Opinion of the European Central Bank of 8 November 2001 at the request of the German Ministry of Finance on a draft law establishing an integrated financial services supervision (Gesetz über die integrierte Finanzdienstleistungsaufsicht) (CON/2001/35)
Date: 2001-11-08
Institutions: European Central Bank
Subjects: Eurosystem, Germany, central bank, conglomerate, exchange of information, financial institution, financial stability, financial supervision, insurance company, securities

EN

OPINION OF THE EUROPEAN CENTRAL BANK

of 8 November 2001

at the request of the German Ministry of Finance

on a draft law establishing an integrated financial services supervision

(Gesetz über die integrierte Finanzdienstleistungsaufsicht)

(CON/2001/35)

1.

On  21  August  2001  the  European  Central  Bank  (ECB)  received  a  request  from  the  Federal

Ministry of Finance for an opinion on a draft law establishing an integrated financial services

supervision (Gesetz über die integrierte Finanzdienstleistungsaufsicht -hereinafter referred to as

the “draft Law”).

2. 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Article 105(4)  of  the  Treaty

establishing the European Community (hereinafter referred to as the “Treaty”), and the third and

sixth indents of Article 2(1) of Council Decision 98/415/EC of 29 June 1998 on the consultation

of the European Central Bank by national authorities regarding draft legislative provisions1, as

the draft Law contains provisions concerning a national central bank as well as rules applicable

to  financial  institutions  which  could  materially  influence  the  stability  of  financial  institutions

and markets. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of

the  European  Central  Bank,  this  opinion  has  been  adopted  by  the  Governing  Council  of  the

ECB.

3. 

The  objective  of  the  draft  Law  is  to  create  a  new  Federal  Authority  for  Financial  Services

Supervision (Bundesanstalt für Finanzdienstleistungsaufsicht - BAF) with responsibility for the

supervision  of  credit  institutions,  insurance  companies,  investment  firms  and  other  financial

institutions.  This  new  supervisory  authority  is  the  result  of  a  merger  between  the  existing

sectoral  authorities,  namely,  the  Federal  Banking  Supervisory  Office  (Bundesaufsichtsamt  für

das Kreditwesen - BAKred), the Federal Insurance Supervisory Office (Bundesaufsichtsamt für

das  Versicherungswesen 

-  BAV)  and 

the  Federal  Securities  Supervisory  Office

(Bundesaufsichtsamt  für  den  Wertpapierhandel  -  BAWe).  The  regulatory  and  supervisory

powers  of  the  new  integrated  supervisory  authority  will  cover  the  entire  range  of  financial

1

OJ L 189, 3.7.1998, p. 42.

                                                          
intermediaries.  As  explained  in  the  explanatory  memorandum  to  the  draft  Law,  this

development is  a  response to  substantial  changes  taking  place in the financial  markets,  which

required  adaptation  of  the  former  institutional  structure  of  three  separate  supervisory  bodies.

According to the explanatory memorandum,  the  substantive law  relating  to  the  supervision  of

credit  institutions,  insurance  companies,  investment  firms  and  other  financial  institutions  will

not be affected by the draft Law, as the provisions deal mainly with organisational matters. The

cooperation between the supervisory authorities and the Deutsche Bundesbank, which up until

now  has  not  been  laid  down  by  law  in  detail,  will  be  governed  by  specific  provisions  in  the

Banking  Act  (Gesetz  über  das  Kreditwesen).  This  applies  in  particular  to  cooperation

concerning the day-to-day supervision of credit and financial institutions to be carried out by the

Deutsche Bundesbank. 

4. 

The  ECB  notes  that  the  explanatory  memorandum  accompanying  the  draft  Law  points  out

several benefits resulting from the merger of the three sectoral authorities into a new financial

regulatory  and  supervisory  authority  in  the  Federal  Republic  of  Germany.  Those  benefits

involve namely strengthening the efficiency of supervision of the financial system as a whole,

achieving  synergy  in  central  supervisory  tasks  and  making  regulation  and  supervision  more

cost-effective.  As  a  complement  to  such  objectives,  the  ECB  suggests  integrating  and

modernising the underlying substantive law relating to financial regulation and supervision. 

5. 

The ECB welcomes the draft Law in so far as the involvement of the Deutsche Bundesbank in

the field of prudential supervision will be laid down in more detail. By virtue of the draft Law, a

clear  legal  basis  for  coordination  and  cooperation  between  the  BAF  and  the  Deutsche

Bundesbank  will  be  established,  encompassing  matters  relating  to  the  stability  of  the  German

financial system, to the development of supervisory practice as well as to aspects of day-to-day

supervision of credit and financial services institutions. This is in line with the ECB's view that

maintaining  the  close  involvement  of  national  central  banks  in  prudential  supervision  is  a

mandatory condition to allow the Eurosystem to contribute adequately to monitoring the risks to

financial  stability  in  the  euro  area.  This  is  of  particular  importance  in  a  context  in  which  the

nature and scope of these risks are affected by the introduction of the single currency and the

related enhanced integration of financial markets. In addition, it safeguards smooth coordination

between the central banking functions exercised at the Eurosystem's level and the supervisory

functions  carried  out  at  national  level.  Against  this  background,  the  ECB  would  like  to  put

forward some specific comments on the provisions of the draft Law. 

6. 

First,  the  institutional  set-up  for  coordination  and  cooperation  between  the  BAF  and  the

Deutsche Bundesbank. First, the ECB welcomes the institutionalisation of the financial markets

regulation  forum  (Forum  für  Finanzmarktaufsicht),  under  Article  3  of  Section  1  of  the  draft

Law, which already exists on the basis of an agreement between the federal supervisory offices

and  the  Deutsche  Bundesbank.  The  forum  comprises  the  BAF  and  the  Deutsche  Bundesbank

and will coordinate their respective work in regulatory and supervisory matters, including those

2

matters that might have a bearing on financial market stability. The ECB understands that the

scope of the work of the forum may include additionally crisis situations and suggests that this

could be clarified in the draft Law. The ECB deems that the establishment of this forum duly

acknowledges  the  role  of  the  BAF  and  the  Deutsche  Bundesbank  as  the  authorities  jointly

responsible for stability of the financial system. In this respect, the ECB considers, in line with

the  ECB’s  opinion  on  the  proposed  amendments  to  the  Act  on  the  Deutsche  Bundesbank

(Gesetz über die Deutsche Bundesbank)2, and on the basis of the reasons expressed therein, that

the  draft  Law  could  be  supplemented  by  clarifying  that  the  Deutsche  Bundesbank  has

responsibility  for  contributing  to  the  overall  stability  of  the  financial  system.  Therefore,  the

definition of such a role by means of a specific provision in the Banking Act or the Act on the

Deutsche  Bundesbank  would  be  welcome.  Furthermore,  the  ECB  takes  note  of  the

establishment of an advisory committee (Fachbeirat) in Article 8 of Section 1 of the draft Law.

It will be composed of 20 members to be elected by the Ministry of Finance with appropriate

representation from the financial, credit and insurance industries, the Deutsche Bundesbank and

consumer  protection  associations.  The  ECB  understands  that  the  purpose  of  the  Advisory

Committee will be to advise the BAF on its activities and to give recommendations on how to

develop supervisory practices. However, as far as banking supervision issues are concerned, the

ECB  suggests  that  the  Deutsche  Bundesbank  should  not  play  an  advisory  role  within  the

Committee. Instead, the BAF and the Deutsche Bundesbank, as  the  responsible  entities in the

field of banking supervision, should both be given advice by the Committee. Finally, the ECB

takes  note  of  the  establishment  of  an  administrative  council  (Verwaltungsrat)  in  Article  7  of

Section  1  of  the  draft  Law,  which  will  supervise  the  activities  of  the  Executive  Board  of  the

BAF  and  support  it  in  the  conduct  of  its  activities.  The  Deutsche  Bundesbank  will  be

represented in this Administrative Council, although without voting rights. This will ensure that,

as  an  integral  part  of  the  institutional  framework  for  prudential  supervision  and  financial

stability,  the  Deutsche  Bundesbank  will  be  informed  where  necessary  of  the  activities  of  the

BAF. 

7. 

Secondly,  cooperation  and  exchange  of  information  between  the  BAF  and  the  Deutsche

Bundesbank on an ongoing basis. The ECB considers that, notwithstanding the abovementioned

mechanisms  for  institutional  cooperation, 

interaction  between  the  overall  supervisory

competences of the BAF and the central banking functions of the Deutsche Bundesbank could

be  further  enhanced  in  the  draft  Law.  First,  the  ECB  suggests  including  in  the  draft  Law  the

basic  principle  that  smooth  interaction  between  the  BAF,  as  a  fully  integrated  supervisory

institution, and the Deutsche Bundesbank should entail the obligation to cooperate closely in all

fields of common interest However, the current draft Law limits such obligation to cooperate to

the matters laid down in Article 7 of the Banking Act (see Article 9 of  Section  2  of  the  draft

Law).  Furthermore,  the  ECB  understands  that  there  are  no  legal  impediments  to  access  to

2 

ECB opinion of 2 August 2001 on a draft Seventh Law amending the Deutsche Bundesbank Act (CON/2001/17).

3

                                                          
information and information sharing on all matters relating to financial stability on an ongoing

basis  between  the  BAF  and  the  Deutsche  Bundesbank.  However,  the  ECB  notes  that,  in

accordance  with  Article  11  of  Section  1  of  the  draft  Law,  the  current  sectoral  confidentiality

rules will continue to apply in the new framework. In this context, the ECB would welcome a

new provision expressly removing possible legal obstacles to information sharing between the

BAF and the Deutsche Bundesbank without being limited to the matters covered by Article 9 of

the Banking Act (see Article 12 of Section 2 of the draft Law). Given the enhanced integration

of financial services and the establishment of the new supervisory authority with cross-sectoral

responsibilities,  it  may  be  considered  necessary  for  access  to  supervisory  information  by  the

Deutsche  Bundesbank  to  include  all  the  sectors  which  may  be  deemed  relevant  for  overall

stability  of  the  financial  system.  The  central  bank  should  have  the  means  to  assess  possible

systemic  implications  stemming  from  cross-sectoral  linkages  and  from  the  behaviour  of

complex  financial  groups  for  the  money  and  capital  markets  as  well  as  for  payment  and

settlement systems. This would also be in line with the recent European Commission's proposal

for  a  directive  on the supervision  of  financial  conglomerates3,  which  purports to  lift  the  legal

obstacles  for  supervisory  information  sharing  regarding  financial  conglomerates  with  central

banks.  Lastly,  it  may  be  noted  that  information  sharing  may  entail  a  cross-border  dimension,

since  it  may  be  necessary  to  provide  other  national  central  banks  of  the  Eurosystem  and  the

ECB  with  information  on  Eurosystem-related  tasks.  Including  a  new  provision  reflecting  this

aspect in the draft Law would also be welcome. 

8. 

Thirdly,  the  operational  involvement  of  the  Deutsche  Bundesbank  in  the  field  of  prudential

supervision.  The  ECB  welcomes  Article  9  of  Section  2  of  the  draft  Law,  proposing  a  new

Article 7(1) of the Banking Act. The new  provision  maintains the  general  principle  contained

already  in  the  present  version  of  the  Banking  Act,  whereby  the  BAF  and  the  Deutsche

Bundesbank cooperate as regards the supervision of credit and financial institutions as defined

by the Banking Act.  Furthermore,  it  clarifies  further the extent  of  operational  involvement  by

the  Deutsche  Bundesbank.  The  ECB  understands  that  the  main  function  of  the  Deutsche

Bundesbank  in  this  process  will  be  the  day-to-day  supervision  of  these  institutions  (c.f.  the

second sentence of Article 7(1) of the proposal for a Banking Act in Article 9 of Section 2 of the

draft law). Moreover, the BAF will generally base its supervisory activities on the assessments

established by the Deutsche Bundesbank (c.f. the fourth sentence of Article 7(2) of the proposal

for  a  Banking  Act). Therefore, the  new  legal framework  will  benefit from  a  continuation  and

even  expansion  of  the  current  involvement  of  the  Deutsche  Bundesbank  in  day-to-day

supervision.  This  is  particularly  significant  in  respect  of  the  participation  of  the  Deutsche

Bundesbank  in  the  inspection  of  capital  adequacy  and  risk  management  of  the  supervised

institutions.  Moreover,  this  should  ensure  that  the  Deutsche  Bundesbank  is  in  a  position  to

3 

Article  9(1)  of  the  proposal  for  adirective  of  the  European  Parliament  and  of  the  Council  on  the  supplementary
supervision  of  credit  institutions,  insurance  undertakings  and  investment  firms  in  a  financial  conglomerate  and
amending  Council  Directives  73/239/EEC,  79/267/EEC,  92/49/EEC,  92/96/EEC,  93/6/EEC  and  93/22/EEC,  and
Directives 98/78/EC and 2000/12/EC of the European Parliament and the Council, COM (2001) 213 final.

4

                                                          
further contribute to the new supervisory activities arising from the new legal framework under

the Basel Capital Accord and Community  provisions  on capital  adequacy.  In  this  context,  the

ECB welcomes also Article 44 of the proposal for a Banking Act, (see Article 46 of Section 2 of

the  draft  Law)  which  now  expressly  provides  that  the  Deutsche  Bundesbank    may  carry  out

special  audits.  As  regards  the  aforementioned  proposed  fourth  sentence  of  Article  7(2)  of  the

Banking Act, according to which the BAF will generally base its supervisory activities on the

assessments established by the Deutsche Bundesbank, the ECB points to the importance that the

formulation  of  this  provision  does  not  give  rise  to  uncertainties  as  regards  the  exclusive

responsibility of the BAF for the supervisory measures taken in fulfilment of its tasks under the

Banking Act. 

9. 

Fourthly,  the  advisory  role  of  the  Deutsche  Bundesbank  on  specific  regulatory  matters.  The

ECB welcomes the new second sentence of Article 7(2) of the proposal for a Banking Act (csee

Section 2, Article 9 of the draft Law), and the proposed Article 35(6) of the Securities Trading

Act  (see  Article  26  of  Section  4  of  the  draft  Law),  in  so  far  as  they  provide  the  Deutsche

Bundesbank with the right to be consulted by the BAF on guidelines (Richtlinien) issued under

the  Banking  Act  and  also  under  the  Securities  Trading  Act  (Wertpapierhandelsgesetz),  to  the

extent  that  the  Acts  do  not  already  oblige  the  BAF  to  act  in  agreement  with  the  Deutsche

Bundesbank.  These  provisions  further  strengthen  cooperation  as  regards  the  regulatory

framework for prudential supervision. However, bearing in mind the far-reaching impact of the

aforementioned  guidelines  issued  under  the  Banking  Act  for  the  work  of  the  Deutsche

Bundesbank in this area and for its personnel and equipment, these  guidelines  should  only  be

adopted in agreement with the Deutsche Bundesbank. The ECB would suggest, in view of  its

financial stability role, providing the Deutsche Bundesbank with an advisory role vis-à-vis the

BAF  for  all legal acts  falling  within its  field  of  competence. This advisory  role  would  be  not

limited to legal acts falling strictly under the banking or securities fields. 

10.  Fifthly,  the  ECB  would  welcome  including  in  the  draft  Law,  as  part  of  its  transitional

provisions,  a  provision  stipulating  that  the  BAF  will  engage  in  those  legal  or  non-legally

binding commitments to cooperation and information sharing undertaken by former supervisory

authorities vis-à-vis other supervisory authorities and the central banks of the Member States.

Done at Frankfurt am Main on 8 November 2001.

The President of the ECB

[signed]

Willem F. DUISENBERG

5