Opinion of the European Central Bank of 29 November 2012 on the extension of the Irish state guarantee of eligible liabilities of credit institutions (CON/2012/98)

OPINION OF THE EUROPEAN CENTRAL BANK of 29 November 2012 on the extension of the Irish state guarantee of eligible liabilities of credit institutions (CON/2012/98) Introduction and legal basis

On 19 November 2012, the European Central Bank (ECB) received a request from the Irish Minister for Finance (hereinafter the ‘Minister’) for an opinion on the draft Credit Institutions (Eligible Liabilities Guarantee) (Amendment) Scheme 2012 (hereinafter the ‘draft scheme’) amending the Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009 (hereinafter the ‘ELG Scheme’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the sixth indent of Article 2(1) of Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions , as the draft scheme relates to rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the revised draft scheme

1.1 The ELG Scheme came into effect on 9 December 2009. The ECB was consulted on the ELG Scheme at the draft stage and adopted its Opinion CON/2009/56 . Subsequently, the ECB adopted Opinions CON/2009/92, CON/2010/71, CON/2010/75 and CON/2011/88 on proposed amendments to the ELG Scheme. 1.2 The Irish Government now proposes a further prolongation of the validity of the ELG Scheme by 12 months, the effect of which will be that eligible liabilities, as defined in the ELG Scheme, may be issued until 31 December 2013.

2. The appropriate time to consult the ECB

The ECB notes that the Minister has requested the ECB to provide its opinion as soon as possible in order to ensure that European Union state aid approval for the draft scheme can be obtained quickly and the draft scheme presented for parliamentary approval. The ECB reiterates its position,

expressed in previous opinions , on the importance of a consultation taking place at a point in the legislative process which affords the ECB sufficient time to examine the draft legislative provisions and to adopt its opinion, and which also enables the relevant national authorities to take the ECB’s opinion into consideration before the provisions are adopted. Article 3(4) of Decision 98/415/EC also obliges Member States to suspend the adoption process for draft legislative provisions pending receipt of the ECB’s opinion.

3. The draft scheme

3.1 The purpose of the draft scheme is the extension of the issuance period under the ELG Scheme from 31 December 2012 to 31 December 2013. The Minister, in his request for an opinion, advises that a positive assessment by the ECB on financial stability grounds of the requirement for a prolongation of the guarantee of short term and interbank liabilities is considered essential by the European Commission to its approval process as regards such state aid. 3.2 The ECB reiterates the views expressed in its previous opinions on the subject of the ELG Scheme and the Irish legislation on financial support to credit institutions . In particular, it recalls that coordination of the duration of national financial support schemes across the Union is of crucial importance in order to ensure a level playing field . The ECB also notes that it is the European Commission’s practice to approve Member States’ guarantee schemes for no longer than six months in advance . 3.3 Taking into account financial stability considerations, a further extension of the ELG Scheme would be beneficial. Moreover, the ECB understands that the extension of the ELG Scheme is safeguarded by the timely compliance of the Irish government with the ongoing European Union- International Monetary Fund Programme of Financial Support for Ireland.

This opinion will be published on the ECB’s website.

Done at Frankfurt am Main, 29 November 2012. [signed]

The President of the ECB

Mario DRAGHI