Opinion of the European Central Bank at the request of the Austrian Federal Ministry of Finance under Article 105 (4), second indent, of the Treaty establishing the European Community and Article 4 (a) of the Statute of the European System of Central Banks and of the European Central Bank on a draft Federal Act amending the Bankwesengesetz (Banking Act), the Wertpapieraufsichtsgesetz (Securities Supervision Act), the Investmentfondgesetz (Investment Fund Act), the Beteiligungsgesetz (Equity Fund Act), the Sparkassengesetz (Savings Bank Act), the Bausparkassengesetz (Building Society Act), the Hypothekenbankengesetz (Mortgage Bank Act), the Pfandbriefgesetz (the Mortgage Bond Act), the Postsparkassengesetz (Postal Savings Bank Act), the Nationalbankgesetz 1984 (Central Bank Act), the Gewerbeordnung 1994 (Industrial Code) (Bankenaufsichtsbehördengesetz - BABG (Banking Supervisory Authority Act)) (hereinafter referred to as the "Draft Law") (CON/99/05)
Date: 1999-07-14
Institutions: European Central Bank
Subjects: Austria, banking supervision, central bank, credit institution, financial stability, national law

OPINION OF THE EUROPEAN CENTRAL BANK

at the request of the Austrian Federal Ministry of Finance under Article 105 (4), second indent,

of the Treaty establishing the European Community and Article 4 (a) of the Statute of the

European System of Central Banks and of the European Central Bank on a draft Federal Act

amending the Bankwesengesetz (Banking Act), the Wertpapieraufsichtsgesetz (Securities

Supervision Act), the Investmentfondgesetz (Investment Fund Act), the Beteiligungsgesetz

(Equity Fund Act), the Sparkassengesetz (Savings Bank Act), the Bausparkassengesetz (Building

Society Act), the Hypothekenbankengesetz (Mortgage Bank Act), the Pfandbriefgesetz (the

Mortgage Bond Act), the Postsparkassengesetz (Postal Savings Bank Act), the

Nationalbankgesetz 1984 (Central Bank Act), the Gewerbeordnung 1994 (Industrial Code)

(Bankenaufsichtsbehördengesetz – BABG (Banking Supervisory Authority Act)) (hereinafter

referred to as the “Draft Law”).

CON/99/05

1. 

On  12  May  1999  the  European  Central  Bank  (ECB)  received  a  request  from  the  Austrian

Federal Ministry of Finance for an ECB Opinion on the Draft Law. 

2. 

The  ECB’s  competence  to  deliver  an  Opinion  is  based  on  Article 2  of  Council  Decision

(98/415/EC) of 29 June 1998 on the consultation of the ECB by national authorities regarding

draft  legislative  provisions,  as  the  Draft  Law  contains  provisions  on  the  Oesterreichische

Nationalbank and rules applicable to financial institutions which have a significant influence on

the stability of financial institutions and markets. In accordance with Article 17.5, first sentence,

of the Rules of Procedure of the ECB, this ECB Opinion has  been  adopted  by  the  Governing

Council of the ECB.

3. 

The Draft Law addresses the organisational structure of banking supervision and combines the

banking  supervision  powers  of  the  Austrian  Federal  Ministry  of  Finance  and  the  assisting

supervisory functions of the Oesterreichische Nationalbank. The latter becomes the sole banking

supervisory  authority  and  takes  over  the  existing  resources  from  the  Austrian  Ministry  of

Finance, particularly in terms of staff. The objective of the Draft Law is, inter alia, to increase

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the speed and the enforceability of statutory supervision measures. In this respect, the Draft Law

stipulates, for example, that supervisory measures may be taken as soon as dangerous business

practices are identified, rather than waiting until creditors are actually at risk. Furthermore, the

Draft Law is aimed at enhancing the effectiveness of the contribution of external auditors to the

supervision of credit institutions by defining more stringent requirements for auditors than this

was previously the case.

4. 

The ECB notes that, according to Section I, Article 141 of the Draft Law (new Article 79 (1) of

the  Austrian  Banking  Act),  the  Oesterreichische  Nationalbank  shall  become  the  sole  banking

supervisory  authority  in  Austria.  The  performance  of  this  function  by  a  central  bank  forming

part  of  the  Eurosystem  does  not  interfere  with  the  objectives  and  tasks  of  the  ESCB.  In  this

context the ECB notes that Article 105 (5) of the Treaty obliges the ESCB to contribute to the

smooth conduct of policies relating to the prudential supervision of credit institutions and other

financial institutions and the stability of the financial system. The ECB furthermore welcomes

the fact that the Oesterreichische Nationalbank also in its capacity as supervisory authority shall

have full autonomy in the execution of these duties and shall not be bound by any directives or

instructions  in  this  respect.  The  ECB  notes  that  the  Oesterreichische  Nationalbank  will  be

authorised to issue both orders and decisions in fulfilling its banking supervisory tasks. The new

authoritative powers of the  Oesterreichische  Nationalbank  cover  all  operational  and  analytical

activities  undertaken  by  authorities,  which  are  presently  undertaken  by  the  Austrian  Federal

Ministry of Finance (sometimes in co-operation with the Oesterreichische Nationalbank). These

also include all supervision functions, in particular the granting of licences to credit institutions

as well as their revocation.

5. 

The ECB notes that according to Section I, Article 141 of the Draft Law (new Article 79 (2) of

the  Austrian  Banking  Act),  the  Oesterreichische  Nationalbank  will  also  be  responsible  for

enforcing  the  decisions  issued  in  the  fulfilment  of  its  banking  supervisory  tasks,  except  for

administrative  penal  decisions.  In  administrative  penal  proceedings  the  parties  will  have  the

right  to  appeal  against  decisions  by  the  Oesterreichische  Nationalbank  at  the  Vienna

Independent  Administrative  Senate.  Apart  from  that,  the  decisions  of  the  Oesterreichische

Nationalbank will not be subject to reversal or amendment through administrative proceedings.

6. 

The ECB notes that Section I, Article 142 of the  Draft  Law (new  Article 79a  of  the  Austrian

Banking  Act)  stipulates  that  civil  servants  presently  engaged  in  banking  supervision  at  the

Federal Ministry of Finance will be seconded by official notice to the personnel office set up at

the Oesterreichische Nationalbank. The civil servants concerned will have the option of entering

into a contract of employment with the Oesterreichische Nationalbank. Contractual employees

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presently engaged in banking supervision at the Federal Ministry of Finance will be assigned on

permanent  service  to  the  Oesterreichische  Nationalbank  on  the  basis  of  an  employer’s

declaration, thereby becoming employees of the Oesterreichische Nationalbank. The personnel

office  to  be  set  up  at  the  Oesterreichische  Nationalbank  shall  be  directly  subordinate  to  the

Austrian  Federal  Ministry  of  Finance  and  will  be  managed  by  the  member  of  the  Executive

Board  of  the  Oesterreichische  Nationalbank  in  charge  of  banking  supervision  matters.  In  this

capacity this member of the Executive Board will be bound by the instructions of the Austrian

Federal  Minister  of  Finance.  The  ECB  recommends  to  state  in  the  explanatory  memorandum

such power of the Austrian Minister of Finance to issue instructions is limited  to matters in the

context of the personnel office.  This would avoid giving the impression that the proposed new

Article 79a (2) of the Austrian Banking Act is in contradiction of Section I, Article 141 of the

Draft Law (new Article 79 (1), last sentence, of the Austrian Banking Act), where it is stated

that  the  Oesterreichische  Nationalbank  shall  not  be  bound  by  any  instruction  in  fulfilling  its

banking supervisory tasks. However, the ECB acknowledges that Section I, Article 141 of the

Draft  Law  is  intended  to  be  adopted  as  constitutional  provision  and  will  therefore  prevail

Section I, Article 142 of the Draft Law (new Article 79a of the Austrian Banking Act).

7. 

The  ECB  suggests  that  the  possibility  for  an  unlimited  regress  against  the  Oesterreichische

Nationalbank granted to the Federal Republic, stipulated in Section I, Article 141 of the Draft

Law  (new  Article  79  (3)  of  the  Austrian  Banking  Act)  be  reconsidered  since  this  could

potentially endanger the fulfilment of the functions of Oesterreichische Nationalbank as defined

in the Treaty and the ESCB Statute. 

8. 

The ECB welcomes the fact that the Draft Law is also aimed at enhancing the effectiveness of

the  contribution  of  external  auditors  to  the  supervisory  process  by  defining  more  stringent

requirements  for  auditors  than  was  previously  the  case.  This  includes  both  the  personal

qualifications  required  of  bank  auditors  and  the  introduction  of  a  rotation  principle  to  ensure

that auditors are reliable.

9. 

The ECB notes that the position of the supervisory board of credit institutions will be reinforced

by the Draft Law. In this respect the Draft Law states that, as a backup to its supervisory duties,

the supervisory board of credit institutions will have the right to initiate audits. Furthermore, the

exchange  of  information  is  made  easier  for  all  institutions  engaged  in  the  monitoring  and

supervision of credit institutions, whilst procedural responsibility for statutory supervision is to

be borne by the Oesterreichische Nationalbank as the banking supervisory authority.

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10.  The ECB takes note that Draft Law states in Section I, Article 118 (new Article 71 (1) of the

Austrian  Banking  Act)  that  the  banking  supervisory  authority  shall  notify  to  the  institution

concerned the audits only when the audit operation starts. Unless it is anticipated that advance

notice  will  defeat  the  objective  of  the  audit,  and  if  advance  notice  is  advisable  in  order  to

perform the audit more easily and quickly on the basis of organisational preparations, the audit

may be notified at most one week before it commences. 

11.  The ECB notes that Section I, Article 120 of the  Draft  Law (new  Article 71a  of  the  Austrian

Banking  Act)  stipulates  that  the  Oesterreichische  Nationalbank  is,  as  the  banking  supervisory

authority,  also  obliged  to  supervise  payment  systems.  The  supervisory  tasks  cover  not  only

conventional  payment  systems  (large  amounts  and  bulk  payment  transactions),  but  also  other

payment  systems  and  means  of  payment,  such  as  points  of  sale,  credit  cards  and  electronic

money (e-money). Not only credit institutions are governed by the standards of this provision,

but  also  corporate  bodies  or  companies  operating  a  payment  system  commercially.  This

provision  supplements  the  national  implementation  of  Directive  98/26/EC  of  the  European

Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities

settlement systems by transferring “the supervision” of payment systems to the Oesterreichische

Nationalbank.  In  the  explanatory  memorandum  to  the  Draft  Law  reference  is  made  only  to

Article  22  ESCB  Statute,  whereas,  no  reference  is  made  to  Article  105  (2)  of  the  Treaty  and

Article 3 of the ESCB Statute, where it is stated that one of the basic tasks of the ESCB shall be

“to  promote  the  smooth  operation  of  payment  systems”.  Thus,  Section  I,  Article  120  of  the

Draft  Law  (new  Article  71a  of  the  Austrian  Banking  Act)  gives  the  impression  that  the

oversight of payment systems is within the exclusive competence of the Austrian legislator and

is  allocated  by  the  Draft  Law  as  part  of  banking  supervision  to  the  Oesterreichische

Nationalbank.  The  ECB  recommends  therefore,  (i)  to  identify  and  to  refer  explicitly  to  the

different nature of the oversight of payment systems, on the one hand, and banking supervision,

on the other hand, and (ii) to make explicit reference to the basic task of the ESCB to promote

the  smooth  operation  of  payments  system  as  determined  by  Article 105  (2)  of  the Treaty  and

Article 3 of the ESCB Statute. This could be done in the explanatory memorandum to the Draft

Law.

12.  The  ECB  takes  note  that  Section  I,  Article  139  of  the  Draft  Law  (new  Article  77a  of  the

Austrian  Banking  Act)  makes  it  easier  for  the  Oesterreichische  Nationalbank  as  banking

supervisory  authority  to  enter  into  agreements  with  the  competent  authorities  of  other  states

outside  the  European  Economic  Area  concerning  collaboration  in  questions  of  banking

supervision.  In  the  explanatory  memorandum  it  is  stated  in  this  respect  that  this  provision  is

aimed at following recommendations of the Basle Committee. 

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13.  The ECB welcomes the fact that Section X, Article 7 of the Draft Law (new Article 81 of the

Austrian Central Bank Act) provides that the issue and use for payment purposes of banknote-

type  documents  denominated  in  euro  and intended  for  circulation  constitute  an  administrative

violation and are punishable by the competent district administrative authority with a fine of up

to E3,000.00. This provision  is  aimed  at  transposing  a  recommendation  of the  ECB  of  7 July

1998 on the adoption of certain measures to enhance the legal protection of euro banknotes and

coins (ECB/1998/7), Official Gazette C No. 11 of 15 January 1999, stating that Member States

shall, in  particular,  render  more  difficult and  strictly  monitor  the  issue  of  euro  banknotes  and

coins which do not constitute legal tender.

14.  The ECB notes that the Draft Law refers partly to Austrian Schillings (e.g. in Section I, Article

133)  and  partly  to  Euro  (e.g.  in  Section  X,  Article  7)  as  the  denomination  of  thresholds

expressed in monetary amounts. A consistent denomination may be considered.

15. 

In  conclusion,  the  ECB  welcomes  the  Draft  Law  and  is  of  the  opinion  that  the  Draft  Law

enhances  the  effectiveness  of  banking  supervision  in  Austria,  as  it  is  aimed,  inter  alia,  at

increasing the speed and the enforceability of statutory supervision measures. 

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

national authorities at their discretion.

Done at Frankfurt am Main on 14 July 1999.

The President of the ECB

[signed]

Willem F. Duisenberg