OPINION OF THE EUROPEAN CENTRAL BANK
at the request of the Austrian Federal Ministry  of Finance under Article 105 (4), second indent,
of the Treaty establishing the European Community and Article 4 (a) of the Statute of the
European System of Central Banks and of the European Central Bank on a draft Federal Act
amending the Bankwesengesetz (Banking Act), the Wertpapieraufsichtsgesetz (Securities
Supervision Act), the Investmentfondgesetz (Investment Fund Act), the Beteiligungsgesetz
(Equity Fund Act), the Sparkassengesetz (Savings Bank Act), the Bausparkassengesetz (Building
Society Act), the Hypothekenbankengesetz (Mortgage Bank Act), the Pfandbriefgesetz (the
Mortgage Bond Act), the Postsparkassengesetz (Postal Savings Bank Act), the
Nationalbankgesetz 1984 (Central Bank Act), the Gewerbeordnung 1994 (Industrial Code)
(Bankenaufsichtsbehördengesetz  BABG (Banking Supervisory Authority Act)) (hereinafter
referred to as the Draft Law).
CON/99/05
1. On 12 May 1999 the European Central Bank (ECB) received a request from the Austrian
Federal Ministry of Finance for an ECB Opinion on the Draft Law. 
2. The ECBs competence to deliver an Opinion is based on Article 2 of Council Decision
(98/415/EC) of 29 June 1998 on the consultation of the ECB by national authorities regarding
draft legislative provisions, as the Draft Law contains provisions on the OesterreichischeNationalbank and rules applicable to financial institutions which have a significant influence onthe stability of financial institutions and market s. In accordance with Article 17.5, first sentence,
of the Rules of Procedure of the ECB, this ECB Opinion has been adopted by the GoverningCouncil of the ECB.
3. The Draft Law addresses the organisational structure of banking supervision and combines the
banking supervision powers of the Austrian Federal Ministry of Finance and the assisting
supervisory functions of the Oesterreichische Nationalbank. The latter becomes the sole banking
supervisory authority and takes over the existing resources from the Austrian Ministry ofFinance, particularly in terms of staff. The objective of the Draft Law is, inter alia, to increase
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the speed and the enforceability of statutory supervision measures. In this respect, the Draft Law
stipulates, for example, that supervisory measures may be taken as soon as dangerous business
practices are identified, rather than waiting until creditors are actually at risk. Furthermore, the
Draft Law is aimed at enhancing the effectiveness of the contribution of external auditors to thesupervision of credit institutions by defining more stringent requirements for auditors than thiswas previously the case.
4. The ECB notes that, according to Section I, Article 141 of the Draft Law (new Article 79 (1) of
the Austrian Banking Act), the Oesterreichische Nationalbank shall become the sole bankingsupervisory authority in Austria. The performance of this function by a central bank forming
part of the Eurosystem does not interfere with the objectives and tasks of the ESCB. In this
context the ECB notes that Article 105 (5) of the Treaty obliges the ESCB to contribute to thesmooth conduct of policies relating to the prudential supervision of credit institutions and otherfinancial institutions and the stability of the financial system. The ECB furthermore welcomesthe fact that the Oesterreichische Nationalbank also in its capacity as supervisory authority shallhave full autonomy in the execution of these duties and shall not be bound by any directives orinstructions in this respect. The ECB notes that the Oesterreichische Nationalbank will beauthorised to issue both orders and decisions in fulfilling its banking supervisory tasks. The newauthoritative powers of the Oesterreichische Nationalbank cover all operational and analytical
activities undertaken by authorities, which are presently undertaken by the Austrian Federal
Ministry of Finance (sometimes in co-operation with the Oesterreichische Nationalbank). Thesealso include all supervision functions, in particular the granting of licences to credit institutionsas well as their revocation.
5. The ECB notes that according to Section I, Article 141 of the Draft Law (new Article 79 (2) of
the Austrian Banking Act), the Oesterreichische Nationalbank will also be responsible forenforcing the decisions issued in the fulfilmen t of its banking supervisory tasks, except for
administrative penal decisions. In administrative penal proceedings the parties will have the
right to appeal against decisions by the Oesterreichische Nationalbank at the Vienna
Independent Administrative Senate. Apart from that, the decisions of the OesterreichischeNationalbank will not be subject to reversal or amendment through administrative proceedings.
6. The ECB notes that Section I, Article 142 of the Draft Law (new Article 79a of the Austrian
Banking Act) stipulates that civil servants presently engaged in banking supervision at theFederal Ministry of Finance will be seconded by official notice to the personnel office set up atthe Oesterreichische Nationalbank. The civil servants concerned will have the option of enteringinto a contract of employment with the Oester reichische Nationalbank. Contractual employees
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presently engaged in banking supervision at the Federal Ministry of Finance will be assigned on
permanent service to the Oesterreichische Nationalbank on the basis of an employers
declaration, thereby becoming employees of the Oesterreichische Nationalbank. The personneloffice to be set up at the Oesterreichische Nationalbank shall be directly subordinate to theAustrian Federal Ministry of Finance and will be managed by the member of the ExecutiveBoard of the Oesterreichische Nationalbank in charge of banking supervision matters. In thiscapacity this member of the Executive Board will be bound by the instructions of the AustrianFederal Minister of Finance. The ECB recommends to state in the explanatory memorandumsuch power of the Austrian Minister of Finance to issue instructions is limited  to matters in thecontext of the personnel office.  This would avoid giving the impression that the proposed new
Article 79a (2) of the Austrian Banking Act is in contradiction of Section I, Article 141 of the
Draft Law (new Article 79 (1), last sentence, of the Austrian Banking Act), where it is statedthat the Oesterreichische Nationalbank shall not be bound by any instruction in fulfilling itsbanking supervisory tasks. However, the ECB acknowledges that Section I, Article 141 of theDraft Law is intended to be adopted as constitutional provision and will therefore prevailSection I, Article 142 of the Draft Law (new Article 79a of the Austrian Banking Act).
7. The ECB suggests that the possibility for an unlimited regress against the Oesterreichische
Nationalbank granted to the Federal Republic, stipulated in Section I, Article 141 of the Draft
Law (new Article 79 (3) of the Austrian Banking Act) be reconsidered since this could
potentially endanger the fulfilment of the functions of Oesterreichische Nationalbank as definedin the Treaty and the ESCB Statute. 
8. The ECB welcomes the fact that the Draft Law is also aimed at enhancing the effectiveness of
the contribution of external auditors to the supervisory process by defining more stringentrequirements for auditors than was previously the case. This includes both the personalqualifications required of bank auditors and the introduction of a rotation principle to ensurethat auditors are reliable.
9. The ECB notes that the position of the supervisory board of credit institutions will be reinforced
by the Draft Law. In this respect the Draft Law states that, as a backup to its supervisory duties,the supervisory board of credit institutions will have the right to initiate audits. Furthermore, theexchange of information is made easier for a ll institutions engaged in the monitoring and
supervision of credit institutions, whilst procedural responsibility for statutory supervision is tobe borne by the Oesterreichische Nationalbank as the banking supervisory authority.
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10. The ECB takes note that Draft Law states in Section I, Article 118 (new Article 71 (1) of the
Austrian Banking Act) that the banking supervis ory authority shall notify to the institution
concerned the audits only when the audit operation starts. Unless it is anticipated that advancenotice will defeat the objective of the audit, and if advance notice is advisable in order toperform the audit more easily and quickly on the basis of organisational preparations, the auditmay be notified at most one week before it commences. 
11. The ECB notes that Section I, Article 120 of the Draft Law (new Article 71a of the Austrian
Banking Act) stipulates that the Oesterreichische Nationalbank is, as the banking supervisoryauthority, also obliged to supervise payment systems. The supervisory tasks cover not only
conventional payment systems (large amounts and bulk payment transactions), but also other
payment systems and means of payment, such as points of sale, credit cards and electronicmoney (e-money). Not only credit institutions are governed by the standards of this provision,but also corporate bodies or companies operating a payment system commercially. Thisprovision supplements the national implementation of Directive 98/26/EC of the EuropeanParliament and of the Council of 19 May 1998 on settlement finality in payment and securitiessettlement systems by transferring the supervision of payment systems to the OesterreichischeNationalbank. In the explanatory memorandum to the Draft Law reference is made only toArticle 22 ESCB Statute, whereas, no reference is made to Article 105 (2) of the Treaty and
Article 3 of the ESCB Statute, where it is stated that one of the basic tasks of the ESCB shall be
to promote the smooth opera tion of payment systems.  Thus, Section I, Article 120 of the
Draft Law (new Article 71a of the Austrian Banking Act) gives the impression that theoversight of payment systems is within the exclusive competence of the Austrian legislator andis allocated by the Draft Law as part of banking supervision to the OesterreichischeNationalbank. The ECB recommends therefore, (i) to identify and to refer explicitly to the
different nature of the oversight of payment systems, on the one hand, and banking supervision,on the other hand, and (ii) to make explicit reference to the basic task of the ESCB to promotethe smooth operation of payments system as determined by Article 105 (2) of the Treaty and
Article 3 of the ESCB Statute. This could be do ne in the explanatory memorandum to the Draft
Law.
12. The ECB takes note that Section I, Article 139 of the Draft Law (new Article 77a of the
Austrian Banking Act) makes it easier for the Oesterreichische Nationalbank as bankingsupervisory authority to enter into agreements with the competent authorities of other statesoutside the European Economic Area concerning collaboration in questions of bankingsupervision. In the explanatory memorandum it is stated in this respect that this provision isaimed at following recommendations of the Basle Committee. 
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13. The ECB welcomes the fact that Section X, Article 7 of the Draft Law (new Article 81 of the
Austrian Central Bank Act) provides that the issue and use for payment purposes of banknote-type documents denominated in euro and intended for circulation constitute an administrativeviolation and are punishable by the competent district administrative authority with a fine of upto E3,000.00. This provision is aimed at transposing a recommendation of the ECB of 7 July1998 on the adoption of certain measures to enhance the legal protection of euro banknotes andcoins (ECB/1998/7), Official Gazette C No. 11 of 15 January 1999, stating that Member States
shall, in particular, render more difficult and strictly monitor the issue of euro banknotes andcoins which do not constitute legal tender.
14. The ECB notes that the Draft Law refers partly to Austrian Schillings (e.g. in Section I, Article
133) and partly to Euro (e.g. in Section X, Article 7) as the denomination of thresholdsexpressed in monetary amounts. A consistent denomination may be considered.
15. In conclusion, the ECB welcomes the Draft Law and is of the opinion that the Draft Law
enhances the effectiveness of banking supervision in Austria, as it is aimed, inter alia, atincreasing the speed and the enforceability of statutory supervision measures. 
16. The ECB confirms that it has no objections to this Opinion being made public by the competent
national authorities at their discretion.
Done at Frankfurt am Main on 14 July 1999.
The President of the ECB
[signed]
Willem F. Duisenberg