Prohibition on the central banks granting credit facilities to public authorities and undertakings

This regulation clarifies the Treaty provisions prohibiting central banks giving credit facilities to public authorities and undertakings.

ACT

Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the application of the prohibitions referred to in Articles 104 and 104b(1) of the Treaty.

SUMMARY

The following definitions are given:

• "overdraft facilities" means any provision of funds to the public sector resulting or likely to result in a debit balance;
• "other types of credit facility" means:

- any claim against the public sector existing at 1 January 1994, except for fixed-maturity claims acquired before that date;

- any financing of the public sector´s obligations vis-à-vis third parties;

- any transaction with the public sector resulting or likely to result in a claim against that sector.

During stage two of EMU, purchases by the national central bank of one Member State, conducted for the purpose of managing foreign exchange reserves, of marketable debt instruments issued by the public sector of another Member State are not considered direct purchases.

During stage three of EMU, the following purchases conducted for the purpose of managing foreign exchange reserves are not considered direct purchases:

• by the national central bank of a Member State not participating in stage three of EMU of marketable debt instruments issued by the public sector of another Member State;
• by the European Central Bank (ECB) or the national central bank of a Member State participating in stage three of EMU of marketable debt instruments issued by the public sector of a Member State not participating in stage three of EMU.

Intra-day credits by the European Central Bank or the national central banks to the public sector are not considered as a credit facility, provided that they remain limited to the day and that no extension is possible.

5.The holding by the European Central Bank or by a national central bank of coins issued by the public sector and credited to the public sector is not regarded as a credit facility where the amount of these assets remains at less than 10% of the coins in circulation.

The financing by the ECB or the national central banks of obligations falling upon the public sector vis-à-vis the IMF or resulting from the implementation of the financial assistance facility is not regarded as a credit facility.

"Public undertaking" is defined as any undertaking over which the State or other regional or local authorities may directly or indirectly exercise a dominant influence by virtue of their ownership of it, their financial participation therein or the rules which govern it.

The European Central Bank and the national central banks do not form part of the public sector.

Last updated: 20.06.2006