Opinion of the European Central Bank of 27 July 2018 on the reciprocal implementation of macroprudential tools in Luxembourg (CON/2018/34)
Date: 2018-07-27
Institutions: European Central Bank
Subjects: Luxembourg, credit institution, directive (EU), economic stabilisation, financial solvency, financial stability, national implementing measure, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 27 July 2018 

on the reciprocal implementation of macroprudential tools in Luxembourg 

(CON/2018/34) 

Introduction and legal basis 

On 14 May 2018, the European Central Bank (ECB) received a request from the Luxembourg Ministry of 

Finance  for  an  opinion  on  a  draft  law  which  seeks  to  implement  Directive  (EU)  2017/2399  of  the 
European  Parliament  and  of  the  Council1  as  regards  the  ranking  of  unsecured  debt  instruments  in 

insolvency hierarchy and to amend various provisions of the amended law of 5 April 1993 relating to the 

financial sector (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/EC2, as the draft law relates to the Banque centrale du Luxembourg (BCL) and 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 main purpose of the draft law is to implement Directive (EU) 2017/2399 into Luxembourg law. 

For this purpose, the draft law seeks to amend the Law of 18 December 2015 relating to the failure 
of credit institutions and certain investment undertakings3. 

1.2  The  draft  law  also  amends  the  Law  of  5  April  1993  in  order  to  empower  the  Commission  de 

Surveillance  du  Secteur  Financier  (the  Luxembourg  Financial  Sector  Supervisory  Commission  – 

CSSF),  acting  as  a  macroprudential  authority,  to  recognise  and  apply  to  credit  institutions  and 

investment firms (hereinafter ‘CRR institutions’) established in Luxembourg, or a subgroup of such 

CRR  institutions,  the  measures  that  other  Member  States  may  apply  according  to  Article  458  of 

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Directive (EU) 2017/2399 of the European Parliament and of the Council of 12 December 2017 amending Directive 
2014/59/EU as regards the ranking of unsecured debt instruments in insolvency hierarchy (OJ L 345, 27.12.2017, p. 
96). 
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). 

Law  of  18  December  2015  on  the  measures  concerning  the  resolution,  reorganisation  winding  up  of  credit 
institutions and certain investment firms as well as the schemes of deposit protection and investor’s compensation.  

 
 
 
 
                                                 
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Regulation (EU) No 575/2013 of the European Parliament and of the Council4. The draft law further 

provides  that,  in  accordance  with  Article  458(6)  of  the  CRR,  the  CSSF  must  notify  the  relevant 

authorities,  where  necessary,  of  the  recognition  in  Luxembourg  of  such  measures.  Article  458(6) 

provides  that  where  Member  States  recognise  the  measures  set  in  accordance  with  Article  458, 

they  must  notify  the  Council,  the  Commission,  the  European  Banking  Authority  (EBA),  the 

European Systemic Risk Board (ESRB) and the Member State authorised to apply the measures. 

According  to  the  explanatory  memorandum  accompanying  the  draft  law,  the  wording  of  this 

provision  of  the  draft  law  is  based  on  Article  59-11  of  the  Law  of  5  April  1993  on  the  financial 

sector,  according  to  which,  pursuant  to  Article  134  of  Directive  2013/36/EU  of  the  European 
Parliament and of the Council5 (hereinafter the ‘CRD’), the CSSF may recognise the systemic risk 

buffer rate set by another Member States in accordance with Article 133 of the CRD and may apply 

that  buffer  rate  to  CRR  institutions  authorised  in  Luxembourg  for  the  exposures  located  in  the 

Member State that sets that buffer rate. The explanatory memorandum also states that according 
to recommendation C.1 of Recommendation ESRB/2015/2 of the European Systemic Risk Board6, 

the relevant authorities should reciprocate the macroprudential policy measures adopted by other 

relevant authorities and recommended for reciprocation by the ESRB. According to the explanatory 

memorandum,  the  European  macroprudential  monitoring  framework  requires  that  reciprocity 
applies  not  only  to  branches  of  CRR  institutions  in  accordance  with  Article  458(5)  of  the  CRR7, 

subject to the notification duty set out in Article 458(6), but also to CRR institutions and subgroups 

of such institutions established in Luxembourg. 

2. 

General observation  

2.1  This opinion does not address the question of whether the draft law, if adopted as proposed, would 

represent  an  effective  means  of 

implementing  Directive  (EU)  2017/2399, 

the  CRR  or 

Recommendation  ESRB/2015/2  in  Luxembourg.  This  opinion  will  focus  on  those  aspects  of  the 

draft  law  that  may  impact  on  the  role  and  tasks  of  the  BCL  as  a  central  bank  and  on 

macroprudential matters. 

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Article 458(2) of 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)  (hereinafter  the  ‘CRR’)  authorises  the  designated  macroprudential  authority  of  a  Member 
State to adopt stricter national measures where it identifies changes in the intensity of macroprudential or systemic 
risk in the financial system with the potential to have serious negative consequences to the financial system and the 
real economy in a specific Member State. 

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). 
Recommendation ESRB/2015/2 of the European Systemic Risk Board of 15 December 2015 on the assessment of 
cross-border effects of and voluntary reciprocity for macroprudential policy measures (OJ C 97, 12.3.2016, p. 9), the 
consolidated  text  of  which  can  be  found  on  www.eur-lex.europa.eu  or  www.esrb.europa.eu.  The  concept  of 
‘reciprocity’ is defined in this Recommendation as ‘an arrangement, whereby the relevant authority in one jurisdiction 
applies the same, or equivalent, macroprudential measure, as is set by the activating relevant authority in another 
jurisdiction,  to  any  financial  institutions  under  its  jurisdiction,  when  they  are  exposed  to  the  same  risk  in  the  latter 
jurisdiction’. 

Article 458(5) of the CRR provides that other Member States may recognise the measures set in accordance with 
Article 458 of the CRR and apply them to domestically authorised branches located in the Member State authorised 
to apply the measures. 

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2.2  The  ECB  notes,  in  this  respect,  that  the  CSSF,  when  acting  as  a  macroprudential  authority, 

including  for  the  proposed  new  macroprudential  measures,  takes  its  decisions  after  consultation 

with  the  BCL  to  reach  a  common  position  and  after  seeking  the  opinion  of  the  Luxembourg 
Systemic Risk Committee8. 

2.3.  As emphasised in a previous opinion9, in view of its existing task of supervising market liquidity10 
and  its  general  mandate  to  contribute  to  financial  stability11,  the  BCL  should,  in  principle,  play  a 

leading  role  in  macroprudential  oversight.  However,  the  legal  framework  governing  the  Systemic 

Risk Committee endows the BCL with an insufficient role as regards countercyclical capital buffers, 

buffers  for  systemically  important  institutions,  systemic  risk  buffers  and  other  macroprudential 

measures described under Article 458 of the CRR, as the BCL merely acts as the secretariat of the 

committee  and  is  a  party  to  the  loose  cooperation  arrangement  described  above.  The  ECB 

therefore  reiterates  its  recommendation  to  bolster  the  BCL’s  role  in  macroprudential  policy, 

including in the context of the reciprocal implementation of macroprudential measures adopted by 

other Member States.  

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

Done at Frankfurt am Main, 27 July 2018. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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See Article 59-12 of the Law of 5 April 1993 on the financial sector, as amended. 
See  paragraphs  5.2  and  5.3  of  Opinion  CON/2014/46.  All  ECB  opinions  are  published  on  the  ECB’s  website  at 
www.ecb.europa.eu. 

See Article 2(4) of the Organic Law. 
See Article 2(6) of the Organic Law. 

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