EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 21 October 2008 
at the request of the German Ministry of Finance 
on a  Law on the implementation of a package of measures to stabilise the financial market and 
an order on its implementation  
(CON/2008/57) 
 
Introduction and legal basis  
On 17 October 2008, the European Central Bank (ECB)  received a request from  the German Federal 
Ministry of Finance for an opinion on a draft la w on the implementation of a package of measures to 
stabilise the financial market (Law on financial market stabilisation, FMStG), adopted on the same day 
(hereinafter the ‘Law’); the original draft law of 13 October 2008 was accompanied by a new Article 1 Section 3a and an amended Article 1 Section 4. Subsequently, also on 17 October 2008, the ECB received 
a request from the German Federal Ministry of Fi nance on an Order on the Implementation of the 
Financial Market Stabilisation Fund Law (Financial Market Stabilisation Fund Order) which was adopted on 20 October 2008 (hereinafter the ‘Implementing Order’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third and sixth indents of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft 
legislative provisions1, as the Law and the Implementing Order relate to the Deutsche Bundesbank as well 
as to rules applicable to financial institutions insofar as they materially influence the stability of financial 
institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of 
the European Central Bank, the Governing Council has adopted this opinion. 
 
1. Purpose of the Law and the Implementing Order 
1.1 The Law and the Implementing Order are motivated by the current financial market crisis. In order 
to stabilise the financial market, safeguard th e supply of capital for the German economy and 
protect consumers and investors, the Federal Government will establish the Financial Market Stabilisation Fund
2 (hereinafter the ‘Fund’) under the Law, for which it will be liable. The 
competence to manage the Fund lies with the Ministry of Finance3; however, the Ministry of 
Finance may delegate this responsibility to the Financial Market Stabilisation Authority (FMSA), 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  Article 1 Section 1 of the Law. 
3  Article 1 Section 4(1) of the Law. 
a body  that is  organisationally  separate from  the Deutsche Bundesbank, u nder t he legal and expert 
supervision o f the Ministr y of Finance4. The Fund has no legal capacity5 . 
1.2 The Fund’ s task is to  secure the re financing of Ger man financial i nstitutions6, includin g 
safeguarding newly  issued refinancing instruments up to 36 m onths. For this purpose, the Ministry 
of Finance will be aut horised to assu me guar antees for the Fund up to an am ount of 
EUR 400 billion for debt s ecurities issued by  financ ial sector entities as fro m entry into f orce of the 
Law until 31 Decem ber 2009, as well as for creat ed obligations fro m deposit s of financial  sector  
companies with a m aturity of up to 36 months, in  order to  eliminate liquid ity shortages and t o 
support refi nancing in the capital market7. Furt herm ore, the Fund can participate in the 
recapitalis ation of financial sector com panies, in particular it may purchas e shares or dorm ant 
equit y holdings and acquire ot her item s constituting own funds of t hese co mpanies, including those 
created by  state law, agains t the pa yment of a contribution8. 
1.3 Financing of the Fund will  be raised by  the Mini stry of Finance, which is authorised to borr ow up  
to an am ount of EUR 100 billion t o cover expenditures under the Fund and m easures under  
Article 1 Sections 6 to 8 of the Law9; the Federal Governm ent sh all bear the costs related to the  
management of the Fun d10. 
1.4 The Law provides that the Fund will expire on 31 Decem ber 2009. 
 
2. General observations  
2.1 The ECB notes that there are ongoing discussions at  both the int ernational and European levels 
with a view t o coordinating actions of countries aimed at preservin g confidence in and stability  of 
the international financial markets. More specifi cally , on 12 Octob er 2008 the Heads of State of the 
euro area issued a ‘Declaration on  a concerted Eu ropean action  plan of  the euro area countries’ 
(hereinafter t he ‘Decl aration’)11, in which they  conf irmed their commit ment to act together in 
a decisive an d com prehen sive way  in order to restore confiden ce and prope r functioni ng of the  
financial sy stem, aiming at restoring appropria te and efficient financing conditions for the 
econom y. They  agreed on common principles to be followed b y the EU and euro area governments, 
central banks and supervis ors to avoid national m easures adversely affecting th e functionin g of the  
single market  and the othe r Mem ber St ates. Such  coordinated approach includes initiatives ai med 
at: (i) ensuring appropr iate liquidit y; (ii) facilitating the fundi ng of banks through various means; 
(iii) providing additional capital resources to fina ncial institutions; and (iv) recapitalisati on of 
                                                 
4  Articl e 1 Sect ion 3a(2)  of th e Law. 
5  Articl e 1 Sect ion 3 of the Law. 
6  Article 1  Section  7(1) of  the draf t law ( after adoption Article 1 Section 6(1)  of the Law). 
7  Article 1  Section  7(1) of  the draf t law ( after adoption Article 1 Section 6(1)  of the Law). 
8  Article 1  Section  6(1) of  the draf t law ( after adoption Article 1 Section 7(1)  of the Law). 
9  Article 1  Section s 9(1)(4) and  (5) of th e Law. 
10  Article 1  Section  12(1) of  the Law. 
11  The Declaration is availab le on th e French  Presidency ’s website at www.ue2008.fr. 
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distressed banks. These principles wer e also endorsed by  the European Council on 16 October 2008 
for all Mem ber States. Ag ainst this background, the ECB highlights that all the initiatives put in 
place by  national governments to restore confiden ce in financi al markets should be aimed at  
implem enting such co mmo n principles, in the spirit of close cooperation with other Mem ber States 
and EU instit utions. 
2.2 The ECB wishes to draw attention to the recen t ECB opinions issued at the request of other  
Member Stat es, in which the ECB has commented on legislative  proposals sharing som e of the 
features of  the present arrangements12. The ECB intends to facilitate coordination of the various  
national efforts addressing the current financial situation, inter alia , throug h timely  adoptio n and  
publication of ECB opinio ns on such draf t national legi slation.  
2.3 The ECB understands the application of an acceler ated legislative procedure, bu t would appreciate 
receiving future consultations with m ore time allowed for the ECB to prepare its opinion. 
 
3. Specific comments 
3.1 Prohibition of monetary financing and t he role of the central bank  
 With regard to the role of the central bank, the ECB reminds the German authorities that a number 
of elements must be observed in order to co mply with the monetary  financin g prohibiti on laid down 
in the Treaty.  
First, the ECB notes th at the Law suggests th at the Fund should be co nsidered as a public 
undertaking within the meaning of Article 101(1) of the  Treaty  and  Council Regulation 
(EC) 3603/ 93 of 13 Decem ber 1993 specify ing def initions f or the application of the pr ohibitions 
referred to in Articles 104 and 10 4b(1)  of the Treaty13. Indeed, t he Fund is established und er the  
designation ‘Financial Market Stabilisation Fun d – FMS ’ as a special fund p ursuant to  
Article 110(1) and Article 115(2) of the  German Basic Law and has no legal capacity14. The ECB  
understands that the Fund will be managed by  the Ministry  of Finance with  the possibility  of 
                                                 
12  See, e.g. ECB Opinion CON/200 8/44 of 3  Octob er 2008 at the re quest of the Ir ish Minister  for Finance on a draf t Credit  
Institutions (Fin ancial Support) Bill 2008, ECB Opinion C ON/2008/46 of 8 October 2008 at th e request of the Belgian  
Ministry of F inance on  a preliminary draf t law o n measures promoting finan cial stability  and in particular  establishing a 
State guar antee for the provision of credi t in the c ontext of financi al stabilit y, ECB Op inion CON/2008/48 of  
15 October  2008  at the request  of the Irish Minist er for Fin ance o n a draft Cr edit Institutions (Fin ancial Support) S cheme 
2008, ECB Opinion CON/2008/50 of 17 October 2008 at the requ est of the Belgian Ministr y of Finance on a draft royal 
decree adopted under Article 117bis of the Law of 2 August 2002 on the sup ervision of the financial sector and on  
financial services; ECB Opinion  CON/2008/ 52 of 17 October 2 008 at the r equest of th e Spanish State Secretar y for 
Economic Affair s on a Ro yal Decree- Law cr eatin g a Fund for the acquisition of f inancial assets and on a Ro yal Decree-
Law adop ting u rgent f inancial an d economic measures in relation to the con certed European  action  plan  of the euro area 
countries, and  ECB Opinion C ON/2008/56 of 21 October 20 08 at the r equest of the Banque de France on a draf t 
amending finan ce law for the financi ng of the econom y. The opinions ar e available on the ECB’s web site at 
www. ecb.europa. eu. 
13  OJ L 332, 31.1 2.1993, p. 1. In order to qualif y as a ‘public un dertak ing’ with in the meaning  of Article 101(1)  of th e 
Treaty, the S tate must exercis e dominant influ ence over the company by controlling its  finan cial resources  and go verning  
bodies in accord ance with Arti cle 8(1) of Regula tion (EC) No  3603/93. A dom inant influ ence on  the part of the State or  
other region al or local au thorities  is pres umed when these author ities, directly  or indirectly  in relati on to an undertaking: 
(i) hold th e major part of the un dertak ing’s subscribed capital; (ii) contro l the majority of th e votes at taching to shares  
issued b y the u ndertak ing; or (iii) can appoint  more than  half of the m embers of the undertaking’s adm inistrativ e, 
managerial or  supervisor y body.  
14  Articl e 1 Sect ion 3 of the Law. 
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delegating su ch management to the F MSA, a publ ic law authority established at the Deutsche 
Bundesbank that is organisationally separate from the Deutsche  Bundesbank. The ECB also 
understands that the Fund’s resources will be fina nced through public debt i ssuance and t hat the  
Fund will  bear its own managem ent costs. The ECB notes that,  to ensure c ompliance with the  
prohibit ion of  monetary  financing, the Fund m ay not benefit fro m overdraft facilities or any  type of 
credit facility15 with the Deutsche Bundesbank (or any  other central bank of the European Sy stem 
of Central Banks), while ESCB central banks are al so prohi bited f rom purchasing debt instru ments 
directly  from the Fund. By  contrast, the acquisition by  an ESCB central bank of debt instruments 
issued for the benefit of the Fund in t he secondary  market is, in principle, allowed. However,  such 
purchases must not be used to circum vent the objectives of Article 101 of the Tr eaty. 
Second, the E CB notes that the invol vement of the Deutsche Bundesbank in the context of t he Fund 
must be co mpatible with the Treaty  provisions. As regards the Law, the ECB understands that the  
Deutsche Bundesbank will not be invol ved in the act ual management of the Fu nd, but m ay be used  
as an agent in the performance of th e FMSA’s tasks. In this regard, it should b e ensured that if the 
State requests  the Deutsche Bundesbank to perform  certain activities for the Fund, the arrange ment  
must also co mply with the monetary  financi ng prohibition as regards the rem uneration for these 
activities and the Deutsche Bundesbank’s institu tional and financial independence must b e 
respected.  
Third , the arrange ment must also sa feguard the pr oper perform ance of the Deutsche Bundesbank’s  
existing tasks under the Treaty  and the Statute of th e European S ystem  of Central Banks and of the 
European Central Bank. F or this purpose, the E CB reco mmends that the Fund’ s tasks be clearly  
separate from the Deutsch e Bundesbank’ s tasks, an d that services  of the Deutsche Bundesbank to 
be provi ded t o the Fun d are perform ed with due re gard to the pri nciple of cost-coverage and the 
avoidance of conflicts of in terest.  
3.2 Eligibility for  support  
 The institutions covered by  the Fund under Ar ticle 1 Section 2(1) of the Law comprise: 
(i) institutions established under Section 1(1)(b) of the Law on banking; (ii) insurance corporations 
and pension  funds established un der Sections 1(1) ( 1) and (2)  of the Law on in surance supervision ; 
(iii) asset managem ent co mpanies pursuant to the Law on investment; and (iv) operators of stock 
exchanges and derivatives exchanges; a nd their resp ective parent com panies, in so far as thes e are 
financial holding com panies, mixed financial holding com panies or supervised financial 
conglom erate co mpanies and the abovementione d com panies have their seat in Germany16. These 
institutions qualify  as ‘financial sector companies’ under the Law. Additionall y, special pu rpose 
vehicles are eligible for s upport17. The ECB notes that, in accordan ce with the Declar ation, the  
                                                 
15  In accordan ce with Regulation (EC) No 3603/93 . 
16  According to  the explanator y text pr esented on th e Federal M inistry of Finance’s website at 
www.bundesfinanzministerium.d e, this also cover s subsidiaries est ablished  in G ermany of foreign institut ions. 
17  See Article 1 Section 7(1) of the draft law (after adoption Ar ticle 1 Section 6(1) of the Law) and Article 1 Section 8(1) o f 
the dr aft law. 
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Fund will ha ve to operate with the  aim  of avoi ding any distort ion in the level pla ying f ield as 
regards both domestic financial instituti ons and subsi diaries of foreign instituti ons. 
3.3  Community rules with regard to  State aid and financial servic es  
The ECB notes that it should be ensured that the beneficiary  institution(s) will not be unfairly 
advantaged b y making un due use of th eir guaranteed status18. In this context, the ECB draw s the  
consulting authorit y’s attention to the Commission’s recently  adopted guidan ce on co mpliance by  
the financial sector support schem es with EU State aid rules19, which includes in the specific  
context of the provision of State guarantees, deta iled rules on setting eligibility criteria for the  
beneficiary  institutions20. Further, in lin e with its previous opini ons21, the ECB reiterat es the 
importance of ensuring that the regula tory practice under  the proposed arrangements will be  
conducted in full com pliance with the relevant Co mmunit y law pro visions, inclu ding EU fina ncial 
services l egislation and the single marke t principles.  
3.4 The relationship with t he single m onetar y policy of the euro area  
 The ECB notes that, in line with the Declaration,  Mem ber States must act in a coordinated manner  
to avoid signi ficant differences in national i mplementation from  having a count er-productive  effect  
and creating distortions in global bankin g markets.  The Declaration acknowle dges the need to work  
in cooperation with the E CB to ensure consistenc y with the Eurosy stem ’s management of liquidit y 
and co mpatibility with it s operational framework. Against this background, the ECB notes that  
uncoordi nated decisions  am ong Mem ber States  shoul d be  avoided  as the y may inv olve 
a fragmentati on of the euro area money  market. In this respect, the ECB makes the fo llowing 
observations which are im portant from  a monetary polic y pers pective, as regards the measure s 
contained in t he Law and the Im plem enting Order. 
 First, under Article 1 S ection 8(1) of  the Law, t he Fund may  acquire assets fro m fi nancial  
institutions, t o be defined in more det ail in sub sequent im plementing legislation. Although such 
measures should restore confidence in the Germ an banking system , it is im portant for the 
conditions applied by the  Fund to its transactions to be deter mined in a coordinated m anner within 
the euro area and the EU. In particu lar, the fi nancial conditions of th e acquisitions should be  
determ ined b y market conditi ons. T he ECB notes the im portance of price determ ination of 
transactions conducted b y the Fund an d their poten tial im plications for the transm ission of the 
single monetary  polic y decisions within the euro  area. Indeed, uncoordinated price determ ination 
between all euro area M ember Stat es could lead to  segmentation of the euro are a money  marke t. 
                                                 
18  See, e.g., paragraph 3.4  of Op inion CON/ 2008/48 and p aragraph 3.1 of  Opinion C ON/2008/50. 
19  See th e ‘Communication from the Commission – The app licatio n of Sta te aid rules to  measure s taken  in relation to  
financial institu tions in  the co ntext of th e current g lobal fin ancial crisis’ of  13 Octob er 2008, av ailable on the  
Commis sion’s w ebsite at www. ec.europa.eu (h ereinafter the ‘Commi ssion’s guidance’).  
20  See paragr aph 1 8 of the Commission’s guida nce, specif ying that ‘The e ligibility criteria of fin ancial insti tutions …  must 
be objective, taking due acco unt of their role in th e relevant banki ng system and the over all econom y, and non-
discriminator y so as to avo id undue distortive effects on n eighbouring markets and the intern al market as  a whole. In  
application of the principle of  non disc rimination on the grou nds of nationality , all institutio ns incorporated  in the 
Member State concerned , includ ing subsidiaries, and with si gnificant activ ities in that Me mber State should be co vered  
by the scheme’ . 
21  See par agraph  2.3 of Opinion  CON/2008/44 and  paragraph  3.5 of Opinion CON/2008/48. 
5 
Moreover, th e transactions conducted b y the Fund  should n ot inter fere with the transm ission of the 
single m onetary  polic y.  
 Second, it is the ECB’ s view that the extension of the State guarantees to cover interbank deposits 
should be av oided. It coul d enta il a substantial distortion in t he various natio nal seg ments of the 
euro area money m arket b y potentially  increasing short-ter m debt issuance acti vity across Me mber 
States and t hereby  impairing the im plementation of the single monetary  policy, which is an  
exclusive com petence of the Euros ystem  under Article 105(2) of  the Treaty . In this contex t, the  
ECB notes Article 1 Section 7(1) of the Law, accord ing to which t he Federal Minister of Finance is 
authorised to take over guarantees provided b y the Fund with respect to bank obligations related to,  
inter alia , interbank deposits with a maturit y of up t o 36 m onths. In this context, it is cruci al to 
ensure the coordination of the price dete rmination of such guarantees within the euro area and the  
EU, as a level -playing-field is of essence.  
 Third, the E CB also notes that, under Sections 2(1) and (2) of t he Im plementing Order, a precise 
deadline is set for guarantees by  the Fund, whic h will expire on 31 Decem ber 2012 at the latest. 
The ECB no tes that this  feature meets the princi ples st ated in the De clarati on pointing to the 
temporary  feature of such  sche me. Ho wever, it al so notes that ha rmonisation regarding the end of 
such scheme across euro area and EU Mem ber Stat es is also cru cial. The ECB should be i nvolved  
in such concertation and coordination , and w ould welco me the explicit provision for this in 
subsequent legislation. 
3.5 Conditions for stabilisation measures  
  The ECB welcomes the f act that, in a ccordance wi th the principle str essed by the D eclar ation to 
ensure that financial institutions t o which Member States make available additional capital 
resources should be obli ged to accept additional rest rictions, nota bly to preclude possible abuse of 
such arrangements at the expense of non-benefici aries, the Law empowers th e Federal Go vernment 
to set in details the condit ions to be com plied with by  the financ ial sector co mpanies whi ch use 
stabilisation mea sures, whereby  such conditions ha ve been furthe r specifi ed in the I mplementing 
Order22. 
 
This opini on will be publis hed on t he ECB’s website.  
 
Done at Frankfurt am  Main, 21  October 200 8. 
[signed ] 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
22  The Im plem enting Order requires that fi nancial sector en tities benefiting from  support will be subject to requir ements to 
ensure a solid and prudent business policy  as regard s their  oper ations. The companies will be required, inter alia, to: (i) 
examine their business policy  and its sust ainability ; and ( ii) grant the Fund app ropriate con tractual info rmation rights. 
The ben eficiar y compan y will also grant the Fund a right o f audit and the Fund sh ould requir e the beneficiar y compan y to 
have the fu lfilm ent of the r equirements audited b y the annual auditor and in cluded in the audit r eport (see Sectio n 5(1), 
Section  5(2)(1)  and Section  5(7) of th e Implementing Order) . 
6