EN
OPINION OF THE EUROPEAN CENTRAL BANK
of 8 November 2001
at the request of the German Ministry of Finance
on a draft law establishing an integrated financial services supervision
(Gesetz über die integrierte Finanzdienstleistungsaufsicht )
(CON/2001/35)
1. On 21 August 2001 the European Central Bank (ECB) received a request from the Federal
Ministry of Finance for an opinion on a draft law establishing an integrated financial servicessupervision ( Gesetz über die integrierte Finanzdienstleistungsaufsicht  -hereinafter referred to as
the draft Law).
2. The ECBs competence to deliver an opinion is based on Article 105(4) of the Treaty
establishing the European Community (hereinafter referred to as the Treaty), and the third andsixth indents of Article 2(1) of Council Decision 98/415/EC of 29 June 1998 on the consultationof the European Central Bank by national authorities regarding draft legislative provisions
1, as
the draft Law contains provisions concerning a national central bank as well as rules applicableto financial institutions which could materially influence the stability of financial institutionsand markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure ofthe European Central Bank, this opinion has been adopted by the Governing Council of theECB.
3. The objective of the draft Law is to create a new Federal Authority for Financial Services
Supervision ( Bundesanstalt für Finanzdienstleistungsaufsicht  - BAF) with responsibility for the
supervision of credit institutions, insurance companies, investment firms and other financialinstitutions. This new supervisory authority is the result of a merger between the existingsectoral authorities, namely, the Federal Banking Supervisory Office ( Bundesaufsichtsamt für
das Kreditwesen  - BAKred), the Federal Insurance Supervisory Office ( Bundesaufsichtsamt für
das Versicherungswesen  - BAV) and the Federal Securities Supervisory Office
(Bundesaufsichtsamt für den Wertpapierhandel  - BAWe). The regulatory and supervisory
powers of the new integrated supervisory authority will cover the entire range of financial
                                                          
1OJ L 189, 3.7.1998, p. 42.
2intermediaries. As explained in the explanatory memorandum to the draft Law, this
development is a response to substantial changes taking place in the financial markets, whichrequired adaptation of the former institutional structure of three separate supervisory bodies.According to the explanatory memorandum, the substantive law relating to the supervision ofcredit institutions, insurance companies, investme nt firms and other financial institutions will
not be affected by the draft Law, as the provisions deal mainly with organisational matters. Thecooperation between the supervisory authorities and the Deutsche Bundesbank, which up untilnow has not been laid down by law in detail, will  be governed by specific provisions in the
Banking Act ( Gesetz über das Kreditwesen ). This applies in particular to cooperation
concerning the day-to-day supervision of credit and financial institutions to be carried out by theDeutsche Bundesbank. 
4. The ECB notes that the explanatory memorandum accompanying the draft Law points out
several benefits resulting from the merger of the three sectoral authorities into a new financialregulatory and supervisory authority in the Federal Republic of Germany. Those benefitsinvolve namely strengthening the efficiency of supervision of the financial system as a whole,achieving synergy in central supervisory tasks and making regulation and supervision morecost-effective. As a complement to such objectives, the ECB suggests integrating andmodernising the underlying substantive law relating to financial regulation and supervision. 
5. The ECB welcomes the draft Law in so far as the involvement of the Deutsche Bundesbank in
the field of prudential supervision will be laid down in more detail. By virtue of the draft Law, aclear legal basis for coordination and cooperation between the BAF and the DeutscheBundesbank will be established, encompassing matters relating to the stability of the Germanfinancial system, to the development of supervisory practice as well as to aspects of day-to-daysupervision of credit and financial services institutions. This is in line with the ECB's view thatmaintaining the close involvement of national central banks in prudential supervision is amandatory condition to allow the Eurosystem to contribute adequately to monitoring the risks tofinancial stability in the euro area. This is of particular importance in a context in which thenature and scope of these risks are affected by the introduction of the single currency and therelated enhanced integration of financial markets. In addition, it safeguards smooth coordinationbetween the central banking functions exercised at the Eurosystem's level and the supervisoryfunctions carried out at national level. Agai nst this background, the ECB would like to put
forward some specific comments on the provisions of the draft Law. 
6. First, the institutional set-up for coordina tion and cooperation between the BAF and the
Deutsche Bundesbank. First, the ECB welcomes the institutionalisation of the financial markets
regulation forum ( Forum für Finanzmarktaufsicht) , under Article 3 of Section 1 of the draft
Law, which already exists on the basis of an agreement between the federal supervisory officesand the Deutsche Bundesbank. The forum comprises the BAF and the Deutsche Bundesbankand will coordinate their respective work in regulatory and supervisory matters, including those
3matters that might have a bearing on financial market stability. The ECB understands that the
scope of the work of the forum may include additionally crisis situations and suggests that thiscould be clarified in the draft Law. The ECB deems that the establishment of this forum dulyacknowledges the role of the BAF and the Deut sche Bundesbank as the authorities jointly
responsible for stability of the financial system. In  this respect, the ECB considers, in line with
the ECBs opinion on the proposed amendments to the Act on the Deutsche Bundesbank(Gesetz über die Deutsche Bundesbank )
2, and on the basis of the reasons expressed therein, that
the draft Law could be supplemented by clarifying that the Deutsche Bundesbank hasresponsibility for contributing to the overall stability of the financial system. Therefore, thedefinition of such a role by means of a specific provision in the Banking Act or the Act on theDeutsche Bundesbank would be welcome. Furthermore, the ECB takes note of the
establishment of an advisory committee ( Fachbeirat ) in Article 8 of Section 1 of the draft Law.
It will be composed of 20 members to be elected by the Ministry of Finance with appropriaterepresentation from the financial, credit and insurance industries, the Deutsche Bundesbank andconsumer protection associations. The ECB understands that the purpose of the AdvisoryCommittee will be to advise the BAF on its activities and to give recommendations on how todevelop supervisory practices. However, as far as banking supervision issues are concerned, theECB suggests that the Deutsche Bundesbank should not play an advisory role within theCommittee. Instead, the BAF and the Deutsche Bunde sbank, as the responsible entities in the
field of banking supervision, should both be given advice by the Committee. Finally, the ECBtakes note of the establishment of an administrative council ( Verwaltungsrat ) in Article 7 of
Section 1 of the draft Law, which will supervise the activities of the Executive Board of theBAF and support it in the conduct of its activities. The Deutsche Bundesbank will berepresented in this Administrative Council, althoug h without voting rights. This will ensure that,
as an integral part of the institutional framework for prudential supervision and financialstability, the Deutsche Bundesbank will be informed where necessary of the activities of theBAF. 
7. Secondly, cooperation and exchange of information between the BAF and the Deutsche
Bundesbank on an ongoing basis. The ECB consid ers that, notwithstanding the abovementioned
mechanisms for institutional cooperation, in teraction between the overall supervisory
competences of the BAF and the central banking functions of the Deutsche Bundesbank couldbe further enhanced in the draft Law. First, the ECB suggests including in the draft Law the
basic principle that smooth interaction between the BAF, as a fully integrated supervisoryinstitution, and the Deutsche Bundesbank should entail the obligation to cooperate closely in all
fields of common interest  However, the current draft Law limits such obligation to cooperate to
the matters laid down in Article 7 of the Banking Act (see Article 9 of Section 2 of the draftLaw). Furthermore, the ECB understands that there are no legal impediments to access to
                                                          
2 ECB opinion of 2 August 2001 on a draft Seventh Law amending the Deutsche Bundesbank Act (CON/2001/17).
4information and information sharing on all matters relating to financial stability on an ongoing
basis between the BAF and the Deutsche B undesbank. However, the ECB notes that, in
accordance with Article 11 of Section 1 of the draft Law, the current sectoral confidentialityrules will continue to apply in the new framework. In this context, the ECB would welcome anew provision expressly removing possible legal obstacles to information sharing between theBAF and the Deutsche Bundesbank without being limited to the matters covered by Article 9 of
the Banking Act (see Article 12 of Section 2 of the draft Law). Given the enhanced integrationof financial services and the establishment of the new supervisory authority with cross-sectoralresponsibilities, it may be considered necessary for access to supervisory information by theDeutsche Bundesbank to include all the sectors which may be deemed relevant for overallstability of the financial system. The central bank should have the means to assess possiblesystemic implications stemming from cross-sectoral linkages and from the behaviour ofcomplex financial groups for the money and capital markets as well as for payment andsettlement systems. This would also be in li ne with the recent European Commission's proposal
for a directive on the supervision of financial conglomerates
3, which purports to lift the legal
obstacles for supervisory information sharing regarding financial conglomerates with centralbanks. Lastly, it may be noted that information sharing may entail a cross-border dimension,since it may be necessary to provide other national central banks of the Eurosystem and theECB with information on Eurosystem-related ta sks. Including a new provision reflecting this
aspect in the draft Law would also be welcome. 
8. Thirdly, the operational involvement of the Deutsche Bundesbank in the field of prudential
supervision. The ECB welcomes Article 9 of Se ction 2 of the draft Law, proposing a new
Article 7(1) of the Banking Act. The new provision maintains the general principle contained
already in the present version of the Banking Act, whereby the BAF and the DeutscheBundesbank cooperate as regards the supervision of credit and financial institutions as definedby the Banking Act. Furthermore, it clarifies further the extent of operational involvement bythe Deutsche Bundesbank. The ECB understands that the main function of the DeutscheBundesbank in this process will be the day-to-day supervision of these institutions (c.f. thesecond sentence of Article 7(1) of the proposal for a Banking Act in Article 9 of Section 2 of thedraft law). Moreover, the BAF will generally base its supervisory activities on the assessmentsestablished by the Deutsche Bundesbank (c.f. the fourth sentence of Article 7(2) of the proposalfor a Banking Act). Therefore, the new legal framework will benefit from a continuation andeven expansion of the current involvement of the Deutsche Bundesbank in day-to-daysupervision. This is particularly significant in respect of the participation of the DeutscheBundesbank in the inspection of capital adequacy and risk management of the supervisedinstitutions. Moreover, this should ensure that the Deutsche Bundesbank is in a position to
                                                          
3 Article 9(1) of the proposal for adirective of the European Parliament and of the Council on the supplementary
supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and
amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, andDirectives 98/78/EC and 2000/12/EC of the European Parliament and the Council, COM (2001) 213 final.
5further contribute to the new supervisory activities arising from the new legal framework under
the Basel Capital Accord and Community provisions on capital adequacy. In this context, theECB welcomes also Article 44 of the proposal for a Banking Act, (see Article 46 of Section 2 ofthe draft Law) which now expressly provides that the Deutsche Bundesbank  may carry outspecial audits. As regards the aforementioned proposed fourth sentence of Article 7(2) of theBanking Act, according to which the BAF will generally base its supervisory activities on theassessments established by the Deutsche Bundesbank, the ECB points to the importance that theformulation of this provision does not give rise to uncertainties as regards the exclusiveresponsibility of the BAF for the supervisory measures taken in fulfilment of its tasks under theBanking Act. 
9. Fourthly, the advisory role of the Deutsche Bundesbank on specific regulatory matters. The
ECB welcomes the new second sentence of Article 7(2) of the proposal for a Banking Act (csee
Section 2, Article 9 of the draft Law), and the proposed Article 35(6) of the Securities TradingAct (see Article 26 of Section 4 of the draft Law), in so far as they provide the DeutscheBundesbank with the right to be c onsulted by the BAF on guidelines ( Richtlinien ) issued under
the Banking Act and also under the Securities Trading Act ( Wertpapierhandelsgesetz ), to the
extent that the Acts do not already oblige the BAF to act in agreement with the DeutscheBundesbank. These provisions further strengthen cooperation as regards the regulatoryframework for prudential supervision. However, bearing in mind the far-reaching impact of theaforementioned guidelines issued under the Banking Act for the work of the DeutscheBundesbank in this area and for its personnel an d equipment, these guidelines should only be
adopted in agreement with the Deutsche Bund esbank. The ECB would suggest, in view of its
financial stability role, providing the Deutsche Bundesbank with an advisory role vis-à-vis the
BAF for all legal acts falling within its field of  competence. This advisory role would be not
limited to legal acts falling strictly under the banking or securities fields. 
10. Fifthly, the ECB would welcome including in the draft Law, as part of its transitional
provisions, a provision stipulating that the BAF will engage in those legal or non-legally
binding commitments to cooperation and information sharing undertaken by former supervisoryauthorities vis-à-vis other supervisory authorities and the central banks of the Member States.
Done at Frankfurt am Main on 8 November 2001.
The President of the ECB
[signed]
Willem F. DUISENBERG