Slide1 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ADJUSTMENT TO BANKING LAWS
TO ACCORD WITH THE EU REQUIREMENTS
Zbigniew Minda
Legal Department
National Bank of Poland
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Slide2 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
Plan
The Architecture of the European Union
2. The Adjustment of the Law on Central Bank to the Statute of the European System of Central Banks and the European Central Bank
3. The Adjustment of the Laws in the Areas of Concern to the ESCB THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Slide3 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
The Architecture of the European Union
The Treaties
B. The Three Pillars
C. The Economic and Monetary Union (The EMU)
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Slide4 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
A. European Treaties
1) Establishig Treaties
†Treaty establishig the European Coal and Steal Community (ECSC)1951(expired 2002)
Treaty establishing the European Atomic Energy Community (EAEC) – Rome 1957
Treaty establishing the European Economic Community (EEC) (after 1992 – the European Community EC) – Rome 1957
Treaty on European Union – Maastricht 1992
2) Modyfinig Treaties
Treaty of Amsterdam 1997
Treaty of Nice 2000 THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Slide5 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007 B. The Three Pillars of
the European Union † The European Coal and
Steal Community ECSC
1951-2002
C. The Economic and Monetary Union Title VII of the Treaty establishing the European Community : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007 C. The Economic and Monetary Union Title VII of the Treaty establishing the European Community Chapter I Economic Policy - Articles 98-104
101 Prohibition of Monetary Financing
102 Prohibition of Privileged Access
Chapter II Monetary Policy
105 Objectives and tasks of the European System of Central Banks
106 Emission of banknotes and coins
107 ESCB Structure
108 Independence of the ECB and the NCBs’
109 Compatibility of the national legislation
Legal Instruments of the ECB
Foreign Exchange Rate Policy Chapter III Institutional Provisions
ECB Decision Making Bodies
Relationships between the ECB and the Institutions of the EC
Monetary Committee/ Economic and Financial Committee
Commission Recommendations and Proposals
Chapter IV Transitional Provisions Art. 116-124
Derogation Statuts
Protocol n. 18 of the Treaty establishing the European Community on the Statute of the European System of Central Banks and of the ECB
Slide7 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
2. The Adjustment of the Law on Central Bank to the Statute of the European System of Central Banks and the European Central Bank
Convergence Report exercise
Central Bank Independence
Polish experiences
Slide8 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Convergence Report exercise for the Member States with derogation
1) The interpretation of the Treaty and the Statute requirements by the ECB and the Commission
2) Convergence Reports: 122. 2 and 121.1 of the Treaty
„121.1 (…) These reports shall include an examination of the compatibility between each Member
State’s national legislation, including the statutes of its national central bank and art. 108 and 109 of this
Treaty and the Statute of the ESCB”
3) The EMI 1996 and 1998 Convergence Reports and the ECB Convergence Reports (once every two
years 2000-2006) – published
4) Accession Country Reports – not published
5) The matter of cooperation with the ECB and of negotiation with the Commission
6) Compatibility vs. Harmonisation, supremacy of the Community legal order is not sufficient, an
impression of the unequal treatment i.e. „the Old Europe and the New Europe” (example of the
participation of the representative of the government), not only the legal texts but also political culture
7) The question of timing: the moment of the entrance into the ESCB or the moment of the adoption of
the euro?
Independence as a test of political will
Legal integartion as a matter of legal common sense
Slide9 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
B. Central Bank Independence
The crucial issue of the adjustment
Article 108 of the Treaty and art.7 of the Statute
When exercising the powers and carrying out the tasks and duties conferred upon them by this Treaty and the Statute of the ESCB, neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body. The Community institutions and bodies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the ECB or of the national central banks in the performance of their tasks.
By way of the EMI/ the ECB interpretation contained in the Convergence Reports:
Functional Independence
Institutional Independence
Personal Independence
Financial Independence
Slide10 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
B. Central Bank Independence
Functional Independence
The primary objective of the central bank
Article 105 of the Treaty and art. 2 of the Statute
The primary objective of the ESCB shall be to maintain price stability. Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community as laid down in Article 2. The ESCB shall act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources, and in compliance with the principles set out in Article 4.
Timing
Article 105(1) of the Treaty does not apply to Member States with a derogation (see Article 122(3)),
Article 2 of the Statute does apply to such Member States (see Article 43(1) a contrario)
Position of the ECB and of the Commission: adapt now
Polish example:
The law on the NBP adapted in 1997 in this point, but regularly contested by some political parties („delete without prejudice”), an „intelligent” way to cancel the independence of the central bank
Adaptation of yours central bank laws in this field is perfect.
Slide11 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
B. Central Bank Independence
Institutional Independence
No problems of timing (art. 122.3 of the Treaty, a contario): as from the moment of the accession to the EU
Express provision to this effect
Prohibition on giving instructions
Prohibition on approving, suspending, annulling or deferring decisions
(Czech example: art. 47.3 of the CNB Law - right of the Parliament to reject the annual financial report;
Polish example: art. 69.3 of the NBP Law – submission of the annual financial report to the Government for approval, apparently no possibility to reject)
Prohibition on censoring decisions on legal grounds
Prohibition on participating in decision-making bodies of an NCB with a right to vote
(Polish example: former wording of the art. 15 of the NBP Law: deleted, even if only right to submit motions)
Prohibition on ex ante consultation on an NCB’s decision
(Polish example: art. 23.1.2: forwarding draft monetary policy guidelines gives an impression of an ex-ante consultation)
Discharge of duties of members of NCB’s decision-making bodies
Slide12 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
B. Central Bank Independence
Personal Independence
No problems of timing (art. 43.1 of the Statute, a contario): as from the moment of the accession to the EU
Statute
14.2. The statutes of the national central banks shall, in particular, provide that the term of office of a Governor of a national central bank shall be no less than five years. A Governor may be relieved from office only if he no longer fulfils the conditions required for the performance of his duties or if he has been guilty of serious misconduct. A decision to this effect may be referred to the Court of Justice by the Governor concerned or the Governing Council on grounds of infringement of this Treaty or of any rule of law relating to its application. Such proceedings shall be instituted within two months of the publication of the decision or of its notification to the plaintiff or, in the absence thereof, of the day on which it came to the knowledge of the latter, as the case may be.
Minimum term of office for Governors (5 years)
Grounds for dismissal of Governors (no longer fulfils the conditions required for the performance of his duties or if he has been guilty of serious misconduct)
Security of tenure of members of the decisionmaking bodies of NCBs, other than the Governors, who are involved in the performance of ESCB-related tasks
Right of judicial review (governor: Court of Justice, others: national courts)
Safeguards against conflict of interest
Slide13 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
B. Central Bank Independence
Personal Independence - Polish case
Grounds for dismissal of Governor (no longer fulfils the conditions required for the performance of his duties or if he has been guilty of serious misconduct)
The NBP Law Art. 9.5. The President of the NBP may be dismissed, if:
1) prolonged illness,
2) convicted of a committed criminal offence under a legally binding court sentence,
3) the Tribunal of State has prohibited him/her from occupying managerial positions or holding posts of particular responsibility in state bodies.
Convergence Report 2004:
„Article 9 of the Act regulates the dismissal of the President of Narodowy Bank Polski. Paragraph 1 of this Article would not be compatible with Article 14.2 of the Statute unless the grounds for dismissal are limited to those listed in paragraph 5. Therefore,compatibility would require clarification in the Act.”
CR 2006: „…needs to be adapted”.
The NBP President Oath (reference to the Community)
Security of tenure of members of the decisionmaking bodies of NCBs, other than the Governors, who are involved in the performance of ESCB-related tasks In Poland: member of the Board and of the Monetary Policy Council
Right of judicial review In Poland: CR 2006: „… the Law is silent…”; governor: Court of Justice (direct applicability), others: members of the Board - Labour Court, MPC members-probably Labour Court
Slide14 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
B. Central Bank Independence
Financial Independence
…without prejudice to the financial means necessary for carrying out the ESCB-related tasks
The determination of its budget (a safeguard clause, if a third party)
The accounting rules (i.a. independent auditor) (The NBP Law Article 67 The NBP accounting principles
should conform to the standards applied in the European System of Central Banks)
The distribution of profits, NCBs’ capital and financial provisions (ex. Sweden – CR 2006)
Financial liability for supervisory authorities
Slide15 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
B. Central Bank Independence
Prohibitions on monetary financing and privileged access art. 101 and 102 of the Treaty
Article 101 Monetary Financing
1. Overdraft facilities or any other type of credit facility with the ECB or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Community institutions or bodies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the ECB or national central banks of debt instruments.
2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the ECB as private credit institutions.
Article 102 Privileged Access
1. Any measure, not based on prudential considerations, establishing privileged access by Community institutions or bodies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States to financial institutions, shall be prohibited.
2. The Council, acting in accordance with the procedure referred to in Article 252, shall, before 1 January 1994, specify definitions for the application of the prohibition referred to in paragraph 1.
Slide16 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
B. Central Bank Independence
Prohibitions on monetary financing and privileged access art. 101 and 102 of the Treaty
Examples of possible incompatibilities:
Bugdet deficit financing (art. 39 and 57 of the NB of Serbia Law)
Financing of the deposit protection funds – credit or direct payments (ex. Poland, Hungary, Slovakia)
Financing of other bodies (ex: Czech Financial Arbitrator)
Extending refinancing credit for not clearly defined purposes (ex. Cyprus) or for rehabilitation
proceedings (art. 42 of the NBP Law) or emergency loan (art. 14 of the Hungarian National Bank Law)
if there are not a specific safeguard clauses (ex: that the government will refinance lost credit to the
central bank)
Transactions with government (ex: Hungary)
Slide17 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
C. NBP Experiences
Before 1 May 2004 main changes in the NBP Law
Security of tenure of members of the Board
Statistical information
Interest on minimum reserves
Deposit facility
Not only treasury bonds in open market operations
Accepting own papers as collateral
Accounting rules
Independent auditor
After 1 May 2004
participation in the General Council
cooperation in the advisory function of the ECB (art. 4 of the Statute)
forwarding of the statistical data to the ECB
Before and after 1 May 2004
continuous adaptations of the internal practice and regulations
Slide18 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
3. The Adjustment of the Laws in the Areas of Concern to the ESCB
A. Banking directives
Directive 2006/48 of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast)
Directive 2006/49/EC of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast)
B. Payment and securities settlement systems
Directive 1998/26/EC of 19 May 1998 on settlement finality in payment and securities settlement systems
Directive 2002/47/EC of 6 June 2002 on financial collateral arrangements
Proposal of a Directive on payment services (adoption in 2007)
C. Capital markets
Directive 2004/39/EC of 21 April 2004 on markets in financial instruments
Slide19 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Payment and securities settlement systems
Directive 1998/26/EC of 19 May 1998 on settlement finality in payment and securities settlement systems
Directive 2002/47/EC of 6 June 2002 on financial collateral arrangements
CONTEXT
Increase of collateralised financial transactions, in particular in the money markets
Impact of Basel II
Collateralisation of central bank credit operations
Collateralised intra-day credit in payment systems
Slide20 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Collateral
Use of different collateral techniques (e.g. pledges, repurchase transactions, title transfer transactions)
Variety of formalities and administrative requirements for the establishment and realisation of collateral
Problems with the legal recognition of top-up collateral (in particular when used for global margining), the substitution of assets and close-out netting
Harmful effects of insolvency proceedings
Slide21 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
THE ESCB and the collateral
Art. 18.1 of the Statute: “In order to achieve the objectives of the ESCB and to carry out its tasks, the ECB and the national banks may: … - conduct credit operations with credit institutions and other market participants, with lending being based on adequate collateral.”
ECB Guideline of 31 August 2000 on monetary policy instruments and procedures of the Eurosystem (ECB/2000/7), as amended
General Documentation (Annex 1)
Additional Minimum Common Features (Annex 2)
Slide22 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Settlement Finality Directive (1998/26/EC)
Aims:
Reduction of systemic risks linked to payment and securities settlement systems
Protection against the effects of insolvency proceedings opened against a participant in a system (in particular foreign participants) or a central bank counterparty
Certainty on the applicable law for dispositions of securities as collateral in connection with systems or central banks
Slide23 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Settlement Finality Directive (1998/26/EC) – main principles
Transfer orders (settled either net or gross and entered before insolvency) and Netting (bilateral or multilateral), shall be legally enforceable and binding on third parties (cf. Article 3). Rules on fraudulent conveyances in a suspect period cannot lead to the unwinding of netting.
2. System rules should define the point at which transfer orders become irrevocable (cf. Recital 14, Article 3.3, Article 5).
3. Rules giving retroactive effect to the insolvency of a participant in a system, such as “zero hour”rules, are abolished (cf. Article 7).
4. The insolvency of a participant in a system continues to be governed by the home country insolvency law. However, the rights and obligations in connection with participation in a system are to be governed by the insolvency law of the jurisdiction which the parties to the system have chosen to govern that system (cf. Article 8). 5. Collateral provided to a participant in a system (pledgee) or a central bank, whether in the form of pledge, repo or any other legal technique, shall not be affected by insolvency proceedings against the pledgor (cf. Article 9.1)
6. The rights of a holder of collateral will be governed by the law of the Member State where this collateral is legally recorded on a register, account or centralised deposit system (cf. Article 9.2).
Slide24 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements (2002/47/EC)
Stated reasons of Directive:
Removal of the major obstacles for the (cross-border) use of collateral
Limitation of administrative burdens, formal acts and cumbersome procedures
Creation of a clear legal framework and of legal certainty
Content:
Substantive collateral law (Articles 3-6)
Substantive insolvency rules (Articles 7 and 8)
Conflict of law rule (Article 9)
Slide25 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements (2002/47/EC)
Ensuring effective and reasonably simple regimes for the creation of collateral under either title transfer (repo) or pledge structures (‘twin track’)
Abolishing formalities and administrative procedures to create and enforce financial collateral (financial instruments, cash)
Recognising the right to re-use pledged collateral
Protecting collateral from certain insolvency effects (through recognition of substitution, top-up collateral and close-out netting)
Creating legal certainty on the applicable law regarding book-entry securities by extending the principle of Article 9(2) of the Settlement Finality Directive
Slide26 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements
Material scope of application
Financial collateral
Cash (i.e. money credited to an account)
Financial instruments: bonds, shares, other negotiable debt instruments, warrants, units in collective investment undertakings, money market instruments, as well as claims relating to the foregoing
Identification of the financial collateral (account entry)
Slide27 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements
Material scope of application
Provision by account entry (or delivery)
Relevant financial obligation (secured by a financial collateral arrangement and giving right to cash settlement and/or delivery of financial instruments)
including future, contingent, or prospective obligations or obligations against third parties or of a specified class or kind arising from time to time
No written form, but possibility of evidencing in writing (or legally equivalent manner)
Slide28 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements
Personal scope of application
Parties (Collateral taker and collateral provider)
Public sector bodies and central banks
Supervised financial institutions (credit institutions, investment firms, insurance undertakings)
Central counterparties, settlement agents, clearing houses
Persons other than natural persons, non-incorporated firms and partnerships, provided that the other party is one of the aforementioned entities
‘Opt-out’ clause for member states
Slide29 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements
Scope of application
Collateralisation techniques
Security financial collateral arrangements
(provision of collateral by way of security without full transfer of ownership, e.g. pledges, charges, liens, etc.), and
Title transfer financial collateral arrangement
(full transfer of ownership, e.g. repurchase transactions or transfer of title, cf. the ISDA credit support annex or the collateral annex to the European Master Agreement)
Slide30 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements
Abolition of formal acts
No further formal acts, e.g.:
notarial deed
registration
notification
public announcement
other formal certifications (data certa)
Slide31 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements
Enforcement of financial collateral
In case of an enforcement event (in or outside insolvency), realisation
by sale or appropriation (if agreed), without
prior notice
court authorisation
public auction
waiting period
and set-off (close-out netting)
Opt-out clause for Member States for appropriation
Slide32 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements
‘Right of use’
Contractually agreed right of the collateral taker, to use financial collateral provided under a security financial collateral arrangement as if he were full owner
If exercised, the collateral taker incurs an obligation to transfer back equivalent collateral
Equivalent collateral transferred back will be treated as if it were original financial collateral (also in case of insolvency)
The obligation may be subject to a close-out netting provision
Slide33 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements
Title transfer and Netting
Recognition of title transfer arrangements
(no ‘re-characterisation’ by courts, causing avoidance)
Protection of ‘Close-out netting’ provisions
in case of insolvency (opening of reorganisation or winding-up proceedings)
against judicial attachments, etc.
Slide34 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements
Disapplication of certain insolvency provisions
No retroactive effect of winding-up or reorganisation proceedings on financial collateral
No invalidation, avoidance or reversal of:
- obligations to provide additional financial collateral (“top-up collateral”), in order to take account of changes in value
- the right to exchange financial collateral against financial collateral of the same value (“substitution”)
Slide35 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements
Conflict of laws
Application of the principle of Article 9(2) of the Settlement Finality Directive:
certain matters relating to book entry securities, i.e.
legal nature and proprietary effects
priorities
perfection requirements
realisation
will be governed by the law of the country where the relevant account is maintained (excluding conflict of law rules of that country)
Slide36 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements
Open issues
Personal scope of application of the Collateral Directive limited (opt-out for Member States as regards SMEs)
Only certain types of collateral techniques covered (transfer of possession necessary)
Limited scope of financial assets covered (only cash and securities)
No protection of rating related top-up collateral
Opt-out clause for Member States for appropriation
Slide37 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Directive on Financial Collateral Arrangements
Implementation by EU member states - Critical points
Abolition of formalities
Registration systems will disappear
“Right of use”
transfer back of equivalent collateral or just netting of positions?
Conflict of law rule
Principle of Article 9(2) of the Settlement Finality Directive (objective location of securities account) - Adaptation required as a consequence of the Hague Convention
Slide38 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Collateral
Review of the recent initiatives
Hague Convention on the law applicable to certain rights in relation to securities
held with an intermediary
UNIDROIT draft Convention on Substantive Rules regarding Intermediated
Securities
Slide39 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Proposal for a Directive on Payment Services (COM/2005/603)
Aims
Create single market in payment services (especially in the context of SEPA, a financial
industry initiative)
Harmonise legal framework for payment transfers throughout all the EU
Ensure proper consumer protection
Directive 97/05/EC of 27 January 1997 on cross-border credit transfers not sufficient
Slide40 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Proposal for a Directive on Payment Services
TITLE 1 Personal and material scope of application
Personal scope of application
Credit institutions
Electronic money institutions
Post office giro institutions
PAYMENT INSTITUTIONS (new institution)
ECB and NCBs, MS central, regional or local authorities
Material scope of application
No to payments in cash, cash transfers, paper cheques and other paper documents
No to specific payments between „professionals”
Slide41 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Proposal for a Directive on Payment Services
TITLE II Payment Services Providers
Payment Institution
single licence if no derogation
how to protect the clients money: which capital requirements? ring-fencing? insurance?
less requirements if only money remittance
activities: payment services, ancillary services, operation of payments systems, other
business activities
no deposit taking
short term credit only from own funds and closely linked to the payment service
supervision
Derogation
less requirements, if only within the territory of home Member State
Slide42 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Proposal for a Directive on Payment Services
TITLE III Transparency of conditions and information requirements for payment services
TITLE IV Rights and obligations in relation to the provision and use of payment services
Micro payment instruments and electronic money – simplification of information
requirements
Slide43 : The adjustment to banking laws to accord with the EU requirements, Zbigniew Minda, Legal Department, National Bank of Poland, Zbigniew.Minda@mail.nbp.pl
THE ROLE OF THE CENTRAL BANK IN THE PROCESS OF EUROPEAN INTEGRATION
Belgrade, Serbia 19-20 February 2007
Proposal for a Directive on Payment Services
“PAYMENT SERVICES” UNDER ARTICLE 4
(1) Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account.
(2) Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account.
(3) Execution of payment transactions, including transfer of funds on a payment account with the user's payment service provider or with another payment service provider:
– execution of direct debits, including one-off direct debits;
– execution of payment transactions through a payment card or a similar device;
– execution of credit transfers, including standing orders.
(4) Execution of payment transactions where the funds are covered by a credit line for a payment service user:
– execution of direct debits, including one-off direct debits;
– execution of payment transactions through a payment card or a similar device;
– execution of credit transfers, including standing orders.
(5) Issuing of payment cards which allow the payment service user to transfer credited funds (debit cards) or funds covered by credit lines (credit cards).
(6) Deleted.
(7) Money remittance.
(8) Execution of payment transactions by any means of communication at a distance such as mobile telephones or other digital or IT devices by the service provider operating the telecommunication or IT system or network acting on behalf of the payment service user, except where the digital goods or electronic communication services are provided essentially using the device itself and the payment is made directly to the service provider operating the telecommunication or IT system or network for its own account, not as an intermediary to a third party.