Establishment of a Systemic Risk Board

The Law of 1 April 2015 establishing the Systemic Risk Board and amending the Law of 23 December 1998 concerning the monetary status and the Luxembourg Central Bank (the "Law") became effective on 7 April 2015.

According to the recommendation of the European Systemic Risk Board (the "ESRB") of 22 December 2011 on the macro-prudential mandate of national authorities (ESRB/2011/3), Member States are invited to designate an authority responsible for the conduct of macro-prudential policy. In view of the second recommendation of the ESRB of 4 April 2013 on intermediate objectives and instruments of macro-prudential policy (ESRB/2013/1), governments are asked to assign the "first" role to the national central banks in the macro-prudential supervisory framework.

To meet these two ESRB recommendations, the Law of 1 April 2015 has established the Systemic Risk Board (the "Board"), consisting of the authorities involved in the regulation and supervision of the financial system, namely the Minister of Finance, the Luxembourg Central Bank, the Commission for the Supervision of the Financial Sector and the insurance regulator "Commissariat aux Assurances".

The Board is responsible for coordinating the implementation of the macro-prudential policy by the authorities represented in the Board. The ultimate aim of this policy is to help in maintaining the stability of the Luxembourg financial system by strengthening the resilience of the financial system and by reducing the build-up of systemic risks, thereby ensuring a sustainable contribution of the financial sector to economic growth.

The Board determines intermediate objectives and is entitled to recommend the use of any macro-prudential instrument that it deems necessary, taking into account the structure and vulnerability of the national financial system and the cyclical dimension of systemic risks.

The Board promotes cooperation between national authorities represented on the Board and ensures the exchange of information and cooperation across borders with the ESRB as well as with foreign macro-prudential authorities.

The Board is able to issue opinions and warnings and make recommendations on corrective actions in relation to the identified financial risks.

Finally, the Board is empowered to request the authorities represented on the Board as well as any other national body to disclose all relevant economic and financial information necessary for the fulfilment of its mission in the best way.

Regarding the Luxembourg Central Bank, a new provision "civil liability" is inserted in the Law. Under this section, the civil liability of the Central Bank may be initiated only if the defendant proves that the damage suffered was caused by serious negligence in the selection and application of resources used for the fulfilment of public duties of the Central Bank.