Opinion of the European Central Bank at the request of the Ministry of Justice of the Republic of Austria under Articles 109l (2) and 109f (6) of the Treaty establishing the European Community and Article 5.3 of the Statute of the European Monetary Institute on a draft legislative proposal concerning a Regulation of the Federal Government on the use of the monetary policy instruments of the European Central Bank as a basis for determining changes in the base and reference interest rates (Regulation on the base and reference interest rates) (CON/98/59)
Date: 1998-12-16
Institutions: European Central Bank
Subjects: Austria, discount rate, interest, money, national law

OPINION OF THE EUROPEAN CENTRAL BANK

at the request of the Ministry of Justice of the Republic of Austria

under Articles 109l (2) and 109f (6) of the Treaty establishing the European Community and

Article 5.3 of the Statute of the European Monetary Institute on a draft legislative proposal

concerning a Regulation of the Federal Government on the use of the monetary policy

instruments of the European Central Bank as a basis for determining changes in the base and

reference interest rates (Regulation on the base and reference interest rates)

CON/98/59

1. 

On 27 November 1998 the European Central Bank (ECB) received a request from the Ministry

of  Justice  of  the  Republic  of  Austria  for  an  ECB  Opinion  on  a  draft  legislative  proposal

concerning  a  Regulation  of  the  Federal  Government  on  the  use  of  the  monetary  policy

instruments of the European Central Bank as a basis for determining changes in the base and

reference  interest  rates  (Regulation  on  the  base  and  reference  interest  rates)  (hereinafter

referred to as the “draft legislative proposal”).

2.

In  accordance  with  Article 109l (2)  of  the  Treaty  establishing  the  European  Community

(hereinafter referred to as the “Treaty”), the ECB has taken over the advisory functions of the

European Monetary Institute (EMI), which went into liquidation upon the establishment of the

ECB on 1 June 1998. The ECB’s competence to deliver an opinion is based on Article 1.1, first

indent, of the Council Decision (93/717/EC) of 22 November 1993 on the consultation of the

EMI  by  the  authorities  of  the  Member  States  on  draft  legislative  provisions,  as  the  draft

legislative  proposal  contains  provisions  concerning  currency  legislation.  In  accordance  with

Article 17.5, first sentence, of the Rules of Procedure of the ECB, the ECB Opinion has been

adopted by the Governing Council of the ECB.

3. 

The ECB notes that the draft legislative proposal is an implementing regulation for Article 1 of

the Austrian Federal Law, dated 14 August 1998, changing  certain  provisions  in  the  Austrian

legislation  as  ancillary  measures  for  the  introduction  of  the  euro  (Erstes  Euro-Justiz-

Begleitgesetz), on which the EMI was consulted and delivered an Opinion on 13 February 1998

(hereinafter  referred  to  as  the  “Austrian  Federal  Law”).  Article 1 (1)  of  the  Austrian  Federal

Law  stipulates  that  references  in  national  laws  and  regulations  to  the  discount  rate,  which  is

currently announced by the Oesterreichische Nationalbank, shall be replaced by a base interest

rate  on  1 January  1999.  Article 1 (2)  of  the  Austrian  Federal  Law  specifies  that  references  in

national  laws  and  regulations  to  the  lombard  rate,  which  is  currently  announced  by  the

Oesterreichische Nationalbank, shall be replaced by a reference interest rate on 1 January 1999.

The  first  base  interest  rate  on  1  January  1999  shall  be  identical  to  the  discount  rate  of

31 December 1998, whereas the first reference interest rate on 1 January 1999 shall be identical

to the lombard rate of 31 December 1998. Under Article 1 (3) of the Austrian Federal Law, the

Federal Government is required, by means of a Regulation, to determine, and, respectively, to

adjust  such  base  and  reference  interest  rates  after  having  consulted  the  Oesterreichische

Nationalbank.

4. 

The ECB notes that Section 1 (1) of the draft legislative proposal provides for the interest rate

on  the  deposit  facility  of  the  ECB  to  be  the  rate  used  to  determine  the  basis  for  calculating

changes in the base interest rate. According to Section 1 (2) of the draft legislative proposal, the

interest  rate  on  the  marginal  lending  facility  of  the  ECB  shall  be  the  rate  used  as  a  basis  for

determining changes in the reference interest rate.

5. 

The  ECB  notes  that,  according  to  the  Explanatory  Memorandum  to  the  draft  legislative

proposal, the Oesterreichische Nationalbank has recommended the solution set out in the draft

legislative proposal on the basis of the following considerations: first, the discount and lombard

rates, as currently announced by the Oesterreichische Nationalbank, mark the lower and upper

limits of the short-term money market rates in Austria and this function will be fulfilled by the

interest rates on the deposit facility (lower limit of the money market rate) and on the marginal

lending  facility  (upper  limit  of  the  money  market  rate)  in  Stage  Three  of  Economic  and

Monetary  Union  (EMU).  Second,  viewed  in  terms  of  their  stability  and  the  frequency  of

changes,  the  facilities  mentioned  were  also  closer  to  the  discount  and  lombard  rates  than  the

interest  rates  on  the  regular  two-week  or  three-month  tenders  of  the  European  System  of

Central Banks (ESCB).

6. 

The ECB welcomes the fact that the Oesterreichische Nationalbank was consulted on the draft

legislative proposal and that the draft legislative proposal takes the form of a Regulation of the

Federal Government, which will enter into force on 1 January 1999.

7. 

The ECB does not have any objections to the draft legislative proposal.

8. 

The  ECB  confirms  that  it  has  no  objections  to  this  ECB  Opinion  being  made  public  by  the

competent national authorities at their discretion.

Done at Frankfurt am Main on 16 December 1998.

The President of the ECB

[signed]

Willem F. Duisenberg