Opinion of the European Central Bank of 20 April 2004 at the request of the French Ministry of Economic Affairs, Finance and Industry on a draft decree concerning negotiable debt securities (CON/2004/15)

OPINION OF THE EUROPEAN CENTRAL BANK of 20 April 2004 at the request of the French Ministry of Economic Affairs, Finance and Industry on a draft decree concerning negotiable debt securities (CON/2004/15)

1. On 15 March 2004 the European Central Bank (ECB) received a request from the French Ministry of Economic Affairs, Finance and Industry for an opinion on a draft decree concerning negotiable debt securities (hereinafter the ‘draft decree’).

2. The ECB’s competence to deliver an opinion is based on the third, fourth and sixth indents of Article 2(1) of Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft decree concerns a national central bank, statistics and rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

3. Article 36 of the French Law No 2003-706 of 1 August 2003 on financial security (hereinafter the ‘Law’) amended Articles L. 213-3 and L. 213-4 of the Monetary and Financial Code (hereinafter the ‘Code’) which concern the regime applicable to the issue of negotiable debt securities (titres de créances négotiables, TCN). The draft decree implements these two articles of the Code and amends Decree No 92-137 of 13 February 1992 on negotiable debt instruments (hereinafter the ‘Decree’). In its opinion of December 2002 on a draft version of the Law , the ECB welcomed the French authorities’ aim of modernising and simplifying some of the rules applicable to the TCN market. For instance, the obligation imposed on TCN corporate issuers to prove that they had existed for two years was repealed while the applicable language regime for issuers when submitting the financial documentation was relaxed. Furthermore, the Law extended the capacity to issue TCN to, inter alia, local authorities, States, certain types of associations and securitisation funds.

4. The draft decree is intended to further clarify the conditions of application of Articles L. 213-3 and L. 213-4 of the Code as well as the responsibilities of the Banque de France concerning the TCN market. TCN must have a value per unit of at least EUR 150 000 . Under the terms of Article 4(c) of the ‘COB’ Regulation Noº98-08 regarding public offerings of financial instruments , there is no obligation to produce a simplified prospectus for public offerings of financial instruments when their value is at least 150 000 EUR. However, according to the proposed amendment to Article 8 of the Decree, TCN issuers must submit financial documentation to the Banque de France (which contains, inter alia, an information memorandum). The ECB also notes that non-supervised entities (i.e. entities which are not credit institutions, investment firms or insurance companies) the securities of which are not admitted to trading on a regulated market must provide a rating of their issue programme or be guaranteed by a guarantor benefiting from such a rating (proposed amendment to Article 6 of the Decree). These arrangements do not give rise to any specific remarks from the ECB.

5. As regards the language regime, the financial documentation may be submitted in English provided that it is accompanied by a summary in French for which the issuer is responsible when the TCN are privately placed with qualified investors, or when they may only be subscribed to or acquired for at least the equivalent of EUR 50 000 (proposed amendment to Article 12 of the Decree). The requirement of submitting the relevant financial information according to French accounting standards has been abolished by the draft decree. The ECB also notes that the information memoranda (including any summary) will be made available on the Banque de France's website (proposed amendment to Article 14 of the Decree). The ECB welcomes these provisions. The ECB also understands that these provisions aim to enlarge the investor base and increase the transparency of the TCN market. In addition, these amendments correspond to some of the recommendations contained in the final report of the Euribor-ACI Short-Term European Paper Task Force aimed at encouraging the convergence of the heterogeneous market standards and practices that currently prevail in the segmented European short-term markets.

6. The proposed amendment to Article 8 of the Decree provides that the Banque de France may request additional information from a TCN issuer where a particular situation so justifies. The proposed amendment to Article 16 of the Decree further provides that TCN issuers shall provide the Banque de France with statistical information concerning their securities under conditions determined by a ministerial order. The Ministerial Order of 31 December 1998 indicates in this respect that TCN issuers shall provide the Banque de France with information on the characteristics of each issue as well as on the daily outstanding value of the securities issued. The ECB is of the Done at Frankfurt am Main on 20 April 2004. The President of the ECB Jean-Claude TRICHET