Opinion of the European Central Bank of 11 May 2022 on the divestment strategy, governance structure and special rights of the Hellenic Financial Stability Fund (CON/2022/18)
Date: 2022-05-11
Institutions: European Central Bank
Subjects: financial stability

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 11 May 2022  

on the divestment strategy, governance structure and special rights of the Hellenic Financial 

Stability Fund 

(CON/2022/18) 

Introduction and legal basis 

On 21 April 2022 the European Central Bank (ECB) received a request from the Greek Minister for Finance 

for an opinion on a draft law amending the Law on the Hellenic Financial Stability Fund (HFSF) (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,  and  the  tasks  conferred  upon  the  ECB  pursuant  to 

Article 127(6) of the Treaty concerning the prudential supervision of credit institutions. 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  Divestment-related amendments

1.1.1  The draft law amends the Law on the HFSF in three main respects. First, the draft law amends the

Law on the HFSF as concerns the HFSF’s divestment strategy. In this respect, the draft law elevates 

the divestment of the HFSF’s holdings in credit institutions to a second main objective of the HFSF, 

and  provides  that  such  divestment  must  take  place  within  a  specific  horizon,  in  a  definitive  and 

efficient manner and in full, and in principle within the lifetime of the HFSF. The Executive Board of 

the HFSF (the ‘HFSF Board’) is responsible for this divestment, and the HFSF Chief Executive Officer 

is required to inform the Greek Ministry of Finance on a quarterly basis on the divestment’s progress. 

1.1.2  The draft law introduces an obligation for the HFSF Board to draft a divestment strategy that must 

contain, inter alia, both the general schedule for divesting as well as specific milestones for each 

credit  institution  in  which  the  HFSF  participates,  and  to  set  out  the  necessary  tender/bidding 

procedures through which the divestments will take place, the conditions for participating in these 

procedures  and  the  possible  pricing  methodology  for  the  divestment  of  HFSF-held  shares  and/or 

instruments.  

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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). 

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1.1.3  The  draft  law  provides  that  the  HFSF  Board  may  consult,  on  matters  relating  to  the  HFSF’s 

divestment  strategy,  with  such  institutional  bodies  as  it  deems  appropriate,  including  credit 

institutions, ensuring the confidentiality of information. To take the decision to adopt the divestment 

strategy,  the  HFSF  Board  must  commission  an  independent  financial  advisor  of  internationally 

recognised standing and experience in similar matters to prepare a report. The Ministry of Finance 

must provide its prior consent on the divestment strategy before it is implemented, and, to that end, 

may consult the Bank of Greece. It must also provide the HFSF, at least on a quarterly basis, with 

its views and opinion on this strategy and its implementation by the HFSF. The HFSF must on its 

side inform the Ministry in writing within ten working days of any reservations it may have regarding 

the Ministry’s views. 

1.1.4  The draft law provides that to decide on any disposal of HFSF-held shares and/or instruments in a 

specific  credit  institution,  the  HFSF  must  obtain  a  second  report  from  an  independent  financial 

advisor of internationally recognised standing and experience in similar transactions (hereinafter the 

‘disposal  advisor’).  For  the  selection  of  the  disposal  advisor  the  Ministry  of  Finance  must  give  its 

opinion to the HFSF on the basis of a list of at least three candidates submitted to it by the HFSF. 

The report must include among others a proposal for a specific disposal transaction in accordance 

with the divestment strategy, a description and assessment of the prevailing  market conditions, a 

reasoned proposal for the most appropriate structure of the transaction and a reference timetable for 

the disposal. The disposal of the HFSF’s holdings in each credit institution is to be carried out in a 

manner consistent with the HFSF’s objectives. The draft law stipulates that the fact that a price at 

which HFSF-held shares and/or instruments will be divested that is expected to be lower than the 

market price or the price at which the HFSF acquired the shares and/or instruments is not a sufficient 

condition for the divestment strategy to be postponed or not implemented. 

1.2   Lifetime and governance of the HFSF 

1.2.1  Second, the draft law amends the Law on the HFSF as concerns the lifetime and governance of the 

HFSF.  In  this  respect,  the  draft  law  extends  the  lifetime  of  the  HFSF  from  December  2022  to 

December 2025.  The  draft  law  provides  that  the  Ministry  of  Finance  will  decide  together  with  the 

European  Financial  Stability  Facility  and  the  European  Stability  Mechanism  (ESM)  on  the  way  in 

which the capital, assets and liabilities of the HFSF will be transferred upon the end of its lifetime or 

liquidation.  To  that  end,  the  draft  law  also  provides  that  the  Ministry  of  Finance  may  directly 

commission a study on the transition process with an independent provider of financial or business 

and management advice, in accordance with a prior joint decision of the Minister for Finance and the 

ESM. 

1.2.2  The  draft  law  also  reforms  the  governance  structure  of  the  HFSF  in  a  number  of  respects.  Most 

notably  it  replaces  the  two-tier  governance  model,  comprising  a  General  Council  and  Executive 

Committee, with a single governance body, the HFSF Board, consisting of 6 non-executive and 3 

executive members. The tasks assigned to the Executive Committee will be exercised by the HFSF 

CEO and the tasks of the General Council will henceforth be exercised by the HFSF Board. 

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1.3   Special powers and rights of the HFSF 

1.3.1  Third, the draft law amends the Law on the HFSF as concerns the HFSF’s special powers and rights 

and  clarifies  that,  under  the  Law  on  the  HFSF,  these  powers  and  rights  exist  in  addition  to  the 

standard shareholders’ rights under general corporate and banking law. In this context, the draft law 

also  removes  all  restrictions  on  voting  rights  associated  with  the  shares  and/or  other  instruments 

held by the HFSF in credit institutions2. 

1.3.2  The draft law removes the following special rights of the HFSF in credit institutions’ board of directors: 

the right to ask that the general assembly of shareholders be convened; the right to veto decisions 

of the credit institution’s board of directors regarding dividend distributions and variable remuneration 

in case the institution’s non-performing exposure (NPE) ratio is below 10%; the right to veto decisions 

of  the  credit  institution’s  board  of  directors  that  might  endanger  depositors’  interests  or  more 

generally the solvency, liquidity or smooth functioning of the credit institution; and the right to approve 

the credit institution’s Chief Financial Officer. In addition, the draft law provides that restrictions on 

the fixed remuneration of members of the board of directors and key executives only apply for as 

long as the NPE ratio of the credit institution in question is above 10%. Bonuses for the same persons 

are  abolished  for  as  long  as  the  EU  restructuring  plan  of  the  credit  institution  in  question  is  not 

concluded3 and variable remuneration can only be provided in the form of shares, stock options or 

other instruments 4, for as long as the credit institution is under capital support 5.  

1.3.3  The  HFSF’s  free  access  to  credit  institutions  books  and  records  is  restricted  only  to  information 

needed for the purpose of the divestment of the HFSF’s holding in the credit institution.  

1.3.4  The  draft  law  removes  certain  HFSF  powers  relating  to  governance  aspects  of  credit  institutions, 

including the power to evaluate the corporate governance arrangements of a credit institution that 

the HFSF has funded, which also extends to the evaluation of individual members of the board of 

directors  and  the  board  committees  of  that  institution 6,  and  the  power  to  develop  criteria  for  the 

evaluation of the above elements 7. The draft law limits the minimum suitability criteria determined by 

the HFSF for a credit institution’s board of directors. On the basis of these amendments, the draft 

law also removes the HFSF’s power to make specific recommendations for changes in the corporate 

governance of a credit institution, including the replacement of members of its board of directors, and 

to escalate to the general assembly of shareholders if needed8.  

1.3.5  The draft law specifies that the criteria for institutions’ boards of directors established by the HFSF 

are complementary to the criteria for institutions’ boards of directors under general corporate banking 

law. 

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These restrictions are currently outlined in Article 7A of the Law on the HFSF. 
Restructuring  plans  are  submitted  to  the  European  Commission  which  must  approve  the  capital  support  for  the 
respective credit institution.  
Within the meaning of Articles 52 or 63 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 amending Regulation (EU) No 648/2012 (OJ L 
176, 27.6.2013, p. 1), in accordance with Article 86 of Law 4261/2014.  

Capital support is currently defined in Article 7 of the Law on the HFSF. 
As stipulated in the current paragraph 5 of Article 10 of the Law on the HFSF, which the draft law proposes to delete. 

As stipulated in the current paragraph 6 of Article 10 of the Law on the HFSF, which the draft law proposes to delete. 
As stipulated in the current paragraph 7 of Article 10 of the Law on the HFSF, which the draft law proposes to amend 
accordingly, and in the current paragraphs 8 and 9 of Article 10 of the Law on the HFSF, which the draft law proposes 
to delete.  

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1.3.6  Lastly, the draft law removes from the HFSF‘s tasks the facilitation of credit institutions in managing 

ECB-PUBLIC 

non-performing loans. 

2. 

General observations  

2.1  The ECB welcomes the divestment-related amendments to the Law on the HFSF, which pave the 

way for further normalisation of the Greek financial sector following the reduction in vulnerabilities 

and crisis-related legacies in recent years. A stronger commitment to accelerate divestment of HFSF-

held shares and/or instruments in credit institutions in a coordinated and transparent manner under 

a pre-established, market-based framework and process laid down in the divestment strategy will 

benefit the Greek banking sector. A further reduction of vulnerabilities in the Greek banking sector 

by addressing remaining weaknesses in credit institutions’ asset quality, capital and profitability will 

support the divestment strategy. In this respect, the twin financial stability and divestment objectives 

of the HFSF should be respected. 

2.2  The ECB welcomes the proposed simplification and streamlining of the HFSF’s governing bodies, 

as this will enable the HFSF to more effectively pursue its objectives and facilitate more effective 

decision-making. At the same time, it is of the utmost importance that the HFSF continues to enjoy 

its  statutory  independence,  and  that  it  continues  to  operate  in  accordance  with  private  economic 

activity standards 9.  

2.3  The ECB welcomes the proposed removal of certain special rights of the HFSF in credit institutions’ 

boards of directors and of certain HFSF powers relating to corporate governance that now fall under 

the mandate of the ECB’s Single Supervisory Mechanism, which did not exist at the time the HFSF 

was established. These amendments also reflect the fact that most Greek credit institutions falling 

within the scope of the Law on the HFSF have completed their EU restructuring plans. The draft law 

is expected to support the transition of Greek credit institutions into ordinary supervised entities and 

help ensure a level playing field with other European credit institutions. In this context, the HFSF’s 

special role in Greek credit institutions will be rationalised, bringing the HFSF closer to an ordinary 

shareholder in accordance with general corporate and banking law.   

This opinion will be published on EUR-Lex.  

Done at Frankfurt am Main, 11 May 2022. 

[signed] 

The President of the ECB 

Christine LAGARDE 

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See paragraph 1.2.1 of Opinion CON/2010/54 and paragraphs 4.2 and 4.3 of Opinion CON/2013/38. All ECB Opinions 
are available on EUR-Lex.  

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