EUR-Lex - 31997L0009 - EN Avis juridique important | 31997L0009 Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemes Official Journal L 084 , 26/03/1997 P. 0022 - 0031 DIRECTIVE 97/9/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 3 March 1997 on investor-compensation schemesTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty establishing the European Community, and in particular Article 57 (2) thereof,Having regard to the proposal from the Commission (1),Having regard to the opinion of the Economic and Social Committee (2),Having regard to the opinion of the European Monetary Institute (3),Acting in accordance with the procedure laid down in Article 189b of the Treaty (4) in the light of the joint text approved by the Conciliation Committee on 18 December 1996,(1) Whereas on 10 May 1993 the Council adopted Directive 93/22/EEC on investment services in the securities field (5); whereas that Directive is an essential instrument for the achievement of the internal market for investment firms;(2) Whereas Directive 93/22/EEC lays down prudential rules which investment firms must observe at all times, including rules the purpose of which is to protect as far as possible investor's rights in respect of money or instruments belonging to them;(3) Whereas, however, no system of supervision can provide complete protection, particularly where acts of fraud are committed;(4) Whereas the protection of investors and the maintenance of confidence in the financial system are an important aspect of the completion and proper functioning of the internal market in this area; whereas to that end it is therefore essential that each Member State should have an investor-compensation scheme that guarantees a harmonized minimum level of protection at least for the small investor in the event of an investment firm being unable to meet its obligations to its investor clients;(5) Whereas small investors will therefore be able to purchase investment services from branches of Community investment firms or on the basis of the cross-border provision of services as confidently as from domestic investment firms, in the knowledge that a harmonized minimum level of protection would be available to them in the event of an investment firm being unable to meet its obligations to its investor clients;(6) Whereas, in the absence of such minimum harmonization, a host Member State might consider itself justified, by considerations of investor protection, in requiring membership of its compensation scheme when a Community investment firm operating through a branch or under the freedom to provide services either belonged to no investor-compensation scheme in its home Member State or belonged to a scheme which was not regarded as offering equivalent protection; whereas such a requirement might prejudice the operation of the internal market;(7) Whereas although most Member States currently have some investor-compensation arrangements those arrangements do not in general cover all investment firms that hold the single authorization provided for in Directive 93/22/EEC;(8) Whereas, therefore, every Member State should be required to have an investor-compensation scheme or schemes to which every such investment firm would belong; whereas each scheme must cover money and instruments held by an investment firm in connection with an investor's investment operations which, where an investment firm is unable to meet its obligations to its investor clients, cannot be returned to the investor; whereas this is entirely without prejudice to the rules and procedures applicable in each Member State as regards the decisions to be taken in the event of the insolvency or winding-up of an investment firm;(9) Whereas the definition of investment firm includes credit institutions which are authorized to provide investment services; whereas every such credit institution must also be required to belong to an investor-compensation scheme to cover its investment business; whereas, however, it is not necessary to require such a credit institution to belong to two separate schemes where a single scheme meets the requirements both of this Directive and of Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes (6); whereas, however, in the case of investment firms which are credit institutions it may in certain cases be difficult to distinguish between deposits covered by Directive 94/19/EC and money held in connection with investment business; whereas Member States should be allowed to determine which Directive shall apply to such claims;(10) Whereas Directive 94/19/EC allows a Member State to exempt a credit institution from the obligation to belong to a deposit-guarantee scheme where that credit institution belongs to a system which protects the credit institution itself and, in particular, ensures its solvency; whereas, where a credit institution belonging to such a system is also an investment firm, a Member State should also be allowed, subject to certain conditions, to exempt it from the obligation to belong to an investor-compensation scheme;(11) Whereas a harmonized minimum level of compensation of ECU 20 000 for each investor should be sufficient to protect the interests of the small investor where an investment firm is unable to meet its obligations to its investor clients; whereas it would therefore appear reasonable to set the harmonized minimum level of compensation at ECU 20 000; whereas, as in Directive 94/19/EC, limited transitional provisions might be required to enable compensation schemes to comply with that figure since this applies equally to Member States which, when this Directive is adopted, do not have any such scheme;(12) Whereas the same figure was adopted in Directive 94/19/EC;(13) Whereas in order to encourage investors to take due care in their choice of investment firms it is reasonable to allow Member States to require investors to bear a proportion of any loss; whereas, however, an investor must be covered for at least 90 % of any loss as long as the compensation paid is less than the Community minimum;(14) Whereas certain Member States' schemes offer levels of cover higher than the harmonized minimum level of protection under this Directive; whereas, however, it does not seem desirable to require any change in those schemes in that respect;(15) Whereas the retention in the Community of schemes providing levels of cover higher than the harmonized minimum may, within the same territory, lead to disparities in compensation and unequal conditions of competition between national investment firms and branches of firms from other Member States; whereas, in order to counteract those disadvantages, branches should be authorized to join their host countries' schemes so that they may offer their investors the same cover as is provided by the schemes of the countries in which they are located; whereas it is appropriate that, in its report on the application of this Directive, the Commission should indicate the extent to which branches have exercised that option and any difficulties which they or the investor-compensation schemes may have encountered in implementing those provisions; whereas the possibility that home Member States' schemes should themselves offer such supplementary cover, subject to the conditions such schemes may lay down, is not ruled out;(16) Whereas market disturbances could be caused by branches of investment firms established in Member States other than their Member States of origin which offer levels of cover higher than those offered by investment firms authorized in their host Member States; whereas it is not appropriate that the level or scope of cover offered by compensation schemes should become an instrument of competition; whereas it is therefore necessary, at least during an initial period, to stipulate that neither the level nor the scope of cover offered by a home Member State's scheme to investors at branches located in another Member State should exceed the maximum level or scope offered by the corresponding scheme in the host Member State; whereas any market disturbances should be reviewed at an early date, on the basis of the experience acquired and in the light of developments in the financial sector;(17) Whereas a Member State must be able to exclude certain categories of specifically listed investments or investors, if it does not consider that they need special protection, from the cover afforded by investor-compensation schemes;(18) Whereas some Member States have investor-compensation schemes under the responsibility of professional organizations; whereas in other Member States there are schemes that have been set up and are regulated on a statutory basis; whereas that diversity of status poses a problem only with regard to compulsory membership of and exclusion from schemes; whereas it is therefore necessary to take steps to limit the powers of schemes in that area;(19) Whereas the investor must be compensated without excessive delay once the validity of his claim has been established; whereas the compensation scheme itself must be able to fix a reasonable period for the presentation of claims; whereas, however, the fact that such a period has expired may not be invoked against an investor who for good reason has not been able to present his claim within the time allowed;(20) Whereas informing investors of compensation arrangements is an essential element of investor protection; whereas Article 12 of Directive 93/22/EEC required investment firms to inform investors, before doing business with them, of the possible application of a compensation scheme; whereas, therefore, this Directive should lay down rules on informing such intending investors regarding the compensation schemes covering their investment business;(21) Whereas, however, the unregulated use in advertising of references to the amount and scope of a compensation scheme could affect the stability of the financial system or investor confidence; whereas Member States should therefore lay down rules to limit such references;(22) Whereas in principle this Directive requires every investment firm to join an investor-compensation scheme; whereas the Directives governing the admission of any investment firm the head office of which is in a non-member country, and in particular Directive 93/22/EEC, allow Member States to decide whether and subject to what conditions to permit branches of such investment firms to operate within their territories; whereas such branches will not enjoy the freedom to provide services under the second paragraph of Article 59 of the Treaty, or the right of establishment in Member States other than those in which they are established; whereas, accordingly, a Member State admitting such branches must decide how to apply the principles of this Directive to such branches in accordance with Article 5 of Directive 93/22/EEC and with the need to protect investors and maintain the integrity of the financial system; whereas it is essential that investors at such branches should be fully aware of the compensation arrangements applicable to them;(23) Whereas it is not indispensable in this Directive to harmonize the ways in which investor-compensation schemes are to be financed given, on the one hand, that the cost of financing such schemes must, in principle, be borne by investment firms themselves and, on the other hand, that the financing capacities of such schemes must be in proportion to their liabilities; whereas that must not, however, jeopardize the stability of the financial system of the Member State concerned;(24) Whereas this Directive may not result in the Member States or their competent authorities being made liable in respect of investors if they have ensured that one or more schemes for the compensation or protection of investors under the conditions prescribed in this Directive have been introduced and officially recognized;(25) Whereas, in conclusion, a minimum degree of harmonization of investor-compensation arrangements is necessary for the completion of the internal market for investment firms since it will make it possible for investors to do business with such firms with greater confidence, especially firms from other Member States, and make it possible to avoid any difficulties caused by host Member States applying national investor-protection rules that are not coordinated at Community level; whereas a binding Community Directive is the only appropriate instrument for the achievement of the desired objective in the general absence of investor-compensation arrangements corresponding to the coverage of Directive 93/22/EEC; whereas this Directive effects only the minimum harmonization required, allows Member States to prescribe wider or higher coverage if they desire and gives Member States the necessary latitude as regards the organization and financing of investor-compensation schemes,HAVE ADOPTED THIS DIRECTIVE:Article 1 For the purposes of this Directive:1. 'investment firm` shall mean an investment firm as defined in Article 1 (2) of Directive 93/22/EEC- authorized in accordance with Article 3 of Directive 93/22/EEC,or- authorized as a credit institution in accordance with Council Directive 77/780/EEC (7) and Council Directive 89/646/EEC (8), the authorization of which covers one or more of the investment services listed in Section A of the Annex to Directive 93/22/EEC;2. 'investment business` shall mean any investment service as defined in Article 1 (1) of Directive 93/22/EEC and the service referred to in point 1 of Section C of the Annex to that Directive,3. 'instruments` shall mean the instruments listed in Section B of the Annex to Directive 93/22/EEC;4. 'investor` shall mean any person who has entrusted money or instruments to an investment firm in connection with investment business;5. 'branch` shall mean a place of business which is a part of an investment firm, which has no legal personality and which provides investment services for which the investment firm has been authorized; all the places of business set up in the same Member State by an investment firm with headquarters in another Member State shall be regarded as a single branch;6. 'joint investment business` shall mean investment business carried out for the account of two or more persons or over which two or more persons have rights that may be exercised by means of the signature of one or more of those persons;7. 'competent authorities` shall mean the authorities defined in Article 22 of Directive 93/22/EEC; those authorities may, if appropriate, be those defined in Article 1 of Council Directive 92/30/EEC of 6 April 1992 on the supervision of credit institutions on a consolidated basis (9).Article 2 1. Each Member State shall ensure that within its territory one or more investor-compensation schemes are introduced and officially recognized. Except in the circumstances envisaged in the second subparagraph and in Article 5 (3), no investment firm authorized in that Member State may carry on investment business unless it belongs to such a scheme.A Member State may, however, exempt a credit institution to which this Directive applies from the obligation to belong to an investor-compensation scheme where that credit institution is already exempt under Article 3 (1) of Directive 94/19/EC from the obligation to belong to a desposit-guarantee scheme, provided that the protection and information given to depositors are also given to investors on the same terms and investors thus enjoy protection at least equivalent to that afforded by an investor-compensation scheme.Any Member State that avails itself of that option shall inform the Commission accordingly; it shall, in particular, disclose the characteristics of the protective systems in question and the credit institutions covered by them for the purposes of this Directive, as well as any subsequent changes to the information supplied. The Commission shall inform the Council thereof.2. A scheme shall provide cover for investors in accordance with Article 4 where either:- the competent authorities have determined that in their view an instrument firm appears, for the time being, for reasons directly related to its financial circumstances, to be unable to meet its obligations arising out of investors' claims and has no early prospect of being able to do so,or- a judicial authority has made a ruling, for reasons directly related to an investment firm's financial circumstances, which has the effect of suspending investors' ability to make claims against it,whichever is the earlier.Cover shall be provided for claims arising out of an investment firm's inability to:- repay money owed to or belonging to investors and held on their behalf in connection with investment business,or- return to investors any instruments belonging to them and held, administered or managed on their behalf in connection with investment business,in accordance with the legal and contractual conditions applicable.3. Any claim under paragraph 2 on a credit institution which, in a given Member State, would be subject both to this Directive and to Directive 94/19/EC shall be directed by that Member State to a scheme under one or other of those Directives as that Member State shall consider appropriate. No claim shall be eligible for compensation more than once under those Directives.4. The amount of an investor's claim shall be calculated in accordance with the legal and contractual conditions, in particular those concerning set off and counterclaims, that are applicable to the assessment, on the date of the determination or ruling referred to in paragraph 2, of the amount of the money or the value, determined where possible by reference to the market value, of the instruments belonging to the investor which the investment firm is unable to repay or return.Article 3 Claims arising out of transactions in connection with which a criminal conviction has been obtained for money laundering, as defined in Article 1 of Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering (10), shall be excluded from any compensation under investor-compensation schemes.Article 4 1. Member States shall ensure that schemes provide for cover of not less than ECU 20 000 for each investor in respect of the claims referred to in Article 2 (2).Until 31 December 1999 Member States in which, when this Directive is adopted, cover is less than ECU 20 000 may retain that lower level of cover, provided it is not less than ECU 15 000. That option shall also be available to Member States to which the transitional provisions of the second subparagraph of Article 7 (1) of Directive 94/19/EC apply.2. A Member State may provide that certain investors shall be excluded from cover by schemes or shall be granted a lower level of cover. Those exclusions shall be as listed in Annex I.3. This Article shall not preclude the retention or adoption of provisions which afford greater or more comprehensive cover to investors.4. A Member State may limit the cover provided for in paragraph 1 or that referred to in paragraph 3 to a specified percentage of an investor's claim. The percentage covered must, however, be equal to or exceed 90 % of the claim as long as the amount to be paid under the scheme is less than ECU 20 000.Article 5 1. If an investment firm required by Article 2 (1) to belong to a scheme does not meet the obligations incumbent on it as a member of that scheme, the competent authorities which issued its authorization shall be notified and, in cooperation with the compensation scheme, shall take all measures appropriate, including the imposition of penalties, to ensure that the investment firm meets its obligations.2. If those measures fail to secure compliance on the part of the investment firm, the scheme may, where national law permits the exclusion of a member, with the express consent of the competent authorities, give not less than 12 months' notice of its intention of excluding the investment firm from membership of the scheme. The scheme shall continue to provide cover under the second subparagraph of Article 2 (2) in respect of investment business transacted during that period. If, on expiry of the period of notice, the investment firm has not met its obligations, the compensation scheme may, again having obtained the express consent of the competent authorities, exclude it.3. Where national law permits, and with the express consent of the competent authorities which issued its authorization, an investment firm excluded from an investor-compensation scheme may continue to provide investment services if, before its exclusion, it made alternative compensation arrangements which ensure that investors will enjoy cover that is at least equivalent to that offered by the officially recognized scheme and has characteristics equivalent to those of that scheme.4. If an investment firm the exclusion of which is proposed under paragraph 2 is unable to make alternative arrangements which comply with the conditions imposed in paragraph 3, the competent authorities which issued its authorization shall withdraw it forthwith.Article 6 After the withdrawal of an investment firm's authorization, cover under the second subparagraph of Article 2 (2) shall continue to be provided in respect of investment business transacted up to the time of that withdrawal.Article 7 1. Investor-compensation schemes introduced and officially recognized in a Member State in accordance with Article 2 (1) shall also cover investors at branches set up by investment firms in other Member States.Until 31 December 1999, neither the level nor the scope, including the percentage, of the cover provided for may exceed the maximum level or scope of the cover offered by the corresponding compensation scheme within the territory of the host Member State. Before that date the Commission shall draw up a report on the basis of the experience acquired in applying this subparagraph and Article 4 (1) of Directive 94/19/EC referred to above and shall consider the need to continue those provisions. If appropriate, the Commission shall submit a proposal for a Directive to the European Parliament and the Council, with a view to the extension of their validity.Where the level or scope, including the percentage, of the cover offered by the host Member State's investor-compensation scheme exceeds the level or scope of the cover provided in the Member State in which an investment firm is authorized, the host Member State shall ensure that there is an officially recognized scheme within its territory which a branch may join voluntarily in order to supplement the cover which its investors already enjoy by virtue of its membership of its home Member State's scheme.If a branch joins such a scheme, that scheme shall be one that covers the category of institution to which the branch belongs or most closely corresponds in its host Member State.Member States shall ensure that objective and generally applied conditions are established concerning branches' membership of all investor-compensation schemes. Admission shall be conditional on a branch meeting the relevant membership obligations, including in particular the payment of all contributions and other charges. Member States shall follow the guiding principles set out in Annex II in implementing this paragraph.2. If a branch which has exercised the option of voluntary membership under paragraph 1 does not meet the obligations incumbent on it as a member of an investor-compensation scheme, the competent authorities which issued its authorization shall be notified and, in cooperation with the compensation scheme, shall take all measures necessary to ensure that the branch meets the aforementioned obligations.If those measures fail to ensure that the branch meets the obligations referred to in this Article, after an appropriate period of notice of not less than 12 months the compensation scheme may, with the consent of the competent authorities which issued the authorization, exclude the branch. Investment business transacted before the date of exclusion shall continue to be covered after that date by the compensation scheme of which the branch was a voluntary member. Investors shall be informed of the withdrawal of the supplementary cover and of the date on which it takes effect.Article 8 1. The cover provided for in Article 4 (1), (3) and (4) shall apply to the investor's aggregate claim on the same investment firm under this Directive irrespective of the number of accounts, the currency and location within the Community.Member States may, however, provide that funds in currencies other than those of the Member States and the ecu shall be excluded from cover or be subject to lower cover. This option shall not apply to instruments.2. Each investor's share in joint investment business shall be taken into account in calculating the cover provided for in Article 4 (1), (3) and (4).In the absence of special provisions, claims shall be divided equally amongst investors.Member States may provide that claims relating to joint investment business to which two or more persons are entitled as members of a business partnership, association or grouping of a similar nature which has no legal personality may, for the purpose of calculating the limits provided for in Article 4 (1), (3) and (4), be aggregated and treated as if arising from an investment made by a single investor.3. Where an investor is not absolutely entitled to the sums or securities held, the person who is absolutely entitled shall receive the compensation, provided that that person has been or can be identified before the date of the determination or ruling referred to in Article 2 (2).If two or more persons are absolutely entitled, the share of each under the arrangements subject to which the sums or the securities are managed shall be taken into account when the limits laid down in Article 4 (1), (3) and (4) are calculated.This provision shall not apply to collective-investment undertakings.Article 9 1. The compensation scheme shall take appropriate measures to inform investors of the determination or ruling referred to in Article 2 (2) and, if they are to be compensated, to compensate them as soon as possible. It may fix a period during which investors shall be required to submit their claims. That period may not be less than five months from the date of the aforementioned determination or ruling or from the date on which that determination or ruling is made public.The fact that that period has expired may not, however, be invoked by the scheme to deny cover to an investor who has been unable to assert his right to compensation in time.2. The scheme shall be in a position to pay an investor's claim as soon as possible and at the latest within three months of the establishment of the eligibility and the amount of the claim.In wholly exceptional circumstances and in special cases a compensation scheme may apply to the competent authorities for an extension of the time limit. No such extension may exceed three months.3. Notwithstanding the time limit laid down in paragraph 2, where an investor or any other person entitled to or having an interest in investment business has been charged with an offence arising out of or in relation to money laundering as defined in Article 1 of Directive 91/308/EEC, the compensation scheme may suspend any payment pending the judgment of the court.Article 10 1. Member States shall ensure that each investment firm takes appropriate measures to make available to actual and intending investors the information necessary for the identification of the investor-compensation scheme of which the investment firm and its branches within the Community are members or any alternative arrangement provided for under the second subparagraph of Article 2 (1) or Article 5 (3). Investors shall be informed of the provisions of the investor-compensation scheme or any alternative arrangement applicable, including the amount and scope of the cover offered by the compensation scheme and any rules laid down by the Member States pursuant to Article 2 (3). That information shall be made available in a readily comprehensible manner.Information shall also be given on request concerning the conditions governing compensation and the formalities which must be completed to obtain compensation.2. The information provided for in paragraph 1 shall be made available in the manner prescribed by national law in the official language or languages of the Member State in which a branch is established.3. Member States shall establish rules limiting the use in advertising of the information referred to in paragraph 1 in order to prevent such use from affecting the stability of the financial system or investor confidence. In particular, a Member State may restrict such advertising to a factual reference to the scheme to which an investment firm belongs.Article 11 1. Each Member State shall check whether branches established by an investment firm the head office of which is outwith the Community have cover equivalent to that prescribed in this Directive. Failing such cover, a Member State may, subject to Article 5 of Directive 93/22/EEC, stipulate that branches established by an investment firm the head office of which is outwith the Community shall join investor-compensation schemes in operation within its territory.2. Actual and intending investors at branches established by an investment firm the head office of which is outwith the Community shall be provided by that investment firm with all relevant information concerning the compensation arrangements which cover their investments.3. The information provided for in paragraph 2 shall be made available in the manner prescribed by national law in the official language or languages of the Member State in which a branch is established and shall be drafted in a clear and comprehensible form.Article 12 Without prejudice to any other rights which they may have under national law, schemes which make payments in order to compensate investors shall have the right of subrogation to the rights of those investors in liquidation proceedings for amounts equal to their payments.Article 13 Member States shall ensure that an investor's right to compensation may be the subject of an action by the investor against the compensation scheme.Article 14 No later than 31 December 1999 the Commission shall submit a report to the European Parliament and to the Council on the application of this Directive together, where appropriate, with proposals for its revision.Article 15 1. The Member States shall bring into force the laws, regulations and administrative provisions necessary for them to comply with this Directive no later than 26 September 1998. They shall forthwith inform the Commission thereof.When the Member States adopt those measures, they shall contain references to this Directive or shall be accompanied by such references on the occasion of their official publication. The methods of making such references shall be laid down by the Member States.2. The Member States shall communicate to the Commission the texts of the main provisions of national law which they adopt in the field covered by this Directive.Article 16 Article 12 of Directive 93/22/EEC shall be repealed with effect from the date referred to in Article 15 (1).Article 17 This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities.Article 18 This Directive is addressed to the Member States.Done at Brussels, 3 March 1997.For the European ParliamentThe PresidentJ. M. GIL-ROBLESFor the CouncilThe PresidentM. DE BOER(1) OJ No C 321, 27. 11. 1993, p. 15 and OJ No C 382, 31. 12. 1994, p. 27.(2) OJ No C 127, 7. 5. 1994, p. 1.(3) Opinion delivered on 28 July 1995.(4) European Parliament opinion of 19 April 1994 (OJ No C 128, 9. 5. 1994, p. 85), Council common position of 23 October 1995 (OJ No C 320, 30. 11. 1995, p. 9) and European Parliament Decision of 12 March 1996 (OJ No C 96, 1. 4. 1996, p. 28). Decision of the Council of 17 February 1997 and Decision of the European Parliament of 19 February 1997 (OJ No C 85, 17. 3. 1997).(5) OJ No L 141, 11. 6. 1993, p. 27.(6) OJ No L 135, 31. 5. 1994, p. 5.(7) First Council Directive 77/780/EEC of 12 December 1977 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions (OJ No L 322, 17. 12. 1977, p. 30). Directive as last amended by Directive 89/646/EEC (OJ No L 386, 30. 12. 1989, p. 1).(8) Second Council Directive 89/646/EEC of 15 December 1989 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions and amending Directive 77/780/EEC (OJ No L 386, 30. 12. 1989, p. 1). Directive as last amended by Directive 92/30/EEC (OJ No L 110, 28. 4. 1992, p. 52).(9) OJ No L 110, 28. 4. 1992, p. 52.(10) OJ No L 166, 28. 6. 1991, p. 77.ANNEX I LIST OF EXCLUSIONS REFERRED TO IN ARTICLE 4 (2) 1. Professional and institutional investors, including:- investment firms as defined in Article 1 (2) of Directive 93/22/EEC,- credit institutions as defined in the first indent of Article 1 of Council Directive 77/780/EEC,- financial institutions as defined in Article 1 (6) of Council Directive 89/646/EEC,- insurance undertakings,- collective-investment undertakings,- pension and retirement funds.Other professional and institutional investors.2. Supranational institutions, government and central administrative authorities.3. Provincial, regional, local and municipal authorities.4. Directors, managers and personally liable members of investment firms, persons holding 5 % or more of the capital of such investment firms, persons responsible for carrying out the statutory audits of investment firms' accounting documents and investors with similar status in other firms within the same group as such a firm.5. Close relatives and third parties acting on behalf of the investors referred to in point 4.6. Other firms in the same group.7. Investors who have any responsibility for or have taken advantage of certain facts relating to an investment firm which gave rise to the firm's financial difficulties or contributed to the deterioration of its financial situation.8. Companies which are of such a size that they are not permitted to draw up abridged balance sheets under Article 11 of the Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54 (3) (g) of the Treaty on the annual accounts of certain types of companies (1).(1) OJ No L 222, 14. 8. 1978, p. 11. Directive as last amended by Directive 94/8/EC (OJ No L 82, 25. 3. 1994, p. 33).ANNEX II GUIDING PRINCIPLES (referred to in the fifth subparagraph of Article 7 (1)) Where a branch applies to join a host Member State's scheme for supplementary cover, the host Member State's scheme will bilaterally establish with the home Member State's scheme appropriate rules and procedures for the payment of compensation to investors at that branch. The following principles will apply both to the drawing up of those procedures and in the framing of the membership conditions applicable to that branch (as referred to in Article 7 (1)):(a) the host Member State's scheme will retain full rights to impose its objective and generally applied rules on participating investment firms; it will be able to require the provision of relevant information and be entitled to verify such information with the home Member State's competent authorities;(b) the host Member State's scheme will meet claims for supplementary compensation after it has been informed by the home Member State's competent authorities of the determination or ruling referred to in Article 2 (2). The host Member State's scheme will retain full rights to verify an investor's entitlement according to its own standards and procedures before paying supplementary compensation;(c) the host Member State's and the home Member State's schemes will cooperate fully with each other to ensure that investors receive compensation promptly and in the correct amounts. In particular, they will agree on how the existence of a counterclaim which may give rise to set-off under either scheme will affect the compensation paid to the investor by each scheme;(d) the host Member State's scheme will be entitled to charge branches for supplementary cover on an appropriate basis which takes into account the cover funded by the home Member State's scheme. To facilitate charging, the host Member State's scheme will be entitled to assume that its liability will in all circumstances be limited to the excess of the cover it has offered over the cover offered by the home Member State regardless of whether the home Member State actually pays any compensation in respect of claims by investors within the host Member State's territory.

Summary: Protecting investors when an investment firm fails Protecting investors when an investment firm fails SUMMARY OF: Directive 97/9/EC on investor-compensation schemes WHAT IS THE AIM OF THE DIRECTIVE? It aims to protect investors following the failure of an investment firm. KEY POINTS The directive requires European Union (EU) countries to set up one or more investor compensation schemes*. All investment firms supplying investment services must belong to such a scheme (credit institutions may be exempted provided that they already belong to a scheme which guarantees protection at least equivalent to that provided under a compensation scheme and that they fulfil certain specific conditions). The compensation scheme operates where: the competent authorities have determined that in their view an investment firm appears, for the time being, to be unable to meet its obligations arising out of investors’ claims and has no early prospect of being able to do so; or a judicial authority has made a ruling which has the effect of suspending investors' ability to make claims against an investment firm. Cover has to be provided for claims arising out of an investment firm’s inability to: repay money owed to or belonging to investors and held on their behalf in connection with investment business; or return to investors any instruments belonging to them and held, administered or managed on their behalf in connection with investment business. Where an investment firm is also a credit institution, the EU country of origin decides which directive should apply to money claims: the above-mentioned directive or that governing deposit-guarantee schemes. No claim in respect of a single amount is eligible for compensation under both directives. The directive sets an EU minimum level of compensation per investor of € 20 000, while at the same time authorising EU countries to provide for a higher level of compensation if they so wish. However, certain categories of investors may be excluded by EU countries from the scheme’s coverage or may be afforded a lower level of coverage. The arrangements for organising and financing schemes are left to the discretion of EU countries. There are procedures to be followed where an investment firm fails to comply with the obligations incumbent on it as a member of a scheme (penalties ranging up to exclusion). Branches of investment firms may join compensation schemes in host countries if they so wish. The coverage applies to the investor’s aggregate claim, irrespective of the number of accounts, the currency and the location in the EU. In the case of joint investment business, claims are divided equally amongst investors. The compensation scheme may fix a period during which investors must submit their claims. The fact that that period has expired may not, however, be invoked by the scheme to deny cover to an investor. An investor’s claim must be met within a maximum of 3 months of the establishment of the eligibility and the amount of the claim. Obligations are laid down regarding information that must be supplied to investors. The European Commission adopted a proposal to amend the directive in July 2010. This was in light of developments since the directive’s entry into force and the financial crisis which began in 2008. The proposed amendment was also informed by an evaluation conducted in 2009. The proposal would: have raised the compensation limit to € 50 000; shortened payout delays; required schemes to be pre-funded by a common minimum amount and extended their coverage to specific third-party entities. The proposal was withdrawn in March 2015 due to a lack of progress in the negotiations between co-legislators (the European Parliament and the Council of the European Union). FROM WHEN DOES THE DIRECTIVE APPLY? It has applied since 26 March 1997. EU countries had to incorporate it into national law by 26 September 1998. BACKGROUND For more information, see: Investment services and regulated markets (MiFID I and MiFID II) on the European Commission’s website. * KEY TERMS investor compensation scheme: a scheme to protect investors who use investment services. It provides them with compensation in cases where an investment firm is unable to return assets belonging to them. MAIN DOCUMENT Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemes (OJ L 84, 26.3.1997, pp. 22-31) last update 06.10.2016


EUR-Lex - 31998Y0202(01) - EN Avis juridique important | 31998Y0202(01) Resolution of the European Council of 13 December 1997 on economic policy coordination in stage 3 of EMU and on Treaty Articles 109 and 109b of the EC Treaty Official Journal C 035 , 02/02/1998 P. 0001 - 0004 RESOLUTION OF THE EUROPEAN COUNCIL of 13 December 1997 on economic policy coordination in stage 3 of EMU and on Treaty Articles 109 and 109b of the EC Treaty (98/C 35/01) THE EUROPEAN COUNCIL, meeting in Luxembourg on 13 December 1997,Having regard to the Treaty establishing the European Community,Recalling the conclusions of the Amsterdam European Council, notably on improving economic coordination and on effective ways on implementing Articles 109 and 109b of the Treaty,Recalling the Amsterdam European Council Resolution on the Stability and Growth Pact,Recalling the Amsterdam European Council Resolution on Growth and Employment, andTaking note of the report of the Council of 1 December 1997,HAS RESOLVED AS FOLLOWS:I. Coordination of economic policies in stage 3 of economic and monetary union (EMU) 1. EMU will link the economies of the euro-area Member States more closely together. They will share a single monetary policy and a single exchange rate. Cyclical developments are likely to converge further. Economic policies, and wage determination, however, remain a national responsibility, subject to the provisions of Article 104c of the Treaty and the Stability and Growth Pact. To the extent that national economic developments have an impact on inflation prospects in the euro-area, they will influence monetary conditions in that area. It is for this basic reason that the move to a single currency will require closer Community surveillance and coordination of economic policies among euro-area Member States.2. Economic and monetary interdependence with non-participating Member States will also be strong; they all participate in the single market. The need to ensure further convergence and a smooth functioning of the single market therefore requires all Member States to be included in the coordination of economic policies. Moreover, interdependence will be especially strong if non euro-area Member States participate in the new exchange rate mechanism, as countries with a derogation are expected to.3. Enhanced economic policy coordination should give full attention to national economic developments and policies which have the potential to influence monetary and financial conditions throughout the euro area or the smooth functioning of the internal market. This includes:- close monitoring of macroeconomic developments in Member States to ensure sustained convergence, and of exchange-rate developments of the euro,- surveillance of budgetary positions and policies in accordance with the Treaty and the Stability and Growth Pact,- monitoring of Member States' structural policies in labour, product and services markets, as well as of cost and price trends, particularly insofar as they affect the chances of achieving sustained non-inflationary growth and job creation, and- the fostering of tax reform to raise efficiency and the discouragement of harmful tax competition.Enhanced economic policy coordination must adhere to the Treaty principle of subsidiarity, respect the prerogatives of national governments in determining their structural and budgetary policies subject to the provisions of the Treaty and the Stability and Growth Pact, respect the independence of the European System of Central Banks (ESCB) in pursuing its primary objective of price stability and the role of the Ecofin Council as the central decision-making body for economic coordination, and respect national traditions and the competences and responsibilities of the social partners in the wage formation process.4. To ensure the smooth functioning of EMU, the Council, the Commission and the Member States are called upon to apply the Treaty instruments for economic policy coordination fully and effectively.To this end, the broad economic policy guidelines adopted in accordance with Article 103(2) of the Treaty should be developed into an effective instrument for ensuring sustained convergence of Member States. They should provide more concrete and country-specific guidelines and focus more on measures to improve Member States' growth potential, thus increasing employment. Therefore, more attention should henceforth be paid in them to improving competitiveness, labour-, product- and services-market efficiency, education and training, and to making taxation and social protection systems more employment-friendly.Enhanced coordination should be aimed at securing consistency of national economic policies and their implementation with the broad economic policy guidelines and the proper functioning of EMU. Economic policies and development in each Member State and in the Community should be monitored in the framework of multilateral surveillance according to Article 103(3) of the Treaty. Particular attention should be paid to giving early warning, not only of threatening budgetary situations in accordance with the Stability and Growth Pact, but also of other developments which, if allowed to persist, might threaten stability, competitiveness and future job creation. To this end, the Council is expected to be more ready to make the necessary recommendations in accordance with Article 103(4) of the Treaty to a Member State whenever its economic policies are not consistent with the broad economic policy guidelines. For its part, the Member State concerned should commit itself to take timely and efficient measures which it deems necessary to respond to the Council's recommendations. Moreover, the Member States should commit themselves to a comprehensive and speedy exchange of information on economic developments and policy intentions with a cross-border impact.5. Monitoring of the economic situation and policy discussions should become a regular item on the agenda of informal Ecofin sessions. In order to stimulate an open and frank debate, the Ecofin Council should from time to time meet in restricted sessions (minister plus one), particularly when conducting multilateral surveillance.6. Under the terms of the Treaty, the Ecofin Council (1) is the centre for the coordination of the Member States' economic policies and is empowered to act in the relevant areas. In particular, the Ecofin Council is the only body empowered to formulate and adopt the broad economic policy guidelines which constitute the main instrument of economic coordination.The defining position of the Ecofin Council at the centre of the economic coordination and decision-making process affirms the unity and cohesion of the Community.The Ministers of the States participating in the euro-area may meet informally among themselves to discuss issues connected with their shared specific responsibilities for the single currency. The Commission, and the European Central Bank (ECB) when appropriate, will be invited to take part in the meetings.Whenever matters of common interest are concerned they will be discussed by Ministers of all Member States.Decisions will in all cases be taken by the Ecofin Council in accordance with the procedures determined by the Treaty.II. Implementing the Treaty provisions on the exchange-rate policy, external position and representation of the Community (Article 109 of the Treaty) 7. The European Council recognises the responsibility which will fall to the Community with the introduction of the euro, one of the major currencies in the world monetary system. The contribution of the Community through the ESCB, in strict accordance with the competences and procedures established by the Treaty, will be to provide a centre of price stability. For its part, the European Council is resolved to play its full part in helping to lay the foundations for a prosperous and efficient economy in the Community, in accordance with the principle of an open economy with free competition, favouring an efficient allocation of resources, and in compliance with the principles set out in Article 3a of the Treaty. The European Council is convinced that this will provide the bases for a currency which is strong and respected.8. The Council should monitor the development of the exchange rate of the euro in the light of a wide range of economic data. The Commission should provide analyses to the Council, and the Economic and Financial Committee should prepare the Council's reviews. It is important to make full use of the Treaty provisions to ensure an exchange of information and views between the Council and the ECB on the exchange rate of the euro. While in general exchange rates should be seen as the outcome of all other economic policies, the Council may, in exceptional circumstances, for example in the case of a clear misalignment, formulate general orientations for exchange-rate policy in relation to non-EC currencies in accordance with Article 109(2) of the Treaty. These general orientations should always respect the independence of the ESCB and be consistent with the primary objective of the ESCB to maintain price stability.9. The Council should decide on the position of the Community at international level as regards issues of particular relevance to economic and monetary union, in accordance with Article 109(4) of the Treaty. These positions will be relevant both to bilateral relations between the European Union and individual third countries and to proceedings in international organizations or informal international groupings. The scope of this provision is necessarily limited as only euro-area Member States vote under Article 109.10. The Council and the European Central Bank will carry out their tasks in representing the Community at international level in an efficient manner and in compliance with the allocation of powers laid down in the Treaty. On elements of economic policy other than monetary and exchange-rate policy, the Member States should continue to present their policies outside the Community framework, while taking full account of the Community interest. The Commission will be involved in external representation to the extent required to enable it to perform the role assigned to it by the Treaty.Representation in international organizations should take account of those organizations' rules. With particular regard to the Community's relations with the International Monetary Fund (IMF), they should be predicated upon the provision in that Fund's Articles of Agreement that only countries can be members of that institution. The Member States, in their capacities as members of the IMF, should help to establish pragmatic arrangements which would facilitate the conduct of IMF surveillance and the presentation of Community positions, including the views of the ESCB, in IMF fora.III. Dialogue between the Council and the ECB 11. In the light of the allocation of responsibilities laid down in the Treaty, the harmonious economic development of the Community in Stage 3 of EMU will call for continuous and fruitful dialogue between the Council and the ECB, involving the Commission and respecting all aspects of the independence of the ESCB.12. The Council should therefore play its full part in exploiting the channels of communication provided by the Treaty. The President of the Council, using his position under Article 109b of the Treaty, should report to the Governing Council of the ECB on the Council's assessment of the economic situation of the Union and on economic policies of the Member States and could discuss with the ECB the views of the Council on exchange-rate developments and prospects. The Treaty provides in turn for the ECB President to attend Council meetings whenever the Council is discussing matters relating to the objectives and tasks of the ESCB, for instance when the broad economic policy guidelines are being developed. Importance also attaches to the annual reports which the ECB will make to the European Parliament, the Council and the Commission, as well as to the European Council.The Economic and Financial Committee, which will bring together senior officials from the national central banks and the ECB as well as from finance ministries, will provide the framework within which the dialogue can be prepared and continued at the level of senior officials.(1) Declaration No 3 to the Treaty on European Union affirms that for the purpose of applying the provisions set out in Title VI on economic and monetary policy of the Treaty establishing the European Community, the usual practice, according to which the Council meets in the composition of Economic and Finance Ministers, shall be continued, without prejudice in Article 109j(2) to (4) and Article 109k(2) of the Treaty.

Summary: European Council resolution on economic policy coordination European Council resolution on economic policy coordination SUMMARY OF: Resolution of the European Council on economic policy coordination in EMU WHAT IS THE AIM OF THE RESOLUTION? It demonstrates the formal commitment of the European Council to respecting the provisions of the Treaty in terms of the surveillance and coordination of economic policies. It also strengthens coordination in practice, both between the European Union (EU) countries which share the single currency (among other things by setting-up an informal Euro Group) and between these countries and those that are not participating. KEY POINTS The countries in the euro area will share a single monetary policy and a single exchange rate, while the other aspects of economic policy will remain national issues. To the extent that national economic developments influence monetary conditions in the euro area, closer surveillance and coordination of economic policies among euro-area countries will be necessary. All EU countries, including those remaining outside the euro area (Denmark, Sweden and the United Kingdom (1)) must be included in the coordination of economic policies, as they all participate in the single market and may also participate in the exchange rate mechanism. Enhanced surveillance and coordination should cover the following areas: macroeconomic developments in EU countries and the development of the exchange rate for the euro; budgetary positions and policies; structural policies in labour, product and services markets, as well as cost and price trends. Coordination must adhere to the principle of subsidiarity. To ensure the smooth functioning of economic and monetary union (EMU), the broad economic policy guidelines should provide more concrete and country-specific guidelines and focus more on measures to improve growth potential and create jobs. EU countries should commit themselves to a comprehensive and speedy exchange of information on economic developments and policy intentions with a cross-border impact, even if there is no threat of a deterioration in the budgetary situation. For its part, the Council could show more inclination to address recommendations to countries whose economic policies are not consistent with the broad guidelines. The Economic and Financial Affairs Council (ECOFIN) occupies the defining position at the centre of the economic coordination and decision-making process. Whenever matters of common interest are addressed, they will be discussed by the ministers of all EU countries. However, the ministers of the countries participating in the euro-area may meet informally among themselves to discuss issues connected with their shared specific responsibilities for the single currency (this formation of ministers normally meets the day before the ECOFIN Council meeting). As the Council must monitor the development of the euro exchange rate, it is important for it to be able to exchange views and information with the European Central Bank (ECB). It may, in exceptional circumstances, formulate general guidelines for exchange-rate policy in relation to non-EU currencies. These must respect the independence of the European System of Central Banks (ESCB) and be consistent with the primary objective of the ESCB, which is to maintain price stability. The Council should decide on the EU’s position on issues of particular relevance to EMU, in connection with both bilateral relations with non-EU countries and proceedings in international organisations or informal international groupings. Only euro-area countries will participate in votes. The Council and the European Central Bank will represent the EU at international level in compliance with the allocation of powers laid down in the Treaty. On elements of economic policy other than monetary and exchange-rate policy, EU countries should continue to present their policies outside the Community framework, while taking full account of the EU’s interest. Representation in international organisations should take account of those organisations’ rules. For example, only countries can be members of the International Monetary Fund. In the light of the allocation of responsibilities laid down in the Treaty, the EU’s harmonious economic development will necessitate continuous dialogue between the Council and the ECB, involving the European Commission and respecting all aspects of the independence of the ESCB. The Economic and Financial Committee will provide the framework within which the dialogue can be prepared and pursued at senior official level. MAIN DOCUMENT Resolution of the European Council of 13 December 1997 on economic policy coordination in stage 3 of EMU and on Treaty Articles 109 and 109b of the EC Treaty (OJ C 35, 2.2.1998, pp. 1–4) last update 21.02.2017(1) The United Kingdom withdraws from the European Union and becomes a third country (non-EU country) as of 1 February 2020.


2.8.1997 EN Official Journal of the European Union L 209/6 COUNCIL REGULATION (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular the second subparagraph of Article 104c (14) thereof, Having regard to the proposal from the Commission (1), Having regard to the opinion of the European Parliament (2), Having regard to the opinion of the European Monetary Institute, (1) Whereas it is necessary to speed up and to clarify the excessive deficit procedure set out in Article 104c of the Treaty in order to deter excessive general government deficits and, if they occur, to further their prompt correction; whereas the provisions of this Regulation, which are to the above effect and adopted under Article 104c (14) second subparagraph, constitute, together with those of Protocol (No 5) to the Treaty, a new integrated set of rules for the application of Article 104c; (2) Whereas the Stability and Growth Pact is based on the objective of sound government finances as a means of strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation; (3) Whereas the Stability and Growth Pact consists of this Regulation, of Council Regulation (EC) No 1466/97 (3) which aims to strengthen the surveillance of budgetary positions and the surveillance and coordination of economic policies and of the Resolution of the European Council of 17 June 1997 on the Stability and Growth Pact (4), in which, in accordance with Article D of the Treaty on European Union, firm political guidelines are issued in order to implement the manner and in particular to adhere to the medium term objective for budgetary positions of close to balance or in surplus, to which all Member States are committed, and to take the corrective budgetary action they deem necessary to meet the objectives of their stability and convergence programmes, whenever they have information indicating actual or expected significant divergence from the medium-term budgetary objective; (4) Whereas in stage three of Economic and Monetary Union (EMU) the Member States are, according to Article 104c of the Treaty, under a clear Treaty obligation to avoid excessive government deficits; whereas under Article 5 of Protocol (No 11) to the Treaty, paragraphs 1, 9 and 11 of Article 104c do not apply to the United Kingdom unless it moves to the third stage; whereas the obligation under Article 109e (4) to endeavour to avoid excessive deficits will continue to apply to the United Kingdom; (5) Whereas Denmark, referring to paragraph 1 of Protocol (No 12) to the Treaty has notified, in the context of the Edinburgh decision of 12 December 1992, that it will not participate in the third stage; whereas, therefore, in accordance with paragraph 2 of the said Protocol, paragraphs 9 and 11 of Article 104c shall not apply to Denmark; (6) Whereas in stage three of EMU Member States remain responsible for their national budgetary policies, subject to the provisions of the Treaty; whereas the Member States will take the necessary measures in order to meet their responsibilities in accordance with the provisions of the Treaty; (7) Whereas adherence to the medium-term objective of budgetary positions close to balance or in surplus to which all Member States are committed, contributes to the creation of the appropriate conditions for price stability and for sustained growth conducive to employment creation in all Member States and will allow them to deal with normal cyclical fluctuations while keeping the government deficit within the 3 % of GDP reference value; (8) Whereas for EMU to function properly, it is necessary that convergence of economic and budgetary performances of Member States which have adopted the single currency, hereafter referred to as ‘participating Member States’, proves stable and durable; whereas budgetary discipline is necessary in stage three of EMU to safeguard price stability; (9) Whereas according to Article 109k (3) Articles 104c (9) and (11) only apply to participating Member States; (10) Whereas it is necessary to define the concept of an exceptional and temporary excess over the reference value as referred to in Article 104c (2) (a); whereas the Council should in this context, inter alia, take account of the pluriannual budgetary forecasts provided by the Commission; (11) Whereas a Commission report in accordance with Article 104c (3) is also to take into account whether the government deficit exceeds government investment expenditure and take into account all other relevant factors, including the medium-term economic and budgetary position of the Member State; (12) Whereas there is a need to establish deadlines for the implementation of the excessive deficit procedure in order to ensure its expeditious and effective implementation; whereas it is necessary in this context to take account of the fact that the budgetary year of the United Kingdom does not coincide with the calendar year; (13) Whereas there is a need to specify how the sanctions provided for in Article 104c could be imposed in order to ensure the effective implementation of the excessive deficit procedure; (14) Whereas reinforced surveillance under the Council Regulation (EC) No 1466/97 together with the Commission's monitoring of budgetary positions in accordance with paragraph 2 of Article 104c should facilitate the effective and rapid implementation of the excessive deficit procedure; (15) Whereas in the light of the above, in the event that a participating Member State fails to take effective action to correct an excessive deficit, an overall maximum period of ten months from the reporting date of the figures indicating the existence of an excessive deficit until the decision to impose sanctions, if necessary, seems both feasible and appropriate in order to exert pressure on the participating Member State concerned to take such action; in this event, and if the procedure starts in March, this would lead to sanctions being imposed within the calendar year in which the procedure had been started; (16) Whereas the Council recommendation for the correction of an excessive deficit or the later steps of the excessive deficit procedure, should have been anticipated by the Member State concerned, which would have had an early warning; whereas the seriousness of an excessive deficit in stage three should call for urgent action from all those involved; (17) Whereas it is appropriate to hold the excessive deficit procedure in abeyance if the Member State concerned takes appropriate action in response to a recommendation under Article 104c (7) or a notice issued under Article 104c (9) in order to provide an incentive to Member States to act accordingly; whereas the time period during which the procedure would be held in abeyance should not be included in the maximum period of ten months between the reporting date indicating the existence of an excessive deficit and the imposition of sanctions; whereas it is appropriate to resume the procedure immediately if the envisaged action is not being implemented or if the implemented action is proving to be inadequate; (18) Whereas, in order to ensure that the excessive deficit procedure has a sufficient deterrent effect, a non-interest-bearing deposit of an appropriate size should be required from the participating Member State concerned, whenever the Council decides to impose a sanction; (19) Whereas the definition of sanctions on a prescribed scale is conducive to legal certainty; whereas it is appropriate to relate the amount of the deposit to the GDP of the participating Member State concerned; (20) Whereas, whenever the imposition of a non-interest-bearing deposit does not induce the participating Member State concerned to correct its excessive deficit in due time, it is appropriate to intensify the sanctions; whereas it is then appropriate to transform the deposit into a fine; (21) Whereas appropriate action by the participating Member State concerned in order to correct its excessive deficit is the first step towards abrogation of sanctions; whereas significant progress in correcting the excessive deficit should allow for the lifting of sanctions in accordance with paragraph 12 of Article 104c; whereas the abrogation of all outstanding sanctions should only occur once the excessive deficit has been totally corrected; (22) Whereas Council Regulation (EC) No 3605/93 of 22 November 1993 on the application of the Protocol on the excessive deficit procedure annexed to the Treaty establishing the European Community (5) contains detailed rules for the reporting of budgetary data by Member States; (23) Whereas, according to Article 109f (8), where the Treaty provides for a consultative role for the European Central Bank (ECB), references to the ECB shall be read as referring to the European Monetary Institute before the establishment of the ECB, HAS ADOPTED THIS REGULATION: SECTION 1 DEFINITIONS AND ASSESSMENTS Article 1 1. This Regulation sets out the provisions to speed up and clarify the excessive deficit procedure, having as its objective to deter excessive general government deficits and, if they occur, to further their prompt correction. 2. For the purpose of this Regulation ‘participating Member States’ shall mean those Member States which adopt the single currency in accordance with the Treaty and ‘non-participating Member States’ shall mean those which have not adopted the single currency. Article 2 1. The excess of a government deficit over the reference value shall be considered exceptional and temporary, in accordance with Article 104s(2) (a), second indent, when resulting from an unusual event outside the control of the Member State concerned and which has a major impact on the financial position of the general government, or when resulting from a severe economic downturn. In addition, the excess over the reference value shall be considered temporary if budgetary forecasts as provided by the Commission indicate that the deficit will fall below the reference value following the end of the unusual event or the severe economic downturn. 2. The Commission when preparing a report under Article 104c (3) shall, as a rule, consider an excess over the reference value resulting from a severe economic downturn to be exceptional only if there is an annual fall of real GDP of at least 2 %. 3. The Council when deciding, according to Article 104c (6), whether an excessive deficit exists, shall in its overall assessment take into account any observations made by the Member State showing that an annual fall of real GDP of less than 2 % is nevertheless exceptional in the light of further supporting evidence, in particular on the abruptness of the downturn or on the accumulated loss of output relative to past trends. SECTION 2 SPEEDING UP THE EXCESSIVE DEFICIT PROCEDURE Article 3 1. Within two weeks of the adoption by the Commission of a report issued in accordance with Article 104c (3), the Economic and Financial Committee shall formulate an opinion in accordance with Article 104c (4). 2. Taking fully into account the opinion referred to in paragraph 1, the Commission, if it considers that an excessive deficit exists, shall address an opinion and a recommendation to the Council in accordance with Article 104c (5) and (6). 3. The Council shall decide on the existence of an excessive deficit in accordance with Article 104c (6), within three months of the reporting dates established in Article 4 (2) and (3) of Regulation (EC) No 3605/93. When it decides, in accordance with Article 104c (6), that an excessive deficit exists, the Council shall at the same time make recommendations to the Member State concerned in accordance with Article 104c (7). 4. The Council recommendation made in accordance with Article 104c (7) shall establish a deadline of four months at the most for effective action to be taken by the Member State concerned. The Council recommendation shall also establish a deadline for the correction of the excessive deficit, which should be completed in the year following its identification unless there are special circumstances. Article 4 1. Any Council decision to make public its recommendations, where it is established that no effective action has been taken in accordance with Article 104c (8), shall be taken immediately after the expiry of the deadline set in accordance with Article 3 (4) of this Regulation. 2. The Council, when considering whether effective action has been taken in response to its recommendations made in accordance with Article 104c (7), shall base its decision on publicly announced decisions by the Government of the Member State concerned. Article 5 Any Council decision to give notice to the participating Member State concerned to take measures for the deficit reduction in accordance with Article 104c (9) shall be taken within one month of the Council decision establishing that no effective action has been taken in accordance with Article 104c (8). Article 6 Where the conditions to apply Article 104c (11) are met, the Council shall impose sanctions in accordance with Article 104c (11). Any such decision shall be taken no later than two months after the Council decision giving notice to the participating Member State concerned to take measures in accordance with Article 104c (9). Article 7 If a participating Member State fails to act in compliance with the successive decisions of the Council in accordance with Article 104c (7) and (9), the decision of the Council to impose sanctions, in accordance with paragraph 11 of Article 104c, shall be taken within ten months of the reporting dates pursuant to Regulation (EC) No 3605/93 as referred to in Article 3 (3) of this Regulation. An expedited procedure shall be used in the case of a deliberately planned deficit which the Council decides is excessive. Article 8 Any Council decision to intensify sanctions, in accordance with Article 104c (11), other than the conversion of deposits into fines under Article 14 of this Regulation, shall be taken no later than two months after the reporting dates pursuant to Regulation (EC) No 3605/93. Any Council decision to abrogate some or all of its decisions in accordance with Article 104c (12) shall be taken as soon as possible and in any case no later than two months after the reporting dates pursuant to Regulation (EC) No 3605/93. SECTION 3 ABEYANCE AND MONITORING Article 9 1. The excessive deficit procedure shall be held in abeyance: — if the Member State concerned acts in compliance with recommendations made in accordance with Article 104c (7), — if the participating Member State concerned acts in compliance with notices given in accordance with Article 104c (9). 2. The period during which the procedure is held in abeyance shall be included neither in the ten month period referred to in Article 7 nor in the two month period referred to in Article 6 of this Regulation. Article 10 1. The Commission and the Council shall monitor the implementation of action taken: — by the Member State concerned in response to recommendations made under Article 104c (7), — by the participating Member State concerned in response to notices given under Article 104c (9). 2. If action by a participating Member State is not being implemented or, in the Council's view, is proving to be inadequate, the Council shall immediately take a decision under Article 104c (9) or Article 104c (11) respectively. 3. If actual data pursuant to Regulation (EC) No 3605/93 indicate that an excessive deficit has not been corrected by a participating Member State within the time limits specified either in recommendations issued under Article 104c (7) or notices issued under Article 104c (9), the Council shall immediately take a decision under Article 104c (9) or Article 104c (11) respectively. SECTION 4 SANCTIONS Article 11 Whenever the Council decides to apply sanctions to a participating Member State in accordance with Article 104c (11), a non-interest-bearing deposit shall, as a rule, be required. The Council may decide to supplement this deposit by the measures provided for in the first and second indents of Article 104c (11). Article 12 1. When the excessive deficit results from non-compliance with the criterion relating to the government deficit ration in Article 104c (2) (a), the amount of the first deposit shall comprise a fixed component equal to 0,2 % of GDP, and a variable component equal to one tenth of the difference between the deficit as a percentage of GDP in the preceding year and the reference value of 3 % of GDP. 2. Each following year, until the decision on the existence of an excessive deficit is abrogated, the Council shall assess whether the participating Member State concerned has taken effective action in response to the Council notice in accordance with Article 104c (9). In this annual assessment the Council shall decide, in accordance with Article 104c (11), and without prejudice to Article 13 of this Regulation, to intensify the sanctions, unless the participating Member State concerned has complied with the Council notice. If an additional deposit is decided, it shall be equal to one tenth of the difference between the deficit as a percentage of GDP in the preceding year and the reference value of 3 % of GDP. 3. Any single deposit referred to in paragraphs 1 and 2 shall not exceed the upper limit of 0,5 % of GDP. Article 13 A deposit shall, as a rule, be converted by the Council, in accordance with Article 104c (11), into a fine if two years after the decision to require the participating Member State concerned to make a deposit, the excessive deficit has in the view of the Council not been corrected. Article 14 1. In accordance with Article 104c (12), the Council shall abrogate the sanctions referred to in the first and second indents of Article 104c (11) depending on the significance of the progress made by the participating Member State concerned in correcting the excessive deficit. Article 15 In accordance with Article 104c (12), the Council shall abrogate all outstanding sanctions if the decision on the existence of an excessive deficit is abrogated. Fines imposed in accordance with Article 13 of this Regulation will not be reimbursed to the participating Member State concerned. Article 16 Deposits referred to in Articles 11 and 12 of this Regulation shall be lodged with the Commission. Interest on the deposits, and the fines referred to in Article 13 of this Regulation constitute other revenue referred to in Article 201 of the Treaty and shall be distributed among participating Member States without a deficit that is excessive as determined in accordance with Article 104c (6) in proportion to their share in the total GNP of the eligible Member States. SECTION 5 TRANSITIONAL AND FINAL PROVISIONS Article 17 For the purpose of this Regulation and for as long as the United Kingdom has a budgetary year which is not a calendar year, the provisions of sections 2, 3 and 4 of this Regulation shall be applied to the United Kingdom in accordance with the Annex. Article 18 This Regulation shall enter into force on 1 January 1999. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 7 July 1997. For the Council The President J.-C. JUNCKER (1) OJ No C 368, 6. 12. 1996, p. 12. (2) OJ No C 380, 16. 12. 1996, p. 29. (3) See p. 1 of this Official Journal. (4) OJ No C 236, 2. 8. 1997, p. 1. (5) OJ No L 332, 31. 12. 1993, p. 7. ANNEX TIME LIMITS APPLICABLE TO THE UNITED KINGDOM 1. In order to ensure equal treatment of all Member States, the Council, when taking decisions in Sections 2, 3 and 4 of this Regulation, shall have regard to the different budgetary year of the budgetary year of the United Kingdom, with a view to taking decisions with regard to the United Kingdom at a point in its budgetary year similar to that at which decisions have been or will be taken in the case of other Member States. 2. For the provisions specified in Column I below there shall be substituted the provisions specified in Column II. Column I Column II ‘three months of the reporting dates established in Article 4 (2) and (3) of Council Regulation (EC) No 3605/93’ (Article 3, (3)) ‘five months after the end of the budgetary year in which the deficit occurred’ ‘the year following its identification’ (Article 3(4)) ‘the budgetary year following its identification’ ‘ten months of the reporting dates pursuant to Council Regulation (EC) No 3605/93 as referred to in Article 3(3) of this Regulation’ (Article 7) ‘twelve months from the end of budgetary year in which the deficit occurred’ ‘the preceding year’ (Article 12(1)) ‘the preceding budgetary year’

Summary: The corrective arm: the excessive deficit procedure The corrective arm: the excessive deficit procedure SUMMARY OF: Council Regulation (EC) No 1467/97 — speeding up and clarifying the implementation of the excessive deficit procedure SUMMARY WHAT DOES THIS REGULATION DO? The Stability and Growth Pact (SGP) is the cornerstone of EU budgetary discipline. The corrective arm of the pact governs the excessive deficit procedure (EDP) which underpins the prompt correction of excessively high public deficits or excessively high public debt. The Regulation seeks to clarify and speed up the EDP under Article 126 of the Treaty on the Functioning of the European Union (TFEU). When an EU country does not respect the budgetary discipline required by the SGP, it may become the subject of an EDP which includes several steps. KEY POINTS Initiating the procedure Under the SGP, the EDP is triggered by deficit and debt criteria: Deficit criterion: the general government deficit is considered excessive if it is over the reference value of 3 % of Gross Domestic Product (GDP) at market prices; or Debt criterion: debt is above 60 % of GDP and the target of reducing debt by 1/20th per year was not reached during the previous 3 years. Stages of the procedure for the EU country whose deficit or debt exceeds the defined limits, the European Commission prepares a report evaluating whether or not to launch an Excessive Deficit Procedure; the Commission then sends a notice to the country in question and informs the Council if it considers that the deficit is excessive; on the Commission’s proposal, the Council decides by qualified majority whether, in light of the observations of the country concerned, the deficit is excessive; if the Council decides that a deficit is excessive, it makes recommendations to the country and prescribes a maximum time limit for it to take effective action (3 or 6 months); if a country persists in not implementing the recommendations, the Council may decide to give it formal notice to take measures to reduce the deficit within a specified period; if the country does not comply with the Council’s decisions, the Council may decide to impose sanctions. Sanctions Sanctions are imposed if the deficit is not reduced. For countries in the euro area, these sanctions are imposed on a gradual basis beginning with: the obligation to lodge with the Commission an interest-bearing deposit of 0.2 % of GDP in the preventive phase; the obligation to lodge a non-interest-bearing deposit of 0.2 % of GDP in the corrective phase. This deposit is converted into a fine of up to 0.5 % of GDP if the recommendations to correct the excessive deficit are not met. In addition, all EU countries (except the United Kingdom (1)) may be subject to a suspension of commitments or payments of EU Structural and Investment Funds. Penalties are also imposed in cases of statistical manipulation. Voting system Decisions on most sanctions under the EDP are taken by reverse qualified majority. This means that a fine is deemed to be adopted unless the Council decides by qualified majority to reject it. Moreover, the 25 countries which signed the Treaty on Stability, Coordination and Governance agreed to apply reverse qualified majority voting at an even earlier stage in the procedure, for example when deciding whether an EU country should be subject to an EDP. SGP flexibility In January 2015, the Commission published a Communication providing guidance to EU countries on making best use of the flexibility within the existing rules of the Stability and Growth Pact to encourage the effective implementation of structural reforms, promote investment and better take into account the economic situation of each EU country. FROM WHEN DOES THE REGULATION APPLY? It applies from 1 January 1999. BACKGROUND Economic governance Press release ACT Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure (OJ L 209, 2.8.1997, pp. 6-11) The successive amendments to Regulation (EC) No 1467/97 have been incorporated into the original text. This consolidated version is of documentary value only. RELATED ACTS Regulation (EU) No 1173/2011 of the European Parliament and of the Council of 16 November 2011 on the effective enforcement of budgetary surveillance in the euro area (OJ L 306, 23.11.2011, pp. 1-7) Communication from the Commission to the European Parliament, the Council, the European Central Bank, the Economic and Social Committee, the Committee of the Regions and the European Investment Bank: Making the best use of the flexibility within the existing rules of the Stability and Growth Pact (COM(2015) 12 final of 13.1.2015) last update 22.02.2016(1) The United Kingdom withdraws from the European Union and becomes a third country (non-EU country) as of 1 February 2020.