Opinion of the European Central Bank at the request of the Austrian Federal Ministry of Finance on a Draft Law constituting the Austrian implementation of Directive 97/5/EC of the European Parliament and of the Council of 27 January 1997 on cross-border credit transfers and Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and security settlement systems (CON/99/07)
Date: 1999-07-23
Institutions: European Central Bank
Subjects: Austria, credit transfer, intra-EU payment, national law, payment system

OPINION OF THE EUROPEAN CENTRAL BANK

at the request of the Austrian Federal Ministry of Finance on a Draft Law constituting the

Austrian implementation of Directive 97/5/EC of the European Parliament and of the Council of

27 January 1997 on cross-border credit transfers and Directive 98/26/EC of the European

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

settlement systems

(CON/99/07)

1. 

On  21  May  1999  the  European  Central  Bank  (ECB)  received  a  request  from  the  Austrian

Federal Ministry of Finance for an ECB Opinion on a draft Federal Act by which a Federal Act

on  cross-border  credit  transfers  (Überweisungsgesetz)  and  a  Federal  Act  on  payment  and

securities  settlement systems  (Finalitätsgesetz)  shall  be  enacted  and  by  which  the  Bankruptcy

Act  (Konkursordnung),  the  Settlement  Act  (Ausgleichsordnung),  the  Stock  Exchange  Act

(Börsegesetz) the Securities Supervision Act (Wertpapieraufsichtsgesetz), and the Banking Act

(Bankwesengesetz)  shall  be  amended  (hereinafter  referred  to  as  the  “Draft  Law”).  The  Draft

Law is intended to constitute the Austrian implementation of Directive 97/5/EC of the European

Parliament and of the Council of 27 January 1997 on cross-border credit transfers (hereinafter

referred  to  as  the  “Cross-border  Credit  Transfers  Directive”)  and  Directive  98/26/EC  of  the

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

security settlement systems (hereinafter referred to as the “Settlement Finality Directive”). The

Draft Law was submitted in the German language only. 

2. 

The purpose of the Draft Law is to provide for the implementation of the Cross-border Credit

Transfers  Directive  and  the  Settlement  Finality  Directive  in  the  Austrian  legal  system.

Consequently,  the  Austrian  authorities  were  not  legally  obliged  to  consult  the  ECB  under

Article 1.2 of Council Decision 98/415/EC of 29 June 1998 on the consultation of the European

Central Bank by national authorities regarding draft legislative provisions. However, the ECB

seeks to proactively promote harmonised implementation of the  Settlement  Finality  Directive,

in particular, in the legislation of the Member States, in order to foster maximum transparency

and legal certainty for the closely connected payment and securities settlement systems and to

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ensure  a  level  playing-field  throughout  the  European  Union.  In  view  thereof,  the  ECB  very

much welcomes the opportunity to issue its opinion on the Draft Law, which addresses matters

pertaining directly to the core fields of competence of the European System of Central Banks

(ESCB),  since  the  Draft  Law  contains  provisions  purported  to  ensure  the  smooth  conduct  of

cross-border  credit  transfers  and  the  smooth  operation  of  payment  and  securities  settlement

systems.

(A)  Section  I  of  the  Draft  Law  –  implementation  of  the  Cross-border  Credit  Transfers

Directive

3. 

The ECB notes that Section I, Article 1 of the Draft Law aims at providing for a guarantee, in

particular for private persons and companies (particularly small and medium-sized enterprises),

that their credit transfers from one part of the Community to another will be transacted swiftly,

reliably and at reasonable costs. As a consequence, the Cross-border Credit Transfers Directive

shall  not  be applicable  to  credit institutions,  other institutions  and  financial  institutions  which

normally act as “executors” of credit  transfers if the institutions  themselves  act  as  mandators.

The  reason  for  this  given  in  the  explanatory  memorandum  is  that  a  need  to  protect  these

institutions is not assumed.

4.

The  Draft  Law  states  in  Section  I,  Article  2  that  credit  institutions  or  other  institutions  are

obliged  to  notify    their  customers  with  regard  to  the  information  on  the  conditions  of  cross-

border transfers contained in Article 3 of the Cross-border Credit Transfers Directive, either in

writing or by electronic means. The ECB welcomes this provision as it implements an essential

objective, namely to make the cross-border credit transfers sector  more  transparent.  However,

the  ECB  is  of  the  opinion  that  whenever  Member  States  are  implementing  Directives,  it  is

neither sufficient nor necessary to make reference to the relevant Community provisions; rather,

there  should  be  explicit  exposition  of  the  contents  of  the  Community  provision  in  national

legislation. 

(B)  Section II of the Draft Law – implementation of the Settlement Finality Directive

5.

The ECB notes that Section II, Article 1 of the Draft Law defines the systems to which the Draft

Law  shall  be  applicable.  Both  national  and  cross-border  payment  and  securities  settlement

systems  are  included.  All  systems  of  the  European  Union,  including  any  securities  offered  in

connection  with  participation  in  the  systems,  can  be  affected  by  the  Draft  Law.  It  is  of  no

importance  in  this  context  whether  participants  in  the  system  are  from  within  the  European

Union or from third countries. Furthermore, it is of no importance which currency or currencies

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are used in the systems, or whether the operation of the systems requires conversion from one

currency to another. Any securities which are used by the Oesterreichische Nationalbank in the

context of its special role as a central bank, above all in the area of monetary policy, shall also

be covered by the Draft Law.

6. 

The ECB takes note of the provision of Section II, Article 7 (3) of the Draft Law stating that, on

a case-by-case basis, the Oesterreichische Nationalbank may, for a system governed by national

law  and  on  application  by  a  participant,  agree  that  an  indirect  participant  is  regarded  as  a

participant if this is justified on grounds of systemic risk and if the indirect participant is a credit

institution (cf. Article 8) and is known to the system. The ECB welcomes this provision to the

extent that concerns about systemic risk are taken into consideration in the rules and functioning

of  the  system.  Moreover,  consideration  may  be  given  to  widening  the scope  of  application  to

indirect  participants  by  making  this  a  general  rule  without  limitations,  thus  increasing  legal

certainty and consistency with respect to the holding and transfer of securities in a multi-layered

chain of holding.

7. 

The  ECB  welcomes  the  fact  that  the  Draft  Law  contains  –  in  Section  II,  Article  12  –  a  clear

definition of netting. 

8. 

The ECB welcomes the broad definition of securities in Section II, Article 14 of the Draft Law.

This provision determines that securities shall be understood as marketable assets (inclusive of a

credit  balance)  made  available  for  securing  obligations  deriving  in  the  context  of  the

participation  in  a  system,  in  the form  of  pledge,  as  a  repurchase  transaction,  as  a  comparable

agreement or in any other form or which are made available to the central bank of a signatory

state of the European Economic Area agreement.

9.

The ECB takes note that Section II, Article 15 of the Draft Law implements Article 3.1 of

the Settlement Finality Directive. This provision states that payment and transfer orders

received  prior  to  the  opening  of  insolvency  proceedings  against  the  assets  of  a

participant  of  the  system  shall  not  cease  to  be  valid  with  the  commencement  of  the

insolvency proceedings. In Section II, Article 15 (3) of the Draft Law it is stated that any

claims  under  civil  law  with  regard  to  legal  transactions  outside  the  systems,  including

an  appeal  in  accordance  with  the  Bankruptcy  Act  (Konkursordnung),  shall  remain

unprejudiced.  In  this  respect  the  ECB  notes  that  Recital  13  of  the  Settlement  Finality

Directive  states  that  actions  relating  to  underlying  transactions  may  not  lead  to  “the

unwinding of netting [or] to the revocation of the transfer order in the system”. The ECB

recommends that this requirement be addressed explicitly in the Draft Law.

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10.  Section  II,  Article  17  of  the  Draft  Law  implements  Article  9.1  of  the  Settlement  Finality

Directive. In the last sentence of this provision it is stated that any claims under civil law with

regard  to  legal  transactions  outside  the  system,  including  an  appeal  in  accordance  with  the

Bankruptcy  Act  (Konkursordnung),  shall  remain  unprejudiced.  In  this  respect  the  ECB  notes

that  Recital  (13)  of  the  Settlement  Finality  Directive  states  that  actions  related  to  underlying

transactions  may  not  lead  to  “the  unwinding  of  netting  [or]  to  the  revocation  of  the  transfer

order in the system.” The ECB recommends that this requirement be addressed explicitly in the

Draft Law.

11.  The  ECB  takes  note  that  Section  III,  Article  18  of  the  Draft  Law  aims  at  implementing

Article 9.2 of the Settlement Finality Directive. The ECB welcomes the fact that the Draft Law

aims  at  establishing  a  general  rule  of  conflict  law  which  is  in  principle  not  limited  in  its

application.  However,  the  ECB  recommends  reconsidering  the  limitation  of  the  scope  of  this

provision to “participants”, which does not seem to include “indirect participants” as defined in

Section II, Article 8 of the Draft Law.

12.

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

competent national authorities at their discretion. In the light of the general observations made,

and  the  importance  to  the  international  financial  markets  of  a  uniform  application  of

Community  Law  in  this  field,  the  ECB  is  arranging  for  this  Opinion  to  be  copied  to  the

competent  national  authorities  of  Member  States  responsible  for  implementing  the  Settlement

Finality Directive.

Done at Frankfurt am Main on 23 July 1999.

The President of the ECB

[signed]

Willem F. Duisenberg