Opinion of the European Central Bank of 30 August 2024 on the term of office of the members of the Board of Governors of Danmarks Nationalbank, oversight and operation competences in respect of payment systems, and the right of deposit in basic business accounts (CON/2024/28)
OPINION OF THE EUROPEAN CENTRAL BANK of 30 August 2024 on the term of office of the members of the Board of Governors of Danmarks Nationalbank, oversight and operation competences in respect of payment systems, and the right of deposit in basic business accounts (CON/2024/28) Introduction and legal basis
On 7 August 2024 the European Central Bank (ECB) received a request from the Danish Financial Supervisory Authority (FSA) for an opinion on a draft law amending the Law on payment accounts, the Law on financial services, the Law on capital markets, the Law on Danmarks Nationalbank and various other laws (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and Article 2(1), first, third and fifth indents, of Council Decision 98/415/EC , as the draft law relates to currency matters, Danmarks Nationalbank and payment and settlement systems. In accordance with Article 17.5, first sentence, of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.
1. Purpose of the draft law
1.1 The draft law amends a number of different laws. However, for the purpose of this opinion it is the 2 3 proposed amendments to the Law on Danmarks Nationalbank , the Law on payments and the Law on payment accounts , which are addressed. 1.2 First, the draft law introduces a fixed term of office for the three members of the Board of Governors of Danmarks Nationalbank by amending the Law on Danmarks Nationalbank. The existing Law on Danmarks Nationalbank provides that the Board of Governors of Danmarks Nationalbank consists of three members . One of the Governors is appointed by the King, and the other Governors are appointed by the Board of Directors on the recommendation of the Committee of Directors . The interpretative notes to the draft law (hereinafter the ‘interpretative notes’) clarify that in practice the
1 Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).
2 Lov om Danmarks Nationalbank, Lov nr. 116 af 7.4.1936.
3 Lov on betalinger, Lov nr. 53 af 18.1.2023.
4 Lov om betalingskonti, Lov nr. 407 af 29.3.2022. appointment of the Governor performed by the King is undertaken by the Government on behalf of 7 8 the King . The said Governor is the chair of the Board of Governors . 1.3 The existing Law on Danmarks Nationalbank contains no term limits for the members of the Board of Governors, but simply provides that they must resign before the expiration of the month in which they reach the age of 70 . The draft law repeals this obligation and replaces it by laying down that the governors are to be appointed for a term of 6 years, with the possibility of one extension of 6 additional years . The interpretative notes state that the maximum term of office of 12 years does not apply where a Governor appointed by the Board of Directors has undertaken his or her office for, for example, almost 12 years, and is subsequently appointed by the King as chair of the Board of Governors with the possibility of reappointment for an additional period of 6 years . 1.4 The draft law clarifies that the new tenure regime does not apply to Governors appointed before 1 January 2025, unless a Governor who was originally appointed by the Board of Directors, is subsequently appointed by the King . Thus, according to the interpretative notes, a Governor appointed by the Board of Directors before the entry into force of the draft law, will in this scenario be subject to a fixed term of office . Moreover, the interpretative notes further clarify that the current members of the Board of Governors do not need to be reappointed upon the entry into force of the new tenure regime and, thus, that their existing terms of employment continue to apply . In this manner, new members of the Board of Governors will not be appointed collectively, but at the time when their predecessors resign. 1.5 The interpretative notes state that the appointment of members of the Board of Governors for an indefinite period is atypical compared generally to other tenure rules in the Danish governmental administration, where fixed term contracts are the rule . Likewise, the current regime is considered atypical compared to the setup in other national central banks (NCBs) in the European System of Central Banks (ESCB), which generally have terms of office of 5 to 8 years, in some cases supplemented by an option for one reappointment. The interpretative notes also refer to Article 14.2 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’). This provision applies to the governors of all Member State NCBs and provides, in order to safeguard their personal independence, that the term of office of an NCB Governor is to be no less than five years. The suggested new regime is considered to ensure a good balance between continuity and continuous replacement of the Board of Governors. 1.6 Second, the draft law amends the Law on payments with a view to transposing into Danish legislation the amendments enacted by Regulation (EU) 2024/886 of the European Parliament and of the Council , which amends, inter alia, Directive 98/26/EC of the European Parliament and of the
7 See page 42 of the general comments to the interpretative notes.
11 See page 43 of the general comments to the interpretative notes.
13 See page 324 of the specific comments to the interpretative notes.
14 See page 324 of the specific comments to the interpretative notes.
15 See pages 42 and 43 of the general comments to the interpretative notes.
16 Regulation (EU) 2024/886 of the European Parliament and of the Council of 13 March 2024 amending Regulations (EU) No 260/2012 and (EU) 2021/1230 and Directives 98/26/EC and (EU) 2015/2366 as regards instant credit transfers in euro (OJ L, 2024/886, 19.3.2024, ELI: http://data.europa.eu/eli/reg/2024/886/oj). Council (hereinafter the ‘SFD’) and Directive (EU) 2015/2366 of the European Parliament and of the Council (hereinafter the ‘PSD2’) . The existing Law on payments requires payment service providers to lay down access conditions for payment systems which are objective, non-discriminatory and proportionate and do not prevent access to the system to a greater extent than is necessary to protect against specific risks such as settlement, operational and commercial risks and to ensure the financial and operational stability of the payment system , which is in line with Article 35 of the PSD2. 1.7 However, there are two exceptions to this requirement , as it applies neither to payment systems designated under the SFD, such as KRONOS2 (Danmarks Nationalbank’s system settling for transactions in Danish kroner) and TARGET-Danmark (which settles transactions in euro as part of TARGET) , nor to payment systems consisting exclusively of payment service providers belonging to the same group. The Law on payments does not apply to payment transactions carried out within the framework of a system for settlement of payments or securities between settlement agents, central counterparties, clearing houses, central banks or other participants in the system and payment service providers, without prejudice to the abovementioned rules on access conditions . 1.8 Regulation (EU) 2024/886 amends Article 35 of the PSD2 , with the consequence that the exemption in the Law on payments for payment systems designated under the SFD, related to access conditions for authorised or registered payment service providers which are objective, nondiscriminatory and proportionate, is repealed . Thus, SFD-designated systems like KRONOS2 and TARGET-Danmark must, from the entry into force of the draft law, have access conditions based on the requirements of the Law on payments. The existing Law on payments allocates the competence to ensure compliance with its provisions to the Danish Competition and Consumer Authority. 1.9 Third, the draft law amends the Law on payment accounts with a view to establishing a regime for ‘basic business accounts’ in line with Directive 2014/92/EU of the European Parliament and of the 26 27 Council (hereinafter the ‘Payment Accounts Directive’) with certain modifications . The draft law accordingly changes the title of the Law on payment accounts to the Law on payment accounts and 28 29 basic business accounts . The interpretative notes state that there may currently be substantial challenges for private entrepreneurs and associations to open bank accounts in Denmark, for which
17 Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (OJ L 166, 11.6.1998, p. 45).
18 Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ L 337, 23.12.2015, p. 35).
21 See Article 3(1) of Guideline (EU) 2022/912 of the European Central Bank of 24 February 2022 on a new-generation Trans-European Automated Real-time Gross Settlement Express Transfer system (TARGET) and repealing Guideline ECB/2012/27 (ECB/2022/8) (OJ L 163, 17.6.2022, p. 84). Under Article 4 of Guideline (EU) 2022/912 (ECB/2022/8) NCBs of Member States whose currency is not the euro may only connect to TARGET if they conclude an agreement with the Eurosystem central banks. TARGET-Danmark is Danmarks Nationalbank’s national TARGET component system.
26 Directive 2014/92/EU of the European Parliament and of the Council of 23 July 2014 on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features (OJ L 257, 28.8.2014, p. 214).
27 See page 38 of the general comments to the interpretative notes.
29 See page 38 of the general comments to the interpretative notes. reason the draft law aims to facilitate this within the wider framework of facilitating the establishment and running of private businesses and the receipt of public subsidies by associations. The draft law accordingly proposes to add to the Law on payment accounts a new Chapter 4a regulating the requirements for a basic business account in Danish kroner. More specifically, it is proposed, inter alia, to insert a new provision defining the ‘services that a trader or an association should be able to use to an unlimited extent’ in relation to a basic business account . This includes, inter alia, the possibility to deposit funds in the account and withdraw funds from it, albeit that cash deposits are in fact limited to in total DKK 20 000 (approximately EUR 2 700) per month . The interpretative notes indicate that the limitation on making cash deposits does not, however, restrict the credit institutions from either generally or via individual agreements with account holders allow entrepreneurs and associations to deposit cash to a larger extent .
2. General observations
2.1 In view of the notice given to the Council by the Danish Government on 3 November 1993, Denmark has an exemption from participating in the third stage of economic and monetary union. The effect of this exemption is that all articles and provisions of the Treaties and the Statute of the ESCB referring to a derogation are applicable to Denmark. As for the abrogation of the exemption, the procedure referred to in Article 140 of the Treaty on the abrogation of derogations of the Member States fulfilling the necessary conditions regarding the achievement of economic and monetary union are only to be initiated at the request of Denmark . 2.2 In accordance with Article 42.2 of the Statute of the ESCB, Danmarks Nationalbank retains its powers in the field of monetary policy according to national law. However, Article 131 of the Treaty and Article 14.1 of the Statute of the ESCB, in accordance with Article 139(2) of the Treaty and Article 42.1 of the Statute of the ESCB, also apply to Denmark, so that Denmark is required to ensure that its national legislation, including the NCB’s statutes, is compatible with the Treaties and the Statute of the ESCB. Furthermore, as Article 130 of the Treaty and Article 7 and Article 14.2 of the Statute of the ESCB, in accordance with Article 139(2) of the Treaty and Articles 42.1 and 42.4 of the Statute of the ESCB, also apply to Denmark, Danish legislation must also comply with the requirements of central bank independence . Hence, with regard to compliance issues relating to central bank
32 See page 127 of the specific comments to the interpretative notes.
33 See Protocol (No 16) to the Treaty on certain provisions relating to Denmark, paragraphs 1 and 2. Furthermore, as elaborated in a Decision of the Heads of State and Government (Decision of Heads of State and Governments, Edinburgh Summit meeting on 11-12 December 1992), the consequence of Denmark having notified that it will not participate in the third stage of economic and monetary union is that it is not bound by the rules concerning economic policy, which apply only to the Member States participating in the third stage of economic and monetary union, and will retain its existing powers in the field of monetary policy according to its national laws and regulations, including Danmarks Nationalbank’s powers in the field of monetary policy. Moreover, Denmark participates fully in the second stage of economic and monetary union and continues to participate in exchange-rate cooperation within the European Monetary System.
34 See ECB Convergence Report (June 2022), p. 17, available on the ECB’s website at www.ecb.europa.eu. independence, this opinion is based on the current legal understanding of the related requirements . Otherwise, this opinion refrains from commenting on matters relating to the possible legal integration of Danmarks Nationalbank into the Eurosystem, which would only be relevant if Denmark requests that the procedure for the abrogation of its exemption is initiated. 2.3 In addition, it is recalled that Danmarks Nationalbank retains its powers in the field of monetary policy according to national law. Given that oversight of clearing and payment systems is a task closely linked to its monetary policy tasks, the Treaty provisions awarding the Eurosystem oversight on clearing and payment systems as part of its mandate pursuant to Article 127(2), fourth indent, of the Treaty, as mirrored in Article 3.1, fourth indent, and Article 22 of the Statute of the ESCB, subject to which one of the basic tasks to be carried out through the ESCB is to promote the smooth operation of payment systems, including the competence to provide facilities, make regulations and ensuring efficient and sound systems, does not apply to Member States with a derogation . Consequently, according to Article 4 of Guideline (EU) 2022/912 (ECB/2022/8), the NCBs of Member States whose currency is not the euro may only connect to TARGET if they conclude an agreement with the Eurosystem central banks. Danmarks Nationalbank has concluded such an agreement, on the basis of which TARGET-Danmark has been established as Danmarks Nationalbank’s TARGET component system. 2.4 The ECB takes due account of the legal culture and legislative technique in Denmark, according to which legislative proposals on draft laws are accompanied by interpretative notes. The ECB understands that once a draft law has been adopted, the interpretative notes are of essential importance for the practical application of the adopted law, representing a very important tool for the courts to understand the intention of the legislator with respect to the adopted law, allowing the courts to apply the law in accordance therewith .
3. Term of office of the members of the Board of Governors of Danmarks Nationalbank
3.1 Article 14.2, first subparagraph, of the Statute of the ESCB requires that the term of office of a Governor of an NCB must be no less than five years. The Chairman of the Board of Governors of Danmarks Nationalbank, is considered to be the Governor of Danmarks Nationalbank in the sense of the Treaty and the Statute of the ESCB. Against this background, the ECB welcomes the
35 In March 1998 the former European Monetary Institute (EMI) established a list of features of central bank independence which were the basis for assessing the compatibility of Member States’ national legislation, in particular the NCBs’ statutes, with central bank independence requirements at that time. The concept of central bank independence articulated by the EMI included various types of independence that must be assessed separately, namely institutional, personal and financial independence. The EMI concluded that Danmarks Nationalbank’s statute did not contain incompatibilities in the area of central bank independence (See EMI Convergence Report: Report required by Article 109j of the Treaty establishing the European Community (March 1998), pp. 15 and 299, available on the ECB’s website at www.ecb.europa.eu). There has been no assessment of the compliance of Danmarks Nationalbank’s statutes with central bank independence requirements since 1998 due to Denmark’s special status (See ECB Convergence Report (June 2022), p. 12, available on the ECB’s website at www.ecb.europa.eu). Over the years there have been further refinements of the analysis of the different aspects of central bank independence in the opinions adopted by the ECB, including functional independence (See paragraph 2.1 of Opinion CON/2019/12. All ECB opinions are published on EUR-Lex.), as well as jurisprudential developments regarding the concept of central bank independence at the Court of Justice of the European Union (see, e.g., Judgment of the Court of 10 July 2003, Commission v ECB, Case C-11/00, EU:C:2003:395, paragraphs 130 to 145).
36 See Article 42.1 of the Statute of the ESCB.
37 See Justitsministeriets vejledning om lovkvalitet (Guide on Law Quality), p. 130, by the Ministry of Justice, available at www.lovkvalitet.dk (in Danish only). introduction of a six-year fixed term of office for the members of the Board of Governors, with the option of one reappointment for an additional 6 years. 3.2 Article 130 of the Treaty and Article 7 of the Statute of the ESCB, concerning central bank independence, both refer to ‘members of the decision-making bodies’ of NCBs. Applying the same rules for the security of tenure and the minimum term of office as applicable to the Governor to the other members of the decision-making bodies of NCBs involved in the performance of ESCB-related tasks safeguards their personal independence. Hence, the ECB also welcomes the introduction of a six-year fixed term of office, with the option of one reappointment for an additional period of six years, also with a view to the other members of the Board of Governors . 3.3 Furthermore, the ECB welcomes the clarification in the draft law that the proposed new tenure rule applies as from the point in time where the draft law has been enacted and enters into force on 1 January 2025. This implies that the members of the Board of Governors appointed in accordance with the currently applicable rules will continue to remain subject to these rules. This ensures that the current members of Danmarks Nationalbank’s decision-making bodies undertaking ESCBrelated matters are allowed to complete their current terms .
4. Oversight and operation competences of the Eurosystem and Danmarks Nationalbank
4.1 The Treaty and the Statute of the ESCB provide for the Eurosystem to conduct oversight of clearing and payment systems as part of its mandate. Pursuant to Article 127(2), fourth indent, of the Treaty, as mirrored in Article 3.1, fourth indent, of the Statute of the ESCB, one of the basic tasks to be carried out through the ESCB is to promote the smooth operation of payment systems. In the performance of this basic task, the members of the ESCB may provide facilities, and the ECB may make regulations, to ensure efficient and sound clearing and payment systems within the Union and with other countries . 4.2 Pursuant to its oversight role, the ECB has adopted Regulation of the European Central Bank (EU) No 795/2014 (ECB/2014/28) (hereinafter the ‘SIPS Regulation’), which governs both large-value payment systems and retail payment systems of systemic importance, operated either by a Eurosystem central bank or a private entity. The SIPS Regulation includes, inter alia, provisions on the establishment and disclosure of non-discriminatory access and participation criteria for the payment systems . In addition, non-systemic payment systems are overseen based on an oversight framework for retail payment systems , which also contains relevant provisions on access and participation criteria . 4.3 To date, the role of primary overseer of the payment systems that are in scope of the Eurosystem is assigned by reference to the national anchor of the respective payment system and the legal
38 See ECB Convergence Report (June 2024), available on the ECB’s website at www.ecb.europa.eu.
39 See paragraph 3.3.3 of Opinion CON/2018/17 and paragraph 2.2.2 of Opinion CON/2019/36.
40 See Article 22 of the Statute of the ESCB.
41 Regulation of the European Central Bank (EU) No 795/2014 of 3 July 2014 on oversight requirements for systemically important payment systems (ECB 2014/28) (OJ L 217, 23.7.2014, p. 16).
42 See Article 16 of the SIPS Regulation.
43 Eurosystem, ‘Revised oversight framework for retail payment systems’, February 2016, available on the ECB’s website at www.ecb.europa.eu.
44 In view of its mandate, the ECB may make further regulations, and carries out frequent reviews to check whether the scope of oversight covers all relevant functions and entities in the payment ecosystem. incorporation of its governance body. For pan-European payment systems, such as TARGET, including TARGET-Danmark, the ECB has as a rule the primary oversight role, unless otherwise decided by the Governing Council . 4.4 Deciding whether to grant access to payment systems operated by Eurosystem central banks is an integral part of the Eurosystem’s basic task of promoting the smooth operation of payment systems , which is also related to its role as operator of payment systems. In this respect, it is for the Eurosystem to adopt the access criteria in respect of payment systems in euro operated by the Eurosystem, such as TARGET, including the TARGET-Danmark national component. 4.5 The Eurosystem has competence for, inter alia, the operation of payment systems by Eurosystem central banks as defined by the Treaty. Consequently, in order for TARGET-Danmark to continue settling euro payments in TARGET, Danmarks Nationalbank must be able to abide at all times by the access criteria defined by the Eurosystem and must also honour its obligations under the agreement between Danmarks Nationalbank and the ECB on the establishment of Danmarks Nationalbank’s TARGET component system, without any interference by the Danish Competition and Consumer Authority. 4.6 Danmarks Nationalbank’s oversight competence in respect of national payment systems is based on the Law on Danmarks Nationalbank , according to which Danmarks Nationalbank must maintain a safe and secure currency system and facilitate and regulate the traffic in money. In 2005, Danmarks Nationalbank received explicit authorisation for supervision/oversight in the Law on securities 48 49 trading , which is now contained in the Law on capital markets . Danmarks Nationalbank is the only authority that oversees Danish payment systems, a task which includes ensuring that there is fair and open access to such systems. Danmarks Nationalbank performs the oversight task based on the international standards set out in the Principles for Financial Market Infrastructures . Thus, Danmarks Nationalbank ensures objective, non-discriminatory and proportionate access to KRONOS2 and the other payment systems established in Denmark, such as the retail payment system operated by Finans Danmark, the Danish Bankers’ Association. In accordance with international best practice , to ensure consistency and equal treatment in the oversight of Danmarks Nationalbank’s own systems and other systems, Danmarks Nationalbank’s oversight function is distinct from its development and operation of payment systems function. The ECB notes that as the oversight of payment systems is typically a central bank task, Danmarks Nationalbank should be able to continue exercising this task in an independent manner.
46 See section 3 (‘Access to central bank-operated payment systems’) of Policy on access by non-bank payment service providers to central bank-operated payment systems and to central bank accounts, July 2024, available on the ECB’s website at www.ecb.europa.eu.
47 See Article 1 of the Law on Danmarks Nationalbank.
48 Lov on værdipapirhandel, Lov nr. 251 af 21/3/2017 (repealed).
50 Principles for Financial Market Infrastructures, April 2012, available on the Bank for International Settlements’ website at www.bis.org.
51 See Principles for Financial Market Infrastructures, paragraph 3.2.7.
5. Right of deposit in basic business accounts
5.1 The ECB welcomes the proposed facilitation of both the establishment and running of private businesses and associations by means of the proposed new regime for basic business accounts. The ECB understands that whilst the new regime is in principle based on the model for consumers’ access to basic payment accounts, in accordance with the Payment Accounts Directive, the proposed law introduces a new requirement that holders of a basic business account may only deposit a total of DKK 20 000 in cash per month. 5.2 The ECB has in recent years opined on a number of reductions of the cash limit under the Danish money laundering regime . On those occasions it was acknowledged that the proposed amendments to the Law on money laundering had neither the objective nor the effect of amending the legal rules governing the status of legal tender. Furthermore, they did not lead, either in law or in effect, to the abolition of banknotes in Denmark. Likewise, it was welcomed that the draft measures did not apply to consumers but only to specific groups of business-to-business and customer-tobusiness payments . However, it was also noted that ‘no substantiation has been provided in the explanatory notes on the effect of the previous 2013 and 2020 reductions of the cash limitations. If such measures have not produced the desired effects, it is hard to understand why lowering that threshold to 15 000 DKK would be considered more appropriate and more effective . In the same vein, whilst recognising that the current draft law is not related to combating money laundering, the ECB questions the need to limit monthly deposits of cash in basic business payment accounts to DKK 20 000, as this is a measure that has negative effects on the use of legal tender in payments in the future and is likely to discredit cash. Whilst the ECB understands that commercial banks that offer such basic payment accounts may set higher ceilings for monthly cash deposits, it is not clear which criteria the banks will apply if a business or association wants to open such an account with a higher ceiling or wants to lift this ceiling for an existing basic business account. While an analogy to the Payment Accounts Directive has been drawn, which has inspired this new type of payment account, the ECB notes that the Payment Accounts Directive requires Member States to ensure that a payment account with basic features allows consumers to execute an unlimited number of operations in relation to services considered to be in the scope of the payment account with basic features, including enabling cash withdrawals . Furthermore, the proposed limitation of cash deposits in basic business accounts would constitute a disadvantage for certain categories of payment service users, which could be considered to contradict the very idea of the introduction of basic business accounts.
52 Lov om hvidvask, nr. 807 af 21.6.2024.
53 See Opinions CON/2013/9, CON/2020/33 and CON/2024/2.
54 See paragraph 3.19 of Opinion CON/2024/2.
55 See Article 17 of the Payment Accounts Directive. 5.3 As a possible alternative to the establishment of a DKK 20 000 ceiling for cash deposits in basic business accounts, it may be expected that the application of existing money laundering rules will provide for sufficient safeguards to identify and report suspicious transactions, including deposits of cash in basic business accounts, to the FSA. This opinion will be published on EUR-Lex. Done at Frankfurt am Main, 30 August 2024. [signed] The President of the ECB Christine LAGARDE