on the Central Bank of Ireland to assess competition in the market for 

mortgage loans and to issue lenders with directions on variable interest rates 

(CON/2016/54)  

Introduction and legal basis 

On  6  October  2016,  the  European  Central  Bank  (ECB)  received  a  request  from  the  Chairman  of  the 

Oireachtas (Irish National Parliament) Joint Committee on Finance, Public Expenditure and Reform, and 

Taoiseach (Irish Prime Minister), for an opinion on the Central Bank (Variable Rate Mortgages) Bill 2016 

(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  third  and  sixth  indents  of  Article 2(1)  of  Council  Decision 
98/415/EC1,  as  the  draft  law  relates  to  (a)  the  basic  task  of  the  European  System  of  Central  Banks 

(ESCB) to implement the monetary policy of the Union pursuant to the first indent of Article 127(2) of the 

Treaty,  (b)  the  specific  tasks  conferred  upon  the  ECB  concerning  policies  relating  to  the  prudential 

supervision  of credit institutions pursuant to Article  127(6)  of the  Treaty, (c) the  Central Bank of Ireland 

(CBI)  and  (d)  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 provides for measures intended to identify and address market failures in the market 

for principal dwelling house mortgage loans. In order to achieve this purpose, the draft law confers 

a number of tasks on the CBI. 

1.2   The draft law requires the CBI to carry out assessments on the state of competition in the market 

for principal dwelling house mortgage loans on at least a quarterly basis, and sets parameters for 

such assessment. The factors to be taken into account by the CBI in carrying out this assessment 

include:  the  variable  interest  rates  being  charged  by  lenders;  the  ease  with  which  borrowers  can 

switch their principal dwelling house mortgage loans; the relationship and proportionality between 

the  variable  interest  rates  being  charged  by  each  lender  and  the  cost  of  funds  of  that  lender; 

lenders’  weighted  average  cost  of  capital  and  the  trend  in  lenders’  weighted  average  costs  of 

capital  over  time;  lenders’  reasonable  profit  expectations  in  the  prevailing  market  conditions;  the 

1  

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). 

 
 
 
 
 
                                                 
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proportion of the principal dwelling house mortgage loan market accounted for by each lender; and 

such other matters as the Governor of the CBI may certify as being of relevance. 

1.3   Upon completion of its assessment, the draft law requires the CBI to form a conclusion whether the 

state of competition is such that a ‘market failure’ exists. The draft law defines a ‘market failure’ as 

a  situation  in  which  market  conditions  are  such  that  a  lender  is  charging  a  variable  interest  rate 

which is higher than the CBI considers can be reasonably and objectively justified. Where the CBI 

forms such a conclusion, the draft law confers powers on the CBI to issue directions to lenders not 

to charge a variable interest rate which exceeds certain thresholds. These thresholds can be: (a) 

rates  specified by the  CBI;  (b) margins specified  by the CBI above the lenders’ cost of funds; (c) 

margins specified by the CBI, above a rate set by the ECB; and/or (d) a proportion if not more than 

one-third, specified by the CBI, above the average variable interest rate charged in the market for 

comparable principal dwelling house mortgage loans as determined by the CBI. 

1.4  With regard to enforcement, the draft law confers powers on the CBI to enforce such directions on 

lenders that fail to comply, by applying to the High Court for an enforcement order. When granting 

the enforcement order, the High Court must also impose a fine on the lender, unless the High Court 

determines that it would be unjust to impose such a fine, in which case it may impose a lesser fine 

or dispense with the requirement to impose a fine.  

1.5  Furthermore, the draft law imposes a requirement on lenders not to discriminate between existing 

and  new  borrowers  when  setting  a  variable  interest  rate  for  a  group,  and  confers  powers  on  the 

CBI  to  enforce  that  prohibition.  In  this  respect,  the  CBI  may  apply  to  the  High  Court  to  seek  a 

rectification order requiring the lender to cease the relevant discriminatory practice. The High Court 

may  also  make  a  compensation  order  to  ensure  that  the  lender  compensates  the  borrowers  for 

such discriminatory practice, and may also impose a fine on the lender. 

1.6  Finally,  the  draft  law  further  specifies  that  there  is  no  right  of  appeal  to  the  Financial  Services 

Appeals Tribunal  or to the  High Court in  respect  of the  assessment of the  CBI,  a  direction  of the 

CBI to a lender, or a decision by the CBI to seek an enforcement or rectification order.  

2. 

Scope of the opinion 

This  opinion  focuses  on:  (1)  specific  aspects  of  the  power  to  issue  directions  to  lenders  not  to 

charge a variable interest rate which exceeds certain thresholds and the relationship of this power 

with the CBI’s existing functions with respect to  monetary policy, banking supervision and financial 

stability  (Section  3.1);  (2)  the  potential  effects  of  the  draft  law  on  the  independence  of  the  CBI 

(Section 3.2); and (3) the new tasks conferred on the CBI in relation to the prohibition of monetary 

financing under Article 123 of the Treaty (Section 3.3). 

3.   Observations 

3.1   Specific  aspects  of the  power  to  issue  directions  to  lenders  not  to  charge  a  variable  interest  rate 

which exceeds certain thresholds  

As a starting  point, the ECB  wishes to emphasise that administrative control  of market pricing by 

public  authorities,  such  as  issuing  directions  to  lenders  not  to  charge  a  rate  exceeding  certain 

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thresholds, should only be undertaken where it is clear which purpose the controls seek to achieve 

and that they are likely to achieve this purpose. 

3.1.1  Effects on the transmission of monetary policy 

ECB-PUBLIC 

The ECB has concerns that the administrative control of the interest rates charged by lenders could 

interfere with the market determination of lending decisions. In turn, this could have a detrimental 

effect on the transmission of monetary policy.  

On the one hand, the smooth pass-through of changes in the ECB policy rates to bank borrowers is 

a component of the monetary policy transmission mechanism, which relies on well-functioning and 

competitive  markets  for  bank  credit.  For  that  reason,  any  measures  aimed  at  ensuring  the  pass-

through of ECB rates or the proper functioning of the monetary policy transmission mechanism are, 

in principle, welcome.  

However,  the  draft  law  seems  instead  to  be  motivated  primarily  by  an  assumption  that,  due  to  a 

lack  of  competition  in  the  Irish  market,  lenders  operating  in  Ireland  are  maintaining  rates  on 

variable  rate  mortgages  in  excess  of  the  rates  necessary  to  cover  the  lenders’  cost  of  funds,  the 

credit  risk  associated  with  lending,  operational  costs  and  the  cost  of  capital.  Despite  this,  the 

measures specified in the draft law do not seek to promote competition in the market, or to address 

other  possible  root  causes  influencing  variable  interest  rates  in  Ireland,  such  as  the  large  legacy 

portfolio  of  tracker  mortgages,  which  have  an  adverse  impact  on  bank  profitability,  the  burden  of 

non-performing loans on lenders’ balance sheets, and the pricing of credit risk in Ireland. 

Against this background, imposing administrative controls on the variable interest rates for principal 

dwelling  house  mortgage  loans  may  have  several  unintended  side  effects.  This  is  particularly 

relevant  given  the  prevalence  of  this  type  of  mortgage  in  a  very  important  segment  of  the  Irish 

market for bank credit. This may not only affect the transmission mechanism of monetary policy but 

also run counter to the very objective of the draft law.  

For example, imposing administrative controls could potentially affect the rates offered by lenders 

for other  types of bank credit,  impairing the  pass-through of the  ECB’s accommodative monetary 

policy stance to low interest rates on loans to other sectors of the economy. For example, lenders 

aiming to achieve a sustainable level of profitability may try to compensate for insufficient margins 

on  their  variable  interest  rate  mortgage  portfolio  by  charging  higher  rates  on  other  types  of  bank 

loans. 

In  addition,  lenders  might  adapt  their  credit  standards,  and  offer  variable  interest  rate  mortgages 

only  to  new  borrowers  with  a  very  low  risk  profile.  This  would  effectively  ration  the  supply  of 

variable  interest  rate  mortgages  in  the  Irish  market.  Lenders  could  be  motivated  by  a  desire  to 

sustain  a  risk-adjusted  margin  on  variable  interest  rate  mortgages  which  is  comparable  to  the 

margin  that  would  otherwise  prevail.  Riskier  borrowers  might  instead  be  offered  fixed-rate 

mortgages, which are outside the scope of the draft law.  

Furthermore, the possibility of restrictions on the maximum rate that banks are allowed to charge 

for  variable  interest  rate  mortgages  could  potentially  render  the  market  less  attractive  and 

discourage  new  entrants.  This  would  lead  instead  to  lower  competition  in  financial  services  in 

Ireland, effectively defeating the purpose of the draft law.   

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Overall,  the  power  to  issue  directions  to  lenders  not  to  set  rates  in  excess  of  a  certain  threshold 

could interfere with the implementation of monetary policy by the CBI, one of its basic Eurosystem 

tasks,  due  to  the  potential  for  such  directions  to  interfere  with  the  monetary  policy  transmission 

mechanism. 

3.1.2  Effects on the banking sector 

In the context of its direct responsibility for the supervision of significant banking groups within the 

euro  area,  the  ECB  monitors  closely  the  profitability  of  credit  institutions.  The  CBI  also  closely 

monitors profitability, in the context of its responsibility for less significant credit institutions. One of 

the reasons for this is because low profitability has been identified as a business model risk, which 

warrants  particular  supervisory  attention.  It  is  important  that  banks  are  not  prevented  from 

generating  sustainable  profits  which  will  result  in  well  capitalised  banks  operating  competitively. 

The high level of non-performing loans in Ireland and the low level of repossessions have brought 

large credit losses to Irish banks in the recent past and indicate that Irish banks could expect higher 

credit  losses  over  the  economic  cycle  than  banks  in  a  number  of  other  euro  area  countries.  In 

addition,  it  is  worth  noting  that,  while  tracker  rate  mortgage  contracts  are  currently  not  offered  to 

new  customers  in  Ireland,  a  substantial  share  of  Irish  mortgage  borrowers,  as  tracker  mortgage 

holders, are currently paying an average interest rate considerably below the average rate offered 

to new borrowers in the euro area.  

In  general,  when  pricing  mortgages,  credit  institutions  should  take  account  of  many  factors, 

including  the  actual  and  future  cost  of  funding,  expenses  and  overhead,  the  cost  of  capital,  and 

expected credit losses. The factors the CBI must consider in carrying out its assessment under the 

draft law reflect these issues only to a limited extent, as they focus on the lenders’ cost of funds, 

the  lenders’  weighted  average  cost  of capital  and  reasonable  profit  expectations  in  the  prevailing 

market conditions. While the draft law permits other matters to be taken into account by the CBI for 

the purposes of the assessment (provided that the Governor of the CBI certifies these as relevant), 

it  does  not  fully  acknowledge  the  wider  matrix  of  factors  that  credit  institutions  need  to  take  into 

account in setting their interest rates.  

The ECB would like to emphasise that extreme caution should be exercised when transferring the 

power to take commercial decisions from market actors to public authorities. The benefits need to 

be weighed against a number of risks including information asymmetry and moral hazard. 

Thus from a supervisory perspective, the ECB also has concerns about the powers conferred on 

the  CBI  by  the  draft  law.  While  the  CBI  is  not  obliged  to  exercise  the  rate-setting  power,  such 

intervention  in  the  setting  of  rates  by  the  market  could  affect  overall  profitability  in  the  banking 

system, which is already challenged by the prevalence of tracker mortgages and the high level of 

non-performing  loans.  As  a  consequence,  the  exercise  of  the  power  conferred  on  the  CBI  could 

possibly conflict with the effective use of the supervisory powers conferred on the ECB as part of 

the  single  supervisory  mechanism  (SSM) 
No 1024/20132.   

in  accordance  with  Council  Regulation  (EU) 

2  

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). 

4 

 
 
 
 
 
                                                 
ECB-PUBLIC 

3.1.3  Effects on financial stability 

The ECB notes that the implementation of the draft law and exercise of the powers thereunder by 

the  CBI  could  entail  financial  costs  for  the  banking  sector.  Consequently,  the  possibility  to  set 

administrative  limits  on  the  profitability  of  a  core  business  activity  of  the  banking  system  might 

induce  more  risk-taking  behaviour  with  banks  engaging  in  alternative  projects  that  do  not  reflect 

prudent  risk-taking  behaviour  thus  potentially  leading  to  financial  instability.  Overall,  given  the 

scope of the draft law and the importance of mortgage portfolios in total bank assets, these factors 

may have a negative impact on the profitability; capitalisation and the future lending capacity of the 

credit institutions affected, and ultimately may have implications for financial stability. 

3.1.4  Compliance with the principle of an open market economy with free competition 

The  Treaty  provides  that  the  ESCB  shall  act  in  accordance  with  the  principle  of  an  open  market 

economy with free competition, favouring an efficient allocation of resources. Likewise, the Treaty 

provides  that  Member  States’  economic  policies  shall  be  conducted  in  accordance  with  this 

principle.  The  ECB  is  generally  not  in  favour  of  the  regulation  of  interest  rates  charged  by  credit 

institutions, including for the reasons outlined in this paragraph 3 and more generally because such 

regulation  would,  under  normal  circumstances,  diverge  from  basic  economic  and  market 
principles3. Conferring powers on a public authority to intervene in the market could undermine the 

principle of an open market economy with free competition and favouring an efficient allocation of 

resources.  In  particular,  the  ECB  is  concerned  that  such  intervention  by  the  CBI  could  create 

market distortions, and could be inconsistent with the gradual return of the banking system to full 

private  ownership.  As  outlined  above,  the  draft  law  presents  challenges  for  the  efficient 

transmission of monetary policy. It could also place possible additional earnings’ pressure on Irish 

credit  institutions  and  result  in  a  loss  of  investor  confidence.  Moreover,  the  decision  to  direct 

lenders as to the interest rate they can charge could even lead to a decrease in competition, and 

discourage foreign lenders from entering the market. 

3.1.5  Observations  on  the  procedure  to  be  followed  by  the  CBI  to  assess,  form  conclusions  and  issue 

directions to lenders 

In terms of procedure, the draft law requires the CBI first to assess and form a conclusion on the 

state of competition in the market as a whole. If the CBI concludes that a market failure exists, it 

may issue directions to a specific lender or lenders, or to lenders in general. The factors to which 

the CBI must have regard in conducting its assessment include both factors influencing the state of 

the market as a whole and factors influencing individual lenders. From a practical perspective, the 

ECB has concerns about  a lack of coherence in the procedure to be followed. While conclusions 

must be drawn based on a market-wide assessment, this may result in targeted measures imposed 

on  individual  lenders,  without  an  individual  assessment  being  conducted  in  relation  to  those 

lenders. 

With regard to the assessment of a ‘market failure’, it may need to be further examined whether the 

definition  under  the  draft  law  is  fully  aligned  with  the  understanding  of  that  concept  under 

3  

The ECB is also generally not in favour of the regulation of savings remuneration, as pointed out in its recent opinion 
CON/2016/51. All opinions are available on the ECB website at: www.ecb.europa.eu.  

5 

 
 
 
 
                                                 
ECB-PUBLIC 

competition law, in particular, in order to encompass considerations relating to the market structure 

and entry barriers.   

Moreover, with regard to the requirement under the draft law for the CBI to publish its assessment, 

the  ECB  wishes  to  stress  that  publication  must  be  conducted  in  accordance  with  the  Union  law 

requirements on professional secrecy, including Article 53 of Directive 2013/36/EU of the European 
Parliament and of the Council4, which provides that confidential information ‘may be disclosed only 

in summary or aggregate form, such that individual credit institutions cannot be identified’. 

In  addition  to  these  practical  concerns,  the  ECB  notes  that  is  for  the  Irish  authorities  to  assess 

whether the draft law complies with Irish constitutional and other legal principles. 

3.1.6  Interaction with the existing objectives and tasks of the CBI 

The  CBI  does  not  currently  have  an  objective  related  to  competition  policy  or  any  function  to 

assess  competition  in  the  financial  sector:  the  competition  authority  in  Ireland  is  the  Competition 

and Consumer Protection Commission.  

As  noted  in  paragraph  3.1.1  above,  the  power  to  issue  directions  to  lenders  not  to  set  rates  in 

excess  of  a  certain  threshold  could  interfere  with  the  CBI’s  basic  Eurosystem  task  to  implement 

monetary  policy,  due  to  the  potential  for  such  directions  to  interfere  with  the  monetary  policy 

transmission  mechanism.  Section  6A(1)  of  the  Central  Bank  Act  1942  states  that  the  primary 

objective of the CBI, in discharging its functions and exercising its powers as part of the ESCB, is 

to maintain price stability. This is in line with the primary objective of the Eurosystem under Article 

127(1)  of  the  Treaty.  It  is  difficult  to  see  how  the  CBI  could  properly  perform  a  task  which  could 

interfere with its overriding monetary policy task and objective.  

The CBI also has other objectives as set out in section 6A(2) of the Central Bank Act 1942, i.e. the 

stability  of  the  financial  system  overall;  the  proper  and  effective  regulation  of  financial  service 

providers and markets, while ensuring that the best interests of consumers of financial services are 

protected; the efficient and effective operation of payment and settlement systems; the resolution of 

financial difficulties in credit institutions; the provision of analysis and comment to support national 

economic  policy  development  and  the  discharge  of  such  other  functions  and  powers  as  are 

conferred on the CBI by law.  

As the national authority responsible for banking supervision and contributing to the stability of the 

financial  system,  the  CBI  will  have  to  mitigate  any  potential  conflicts  of  interests  between  the 

proposed  new  competition  tasks  under  the  draft  law  and,  inter  alia,  its  banking  supervision  and 

financial  stability  mandates  by  always  taking  the  latter  into  account  when  exercising  its  powers. 

Sufficient  mitigation  measures  would  be  necessary  to  ensure  that,  in  the  event  of  a  conflict  of 

interest, financial stability and prudential supervisory considerations prevail. However, in light of the 

objectives of the CBI set out in the Central Bank Act 1942, it appears particularly difficult to ensure 

that  sufficient  mitigation  measures  can  be  put  in  place.  As  all  of  the  secondary  objectives  under 

Section 6A(2) of the Central Bank Act 1942 must be regarded as equal by the CBI, it would not be 

able  to  mitigate  the  conflict  of  interest  between  the  competition  objectives  of  its  new  role  and  its 

4  

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). 

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existing financial stability and prudential supervision objectives, by giving precedence to the latter 

objectives when exercising its new powers. 

3.2  Central bank independence 

As noted in paragraphs 3.1.1 and 3.1.6, the power to issue directions to lenders not to set rates in 

excess of a certain threshold has the potential to interfere with the overriding monetary policy task 

and objective of the Eurosystem, including of the CBI. The ECB has concerns that the conflict of 

interest between this new task and the exercise of the CBI’s monetary policy and financial stability 

tasks,  which  have  different  objectives,  may  potentially  have  an  impact  on  the  institutional 

independence of the CBI and the personal independence of the Governor of the CBI. This could, 

by  extension,  potentially  damage  the  credibility  of  the  CBI,  the  ECB  and  the  Eurosystem  as  a 

whole. 

In  addition,  as  outlined  in  further  detail  in  paragraph  3.3,  the  CBI  itself  will  have  to  dedicate 

additional human and financial resources to carry out the assessments required under section 2 of 

the  draft  law  and  may  also  incur  further  costs  in  the  context  of  monitoring  compliance  with 

directions,  and  applying  to  the  High  Court  for  relevant  court  orders.  The  CBI  should  be  provided 

with sufficient resources to perform the new tasks.  

For  these  reasons,  the  ECB  has  concerns  that  the  draft  law  could  undermine  the  independence 

required  of  the  CBI  as  a  central  bank  of  the  Eurosystem,  and  of  the  Governor  of  the  CBI  as  a 

member of the ECB Governing Council.  

Furthermore, the CBI is a national competent authority (NCA) of the Single Supervisory Mechanism 

(SSM) and in the exercise of the powers conferred upon the ECB by the SSM Regulation, and thus 

is,  under  Article  19  SSM  Regulation,  required  to  act  independently.  The  ECB  has  concerns 

regarding  the  interaction  of  this  new  task  with  the  exercise  of  the  CBI’s  supervisory  tasks.  The 

exercise of the powers assigned by the draft law could potentially conflict with the effective use of 

the supervisory powers conferred on the ECB on the basis of the SSM Regulation, and therefore 

may potentially impact on the CBI’s independence as an NCA member of the SSM.  

3.3  Conferral of new tasks on the CBI 

3.3.1  As  noted  in  paragraph  1,  the  draft  law  confers  a  number  of  new  tasks  on  the  CBI  regarding  the 

assessment of whether the state of competition in the market for principal dwelling house mortgage 

loans  is  such  that  a  ‘market  failure’  exists,  the  issuance  of  directions  in  such  circumstances  to 

lenders  not  to  charge  a  variable  interest  rate  which  exceeds  certain  thresholds,  and  related 

enforcement powers. 

3.3.2  The ECB underlines that, in the context of a proposed conferral of tasks on a national central bank 

(NCB)  in  the  ESCB,  it  is  necessary  to  assess  such conferral  against  the  prohibition  on  monetary 

financing under Article 123 of the Treaty. For the purposes of that prohibition, Article 1(1)(b)(ii) of 

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ECB-PUBLIC 

Council  Regulation  (EC)  No  3603/935  defines  ‘other  type  of  credit  facility’,  inter  alia,  as  ‘any 

financing of the public sector’s obligations vis-à-vis third parties’.  

As  the  objective  of  the  monetary  financing  prohibition  of  maintaining  a  sound  budgetary  policy  of 

Member States may not be circumvented, the task of financing measures which are normally the 

responsibility of the Member States, and financed from their budgetary sources rather than by the 

NCBs,  must  not  be  entrusted  to  NCBs  by  law.  In  order  to  decide  what  constitutes  a  form  of 

financing of the  public sector’s obligations vis-à-vis third parties –  which can be translated  as the 

provision of central bank financing outside the scope of the central bank tasks – an assessment of 

whether the task to be undertaken by an NCB is a central bank task or a government task, i.e. a 

task  within  the  responsibility  of  the  Member  States,  needs  to  be  carried  out  on  a  case-by-case 

basis. In other words, sufficient safeguards must be in place to ensure that circumventions of the 

objective of the monetary financing prohibition of maintaining a sound budgetary policy of Member 

States do not take place. 

3.3.3  As part of its discretion in the exercise of its duty, on the basis of Article 271(d) of the Treaty and 

Article 35.6 of the Statute of the ESCB, to ensure that NCBs honour the obligations laid down by 

the Treaty, the Governing Council has endorsed safeguards of that kind in the form of criteria for 

determining what may be seen as falling within the scope of a public sector’s obligation within the 

meaning  of  Article  1(1)(b)(ii)  of  Regulation  (EC)  No  3603/93  or,  in  other  words,  constitute  a 

government task as follows: 

First, central bank tasks are in particular those tasks that are  related to the tasks that have been 
conferred upon the ECB and the NCBs by the Treaty6 and the Statute of the ESCB. These tasks 

are mainly defined in Article 127(2), (5) and (6) and Article 128(1) of the Treaty, as well as Article 

22 and Article 25.1 of the Statute of the ESCB. 

Second, as Article 14.4 of the Statute of the ESCB allows NCBs to perform ‘other functions’, new 

tasks, i.e. tasks that are not related to tasks that have been conferred upon the ECB and the NCBs, 

are  not  precluded  per  se.  However,  new  tasks  that  are  undertaken  by  an  NCB  and  which  are 

atypical of NCB tasks or which are clearly discharged on behalf of and in the exclusive interest of 

the government or of other public sector entities should be considered government tasks. 

Third, an important criterion for qualifying a new task as atypical of an NCB task or as being clearly 

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

entities  is  the  impact  of  the  task  on  the  institutional,  financial  and  personal  independence  of  that 

NCB.  

In particular, the following aspects should be taken into account: 

(a)  Whether the performance of the new task creates conflicts of interest with existing central bank 

tasks which are not adequately addressed and does not necessarily complement those existing 

central  bank  tasks.  If  a  conflict  of  interest  arises  between  existing  and  new  tasks,  sufficient 

safeguards  to  mitigate  that  conflict  should  be  in  place.  The  complementarity  between  a  new 

task and the existing central bank tasks should not be interpreted broadly, so as to lead to the 

5  

6  

Council  Regulation  (EC)  No  3603/93  of  13  December  1993  specifying  definitions  for  the  application  of  the 
prohibitions referred to in Articles 104 and 104b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1). Articles 104 and 104b 
of the Treaty are now Articles 123 and 124 of the Treaty. 

This includes the Treaty on European Union and the Treaty on the Functioning of the European Union. 

8 

                                                 
ECB-PUBLIC 

creation  of  an  indefinite  chain  of  ancillary  tasks.  Such  complementarity  should  be  examined 

also in relation to the financing of those tasks. 

(b)  Whether without new financial resources the performance of the new task is disproportionate to 

the  NCB’s  financial  or  organisational  capacity  and  may  negatively  impact  on  the  capacity  to 

perform properly the existing central bank tasks. 

(c)  Whether the performance of the new task fits into the institutional set-up of the NCB in light of 

central bank independence and accountability considerations. 

(d)  Whether the performance of the new task harbours substantial financial risks. 

(e)  Whether the performance of the new task exposes the members of the NCB decision-making 

bodies  to  political  risks  which  are  disproportionate  and  may  also  impact  on  their  personal 

independence and, in particular, on the guarantee of term of office set out in Article 14.2 of the 

Statute of the ESCB. 

3.3.4  On the basis of the criteria set out above, the following paragraphs assess whether the CBI’s new 

tasks are in line with the monetary financing prohibition. 

3.3.4.1  Tasks related to the tasks conferred upon the ECB and the NCBs by the Treaty and the Statute 

of the ESCB 

The powers conferred on the CBI by the draft law are expressly characterised as powers for the 

purposes  of  protecting  competition  in  the  mortgage  loan  market.  These  powers  could  also  be 

seen as being related to the protection of consumers of mortgage loan services. However, the 

goal  of  consumer  protection  appears  to  be  subsidiary  to  the  draft  law’s  overriding  goal  of 

protecting competition in the mortgage loan market.  

It  has  to  be  examined  to  what  extent  these  powers  are  related  to  the  performance  of 

Eurosystem tasks, including the implementation of monetary policy, the specific tasks conferred 

upon the ECB concerning policies relating to the prudential supervision of credit institutions and 

contributing to the smooth conduct of policies pursued by the competent authorities relating to 

the  stability  of the  financial  system  in  accordance  with  the  first  indent  of  Article  127(2),  Article 

127(5)  and  (6)  and  Article  128(1)  of  the  Treaty,  as  well  as  Article  22  and  Article  25.1  of  the 

Statute of the ESCB. Importantly, although in  accordance  with Article 127(1)  of the Treaty the 

Eurosystem  must  act  in  accordance  with  the  principle  of  an  open  market  economy  with  free 

competition,  favouring  an  efficient  allocation  of  resources,  the  Eurosystem  has  not  itself  been 

conferred with any tasks in the area of competition policy.  

As noted in paragraph 3.1.1, the power to issue directions to lenders not to set rates in excess 

of  a  certain  threshold  could  interfere  with  the  CBI’s  basic  Eurosystem  task  to  implement 

monetary  policy,  due  to  the  potential  for  such  directions  to  interfere  with  the  monetary  policy 

transmission  mechanism.  As  noted  in  paragraph  3.1.2,  the  exercise  of  this  power  by  the  CBI 

could  also  possibly  conflict  with  the  effective  use  of  the  supervisory  powers  conferred  on  the 

ECB on the basis of the SSM, and therefore has the potential to create tensions with the CBI’s 

role as a NCA within the SSM.  

9 

 
ECB-PUBLIC 

The supervision of consumer credit providers7, as well as the oversight of the market for credit 
agreements  relating  to  residential  immovable  property8,  can  be  considered  tasks  related  to 

those referred to in Article 127(5) and  (6) of the Treaty, based on the understanding that they 

are complementary to the banking supervision tasks exercised  by NCBs and are linked to the 

task of contributing  to the  stability  of  the financial  system. In Ireland, the CBI’s  responsibilities 

include ensuring compliance with, inter alia, the Consumer Protection Act 2007, the European 

Communities  (Unfair  Terms  in  Consumer  Contracts)  Regulations  1995  and  2000  and  with  the 

European Union (Consumer Mortgage Credit Agreements) Regulations 2016. However, in light 

of  the  fact  that  the  draft  law  is  primarily  aimed  at  addressing  market  failures  and  enhancing 

competition  in  the  banking  sector,  rather  than  directly  aimed  at  protecting  the  consumers  of 

banking  services,  it  is  difficult  to  characterise  the  draft  law  as  complementary  to  the  banking 

supervision  tasks  of  the  CBI,  also  taking  account  of  the  implications  of  the  draft  law  for  the 

banking sector and on financial stability, as out outlined in paragraphs 3.1.2 and 3.1.3. 

For  these  reasons,  the  tasks  conferred  on  the  CBI  by  the  draft  law  cannot  be  considered  as 

related  to  the  tasks  of  monetary  policy  implementation  and  contribution  to  financial  stability 

referred  to  in  the  first  indent  of  Article  127(2)  and  Article  127(5)  of  the  Treaty,  or  to  the  tasks 

exercised by the CBI as part of the SSM, in accordance with Regulation (EU) No 1024/2013.  

3.3.4.2  Tasks which are atypical of NCB tasks 

As outlined above, the powers conferred on the CBI by the draft law are expressly characterised 

as powers for the purposes of protecting competition in the mortgage loan market. However, the 

ECB has not identified any other NCB in the ESCB which has been conferred with or exercises 

similar powers for the purposes of protecting competition.  

With  regard  to  ensuring  the  protection  of  consumers  of  mortgage  loan  services,  the  ECB  has 

generally accepted the allocation of consumer protection tasks to NCBs, including supervisory 
tasks related  to  the  provision  of consumer credit9 and the fight  against usury10, provided  such 
tasks  do  not  interfere  with  the  performance  of  the  NCB’s  ESCB-related  tasks11  and  provided 

that those tasks ‘complement existing supervisory powers and thus contribute to the soundness 
of the financial market and the preservation of confidence in the market place’12. In light of the 

CBI’s statutory responsibility for banking supervision and financial stability, further powers in the 

area of consumer protection could be argued to be not atypical of a central bank.  

The ECB understands that the laws in a number of Member States have put in place limitations 
on the maximum interest rates that can be charged by lenders13 for consumer loans14, including 

7  
8  
9  
10  
11  

12  
13  

See paragraph 3.3 of Opinion CON/2015/54 and paragraph 3.3 of Opinion CON/2016/31. 
See paragraph 4.3 of Opinion CON/2016/34. 
See paragraph 3.4 of Opinion CON/2015/54 and paragraph 4.4 of Opinion CON/2016/34. 

See paragraph 4 of Opinion CON/2004/16. 
See, for example, paragraphs 2.1 to 2.3 of Opinion CON/2006/38, paragraphs 2.1 and 2.2 of Opinion CON/2006/47, 
paragraphs 2.1 to 2.5 of Opinion CON/2007/29 and paragraph 2 of Opinion CON/2009/71. 
See paragraph 3.1 of Opinion CON/2015/21. 
The national laws may apply to credit institutions, to entities other than credit institutions, or to both, depending on 
the jurisdiction.  

10 

                                                 
ECB-PUBLIC 

those relating to immovable property15. The national legislation in those Member States either: 

(a) sets out the methodology for determining the relevant reference index or reference interest 

rate, and the maximum margin above the reference interest rate which the interest rate charged 
by the lender cannot exceed16; or (b) determines the maximum interest rate in the law itself or in 
a  decree  adopted  thereunder17.  The  role  of  the  NCB  in  relation  to  the  reference  rates  can 

include:  (i)  the  provision  of  advice  to  the  legislature  or  government  on  the  setting  of  the  rate, 
taking into account evolutions in the market18; or (ii) the periodic calculation and publication of a 
reference  interest  rate19.  In  many  cases,  the  NCB  must  calculate  the  reference  interest  rate 
based  on  the  average  interest  rate  charged  by  market  participants20.  The  national  authority 

responsible  for  monitoring  and  enforcement  of  compliance  with  such  national  laws  varies, 
depending  on  the  Member  State,  and  may  be  conducted  by  the  Ministry  for  Economics21,  the 
national consumer protection authority22, national competition authority23 the national competent 
authority  for  prudential  supervision24,  the  NCB25  or  by  the  courts,  as  a  matter  of  civil26  or 
criminal27 law. It is noted that in one Member State28, a specific consumer protection power is 

given  to  the  NCB,  in  its  capacity  as  supervisory  authority,  to  monitor  compliance  of  certain 

institutions  with  rules  on  business-to-consumer  commercial  practices.  Further,  it  may  impose 

sanctions on financial institutions in the event of a serious infringement of the provisions of the 
banking  laws29.  Some  Member  States  also  seek  to  control  the  interest  rate  for  savings 
deposits30, including by means of tax incentives31.  

14  

15  

16  
17   
18  
19  
20  
21  
22  

23  

24  
25  
26  
27  
28  

29  
30  

See, for example, Belgium: Royal decree of 4 August 1992; Bulgaria: Article 19(4) of the Law on consumer credits; 
Cyprus:  Section  314A  of  the  Cyprus  Criminal  Code,  Cap.  154;  this  does  not  apply    to  credit  granted  by  credit 
institutions and in some other specified cases; Estonia: Section 406 of the Law on obligations; France: Article L. 314-
6 (1) of the Consumer Code; Croatia: Article 11c of the Law on consumer credit (Official Gazette 75/2009, 112/2012, 
143/2013, 9/2015, 78/2015, 102/2015 and 52/2016); Hungary: Law CLXII of 2009 on consumer credit, as amended 
by Law LCCVIII of 2014; Italy: Law on usury (Law 108/1996); ; Malta: Article 1852 of the Civil Code: this does not 
apply to credit granted by credit institutions;  Poland: Article 359 of the Civil Code and Article 304 of the Penal Code; 
Portugal: Decree-law 133/2009 of 2 June; Slovenia: Article 24 of the Law on consumer credit; and Slovakia: Article 
53(6) of Law No 40/1964 Coll. Civil Code as amended, and Article 1a of Government Regulation No 87/1995 Coll., 
as amended. 
See, for example, Belgium: Royal decree of 11 January 1993; Bulgaria: Article 29(9) of the Law on consumer credits 
related to immoveable property; France: Article L. 314-6 (1) of the Consumer Code; Croatia: Article 11b of the Law 
on consumer credit; Hungary: Law CLXII of 2009 on consumer credit, as amended by Law LCCVIII of 2014; Italy: 
Law on usury (Law 108/1996); and Poland: Article 359 of the Civil Code and Article 304 of the Penal Code. 
This applies in Belgium, Cyprus, Estonia, France, Croatia, Hungary, Italy, Portugal and Slovenia. 
The rate is set by law in, Malta, Poland and Slovakia. In Bulgaria, the Council of Ministers sets the limitation.  

This is the case in Belgium.  
This is the case in Cyprus, Estonia, France, Croatia, Hungary, Italy, Portugal and Slovenia. 
This applies in Cyprus, Estonia, France, Croatia, Italy, Portugal and Slovenia.  
This is the case in Belgium and Slovenia.  
This is the case in Bulgaria and Latvia. It is also the case in Hungary in specific instances, depending on the type of 
breach. 
The Hungarian Competition Authority carries tasks relating to competitive discipline (see Law XLVII of 2008 on the 
prohibition of unfair business-to-consumer commercial practices).   
This is the case in France (Autorité de contrôle prudentiel et de résolution). 
This is the case in Croatia, Italy, Portugal, Slovakia. This is the case in Hungary in specific instances. 

This is the case in Estonia, France, Poland and Malta.  
This is the case in Cyprus, France and Poland. 
Hungary:  Law  CCXXXVII  of  2013  on  credit  institutions  and  financial  enterprises  and  Law  XLVII  of  2008  on  the 
prohibition of unfair business-to-consumer commercial practices. 
In those circumstances, the NCB may determine the highest rate of interest that may be charged by that credit institution. 
France: Regulation n° 86-13 regarding the remuneration of funds received by credit institutions. 

11 

                                                                                                                                                             
ECB-PUBLIC 

However, the key difference between the national laws mentioned and the Irish draft law relates 

to  the  powers  conferred  on  the  CBI.  None  of  the  above  examples  confer  broad  discretionary 

decision-making  powers  on  an  NCB  to  determine  the  appropriate  level  of  interest  rates  which 

lenders may charge, as this kind of power is exercised by the legislature or by the government. 

Where NCBs play a role under such laws, this role is limited to the calculation and publication of 

a reference  rate, based  on predefined  criteria,  or to  the  enforcement of such  laws  against  the 

relevant lenders, as an aspect of the NCB’s mandate for consumer protection.  

Thus, the decision-making powers conferred on the CBI by the draft law, to issue directions to 

lenders  not  to  charge  a  variable  interest  rate  which  exceeds  certain  thresholds,  may  be 

considered  atypical  of  a  central  bank,  even  if  they  could  be  characterised  as  consumer 

protection and not competition powers. 

For the sake of completeness, the powers under the draft law also cannot be characterised as 

macroprudential  powers,  as 

it 

is  difficult 

to  conclude 

that 

they  pursue  a 

legitimate 

macroprudential  objective.  The  legitimate  objectives  of  macroprudential  policy  can  be 

understood  by  reference  to  Recommendation  ESRB/2013/1  of  the  European  Systemic  Risk 
Board on intermediate objectives and instruments of macroprudential policy32, which considers 

the  objectives  of  macroprudential  policy  to  include  the  mitigation  and  prevention  of  excessive 

credit  growth  and  leverage,  the  mitigation  and  prevention  of  excess  maturity  mismatches  and 

market  illiquidity,  the  limitation  of  concentration  of  exposures,  the  limitation  of  the  systemic 

impact  of  misaligned  incentives,  and  the  strengthening  of  the  resilience  of  financial 

infrastructures. 

To conclude, the conferral of these new powers on the CBI should be regarded as atypical of a 

central bank. 

3.3.4.3 

Impact of the tasks on the independence of the CBI  

The  draft  law  designates  the  CBI  as  the  sole  authority  with  the  power  to  assess  the  state  of 

competition in the market for principal dwelling house mortgage loans and to issue directions to 

lenders  not  to  charge  a  variable  interest  rate  which  exceeds  certain  thresholds.  Given  the 

factual  assessment  that  this  task  is  atypical  of  a  central  bank,  it  should  be  considered,  in 

addition, whether the task is being discharged on behalf of and in the exclusive interest of the 
government33.  An  important  criterion  for  this  qualification  is  the  impact  of  the  task  on  the 

independence of the CBI. Such impact is analysed in paragraph 3.2 of this Opinion. 

3.3.4.3.1  Extent  to  which  performance  of  the  new  task  creates  conflicts  of  interest  with  existing  central 

bank tasks 

As noted above, the power to issue directions to lenders not set to rates in excess of a certain 

threshold  could  interfere  with  the  CBI’s  basic  Eurosystem  task  to  implement  monetary  policy, 

31  
32  

33  

Belgium: Article 21, 5° Code of Income Tax and Royal decree of 27 August 1993. 

Recommendation ESRB/2013/1 of the European Systemic Risk Board of 4 April 2013 on intermediate objectives and 
instruments of macroprudential policy (OJ C 170, 15.6.2013, p. 1). 
In the context of the regulation of savings remuneration by an NCB, the ECB has pointed out that it considered such 
a role to be carried out on behalf of the government, and exercising this government task has the potential to place 
the NCB and its Governor in a position in which there is a conflict of interest between the exercise of this task and 
the exercise of the NCB’s central banking tasks. See ECB Opinion CON/2016/51. 

12 

                                                                                                                                                             
ECB-PUBLIC 

due  to  the  potential  for  such  directions  to  interfere  with  the  monetary  policy  transmission 

mechanism. The exercise of this power by the CBI could also possibly conflict with the effective 

use of the supervisory powers conferred on the ECB on the basis of the SSM, and therefore has 

the  potential  to  create  tensions  with  the  CBI’s  role  as  an  NCA  within  the  SSM.  The  ECB 

discourages  the  concentration  of  decision-making  powers  in  the  areas  of  competition  and 
banking supervision in one body34. In fact, the ECB has previously welcomed draft national laws 

transferring the responsibilities for the enforcement  of competition  policy in the banking sector 
away from the NCB to a national competition authority35 and discouraged the concentration of 
decision-making  powers  in  the  areas  of  antitrust  and  banking  supervision  in  one  body36.  In 

doing  so,  the  ECB  highlighted  the  need  to  balance  the  potentially  conflicting  objectives  of 
market competition and financial stability37. While coordination is highly  necessary to avoid an 

overly complex framework for supervised entities, it would seem appropriate to maintain a clear 
distinction  between  procedures  that  are  pursuing  distinct  public  interests38  in  particular  for 
procedures  leading  to  antitrust  and  banking  supervision  decisions39.  For  that  reason  the  ECB 

considers  that  in  these  circumstances  draft  national  laws  should  reflect  the  principle  of 
allocating powers to authorities in accordance with their respective objectives40. 

3.3.4.3.2 Extent  to  which  performance  of  the  new  task  is  disproportionate  to  the  CBI’s  financial  or 

organisational capacity  

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

only  their  ESCB-related  tasks  but  also  their  national  tasks,  both  from  an  operational  and 
financial perspective41. Under the draft law, the CBI is obliged to carry out detailed assessments 

on  the  state  of  competition  in  the  market  for  principal  dwelling  house  mortgage  loans  on  a  at 

least a quarterly basis, taking into account a wide range of factors. This may require the CBI to 

impose  additional  reporting  requirements  on  mortgage  lenders,  which  will  impose  costs  on 

those  mortgage  lenders.  Moreover,  the  CBI  itself  will  have  to  dedicate  additional  human  and 

financial resources to compile the relevant indicators and methodology, to collect, process and 

analyse the relevant data in order to carry out that assessment, and to present and report the 

data.  Moreover,  the  CBI  may  incur  further  costs  in  the  context  of  monitoring  compliance  with 
directions, and applying to the High Court for court orders. The draft law contains no provision 

for the reimbursement of the CBI for this additional burden. 

3.3.4.3.3 Extent  to  which  performance  of  the  new  task  fits  into  the  CBI’s  institutional  set-up,  in  light  of 

central bank independence and accountability considerations 

As discussed in paragraph 3.1.6 above, it is difficult to see how the CBI could properly perform 

a task which could interfere with its overriding monetary policy task and objective. Moreover, the 

34  
35  
36  
37  
38  
39  
40  
41  

See paragraph 4 of Opinion CON/2008/44. 
See paragraph 14 of Opinion CON/2004/16. 

See paragraph 4 of Opinion CON/2008/44. 
See paragraph 3.3 of Opinion CON/2006/51. 
See paragraph 14 of Opinion CON/2004/16. 

See paragraph 8 of Opinion CON/2005/58. 
See paragraph 4 of Opinion CON/2007/17.  

See the ECB’s 2016 Convergence Report, p. 25. 

13 

                                                 
ECB-PUBLIC 

exercise  of  this  power  by  the  CBI  could  also  possibly  conflict  with  the  effective  use  of  the 

supervisory  powers  conferred  on  the  ECB  on  the  basis  of  the  SSM,  and  therefore  has  the 

potential  to  create  tensions  with  the  CBI’s  role  as  an  NCA  within  the  SSM.  As  the  national 

authority  responsible  for  banking  supervision  and  contributing  to  the  stability  of  the  financial 

system, the CBI will have to mitigate any potential conflicts of interests between its competition 

tasks  and  its  banking  supervision  and  financial  stability  mandates,  by  always  taking  the  latter 

into account when exercising its powers. Sufficient mitigation measures would be necessary to 

ensure  that,  in  the  event  of  a  conflict  of  interest,  financial  stability  and  prudential  supervisory 

considerations prevail. However, in light of the objectives of the CBI set out in the Central Bank 

Act 1942, it appears particularly difficult to ensure that sufficient mitigation measures can be put 

in place. As all of the secondary objectives under Section 6A(2) of the Central Bank Act 1942 

must  be  regarded  as  equal  by  the  CBI,  it  would  not  be  able  to  mitigate  the  conflict  of  interest 

between  the  competition  objectives  of  its  new  role  and  its  existing  financial  stability  and 

prudential supervision objectives, by giving precedence to the latter objectives when exercising 

its new powers.   

Finally,  there  is  the  reputational  risk  that  the  CBI  could  be  held  accountable  by  the  general 

public for problems related to the divergent treatment of holders of variable rate mortgages and 

tracker mortgages by commercial banks, even where the CBI’s assessment concludes that the 

variable  rates  can  be  reasonably  and  objectively  justified,  by  reference  to  the  various  factors 

outlined in paragraph 3.1.2. 

Thus, given the absence of complementarity with the CBI’s existing tasks, the new tasks do not 

appear to fit into the CBI’s current institutional set-up. 

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

The draft law specifies that there is no right of appeal to the Financial Services Appeals Tribunal 

or to the High Court in respect of the assessment of the CBI, a direction of the CBI to a lender, 

or a decision by the CBI to seek an enforcement or rectification order. In that respect, the CBI 

may  not  be  exposed  to  substantial  financial  risks.  However,  it  is  for  the  Irish  authorities  to 

assess  whether  the  draft  law  complies  with  Irish  legal  and  constitutional  principles  in  this 

particular respect. 

3.3.4.3.5 Extent  to  which  performance  of  the  new  task  exposes  members  of  the  CBI’s  decision-making 

bodies to disproportionate political risks and impacts on their personal independence  

As noted in paragraph 3.1.2 and paragraph 3.2, while the CBI is not obliged to exercise its new 

interest rate setting power, the ECB would be concerned that new task could create a conflict of 

interest with the CBI’s existing monetary policy and supervisory tasks, which would undermine 

the independence required of the CBI as a central bank of the Eurosystem and of the Governor 

of the CBI as a member of the Governing Council.  

3.3.4.4  Conclusion regarding the compatibility of the draft law with the prohibition on monetary financing 

The ECB considers that the CBI’s new tasks relating to the variable rate mortgages qualify as 

government  tasks,  in  the  sense  that  they  are,  first,  not  linked  to  and  do  not  complement  the 

CBI’s  existing  monetary  policy,  supervisory  or  financial  stability  tasks  and,  second,  atypical  of 

14 

ECB-PUBLIC 

central  banks.  In  addition,  given  that  the  draft  law  is  primarily  aimed  at  addressing  market 

failures and enhancing competition in the mortgage loan market, the conferral of this task on the 

CBI  creates  a  conflict  of  interest  with  the  CBI’s  monetary  policy,  banking  supervision  and 

financial stability tasks and objectives and raises concerns with regard to the independence of 

the  CBI.  Thus,  the  task  is  clearly  discharged  on  behalf  of  and  in  the  exclusive  interest  of  the 

government.  This  conclusion  is  particularly  evident  with  regard  to  the  CBI’s  discretionary, 

decision-making powers under the draft law to issue directions to lenders, but is also true with 

regard to the requirement to assess competition and form a conclusion on whether the state of 

competition is such that a ‘market failure’ exists. The carrying out of this government task by the 

CBI would only be compatible with the monetary financing prohibition if this task were fully and 
adequately remunerated42. As this is not currently provided for in the draft law, the conferral of 

these  new  tasks  on  the  CBI  would  not,  therefore,  appear  to  be  compatible  with  the  monetary 

financing prohibition.  

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

Done at Frankfurt am Main, 17 November 2016. 

[signed] 

The President of the ECB 

Mario DRAGHI 

42  

See the subsection headed ‘Financing of the public sector or of public sector obligations to third parties’ in Section 
2.2.5.1 (‘Prohibition on monetary financing’) of the ECB’s 2016 Convergence Report. 

15