EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 20 October 2008 
at the request of the Austrian Ministry of Finance 
on draft legal measures to ensure the stab ility of the Austrian financial market 
(CON/2008/55) 
 
Introduction and legal basis  
On 15 October 2008, the European Central Bank (ECB) received a request from the Austrian Ministry of 
Finance (hereinafter the ‘Ministry’) for an opinion on a draft Federal law adopting a Federal Law on the 
strengthening of the interbank money market and a Federal Law on measures for ensuring the stability of 
the financial market, as well as amending the Law on th e Austrian Investment and Privatisation Agency 
(the ‘OIAG’) 2000, the Law on banking, the Law on the stock exchange, the Law on the Financial Market 
Supervisory Authority and the Law on the Federal budget 2008 (hereinafter the ‘draft law’). The Ministry 
has informed the ECB that the first chamber of the Austrian Parliament will discuss the draft law in a 
special session on 20 October 2008 and that the second ch amber of Parliament will convene several days 
later, implying that the Ministry is invoking the exemption under Article 3(2) 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, which allows for a reduction in the minimum time limit for 
consultation of one month in case of extreme urgency.  
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and on the sixth indent of Ar ticle 2(1) of Council Decision 98/415/EC, as the draft 
law relates to rules applicable to fi nancial 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, th e Governing Council has adopted this opinion. 
 1.  Purpose of the draft law 
1.1 The draft law is motivated by the current financial market crisis and comprises a number of 
different legal measures to ensure the stability of th e Austrian financial market. In its letter to the 
ECB, the Ministry stresses that the draft law is in line with the decisions taken at the summit of the 
euro-area Member States held on 12 October 2008.  
1.2 The main purpose of the first part of the draft la w is to revive the interbank money market. It 
therefore envisages that financial institutions, i.e.  banks, insurance companies or their respective 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2 interest groups established by law, may set up a co mpany that will operate as a ‘clearing house’, as 
it is referred to in the explanatory memorandum to  the draft law, between financial institutions, 
i.e. borrow money from financial institutions and le nd money against collateral and at a market rate 
to financial institutions. According to the submission  of the Minister to the Council of Ministers of 
14 October 2008, which is not repeated in the dr aft law or the explanatory memorandum, however, 
the collateral must not qualify as eligible colla teral for receiving central bank liquidity. The 
clearing house has to provide access to all banks as defined in Section 1(1) of the Law on banking 
and to all Austrian insurance companies on equal terms. The Minister is empowered to provide a 
state guarantee to the clearing house for its le nding and borrowing operations, which would be 
effective for a limited period only, and to act as gua rantor to credit institutions that issue certain 
securities for refinancing operations. The benefici aries of the measures have to pay adequate 
compensation for such guarantees. The measures ma y not exceed the amount of EUR 85 billion in 
total. Finally, the Minister has sole discretion to take any of the measures, although he has to report 
to the main committee of Parliament on a regular  basis regarding any measures taken. The draft 
law on the strengthening of the interbank money market provides that it will expire on 31 December 2009. 
1.3 The main purpose of the second part of the draft la w is to support financial institutions in distress. 
The Minister is empowered to act as guarantor for the liabilities of a financial institution or towards 
a financial institution, to provide loans or own funds to financial institutions, to acquire shares 
either by way of a capital increase or by contract and to take over the assets of a financial institution. If this proves insuffici ent, the Minister may also temporarily take over ownership rights 
by adoption of a decree, thereby making all othe r ownership rights null and void, while providing 
for adequate compensation of the previous owners, i.e. nationalisation. The ownership rights of the 
State may be held by the Austrian Investment and Privatisation Agency. Once the measures prove 
successful, the re-privatisation of the nationalised  companies will begin. The measures under this 
part of the draft law may not cost more than EUR 15 billion total, unless the measures to support the interbank money market have not been used  up to the maximum amount permitted. Again, the 
Minister of Finance has to report to Parliament on the measures taken under this part of the draft law. 
1.4 Regarding the proposed amendments to the Law on banking, the deposit guarantee for natural 
persons, which is currently EUR 20 000 per account holder and per bank, will become an unlimited 
guarantee with retroactive effect from 1 October 2 008. This applies to all banks that are members 
of the Austrian deposit guarantee mechanisms, part icipation in which is mandatory for all banks 
with a licence from the Financial Market Supervisor y Authority (hereinafter the ‘FMA’). As a last 
resort, if a deposit guarantee mechanism is unable to meet this obligation, it has to take out loans or 
issue debt certificates, which the State can guara ntee. The State has – up to a certain amount - 
recourse to the deposit guarantee mechanism concerned.  Moreover, the FMA’s powers to require a bank to have additional capital in specific circumst ances, where the bank concerned is subject to an 
3 increased risk that is not adequately covered by the generally applicable capital requirements have 
been strengthened. 
1.5 The proposed amendments to the Law on the stock exchange provide a legal basis for the FMA to 
prohibit short selling of financial instruments. 
1.6 Finally, as regards the proposed amendments to  the Law on the FMA, the FMA is required to 
report to the Minster if it becomes aware that it is possible that measures under the draft law on measures for ensuring the stability of the financial market could be necessary. 
 2. General observations 2.1 The ECB notes that there is an ongoing discussion at both international and European level with a 
view to coordinating the actions of countries aimed at preserving confidence in and stability of the international financial markets. More specifically, the ECB notes that on 12 October 2008 the Heads of State of the euro area issued a ‘Declar ation on a concerted European action plan of the 
euro area countries’
2 (hereinafter the ‘Declaration’), in which they confirmed their commitment to 
act together in a decisive and comprehensive way in order to restore confidence and proper 
functioning of the financial system, aiming at restoring appropriate and efficient financing 
conditions for the economy. They agreed on common principles to be followed by the EU and euro 
area governments, central banks and supervisors to  avoid national measures adversely affecting the 
functioning of the single market and the other Me mber States. Such coordinated approach includes 
initiatives aimed at ensuring appropriate liquidity, facilitating the funding of banks through various 
means, providing additional capital resources to financial institutions and recapitalisation of 
distressed banks. These principles were also e ndorsed for all Member States by the European 
Council on 16 October 2008. Against this backgr ound, the ECB highlights that all the initiatives 
put in place by national governments to restore th e confidence in financial markets should be aimed 
at implementing such common principles, in the spirit of close cooperation with other Member 
States and EU institutions.    
2.2 The draft law was agreed by the Council of Ministers on 14 October 2008, i.e. two days following 
the summit of euro area Member States. In line with  the Declaration, Member States have to act in 
coordinated manner to avoid significant differen ces in national implementation having a counter-
productive effect, creating distortions in global banki ng markets. The euro ar ea Heads of State also 
acknowledged the need to cooperate with the ECB to  ensure consistency with the management of 
liquidity by the Eurosystem and compatibility w ith the operational framework of the Eurosystem. 
The ECB appreciates the fact that the Ministry consulted it on the draft law on 15 October 2008, five days before the discussion in the first ch amber of Parliament. It understands that the 
application of an accelerated procedure during the preparation and adoption of the draft law left 
insufficient time for the normal consultation pr ocess. This does not, however, prejudice the duty 
under Article 105(4) of the Treaty to consult th e ECB on national draft legislative provisions 
                                                 
2  See the Declaration of 12 Octobe r 2008, available on the website of the French Presidency, www.ue2008.fr. 
4 falling within its advisory fields of competence, and perhaps the ECB could have been consulted on 
a previous version of the draft law a few days earlier. 
 3. Specific observations  Eligibility for support  
3.1  The ECB notes that both the draft law on the st rengthening of the interbank money market and the 
draft law on measures for ensuring the stability of th e financial market refer to support measures to 
credit institutions and ‘domestic insurance undertak ings’. the ECB understands that the institutions 
potentially addressed by these measures comprise all credit institutions licensed in Austria and all 
insurance companies having their seat in Austria a nd being licensed by the Austrian FMA as well. 
Thereby any distortion in the level playing field as regards the treatment of domestic financial institutions and subsidiaries of foreign institu tions should be avoided. The ECB draws the 
Ministry’s attention to the recently adopted Commission guidance on compliance by financial sector support schemes with EU State aid rules
3, which includes in the specific context of provision 
of State guarantees detailed rules on setting the elig ibility criteria for the beneficiary institutions4.  
3.2 Moreover, the ECB would draw attention to th e conclusions adopted by the Declaration which 
highlighted some common principles to guide the action of euro area Member States when providing for recapitalisation of relevant financial institutions, in particular stressing the need to 
ensure that financial institutions to which Member States make available additional capital 
resources should be obliged to accept additional rest rictions, notably to preclude possible abuse of 
such arrangements at the expense of non-beneficiar ies. The ECB would therefore suggest that the 
draft law should include specific terms in acco rdance with the abovementioned principles
5. 
Relationship with the central bank 3.3 The ECB understands that the Oesterreichi sche Nationalbank (OeNB) will not be among the 
possible shareholders of the ‘clearing house’  to be established under the draft law on the 
strengthening of the interbank money mark et. In line with its previous opinions
6, the ECB 
considers that, with a view to ensuring the co mpatibility of the envisaged structure with the 
financial independence of the European System of Central Banks and the monetary financing 
prohibition laid down in Article 101 of the Treaty,  the OeNB, not being involved in the operation 
                                                 
3  See ‘Communication from the Commission – The application of St ate aid rules to measures ta ken in relation to financial 
institutions in the context of the current global financ ial crisis’ of 13 October 2008, available on the Commission’s 
website, www.ec.europa.eu. 
4  See paragraph 18 of the Commission’s guida nce, specifying that ‘The eligibility criteria of financial institutions … must 
be objective, taking due acco unt of their role in the relevant banki ng system and the overall economy, and non-
discriminatory so as to avoid undue distortive effects on ne ighbouring markets and the intern al market as a whole. In 
application of the principle of non disc rimination on the grounds of nationality, all institutions incorporated in the 
Member State concerned, including subsidiaries, and with si gnificant activities in that Me mber State should be covered 
by the scheme’. 
5  On 20 October 2008 the Austrian authorities informed the ECB th at it will adjust the draft legislation in order to include 
this point. 
6  See paragraph 5 of ECB Opinion CON/2003/27 of 2 December 2003 at the request of the Austrian Federal Ministry of 
Finance on a draft Federal law on  the National Foundation for Research, Technology and Development. 
5 of the ‘clearing house’, should be under no obligation to contribute to its finances, either under the 
draft law or otherwise. The OeNB has confirmed that no OeNB contribution is envisaged or under 
discussion.  
Relationship of the proposals under the draft law to the single monetary po licy of the euro area  
3.4  The ECB notes that, in line with the Declaration, Member States have to act in a coordinated 
manner to avoid significant differences in natio nal implementation havi ng a counter-productive 
effect, creating distortions in global banking markets. The euro area Heads of State also acknowledged the need to work in cooperation w ith the ECB to ensure consistency with the 
management of liquidity by the Eurosystem and compatibility with the operational framework of 
the Eurosystem. The ECB therefore notes that uncoordinated decisions among Member States 
should be avoided as they may involve a fragmentation of the euro area money market. The Declaration states that the euro area Governments would make available a Government guarantee of new medium-term (up to 5 years) bank senior de bt issuance. Against this background, the ECB 
has a number of observations to make in relation to the draft law. 
3.5 Regarding the draft law on measures for ensuring  the stability of the financial market, the ECB 
understands that the Minister of Finance is em powered to act as guarantor for liabilities of a 
financial institution without limitation in time.  Although such measures should have a positive 
impact to restore confidence in the Austrian banki ng system, it should also be noted that an open-
ended scheme of this nature does not seem to be in  line with the Declaration, which pointed to the 
temporary nature of such schemes. Moreover, it is the ECB’s view that the extension of the guarantee to cover all interbank de posits should be avoided. Otherwi se there could be a substantial 
distortion in the various national segments of th e euro area money market due to a potential 
increase in short-term debt issuance activity across Member States, which would impair the 
implementation of the single monetary policy, whic h is an exclusive compet ence of the Eurosystem 
under Article 105(2) of the Treaty. It also appears crucial to ensure the harmonisation of the price 
determination of such guarantee within the euro area and the EU, where a level-playing-field is 
essential. The ECB should be involved in such coor dination, and the ECB would welcome that this 
is explicitly provided for in a ny subsequent legislation.  
3.6 Regarding the draft amendments to the Law on ba nking, while recognising that the extension of the 
deposit guarantee for natural persons from EUR 20 000 to an unlimited amount should improve 
consumer confidence in Austrian financial institu tions, the ECB would also remind the Ministry of 
the need for coordinated measures in this matter, as stated in the Declaration. 
 4. Information obligations of the FMA The ECB understands that under the draft amendments to the Law on the FMA, the FMA must report to 
the Minister if it becomes aware of  the possibility that measures under the Law on measures for ensuring 
6 the stability of the financial market could become  necessary. As emphasised in previous ECB opinions7, 
central bank access to prudential information, and c ooperation between financia l supervisory authorities 
and central banks are essential for the conduct of macr o-prudential monitoring, the oversight of payment 
systems and the safeguarding of other market infrast ructures, which are in turn essential for the smooth 
conduct of monetary policy. In particular, from a fi nancial stability perspective, a central bank would 
inevitably need to be involved in the event of any cris is in financial markets. Even though it is understood 
that the Austrian system of banking supervision a nd the safeguarding of financial stability requires close 
cooperation and information exchange  between the FMA and the OeNB, w ith the OeNB being in charge 
of all analyses and on-site inspections in the banking area and entrusted with an explicit financial stability 
monitoring responsibility. However, the draft law coul d further underline this in teraction andprovide for a 
similar reporting obligation to the OeNB. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 20 October 2008. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
7  See, e.g. paragraph 2.4 of ECB Op inion CON/2007/33 of 5 November 2007 on the reform of financial supervision in 
Austria (title shortened).