Opinion of the European Central Bank of 25 February 2021 on the participation of the Hellenic Financial Stability Fund in increases in the capital of credit institutions for purposes other than precautionary recapitalisation or resolution (CON/2021/6)
Date: 2021-02-25
Institutions: European Central Bank
Subjects: financial stability

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 25 February 2021  

on the participation of the Hellenic Financial Stability Fund in increases in the capital of credit 

institutions for purposes other than precautionary recapitalisation or resolution 

(CON/2021/6) 

Introduction and legal basis 

On  8  February  2021  the  European  Central  Bank  (ECB)  received  a  request  from  the  Greek  Ministry  of 

Finance for an opinion on a draft law on the participation of the Hellenic Financial Stability Fund (HFSF) in 

increases  in  the  capital  of  credit  institutions  which  cannot  be  characterised  as  capital  support  (for  the 

purposes  of  precautionary  recapitalisation)  or  as  public  financial  support  (as  part  of  a  resolution) 

(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/EC 1, 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  enables  the  HFSF  to  decide  in  connection  with  a  capital  increase  whether  to: 

(i) exercise  some  or  all  of  its  pre-emption  rights;  (ii)  subscribe,  up  to  its  existing  shareholding 
percentage, for shares or  other instruments of ownership2 issued as part of such capital increase 

(including capital increases where pre-emption rights have been waived or restricted); (iii) in the case 

of a credit institution which has been subject to a corporate reorganisation or group restructuring, 

participate,  up  to  its  existing  shareholding  percentage,  in  the  issuance  of  new  shares  or  other 

instruments of ownership by the relevant holding entity and/or the credit institution which will carry 

on  the  banking  operations  of  the  group,  as  the  case  may  be;  or  (iv)  to  subscribe  one  or  more 

unallocated  shares  resulting  from  a  capital  increase  or  from  issuances  of  other  instruments  of 

ownership, if distributions of such shares or instruments are foreseen. In order for a capital increase 

to be eligible for the purposes of (i) to (iv) above: (a)  it must be a credit institution or, in the case of 

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2  

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). 

As  defined  in  Article  2,  internal  Article  2(1)  point  (107)  of  Law  4335/2015  (Government  Gazette  Α’87/2015)  which 
transposes point (61) of Article 2(1) of Directive 2014/59/EU of the European Parliament and of the Council of 5 May 
2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending 
Council  Directives  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  1093/2012  and  (EU)  No 648/2012,  of  the 
European Parliament and of the Council (OJL 173, 12.6.2012, p. 190).  

 
 
 
 
 
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a corporate reorganisation or group restructuring, the holding entity and/or credit institution which will 

carry on the banking operations of the group 3 that is increasing its capital; (b) the participation of the 

HFSF in that capital increase must not constitute capital support within the meaning of the Law on 

the HFSF4; and (c) private investors’  participation in that capital increase must be of real economic 

significance and on the same terms and conditions and, therefore, with the same level of risk and 

rewards (ie participation on a pari passu basis). 

1.2  The draft law enables the HFSF, at its discretion and by decision of its General Council, to exercise 

the special veto rights referred to in the Law on the HFSF5 in order to prevent the issuance of shares 

or other instruments of ownership by the credit institutions in which it retains a holding or, if a credit 

institution  has  been  subject  to  a  corporate  reorganisation  or  group  restructuring,  by  the  credit 

institution that will carry on the banking operations of the group or by the holding entities of credit 

institution(s),  if  the  terms  of  that  issuance  waive  or  restrict  the  pre-emptive  rights  of  the  existing 

holders of shares or other instruments of ownership. The exercise of these special veto rights by the 

HFSF does not oblige the HFSF to exercise its pre-emptive rights in whole or in part, if subsequently 

a decision to launch a capital increase with pre-emptive rights is adopted. 

1.3  The draft law provides that the participation of the HFSF in the capital increases set out in paragraph 

1.1 above takes place by decision of its General Council, taken following a report by two independent 

financial  advisors  confirming  that  the  proposed  participation  in  the  issue  of  new  shares  or  other 

instruments of ownership contributes to maintaining, protecting or improving the value of the HFSF’s 

existing shareholding in the capital of the issuer or the prospects for divesting its shareholding, taking 

into account prevailing market conditions at the time and the business plan forecasts of the relevant 

credit institution at the time the credit institution decided to increase its share capital increase or issue 

other instruments of ownership.  

1.4  The draft law also stipulates that the registration for, subscription for, and taking up of shares or other 

instruments of ownership by the HFSF in the context of these capital increases must be: (a) at an 

acquisition  price  not  higher,  and  on  terms  not  more  onerous,  than  those  applicable  to  the  other 

shareholders of the issuer; (b) without prejudice to the existing rights of the HFSF arising from its 

framework agreements with credit institutions referred to in the Law on the HFSF 6; and (c) financed 

exclusively from HFSF’s own liquid funds or from the reinvestment of the proceeds of a prior asset 

disposal.  

1.5  The  new  shares  or  other  instruments  of  ownership  thus  acquired  must  confer  on  the  HFSF  full 

shareholder or ownership rights, including voting rights, but shall not confer, inter alia, the special 

rights referred to in the Law on the HFSF7. In the event of a partial divestment of its holdings in a 

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7  

Within  the  framework  of  Law  4548/2018  on  reforming  the  Law  on  sociétés  anonymes  (Government  Gazette 
A’ 104/13.6.2018).  
See Articles 6, 6a, 6b and 7 of law 3864/2010 ‘on the establishment of a Financial Stability Fund’ Government Gazette 
A 119/21.07.2010(Law on the HFSF). 
See Article 10(2) of the Law on the HFSF. 

See Article 6(4) of the Law on the HFSF. 
These rights include the HFSF’s right to appoint a representative on the credit institution’s board of directors who may 
veto certain decisions of the credit institution’s board, convene a general assembly of shareholders or a board meeting 
or approve the appointment of a chief financial officer; the HFSF’s right of access to the credit institution’s books and 
records; the HFSF’s right to evaluate the credit institution’s corporate governance; the HFSF’s right to lay down criteria 
for the assessment of the credit institution’s governing bodies. See Article 10 of the Law on the HFSF. 

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credit  institution  or  holding  entity  by  the  HFSF,  the  ordinary  shares  or  instruments  of  ownership 

acquired by the HFSF by the exercise of its rights under the draft law are deemed to be disposed of 

first, from among the other instruments of ownership of the same category HFSF holds in that credit 

institution or holding entity (‘last in, first out’), such that the special rights of the HFSF under the Law 

on the HFSF8 are maintained in full for as long as the HFSF continues to retain a participation in that 

credit institution or holding entity. 

1.6  The draft law also provides that the new shares and/or other instruments of ownership acquired in 

the context of the HFSF’s participation as an investor in credit institutions may be disposed of by the 

HFSF  by  exemption  from  the  rule  to  submit  a  mandatory  takeover  bid  per  Article  7  of  Greek  law 

3461/20069. 

1.7  The current Law on the HFSF provides that for all types of divestments (be it decreases in its holdings 

via partial exercise of its pre-emptive rights in a capital increase or ordinary disposals of bank shares 

held by the HFSF), the acquisition price (for the former) and the sale price (for the latter) may be 

lower than the most recent price at which HFSF acquired shares or the current market price of the 

share, provided that such divestments fall within the mandate of the HFSF and there is a report of 

two  independent  financial  advisors  of  esteemed  reputation  experienced  in  evaluating  credit 

institutions and related matters. The draft law additionally provides that if this designated procedure 

is followed, this is deemed to constitute a diligent management of its property by the HFSF and that 

if this type of divestment proves ultimately detrimental to the HFSF’s property, criminal charges may 

only  be  brought  if  the  HFSF  itself  decides  to  trigger  a  criminal  prosecution  under  the  relevant 

provisions of the Greek Criminal Code10. 

1.8  The draft law eliminates the provision in the Law on the HFSF that ascribes to the HFSF, together 

with the Greek State, priority ranking, compared to all other shareholders, in the proceeds from the 

liquidation  of  a  credit  institution.  In  addition,  the  draft  law  revises  the  description  of  the  capital 

instruments listed in the Law on the HFSF11 (in the context of allocating the capital shortfall of a credit 

institution to holders of capital instruments, as deemed appropriate), so that this description follows 

the description of Articles 26 (Common Equity Tier 1 items) and 31 (capital instruments subscribed 

by public authorities in emergency situations) of Regulation (EU) No 575/201312. 

1.9  Finally, the draft law assigns the judicial and extra-judicial representation of the HFSF to the General 

Council of the HFSF for all matters except those listed in the Law on the HFSF13 in respect of which 

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9  

10  

11  
12  

13  

See Article 10 of the Law on the HFSF. 

Law  3461/2006  ‘Ενσωμάτωση  στο  Εθνικό  Δίκαιο  της  Οδηγίας  2004/25/ΕΚ  σχετικά  με  τις  δημόσιες  προτάσεις’ 
(Government  Gazette  Α  106/30.5.2006),  transposing  Directive  2004/25/EC  of  the  European  Parliament  and  of  the 
Council of 21 April 2004 on takeover bids (OJ L 142, 30.4.2004, p. 12). 
See Articles 390 and 405(1), second sentence, of the Greek Criminal Code (Law 4619/2019, Government Gazette 
Α 95/11.06.2019). 
See Article 6A of the Law on the HFSF. 

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). 

See Article 4(10) of the Law on the HFSF. 

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the HFSF is represented by the Executive Board14. The draft law also provides that HFSF’s General 

Council will be generally responsible for carrying out all tasks assigned to the HFSF, except for those 

tasks which have been expressly assigned to HFSF’s Executive Board. 

2. 

General observations 

2.1  The ECB welcomes the fact that the draft law enables the HFSF to participate going forward as an 

investor in share capital  increases of a Greek credit  institution for purposes other than to provide 

capital  support  to  cover  capital  shortfalls  in  a  resolution  scenario  or  as  a  precautionary 

recapitalisation  or  as  a  public  equity  support  measure.  The  ECB  also  welcomes  the  safeguards 

introduced  by  the  requirement  of  the  draft  law  that  the  HFSF  must  participate  in  such  capital 

increases alongside private investor participation of real economic significance and under the same 

terms and conditions as those private investors, in line with the relevant Union legal framework.  

2.2  The ECB welcomes the flexibility afforded to the HFSF to decrease its holdings by participating in 

such  capital  increases  (for  example  by  exercising  only  part  of  its  pre-emptive  rights  in  a  capital 

increase,  or  by  participating  in  capital  increases  where  the  pre-emptive  rights  are  waived),  while 

being in a position to subscribe for unallocated shares or other instruments of ownership issued in 

such capital increases. 

2.3  The ECB considers that the above provisions of the draft law will contribute to the ability of Greek 

credit institutions in which the HFSF holds a participation to address both legacy vulnerabilities and 

additional challenges that may arise from the impact of COVID-19 on the asset quality and capital 

adequacy of Greek credit institutions and from a future gradual lifting of the protective measures that 

have been taken by the Greek State in response to them to date. These provisions of the draft law 

should  facilitate  Greek  credit  institutions  in  their  strategies  to  attract  additional  capital  at  market 

conditions,  while  at  the  same  time  affording  them  flexibility  in  their  relevant  planning  for  possible 

corporate reorganisations  within their banking groups. In that context,  it  is also important that the 

draft  law  allows  the  HFSF  to  participate  in  offerings  of  shares  or  other  instruments  of  ownership 

irrespective of whether the issuer and/or offeror of such shares or instruments is the credit institution 

itself or the holding entity of the credit institution following a reorganisation of the banking group (e.g. 

following a ‘hive-down’ restructuring). At the same time, the ECB recognises the divestment of shares 

held in credit institutions as a strategic objective of the HFSF 15 for the medium term and in line with 

its mandate so that Greek credit institutions gradually return to private ownership. The ECB wishes 

to emphasise the importance it attaches to the stability of the financial system in Greece and to the 

need  to  strengthen  the  intermediary  role  of  the  banking  system  to  finance  the  real  economy  and 

support economic growth,  while restoring  access to market-based capital for credit  institutions  on 

commercial terms 16. 

14  

15  

16  

Namely tasks relating to the administration of the HFSF, procurement-related tasks, entering into contracts on behalf 
of the HFSF, hiring of personnel, delegations of tasks to any of the Executive Boards’ members or to HFSF personnel, 
making recommendations to HFSF’s General Council in respect of the General Council’s tasks, and implementing the 
decisions of the General Council. 

The recently published HFSF strategy for 2021-2022 also recognises the ‘aim of returning systemic banks to private 
ownership’  as  part  of  the  HFSF’s  objectives.  See  https://hfsf.gr/wp-content/uploads/2021/02/Agenda-item-2-HFSF-
Strategy-Review-Workshop-results-for-Website-slides-2-3-5-ONLY.pdf.  

See Opinion CON/2014/29, paragraphs 3.2, 6.1 and 6.2. 

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2.4  The ECB welcomes the provisions of the draft law aligning the classification of the HFSF shares in 

credit institutions with the provisions of  Regulation (EU) 575/2013. 

2.5  The ECB reiterates the importance for independent decision-making by the HFSF bodies, which is 

ensured by the envisaged amendment regarding the judicial and extra-judicial representation of the 

HFSF  by  the  General  Council  that  also  contributes  to  a  clear  allocation  of  competences  and 

responsibilities  among  the  HFSF  decision-making  bodies.  Any  amendment  to  the  HFSF’s 

governance structure should be geared towards enabling the HFSF to pursue effectively and deliver 

on its critical mandate to maintain the stability of the Greek banking system, while minimising costs 

for taxpayers17. 

This opinion will be published on EUR-Lex.  

Done at Frankfurt am Main, 25 February 2021. 

[signed] 

The President of the ECB 

Christine LAGARDE 

17  

See Opinion CON2010/54, also paragraphs 2.1 and 2.8 and Opinion ECB/2013/38, paragraph 4.3.  

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