Opinion of the European Monetary Institute at the request of the Austrian Ministry of Finance under Article 109f (6) of the Treaty establishing the European Community (the “Treaty”) and Article 5.3 of the Statute of the EMI on a draft law amending the Central Bank Act and other related laws (the “Draft Law”) (CON/97/30)
Date: 1997-12-15
Institutions: European Monetary Institute
Subjects: Austria, board of directors, central bank, euro, institutional activity, monetary integration, money, national law

15 December 1997

OPINION OF THE EUROPEAN MONETARY INSTITUTE

at the request of the Austrian Ministry of Finance under Article 109f (6) of the Treaty
establishing the European Community (the “Treaty”) and Article 5.3 of the Statute of the

EMI on a draft law amending the Central Bank Act and other related laws (the “Draft Law”)

CON/97/30

1.

On 21 November 1997 the EMI received a request from the Austrian Ministry of Finance for an

opinion on the Draft Law.

2.

The EMI’s competence to deliver an opinion  is based on Article 1.1, first and second indent, of

the Council Decision of 22 November 1993 (93/717/EC) on the consultation of the EMI by the

authorities  of  the  Member  States  on  draft  legislative  provisions,  as  the  Draft  Law  contains

provisions  concerning  currency  legislation,  the  status  and  powers  of  the  Oesterreichische

Nationalbank (the “Bank”) and the instruments of monetary policy, inter alia, in view of the need

to implement provisions of the Treaty and in particular Article 108 thereof.

3.

In accordance with Article 108 of the Treaty, the Draft Law is intended to adapt the Statute of

the Bank to meet the requirements of the Statute of the European System of Central Banks and

of the European Central Bank (the “ESCB Statute”) and the Treaty. The EMI notes that most

of  the  provisions  which  are  aimed  at  achieving  the  institutional  independence  of  the  Bank  will

enter into force even before the European System of Central Banks (the “ESCB”) is established,

namely  on  the  day  following  confirmation  by  the  Council  in  accordance  with  Article  109j(4)  of

the Treaty, of which Members States fulfil the necessary conditions for the adoption of the single

currency. The EMI also notes that those provisions relating to the integration of the Bank in the

ESCB will enter into force on the first day on which the Republic of Austria participates in Stage

Three  of  Economic  and  Monetary  Union  (“Stage  Three”)  without  a  derogation  according  to

Article 109k of the Treaty. Furthermore, the Draft Law contains transitional provisions some of

which  relate  to  institutional  independence,  which  are  aimed  at  covering  the  period  of  time

between  the  establishment  of  the  ESCB  and  the  start  of  Stage  Three,  during  which  Member

States will retain their powers in the field of monetary policy.

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4.

The  EMI  notes  with  satisfaction  the  comprehensive  approach  which  has  been  adopted  for  the

adaptation of the Statute of the Bank and other related provisions including the Coinage Act and

the  Law  on  the  Schilling  (“Schillinggesetz”),  and  the  fact  that  a  complete  reorganisation  of  the

structure of the Bank is foreseen for Stage Three, which is aimed at ensuring compliance with

the requirements of the ESCB Statute and the Treaty.

5.

However,  the  EMI  would  like  to  comment  on  certain  aspects  of  central  bank  independence.

Chapter II, Section 2.3, of the EMI’s Report on “Progress towards Convergence 1996”, states

that "NCBs  in  Stage  Three  operate  in  a  framework  whose  objectives  are  determined  by

Article 105(1) of the Treaty and Article 2 of the Statute (the core element of which is the

primacy of maintaining price stability) and statutes of N[ational]C[entral]B[ank]s should

unambiguously reflect this situation". Article 105(1) of the Treaty and Article 2 of the ESCB

Statute state that "[t]he primary objective of the ESCB shall be to maintain price stability."

Article  2(2)  of  the  Draft  Law  states  that  the  Bank  has  to  ensure  fulfilment  of  the  objective  of

price  stability  and  must  take  the  macroeconomic  requirements  into  account  with  regard  to

economic  growth  and  employment  trends.  This  means,  that  consideration  of  certain  aspects  of

the  economy  is  defined  as  an  objective  of  the  Bank  which  is  accorded  equal  weight  to  the

objective  of  maintaining  price  stability.  The  EMI  notes  that  this  wording  does  not  reflect  the

primacy  of  maintaining  price  stability  and  is  therefore  incompatible  with  Article  105(1)  of  the

Treaty and Article 2 of the ESCB Statute.

6.

The  timetable  for  the  adaptation  of  national  legislation  regarding  the  independence  of  national

central  banks  (“NCBs”)  pursuant  to  Articles  107  and  108  of  the  Treaty  is  addressed  in  the

EMI’s  report  on  “Legal  Convergence  in  the  Member  States  of  the  European  Union  -  As  at

August 1997”, dated October 1997. The final paragraph of the Introduction (p.2) states that  “In

order to comply with Article 108, the national legislative procedures must be accomplished

in  such  a  way  that  the  compatibility  of  national  legislation  is  ensured  at  the  latest  at  the

date of the establishment of the ESCB. Moreover, adaptations of NCB statutes in the field

of central bank independence need also to be fully effective at the latest by the date of the

establishment  of  the  ESCB,  whilst  adaptations  aiming  at  the  integration  of  NCBs  in  the

ESCB would need to become effective only at the start of Stage Three for Member States

without  a  derogation  or  at  the  start  of  their  full  participation  in  Monetary  Union  for

Member  States  with  a  derogation  or  with  a  special  status.”  Until  the  Republic  of  Austria

participates in Stage Three without a derogation, the General Council of the Bank will remain its

decision-making  body  in  the  field  of  ESCB-related  tasks.  The  General  Council  is  largely

composed of  representatives  of  various  branches  of  industry,  who  perform  their  duties  for  the

Bank on a non-exclusive basis, and a State Commissioner with the right to raise objections to its

decisions with suspensive effect. However, it is noted that the President of the General Council

of the Bank and his deputy will represent the Bank in the European Central Bank ( the “ECB”)

- 3 -

until  a  new  Governor  has  been  appointed  and  that  they  cannot  be  bound  by  decisions  of  the

Board of Executive Directors or the General Council of the Bank and are not allowed to take or

receive instructions from any party (see Article 34(1) and 86 Section 3 of the Draft Law).

No distinction has been made in the EMI’s Convergence Reports between the independence of

the  decision-making  body  of  an  NCB  in  the  performance  of  ESCB-related  tasks  and  the

independence of the representative of this NCB in the ECB. Although the provision of Article  34

(1) of the Draft Law is very clear in its wording and the transitional provision of Article 87 (2)

Section 5, of the Draft Law states that ”[t]he General Council shall, in performing its tasks,

observe  the  preparations  for  exercising  its  powers  adopted  by  the  ECB  in  accordance

with Article 109l paragraph 1 of the Treaty”, the solution described in the Draft Law for the

period  between  the  establishment  of  the  ESCB  and  the  day  on  which  the  Republic  of  Austria

adopts  the  single  currency  may  give  rise  to  questions  as  regards  the  fulfilment  of  the
independence criteria as required by the Treaty and the ESCB Statute1.

7.

Article  33  (3),  last  sentence,  of  the  Draft  Law  provides  that  the  members  of  the  Board  of

Executive Directors may not be involved in any other activity which might cast doubts on their

impartiality.  The  EMI  notes  that  this  provision  is  to  be  understood  as  an  additional  tool  to

guarantee the personal independence of the members of the Board of Executive Directors of the

Bank. Article 33 (4), first sentence, of the Draft Law states that “[t]he members of the Board

of Executive Directors of the Bank may be removed from office only should they no longer

fulfil the conditions for holding their office (paragraph 3)".  The  EMI  notes  that  dismissal

based on mere doubts about impartiality would in itself not  be  compatible  with  the  grounds  for

dismissal set out in Article 14.2 of the ESCB Statute.

8.

Article  20  (2)  of  the  Draft  Law  provides  for  that  the  General  Council  of  the  Bank  has  an

obligation to advise the Board of Executive Directors on monetary policy matters. As monetary

policy  matters  will  certainly  have  to  be  considered  to  be  ESCB-related  tasks,  it  should  not  be

possible  for  any  party  to  influence  the  decision-making  body  of  an  NCB  in  this  area.  A

right/obligation to give advice can entail the possibility of seeking to influence the decision of the

advised person/body. The EMI notes therefore, that Article 20 (2) of the Draft Law gives rise to

concerns regarding the fulfilment of the independence criteria as required by the Treaty and the

ESCB Statute.

1  Deutsche  Bundesbank  and  De  Nederlandsche  Bank  are  of  the  opinion  that  this  construction  is  incompatible
with the Treaty and the ESCB Statute. They point out that the decision making body of the Bank for the period of
time between the establishment of the ESCB and the moment at which the Republic of Austria will enter Stage
Three  without  derogation  does  not,  because  of  its  composition,  fulfil  the  independence  requirements  of  the
Treaty  and  the  ESCB  Statute.  This  is  particularly  relevant  as  NCBs  will  have  to  take  important  decisions  with
regard to Stage Three and therefore decision making bodies of NCBs have to fulfil the independence requirements
of the Treaty and the ESCB Statute on the day of the establishment of the ESCB at the latest.

- 4 -

9.

The EMI welcomes the proposed modification to the structure of the Bank and the allocation of

responsibilities which the Draft Law foresees for Stage Three. As from the first day on which

the  Republic  of  Austria  participates  in  Stage  Three  without  a  derogation,  according  to  Article

109k of the Treaty, all competencies in the field of ESCB related tasks will be transferred to the

Board of Executive Directors. The Bank will be represented on the Governing Council and the

General  Council  of  the  ECB  by  the  Governor  or  his  deputy  (after  a  new  Governor  has  been

appointed - see the transitional provision in Article 86 Section 3 of the Draft Law) who will be

members of the Bank’s Board of Executive Directors. In this function, neither the Governor nor

the Deputy Governor is bound by the decisions of the Board of Executive Directors or those of

the General Council of the Bank nor may the Governor or the Deputy Governor take or receive

instructions from an party. The General Council of the Bank will loose its competence in the field

of  ESCB-related  tasks  in  Stage  Three.  In  this  context  the  EMI  welcomes  Article  21(5)  of  the

Draft Law, according to which  “[t]he  power  of  the  General  Council  to  approve  and  take

decisions  [....]  shall  be  restricted  in  such  a  way  that  decisions  taken  by  the  General

Council shall not interfere with the tasks of the ESCB.” This provision seems to be important

given the fact that the General Council of the Bank has the power to decide on the dismissal of

members of the Board of Executive Directors (except the Governor and the Deputy Governor),

the  authorisation  of  items  of  expenditure  not  provided  for  in  the  cost  estimates  for  the  year  in

question, and the rules of procedure for the Board of Executive Directors, etc. Finally, the EMI

notes with satisfaction that Article 33 (2) of the Draft Law foresees a minimum term of office of

five years for all members of the Board of Executive Directors of the Bank.

10. Article 32 (5) of the Draft Law requires that the Governor and the Deputy Governor will have

an obligation to report to Parliament, at least twice a year, on the situation and development of

monetary policy. Such an obligation is not contained in the existing Central Bank Act. The EMI

notes that this provision in order to be compatible with the Treaty should be redrafted in such a

way as to indicate clearly that such a duty is to be understood as an obligation to inform ex post

and  that  the  provisions  of  Article  38  of  the  ESCB  Statute  on  professional  secrecy  must  be

respected.

11. Article 40 of the Draft Law provides for the institution of a State Commissioner as a government

representative,  who  will  be  entitled  to  attend  -  albeit  in  an  advisory  capacity  -  the  meetings

organised  by  the  General  Council  of  the  Bank.  The  State  Commissioner  will  also  have  full

access  to  confidential  ESCB-related  information.  As  Article  45  of  the  Draft  Law,  which  deals

with professional secrecy, does not seem to apply to the State Commissioner, the EMI suggests

that the scope of this provision should be extended to include the State Commissioner.

- 5 -

12. As regards the integration of the Bank in the ESCB, the EMI would like to make the following

comments. Item 5, above, states that the objectives of the Bank, as defined in Article 2 (2) of the

Draft  Law,  do  not  reflect  the  primacy  of  maintaining  price  stability  and  are  therefore

incompatible with Article 105(1) of the Treaty and Article 2 of the ESCB Statute. With regard to

the  tasks  and  operations  of  the  Bank,  the  EMI  notes  with  satisfaction  the  comprehensive

approach which has been applied in preparing the Draft Law.

With  regard  to  Article  45  (1)  of  the  Draft  Law,  the  EMI  would  prefer  to  see  inclusion  in  this

provision  of  a  reference  to  Article  38  of  the  ESCB  Statute  in  order  to  make  it  clear  that

professional secrecy is covered by a directly applicable provision of the ESCB Statute.

With regard to the issuance and the redemption of banknotes (see Articles 62 and 86, sections 4.

to  8.  of  the  Draft  Law),  the  EMI  notes  that  not  only  does  the  Draft  Law  recognise  the

competence  of  the  ECB  in  this  field  but  it  also  puts  forward  a  comprehensive  solution  for  the

transitional period, during which euro banknotes and national banknotes will circulate in parallel.

Concerning Article 52 of the Draft Law on minimum reserves, the EMI notes that paragraph 2

of  this  provision  aims  to  reflect  the  directly  applicable  provision  of  Article  19.2  of  the  ESCB

Statute  by  using  a  form  of  wording  which  is  not  exactly  the  same  as  that  used  in  the  Statute

itself. As the EMI has pointed out in previous opinions, it would be desirable for reasons of legal

clarity  to  avoid  addressing  issues  in  one  way  in  the  Treaty  and  in  another  way  in  Statutes  of

NCBs. Therefore, consideration should be given to redrafting this provision. The EMI notes that

this statement applies also for other provisions in the Draft Law.

As for the accounting obligation of the Bank, the EMI welcomes the fact that Article 67 (2) of

the Draft Law states that in drawing up the balance sheet and profit and loss account,  “[t]he

regulation laid down by the Governing Council of the ECB in accordance with Article 26

(4) of the ESCB/ECB Statute shall be taken into consideration” and in Article 69 (1) that the

total earnings of the Bank for each year shall be derived  “in observance of the provisions of

Article  32  and  51  of  the  ESCB/ECB  Statute  and  the  provisions  of  Article  33  of  the

ESCB/ECB Statute on the allocation of net profits and losses of the ECB,[ ...]”.

With regard to Article 75, last sentence of the Draft Law the EMI notes that this provision does

not make it clear that Article 35.6 of the ESCB Statute refers exclusively to intra ESCB-disputes

concerning the fulfilment by an NCB of obligations under the ESCB Statute and not to disputes

between  NCBs  and  third  parties,  whilst  the  Austrian  legislation  may  also  not  assume

responsibility for the attribution of competencies to the European Court of Justice.

- 6 -

The EMI notes that according to Article 83 of the Draft Law, ERP financial operations may be

entered  into  by  the  Bank  outside  the  framework  of  the  “General  Documentation  on  ESCB

Monetary  Policy  Instruments  and  Procedures”  (the  “General  Documentation”)  whereas  such

operations will not be subject to the collateral requirements of the General Documentation. The

EMI points out that in Stage Three NCBs will have only the possibility to provide liquidity outside

the  scope  of  the  General  Documentation  subject  to  the  provisions  of  a  guideline  issued  by  the

Governing Council of the ECB stipulating the rules for such operations.

The  EMI  is  in  the  process  of  preparing  such  rules  to  be  adopted  within  the  framework  of  the

ESCB in order to ensure the unobstructed implementation and execution of the single monetary

policy in Stage Three.

Concerning Article 86 Section 5 of the Draft Law, which states that banknotes denominated in

Austrian Schillings will cease to be legal tender on a date set out specifically by federal law, the

EMI notes that this provision has to be interpreted in the light of the fact that the latest date on

which banknotes will cease to be legal tender will be defined by directly applicable Community

legislation.

13.

The EMI welcomes the fact that the Draft Law is also intended to amend other legislation with a

view  to  ensuring  compliance  with  the  Treaty  and  the  ESCB  Statute.  However,  concerning  the

proposed amendment of Article 3(1) of the Austrian Coinage Act (Article III, Section 2 of the

Draft  Law),  the  EMI  would  like  to  make  the  following  comment.  The  second  sentence  of  this

provision  states  that  from  the  first  day  on  which  Austria  participates  in  Stage  Three  without  a

derogation, the euro shall be  "also unit of account in Austria". This wording does not reflect

the  point  in  time  at  which  the  euro  will  be  the  only  unit  of  account  in  Austria,  and  seems  to

characterise it as another currency. The EMI recommends that the wording should refer to or be

made fully consistent with, the Community monetary law.

14.

The present opinion  does not prejudge reports which the EMI is required to draft under Article

109(j) of the Treaty and Article 7 of its Statute.

15.

The EMI agrees to this opinion being made public by the consulting authorities.

15 December 1997