EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 17 March 2009 
at the request of the German Ministry of Finance 
on a draft law on the further stabilisation of the financial market 
(CON/2009/24) 
 
Introduction and legal basis  
On 10 March 2009, the European Central Bank (ECB) re ceived a request from the German Ministry of 
Finance for an opinion on a draft law on the further st abilisation of the financial market (hereinafter the 
‘draft law’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the sixth indent of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Ce ntral Bank by national authorities regarding draft 
legislative provisions1, as the draft law relates to rules applicable  to financial institutions insofar as they 
materially influence the stability of financial ins titutions 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 draft law 
1.1 The purpose of the draft law is to make the in struments introduced by the law on financial market 
stabilisation in October 2008
2 more flexible and to provide for additional options for action. In 
particular, the draft law provides for an extensi on of the maximum maturity period for guarantees 
from 36 months to 60 months. Furthermore, it ame nds provisions of takeover and company law, in 
particular as regards the convening of share holders’ meetings and am endments to the voting 
procedure for capital increases. 
1.2 Moreover, the draft law provides for the possibility  of expropriation of shares and other rights in 
financial sector institutions (hereinafter ‘expropria tion’) and nationalisati on of such institutions. 
Expropriation and nationalisation will be restricted to cases where there is no other solution and it 
is necessary to ensure the stability of the financ ial system. Expropriation as a stabilisation measure 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  Law on the implementation of a package of measures to  stabilise the financial market of 17 October 2008 ((2008) 
Bundesgesetzblatt . I p. 1982). 
2 under the draft law requires the adoption of a Federal statutory order in respect of the specific 
expropriation. Expropriation is subject to the paym ent of compensation, the nature and extent of 
which are to be determined in accordance with current market value, which is principally 
calculated based on the average stock exchange pr ice during the two weeks before the day of the 
expropriation decision. The Federal Ministry of Finance may only initiate expropriation procedures 
before 30 June 2009 and must adopt a regulati on on specific expropriations by 31 October 2009. 
The expropriated object needs to be repr ivatised as soon as it has been stabilised. 
 2. General observations 2.1 The ECB notes that the draft law amends the law providing for State intervention in the financial 
sector to mitigate the current financial turmoil
3 on which the ECB was consulted in October 2008, 
and accordingly reminds the consulting authority of its views expressed in its previous opinion4.  
2.2 In line with the ‘Declaration on a concerted European action plan of  the euro area countries’ issued 
by the Heads of State of the euro area on 12 October 2008 (hereinafter the ‘Declaration’)5, the ECB 
has highlighted in its opinions that close coordina tion at the European Union level of Government 
measures intended to alleviate tensions in th e financial markets is of crucial importance6. This 
coordinated approach includes initiatives aimed at  ensuring appropriate liquidity, facilitating the 
funding of banks by various means, providing a dditional capital resources to financial institutions 
and recapitalising distressed banks.  
In line with the Declaration, the ECB emphasises that the suppor t measures brought in by Member 
States should be temporary in nature and harmonise d throughout the EU. Furthermore, and in line 
with previous ECB opinions7, it should be ensured that such me asures are in accordance with the 
requirements of Community competition law, in partic ular State aid rules, and that the State’s role 
as shareholder is limited in time8. 
                                                 
3  See footnote 2. 
4  ECB Opinion CON/2008/57 of 21 October 2008 on a Law on the im plementation of a package of  measures to stabilise 
the financial market and an order on its implementation. All ECB opinions are available on the ECB’s website at 
www.ecb.europa.eu. 
5  The Declaration is availabl e on the French Presidency’s website at www.ue2008.fr. 
6  See the Recommendations of the Governing Council of the Eu ropean Central Bank on the pr icing of reca pitalisations 
issued on 20 November 2008, available on the ECB’s website at www.ecb.europa.eu. See also ECB Opinion 
CON/2008/79 of 27 November 2008 at the request of the Greek  Ministry of Economy and Finance on a draft law on 
enhancing liquidity of the economy to address the impact of th e international financial crisis  and on a draft decision on its 
implementation, as well as ECB Opinion CON/2009/3 of 8 Ja nuary 2009 at the request of the Slovenian Ministry of 
Finance on a draft decree laying down crit eria and conditions for the implementati on of State capital investments and for 
the conversion of State claims in to capital shares under Article 81. a of the Law on public finance. 
7  See e.g. paragraph 3.8 of ECB Opinion CON/2008/68 of 13 N ovember 2008 at the request of the Finnish Ministry of 
Finance on a draft government proposal for laws amending the Law on the Government Guarantee Fund and the Law on 
credit institutions. 
8 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 financial crisis’ (OJ C 208 of 25.10.2008, p. 8). Also ‘Communication 
from the Commission – The recapitalisation of financial institution s in the current financial crisis: limitation of aid to the 
minimum necessary and safeguards agains t undue distortions of competition’, available on the Commission’s website at 
www.ec.europa.eu. 
3 3. Specific observations 
3.1 Extension of duration of debt guarantees  
 The ECB notes that the European Commi ssion in its decision of 12 December 20089 approved 
modifications of the German rescue package fo r financial institutions which it had originally 
approved on 27 October 200810. These approved modifications concern, inter alia , the possibility 
of extending the duration of debt guarantees to a maximum of five years under certain circumstances. The ECB understands that Article 1 § 6 a) of the draft law aims at implementing 
this particular modification. As stated in its previous opinions
11, the ECB emphasises in line with 
the Declaration that harmonisation regarding th e duration of national financial support schemes 
across the EU is of crucial importance. 
3.2 Expropriation and the relationship with the single monetary policy of the euro area 
3.2.1 In line with the Declaration,  the ECB reiterates that uncoordinated decisions among Member States 
should be avoided as they may lead to a fragmentation of the euro area money market. The possibility for expropriation pursuant to Article  3 of the draft law raises questions as to: 
(a) evaluation from the point of view of a market  economy; (b) its factual scope of application; 
(c) its temporal scope of application; (d) the pricing for compensation paid for the assets of a 
nationalised institution; and (e) an adequate exit strategy. In this respect, the ECB would like to 
make the following observations. 
3.2.2 Expropriation is a severe measure with far-reachi ng effects on market participants. For this reason, 
expropriation by the State in relation to companie s in distress should remain a tool for use in 
clearly defined and exceptional circumstances. The E CB stresses that it should be ensured that such 
measures are only used as a last resort, that th e disturbances to the level playing-field are 
minimised and that the State’s role is limited in  time. Due to the importance of the impact of 
expropriation on the credit institutions concerned a nd on their shareholders as well as on the market 
in general, it is crucial to achieve absolute lega l certainty in relation to such measures. In this 
connection, the ECB notes that individual expropriation measures may raise Community and international private law questions due to their possible cross-border impact. 
3.2.3 Concerning the factual scope of application of  the proposals, the ECB notes that the draft law in 
Article 3 § 1(4) no 1 limits expropriation to cases wh ere it is ‘necessary to ensure financial market 
stability and other legal and commercially reasonabl e solutions are no longer available in the period 
necessary to ensure financial market stability to  the same extent but in a less radical way.’ 
Moreover, under Article 3 § 1(4)  no 2, expropriation will only c oncern systemically relevant 
institutions, institutions for which stabilisati on measures under the Fund have proved to be 
                                                 
9  European Commission, N 625/2008, K (2008) 8629, avai lable on the Commission’s we bsite at www.ec.europa.eu. 
10  European Commission, N 512/2008, K (2008) 6422, avai lable on the Commission’s we bsite at www.ec.europa.eu. 
11  ECB Opinion CON/2009/6 of 26 January 2009 at the request of the Danish Ministry of Economic and Business Affairs 
on a proposal for a Law on State investments in credit in stitutions and a proposal for a Law amending the Law on 
financial stability. 
4 insufficient for stabilisation and cases where the expropriating authority has previously made 
serious but unsuccessful endeavours to find an alte rnative solution. The ECB understands that these 
provisions effectively restrict the scope of expropri ation to cases of last resort and subject it to a 
detailed proportionality test.  
3.2.4 On the temporal scope of application, the ECB welcomes the introduction of precise deadlines in 
the draft law12 both for the decision to initiate an expropriation (30 June 2009) as well as for the 
adoption of a legal order by which the e xpropriation is effected (31 October 2009). 
3.2.5 As regards the pricing of compensation, ev en in a case of expropriation the ECB reminds the 
consulting authority of the importance of pricing th at reflects appropriately the goals of enhancing 
the stability of the financial system, facilitating a return to normal market conditions and ensuring 
the proper financing of the economy. In order to monitor the preservation of a level playing-field, 
transparency of valuation is of the essence.   
3.2.6 As concerns an exit strategy, according to  the explanatory memorandum to the draft law, 
expropriation is only meant to be temporary. Th e ECB understands that the draft law provides in 
Article 3 § 6(2) for reprivatisation once the ins titution in question has been  sustainably stabilised. 
As mentioned in previous ECB opinions, it is impor tant to ensure that th e State’s involvement is 
limited in time13. In this respect, the ECB welcomes that  the abovementioned provision already set 
outs different methods of reprivatisation and stipulat es that former shareholders have the first right 
to purchase14.  
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 17 March 2009. 
 
[signed] 
 
The Vice-President of the ECB 
Lucas D. PAPADEMOS 
 
                                                 
12  See Article 3 § 6(1) of the draft law. 
13  See footnote 11. 
14  See Article 3 § 6 (2) of the draft law.