EN
OPINION OF THE EUROPEAN CENTRAL BANK
of 13 September 2001
at the request of the Austrian Ministry of Finance on a draft federal law con cerning real estate
funds (Real Estate Investment Fund Act  ImmoInvFG) and to amend the Banking Act, the
1993 Investment Fund Act, the Money Market Act, the Securities Regulati on Act, the Insurance
Regulation Act, the Pension Fund Act, the Finance Market Regulator Act, the Income Tax Act,
the Corporation Tax Act and the Federal Law establishing a Federal Pension Fund Public
Limited Company [ Bundespensionskasse AG ]
(CON/2001/24)
1. On 30 July 2001 the European Central Bank (ECB ) received a request from the Austrian Ministry
of Finance for an opinion on a draft federal la w concerning real estate funds (Real Estate
Investment Fund Act  ImmoInvFG) and to am end the Banking Act, the 1993 Investment Fund
Act, the Money Market Act, the Securities Regu lation Act, the Insurance Regulation Act, the
Pension Fund Act, the Finance Market Regulator Act, the Income Tax Act, the Corporation Tax
Act and the Federal Law establishing a Federal Pension Fund Public Limited Company(Bundespensionskasse AG ) (hereinafter referred to as the draft law).
2. The ECBs competence to deliver an opinion is based on the second indent of Article 105(4) of
the Treaty establishing the European Community, th e second indent of Article  4(a) of the Statute
of the European System of Central Banks and of  the European Central Bank and the fifth indent
of Article 2(1) of Council D ecision 98/415/EC of 29 June 1998 on the consultation of the ECB by
national authorities regarding draft legislative provisions 1, as the legislative proposal contains
rules applicable to financial in stitutions which materially infl uence the stability of financial
institutions and markets. The Governing C ouncil of the ECB has adopted this opinion in
accordance with the first sentence of Article 17.5 of the Rules of Procedure of the ECB.
3. The main features of the draft law are:
(i) that the issue and administration of real esta te funds represent a bank transaction, and are
therefore subject to prudential supervision;
                                                          
1OJ L 189, 3.7.1998, p. 42.
2(ii) that the valuation of property in real estate  funds will be undertaken at least once a year by
two independent experts;
(iii) the establishment of statutory minimu m spread requirements for individual funds;
(iv) the requirement of involvement by a deposit bank ( Depotbank ) and the establishment of
insolvency protection measures in favour of investors.
The explanatory memorandum to the draft law notes that the rapid advance of foreign real estate
funds on the Austrian market requires the introduc tion of an Austrian Real Estate Investment
Fund Act and a number of accompanying amendments. The intention of the Amendment to the1993 Investment Fund Act and the Amendment to the Money Market Act is to treat foreign realestate funds as equivalent to all other foreign investment funds in terms of public sales inAustria. The investment rules will extend to Au strian real estate funds that are currently
regulated by the Amendments to the Insurance Regulation Act and the Pension Fund Act.
4. The ECB welcomes the draft law as it establishe s a regulatory framework to supervise Austrian
Real Estate Investment Funds with particular atte ntion paid to  achieving the level playing field by
harmonising the regulation of investment funds. Another item worth particular attention is the
forward-looking perspective of the draft law as  it aims to address future capital flows due to
pension provisions. Specifically, the intention of th e draft law is to ensure secure long-term high
yield investment opportunities also for invest ors with limited funds. Finally, the draft law
recognises the close relationship between banks a nd investment funds by particularly highlighting
the role of the deposit bank in Article 35. 
5. The ECB would like to highlight the fact that in vestment funds may face liquidity shortages, even
when they are considered solvent, in cases where long-term investments are illiquid while the
funding is potentially of shorter maturity. Investments in real estate assets can generally beconsidered as long term and illiquid. Furthermore,  Article 11 of the draft law provides for the
possibility that the share certificates may be return ed to the fund for redemption of the share at the
request of the shareholder. Consequently, this concern may materialise for individual real estate
investment funds. The ECB recogn ises that Article 32 of the draft law expressly addresses
concerns over liquidity and also provides for a te mporary waiver of the investors payment of the
redemption price under extenuating circumstances in Article 11. Nevertheless, as a limit on thiswaiver to one year (or to two years where fore seen by the funds rules) is also implemented,
liquidity shortage may arise in extreme circumst ances. As the real estate sector has been the
source of instability in many countries, the ECB would like to emphasise that supervision should
continue to focus on liquidity issues. In the impl ementation of the law, supervisors should actively
monitor the funds liquidity.
Furthermore, the ECB would like to  draw attention to the possible impact on asset prices of the
expected capital inflows from invest ors into the real estate sector through real estate investment
funds. As the reaction of the supply-side tends to be  sluggish in the real estate sector, an increase
3in demand may predominantly influence prices and also increase price volatility. Furthermore,
the determination of asset value may be of par ticular concern as the valuation of the share
certificate will mostly not be verifiable by market  prices. Article 29 of the draft law provides for
the appointment of at least two suitable experts for the valuation of the funds assets. Thus, the
ECB would recommend that supervisors, in im plementing the law, fo cus their attention
particularly on price development in those a ssets that are eligible for investment under
Article 21.
6. The ECB notes that the continuous monitoring of  business conduct by deposit banks is to become
mandatory. The ECB welcomes the supervision of companies investing in real estate by the
financial markets supervisory authority ( Finanzmarktaufsichtsbehörde ). 
7. The ECB notes that the draft law aims, inter alia , at facilitating the management of: (i) real estate
funds for the public at large; and (ii) the mana gement of special real estate funds for major
investors who are not natural persons by Austri an real estate companies (which must pay
particular attention to the protection of the interests of the investors).
8. The ECB notes that the draft law defines  r eal estate fund and real estate investment
companies. The ECB welcomes the detailed provisions on liability conditions, the mandatoryinvolvement of a deposit bank, the winding up of  real estate funds, property companies, the
valuation of assets, risk spread, liquidity prov isions and derivative products in the draft law.
9. The ECB welcomes criminal law provisions in th e draft law, which are similar to those of the
Investment Fund Act, with the intention of creating an efficient tool guaranteeing adherence to the
provisions of the draft law. In this context, the draft law also imposes fines for deposit banks
violating the rules laid down in the draft law.
10. The ECB recommends that the draft law expressl y acknowledge that the reporting obligations it
imposes do not prejudice any statistical repor ting requirements imposed by the ECB on the
entities subject to the draft law in accordance with Article 2 of Council Regulation (EC) No
2533/98 of 23 November 1998 concerning the coll ection of statistical information by the
European Central Bank.
11. The ECB confirms that it has no objection to th e publication of this opinion by the competent
national authorities.
Done at Frankfurt am Main on 13 September 2001.
The President of the ECB
[signed]
Willem F. DUISENBERG