CELEX: 52017PC0827
Language: en
Date: 2017-12-06
Title: Proposal for a COUNCIL REGULATION on the establishment of the European Monetary Fund

EUROPEAN COMMISSION
            Brussels,6.12.2017
            COM(2017) 827 final
            2017/0333(APP)
            Proposal for a
            COUNCIL REGULATION
            on the establishment of the European Monetary Fund
            
               
         
         
            
               EXPLANATORY MEMORANDUM
            
            
               1.CONTEXT OF THE PROPOSAL
            
            
               •Reasons for and objectives of the proposal
            
            
               It is almost sixteen years since the first euro coins and notes entered European citizens' daily lives. The currency is now used every day by 340 million Europeans in 19 Member States ("euro area"). The euro is the second most used currency worldwide. Sixty other countries and territories around the world, home to 175 million people, have chosen to use the euro as their currency or to peg their own currency to it. 
            
            
            
               The financial and economic crisis that hit Europe in 2008, the consequences of which are still felt to this day, did not start in the euro area but it laid bare some of its institutional weaknesses. As an emergency response to the immediate challenges, several instruments were adopted. They provided new financial firewalls, assisted the countries most affected and stepped up policy coordination at EU level. Apart from the European Financial Stabilisation Mechanism ("EFSM") based on Council Regulation (EU) No 407/2010, most of them were established outside of the Union legal framework. Member States provided bilaterally financial assistance to Greece and set up the European Financial Stabilisation Facility ("EFSF"). Still in 2010, the European Council concluded that the EFSF, established as a temporary mechanism only, should be replaced by a permanent institution, the European Stability Mechanism ("ESM"). They strengthened the fiscal and financial rules in order to prevent the crisis from escalating further. Monetary policy action by the European Central Bank has also proved decisive.
            
            
            
               After years of low or no growth, determined efforts at all levels have started to pay off. Europe is now experiencing a robust recovery. All Member States are now growing and overall EU growth has stood at around 2% on average for several years in a row.
                  1
                The economic sentiment indicator is at its highest in the EU and euro area since 2000. Unemployment is at its lowest since late 2008. Popular support for the euro is the highest in the euro area since since the introduction of the euro notes and coins in 2002.
                  2
                However, as the current Commission said when taking office, the crisis is not over as long as unemployment remains so high, with 14.3 million people still without a job in the euro area in October 2017.
            
            
            
               Important lessons needed to be drawn from the crisis years. The relevant issues were already clearly identified in the Five Presidents' Report of June 2015
                  3
               .  Since then, a lot has been done in order to "deepen" the Economic and Monetary Union ("EMU") by "doing". The European Semester of economic policy coordination has been strengthened with clearer guidance for the euro area as a whole and a stronger focus on social aspects. Economic governance has been improved, with the creation of a European Fiscal Board and National Productivity Boards. Technical assistance to Member States was boosted with the creation of the Structural Reform Support Service. Important steps towards completing the Banking Union
                  4
                and Capital Markets Union
                  5
                have been taken, notably by advancing in parallel on risk-reduction and risk-sharing measures in the banking sector. To increase ownership at all levels, the dialogue with national and European political actors and social partners has also been intensified.
            
            
            
               As a result, the euro area architecture is much more robust than ever before but this does not mean that it is complete. The Reflection Paper on the deepening of the Economic and Monetary Union,
                  6
                  as well as the Reflection Paper on the future of EU finances
                  7
                 presented by the Commission as part of the follow-up to the White Paper on the Future of Europe,
                  8
                recalls the state of play and outlines a possible ways forward to 2025. 
            
            
            
               Europe is now visibly regaining its strength. Both economically and politically, there is a window of opportunity and positive developments are further encouragements to act. There should be no complacency: one should always fix the roof when the sun is shining.
            
            
            
               In his State of the Union address on 13 September 2017,
                  9
                  President Juncker set out his views for a More United, Stronger and More Democratic Union and made it clear that the completion of Europe's Economic and Monetary Union is an essential part of the roadmap leading to the meeting of Leaders in Sibiu, called by President Tusk for 9 May 2019, where important decisions on the future of Europe should take place. 
            
            
            
               This is also reflected in the Leaders' Agenda,
                  10
                 with EU Leaders planning a Euro Summit on 15 December 2017 to discuss a timeline for decisions on the Economic and Monetary Union and the Banking Union, and a dedicated meeting planned on 28-29 June 2018 with a view of reaching concrete decisions.
            
            
         
         
            
               The call for unity, efficiency and democratic accountability of the State of the Union address is particularly relevant for the completion of the Economic and Monetary Union:
            
            
            
               •
                     Unity: The euro is the single currency of the EU and what is conceived for the euro area should also be conceived for and with those Member States that are expected to join the euro in the future. With the exception of the United Kingdom and Denmark, all non-euro Member States are legally committed to joining the euro eventually.
                  11
                 Moreover, with the United Kingdom's departure, euro area economies will represent about 85% of the EU's total Gross Domestic Product. The EU's political and economic integration, of which the single market is the core, means that the futures of both euro and non-euro Member States are already intertwined, and a strong and stable euro area is key to its members as well as to the EU as a whole.  
            
            
            
               This explains why it is important that the euro area Member States through the European Monetary Fund ("EMF") jointly with the non-euro Member States which participate in the Banking Union provide a backstop for the Single Resolution Board ("SRB") on equivalent terms and conditions to allow the Single Resolution Board to use such means if necessary for undertaking successfully a resolution action in the Banking Union. 
            
            
            
               •
                     Efficiency: A stronger Economic and Monetary Union requires stronger governance and a more efficient use of available resources. The current system still reflects a patchwork of decisions taken to face an unprecedented crisis. This has sometimes led to a multiplication of instruments and an increased sophistication of rules, which is a source of complexity and creates risks of duplications. Greater synergies, streamlined procedures and integration of intergovernmental arrangements within the EU legal framework would strengthen governance and decision-making. It is also for efficiency reasons that all the changes proposed by the Commission as part of today's package can be implemented within the framework of the current EU Treaties.
            
            
            
               Experience has shown that it is difficult and cumbersome to articulate a collective action of the Member States with the competences of economic policy coordination conferred on the Union. More generally, the coexistence of the Union institutions and of a permanent intergovernmental mechanism such as the ESM generates a complex landscape where judicial protection, respect of fundamental rights and democratic accountability are fragmented and unevenly implemented. Furthermore, the decision-making process under an intergovernmental method usually requires cumbersome national procedures and is therefore often difficult to reconcile with the speed needed for ensuring an effective crisis management, as illustrated by the use in July 2015 of the EFSM to bridge finance an ESM support to Greece: amending an EU Regulation and deciding to use it proved in practice to be quicker than taking an ordinary ESM decision of disbursement. This also extends to the adaptation of actions to new circumstances. Since even minor modifications rely on the signature of all contracting parties at the highest political level, the approval of the national Parliaments may be necessary to modify them. Those procedures are time consuming and may prevent taking action at the time when it is needed. The EU legal framework, on the other hand, offers a potential range of methods for modifications of existing acts, with their complexity corresponding to the seriousness of the issue in question and the form of the measure to be adapted. Application of EU decision-making framework would therefore make the process of adjustments of relevant provisions faster, if needed. Greater synergies and a more streamlined decision-making would strengthen governance and procedures.
            
            
            
               •
                     Democratic accountability: Completing the Economic and Monetary Union also means greater political responsibility and transparency about who decides what and when at the different levels. This requires bringing the European dimension of decision-making closer to citizens and more to the forefront of national debates and making sure that both national Parliaments and the European Parliament have sufficient powers of oversight on the management of the EU’s economic governance. This should also lead to greater ownership of collective decisions and openness on the way they are taken and communicated. This is in particular true for the EMF as successor to the ESM. Democratic accountability is a key aspect of the debate on the future of Europe. The ESM has acquired over the years a very important role. Its transformation into a EMF should be accompanied with an effort to anchor its functioning in the robust accountability framework of the Union together with a fully-fledged judicial control. The involvement of the European Parliament in particular would enhance democratic oversight, while the role for National Parliaments remains fully preserved, in view of the large contributions of the Member States to the EMF.
            
            
            
               For all the abovementioned reasons, the necessary structures for providing financial stability support to euro area Member States are best placed in the Union framework and in the hands of a Union body created for such purpose. Given the financial constraints and challenges faced by the Union itself and the accumulated expertise in this area by the ESM, however, setting up such a body from scratch would be prohibitively cost-inefficient. Hence, the proposed EMF should rather incorporate and absorb the already existing ESM with its current objectives, functions and instruments. The EMF now proposed by the Commission can be implemented within the framework of the current Treaties. Beyond such endeavour, this also offers the ideal occasion for creating a common backstop to the SRB. The creation of a backstop for the Single Resolution Fund ("SRF") was already agreed by Member States in 2013, as a complement to the political agreement on the Single Resolution Mechanism Regulation.
                  12
                A common last-resort backstop would serve the purpose of providing enhanced confidence to all parties concerned with regard to the credibility of the actions to be taken by the SRB and to increase the financial capacity of the Single Resolution Fund. As a last resort tool, it would only be activated in case the Single Resolution Fund proved to be insufficient to finance the resolution of the bank or banks concerned. The backstop would be fiscally neutral over time, since any funds used would be recovered from the banking sectors in the Member States participating in the Banking Union.
            
            
               Safeguarding the financial stability of euro area Member States is the rationale linking the SRB with the EMF and its predecessor, the ESM, created in order to safeguard the financial stability of the euro area. In fact, the now well-established sovereign-bank nexus implies that not only the financial soundness of sovereigns but also the one of systemic banks are a critical element for the financial stability of the euro area and the single currency itself. It is hence all the more natural that this proposal will provide the link between the activities of the SRB and of the EMF in the form of an instrument allowing for providing either a credit line or guarantees to the SRB in support of its activities. 
            
            
               In recent years, many views have been expressed on the completion of the Economic and Monetary Union. Opinions may differ but there is a broad consensus on the need to make further progress. There have also been very significant contributions from the European Parliament
                  13
                  and important discussions in the Eurogroup.
                  14
                 
            
            
            
               The proposed Regulation on the establishment of the EMF is one of the initiatives announced in the Commission's Communication on "Further steps towards completing the economic and monetary union". This Communication gives a summary of the rationale and content of all the initiatives presented by the Commission. It then recalls how this package is embedded in a broad roadmap to complete the Economic and Monetary Union by 2025 and provides a timeline for action over the next 18 months.
            
            
            
               This proposal builds on the well-established structure of the European Stability Mechanism by creating a European Monetary Fund anchored within the EU's legal framework. This was already announced in the Five Presidents' Report and has also been called for by the European Parliament which stressed the need for the European Monetary Fund to be equipped with adequate lending and borrowing capacities and a clearly defined mandate.
                  15
                
            
            
         
         
            
               The European Stability Mechanism was set up in October 2012 at the height of the crisis. The pressure of events at the time led to an intergovernmental solution being found. However, it was already clear then that this could also be achieved within the framework of the EU Treaties, as indicated, for instance, in the Commission's Blueprint for a Deep and Genuine Economic and Monetary Union.
                  16
                
            
            
            
               Over the years, the European Stability Mechanism has proven decisive in helping to preserve the financial stability of the euro area. It has done so by providing additional financial support to euro area Member States in distress. Its transformation into a European Monetary Fund will further strengthen its institutional anchoring. It will help to create new synergies within the EU framework, notably in terms of transparency, judicial review and efficiency of the EU’s financial resources and thus offering a better support to Member States. It will also help improve further the cooperation with the Commission and accountability to the European Parliament. This will be done without affecting the way in which national governments are held to account by their own national Parliaments and preserving the commitments of the existing European Stability Mechanism.
            
            
            
               The initiative takes the form of a proposal for a Council Regulation, which is subject to the consent of the European Parliament, under Article 352 of the Treaty on the Functioning of the European Union. Article 352 allows for the integration of the European Stability Mechanism into the Union framework, as this action is necessary for the financial stability of the euro area
                  17
                and the Treaties have not provided any other legal basis for the EU to reach this precise objective.
                  18
                Paragraph 2 of that Article explicitly foresees a role for national Parliaments. Historically, several significant decisions paving the way towards the establishment of the Economic and Monetary Union have been based on the equivalent of Article 352. For instance, decisions on the European Monetary Cooperation Fund, the European Currency Unit and the first balance of payment mechanisms were taken under Article 235 of the Treaty on the European Economic Community, the predecessor to Article 352.
            
            
               The proposal is complemented by a draft of what could become an intergovernmental agreement for euro area Member States to agree among themselves on the transfer of funds from the European Stability Mechanism to the European Monetary Fund. This also foresees that the Fund would succeed to and replace the ESM, including in its legal position, with all its rights and obligations.
            
            
            
               Under today's proposal, the European Monetary Fund will be established as a unique legal entity under Union law. It will succeed the European Stability Mechanism, with its current financial and institutional structures essentially preserved. This means that the European Monetary Fund will continue to provide financial stability support to Member States in need, to raise funds by issuing capital market instruments and to engage in money market transactions. The membership will not change and the participation of additional Member States will remain possible, once they adopt the euro. 
            
            
            
               Given that the European Monetary Fund would become a Union body, some targeted adjustments are necessary to the current structure of the European Stability Mechanism. They include an endorsement by the Council of discretionary decisions taken by the European Monetary Fund.
                  19
               
            
            
            
               In addition, today’s proposal adds a limited number of new features.
            
            
            
               First, the European Monetary Fund will be able to provide the common backstop to the Single Resolution Fund. This is an essential component of the second pillar of the Banking Union, the so-called Single Resolution Mechanism.
                  20
                When the Single Resolution Mechanism was adopted in 2013, Member States also agreed to develop a backstop to the Single Resolution Fund. This was meant as a last resort to be activated if the Single Resolution Fund's immediately available resources proved to be insufficient for capital or liquidity purposes. Member States also agreed that it should be fiscally neutral over the medium term so that any potential deployment of the backstop would be recovered from the banking sector in the euro area. 
            
            
            
               New EU rules on banking supervision and resolution developed in the aftermath of the crisis have significantly reduced the likelihood and potential impact of bank failures. However, a common fiscal backstop continues to be needed to enhance the financial capacity of the Single Resolution Fund. Such a backstop will instil confidence in the banking system by underpinning the credibility of actions taken by the Single Resolution Board. In turn, this would actually reduce the likelihood of a situation in which a backstop would be to be called on.
            
            
            
               There is now wide consensus that the European Stability Mechanism – the future European Monetary Fund – is best placed to provide such a backstop in the form of a credit line or guarantees to the Single Resolution Fund. This is reflected in today's proposal which also sets out appropriate decision-making processes to ensure that the backstop can be deployed quickly, if needed. Special arrangements are also proposed to cater for the legitimate interests of non-euro Member States having joined the Banking Union. 
            
            
            
               Second, in terms of governance, the proposal includes the possibility for faster decision-making in specific urgent situations. It is proposed to keep unanimity voting for all major decisions with financial impact (e.g. capital calls). However, reinforced qualified majority, in which 85% of the votes are required, is proposed for specific decisions on stability support, disbursements and the deployment of the backstop.
            
         
         
            
               Third, as regards the management of financial assistance programmes, the proposal foresees a more direct involvement of the EMF, alongside the European Commission.
            
            
               Fourth, the proposal refers to the possibility for the European Monetary Fund to develop new financial instruments. Over time, such instruments could supplement or support other EU financial instruments and programmes. Such synergies could prove particularly useful if the European Monetary Fund were to play a role in support to a possible stabilisation function in the future.
            
            
               With these changes, the European Monetary Fund will establish itself as a robust crisis management body within the Union framework, working in full synergy with other EU Institutions. The Council and the Commission will retain their competences and responsibilities in terms of economic and fiscal surveillance and policy coordination, as set out in the EU Treaties. 
            
            
               Practical cooperation can also be stepped up to better serve Member States, engage with market participants and avoid duplications of activities. Further cooperation could be sought in the light of further progress towards the strengthening of Economic and Monetary Union.
            
            
            
               •Proposed improvements of the ESM set-up
            
            
               
                  The proposed Regulation and its Annex containing the Statute of the EMF is based on the ESM Treaty and the ESM By-laws. 
               
               
                  In particular the Annex largely mirrors the text of the ESM Treaty. It leaves a number of articles of the ESM Treaty broadly unchanged. It concerns articles related to the capital stock, capital calls as well as the contribution key (Articles 8, 9 and 11), the articles related to the instruments for providing financial stability support to EMF Members (Articles 14 to 18), the pricing policy (Article 20), the borrowing operations (Article 21), the financial management (Articles 25 to 28), the internal audit (Article 33), and the temporary correction of the contribution key (Article 44).
               
               
                  The proposal departs from the text of the current ESM Treaty for two reasons, legal consistency with the EU legal framework and limited changes with a view to enhance the operations and decision-making of the EMF. 
               
               
                  1) Legal consistency with the EU legal framework:
               
               
                  First, the proposed Regulation itself includes articles with changes which are necessary for reasons of consistency with EU law: the establishment of the EMF (Article 1),  its legal succession to and replacement of the EMF (Article 2), the introduction of an approval process by the Council for decisions taken by the Board of Governors or Board of Directors which exhibit political discretion (Article 3) and the related publication requirements (Article 4), and dedicated accountability provisions (Articles 5 and 6) towards the European Parliament and national Parliaments. Two final provision are also foreseen (Articles 7 and 8). 
               
               
                  Second, the Annex to the proposed Regulation contains the Statute of the EMF. It contains changes in order to ensure consistency with Union law such as: the determination of the lending capacity (Article 8), the principles for stability operations (Article 12), inclusion of the instrument for providing assistance for the direct recapitalisation of credit institutions (Article 19), the procedure related to the EMF budget (Articles 29-30), the annual accounts (Article 31), the financial statements and the annual reports (Article 32), the external audit (Article 34), the Board of Auditors (Article 35), the seat agreement (Article 37), the privileges and immunities (Article 38), the staff provisions (Article 39), professional secrecy and exchange of information (Article 40), the management empowerment related to the EFSF (Article 42), anti-fraud measures (Article 45), access to documents (Article 46),  language requirements (Article 47). 
               
               
                  2) Enhancement of the operations and decision-making of the EMF:
               
               
                  Moreover, changes are introduced to articles of the ESM Treaty for achieving certain  additional objectives: enhancing the voting procedures (Articles 5 and 6), the appointment procedure for the managing director (Article 7), establishment of the new function to support the SRB and amending the EMF objectives and principles accordingly (Articles 3, 22 to 24), providing more flexibility with regard to cooperation arrangements (Article 41).
               
               
                  3) Table of equivalence
               
               
                  The following correlation table provides an overview of the compared structure of the ESM Treaty on the left side and of the proposed Regulation and the Statute of the EMF on the right side:
               
            
            
                     
                        Articles of the ESM Treaty
                     
                  
                  
                     
                        Corresponding provisions of the proposed EMF Regulation and the Statute of the EMF ("Statute")
                     
                  
               
                     
                        Article 1 (establishment of the EMF) 
                     
                  
                  
                     
                        Article 1 of the proposed Regulation (establishment of the EMF)
                     
                  
               
                     
                        -
                     
                  
                  
                     
                        Article 2 of the proposed Regulation (succession to and replacement of the ESM)
                     
                  
               
                     
                        -
                     
                  
                  
                     
                        Article 3 of the proposed Regulation (role of the Council)
                     
                  
               
                     
                        -
                     
                  
                  
                     
                        Article 4 of the proposed Regulation (publication)
                     
                  
               
                     
                        -
                     
                  
                  
                     
                        Article 5 of the proposed Regulation (European Parliament)
                     
                  
               
                     
                        -
                     
                  
                  
                     
                        Article 6 of the proposed Regulation (national Parliaments)
                     
                  
               
                     
                        -
                     
                  
                  
                     
                        Article 7 of the proposed Regulation (references to ESM in existing Union legislation)
                     
                  
               
                     
                        - 
                     
                  
                  
                     
                        Article 1 of the Statute (legal status of the EMF)
                     
                  
               
                     
                        Article 2 (membership)
                     
                  
                  
                     
                        Article 2 of the Statute (membership)
                     
                  
               
                     
                        Article 3 (purpose)
                     
                  
                  
                     
                        Article 3 of the Statute (objective and tasks)
                     
                  
               
                     
                        Article 4 (structure and voting rules)
                     
                  
                  
                     
                        Article 4 of the Statute (structure and voting rules)
                     
                  
               
                     
                        Article 5 (board of governors)
                     
                  
                  
                     
                        Article 5 of the Statute (board of governors)
                     
                  
               
                     
                        Article 6 (board of directors)
                     
                  
                  
                     
                        Article 6 of the Statute (board of directors)
                     
                  
               
                     
                        Article 7 (managing director)
                     
                  
                  
                     
                        Article 7 of the Statute (managing director)
                     
                  
               
                     
                        Article 8 (authorised capital stock)
                     
                  
                  
                     
                        Article 8 of the Statute (initial authorised capital stock)
                     
                  
               
                     
                        Article 9 (capital calls) 
                     
                  
                  
                     
                        Article 9 of the Statute (capital calls)
                     
                  
               
                     
                        Article 10 (changes in authorised capital stock)
                     
                  
                  
                     
                        Article 10 of the Statute (capital increases)
                     
                  
               
                     
                        Article 11 (contribution key)
                     
                  
                  
                     
                        Article 11 of the Statute (contribution key)
                     
                  
               
                     
                        Article 12 (principles)
                     
                  
                  
                     
                        Article 12 of the Statute (principles underlying stability operations of the EMF)
                     
                  
               
                     
                        Article 13 (procedure for granting stability support)
                     
                  
                  
                     
                        Article 13 of the Statute (procedure for granting stability support to EMF Members)
                     
                  
               
                     
                        Article 14 (ESM precautionary financial assistance)
                     
                  
                  
                     
                        Article 14 of the Statute (EMF precautionary financial assistance)
                     
                  
               
                     
                        Article 15 ((financial assistance for the re-capitalisation of credit institutions of an ESM Member)
                     
                  
                  
                     
                        Article 15 of the Statute (financial assistance for the re-capitalisation of credit institutions of an EMF Member)
                     
                  
               
                     
                        Article 16 (ESM loans)
                     
                  
                  
                     
                        Article 16 of the Statute (EMF loans)
                     
                  
               
                     
                        Article 17 (primary market support facility)
                     
                  
                  
                     
                        Article 17 of the Statute (primary market support facility)
                     
                  
               
                     
                        Article 18 (secondary market support facility
                     
                  
                  
                     
                        Article 18 of the Statute (secondary market support facility)
                     
                  
               
                     
                        Article 19 (review of the list of financial instruments) 
                     
                  
                  
                     
                        -
                     
                  
               
                     
                        -
                     
                  
                  
                     
                        Article 19 of the Statute (instrument for the direct recapitalisation of credit institutions)
                     
                  
               
                     
                        Article 20 (pricing policy)
                     
                  
                  
                     
                        Article 20 of the Statute (pricing policy)
                     
                  
               
                     
                        Article 21 (borrowing operations)
                     
                  
                  
                     
                        Article 21 of the Statute (borrowing operations)
                     
                  
               
                     
                        - 
                     
                  
                  
                     
                        Article 22 of the Statute (credit line or guarantees to the SRB)
                     
                  
               
                     
                        -
                     
                  
                  
                     
                        Article 23 of the Statute (rules applying to the EMF)
                     
                  
               
                     
                        -
                     
                  
                  
                     
                        Article 24 of the Statute (rules applying to the participating Member States whose currency is not the euro, within the meaning of Article 2 of Regulation (EU) No 1024/2013)
                     
                  
               
                     
                        Article 22 (investment policy)
                     
                  
                  
                     
                        Article 25 of the Statute (investment policy)
                     
                  
               
                     
                        Article 23 (dividend policy)
                     
                  
                  
                     
                        Article 26 of the Statute (dividend policy)
                     
                  
               
                     
                        Article 24 (reserve and other funds)
                     
                  
                  
                     
                        Article 27 of the Statute (reserve and other funds)
                     
                  
               
                     
                        Article 25 (coverage of losses)
                     
                  
                  
                     
                        Article 28 of the Statute (coverage of losses)
                     
                  
               
                     
                        Article 26 (budget)
                     
                  
                  
                     
                        Article 29 of the Statute (budget)
                     
                  
               
                     
                        - 
                     
                  
                  
                     
                        Article 30 of the Statute (establishment of the budget)
                     
                  
               
                     
                        Article 27 (annual accounts)
                     
                  
                  
                     
                        Article 31 of the Statute (annual accounts) 
                     
                  
               
                     
                        - 
                     
                  
                  
                     
                        Article 32 of the Statute (financial statements and annual report)
                     
                  
               
                     
                        Article 28 (internal audit)
                     
                  
                  
                     
                        Article 33 of the Statute (internal audit)
                     
                  
               
                     
                        Article 29 (external audit)
                     
                  
                  
                     
                        Article 34 of the Statute (external audit) 
                     
                  
               
                     
                        Article 30 (board of auditors)
                     
                  
                  
                     
                        Article 35 of the Statute (board of auditors) 
                     
                  
               
                     
                        Article 31 (location)
                     
                  
                  
                     
                        Article 36 of the Statute (location)
                     
                  
               
                     
                        - 
                     
                  
                  
                     
                        Article 37 of the Statute (seat agreement)
                     
                  
               
                     
                        Article 32 (privileges and immunities)
                     
                  
                  
                     
                        Article 38 of the Statute (privileges and immunities)
                     
                  
               
                     
                        Article 33 (staff of ESM)
                     
                  
                  
                     
                        Article 39 of the Statute (staff of the EMF)
                     
                  
               
                     
                        Article 34 (professional secrecy)
                     
                  
                  
                     
                        Article 40 of the Statute (professional secrecy and exchange of information
                     
                  
               
                     
                        Article 35 (immunities for persons)
                     
                  
                  
                     
                        -
                     
                  
               
                     
                        Article 36 (exemption from taxation)
                     
                  
                  
                     
                        - 
                     
                  
               
                     
                        Article 37 (interpretation and dispute settlement) 
                     
                  
                  
                     
                        -
                     
                  
               
                     
                        Article 38 (international cooperation)
                     
                  
                  
                     
                        Article 41 of the Statute (cooperation)
                     
                  
               
                     
                        Article 39 (relation with EFSF lending)
                     
                  
                  
                     
                        -
                     
                  
               
                     
                        Article 40 (transfer of EFSF supports)
                     
                  
                  
                     
                        -
                     
                  
               
                     
                        - 
                     
                  
                  
                     
                        Article 42 of the Statute (management of the EFSF)
                     
                  
               
                     
                        Article 41 (payment of the initial capital)
                     
                  
                  
                     
                        Article 43 of the Statute (payment of initial capital)
                     
                  
               
                     
                        Article 42 (temporary correction of the contribution key) 
                     
                  
                  
                     
                        Article 44 of the Statute (temporary correction of the contribution key)
                     
                  
               
                     
                        Article 43 (first appointments)
                     
                  
                  
                     
                        -
                     
                  
               
                     
                        Article 44 (accession)
                     
                  
                  
                     
                        -
                     
                  
               
                     
                        Article 45 (annexes) 
                     
                  
                  
                     
                        -
                     
                  
               
                     
                        Article 46 (deposit)
                     
                  
                  
                     
                        -
                     
                  
               
                     
                        Article 47 (ratification, approval or acceptance)
                     
                  
                  
                     
                        -
                     
                  
               
                     
                        Article 48 (entry into force) 
                     
                  
                  
                     
                        Article 8 of the proposed Regulation
                     
                  
               
                     
                        -
                     
                  
                  
                     
                        Article 45 of the Statute (anti-fraud measures)
                     
                  
               
                     
                        - 
                     
                  
                  
                     
                        Article 46 of the Statute (access to documents)
                     
                  
               
                     
                        -
                     
                  
                  
                     
                        Article 47 of the Statute (language requirements)
                     
                  
               
            
            
               •Consistency with existing policy provisions in the policy area
            
         
         
            
               
                  With its proposal to establish the EMF, the Union would provide itself with a Union body to act decisively in order to safeguard the financial stability of its Member States. More specifically, in combination with the permanent facility for providing medium-term balance of payment support for non euro Member States, the Union would be equipped with a full range of permanent stabilisation facilities covering the entirety of the Member States, and drawing on considerable financial resources, over and beyond those accessible through the EFSM.
               
               
                  The proposed Regulation on the establishment of the EMF is also a logical step in addition to  Regulation (EU) No 472/2013. In the latter Regulation the Union asserted its competence in the area of financial assistance and the economic policy coordination related thereto, while showing also its capacity to provide for appropriate arrangements, combining the democratic legitimacy of its framework with the efficiency of its decision-making structures. The establishment of the EMF within the Union framework is hence fully in line with the Union's past policy initiatives and complements previous action in that respect.
               
               
                  Furthermore, the creation of a backstop function in order to support the SRB complements recent initiatives to decisively weaken the link between Member States finances and their banking systems. By conferring to the SRB the design and execution of schemes to resolve credit institutions, Regulation (EU) No 806/2014 in addition to Directive 2014/59/EU was a major step into this direction. The Regulation empowers the SRB to contract financial arrangements to put into place funding arrangements. The proposal implements this while clarifying that any funds the SRB borrows from the EMF should be recouped fully from the banking system.
               
               
                  Also future policy initiatives such as for instance the establishment of a stabilisation function could be conceived in this context. A stabilisation function is defined by the possibility to rapidly activate resources in an automatic way, subject to eligibility criteria defined in advance. The objective would be to use these resources to attenuate the effects of large asymmetric shocks. In case of a downturn, Member States would first use their automatic stabilisers and discretionary fiscal policy in compliance with the Stability and Growth Pact (SGP). The SGP provides for additional buffers and the necessity for a smaller fiscal effort to be undertaken during difficult economic conditions. Only if these buffers and stabilisers are not sufficient in the case of large asymmetric shocks, the stabilisation function would be triggered. The EMF could support the implementation of such a function by means of organising and making available any necessary market financing associated with the triggering of the function.
               
            
            
               2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
            
            
               •Legal basis
            
            
               
                  The legal basis for this proposal is Article 352 TFEU. To use that Article, three conditions must be fulfilled. The first two conditions are that no specific legal basis exists in the Treaties and that the action is within the framework of Union policies. The European Court of Justice has already ruled that both conditions are met as regards the ESM (in the Pringle case
                     21
                  ). Within the framework of the economic policy of the Union, as provided for in Title VIII "Economic and Monetary Policy" of Part III of the TFEU, the necessary powers for the Union to establish a Union body in charge of providing financial support for ensuring the financial stability of the euro area have not been enshrined. In the absence of any such powers, Article 352 TFEU allows the Council to adopt unanimously on a proposal from the Commission and after obtaining the consent of the Parliament, the appropriate measures. The third condition is the necessity to attain a Treaty objective. The necessity of having a body like the ESM to safeguard the financial stability of the euro area is based on factual elements and confirmed by Article 136 (3) TFEU and the second recital of the ESM Treaty which refer to the current ESM as "a stability mechanism to be activated if indispensable to safeguard the financial stability of the euro area as a whole". The establishment of the EMF is necessary to contribute to the safeguarding of the financial stability of the euro area as a whole, its Member States and the non euro Member States which participate in the Banking Union on the basis of a close cooperation agreement with the ECB in accordance with Council Regulation (EU) No 1024/2013.
               
               
                  The integration of the ESM into the Union framework through a Regulation based on Article 352 TFEU would ensure a seamless continuation of activities and a direct legal succession between the existing ESM and the new Union body (the EMF). The euro area Member States would agree that the capital of the ESM is attached to this body, through a simplified multilateral act. 
               
               
                  Article 352 TFEU could also be used to confer additional tasks on the ESM when it is integrated into the Union.
               
            
            
               Although a measure based on Article 352 TFEU is adopted by unanimity in the Council (EU28), the application of such a measure can be limited to a subset of Member States where the limitation rests on an objective reason. The fact that the ESM acts only to safeguard the financial stability of the euro area justifies that its membership is limited to euro area Member States. As a result, the proposed EMF could operate as the ESM currently does, with its support available only to euro area Member States and its internal governance structure made up of those same Member States.•Subsidiarity (for non-exclusive competence) 
            
            
               
                  The financial stability of the economic and monetary union and the Member States which participate in the Banking Union has a Union wide dimension. Given the strong interconnections between euro area Member States, severe risks to the financial stability of Member States may put at risk the financial stability of other Member States and of the euro area as a whole.
               
               
                  The proposed Regulation sets out the framework for providing financial stability support to Member States whose currency is the euro and also foresees a new role which consists of providing the financial means to the SRB. Regarding the latter role, the EMF will be entitled to provide credit lines and guarantees to the SRB which could serve as a backstop for the Single Resolution Fund. 
               
               
                  Member States and national authorities cannot unilaterally solve risks to financial stability posed to Member States by financial markets which operate on a cross-border basis beyond the scope of national jurisdictions. In addition, Member States have difficulties in mitigating on their own risks. Member States and national authorities cannot address on their own the systemic risks that another Member State or its credit institutions can pose to the financial stability of the Union as a whole. 
               
               
                  The objectives of this Regulation cannot be sufficiently achieved by the Member States individually and can therefore, by reason of the scale of the action, be better achieved at Union level in accordance with the principle of subsidiarity as set out in Article 5(3) TFEU.
               
            
            
               •Proportionality
            
            
               The proposal aims to ensure the financial stability in the euro area and the EU as a whole, its Member States, and those Member States which participate in the Banking Union. The proposal sets out a streamlined framework for the provision of financial stability support to EMF Members and the provision of credit lines and guarantees in support of the SRB with respect to financing potential resolution actions undertaken in the Member States which participate in the Banking Union. 
            
            
            
               The proposal sets out the different roles and responsibilities for all the governance bodies of the EMF and other Union institutions involved. It also provides for the financial instruments at the disposal of the EMF to achieve its objectives. 
            
            
            
               By establishing a central authority within the Union in charge of providing financial assistance to Member States, the proposal contributes to addressing the risks to financial stability for the euro area and its Member States while preserving the fiscal responsibilities of the Member States by requiring the beneficiary EMF Member to comply with strict policy conditions, appropriate to the financial assistance instrument chosen and the weaknesses to be addressed. Moreover, the EMF would also be tasked with providing financial support to the SRB. The EMF's involvement will contribute to breaking the negative feedback loops between sovereigns, banks and the real economy, which is crucial for a smooth functioning of the EMU. 
            
         
         
            
            
               At the same time, the proposal does not go beyond what is necessary to achieve the EMF's objective of reducing risks to financial stability for the euro area and its Member States. Any support provided by the EMF to EMF Members is subject to policy conditions aimed at addressing the weaknesses present in such Member with a view to rapidly re-establish a sound and sustainable economic and financial situation and restoring or enhancing the Member's capacity to finance itself fully on the financial markets.
            
            
               •Choice of the instrument
            
            
               
                  This act takes the form of a Regulation because the act creates a new body within the Union framework contributing to safeguarding the financial stability and has to be binding in its entirety and directly applicable in Member States. 
               
            
            
               3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
            
            
               •Fundamental rights
            
            
               
                  The EU is committed to high standards of protection of fundamental rights and is signatory to a broad set of conventions on human rights. In this context, the proposal could have a direct impact on these rights, as listed in the Charter of Fundamental Rights of the European Union ("The Charter") which is an integral part of the EU Treaties, and the European Convention on Human Rights ("ECHR"). 
               
               
                  This Regulation respects the fundamental rights and observes the rights, freedoms and principles recognised in particular by the Charter, and, in particular, the right to negotiate conclude and enforce collective agreements or take collective actions, the protection of personal data, the right of access to documents, and should be implemented in accordance with those rights and principles. By integrating the current ESM within the Union framework, it expands the scope of application of the Charter accordingly. 
               
            
            
               4.BUDGETARY IMPLICATIONS
            
            
               
                  The proposal is not expected to have any budgetary implications. The EMF's capital will be subscribed by the euro area Member States. The Union budget will not be liable for any expenses or losses of the EMF. The EMF will also have a self-financed budget.  
               
            
            
               5.OTHER ELEMENTS
            
            
               •Detailed explanation of the specific provisions of the proposal
            
            
               
                  Part I of the proposed Regulation (Articles 1 and 2) provides for the establishment of the EMF within the Union framework. Furthermore, this part also provides for a provision catering for issues related to the succession of the EMF to the ESM. The euro area Member States would need to agree that the capital of the ESM is attached to this body, through individual pledges or a simplified multilateral act. As further developed in the Statute, the authorised capital of the EMF would remain unchanged in comparison to the capital of the ESM.  
               
               
                  Part II of the proposed Regulation (Articles 3 to 6) contains for legal reasons and with a view to respect the Meroni case-law of the Court of Justice of the European Union, a role for the Council. The latter should approve discretionary decisions taken by the Board of Governors and the Board of Directors. It also provides for the accountability arrangements of the EMF towards the European Parliament, the Council and the Commission. Such arrangements currently do not exist for the ESM in the ESM Treaty. The EMF should be required to submit an annual report to the aforementioned Union institutions together with is annual accounts and its financial statements. The Managing Director can be invited by the Parliament or request to be invited. The EMF should also respond to oral and written questions from the Parliament. The possibility for organising confidential oral discussions just like it is the case for the SRB and the SSM should be provided for in view of the sensitive and confidential nature of the discussions relating the performance of the EMF's tasks. Moreover, the Regulation also provides for a more explicit scrutiny role of national Parliaments in comparison to the current state of play in the ESM Treaty. Such a role is warranted in view of the impact of the EMF's decisions on the political constituencies of its Members.
               
               
                  Part III of the proposed Regulation (Article 7 and 8) caters for references to the ESM in Union legislation as well as the entry into force of the proposed Regulation. 
               
               
                  Part I of the Statute of the EMF annexed to this proposed Regulation (Articles 1 to 3) refers to the legal status of the EMF. The EMF shall be a Union body with legal personality. Furthermore, reference is made to the EMF's membership (Article 2). The latter shall consist of euro area Member States. This reflects the current membership of the ESM. Moroever, a provision is foreseen regarding the objectives and tasks of the EMF. In the same way as in the ESM architecture, the EMF would provide financial stability support to its members (euro area Member States). In addition to the ESM's current sole mission, the EMF would also be given the new task of providing credit lines or guarantees in support of the SRB for backstopping the SRF. The latter could serve as a public financial arrangement (backstop) within the meaning of Article 74 of Regulation No 806/2014.
               
               
                  Part II of the Statute of the EMF annexed to this proposed Regulation (Articles 4 to 7) concerns the organisation and decision-making proceedings, including the applicable voting rules of the EMF. Similar to the ESM, the EMF will have a Board of Governors, a Board of Directors, and a Managing Director who would be assisted by a management board. The categories of voting rules enshrined in the ESM Treaty will remain the same in the EMF. Four types of voting rules should be distinguished: (i) unanimity; (ii) reinforced qualified majority (85%), (iii) qualified majority (80%), and (iv) a simple majority. Similar to the rules of the ESM Treaty, unanimity has been kept for decisions having a major direct financial impact on Member States (e.g. decisions on the lending capacity, on capital calls not urgently needed). However, decisions related to granting financial support or disbursements to EMF Members were moved from mutual agreement to a reinforced qualified majority (85%). Moreover, in contrast to the current appointment process of the Managing Director, a consultative role has been foreseen for the European Parliament. Further clarifications stemming from the ESM By-laws on the Managing Director's role and the management board of the ESM have been introduced. Finally, Part II also provides for the rules on the remuneration of members and alternates of the Board of Governors and Board of Directors. 
               
               
                  Part III of the Statute of the EMF annexed to the proposed Regulation (Articles 8 to 11) concerns the the authorised capital stock of the EMF and the lending capacity. The lending capacity and the authorised capital stock of the EMF should be fully preserved compared to the current situation in the ESM. The existing possibility to amend the capital stock and lending capacity of the EMF is maintained.
               
               
                  Part IV of the Statute of the EMF annexed to this proposed Regulation (Articles 12 to 21) provides for the principles underlying the stability support operations of the EMF, the procedure for granting financial stability support to EMF Members and the related financial instruments at the disposal of the EMF. These principles and procedures are the same as those provided for in the ESM Treaty with the exception that the EMF will be given a role in negotiating and signing the memorandum of understanding which accompanies the financial stability support operation.  An explicit reference to Article 152 TFEU and the Charter of Fundamental Rights is also enshrined confirming that the Regulation in the context of providing financial stability support to EMF Members does not impinge on the right of collective bargaining and collective action. In addition to the instruments already provided for in the ESM Treaty with respect to the provision of financial stability support to euro area Member States, also integrates the instrument for the direct recapitalisation of credit institutions. This instrument was only created after the entry into force of the ESM Treaty on the basis of the enabling clause provide for in its Article 19. 
               
               
                  Part V (Articles 22 to 24) of the Statute annexed to this proposed Regulation concerns the provision of a backstop by the EMF and non euro Member States which participate in the Banking Union. The provision of credit lines and guarantees to the SRB would be a totally new function for the EMF in comparison to the ESM's current objective and tasks. The combined amount of outstanding commitments for backstopping the SRF is subject to a ceiling of EUR 60 000 million. This ceiling can be increased. The Board of Governors in agreement with the non-euro Member States of the Banking Union should adopt the financial terms and conditions of such support to the SRB. To ensure a swift availability, the Managing Director shall be authorised to decide on the drawdown of the credit line or the provision of guarantees on liabilities of the SRB. In case the support is requested in relation to a resolution scheme, the SRB may ask such support before the adoption of the resolution scheme.
               
            
         
         
            
               
                  Part VI (Articles 25 to 28)  of the Statute of the EMF annexed to this proposed Regulation deals with the financial management of the EMF. These provisions mirror those of the ESM Treaty. 
               
               
                  Part VII (Articles 29 to 35) of the Statute of the EMF annexed to this proposed Regulation concerns the financial provisions of the EMF. Such rules reflect those of the ESM Treaty and the ESM By-laws. These rules concern the budget of the EMF and its establishment, the annual accounts, the financial statements and the annual report, the internal and external audit function and the role of the Board of Auditors.
               
               
                  Part VIII (Articles 36 to 41) of the Statute of the EMF annexed to this proposed Regulation provides for a number of provisions regarding the location of the EMF and its possibility to arrange for a seat agreement.Moreover, the EMF shall benefit from the privileges and immunities established in Protocol No 7. The current regime of privileges and immunities provided for in the ESM Treaty cannot be maintained for legal reasons. Part VIII also caters for the staff rules applicable to the EMF's staff. Rules regarding the confidentiality and exchange of information should be included. Such rules which differ in nature can also be found back in the By-laws of the ESM. 
               
               
                  Part IX (Articles 42 to 44) of the Statute of the EMF annexed to this proposed Regulation provides for the transitional arrangements regarding the payment of new EMF members of their contribution to the authorised capital stock. The provision reflects the one provided for ESM Members in the ESM Treaty with the understanding that the article in this Regulation only applies to new EMF Members which would join once they adopt the euro in the future. The rule on the temporary correction of the capital key provided for in the ESM Treaty will also remain intact in the context of the EMF. 
               
               
                  Part X (Articles 45 to 47) of the Statute of the EMF annexed to this proposed Regulation contains a number of provisions regarding transparency. Rules regarding anti-fraud measures, access to documents and language requirements are provided for. 
               
               
                   
               
            
            
               2017/0333 (APP)
            
            
               Proposal for a
            
            
               COUNCIL REGULATION
            
            
               on the establishment of the European Monetary Fund
            
            
               THE COUNCIL OF THE EUROPEAN UNION,
            
            
               Having regard to the Treaty on the Functioning of the European Union, and in particular Article 352 thereof,
            
            
               Having regard to the proposal from the European Commission,
            
            
               After transmission of the draft legislative act to the national Parliaments,
            
            
               Having regard to the opinion of the European Central Bank
                  22
               , 
            
            
               Having regard to the consent of the European Parliament, 
            
            
               Acting in accordance with a special legislative procedure,
            
            
               Whereas:
            
            
               (1)The unprecedented financial and economic crisis that hit the world and the Union since 2007 seriously threatened financial stability and damaged economic growth, resulting in a strong deterioration in the government deficit and debt position of several Member States, leading a number of them to seek financial assistance within and outside the framework of the Union. 
            
            
               (2)That crisis revealed that the Union lacked sufficiently solid instruments to act swiftly and decisively in response to challenges to its financial stability. Those instruments are essential for the stability of the euro area, its Member States, for its citizens and other economic actors, and are paramount to strengthen confidence in the single currency. 
            
         
         
            
               (3)In response to the exceptional situation of a severe deterioration of the borrowing conditions of several Member States, beyond what could be explained by economic fundamentals, threatening the financial stability of the Union, a number of measures were adopted, some of them outside the framework of the Union. 
            
            
               (4)Firstly, a European Financial Stabilisation Mechanism (‘EFSM’) through which the Union could provide financial assistance to Member States was established in 2010. That mechanism allowed the Union to respond in a coordinated, rapid and active manner to acute difficulties in a particular Member State but with a limited financial capacity and on a purely temporary basis. 
            
            
               (5)Secondly, in 2010, the Member States whose currency is the euro also established among themselves the European Financial Stability Facility (‘EFSF’), on a temporary basis. The EFSF has provided financial assistance to Ireland, Portugal and Greece. The assistance was financed by the EFSF through the issuance of bonds and other debt instruments on capital markets. The EFSF does not provide any further financial assistance, as this task is currently performed solely by the European Stability Mechanism (‘ESM’).
            
            
               (6)Thirdly, on 17 December 2010, the European Council agreed on the need for Member States whose currency is the euro to establish a permanent stability mechanism replacing the EFSF for granting possible new financial support.
            
            
               (7)The ESM was established as an international financial institution by the Treaty establishing the European Stability Mechanism of 2 February 2012, concluded outside the framework of the Union. The ESM assumed the EFSF's task of providing financial assistance to Member States whose currency is the euro and became operational in October 2012.
            
            
               (8)Over the years, the ESM has proven decisive in helping to preserve the financial stability of the euro area. It has done so by providing additional financial support to euro area Member States in distress. Its transformation into a European Monetary Fund ('EMF') will further strengthen its institutional anchoring. It will help to create new synergies within the EU framework, notably in terms of transparency, efficiency of the EU financial resources and legal review, thus offering a better support to Member States. It will also help improve further cooperation with the Commission and accountability to the European Parliament. This will be done without affecting the way in which national governments are held to account by their own national Parliaments and preserving the ESM commitments.
            
            
               (9)The integration of the ESM into the Union framework by establishing the EMF also contributes to increasing transparency and accountability in the economic and monetary union (‘EMU’). At the height of the crisis, far-reaching decisions for Member States whose currency is the euro and for their citizens were taken. The pivotal role which the ESM played in providing financial stability subject to strict conditionality justifies its integration into the Union framework so as to ensure more dialogue, mutual trust and greater democratic accountability and legitimacy in the decision-making processes of the Union. The EMF should thus be accountable to the European parliament and to the Council. 
            
            
               (10)To enhance the democratic control by the European Parliament, the EMF should report annually on the execution of its tasks. The Parliament should be entitled to pose oral and written questions and to organise hearings. Given the sensitive nature of the activities of the EMF and their impact on financial markets, it should be possible for the Parliament to organise confidential oral discussions with the EMF's Managing Director on the progress made in relation to the process of providing or implementing financial stability support to an EMF Member as well as with respect to the provision of financial support to the Single Resolution Board (‘SRB’). 
            
            
               (11)For reasons of transparency and democratic control, national Parliaments should have rights to obtain information about the activities of, and to engage in a dialogue with the EMF. The national Parliament of an EMF Member should be able to invite the Managing Director to participate in a discussion in relation to progress made on the implementation of a financial stability support operation in view of the impact of such a measure on the EMF Member concerned. Such an exchange of views could help foster understanding between the EMF and the EMF Member concerned. 
            
            
               (12)The TEU and the TFEU have not provided the necessary powers, in the form of a specific legal basis, to establish a permanent Union body in charge of providing financial support for ensuring the financial stability of the euro area and of the Member States whose currency is not the euro but which participate in the Banking Union.
            
            
               (13)In absence of such a specific legal basis, the Council, with the consent of the European Parliament, is allowed to establish an EMF as a measure that is necessary to attain one of the objectives set out in the Treaties within the meaning of Article 352 TFEU.
            
            
               (14)Given the strong interconnections between Member States whose currency is the euro, severe risks to the financial stability of those Member States could put at risk the financial stability of the euro area as a whole. Therefore, the EMF should provide financial stability support to Member States whose currency is the euro where it is indispensable to safeguard the financial stability of the euro area or its Member States.
            
            
               (15)Action by the Union is hence necessary to attain the objectives of establishing an economic and monetary union whose currency is the Union in accordance with Article 3(4) TEU, and of securing a sustainable development of Europe based on balanced economic growth and price stability, and a highly competitive social market economy, aiming at full employment and social progress in accordance with Article 3(3) TEU. More concretely, safeguarding the financial stability of the euro area, of the Member States whose currency is the euro, and of the Member States whose currency is not the euro that participate in the Banking Union aims at achieving a deeper, fairer and more resilient economic and monetary union.
            
            
               (16)Since the objectives of this Regulation cannot be sufficiently achieved by the Member States acting individually but can therefore, by reason of the scale of the action, be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 TEU.
            
            
               (17)The EMF should be established, pursuant to Union law, as a Union body with legal personality. 
            
            
               (18)The EMF should be governed by this Regulation and the Statute of the EMF, which forms an integral part of it. The Statute of the EMF should contain the relevant provisions on the legal status, membership, objectives and tasks of the EMF, its organisation and internal decision-making, the EMF's lending capacity and capital, the rules governing the provision of stability support to Member States whose currency is the euro and the EMF's support to the SRB, the rules related to the EMF's financial provisions and financial management, and the transitional arrangements governing the payment of new EMF Members initial capital and the rules regarding the temporary correction of the EMF contribution key and a number of general provisions. 
            
            
               (19)In order to ensure a seamless continuation of activities and the required legal certainty, the EMF should replace the ESM succeeding it in its legal position, including in all its rights and obligations. 
            
            
               (20)The succession of the EMF to the ESM does not create any new financial obligations for Member States whose currency is the euro as regards their contribution to the authorised capital stock of the EMF, which they have already subscribed. 
            
            
               (21)Given the legal nature of the ESM as an international financial institution based on an international agreement between the Member States whose currency is the euro, the Board of Governors, as the highest decision-making body of the ESM representing the Contracting Parties to the ESM Treaty, should give its prior consent to such succession and transfer of the subscribed capital. The succession should be completed upon the entry into force of this Regulation and the consent of the ESM, whichever is the latest.
            
            
               (22)All Member States whose currency is the euro and which are currently Contracting Parties to the ESM Treaty should be members of the EMF at the moment of the entry into force of this Regulation. As a consequence of adopting the euro, a Member State should become an EMF Member with full rights and obligations, in line with those of the existing EMF Members. 
            
         
         
            
               (23)The rights of a new EMF Member under this Regulation, including voting rights, should be conditional upon subscription of their contribution to the authorised capital stock.
            
            
               (24)Transitional rules, similar to those provided for in the ESM Treaty, should be enshrined as regards new EMF Members which adopt the euro after the entry into force of this Regulation. It should be possible for those Members to pay-in the contribution to the EMF's capital in instalments. Those new EMF Members whose GDP per capita is below 75 percent of the Union GDP per capita in the year preceding its entry into the EMF should benefit from a temporary correction of the contribution key for paying in capital of the EMF. In such a case, the temporary correction should apply for a period of twelve years.
            
            
               (25)The stability support provided for by the EMF should be subject to strict policy conditions. Such conditions should be appropriate to the financial assistance instrument chosen.
            
            
               (26)The policy conditions attached to the financial assistance facility should be defined in a memorandum of understanding (‘MoU’) and should be fully consistent with any of the measures of economic policy coordination adopted on the basis of the TFEU. A social impact assessment should inform the negotiation of the MoU and guide the follow-up and monitoring of its implementation.
            
            
               (27)The Single Supervisory Mechanism ('SSM') established by Council Regulation (EU) No 1024/2013
                  23
                and the Single Resolution Mechanism (‘SRM’) established by Regulation No 806/2014 of the European Parliament and of the Council
                  24
                were created in response to the crisis, as steps towards a Banking Union, to cover the Member States whose currency is the euro and those Member States whose currency is not the euro but choose to participate in the SSM (the ‘participating Member States’) in accordance with Article 7 of Regulation (EU) No 1024/2013, making them subject to the supervisory powers of the ECB and the resolution powers of the SRB in relation to their credit institutions.
            
            
               (28)Supervisory control and resolution operations at Union level underpin the establishment of a Banking Union. The EMF should hence provide financial support to the SRB, the central resolution authority established by Regulation No 806/2014 by means of credit lines or guarantees for the tasks which the SRB executes or will execute in relation to credit institutions within the Banking Union.
            
            
               (29)As part of the creation of the SRM, the Single Resolution Fund (‘SRF’) was established. It is financed by bank contributions raised at national level and pooled at Union level. Pursuant to Article 74 of Regulation No 806/2014, the SRB can contract for the SRF public financial arrangements of additional financial means to be used where the ex-ante and ex-post contributions are not sufficient to meet the Funds' obligations.
            
            
               (30)The EMF should have sufficient financial means to carry out its duties effectively. Given the Union's limited own resources, EMF Members should provide the necessary means in exchange for the rights provided in this Regulation. This should be reflected in appropriate governance arrangements and voting rules ensuring Members' sufficient oversight over the use of the funds that they provide.
            
            
               (31)In view of the EMF's specific financial structure, the voting rights of each EMF Member should reflect the weight of their individual financial contribution to the EMF. The decision making within the EMF's governance bodies should therefore take place in accordance with voting rules that build upon those already existing in the ESM Treaty, to ensure to the largest extent possible a continuity of existing voting practice.
            
            
               (32)Insofar as Member States whose currency is not the euro participate in the Banking Union, their representatives should participate in the meetings of the Board of Governors for any discussions as regards the use of credit lines or guarantees in support of the SRB.
            
            
               (33)The Board of Governors and the Board of Directors should be able to establish permanent or ad hoc committees or subsidiary bodies as they consider necessary or appropriate to advise or otherwise assist them or the Managing Director in the performance of their respective duties. Rules on their tasks, composition and operation should be defined internally. Such committees or subsidiary bodies should not have any decision-making powers. 
            
            
               (34)Following established case-law, decisions taken within the framework of the EMF relating to economic policy and involving a considerable degree of discretion should only be taken with approval and under the responsibility of the Union institutions. In line with the powers enshrined in the Treaties for the coordination of the economic policies of the Member States and with other acts of secondary Union law, the power to approve such decisions pursuant to Article 291 TFEU should be conferred upon the Council.
            
            
               (35)As regards the instruments aimed at granting stability support to EMF Members, the present Regulation is adopted pursuant to Article 352 TFEU as a necessary measure complementing the powers laid down by the Treaty provisions specific to Member States whose currency is the euro (Articles 136 to 138 TFEU). According to those provisions, for Council measures only the members representing Member States whose currency is the euro take part in the vote. For those instruments, this Regulation exclusively concerns the use of resources made available by the Member States whose currency is the euro for the sole benefit of those Member States, with a view to guaranteeing stability in the euro area. In consequence, for decisions of the Council to approve the acts referred to in the previous recital the votes of non-euro area Member States should be suspended and only members of the Council representing Member States whose currency is the euro should take part in the vote.
            
            
               (36)An emergency procedure should be established for the Council to endorse or object to decisions of the EMF governing bodies where the urgent provision of financial stability support to EMF Members is required. In such a case, the Chairperson of the Board of Governors should be able to request the Council to endorse or object to a decision within 24 hours from the transmission of the decision. The emergency procedure could be used for the approval of the financial terms and conditions and the financial assistance facility agreements regarding support to the SRB by means of credit lines or guarantees of the EMF. 
            
            
               (37)The Board of Governors should be entitled to adopt Rules of Procedure governing the practical aspects of the EMF's operations. Those Rules of Procedure should replace the ESM By-laws and the rules of procedure of the Board of Governors and Board of Directors. 
            
            
               (38)The lending capacity of the EMF should be no less than EUR 500 000 million. That amount reflects the current lending capacity of the ESM. The Board of Governors should be able to increase the lending capacity, if it deems that such a review is appropriate for enabling the EMF to pursue its objectives and related tasks. Since such a decision has a significant financial impact for EMF Members, it should be taken unanimously by the Board of Governors. In duly justified exceptional cases, the Board of Governors may also provisionally decrease the lending capacity if this is needed to ensure the ability of the EMF to fulfil its functions.
            
            
               (39)At inception, the EMF's initial authorised capital stock should reflect the authorised capital stock of the ESM. Member States whose currency is the euro should be the sole subscribers of the EMF's authorised capital stock, which should amount to EUR 704 798.7 million, to be divided in equal shares. The liability of an EMF Member should be limited to its portion of the authorised capital stock. EMF Members should not be liable for the obligations of the EMF. The Union budget should not be liable for expenses or losses of the EMF.
            
            
               (40)The Board of Governors should be able to increase the capital of the initial authorised capital stock if it deems such an increase appropriate for enabling the EMF to pursue its objectives and tasks. The ensuing capital and shares between the EMF Members should be published in the Official Journal of the European Union. 
            
            
               (41)Like the ESM, the EMF should provide stability support to its Members when their regular access to market financing is impaired or is at risk of being impaired.
            
            
               (42)The EMF should be involved in the negotiation and signing of the MoU in view of the importance of the conditionality attached to the financial assistance for contributing to ensuring the repayment of EMF financial assistance.  
            
         
         
            
               (43)The range of financial instruments currently available for the ESM should also be available for the EMF, including the possibility to provide precautionary financial assistance, financial assistance for the recapitalisation of credit institutions in an EMF Member, the direct recapitalisation of credit institutions in an EMF Member, the provision of loans, and the purchasing bonds of an EMF Member on the primary and secondary markets. 
            
            
               (44)The objective of financial stability support in the form of precautionary financial assistance is to support sound policies and prevent crisis situations, allowing EMF Members the possibility to access EMF assistance before they face major difficulties raising funds in the capital markets. Precautionary financial assistance aims at helping EMF Members whose economic conditions are still sound to maintain continuous access to market financing by reinforcing the credibility of their macroeconomic performance while ensuring an adequate safety-net. 
            
            
               (45)Financial assistance to EMF Members in the form of a loan to recapitalise beneficiary credit institutions should address cases where financial or economic distress is linked to the financial sector and not directly related to fiscal or structural policies. Therefore, financial assistance for the purpose of recapitalising financial institutions should be granted to an EMF Member outside the framework of a macroeconomic adjustment programme.
            
            
               (46)The instrument of direct recapitalisation of credit institutions aims at preserving the financial stability of the euro area as a whole and of its Member States by catering for those specific cases in which an EMF Member experiences severe difficulties with its financial sector that cannot be remedied without significantly endangering its fiscal sustainability due to a severe risk of contagion from the financial sector to the sovereign. The use of that instrument could also be considered if other alternatives would have the effect of endangering the continuous market access of an EMF Member. As far as the use of the instrument of an EMF loan for the recapitalisation of financial institutions is not possible, such financial assistance seeks to help remove the risk of contagion from the financial sector to the sovereign by allowing for the direct recapitalisation of institutions, thereby reducing the risks of a vicious circle between a fragile financial sector and a deteriorating creditworthiness of the sovereign.
            
            
               (47)There should be financial stability support in the form of loans to assist EMF Members that have significant financing needs but have to a large extent lost access to market financing, either because they cannot find lenders or because lenders will only provide financing at excessive prices that would adversely impact the sustainability of public finances. 
            
            
               (48)In the same way as ESM loans, future EMF loans and outstanding ESM loans should enjoy preferred creditor status in a similar fashion to those of the International Monetary Fund (‘IMF’). However, they should rank second after IMF loans. That status should be effective as of the date of entry into force of this Regulation. 
            
            
               (49)In order for EMF Members to maintain or restore their market access, the EMF should be able to engage in purchases on the primary market of bonds or other debt securities issued by EMF Members under the primary market support facility, in addition to regular loans under a macroeconomic adjustment programme or to draw-downs of funds under the precautionary financial assistance instrument.
            
            
               (50)The EMF should be able to buy bonds of an EMF Member on the secondary market. The secondary market support facility should aim at supporting the good functioning of the government debt markets of EMF Members in exceptional circumstances where the lack of market liquidity threatens financial stability, with a risk of pushing sovereign interest rates towards unsustainable levels and creating refinancing problems for the banking system of the EMF Member concerned. An EMF secondary market intervention should enable market making that would ensure some debt market liquidity and incentivise investors to further participate in the financing of EMF Members.
            
            
               (51)The Member States whose currency is the euro should support equivalent creditor status of the EMF and that of other Member States lending bilaterally in coordination with the EMF.
            
            
               (52)This Regulation should not affect the commitment agreed between the Contracting Parties to the Treaty establishing the ESM pursuant to Article 12(3) of that Treaty, namely that collective action clauses must be included in all new euro area government securities, with a maturity above one year, in a way which ensures that their legal impact is identical.
            
            
               (53)Support to the SRB, through credit lines or guarantees, should be made available in situations where the amounts raised under Article 70 of Regulation (EU) No 806/2014 are not sufficient to cover the losses, costs or other expenses incurred by the use of the SRF in relation to resolution actions and where the extraordinary ex-post contributions provided for in Article 71 of Regulation (EU) No 806/2014 are not immediately accessible. 
            
            
               (54)In order to ensure appropriate equivalent treatment within the Banking Union, participating Member States whose currency is not the euro should offer to the SRB, in parallel to the EMF, credit lines or guarantees on equivalent terms and conditions as those of the EMF.
            
            
               (55)Other Member States whose currency is not the euro should provide for credit lines or guarantees when notifying to the other Member States, the Commission, the ECB, and European Banking Authority the request to enter into a close cooperation with the ECB in relation to the exercise of tasks conferred to it pursuant to Council Regulation (EU) No 1024/2013, subject to the adoption of the ECB decision.
            
            
               (56)From 1 January 2024 the resources in the SRF will be fully mutualised. From that date, Regulation (EU) No 806/2014 stipulates that banks in all Member States participating in the Banking Union are to contribute to the SRF and provide extraordinary ex post contributions to repay borrowings from third parties, in line with a key established on the basis of their size and risk profile. As the support to the SRB is intended to complement the SRF's resources, the same key, applied to the level of the Member States whose currency is not the euro participating in the Banking Union and the EMF should be the basis for determining their respective participation in the support to be provided.
            
            
               (57)The Board of Governors should adopt the applicable financial terms and conditions for the set-up of the backstop by the EMF. With a view to ensuring their appropriate involvement, the EMF and the participating Member States whose currency is not the euro should agree to the financial terms and conditions attached to the credit lines or guarantees to be provided to the SRB as well as the overall ceiling applicable, which should be revised proportionally when a Member State whose currency is not the euro joins the Banking Union.
            
            
               (58)The Managing Director should have the authority to decide, within 12 hours from the reception of the SRB's request, on the drawdown of the credit line or the provision of guarantees on the liabilities of the SRB.
            
            
               (59)In order to ensure the immediate availability of additional financial means to the SRF, the SRB should be able to issue a request for support prior to the adoption of a specific resolution scheme. That should be done in consultation with the Commission, in accordance with the procedure under Article 18 of Regulation (EU) No 806/2014. For decisions related to resolution schemes, the decision of the Managing Director should take effect only once a resolution scheme enters into force in accordance with Article 18 of that Regulation. The sequencing of the request and of the decision should not add to the existing timeline of the resolution procedure as established in Article 18 of Regulation (EU) No 806/2014.
            
            
               (60)The Managing Director's decision regarding disbursement of funds or the granting of guarantees should only be contingent on the SRB conducting its activities pursuant to Regulation (EU) 806/2014, including the applicable bail-in rules. No further conditions should apply.
            
            
               (61)In order to ensure that the EMF continues to be able to provide financial support to its Members when needed, the amount available for the purposes of support to the SRB should be subject to a ceiling of EUR 60 000 million. However, the EMF should be able to respond flexibly to unforeseen funding needs arising from resolution operations. Therefore, the Board of Governors should have the power to increase the ceiling accordingly. 
            
            
               (62)Any financial support provided to the SRB by the EMF and any financial support being provided by participating Member States whose currency is not the euro should be fully repaid by the SRB from its own resources, including contributions from the industry. 
            
         
         
            
               (63)Appropriate rules should be laid down as regards the budget of the EMF and the internal and external audit of its accounts. The EMF's financial statements and accounts should be audited and certified by independent external auditors since the EMF's is an actor in the financial markets. In addition, there should be an independent Board of Auditors which tasks should be to inspect and audit the EMF’s accounts, and ensure compliance, performance and correct risk management of the EMF. It should also monitor and review the EMF's internal and external audit review processes. 
            
            
               (64)The powers of the independent external auditors and the Board of Auditors are without prejudice to the powers of the European Court of Auditors pursuant to Article 287 TFEU.
            
            
               (65)Protocol No 7 on the Privileges and Immunities of the European Union annexed to the TEU and the TFUE should be applicable to the EMF. The Chairperson of the Board of Governors and in particular the Governors, alternate Governors, the Directors, and alternate Directors should, as representatives of EMF Members, enjoy the privileges and immunities granted by virtue of Article 10 of that Protocol. 
            
            
               (66)To enable the EMF to fulfil the tasks currently performed by the ESM as well as its new tasks, transitional measures should be laid down, in particular with regard to the Managing Director, the Management Board and staff which are currently employed under a contract with the ESM. This should also include nationals of third countries which are currently employed by the ESM. The existing contractual arrangements should continue to apply to staff employed by the ESM before the entry into force of this Regulation. Staff joining the EMF, after the entry force of this Regulation, shall be subject to the Staff Regulations, the Conditions of Employment of Other Servants and the rules of application. 
            
            
               (67)In order to preserve the confidentiality of the work of the EMF, the members of its governing bodies and its staff, including the staff exchanged with or seconded by EMF Members for the purpose of carrying out the EMF's tasks, should be subject to requirements of professional secrecy, even after their duties have ceased. A code of conduct should be established in that respect. 
            
            
               (68)The obligation of confidentiality should also apply to observers invited to attend the meetings of the Board of Governors and to participants in such meetings of participating Member States whose currency is not the euro. For the purpose of performing the tasks conferred to it by this Regulation, the EMF should be authorised, subject to conditions, to exchange information with its Members, other Union authorities and bodies as well as with certain national authorities.
            
            
               (69)For the purpose of fulfilling its objectives, the EMF should cooperate with Union institutions and other bodies, offices or agencies as well as with third States which provide financial assistance to an EMF Member. The EMF should also be entitled to cooperate with international organisations or entities having special responsibilities in fields related to the EMF's activities.  This includes amongst others, the IMF and central banks. 
            
            
               (70)The EMF should be subject to the Union rules on public access to documents. When assessing the grounds for refusing access to a document set out in Article 4 of Regulation (EC) No 1049/2001 of the European Parliament and of the Council
                  25
               , the EMF should duly take into account the need to protect the confidentiality of the proceedings of the Board of Governors, the Board of Directors, any of their respective committees, the Management Board and the Board of Auditors, the internal finances of the EMF and the stability of the financial system in the euro area, of an EMF Member, or of a participating Member State as defined by Article 2 of Council Regulation (EU) No 1024/2013, and also of the international, financial, monetary or economic relations.
            
            
               (71)In the future, the EMF could also be conferred new financial instruments, e.g. to support policy initiatives related to the establishment of a stabilisation function. A stabilisation function is intended to attenuate the effects of large asymmetric shocks. To this effect, it would rapidly activate countercyclical resources in an automatic way, subject to eligibility criteria defined in advance. The EMF could support the implementation of such a function by means of organising and making available any necessary market financing associated with the triggering of the function.
            
            
               (72)A possible form of such support by the EMF to a stabilisation function would be that upon activation the EMF would provide loans to the beneficiary EMF Member. The loans provided by the EMF could be provided without conditionality while the activation of the stabilisation function itself would be made subject to the adherence of pre-defined eligibility criteria,
            
            
            
               HAS ADOPTED THIS REGULATION:
            
            
               PART I 
            
            
               THE EUROPEAN MONETARY FUND
            
            
               Article 1
            
            
               Establishment
            
            
               1. This Regulation establishes the European Monetary Fund ("EMF”). 
            
            
               2. The Statute of the EMF is set out in the Annex to this Regulation and forms an integral part thereof. 
            
            
               Article 2
            
            
               Succession to and replacement of the European Stability Mechanism
            
         
         
            
            
               1. The EMF shall succeed to and replace the European Stability Mechanism ("ESM"), including its legal position and assuming all its rights and obligations. The process shall be completed upon the entry into force of this Regulation or upon the consent of the ESM, whichever is the latest.
            
            
               2. All existing appointments and mandates in the ESM shall be maintained for the remaining period of their terms of office, within the framework of the EMF.
            
            
               PART II 
            
            
               ROLE OF THE COUNCIL AND ACCOUNTABILITY
            
            
            
               Title I 
            
            
               Role of the Council
            
            
               Article 3
            
            
               Role of the Council
            
            
               1. Decisions taken by the Board of Governors pursuant to Article 8(6), Article 9(1), Article 10, Article 11(4), Article 11(5), Article 11(6), Article 13(2), Article 13(4), Article 14(1), Article 14(2), Article 15(1), Article 15(2), Article 19(1), Article 19(4), Article 16(1), Article 16(2), Article 17(1), Article 17(2), Article 18(1), Article 18(3), Article 22(4), Article 22(5), and Article 23(1) of the Statute of the EMF, decisions taken by the Board of Governors regarding financial assistance facility agreements pursuant to Article 13(3) of the Statute of the EMF, and decisions taken by the Board of Directors pursuant to Article 9(2), Article 14(4), Article 15(4), Article 19(5), Article 16(4), Article 17(4), Article 18(5), and Article 23(3) of the Statute of the EMF, shall be transmitted to the Council immediately after their adoption, together with the reasons on which they are based. They may enter into force only if they are approved by the Council. 
            
            
               2. Where circumstances require the urgent provision of stability support to an EMF Member in accordance with Article 16, decisions may be taken by an emergency procedure. In such an event, the decision taken by the Board of Governors or the Board of Directors shall be transmitted to the Council immediately after its adoption together with the reasons on which it is based. Upon request of the Chairperson, the Council shall discuss the decision, within 24 hours of its transmission. The Council may object to the decision. In the event of an objection, the Council may itself adopt another decision on the matter, or refer the matter back to the Board of Governors for another decision. 
            
            
               The emergency procedure may also be used by the Board of Governors for the decision pursuant to Article 22(4) and (5), and Article 23(1). 
            
            
               3. The Council shall provide reasons for the exercise of its powers referred to in paragraph 1 where it does not approve a decision or the exercise of its powers referred to in paragraph 2 where it objects to a decision. Any new decision that the Board of Governors or the Board of Directors may take on the same subject matter shall respect the reasons given by the Council.
            
            
               4. Where the Council acts in accordance with paragraphs 1 or 2, and with the exception of decisions taken pursuant to Article 22 to 23 of this Statute, the votes of members of the Council representing Member States whose currency is not the euro shall be suspended. A qualified majority shall be defined in accordance with Article 238(3) TFEU. The Chairperson of the Board of the Governors may attend the meetings of the Council. 
            
            
            
               Article 4
            
            
               Publication
            
            
               Decisions taken by the Board of Governors and approved by the Council pursuant to Article 3(1) shall be published in the Official Journal of the European Union.
            
            
         
         
            
               Title II
            
            
               Accountability 
            
            
            
               Article 5
            
            
               Accountability towards the European Parliament and the Council
            
            
               1. The EMF shall be accountable to the European Parliament and to the Council for the execution of its tasks. 
            
            
               2. The EMF shall submit on an annual basis to the European Parliament, to the Council, and to the Commission a report on the execution of its tasks, together with its annual accounts and its financial statement. The Managing Director shall present those documents to the European Parliament and to the Council, both of which may hold a general debate on that basis. 
            
            
               3. The Managing Director may, at the request of the European Parliament or on his or her own initiative, be heard by the competent committees of the European Parliament on the execution of the EMF’s tasks.
            
            
               4. The EMF shall reply orally or in writing to questions put to it by the European Parliament or by the Council in accordance with the EMF's own procedures. 
            
            
               5. Upon request, the Managing Director shall hold confidential oral discussions behind closed doors with the Chair and Vice-Chairs of the competent committees of the European Parliament concerning its tasks, including the social impact assessment, the implementation of financial stability support and the provision of credit lines or setting of guarantees in support of the SRB. An agreement shall be concluded between the European Parliament and the EMF outlining detailed arrangements for organising such discussions, with a view to ensuring full confidentiality.
            
            
            
               Article 6
            
            
               Accountability towards National Parliaments
            
            
               1. When submitting the report provided for in Article 5(2), the EMF shall simultaneously forward it directly to the national Parliaments of the EMF Members and of the participating Member States as defined in Article 2 of Regulation (EU) No 1024/2013. National Parliaments may address their reasoned observations on that report to the EMF.
            
            
               2. National Parliaments of the Member States referred to in paragraph 1 may request the EMF to reply in writing to any observations or questions submitted by them to the EMF in respect of the tasks of the EMF.
            
            
               3. The national Parliament of an EMF Member may invite the Managing Director to participate in an exchange of views in relation to the progress made regarding the implementation of the financial stability support. 
            
            
            
               PART III
            
            
               FINAL PROVISIONS 
            
            
         
         
            
               Article 7
            
            
               References in Union law
            
            
               References to the European Stability Mechanism or ESM in acts of Union law shall be construed as references to the European Monetary Fund or EMF. 
            
            
            
               Article 8
            
            
               Entry into force
            
            
               This Regulation shall enter into force on the day of its publication in the Official Journal of the European Union. 
            
            
               This Regulation shall be binding in its entirety and directly applicable in all Member States.
            
            
            
               Done at Brussels,
            
            
               
                     For the Council
               
               
                     The President
               
            
         
         
            
                  
                     (1)
                  
                        European Economic Forecast Autumn 2017; Institutional Paper 63.
               
               
                  
                     (2)
                  
                        Flash Eurobarometer 458, 4 December 2017.
               
               
                  
                     (3)
                  
                        “Completing Europe's Economic and Monetary Union”, Report by Jean-Claude Juncker, in close cooperation with Donald Tusk, Jeroen Dijsselbloem, Mario Draghi and Martin Schulz, 22 June 2015. 
               
               
                  
                     (4)
                  
                        See in particular COM(2017) 592 final, 11 October 2017. 
               
               
                  
                     (5)
                  
                        COM(2017) 292 final, 8 June 2017.
               
               
                  
                     (6)
                  
                        COM(2017) 291, 31 May 2017.
               
               
                  
                     (7)
                  
                        COM(2017) 358, 28 June 2017.
               
               
                  
                     (8)
                  
                        COM (2017) 2025, 1 March 2017.
               
               
                  
                     (9)
                  
                        President Jean-Claude Juncker’s State of the Union Address 2017, 13 September 2017.
               
               
                  
                     (10)
                  
                        Leaders’ Agenda: Building our future together, endorsed by the European Council on 20 October 2017.
               
               
                  
                     (11)
                  
                        To note that among the non-euro Member States, Denmark and Bulgaria have pegged their currency to the euro since the introduction of the latter in 1999. Unlike Denmark, Bulgaria does not participate in the Exchange Rate Mechanism II, but the lev is pegged to the euro within the framework of a currency board arrangement.
               
               
                  
                     (12)
                  
                        Statement of Eurogroup and Economic and Financial Affairs Council Ministers on the Single Regulation Mechanism backstop, 18 December 2013.
               
               
                  
                     (13)
                  
                        See in particular the European Parliament resolutions of 16 February 2017 on i) budgetary capacity for the euro area (2015/2344(INI)), ii) possible evolutions of and adjustments to the current institutional set-up of the European Union (2014/2248(INI)) and iii) improving the functioning of the European Union building on the potential of the Lisbon Treaty (2014/2249(INI)).
               
               
                  
                     (14)
                  
                        See in particular Eurogroup of 6 November 2017 on “Fiscal capacity and fiscal rules for the Economic and Monetary Union”, Eurogroup of 9 October 2017 on “Deepening Economic and Monetary Union – The role of the ESM” (ecfin.cef.cpe(2017)5598799) or Eurogroup of 10 July 2017 on “Follow-up on deepening of the Economic and Monetary Union” (ecfin.cef.cpe(2017)3980511).
               
               
                  
                     (15)
                  
                        European Parliament's resolution of 16 February 2017 on a budgetary capacity for the euro area (2015/2344(INI)).
               
               
                  
                     (16)
                  
                        COM(2012)777 “Blueprint for a Deep and Genuine Economic and Monetary Union”, 28 November 2012.
               
               
                  
                     (17)
                  
                        The necessity of having a body like the European Stability Mechanism to safeguard the stability of the euro area is based on factual elements and confirmed by Article 136(3) Treaty on the Functioning of the EU, as well as the second recital of the European Stability Mechanism Treaty which refer to the current European Stability Mechanism as "a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole".
               
               
                  
                     (18)
                  
                        The European Court of Justice has already considered the possibility that Article 352 could be used to establish a Union body in charge of providing financial support to ensure stability of the euro area. See “Pringle case”- judgment of 27 November 2012, Case C-370/12, EU:C:2012:756, paragraph 67.
               
               
                  
                     (19)
                  
                        This will ensure compliance with the “Meroni doctrine”. The Meroni doctrine, which arose from Cases 9/56 and10/56 (Meroni v High Authority [1957/1958] ECR 133), relates to the extent to and conditions under which EU Institutions may delegate their tasks to regulatory agencies.
               
               
                  
                     (20)
                  
                        Regulation (EU) No 806/2014. The Single Resolution Board (SRB) is the resolution authority for large and systemic banks in the euro area, operational since January 2016. The Single Resolution Fund (SRF) is financed via contributions from the euro area banking sector. It may be used to finance resolution costs, provided that all conditions of the regulatory framework are met, including the bail-in of 8% of total liabilities of the bank concerned.
               
               
                  
                     (21)
                  
                        Case C-370/12 Pringle EU:C:2012:756. The Court of Justice was asked by the Supreme Court of Ireland if euro area Member States were prevented from concluding the ESM Treaty amongst themselves by various provisions of the Treaties, including Articles 119 to 123 TFEU and 125 to 127 TFEU. 
               
               
                  
                     (22)
                  
                        OJ C , , p. .
               
               
                  
                     (23)
                  
                        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).
               
               
                  
                     (24)
                  
                        Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ L 225, 30.7.2014, p. 1).
               
               
                  
                     (25)
                  
                        Regulation (EC) No 1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding public access to European Parliament, Council and Commission documents (OJ L 145, 31.5.2001, p. 43).
               
            
      
    ---documentbreak--- 
      
         
               EUROPEAN COMMISSION
            Brussels,6.12.2017
            COM(2017) 827 final
            ANNEX
            to the
            Proposal for a Council Regulation
            on the establishment of the European Monetary Fund 
            
               
         
         
            
               STATUTE OF THE EUROPEAN MONETARY FUND
            
            
            
               PART I 
            
            
               MEMBERSHIP AND SCOPE
            
            
            
               Article 1 
            
            
               Legal Status of the EMF
            
            
            
               The EMF shall have legal personality. It shall enjoy in all the Member States the most extensive legal capacity accorded to legal persons under their laws. It may, in particular, acquire and dispose of movable and immovable property and may be a party to legal proceedings. 
            
            
               Article 2
            
            
               Membership
            
            
               1. Members of the EMF shall be the Member States whose currency is the euro.
            
            
               2. A Member State whose currency is not the euro shall become an EMF Member as from the date of entry into force of the decision of the Council in accordance with Article 140 (2) TFEU abrogating its derogation from adopting the euro. It shall become an EMF Member on the same terms and conditions as existing EMF Members.
            
            
               3. The exercise by EMF Members of all the rights granted by this Regulation, including voting rights, shall be conditional upon the subscription of their contribution to the authorised capital stock. 
            
            
               4. A new member of the EMF shall receive shares in the EMF in exchange for its capital contribution, calculated in accordance with the contribution key provided for in Article 14. 
            
            
            
               Article 3
            
            
               Objective and tasks
            
            
               1. The EMF shall contribute to safeguarding the financial stability of the euro area, as well as the financial stability of the 'participating Member States' within the meaning of Article 2 of Regulation (EU) No 1024/2013. 
            
         
         
            
               2. To achieve its objective, the EMF shall:  
            
            
               (a) mobilise funding and provide stability support under strict policy conditions, appropriate to the financial assistance instrument chosen, to the benefit of its Members which are experiencing, or are threatened by, severe financing problems, if indispensable to safeguard the financial stability of the euro area as a whole or of its Members;
            
            
               (b) provide credit lines or set guarantees in support of the Single Resolution Board (‘the SRB’) established in accordance with Regulation (EU) No 806/2014 for any task assigned to it.
            
            
            
               PART II 
            
            
               ORGANISATION AND DECISION-MAKING
            
            
               Article 4
            
            
               Structure and voting rules
            
            
               1. The EMF shall have a Board of Governors and a Board of Directors, as well as a Managing Director and other staff as may be considered necessary. Governors, Directors, and their respective alternates shall perform their duties without remuneration from the EMF. 
            
            
            
               2. The decisions of the Board of Governors and the Board of Directors shall be taken by unanimity, reinforced qualified majority, qualified majority or simple majority as specified in this Regulation. In respect of all decisions, a quorum of two thirds of the EMF Members with voting rights representing at least two thirds of the voting rights must be present. 
            
            
               3. Abstentions by members present in person or represented shall not prevent the adoption of a decision requiring unanimity.
            
            
               4. The adoption of a decision by reinforced qualified majority requires 85% of the votes cast. 
            
            
               5. The adoption of a decision by qualified majority requires 80 % of the votes cast. 
            
            
               6. The adoption of a decision by simple majority requires a majority of the votes cast.
            
            
               7. The voting rights of each EMF Member, as exercised by its representative on the Board of Governors or Board of Directors, shall be equal to the number of shares allocated to it in the authorised capital stock of the EMF.
            
            
               8. If any EMF Member fails to pay any part of the amount due in respect of its obligations in relation to paid-in shares or calls of capital under Articles 8, 9 and 10 of this Statute, or in relation to the reimbursement of the financial assistance under Article 16 or 17 of this Statute, the voting rights of that EMF Member shall be suspended for so long as such failure continues. The voting thresholds shall be recalculated accordingly.
            
            
               Article 5
            
            
               Board of Governors
            
            
               1. Each EMF Member shall appoint a Governor and an alternate Governor. Such appointments shall be revocable at any time. The Governor shall be a member of the government of that EMF Member who has responsibility for financial affairs. The alternate Governor shall have full power to act on behalf of the Governor when the latter is not present. 
            
         
         
            
               2. The Chairperson of the Board of Governors (‘the Chairperson’) shall be the President of the Euro Group, as referred to in Protocol No 14 on the Euro Group annexed to the TEU and to the TFEU. The Board of Governors shall elect a Vice-Chairperson from among its members for a term of two years. The Vice-Chairperson may be re-elected. A new election shall be organised without delay if the incumbent no longer meets the requirement laid down in paragraph 1.
            
            
               3. A Member of the Commission and the President of the European Central Bank (‘ECB’) shall participate in the meetings of the Board of Governors as non-voting members.
            
            
            
               4. Representatives of Member States whose currency is not the euro participating on an ad hoc basis alongside the EMF in a stability support operation for a Member State whose currency is the euro shall also be invited to participate, as observers, in the meetings of the Board of Governors where that stability support and its monitoring are to be discussed 
            
            
            
               5. Other persons, including representatives of Member States whose currency is not the euro for purposes other than those referred to in paragraph 4, institutions or organisations may be invited by the Board of Governors to attend meetings as observers on an ad hoc basis. 
            
            
            
               6. The Board of Governors shall take the following decisions provided for in this Statute by unanimity:
            
            
               (a) increase or decrease the minimum lending capacity in accordance with Article  8(6). 
            
            
               (b) make capital calls, in accordance with Article 9(1);
            
            
               (c) increase the authorised capital stock in accordance with Article 10(1);
            
            
               (d) take into account a possible update of the key for the subscription of the ECB capital and the changes to be made to the contribution key for the subscription of the EMF authorised capital stock in accordance with Article 11(4);
            
            
               (e) approve changes to be made to the distribution of capital among EMF Members and the calculation of such a distribution as a direct consequence of a Member State becoming a new EMF Member, in accordance with Article 11(3);
            
            
               (f) confirm or revise the terms and conditions for the provision of credit lines or the setting of guarantees in support of the SRB and decide to increase the ceiling for support to the SRB, in accordance with Article 22(5);
            
            
               (g) adopt the financial terms and conditions for the provision of credit lines or the setting of  a ceiling for guarantees in support of the SRB, in accordance with Articles 22(5) and 23(1). 
            
            
            
               7. The Board of Governors shall take the following decisions provided for in this Statute by reinforced qualified majority: 
            
            
               (a) provide stability support to EMF Members, including the policy conditions as stated in the memorandum of understanding referred to in Article 13(3), and to establish the choice of instruments and the financial terms and conditions, in accordance with Articles 14 to 18;
            
            
               (b) request the Commission to negotiate, in liaison with the ECB, the economic policy conditions attached to each financial assistance, in accordance with Article 13(3); 
            
            
               (c) change the pricing policy and pricing guideline for financial assistance, in accordance with Article 20;
            
         
         
            
            
               8. The Board of Governors shall take the following decisions provided for in this Statute by qualified majority: 
            
            
            
               (a) set out the detailed technical terms when a Member State becomes a EMF Member; 
            
            
               (b) elect its Vice-Chairperson, in accordance with paragraph 2 of this Article;
            
            
               (c) determine the list of activities incompatible with the duties of a Director or an alternate Director, in accordance with Article 6(8); 
            
            
               (d) adopt the shortlist of candidates for the position of the Managing Director and request the Court of Justice for the removal of the latter, in accordance with Article 7; 
            
            
               (e) set out the rules of procedure of the EMF;
            
            
               (f) establish other funds, in accordance with Article 27; 
            
            
               (g) decide on the actions to be taken for recovering a debt from an EMF Member, in accordance with Article 28 (2) and (3); 
            
            
               (h) approve the annual accounts and annual report of the EMF, in accordance with Articles 31 and 32, respectively; 
            
            
               (i) approve the external auditors, in accordance with Article 34; 
            
            
               (j) appoint the members of the Board of Auditors, in accordance with Article 35(1);
            
            
               (k) decide on the working language of the EMF in accordance with Article 47.
            
            
            
               9. The Chairperson shall convene and preside over the meetings of the Board of Governors. The Vice-Chairperson shall preside over those meetings when the Chairperson is unable to participate.
            
            
               Article 6
            
            
               Board of Directors
            
            
               1. Each Governor shall appoint one Director and one alternate Director from among people of high competence in economic and financial matters. Such appointments shall be revocable at any time. The alternate Directors shall have full power to act on behalf of the Director when the latter is not present. 
            
            
               Each Director and alternate Director shall devote the time and attention to the activities of the EMF as so required. While holding office at the EMF, and for a period of six months after no longer holding office, a Director or alternate Director may not engage in the activities determined by the Board of Governors in accordance with paragraph 8. 
            
         
         
            
               2. The Commission may appoint one non-voting member. The ECB may appoint one observer.
            
            
               3. A representative of each Member State whose currency is not the euro participating on an ad hoc basis alongside the EMF in a financial stability support and assistance operation for a Member State whose currency is the euro shall also be invited to participate, as observers, in the meetings of the Board of Directors when that financial assistance and its monitoring are to be discussed. 
            
            
               4. Other persons, including representatives of Member States whose currency is not the euro for purposes other than those referred to in paragraph 3 of this Article, institutions or organisations, may be invited by the Board of Governors to attend meetings as observers on an ad hoc basis.
            
            
               5. The Board of Directors shall take decisions by qualified majority, unless otherwise provided for in this Statute. 
            
            
               6. Without prejudice to the powers of the Board of Governors as set out in Article 5, the Board of Directors shall ensure that the EMF is run in accordance with this Regulation and the rules of procedure of the EMF. 
            
            
               7. Any vacancy in the Board of Directors shall be immediately filled in accordance with paragraph 1.
            
            
               8. The Board of Governors shall lay down what activities are incompatible with the duties of a Director or an alternate Director.
            
            
               Article 7
            
            
               Managing Director
            
            
               1. The Managing Director shall be appointed by the Council on the basis of merit from among candidates having the nationality of an EMF Member, relevant international experience and a high level of skills, knowledge and competence in economic and financial matters. 
            
            
            
               The Board of Governors shall draw up a shortlist of candidates for the position of Managing Director. It shall strive to respect the principle of gender balance.
            
            
            
               The Council, after consulting the European Parliament, shall appoint the Managing Director. The Council shall act by qualified majority. Only members of the Council representing Member States whose currency is the euro shall vote.
            
            
            
               The Managing Director shall be a full time position. In addition, he or she may exercise the role of Chief Executive Officer of the European Financial Stability Facility (EFSF). The Managing Director shall not hold another office at national, Union or international level and may not be a Governor or Director or an alternate of either. 
            
            
            
               2. The term of office of the Managing Director shall be five years. He or she may be re-appointed once. The Managing Director shall remain in office until his or her successor is appointed. If the Managing Director no longer fulfils the conditions required for the performance of his or her duties or has been found guilty of serious misconduct, the Court of Justice may, upon the request of the Board of Governors and after informing the European Parliament adopt a decision to remove him or her from office.
            
            
            
               3. The Managing Director shall chair the meetings of the Board of Directors and shall participate in the meetings of the Board of Governors.
            
         
         
            
                
            
            
               4. The Managing Director shall be chief of the staff of the EMF and shall be responsible for organising, appointing and dismissing staff in accordance with Article 39 of this Statute..
            
            
            
               5. The Managing Director shall be the legal representative of the EMF. 
            
            
            
               Without prejudice to Article 13(4), Article 14(3), Article 15(3), Article 16(3), Article 17(3), Article 18(4) and Article 23(2) of this Statute, the EMF shall be validly represented in dealings with third parties as follows: 
            
            
               (a) by the Managing Director or, in his or her absence, by any two members of the management board acting jointly, and
            
            
               (b) by any person acting within the limits of specific powers delegated by the Managing Director. 
            
            
            
               6. The Managing Director shall conduct, under the direction of the Board of Directors, the current business of the EMF and shall be assisted by a management board. 
            
            
            
               The management board shall consist of the Managing Director, who shall chair it, and such other members of the EMF's staff as the Managing Director shall designate from time to time. 
            
            
            
               CAPITAL AND LENDING CAPACITY
            
            
               Article 8
            
            
               Initial authorised capital stock and lending capacity
            
            
               1. The initial authorised capital stock of the EMF shall be EUR 704 798.7 million. It shall be divided into seven million forty-seven thousand nine hundred and eighty-seven shares, having a nominal value of EUR 100 000 each, which shall be available for subscription through transfer of the capital of the ESM according to the initial contribution key provided for in table I and calculated in accordance with Article 11 of this Statute. The subscriptions to the initial authorised capital stock are set out in table II. 
            
            
            
               2. The initial authorised capital stock of the EMF shall be divided into paid-in shares and callable shares. The initial total aggregate nominal value of paid-in shares shall be EUR 80 548.4 million. Shares of authorised capital stock initially subscribed shall be issued at par. Other shares shall be issued at par.
            
            
         
         
            
               3. Shares of authorised capital stock shall not be encumbered or pledged in any manner whatsoever and they shall not be transferable, with the exception of transfers for the purposes of implementing adjustments of the contribution key provided for in Article 11(5) of this Statute to the extent necessary to ensure that the distribution of shares corresponds to the adjusted key.
            
            
                
            
            
               4. The liability of each EMF Member shall be limited, in all circumstances, to its portion of the authorised capital stock at its issue price. No EMF Member shall be liable, by reason of its membership, for obligations of the EMF. The obligations of EMF Members to contribute to the authorised capital stock in accordance with this Regulation shall not be affected if any such EMF Member becomes eligible for, or is receiving, financial assistance from the EMF.
            
            
            
               5. The Union budget shall not be held liable for the expenses or losses of the EMF.
            
            
               6. The initial lending capacity of the EMF shall be no less than EUR 500 000 million. The sum of all financial commitments of the EMF shall not exceed the minimum lending capacity at any point in time. The Board of Governors may decide to increase the lending capacity. In duly justified exceptional cases, the Board of Governors may also provisionally decrease the lending capacity if this is needed to ensure the ability of the EMF to fulfil its functions.
            
            
               Article 9
            
            
               Capital calls
            
            
            
               1. The Board of Governors may call in authorised unpaid capital at any time and set an appropriate period of time for its payment by the EMF Members. 
            
            
               2. The Board of Directors may call in authorised unpaid capital by simple majority decision to restore the level of paid-in capital if the amount of the latter is reduced by the absorption of losses below the level established in Article 8(2) of this Statute, as may be amended by the Board of Governors following the procedure provided for in Article 10 of this Statute, and set an appropriate period of time for its payment by the EMF Members.
            
            
               3. The Managing Director shall call authorised unpaid capital in a timely manner if needed to avoid the EMF being in default of any scheduled or other payment obligation due to EMF creditors. The Managing Director shall inform the Board of Directors and the Board of Governors of any such call. When a potential shortfall in EMF funds is detected, the Managing Director shall make such capital call or calls as soon as possible with a view to ensuring that the EMF has sufficient funds to meet payments due to creditors in full on their due date. EMF Members shall irrevocably and unconditionally undertake to pay on demand any capital call made on them by the Managing Director pursuant to this paragraph, such demand to be paid within seven days of receipt.
            
            
                
            
            
               4. The EMF Members shall meet all capital calls on a timely basis.
            
            
               5. The Board of Directors shall adopt the detailed terms and conditions which shall apply to capital calls pursuant to this Article.
            
            
            
               Article 10
            
            
               Capital increases
            
            
               1. The Board of Governors may decide to increase the authorised capital stock of the EMF provided for in Article 11. The new shares shall be allocated to the EMF Members according to the contribution key provided for in Article 11.
            
            
         
         
            
               2. Upon a Member State becoming a new EMF Member, the authorised capital stock of the EMF shall be automatically increased by multiplying the respective amounts then prevailing by the ratio, within the adjusted contribution key provided for in Article 11 of this Statute, between the weighting of the new EMF Member and the weighting of the existing EMF Members.
            
            
            
               Article 11
            
            
               Contribution key
            
            
            
               1. The contribution key for subscribing to EMF authorised capital stock by EMF Members which are Member States whose currency is the euro shall, subject to paragraphs 2 and 3, be based on the key for subscription, by the national central banks of EMF Members, of the ECB's capital pursuant to Article 29 of Protocol No 4 on the Statute of the European System of Central Banks and of the European Central Bank (‘the ESCB Statute’) annexed to the TEU and TFEU. 
            
            
               2. The initial contribution key for the subscription of the EMF authorised capital stock is set out in table I attached to this Statute.
            
            
               3. The contribution key for the subscription of the EMF authorised capital stock shall be adjusted when: 
            
            
               (a) a Member State becomes a new EMF Member and the EMF's authorised capital stock automatically increases; or
            
            
               (b) the twelve-year temporary correction applicable to an EMF Member established in accordance with Article 44 ends.
            
            
               4. The Board of Governors may decide to take into account possible updates to the key for the subscription of the ECB's capital referred to in paragraph 1 when the contribution key is adjusted in accordance with paragraph 3. 
            
            
               5. When the contribution key for the subscription of the EMF authorised capital stock is adjusted, the EMF Members shall transfer among themselves authorised capital stock to the extent necessary to ensure that the distribution of authorised capital stock corresponds to the adjusted key. 
            
            
               6. The Board of Directors shall take all other measures necessary to ensure the application of the provisions of this Article. 
            
            
            
               PART IV
            
            
               STABILITY SUPPORT OPERATIONS OF THE EMF 
            
            
               Title I 
            
            
               Principles underlying stability operations of the EMF
            
            
               Article 12
            
            
               Principles
            
         
         
            
            
               1. If indispensable to safeguard the financial stability of the euro area or of its Member States, the EMF may provide stability support through the instruments provided for in Articles 14 to 19 to an EMF Member subject to strict policy conditions, appropriate to the financial assistance instrument chosen. Such policy conditions may range from a macro-economic adjustment programme pursuant to Regulation (EU) No 472/2013 of the European Parliament and of the Council
                  1
                to continuous respect of pre-established eligibility conditions.
            
            
               2. The EMF, the Council, the Commission and the Member States shall fully observe Article 152 TFEU and shall take into account national rules and practice and Article 28 of the Charter of Fundamental Rights of the European Union. Accordingly, the application of this Regulation does not affect the right to negotiate, conclude and enforce collective agreements or to take collective action in accordance with national law.
            
            
            
               Title II 
            
            
               Financial stability support to EMF Members 
            
            
            
               Article 13
            
            
               Procedure for granting stability support to EMF Members
            
            
            
               1. An EMF Member may address a request for stability support to the Chairperson of the Board of Governors. Such a request shall indicate the financial assistance instrument or instruments to be considered. On receipt of such a request, the Chairperson of the Board of Governors shall request the Commission in liaison with the ECB, to carry out the following tasks: 
            
            
            
               (a) to assess the existence of a risk to the financial stability of the euro area as a whole or of its Member States, unless the ECB has already submitted an analysis under Article 18(2) of this Statute;
            
            
                
            
            
               (b) to assess whether public debt is sustainable; 
            
            
            
               (c) to assess the actual or potential financing needs of the EMF Member concerned.
            
            
                
            
            
               2. On the basis of the request of the EMF Member and the assessment referred to in paragraph 1, the Board of Governors may decide to grant, in principle, stability support to the EMF Member concerned in the form of a financial assistance facility.
            
            
               3. If a decision pursuant to paragraph 2 is adopted, the Board of Governors shall request the Commission, in liaison with the ECB, and in cooperation with the EMF, to negotiate, with the EMF Member concerned, a memorandum of understanding (‘MoU’) detailing the policy conditions attached to the financial assistance facility. The content of the MoU shall reflect the severity of the weaknesses to be addressed and the financial assistance instrument chosen. In parallel, the Managing Director shall prepare a proposal for a financial assistance facility agreement, including the financial terms and conditions and the choice of instruments, to be adopted by the Board of Governors. 
            
         
         
            
            
               The MoU shall be fully consistent with the measures of economic policy coordination provided for in the TFEU, in particular with any act of Union law, including any opinion, warning, recommendation or decision addressed to the EMF Member concerned and with the macroeconomic adjustment programme to be approved by the Council pursuant to Article 7(2) of Regulation (EU) No 472/2013. It shall be preceded by a social impact assessment.
            
            
                
            
            
               4. The Commission and the EMF shall sign the MoU, subject to prior compliance with the requirements set out in paragraph 3 and approval by the Board of Governors. 
            
            
            
               5. The MoU shall be made public.  
            
            
            
               6. The Board of Directors shall approve the financial assistance facility agreement detailing the financial aspects of the stability support to be granted and, where applicable, the disbursement of the first tranche of the assistance. 
            
            
               7. The EMF shall establish an appropriate warning system to ensure that it receives any repayments due by the EMF Member under the stability support in a timely manner.
            
            
               8. The Commission, in liaison with the ECB, shall monitor compliance with the policy conditions attached to the financial assistance facility.
            
            
               Article 14
            
            
               EMF precautionary financial assistance
            
            
            
               1. The Board of Governors may decide to grant precautionary financial assistance in the form of a precautionary conditioned credit line or in the form of an enhanced conditions credit line in accordance with Article 12(1) of this Statute.
            
            
            
               2. The policy conditions attached to the EMF precautionary financial assistance shall be detailed in the MoU, in accordance with Article 13(3). 
            
            
               3. The financial terms and conditions of the EMF precautionary financial assistance shall be specified in a precautionary financial assistance facility agreement, to be signed by the Managing Director.
            
            
               4. The Board of Directors shall adopt the detailed guidelines on the modalities for implementing the EMF precautionary financial assistance. 
            
            
            
               5. The Board of Directors shall decide by reinforced qualified majority, on the basis of a proposal from the Managing Director and after having received a monitoring report from the Commission in accordance with Article 13(8), whether the credit line should be maintained. 
            
         
         
            
               6. After the EMF Member has drawn funds for the first time, via a loan or a primary market purchase, the Board of Directors shall decide by reinforced qualified majority, on the basis of a proposal from the Managing Director and following an assessment conducted by the Commission, in liaison with the ECB, whether the credit line continues to be adequate or whether another form of financial assistance is needed.
            
            
               Article 15
            
            
               Financial assistance for the re-capitalisation of credit institutions of an EMF Member
            
            
            
               1. The Board of Governors may decide to grant financial assistance through loans to an EMF Member for the specific purpose of re-capitalising the credit institutions of that EMF Member.
            
            
               2. The policy conditions attached to financial assistance for the re-capitalisation of an EMF Member's credit institutions shall be laid down in the MoU, in accordance with Article 13(3). 
            
            
            
               3. Without prejudice to Articles 107 and 108 TFEU, the financial terms and conditions of financial assistance for the re-capitalisation of an EMF Member's credit institutions shall be specified in a financial assistance facility agreement, to be signed by the Managing Director. 
            
            
            
               4. The Board of Directors shall adopt the detailed guidelines on the modalities for implementing financial assistance for the re-capitalisation of an EMF Member's credit institutions. 
            
            
               5. Where applicable, the Board of Directors shall decide by reinforced qualified majority, on a proposal from the Managing Director and after having received a monitoring report from the Commission in accordance with Article 13(8), the disbursement of the tranches of the financial assistance subsequent to the first tranche.
            
            
            
               Article 16
            
            
               EMF loans
            
            
            
               1. The Board of Governors may decide to grant financial assistance in the form of a loan to an EMF Member, in accordance with Article 12(1).
            
            
                
            
            
               2. The policy conditions attached to the EMF loans shall be contained in a macro-economic adjustment programme detailed in the MoU, in accordance with Article 13(3). 
            
            
            
               3. The financial terms and conditions of each EMF loan shall be specified in a financial assistance facility agreement, to be signed by the Managing Director.
            
         
         
            
                
            
            
               4. The Board of Directors shall adopt the detailed guidelines on the modalities for implementing EMF loans.
            
            
                
            
            
               5. The Board of Directors shall decide by reinforced qualified majority, on a proposal from the Managing Director and after having received a monitoring report from the Commission in accordance with Article 13(8), the disbursement of the tranches of the financial assistance subsequent to the first tranche.
            
            
               Article 17
            
            
               Primary market support facility
            
            
            
               1. The Board of Governors may decide to arrange for the purchase of bonds of an EMF Member on the primary market, in accordance with Article 12(1) and with the objective of maximising the cost efficiency of the financial assistance.
            
            
                
            
            
               2. The policy conditions attached to the primary market support facility shall be detailed in the MoU, in accordance with Article 13(3). 
            
            
            
               3. The financial terms and conditions under which the bond purchase is conducted shall be specified in a financial assistance facility agreement, to be signed by the Managing Director. 
            
            
            
               4. The Board of Directors shall adopt detailed guidelines on the procedure for implementing the primary market support facility. 
            
            
            
               5. The Board of Directors shall decide by reinforced qualified majority, on the basis of a proposal from the Managing Director and after having received a monitoring report from the Commission in accordance with Article 13(8), the disbursement of financial assistance to a beneficiary Member State through operations on the primary market.
            
            
               Article 18
            
            
               Secondary market support facility
            
            
            
               1. The Board of Governors may decide to arrange for operations on the secondary market in relation to the bonds of an EMF Member in accordance with Article 12(1). 
            
         
         
            
               2. Decisions on interventions on the secondary market to address contagion shall be taken on the basis of an analysis of the ECB recognising the existence of exceptional financial market circumstances and risks to financial stability.
            
            
               3. The policy conditions attached to the secondary market support facility shall be detailed in the MoU, in accordance with Article 13(3).
            
            
               4. The financial terms and conditions under which the secondary market operations are to be conducted shall be specified in a financial assistance facility agreement, to be signed by the Managing Director.
            
            
               5. The Board of Directors shall adopt detailed guidelines on the procedure for implementing the secondary market support facility. 
            
            
               6. The Board of Directors shall decide by reinforced qualified majority, on the basis of a proposal from the Managing Director, to initiate operations on the secondary market.
            
            
            
               Article 19
            
            
               Instrument for the direct recapitalisation of credit institutions
            
            
               1. Without prejudice to Articles 107 and 108 TFEU, Articles 18(4)(d) and 27(9) of Regulation (EU) No 806/2014 and Articles 56, 57, and 58 of Directive 2014/59/EU, the Board of Governors of the EMF may decide to grant financial assistance to directly recapitalise credit institutions at the request of an EMF Member. The assistance shall cater for specific cases in which the EMF Member experiences acute difficulties with its financial sector that cannot be remedied without significantly endangering its fiscal sustainability due to a severe risk of contagion from the financial sector to the sovereign or where other alternatives would have the effect of endangering the EMF Member's continuous market access.
            
            
               2. The credit institution concerned shall be of systemic relevance or shall pose a serious threat to the financial stability of the euro area as a whole or of the requesting EMF Member. 
            
            
               3. The EMF Member in whose territory the credit institution referred to in paragraph 2 is located shall contribute capital of an appropriate volume and quality along with the EMF.
            
            
               4. The Board of Governors shall adopt detailed guidelines on the procedure for implementing the instrument for the direct recapitalisation of credit institutions.
            
            
               5. The Board of Directors shall approve the recapitalisation. Where applicable, such approval may be made subject to conditions specific to the beneficiary institution.
            
            
               6. Financial commitments arising from decisions adopted pursuant to paragraph 1 shall not exceed the amount of EUR 60 000 million in total.
            
            
               Title III
            
            
               Pricing policy and borrowing operations of the EMF
            
            
               Article 20
            
            
               Pricing policy
            
            
            
               1. When granting stability support, providing credit lines or setting guarantees, the EMF shall aim to fully cover its financing and operating costs and shall include an appropriate margin.
            
         
         
            
            
               2. For all instruments, pricing shall be detailed in a pricing guideline, which shall be adopted by the Board of Governors. 
            
            
               3. The pricing policy may be reviewed by the Board of Governors.
            
            
               Article 21
            
            
               Borrowing operations
            
            
            
               1. The EMF may raise funds by issuing financial instruments or by entering into agreements or arrangements, financial or otherwise, with its Members, financial institutions or other third parties. 
            
            
            
               2. The modalities of the borrowing operations shall be determined by the Managing Director, in accordance with detailed guidelines to be adopted by the Board of Directors. 
            
            
            
               3. The EMF shall use appropriate risk management tools, which shall be reviewed regularly by the Board of Directors.
            
            
            
               PART V
            
            
               SUPPORT TO THE SRB
            
            
            
               Article 22
            
            
               Credit line or guarantees to the SRB
            
            
               1. Financial support to the SRB shall be jointly provided by the EMF and by the participating Member States within the meaning of Article 2 of Regulation (EU) No 1024/2013 whose currency is not the euro, on equivalent terms and conditions, through credit lines or ceilings, or both, for guarantees on liabilities of the SRB.
            
            
               Amounts of support provided to the SRB in accordance with paragraph 1 shall be borne by the EMF and by the participating Member States referred to in paragraph 1 of this Article in proportion to a key to be communicated by the SRB when requesting the support. In order to determine that key, the SRB shall calculate the extraordinary ex-post contributions that would need to be raised in order to repay the total amount of support, and it shall aggregate the results at the level of respectively the territory of all EMF Members and the territories of each participating Member State within the meaning of Article 2 of Regulation (EU) No 1024/2013 whose currency is not the euro. The SRB shall perform this calculation on the basis of the latest information available to it for the purposes of Article 70 of Regulation (EU) No 806/2014. For the purposes of this calculation, the SRB shall not apply Article 5(1)(e) of the agreement on the transfer and mutualisation of contributions to the Fund. 
            
            
               2. The combined amount of outstanding commitments arising from decisions adopted under paragraph 1 shall be subject to an initial ceiling of EUR 60 000 million. 
            
         
         
            
               3. Funds provided to the SRB shall be recouped by the SRB in accordance with Article 73 of Regulation (EU) No 806/2014.
            
            
               4. The Board of Governors, acting in agreement with the participating Member States referred to in paragraph 1:
            
            
               (a) shall adopt the financial terms and the conditions of the support;
            
            
               (b) may decide to increase the ceiling referred to in paragraph 2.
            
            
               5. Where a Member State whose currency is not the euro becomes a participating Member State within the meaning of Article 2 of Regulation (EU) No 1024/2013, that Member State shall agree with the EMF and the other participating Member States within the meaning of Article 2 of Regulation (EU) No 1024/2013 whose currency is not the euro, to confirm or revise, as necessary the terms and conditions referred to in paragraph 4.
            
            
               Where a Member State whose currency is not the euro becomes a participating Member State within the meaning of Article 2 of Regulation (EU) No 1024/2013, the initial ceiling referred to in paragraph 3  shall increase by the same proportion as the increase in the target level that occurs in accordance with Article 69 of Regulation (EU) No 806/2014 when a Member State whose currency is not the euro becomes a participating Member State within the meaning of Article 2 of Regulation (EU) No 1024/2013.
            
            
               6. The financial terms and conditions referred to in point (a) of paragraph 4 shall be further detailed in one or several financial assistance facility agreements, to be concluded between the SRB, on the one hand, and the EMF and the participating Member States  referred to in paragraph 1, on the other hand.
            
            
               7. Decisions on the drawdown of the credit line or the provision of guarantees on liabilities of the SRB shall be adopted at the latest 12 hours after the receipt of a request from the SRB.
            
            
               8. Where the request of the SRB is in relation to a resolution scheme, the SRB may, after consulting the Commission, request support before the adoption of such resolution scheme. In that case, the decisions on the drawdown of the credit line or the provision of guarantees on liabilities of the SRB shall take effect at the same time the resolution scheme enters into force.
            
            
            
               Article 23
            
            
               Rules applying to the EMF
            
            
               1. The Board of Governors shall adopt the financial terms and conditions of the EMF support. 
            
            
               2. The Managing Director shall:
            
            
               (a) sign the agreement, subsequent to approval by the Board of Directors;
            
            
               (b) have the authority to decide on the drawdown of the credit line or the provision of guarantees on liabilities of the SRB. 
            
            
               3. The Board of Directors shall adopt the detailed guidelines on the modalities for implementing EMF credit lines or guarantees to the SRB.
            
            
            
               Article 24
            
            
               Rules applying to the participating Member States whose currency is not the euro, within the meaning of Article 2 of Regulation (EU) No 1024/2013
            
         
         
            
               Before a Member State whose currency is not the euro becomes a participating Member State within the meaning of Article 2 of Regulation (EU) No 1024/2013, that Member State shall provide credit lines or guarantees in support of the SRB in accordance with Article 22 of this Statute, subject to the adoption of the decision of the ECB establishing close cooperation between the ECB and the national competent authority of that Member State in accordance with Article 7(2) of Regulation (EU) No 1024/2013.
            
            
               Those Member States shall put in place the procedures to allow these credit lines and guarantees to be activated in accordance with Article 22 of this Statute.
            
            
            
               PART VI 
            
            
               FINANCIAL MANAGEMENT
            
            
               Article 25
            
            
               Investment policy
            
            
            
               1. The Managing Director shall implement a prudent investment policy for the EMF, in order to ensure its highest creditworthiness, in accordance with guidelines to be adopted and reviewed regularly by the Board of Directors. The EMF shall be entitled to use part of the return on its investment portfolio to cover its operating and administrative costs. 
            
            
               2. The operations of the EMF shall comply with the principles of sound financial and risk management.
            
            
               Article 26
            
            
               Dividend policy
            
            
            
               1. The Board of Directors may decide, by simple majority, to distribute a dividend to the EMF Members where the amount of paid-in capital and the reserve fund exceed the level required for the EMF to maintain its lending capacity and where proceeds from the investment are not required to avoid a payment shortfall to creditors. Dividends are distributed pro rata to the contributions to the paid-in capital, taking into account the possible acceleration referred to in Article 44(3). 
            
            
            
               2. Without prejudice to Article 8(6) and Article 9(1) of this Statute, and provided that the EMF has not granted financial assistance to one of its members, the proceeds from the investment of the EMF paid-in capital shall be returned to the EMF Members according to their respective contributions to the paid-in capital, after deductions for operational costs.
            
            
               3. The Managing Director shall implement the dividend policy for the EMF in accordance with guidelines to be adopted by the Board of Directors.
            
            
               Article 27
            
            
               Reserve and other funds
            
            
         
         
            
               1. The Board of Governors shall establish a reserve fund and, where appropriate, other funds. 
            
            
            
               2. Without prejudice to Article 26 of this Statute, the net income generated by the EMF operations and the proceeds of the financial sanctions received from the EMF Members under the multilateral surveillance procedure, the excessive deficit procedure and the macro-economic imbalances procedure established under Article 121(6) and Article 126 TFEU shall be put aside in a reserve fund. 
            
            
            
               3. The resources of the reserve fund shall be invested in accordance with guidelines to be adopted by the Board of Directors. 
            
            
               4. The Board of Directors shall adopt such rules as may be required for the establishment, administration and use of other funds.
            
            
               Article 28
            
            
               Coverage of losses
            
            
            
               1. Losses arising in the course of the EMF operations shall be charged: 
            
            
            
               (a) firstly, against the reserve fund; 
            
            
               (b) secondly, against the paid-in capital; and 
            
            
               (c) lastly, against an appropriate amount of the authorised unpaid capital, which shall be called in accordance with Article 9(3).
            
            
            
               2. Where an EMF Member fails to meet the required payment under a capital call made pursuant to Article 9(2) or (3), a revised increased capital call shall be made to all EMF Members with a view to ensuring that the EMF receives the total amount of paid-in capital needed. After having informed the Commission, the Board of Governors shall decide on an appropriate course of action for ensuring that the EMF Member concerned settles its debt to the EMF within a reasonable period of time. The Board of Governors shall be entitled to require the payment of default interest on the overdue amount. 
            
            
               3. Where an EMF Member settles its debt to the EMF, as referred to in paragraph 2, the excess capital shall be returned to the other EMF Members in accordance with rules adopted by the Board of Governors.
            
            
            
               PART VII
            
            
               FINANCIAL PROVISIONS
            
         
         
            
               Article 29
            
            
               Budget
            
            
               1. The EMF shall have an autonomous self-financed budget which is not part of the Union budget. 
            
            
               2. The financial year of the EMF shall begin on 1 January and end on 31 December of each year. 
            
            
            
               Article 30
            
            
               Establishment of the budget
            
            
               1. The Managing Director shall draw up an administrative budget for each financial year and submit it to the Board of Directors no later than 15 November of the preceding financial year. 
            
            
            
               The Board of Directors shall approve the administrative budget no later than 15 December of the preceding financial year. 
            
            
               2. The annual budget, as approved by the Board of Directors, shall be presented to the Board of Governors at its following annual meeting.
            
            
               Article 31
            
            
               Annual accounts 
            
            
            
               1. The Board of Directors shall keep the annual accounts of the EMF and shall draw up its annual accounts, as well as the quarterly summary statement and profit and loss statement, both expressed in euro, in accordance with generally accepted accounting principles and such additional accounting conventions as required by the Board of Directors and approved by the Board of Auditors. 
            
            
            
               2. The EMF shall in its internal accounting keep separate accounts for its activities carried out pursuant to Article 19 of this Statute, in accordance with generally accepted accounting principles and such additional accounting conventions adopted in accordance with paragraph 1 of this Article. 
            
            
            
               3. The accounts of the EMF shall be audited in accordance with generally accepted auditing standards at least once every year in accordance with Article 34 of this Statute.
            
            
         
         
            
               4. The Board of Governors shall approve the annual accounts of the EMF.
            
            
            
               5. The Managing Director shall circulate to EMF Members a quarterly summary statement of its financial position and a profit and loss statement showing the results of the EMF's operations.
            
            
            
               Article 32
            
            
            
               Financial statements and annual report
            
            
            
               1. The Board of Directors shall draw up the financial statements in respect of any given financial year no later than 31 March of the following year in the form of a balance sheet, a statement of profit and loss and explanatory notes. The explanatory notes shall contain a summary of the relevant balance sheet and statement of profit and loss items in respect of the activities carried out under the instrument for the direct recapitalisation of institutions, extracted from the accounts referred to in Article 31(2).
            
            
               2. The Managing Director shall draw up an annual report in respect of each financial year and submit it to the Board of Governors for approval at its annual meeting. 
            
            
               The annual report shall contain: 
            
            
               (a) a description of the policies and activities of the EMF; 
            
            
               (b) the financial statements for the relevant financial year; 
            
            
               (c) the report of the external auditors in respect of their audit of the financial statements pursuant to Article 34; and 
            
            
               (d) the report of the Board of Auditors in respect of the financial statements pursuant to Article 35. 
            
            
               5. Once approved by the Board of Governors, the annual report shall be published on the website of the EMF.
            
            
               Article 33
            
            
               Internal audit
            
            
            
               An internal audit function shall be established according to international standards. 
            
         
         
            
               Article 34
            
            
               External audit
            
            
            
               1. The accounts of the EMF shall be audited by independent external auditors approved by the Board of Governors for a term of three years from among audit firms of good international repute, approved and subject to public oversight in accordance with Directive 2006/43/EC of the European Parliament and of the Council.
                  2
                 
            
            
               There shall be a mandatory rotation of the audit firm every six years. 
            
            
               2. The independent external auditors shall be responsible for certifying the annual financial statements and shall have full power to examine all books and accounts of the EMF and obtain full information about its transactions.
            
            
               Article 35
            
            
               Board of Auditors
            
            
               1. The Board of Auditors shall consist of five members appointed for a non-renewable term of three years by the Board of Governors and shall be composed as follows: 
            
            
               (a) two members proposed by the Chairperson;
            
            
               (b) two members designated by the supreme audit institutions of two EMF Members, one from the group of half of the EMF Members, rounded down to the nearest integer number, holding the highest number of shares of the EMF and the other from the group of remaining EMF Members, according to a rotation system following the alphabetical order of the names of the EMF Members in each group in English, as set out in table I of this Statute;
            
            
               (c) one member designated by the European Court of Auditors. 
            
            
               To be eligible for appointment to the Board of Auditors, appointees must have competence in auditing and financial matters and must possess the professional knowledge, skills and auditing experience that are necessary for the proper performance of the Board's tasks.  
            
            
               The Board of Auditors shall select a chairperson and vice-chairperson from among its members, each for a renewable term of one year. 
            
            
               The Board of Auditors shall establish rules of procedure to govern its proceedings.
            
            
               2. The members of the Board of Auditors shall be independent in the performance of their duties. They shall neither seek nor take instruction from the EMF governing bodies, the EMF Members or any other public or private body.
            
            
               The members of the Board of Auditors shall, in accordance with international standards, take care to avoid all conflicts of interests and shall refrain from any action incompatible with their duties, at the time of their appointment and both during and after their term of office. 
            
            
               3. The Board of Auditors shall draw up independent audits. It shall inspect the EMF accounts and verify the correctness of the operational accounts and balance sheet. It shall audit the regularity, compliance, performance and risk management of the EMF in accordance with international auditing standards. It shall monitor and review the EMF’s internal and external audit processes and their results. 
            
            
               The Board of Auditors shall have full access to any EMF document and information, including data regarding internal and external audit processes that are needed for the implementation of its tasks. 
            
            
               4. The Board of Auditors may inform the Board of Directors at any time of its findings. It shall, on an annual basis, draw up a report to be submitted to the Board of Governors, on its audit findings in relation to the operational accounts and balance sheet and its conclusions and recommendations. 
            
         
         
            
               5. The Board of Governors shall make the annual report accessible to the national Parliaments and supreme audit institutions of the EMF Members and to the European Court of Auditors no later than 30 days after receipt from the Board of Auditors. It shall simultaneously send the report to the European Parliament, the Council and the Commission.
            
            
               6. The Board of Auditors may decide to draw up additional reports at the request of the Board of Governors or the Managing Director. 
            
            
               7. The members of the Board of Auditors and the experts appointed by it shall keep in strict confidentiality and shall not disclose all non-public information obtained in the performance of their duties, including after the termination of their term of office or appointment.
            
            
            
               PART VIII
            
            
               GENERAL PROVISIONS
            
            
               Article 36
            
            
               Location
            
            
            
               1. The EMF shall have its seat and principal office in Luxembourg. 
            
            
               2. The EMF may establish liaison offices subject to a decision by the Board of Directors pursuant to Article 6(5) of this Statute. 
            
            
               Article 37
            
            
               Seat agreement
            
            
               The arrangements concerning the accommodation and the facilities to be provided for the EMF by the Grand Duchy of Luxembourg, shall be laid down in a seat agreement between the EMF and Luxembourg. Until the entry into force of the seat agreement, the headquarters agreement between the ESM and the Grand Duchy of Luxembourg of 8 October 2012 shall remain applicable to the EMF.
            
            
               Article 38
            
            
               Privileges and immunities
            
            
               1. Protocol No 7 on the privileges and immunities of the European Union, annexed to the TEU and to the TFEU, shall apply to the EMF and its staff. 
            
            
               2. The EMF shall be exempted from any requirement to be authorised or licensed as a credit institution, investment services provider or other authorised licensed or regulated entity under Union law and the laws of its Member States. 
            
            
               Article 39
            
            
               Staff of the EMF
            
         
         
            
            
               1. The Staff Regulations, the Conditions of Employment of Other Servants and the rules of application adopted jointly by the Union institutions for giving effect to the Staff Regulations and to the Conditions of Employment of Other Servants shall apply to the staff of the EMF pursuant to Article 1a(2) of the Staff Regulations, with the exception of staff who, on date of entry into force of the Regulation, are employed under a contract concluded with the ESM. Such contracts, including those with nationals of third countries, shall continue to be governed by the contractual arrangements applicable at the time of the entry into force of this Regulation. 
            
            
            
               In accordance with the Conditions of Employment of Other Servants, the authority entitled to conclude contracts referred to in paragraph 5 of this Article shall offer employment of indefinite duration as a member of the temporary or contract staff to any person who, on date of entry into force of this Regulation, is employed under a contract of indefinite duration concluded by the ESM. The offer of employment shall be based on the tasks to be performed by the servant as a member of the temporary or contract staff.
            
            
            
               The contracts of a definite duration concluded by the ESM shall expire at their due date and shall not be renewed under the contractual arrangements applicable at the time of the entry into force of this Regulation.
            
            
            
               2. By way of derogation from paragraph 1 of this Article, the Managing Director shall be on a par with the Vice-President of the Court of Justice regarding emoluments and pensionable age, as defined in Council Regulation (EU) No 300/2016.
                  3
                Members of the management board shall be on par with a Member of Specialised Tribunal, as defined in Regulation (EU) No 300/2016. For aspects not covered by Regulation (EU) No 300/2016, the Staff Regulations and the Conditions of Employment shall apply. 
            
            
            
               3. EMF staff shall consist of officials, temporary staff and contract staff. The Management Board shall be informed on a yearly basis of contracts of an indefinite duration granted by the Managing Director.
            
            
            
               4. The Board of Directors shall adopt the necessary implementing measures in accordance with the arrangements provided for in Article 110 of the Staff Regulations. 
            
            
            
               5. In respect of the staff of the EMF, the Managing Director shall exercise the powers conferred on the appointing authority by the Staff Regulations and on the authority entitled to conclude contracts by the Conditions of Employment of Other Servants.
            
            
               Article 40
            
            
               Professional secrecy and exchange of information
            
            
               1. The Members and former Members of the Board of Governors or of the Board of Directors and any other persons who work or have worked for or in connection with the EMF shall not disclose information that is subject to professional secrecy pursuant to Article 339 TFEU and to the applicable provisions in Union law, even after the termination of their duties. They shall, in particular, be required not to disclose information of the kind covered by the obligation of professional secrecy acquired during the course of their professional activities to any person or authority, unless it is in the exercise of their functions under this Regulation.
            
            
               2. The Board of Directors shall adopt a code of conduct which shall be binding on the Managing Director and all directors, alternate directors and members of staff of the EMF and shall set forth their obligations on such matters as confidentiality, public statements and contacts with the media, personal investments and disclosure of financial and business interests. 
            
            
               3. The Board of Directors shall adopt the necessary measures regarding the safe handling, processing, disclosure, and sharing of confidential information.
            
            
               4.  The Managing Director shall ensure that before any information is disclosed, that it does not contain confidential information, in particular by assessing the effects that the disclosure could have on the public interest as regards the stability of the financial system of the euro area, of an EMF Member or of a participating Member State within the meaning of Article 2 of Council Regulation (EU) No 1024/2013, on international, financial, monetary, or economic policy and relations, on the commercial interests of natural and legal persons, on court proceedings, on the purpose of inspections, on investigations and on audits. The procedure for checking the effects of disclosing information shall include a specific assessment of the effects of any disclosure of the contents and details of any document regarding the provision of financial stability support referred to in Article 16 of this Statute or the provision of credit lines or setting guarantees in support of the SRB referred to in Articles 22 to 24 of this Statute.
            
         
         
            
               5. Subject to appropriate safeguards for ensuring confidentiality established pursuant to paragraph 3 of this Article, the Board of Directors shall not prevent the EMF, its Members, the Council, the Commission, the ECB, including their respective employees and experts, from sharing any information, including confidential information, with each other and with central banks, national competent authorities within the meaning of Article 2 of Regulation (EU) No 1024/2013, deposit guarantee schemes, investor compensation schemes, the SRB, national resolution authorities, authorities responsible for normal insolvency proceedings and with participating Member States within the meaning of Article 2 of Regulation (EU) No 1024/2013 whose currency is not the euro or their competent authorities that carry out functions equivalent to those mentioned in this paragraph, for the execution of the EMF's tasks. The Managing Director shall subject the sharing of information to the necessary measures provided for in paragraph 3 of this Article. 
            
            
               6. This Article shall apply without prejudice to the accountability requirements of the EMF to the European Parliament in accordance with Article 5 and to the national parliaments of EMF Members in accordance with Article 6(3) of this Regulation. 
            
            
               7. The requirements of professional secrecy referred to in paragraph 1 shall also apply to observers pursuant to Article 5(3), (4) and (5) or participants who attend the meetings of the Board of Governors pursuant to Article 22.
            
            
               Article 41
            
            
               Cooperation 
            
            
               1. The EMF may establish and maintain cooperative relations with institutions, bodies, offices and agencies of the Union in accordance with their respective objectives, and with the authorities of the Member States, the authorities of third countries which provide financial assistance to an EMF Member on an ad hoc basis, and international organisations or entities having specialised responsibilities in related fields.
            
            
               2. For the purposes set out in paragraph 1, the EMF may conclude working arrangements, in particular with the Commission and the European Central Bank. Those working arrangements shall be of a technical and/or operational nature and shall in particular aim at facilitating cooperation and the exchange of information between the parties thereto in accordance with Article 40(5) of this Statute. The working arrangements shall not have legally binding effects.
            
            
            
               PART IX
            
            
               TRANSITIONAL ARRANGEMENTS
            
            
               Article 42
            
            
               Management of the European Financial Stability Facility
            
            
               The EMF may manage the EFSF on the basis of a management agreement with the EFSF including terms of remuneration. Where the ESM has concluded any agreement to the same effect, Article 2 of this Regulation shall apply to such an agreement.
            
            
               Article 43
            
            
               Payment of the initial capital for new EMF members
            
            
            
               1. Without prejudice to Article 8(4) and paragraph 3 of this Article, the exercise of a new EMF Member's rights granted by this Regulation, including voting rights, shall be conditional upon the subscription of its initial contribution to the authorised capital stock.
            
            
            
               2. When subscribing its initial contribution, the new EMF Member's payment of paid-in shares shall be made in five equal annual instalments of 20% of the total amount. The remaining four instalments shall each respectively be payable on the first, second, third and fourth anniversary of the payment date of the first instalment.
            
            
                
            
         
         
            
               3. During the five-year period of capital payment by instalments, new EMF Members shall accelerate the payment of paid-in shares in a timely manner prior to the issuance date in order to maintain a minimum 15% ratio between paid-in capital and the outstanding amount of EMF issuances and guarantee a lending capacity of the EMF of EUR 500 000 million.
            
            
            
               4. A new EMF Member may decide to accelerate the payment of its share of paid-in capital.
            
            
            
               Article 44 
            
            
               Temporary correction of the contribution key
            
            
            
               1. The temporary correction included in the initial contribution key shall apply for a period of twelve years after the date of adoption of the euro by the EMF Member concerned.
            
            
                
            
            
               2. If a new EMF Member's gross domestic product (GDP) per capita at market prices in euro in the year immediately preceding its entry into the EMF is less than 75% of the Union average GDP per capita at market prices, then its contribution key for subscribing to EMF authorised capital stock, determined in accordance with Article 8, shall benefit from a temporary correction and equal the sum of: 
            
            
            
               (a) 25% of the percentage share in the ECB capital of the national central bank of that EMF Member, determined in accordance with Article 29 of the ESCB Statute; and 
            
            
               (b) 75% of that EMF Member's percentage share in the gross national income at market prices in euro of the euro area in the year immediately preceding its entry into the EMF.
            
            
               The percentages referred to in points (a) and (b) shall be rounded up or down to the nearest multiple of 0.0001 percentage points. The statistical terms shall be those published by Eurostat. 
            
            
            
               3. The temporary correction referred to in paragraph 2 shall apply for a period of twelve years from the date of adoption of the euro by the EMF Member concerned. 
            
            
               4. As a result of the temporary correction of the key, the relevant proportion of shares allocated to an EMF Member pursuant to paragraph 2 of this Article shall be reallocated amongst the EMF Members not benefiting from a temporary correction on the basis of their shareholding in the ECB, determined in accordance with Article 29 of the ESCB Statute, subsisting immediately prior to the issue of shares to the new EMF Member.
            
            
            
               PART X 
            
            
               OTHER PROVISIONS 
            
         
         
            
            
               Article 45
            
            
               Anti-fraud measures
            
            
               1. For the purposes of combating fraud, corruption and any other unlawful activity referred to in Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council,
                  4
                within six months from the date of entry into force of this Regulation, the EMF shall accede to the Interinstitutional Agreement of 25 May 1999 concerning internal investigations by the European Anti-Fraud Office (‘OLAF’) and shall immediately adopt appropriate provisions applicable to all staff of the EMF using the template set out in the Annex to that Interinstitutional Agreement.
            
            
               2. The Court of Auditors shall have the power to audit the beneficiaries, contractors and subcontractors who have received funds from the EMF on the basis of documents and of on- the-spot checks.
            
            
               3. OLAF may carry out investigations, including on-the-spot checks and inspections with a view to establishing whether there has been fraud, corruption or other illegal activity affecting the financial interests of the Union in connection with a contract funded by the EMF in accordance with the provisions and procedures laid down in Council Regulation (Euratom, EC) No 2185/96
                  5
                and Regulation (EU, Euratom) No 883/2013.
            
            
            
               Article 46
            
            
               Access to documents
            
            
               1. Regulation (EC) No 1049/2001 of the European Parliament and the Council
                  6
                shall apply to documents held by the EMF. 
            
            
               2. The EMF shall, within six months of the date of entry into force of this Regulation, adopt internal measures for the application of Regulation (EC) No 1049/2001. 
            
            
               3. Decisions taken by the EMF in accordance with Article 8 of Regulation (EC) No 1049/2001 may be the subject of a complaint to the European Ombudsman or of proceedings before the Court of Justice under the conditions laid down in Articles 228 and 263 TFEU respectively. 
            
            
               4. Persons who are subject to the EMF’s decisions shall be entitled to have access to the EMF's file, subject to the legitimate interest of other persons in the protection of their business secrets. The right of access to the file shall not extend to confidential information or internal preparatory documents of the EMF. 
            
            
               Article 47
            
            
               Language requirements
            
            
               1. Unless otherwise provided for in this Regulation, Council Regulation 1/1958
                  7
                shall apply to the EMF.
            
            
               2. The working language or languages of the EMF, including for the conduct of meetings of the Board of Governors, the Board of Directors, the Management Board and the Board of Auditors, shall be determined by the Board of Governors in accordance with Article 5(8) of this Statute. 
            
            
               3. The EMF may decide which of the official languages to use when sending documents to Union institutions, agencies or bodies. 
            
            
               4. The authentic version of all records of the EMF shall be the English version, unless: 
            
            
               (a) the Board of Directors decides otherwise in respect of a particular transaction;
            
         
         
            
               (b) the Managing Director, at the request and at the expense of an EMF Member, validates as authentic the translation of a particular decision taken by the Board of Governors or by the Board of Directors into the official language or languages of that EMF Member if necessary for the completion of applicable national procedures.
            
            
            
               TABLE I
            
            
               Initial contribution key of the EMF
            
            
            
                     
                        EMF Member
                     
                     
                     
                  
                  
                     
                        EMF key (%) 
                     
                  
               
                     
                        Kingdom of Belgium 
                     
                     
                  
                  
                     
                        3.4534 
                     
                  
               
                     
                        Federal Republic of Germany 
                     
                     
                  
                  
                     
                        26.9616 
                     
                  
               
                     
                        Republic of Estonia 
                     
                     
                  
                  
                     
                        0.1847 
                     
                  
               
                     
                        Ireland 
                     
                     
                  
                  
                     
                        1.5814 
                     
                  
               
                     
                        Hellenic Republic 
                     
                     
                  
                  
                     
                        2.7975 
                     
                  
               
                     
                        Kingdom of Spain 
                     
                     
                  
                  
                     
                        11.8227 
                     
                  
               
                     
                        French Republic 
                     
                     
                  
                  
                     
                        20.2471 
                     
                  
               
                     
                        Italian Republic 
                     
                     
                  
                  
                     
                        17.7917 
                     
                  
               
                     
                        Republic of Cyprus 
                     
                     
                  
                  
                     
                        0.1949 
                     
                  
               
                     
                        Republic of Latvia 
                     
                     
                  
                  
                     
                        0.2746 
                     
                  
               
                     
                        Republic of Lithuania 
                     
                     
                  
                  
                     
                        0.4063 
                     
                  
               
                     
                        Grand Duchy of Luxembourg 
                     
                     
                  
                  
                     
                        0.2487 
                     
                  
               
                     
                        Malta 
                     
                     
                  
                  
                     
                        0.0726 
                     
                  
               
                     
                        Kingdom of the Netherlands 
                     
                     
                  
                  
                     
                        5.6781 
                     
                  
               
                     
                        Republic of Austria 
                     
                     
                  
                  
                     
                        2.7644 
                     
                  
               
                     
                        Portuguese Republic 
                     
                     
                  
                  
                     
                        2.4921 
                     
                  
               
                     
                        Republic of Slovenia 
                     
                     
                  
                  
                     
                        0.4247 
                     
                  
               
                     
                        Slovak Republic 
                     
                     
                  
                  
                     
                        0.8184 
                     
                  
               
                     
                        Republic of Finland 
                     
                     
                  
                  
                     
                        1.7852 
                     
                  
               
                     
                        Total
                     
                  
                  
                     
                        100.0
                     
                  
               
            
               The above figures are rounded to four decimals.
            
            
            
               TABLE II
               
            
               Subscription to the initial authorised capital stock
            
            
            
                     
                        EMF Member
                     
                  
                  
                     
                        Number of shares
                     
                  
                  
                     
                        Capital subscription
                     
                     
                        (EUR)
                     
                  
               
                     
                        Kingdom of Belgium 
                     
                  
                  
                     
                        243 397
                     
                  
                  
                     
                        24 339 700 000
                     
                  
               
                     
                        Federal Republic of Germany 
                     
                  
                  
                     
                        1 900 248
                     
                  
                  
                     
                        190 024 800 000
                     
                  
               
                     
                        Republic of Estonia 
                     
                  
                  
                     
                        13 020
                     
                  
                  
                     
                        1 302 000 000
                     
                  
               
                     
                        Ireland 
                     
                  
                  
                     
                        111 454
                     
                  
                  
                     
                        11 145 400 000
                     
                  
               
                     
                        Hellenic Republic 
                     
                  
                  
                     
                        197 169
                     
                  
                  
                     
                        19 716 900 000
                     
                  
               
                     
                        Kingdom of Spain 
                     
                  
                  
                     
                        833 259
                     
                  
                  
                     
                        83 325 900 000
                     
                  
               
                     
                        French Republic 
                     
                  
                  
                     
                        1 427 013
                     
                  
                  
                     
                        142 701 300 000
                     
                  
               
                     
                        Italian Republic 
                     
                  
                  
                     
                        1 253 959
                     
                  
                  
                     
                        125 395 900 000
                     
                  
               
                     
                        Republic of Cyprus 
                     
                  
                  
                     
                        13 734
                     
                  
                  
                     
                        1 373 400 000
                     
                  
               
                     
                        Republic of Latvia 
                     
                  
                  
                     
                        19 353
                     
                  
                  
                     
                        1 935 300 000
                     
                  
               
                     
                        Republic of Lithuania 
                     
                     
                        Grand Duchy of Luxembourg 
                     
                  
                  
                     
                        28 634
                     
                     
                        17 528
                     
                  
                  
                     
                        2 863 400 000
                     
                     
                        1 752 800 000
                     
                  
               
                     
                        Malta 
                     
                  
                  
                     
                        5 117
                     
                  
                  
                     
                        511 700 000
                     
                  
               
                     
                        Kingdom of the Netherlands 
                     
                  
                  
                     
                        400 190
                     
                  
                  
                     
                        40 019 000 000
                     
                  
               
                     
                        Republic of Austria 
                     
                  
                  
                     
                        194 838
                     
                  
                  
                     
                        19 483 800 000
                     
                  
               
                     
                        Portuguese Republic 
                     
                  
                  
                     
                        175 644
                     
                  
                  
                     
                        17 564 400 000
                     
                  
               
                     
                        Republic of Slovenia 
                     
                  
                  
                     
                        29 932
                     
                  
                  
                     
                        2 993 200 000
                     
                  
               
                     
                        Slovak Republic 
                     
                  
                  
                     
                        57 680
                     
                  
                  
                     
                        5 768 000 000
                     
                  
               
                     
                        Republic of Finland 
                     
                  
                  
                     
                        125 818
                     
                  
                  
                     
                        12 581 800 000
                     
                  
               
                     
                        Total 
                     
                  
                  
                     
                        7 047 987
                     
                  
                  
                     
                        704 798 700 000
                     
                  
               
         
         
            
                  
                     (1)
                  
                        Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability (OJ L 140, 27.5.2013, p. 1).
               
               
                  
                     (2)
                  
                        Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC (OJ L 157, 9.6.2006, p. 87).
               
               
                  
                     (3)
                  
                        Council Regulation (EU) 2016/300 of 29 February 2016 determining the emoluments of EU high-level public office holders (OJ L 58, 4.3.2016, p. 1).
               
               
                  
                     (4)
                  
                        Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council of 11 September 2013 concerning investigations conducted by the European Anti-Fraud Office (OLAF) and repealing Regulation (EC) No 1073/1999 of the European Parliament and of the Council and Council Regulation (Euratom) No 1074/1999 (OJ L 248, 18.9.2013, p. 1).
               
               
                  
                     (5)
                  
                        Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities' financial interests against fraud and other irregularities (OJ L 292, 15.11.1996, p. 2).
               
               
                  
                     (6)
                  
                        Regulation (EC) No 1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding public access to European Parliament, Council and Commission documents (OJ L 145, 31.5.2001, p. 43).
               
               
                  
                     (7)
                  
                        Council Regulation No 1 of 15 April 1958 determining the languages to be used by the European Economic Community (OJ 17, 6.10.1958, p. 385).