2004/138/EC: Commission decision of 11 June 2002 relating to a proceeding under Article 81 of the EC Treaty (Case COMP/36.571/D-1: Austrian banks — "Lombard Club") (notified under document number C(2002) 2091)
Date: 2002-06-11
Institutions: European Commission
Subjects: Austria, bank, competition law, restriction on competition, restrictive trade practice

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 11 June 2002

relating to a proceeding under Article 81 of the EC Treaty

(Case COMP/36.571/D-1: Austrian banks — ‘Lombard Club’)

(notified under document number C(2002) 2091)

(Only the German text is authentic)

(2004/138/EC)

CONTENTS

1.

2.

3.

4.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Austrian banking market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Undertakings and products concerned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.1.

4.2.

4.3.

4.4.

The cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The requests for information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The undertakings’ reaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.

Background to, and creation, functioning and object of, the ‘Lombard’ network . . . . . . . . . . . . . . . . . . .

5.1.

5.2.

5.3.

5.4.

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The individual committees, their relationship with one another and the role of the lead
institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The pattern followed by committee meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The object . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.

7.

8.

9.

Chronology of events: Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chronology of events: 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chronology of events: 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chronology of events: 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10. Chronology of events: 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11. Chronology of events: 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

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3

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10

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15

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12. Special committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.1.

Export Financing Committee, Export Lombard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.2.

Payment transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.3.

Regional committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13. The Parties’ main arguments regarding the facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13.1.

The specific historical, societal, economic and social aspects of the Lombard network . . . . . .

13.2.

The effects of the Lombard network on the Austrian banking market . . . . . . . . . . . . . . . . . . . .

14. Legal assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.1. Applicability of competition law to the banking industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.2.

Commission’s competence in respect of 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.3. Article 81 of the EC Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.3.1.

Agreement and concerted practice: case-law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.3.2.

Agreement and concerted practice: nature of the infringement in the present case

14.3.3. Object or purpose of the restriction of competition . . . . . . . . . . . . . . . . . . . . . . . . . .

14.3.4.

Effect on trade between Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.4. Undertakings found to have committed an infringement

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.4.1.

Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.4.2. Questions of attribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.5. Duration of the infringement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15. The extent of an undertaking’s duty to reply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.1. Article 3 of Regulation No 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.2. Article 15(2) of Regulation No 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.2.1.

Fault: intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.2.2.

General considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.2.3.

Basic amount of fines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.2.3.1.

Gravity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.2.3.2.

Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.2.3.3.

Conclusion regarding basic amounts of fines . . . . . . . . . . . . . . . . . . . . .

16.2.4. Mitigating circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.2.5.

Intermediate outcome before application of 1996 Leniency Notice . . . . . . . . . . . . .

16.2.6.

1996 Leniency Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.2.7.

Final amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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50

52

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53

55

55

56

57

58

59

63

63

64

65

65

66

66

66

66

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67

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69

70

72

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THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(2)

Having regard to the Treaty establishing the European Com-
munity,

Having regard to Council Regulation No 17 of 6 February
1962 first Regulation implementing Articles 85 and 86 of the
Treaty (1), as last amended by Regulation (EC) No 1/2003 (2)
and in particular Articles 3 and 15 thereof,

Having regard to the Commission decision of 11 September
1999 to initiate proceedings in this case,

(3)

Having given the undertakings concerned the opportunity to
make known their views on the objections raised by the
Commission in accordance with Article 19(1) of Regulation
No 17 and with Commission Regulation (EC) No 2842/98 of
22 December 1998 on the hearing of parties in certain
proceedings under Articles 85 and 86 of the EC Treaty (3),

Having regard to the final report of the Hearing Officer in this
case (4),

After consulting the Advisory Committee on Restrictive Prac-
tices and Dominant Positions,

Whereas:

In establishing the facts, the Commission was able to
rely on a large number of seised original documents
dating from the relevant period such as minutes of
meetings, memoranda, records of telephone conver-
sations, correspondence, etc. The express object, and
profound effect, of these agreements was to restrict
competition. This constitutes a clear, unequivocal
infringement of Article 81 of the EC Treaty, which must
be punished by a fine.

The structure of this Decision is as follows: by way of
introduction, a few features of the Austrian banking
market which are essential to an understanding of this
case are described (section 2). This is followed by a brief
description of the most important banks and bank
groupings involved, being addressees of this Decision,
the products/services covered by the cartel
and of
(section 3). After a brief review of the main procedural
steps (section 4), the background to and organisational
structure, functioning and object of the rounds of talks/
committees in the Lombard network are discussed
(section 5). There follows a chronological account of the
main cartel meetings between 1994 and 1998 (sec-
tions 6 to 11). A separate section is devoted to selected
special committees (section 12). The main arguments
put forward by the undertakings are then discussed.
The legal assessment of the facts (section 14), some
reflections on procedural
issues (section 15) and a
discussion of the necessary penalties (section 16) are to
be found at the end of the Decision.

1.

INTRODUCTION

2. THE AUSTRIAN BANKING MARKET

(1)

There was in the past in Austria a long tradition of
agreements, mainly about interest rates and charges/fees,
among Austrian banks, based well into the 1980s in
some measure on statute law (5). Over the years the
banks had created a close network of committees
covering every conceivable subject within which, up
until the unannounced investigation by the Commission
in June 1998, they regularly (every fourth working day
on average) coordinated their conduct with respect to
every essential factor of competition. Being aware of the
relevance of these agreements from an antitrust point of
view, they tried (largely in vain as it turned out), through
a mixture of evasiveness, deception and the destruction
of records, to cover up or eradicate all traces of their
meetings.

(1) OJ 13, 21.2.1962, p. 204/62.
(2) OJ L 1, 4.1.2003, p. 1.
(3) OJ L 354, 30.12.1998, p. 18.
(4) OJ C 48, 24.2.2004.
(5) On 1 January 1994, the date of Austria’s accession to the
European Economic Area, the last remaining legal bases for all
the agreements were removed.

(4)

The very high level of public ownership in Austrian
banks until recent times may help explain why the
pursuit of profit took a back seat to the quest for
increased turnover and higher market share. On their
the responsible banking executives
own admission,
were not able to make calculations based on business
economics (6). In the consumer lending sphere in particu-
lar this led, against a background of stagnating demand
for credit, to oversupply (7) and hence to declining
interest margins for the banks.

(6) 42.290 (RLB).
(7) In terms of population size, the number of bank branches and
bank employees in Austria is well above the EU average. Banks
have basically two main sources of profit: net interest income, by
far the largest source of income, and the profit from service
transactions and commission business. In a nutshell, oversupply
and weak demand for credit in Austria were bringing pressure to
bear on interest margins and hence making possible only slight
increases in net interest income, whereas commission income was
enjoying dynamic growth.

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(5)

(6)

Competition which leads to declining margins, to the
point where prices fall below average costs, is normally
considered by the undertakings concerned to be ‘destruc-
tive’. In such circumstances the undertakings are faced
basically with two alternatives. Either the steady decline
in earnings leads to a shakeout (exit from the market or
capacity reduction as a result of a merger) or the various
players on the market try to restrict, as far as possible,
the competition induced by the oversupply and thus to
slow down or even stop the collapse in prices. The
upshot is excessive prices and the artificial maintenance
of inefficient market structures.

The Austrian banks opted, at least in part, for the second
alternative. Since, owing to the,
in the banks’ view,
‘uncontrollable risk’, the possible scenario of a shakeout
was not only regarded by the banks as a suitable starting
point for business initiatives but also aroused ‘fear’ (8),
the banks strove to achieve ‘disciplined’ and ‘orderly’
competition brought about by agreement (9). Cartel
agreements proved to be a welcome means by which to
combat so-called ‘destructive, cut-throat competition’,
or free competition, as it might simply be termed (10).
Episodes of more or less unrestricted competition used,
however, to be described by the banks as ‘hyperactivity’.
Charges were seen in this context, not so much as a
factor of competition, but more as ‘a joint earnings
opportunity’, to the detriment of customers (11). In fact,
the Austrian banks’ endeavours to achieve improve-
ments in their margins by means of coordinated action,
i.e. jointly at the expense of the consumer instead of
individually at the expense of competitors, run like a
leitmotif through this investigation. One bank itself
admits that the cartel had the effect of preventing the
necessary shakeout (12).

(7)

Because of the extensive standardisation of products, the
publication (‘posting at the counter’) of interest rates, and
regular price comparisons by the media and consumer
bodies, the Austrian banking market is on the whole
highly transparent. In order to increase this transparency
still further, to be better able to monitor compliance
with the cartel agreements and to minimise the effective-
ness of any secret competition, e.g. through deviations

(8) 41.916 (Erste). A shakeout occurred only sporadically and slowly
(1990 merger between Zentralsparkasse and Länderbank, 1992
merger between Girocentrale and Österreichisches Creditinstitut,
1997 acquisition of Creditanstalt by Bank Austria and of
GiroCredit by Erste Bank).
(9) For evidence see Section 5.4.
(10) See footnotes 141 and 283 and footnotes 130, 152, 168, 280

and 350.
(11) See recital 279.
(12) 41.570 (BA).

from published interest rates, Austrian banks regularly
carried out extensive checks,
‘competition-monitoring
exercises’, on their competitors and reached agreement
on ‘ongoing direct contact in respect of departures’ from
agreements ‘which are presumed/alleged to exist by
customers/supposedly established’ (13).
‘Should offers
come to light which are at variance with the (agreed)
principles’, one of the cartel members assumed responsi-
bility for ‘coordination and clarification of the facts’ (14).
That such checks were the rule can be seen from the
minutes of a cartel meeting in July 1994, according to
which the Bank Austria representative proposed that
‘competition-monitoring exercises be dispensed with in
August’ (15). In many cases, though, the temptation for
the banks concerned to undercut the agreed rates and
thereby increase their market share proved too great.

3. UNDERTAKINGS AND PRODUCTS CONCERNED

(8)

Almost all credit institutions from every major seg-
ment (16) took part in the conduct at issue. After the
long-overdue shakeout, four bank groupings are now in
a strong position on the Austrian banking market:
HypoVereinsbank-owned Bank Austria, the savings bank
grouping together with Erste Bank,
the agricultural
credit cooperative grouping together with Raiffeisen
Zentralbank, and Bank für Arbeit und Wirtschaft/Post-
sparkasse. Some distance behind is the credit union
grouping together with ÖVAG.

(13) 23.274 et seq.
(14) 23.178 et seq.
(15) 20.743 et seq.
(16) In Austria a distincti on is made between single-tier segments, as
in the case of joint stock banks (Aktienbanken), provincial
mortgage banks (Landes-Hypothekenbanken), building societies
(Bausparkassen) and specialised banks, and multi-tier, or
‘decentralised’, segments. Savings banks (Sparkassen) and credit
unions (Volksbanken) have a two-tier structure, and agricultural
credit cooperatives (Raiffeisenbanken) have a three-tiered one.
Within these multi-tiered segments, which call themselves ‘bank
groupings’ (Bankengruppen), the respective lead institution per-
forms coordination functions for the line of business carried on.
The multifarious relationships and mutual rights and obligations
between lead institutions and individual sector members are
governed by the Banking Act (Bankwesengesetz).

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(9)

This Decision is addressed to the following credit
institutions (17):

c)

Raiffeisen Zentralbank Österreich AG (hereinafter
called RZB)

a)

Bank Austria Aktiengesellschaft (hereinafter called
BA)

Following BA’s merger with Creditanstalt AG (here-
inafter called CA) (18) on 23 September 1998, BA
is now the largest bank grouping in Austria. As a
result of an assets merger in early 2001, Bayerische
Hypo-Vereinsbank AG (hereinafter called HVB)
acquired sole control of the entire BA grouping (19).
The BA grouping’s market share comes to approxi-
mately 25 %. In the whole of Austria the grouping
has some 470 branches and employs around
13 000 people;

b)

Erste Bank der österreichischen Sparkassen AG
(hereinafter called Erste)

Since it merged with GiroCredit Bank Aktienge-
sellschaft der Sparkassen on 4 October 1997 (20),
Erste has been the lead institution in the savings
bank grouping, which consists of some 70 savings
banks (21), and the second-largest banking group in
Austria. The market share of the savings bank
grouping together with Erste comes to approxi-
mately 30 % (22). The grouping has
some
1 500 branches in Austria and employs around
24 000 people;

(17) For descriptions of the Austrian banking market, see inter alia
Commission decisions COMP/M.2125, HypoVereinsbank/Bank
Austria, recital 21, COMP/M.2140, BAWAG/PSK, recital 9 and
COMP/2402, Creditanstalt/RZB/JV, recital 15. The market shares
mentioned further on in this section relate to retail banking and
corporate banking (lending and deposit sides) and were obtained
from the public versions of the abovementioned decisions,
annual reports, publications and other publicly available sources.
Although in terms of its scope the Lombard network goes far
beyond retail and corporate banking, covering all essential
competition parameters (see below), these market shares give a
representative picture of the overall market positions of the
banks and bank groupings concerned.

(18) References in this Decision to ‘CA’ are to be read as references
to Creditanstalt-Bankverein, which was subsequently renamed
Creditanstalt AG, prior to the merger.

(19) COMP/M.2125, HypoVereinsbank/Bank Austria.
(20) References in this Decision to ‘GiroCredit’ are to be read as
references to GiroCredit Bank Aktiengesellschaft der Sparkassen
before the merger. References to ‘Erste’ are, in respect of the
period before 4 October 1997, to be read as references to Erste
oesterreichische Spar-Casse Bank, and in respect of the period
after that date, as references to Erste Bank der österreichischen
Sparkassen AG.

(21) Within the savings bank grouping there are special links which
confer on it a group-like structure. All Austrian savings banks
hold shares in Erste, which in turn has holdings in a number of
savings banks. In its capacity as lead institution, Erste is required
to perform various services for the savings banks affiliated to it,
which result in a dense network of mutual rights and obligations.
(22) The market share of Erste on its own comes to approximately

7 %.

RZB is the lead institution of the Austrian agricul-
tural credit cooperative grouping. This is three-
tiered in structure (23) and has over 2 350 branches.
The agricultural credit cooperative grouping has a
market share of approximately 22 % and employs
about 20 000 people. Besides its function as rep-
resentative of the agricultural credit cooperative
grouping, RZB engages in banking business itself,
focusing on foreign business and looking after large
customers (24);

d)

Bank für Arbeit und Wirtschaft Aktiengesellschaft
(hereinafter called BAWAG)

Since December 2000 BAWAG has been the
principal shareholder in Österreichische Postspark-
asse Aktiengesellschaft (PSK) (25). As a result of the
extensive organisational convergence between the
two institutions, the BAWAG-PSK grouping has
more than 2 000 branches throughout Austria and
a market share of approximately 10 %, some 5 %
of which is accounted for by BAWAG and 5 % by
PSK (26).

e) Österreichische Postsparkasse Aktiengesellschaft

(hereinafter called PSK).

PSK is (following a merger with effect from 1 Octo-
ber 1998) legal successor to Bank der Österreich-
ischen Postsparkasse Aktiengesellschaft (hereinafter
called PSK-B);

(23) The first tier comprises some 615 legally independent local
agricultural credit cooperatives, which are engaged mainly in the
business of retail banking and corporate banking for small and
medium-sized enterprises. As the second tier they operate at
the level of the Austrian provinces eight regional provincial
agricultural credit cooperatives (Raiffeisen-Landesbanken —
RLB), the shares in which are held by the primary banks. The
RLB themselves engage in retail banking and corporate banking
business and act as clearing houses for the primary banks,
supplying extensive business and consultancy services to them.
The third tier consists of RZB, more than 80 % of the shares in
which are held by the RLB. Although the agricultural credit
to
cooperatives are legally independent entities not subject
directions from the RLB and/or RZB, they have, owing to the
united front they present in the market and the regionality
principle, a restricted competitive relationship with one another.
(24) The market share of RZB on its own comes to approximately

2 %.

(25) Since 1 December 2000 74,82 % of PSK’s share capital has been
held by BAWAG and 25,18 % by KSP Unternehmensbeteiligungs-
gesellschaft mbH; see COMP/M.2140, BAWAG/PSK.

(26) BAWAG and PSK continue to operate, however, as legally

independent limited companies and banking institutions.

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f)

Österreichische Volksbanken AG (hereinafter called
ÖVAG)

ÖVAG is the lead institution in the two-tier credit
union sector, which consists of approximately
60 independent credit unions at the primary level.
The credit unions cooperate closely in important
areas such as organisation and marketing and are
in turn majority shareholders of ÖVAG. The market
share of
the credit union grouping comes to
approximately 7 % (27). The grouping has some
600 branches in Austria and employs about
5 000 people;

g) NÖ Landesbank-Hypothekenbank AG (hereinafter

called NÖ Hypo) (28)

Since 1 January 1997 NÖ Hypo has been a member
of the ÖVAG group (29). It is active primarily in
Vienna and Lower Austria. Its market share there is
reckoned not to exceed 2 % (30).

h)

Raiffeisenlandesbank Niederösterreich-Wien reg
Gen mbH (hereinafter called RLB)

In 1997 (immediately after the transfer to it of the
banking business of Raiffeisenbank Wien reg Gen
mbH) Raiffeisenbank Wien AG (RBW) was merged
with, and re-registered as, its principal shareholder
RLB (31). The sphere of activity of RLB/RBW is
confined to the federal capital Vienna, where it has
a market share of about 5 %.

(10) The abovementioned banks or bank groupings offer
and corporate

retail banking

areas of

in the

(27) The market share of ÖVAG on its own comes to less than 1 %.
(28) ‘NÖ’

is an abbreviation of Niederösterreich (the province of

Lower Austria).

(29) Before that, the province of Lower Austria was NÖ Hypo’s sole
shareholder. ÖVAG and NÖ Hypo continue to operate as limited
companies and banking institutions.

(30) Like the other seven provincial mortgage banks (Landes-Hypothe-
kenbanken), NÖ Hypo is an ordinary member of the Association
of Austrian Provincial Mortgage Banks (Verband der österreich-
ischen Landes-Hypothekenbanken, hereinafter called Hypo-Ver-
band).

(31) Before this, RLB had carried out transactions for its own account
to only a very limited extent. References to ‘RBW’ are, in respect
of the period before the re-registration, to be read as references
to Raiffeisenbank Wien reg Gen mbH.

that

follow,

banking (32) all the products and services which are
typically provided by universal banks. As will be
shown in the sections
the Austrian
banking cartel related to the whole range of these
from savings and lending
products and services,
rates (33)
to charges and fees, and covered further
factors of competition such as advertising, contact
with media/consumer representatives and calculation
bases.

(11) There has been a sharp increase in recent years in the
volume of loans granted to manufacturing and services
enterprises for investment purposes (in 1997 it grew by
14 %). This is attributable among other things to the
increased export activity of this category of borrowers,
whether they be large or small/medium-sized enterprises.

(12)

In 1999 deposits by foreign non-banks with Austrian
credit institutions totalled some EUR 26 billion and
loans granted by Austrian credit institutions to foreign
non-banks amounted to approximately EUR 36 billion.
In February 2002 Austrian credit institutions maintained
some 380 000 savings deposit accounts on behalf of
foreign customers (34).

loans:

(32) Definitions: 1. Retail banking: (a) deposits: customers can dispose
of sight deposits at any time (these generally consist of low-
interest-bearing current, payroll and pension accounts). Savings
deposits are cash deposits in accounts which, unlike sight
deposits, serve investment purposes and they can be withdrawn
on production of a ‘(capital) savings booklet’ (in the case of
‘variable’ savings deposits, the interest payable may be altered by
the credit institution in the light of money and capital market
developments, while ‘fixed-interest’ savings deposits have an
agreed duration and interest rate).
‘Preferential rates’ may be
offered for deposits (which may then be called ‘bonus-carrying’
deposits). Charges/fees may be levied, e.g. for maintaining an
account, entering amounts into an account, cheque transactions
these cover personal
(b)
or the use of ATM cards;
loans (including building loans and mortgages), ‘works council
members loans’
(both in Austrian schillings and in foreign
currency) and charges/fees (in particular the ‘handling fee’);
(c) other areas are payment transactions, in particular transfer
charges (both in Austria and cross-border) and security trans-
actions (e.g. custody charges, buying and selling fees). 2. Corpor-
ate banking can be subdivided into banks and non-banks: (a) the
former category comprises interbank business (interbank charges,
for both domestic and cross-border payment transactions, includ-
ing value-date rules, and for letters of credit), federal financing
and bill discounting/collection charges;
(b) non-banks corre-
sponds, with regard to deposits, to retail banking. In the case of
loans,
there are both operating loans (including the ‘fixed
advance’ or ‘cash advance’, a short-term loan to the most
creditworthy corporate customers, in both domestic and foreign
currency, where the interest rate is based on the money market
and is fixed, as is the duration) and investment credit; (c) other
services in the corporate banking sphere are payment trans-
actions, export financing (in particular the ‘house bank margin’
and the ‘house bank margin commission’), documentary business
and security issues.

(33) The word Konditionen (conditions) is often used in the original
(German) version of the documents cited in this Decision to
mean ‘interest rates’ or ‘rates’, and has been so translated here.

(34) Source: OeNB.

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4. THE PROCEEDING

4.3. Requests for information

4.1. The cause

(13)

In April 1997 (...), a member of the management board
of an Austrian bank committed suicide. He left a note
which he sent, along with a number of enclosures, to
the Public Prosecutor’s office and to opposition parties.
Among the enclosures was a list of 13 measures to
improve banks’ earnings on which ‘Lombard 8.5.’ had
been written by hand.

(14) On 6 May 1997 the Commission became aware of the
existence of this document, clearly the agenda for, or
record of, a meeting held on 8 May 1996 (35), and
prepared the ground for an investigation into suspected
competition-restricting agreements and/or concerted
practices. On 30 June 1997 the Freedom Party lodged a
invoking Article 3 of Regulation No 17,
complaint,
against eight Austrian credit institutions for suspected
competition-restricting agreements.

4.2. The inspections

(15) On 23 and 24 June 1998 Commission officials,
accompanied by officials from the Federal Austrian
Ministry for Economic Affairs, carried out, on the basis
of Commission decisions of 18 June 1998, unannounced
inspections on the premises of, among others, BA, CA,
Erste, RZB, PSK and BAWAG.

(16)

(17)

Since PSK opposed the inspection, officials of the Federal
Ministry for Economic Affairs, armed with an order of
the President of the Cartel Court, carried out a search of
the bank’s premises pursuant
to Article 142(4) of
the Austrian Code of Criminal Procedure, read in
conjunction with Article 4(5) of the EU Competition Act
(BGBl 627/94 and BGBl 175/1995).

In the course of the inspections and search, the officials
of the Commission and of the Federal Ministry for
Economic Affairs found extensive written evidence (lists
records of meetings, memoranda,
of participants,
internal notes, etc.) which confirmed the suspicion about
the existence of prohibited agreements and/or concerted
practices.

(18) On 21 September 1998 the Commission sent to most
of the credit institutions referred to at (15) and to
other credit institutions and associations requests for
information pursuant to Article 11 of Regulation No 17.
The addressees were asked therein to furnish the dates
of, and names of participants in, the committee meet-
ings (36) and to submit the documents that were available
to them.

4.4. The undertakings’ reaction

(19) After receiving the requests for information, the largest
banks concerned requested a meeting with the Com-
mission’s Director-General for Competition and offered,
at that meeting, their ‘cooperation’ in establishing the
facts. This ‘cooperation’ was such that the banks, instead
of answering the requests for information, would state
the facts ‘voluntarily’ and waive their right to a hearing.
In return,
for Competition
would not insist on the requests for information being
answered and would impose only a ‘moderate’ fine.
The Director-General welcomed in principle the banks’
willingness to cooperate, but rejected the idea of a deal
between the banks and the Commission, pointing out
that the proceeding would run its course like any other.
The requests for information would therefore have to be
answered on time and in full.

the Directorate-General

(20) With regard to the ‘voluntary’ statement of the facts as
proposed by the banks, the Director-General said that
the banks naturally remained at liberty, independently of
the timely and complete answering of the Commission’s
requests for information, to communicate facts which
were not covered by those requests. The Commission
would consider in each individual case whether such
communications of facts were involved and, if this was
indeed the case, whether those facts were of such a
nature as to make a substantial contribution to the
establishment of an infringement and hence could form
the subject matter of possible fine-reducing ‘cooper-
ation’.

(21) All the addressees subsequently answered the requests
for information. Some took the view in this connection,
regarding the major part of the request for information
addressed to them, that they were under no obligation
to reply and that they were therefore submitting the
relevant documents and answering the relevant ques-
tions voluntarily as part of the abovementioned ‘cooper-
ation’. The Commission rejected this interpretation of
the law as being incorrect.

(35) The document was subsequently found in the course of the
inspections. It is a list drawn up (by BA) of measures decided on
at the Lombard Club meeting on 8 May 1996; see recital 248.

(36) See section 5.2.

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(22)

Soon afterwards the largest banks concerned transmitted
to the Commission a document described as a ‘joint
exposition of the facts’ in which they set out at length
the historical background to the cartel and summarised
briefly and assessed from their point of view the content
of the individual committee meetings as apparent from
the documents which had been seized or the trans-
mission of which had been requested. At the same time
they again submitted the documents which had been
seized by the Commission and those the transmission of
which had been requested pursuant to Article 11 of
Regulation No 17. In order that it might assess any
added value that these documents submitted with the
exposition of the facts might represent for the ongoing
investigation, the Commission asked the banks to indi-
cate whether any of these documents were not yet
known to the Commission, and if so which. The banks,
however, considered this to be neither feasible nor
necessary.

(23) On 13 September 1999, the Commission transmitted to
the banks concerned the statement of objections of
11 September 1999. After access had been granted to
the file and the banks had made written submissions, a
hearing was held on 18 and 19 January 2000. On
22 November 2000 the Commission transmitted to
the banks concerned the supplementary statement of
objections of 21 November 2000.

(24) On 5 February 2001 all the banks concerned transmitted
to the Commission a document described as a ‘sup-
plementary exposition of the facts’
(together with a
number of further documents) in which they set out
from their own point of view the facts portrayed in the
supplementary statement of objections. After access had
been granted to the file and the banks had made written
submissions, a second hearing was held on 27 February
2001.

5.1. Background

(27) The 1979 Austrian Banking Act provided for the
possibility for specialist banking associations or for
banks themselves to conclude agreements on the interest
rate for savings deposits terminable both at
three
months’ notice (base rate agreement (38)) and at a freely
agreed period of notice (credit interest agreement (39))
and on advertising (competition agreement (40)). The
generally poor profitability of Austrian banks in the
early 1980s elicited a reaction from the legislator in the
form of an amendment to the 1986 Banking Act and
from banks themselves in the form of the establishment
of a target-rate cartel for lending and deposit rates
(regulative agreements, 1985). Several committees,
Lending Rates Committee, Deposit Rates Committee,
Minilombard Committee, came into being at that time.

(28)

In the summer of 1989 the regulative agreements were
annulled (41). Since, however,
institutions
found it difficult to set their rates meaningfully without
recourse to binding agreements,
they continued to
conclude agreements on lending and deposit rates within
the network.

the credit

(29) The relevance of such agreements from an antitrust

point of view was already known at that time.

(30) On 1 February 1991 the Association of Austrian Cham-
bers of Labour lodged an application with the Restrictive
Practices Court, asking it to require a total of nine banks
to notify, as a cartel, the introduction or raising by them
of current account charges. In the Association’s opinion,
the uniform introduction or raising of such charges on
1 January 1991 could be attributed only to a cartel
agreement.

5. BACKGROUND TO, AND CREATION, FUNCTIONING
AND OBJECT OF, THE ‘LOMBARD’ NETWORK

(25) Before giving a chronological account of cartel meetings
during the years 1994 to 1998 (see section 7), the
historical background to, and the organisation, func-
tioning and object of, the Lombard network will be
briefly described here.

(31) The Court having found for the Association, the banks
concerned lodged an appeal against its decision before
the Higher Restrictive Practices Court, which described
the agreement on the joint action or the coordination of
that action in respect of the introduction or raising of
the charges as conduct which served only ‘(...) to restrict
competition for customers interested in holding or
opening current accounts’ (42).

(26) The Commission’s knowledge is directly based on docu-
ments dating from the relevant period, records of
meetings, internal memos, correspondence, etc., which
were either seized in the course of the unannounced
inspections or submitted in response to requests for
information (37).

(37) The sources of verbatim quotations are cited in a footnote at the
end of the last paragraph dealing with the relevant meeting.

(38) See Article 20(2) of the 1979 Banking Act.
(39) See Article 20(3) of the 1979 Banking Act; no such agreements

have been concluded since 1980.

(40) See Article 21(9) of the 1979 Banking Act.
(41) See Grubmayr, Die Ausnehmungen der Banken, Versicherungen
und Genossenschaften aus dem Kartellgesetz (1991) p. 8 et seq.
Only the competition agreement and the base rate agreement
remained in force until the end of 1993.

(42) Higher Restrictive Practices Court 9 September 1991, Oct 7/91

— Current account charges — WBl 1991, pp. 394, 396.

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(32)

In view of Austria’s impending accession to the European
Economic Area (EEA), increasing attention was being
paid to European antitrust law. In September 1992, for
instance, an article, entitled ‘Bankenkartelle im EWR’, in
the leading banking periodical explained the effects of
Austrian accession to the European Economic Area.
After a detailed description of the relevant case-law of
the European Court of Justice and of the decision-making
practice of the Commission, the author concludes that
‘the Austrian banking industry (would) be well advised
to consider the compatibility with the EEA of the various
agreements, decisions, circulars, recommendations (...).
Such agreements will therefore have to be amended in
advance of accession to the EEA or they will have to be
dispensed with altogether’ (43).

(33) Again in 1992 there appeared in the omnibus volume
Banken im Binnenmarkt, edited by a leading academic,
an article dealing in depth with the subject of ‘EEC
antitrust law and banks’. In this it was pointed out
that the inter-State clause is ‘normally interpreted very
broadly’ by the Community institutions and is applied
‘at all events where’ a cartel ‘covers the whole territory
of a Member State’. The author came to the conclusion
that agreements on rates, should there still be any in
force following the expiry of the regulative agreements,
were inadmissible under antitrust
law in both the
European Economic Area and the Community. An
exempting of such agreements by the Commission was
‘altogether unrealistic’ (44).

(34) When,

in September 1993, the media learned of a
strategy paper concerning uniform calculation bases and
minimum interest rates drawn up jointly by BA, CA,
Erste, RZB, ÖVAG, PSK and BAWAG (see recital 74), a
representative of the Vienna Chamber of Labour publicly
accused the banks of having concluded a cartel agree-
ment. The banks denied the allegation, stating that there
had been no board resolutions to that effect. In a letter
to CA dated 28 March 1993, Bank für Tirol und
Vorarlberg expressed the view that, given ‘the unexpec-
ted publication of the paper under the caption “concerted
practice” ..., further thought (would) have to be given to
the specific form any action (would) take’ (45).

(35) Despite the manifest incompatibility of their agreements
with Community antitrust law, one only has to look at
the articles in publications on the subject mentioned at
recitals 32 and 33, the banks were unimpressed by the
imminent applicability of the Community competition
rules. As regards the competition agreement, for exam-
ple, which restricted the advertising of interest rates and
was accordingly described in one of the abovementioned
articles as ‘doubtless subject in its entirety to the EEC
cartel ban’, it was proposed in December 1993 that
these agreements should be maintained even after 1 Jan-
uary 1994. In the course of a conversation at the end of
December 1993 between the (representatives) of BA, CA
and RZB, it transpired that CA, RZB and PSK wished to
maintain the agreements, while BAWAG did not. BA’s
(representative) accordingly wrote in his record of the
meeting that ‘talks had to be held with (...) (BAWAG’s
representative) as soon as possible’ (46). In fact, avoidance
of advertising interest rates was a regular feature of
the agreements subsequently concluded between the
Austrian banks.

(36) Austria acceded to the European Economic Area on
1 January 1994. The 1994 Banking Act entered into
force on the same day, removing the last remaining
statutory bases for any coordination between the credit
institutions. On 1 January 1995 Austria became a
member of the European Union.

(37) But the banks did not terminate their agreements despite
the fact that they manifestly infringed EEA/EC antitrust
law, continuing instead with the numerous existing
rounds of talks even after 1 January 1994. The Lombard
network thus remained in existence and served to an
unlimited extent as a vehicle for the many arrangements
and agreements between the participating banks. The
latter took the view that cartel agreements ‘had always
been part’ (47) of banking and they therefore did not in
the least intend to change this now simply because of
the applicability of European antitrust law.

(38) The Austrian public was still suspicious, and in connec-
tion with changes to rates and charges, accusations of
‘cartel-like pricing policies’ (48) and of ‘manifest agree-
ments’ (49) were repeatedly being made in public and the
question was raised of the existence of ‘interest rate
agreements’ (50).

(39) Numerous documents show in fact that the banks were
actually aware of the relevance of their agreements from
an antitrust point of view.

(43) Gugerbauer, Die kartellrechtliche Bankenbereichsausnahme im

EWR, Österreichisches Bank-Archiv 9/92, p. 770 et seq.

(44) T. Eilmansberger, EWG — Kartellrecht und Banken, in S. Griller,

ed., Banken im Binnenmarkt (1992), p. 711 et seq.

(45) Profil of 20 September 1993, 2767; 2413, 2417.

(46) 26.309; 25.111.
(47) 43.101 (BA).
(48) Austria Presse Agentur (APA) of 27 January 1994.
(49) APA of 1 September 1994.
(50) Salzburger Nachrichten of 25 November 1997.

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(40) During a committee meeting in October 1994 about the
increasing of transfer charges, ‘reference was made to
the antitrust aspects (in business with customers)’ and it
was stated that ‘in the EU a fundamentally different
interpretation of the issue
(from the Austrian)
prevailed. The legal departments of the various insti-
tutions ought to look into this EU issue’ (51).

legal

(41) During talks in November 1994 about charges for cross-
border payment transactions,
it was stated that ‘the
question whether the banks, in setting an interbank rate,
were infringing the Restrictive Practices Act could not
be answered immediately’ (52).

(42) During talks in March 1995 it was stated, in connection
with the conduct of such rounds of talks, that ‘the
possible consequences of EU antitrust law (would) have
to be examined in due course’ (53).

(43) During talks in May 1995, again on the subject of price
coordination between banks, a report (clearly an internal
GiroCredit document) was discussed which examined
the question ‘whether the regular discussions in the
Cross-border Transactions Committee, during which
interbank pricing was coordinated between Austrian
banks, were questionable from an antitrust point of
view’. The report concludes that ‘a restriction of compe-
tition may also be seen under EU law in the agreeing of
interbank prices’. This could ‘result in the initiation of
investigation proceedings by the European Commission
and the imposition of heavy fines’ (54).

(44) On 24 May 1996 a ‘bank management board member
who wishes to remain anonymous’ confirmed in a
statement to Austria Presse Agentur that there was ‘a
desire in banking circles for definite agreements’, but
admitted that the interest rate agreements common in
the 1980s (see recital 27) were now no longer possible
‘for reasons of antitrust law’ (55). The board member
in question omitted to mention, though, that these
inadmissible agreements still remained fully in force.

(45) During talks in October 1996 the participants came to
conclusion that none of the variations on the theme
with which they were concerned there ‘provided a
solution to the antitrust problem’ (56).

(51) 6867; 6884 and 85; 6888; see recital 347.
(52) 8586 et seq.
(53) 21.251 et seq.
(54) 8523 et seq.; 8569 et seq.; 8573 et seq.; 32.223 et seq.
(55) 39.
(56) 21.361 et seq.

(46) The awareness of the antitrust problem to which their
agreements gave rise finally induced the institutions
involved to concern themselves with taking practical
precautionary measures.

(47) During talks in November 1997 one participant suggest-
ed that, as a precaution, in future ‘no more minutes
should be kept of such meetings’. The legal department
of one institution was consulted on the matter. The
down-to-earth recommendation of the lawyers consult-
ed could not have been clearer:
‘Destruction of all
existing records’ (57).

(48)

Further proposals to camouflage the agreements were
the ‘renaming (e.g. market observations)’ (58) of internal
memoranda on the subject and their return to their
author for ‘subsequent destruction’ (59). Records and
minutes were now marked ‘Strictly confidential’ (60).

(49) During talks in May 1998 a participant again mentioned
that his attention had been drawn by his institution’s
legal department ‘to the problem of minutes ... in the
light of competition reservations’. ‘Therefore, no minutes
of these talks (would) be kept’ (61).

(50)

In a radio interview in February 2000, (a representative)
of one of the banks concerned admitted that the Austrian
banks would ‘have to put an end’ to their agreements.
Because they had not done so, however, ‘we shall have
to pay the price’ (62).

5.2. The individual committees, their relationship with
one another and the role of the lead institutions

(51) The agreements were comprehensive as regards their
contents, highly institutionalised and closely intercon-
nected, and covered the entire country,
‘down to the
smallest village’, as one institution aptly put it (63). For
every banking product there was a separate committee
on which the competent employee at the second or
third level of management sat. In practice, however, this
separation as regards contents was not strictly adhered
to. Sometimes, substantively related topics which were
covered by more than one committee were dealt with in
one and the same committee. The individual committees
were part of an organisational whole.

(57) 1564 et seq.
(58) 12.175 et seq.
(59) 14.342; 14.259.
(60) e.g. 21.189.
(61) 4359 et seq.
(62) On the ORF’s ‘Journal zu Gast’ programme, quoted in the press

on 21 February 2001.

(63) 41.519 (BA).

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1)

Lombard Club, specialist committees, special com-
mittees and regional committees (64)

f)

a)

Each month (apart from the holiday month of
August) [senior representatives] of the largest Aus-
trian banks got together as the top-level body
(Lombard Club). In addition to matters of general
interest that were clearly neutral from a compe-
tition point of view (as indicated by the presence
of representatives of the Austrian National Bank
(OeNB), [they] discussed changes in interest rates,
advertising measures, etc.

b) One level down were the product-based specialist
committees. The most important ones were the
‘Lending Rates Committees’ and the ‘Deposit Rates
Committees’, which, as their names suggest, dealt
with lending and deposit interest rates and were
convened either separately or jointly (Lending and
Deposit Rates Committees). A constant flow of
information took place in particular between these
committees and the Lombard Club at the top. [A
representative of a bank] thus transmitted the
conclusions reached in the Lombard Club to [a
representative of a bank] on the Deposit Rates
Committee, who for his part would ‘take them into
account on Monday at the Federal Lending and
Deposit Rates Committee’ (65).

c)

d)

e)

Both the Lombard Club and the Vienna Lending
and Deposit Rates Committees sent out signals to
the diverse and numerous ‘regional committees’,
which held regular meetings in every province of
Austria. In some provinces even, the hierarchical
structure of ‘Lombard’ and specialist committees
was replicated.

The views expressed in the provinces flowed in the
opposite direction back to meetings of the ‘Federal
Lending and/or Deposit Rates Committees’,
in
which bank representatives from Vienna met with
their opposite numbers from the provinces and
whose decisions were in principle valid for the
whole of Austria.

inter alia, corporate banking, retail banking
For,
business involving the self-employed, mortgage
lending and building loans, there were separate
special committees (namely the Minilombard Com-
mittee, the Key Account Management Committee,
the Liberal Professions Lending Rates Committee,
the Mortgages Committee and the Building Loans
Deposit Rates Committee).

Lastly, there took place at regular intervals a large
number of further committee meetings on matters
of relevance from a competition point of view: in
the ‘Treasurer Committee’, federal financing and
interest rate questions were discussed; in the various
payment
transactions committees (in particular
the Payment Transactions Committee, the Cross-
border Transactions Committee and the Organising
Committee of Austrian Credit Institution Associ-
ations), fees and charges for payment transactions
were among the matters discussed; in the ‘Export
Financing Committee’, matters of export financing
were discussed, along with other matters; and in
the ‘Securities Committee’, minimum fees, charges
and interest rates were discussed.

g)

From all these special committees there stands out
the ‘Controller Committee’, on which [representa-
tives] of the controlling departments of the leading
Austrian banks sat.
It was at meetings of this
committee that, for instance, uniform calculation
bases and joint proposals for improving earnings
were drawn up. The banks thereby increased the
mutual transparency of their respective cost and
calculation factors.

(52) Between all these committees concerned primarily with
lending and deposit rates and with charges/fees, a regular
flow of information took place. Discussions in one
committee were often held over pending agreement in
another. Lastly, the higher-ranking nature of the Lom-
bard Club meant that, in controversial cases, its guidance
was awaited, while in the case of less important decisions
confirmation ‘at the next Lombard’ was ‘considered
unnecessary’ (66).

(53) With a view to extensive, countrywide implementation
of (or for the purpose of coordination with) the agree-
ments concluded in the abovementioned Vienna com-
mittee meetings,
there was also a regular flow of
information to the various regional committees in the
provinces and from the latter to the central committees
in Vienna. Occasionally the regional committees them-
selves sent representatives to Federal Lending and/or
Deposit Rates Committee meetings. A certain employee
of a Carinthian bank thus attended federal committee
meetings regularly ‘as representative for Carinthia’ with
a view to reporting back to the ‘Carinthian Banking
Committee’ (67).

(54) The results achieved in the various committees were
transmitted within each institution to the managing
board, where they were either translated into action
immediately or fed into the decision-making process.

(64) The subheadings in italics are intended only to assist the reader

and have no legal significance.

(65) 1914.

(66) See recital 306.
(67) 23.051, 23.053.

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(55) The importance to the institutions concerned of this
close network of regular and comprehensive coordi-
nation measures and agreements can also be described
in quantitative terms. During the period covered by this
investigation (1 January 1994 to the end of June 1998),
in Vienna alone, i.e. excluding the numerous regional
committee meetings, at least 300 meetings took place.
In terms of working days, this means that, in Vienna
alone, a meeting took place every four days.

(61) At the same time, the lead institutions represented not
only their own interests at cartel meetings but those of
their respective groupings as well. The other cartel
members perceived the lead institutions in this connec-
tion as being representatives of their respective group-
ings. The agreements were therefore reached not only
between the individual institutions themselves but also
between the groupings, as can be seen from the following
examples.

(56)

Lastly, even outside this
institutionalised network,
numerous contacts took place between representatives
of the banks concerned, sometimes at the highest level,
on interest rates and charges/fees.

(57) The banks were also anxious to avoid competition from
competitors in other, closely related industries. So as not
to see the agreements reached between the banks on
building loan rates ‘thwarted by cheaper offers by
insurance companies’, it was agreed that ‘talks on the
subject
should be held with the insurance com-
panies’ (68).

2) The role of the lead institutions of the savings bank,
agricultural credit cooperative and credit union
groupings: intra- and inter-grouping coordination

(58) At this point the special part played in the network by
the lead institutions Erste (ex-GiroCredit), RZB and
ÖVAG must be examined. Their historical, well-practised
role as coordinator and representative of their respective
bank groupings on the Austrian banking market was
directly utilised for the smooth functioning of
the
Lombard network. Firstly, they organised the mutual
transfer of information between Vienna and the prov-
inces within the respective bank groupings, and secondly
they represented the interests of their grouping vis-à-vis
the other groupings in the cartel.

(59)

(60)

In ensuring the systematic, seamless feedback of infor-
mation between the Vienna and regional committees,
the well-coordinated communication channels played
an important role. While in the case of the large banks,
with their countrywide presence,
these information
channels ran between the head offices in Vienna and the
provincial head offices, in the case of the multi-tier bank
groupings recourse was had to specially created internal
information and representation mechanisms.

the flow of

In its capacity as lead institution, GiroCredit/Erste took
care of
information to and from the
institutions of the savings bank grouping in the prov-
inces. Within the agricultural credit cooperative and
credit union groupings, this task fell respectively to RZB
and ÖVAG in their capacity as lead institutions. Details
and illustrative examples of these ingenious represen-
tation and information mechanisms are to be found in
Section 12.3 below.

(68) 23.178 et seq.

(62) BAWAG, for instance, announced its decision on a
prospective cut in interest rates ‘by fax to the other
sectors, which will then take their lead from it’ (69); first
of all, ‘opinion formation’ took place ‘in the individual
sectors’ before ‘further negotiations’ could take place
between the groupings (70); before the agreed measure
was implemented, there also took place a ‘consultation
by telephone with the other sectors’ (71); at a Consumer
Lending Rates Committee meeting ‘the request’ was
made, addressed to GiroCredit, RBW (72) and ÖVAG, ‘to
all sectors to get the provincial talks going’ (73); and on
another occasion ‘the agricultural credit cooperative
sector (was) requested to do more to rein in offers by
small cooperatives’ (74). ÖVAG, for example, informed
the other cartel members as follows: ‘CU sector: KSB
(capital savings accounts) lower’ (75), or ‘credit union
sector favours 1/2 % cut ...’ (76); ‘GiroCredit/savings banks’
informed the other cartel members of a ‘cut in bonus-
carrying deposits coordinated with provincial savings
banks’ (77);
in early 1997 it was established to the
satisfaction of cartel members that ‘the cuts agreed’ at
the end of 1996 had ‘in the meantime been implemented
by all sectors’ (78).

5.3. The pattern followed by committee meetings

(63) Cartel members constantly strove, especially at meetings
of those committees which dealt explicitly with interest
rates, to reach a consensus on the setting of rates. As
described in detail in sections 7 to 11, these meetings all
followed a very similar pattern.

(69) 36.339; 14.321; 1286 et seq.; 2314.
(70) 1278; 790; 13.175; 1972; 14.431; 12.102.
(71) 14.634.
(72) As a rule RZB represented the agricultural credit cooperative
grouping at committee meetings. In the case of Vienna Lending
and Deposit Rates Committee meetings, this role was occasionally
performed by RLB/RBW.

(73) See recital 257.
(74) 20.210 et seq.
(75) 20.764 (CU stands for credit union).
(76) 20.952.
(77) 20.757.
(78) 4231; 14.370.

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(64) Often what occasioned such meetings was a change in
the key lending rates (79) by the National Bank, where-
upon the banks would promptly meet ‘for the joint
clarification of measures to be taken’ (80). In many cases
the banks reacted to a lowering, say, of the key lending
rates by immediately reducing deposit rates without at
the same time reducing lending rates, claiming that
‘against a background of changing interest rates’ they
could ‘earn a profit only through asymmetrical interest
rate adjustments’ (81). Such an ‘asymmetrical’ passing-
on (82) of key lending rate reductions, which resulted in
substantial interest earnings for the banks (at the expense
of the consumer), called, if it was to be successful, for
prior coordination between the banks. The coordinated
delaying of lending rate cuts was therefore the ‘declared
aim of all committee meetings on the subject’ (83).

(65) The representative of the ‘host’ institution would start
the proceedings by asking for ‘contributions on current
interest rate developments’ (84), whereupon one partici-
pant after another would say what reaction (i.e. a certain
rate reduction or increase) his institution considered
appropriate at that time, ‘subject to coordination with
the other institutions’ (85). Sometimes meetings began
with a debriefing about earlier joint actions. After all
opinions and proposals, such as a reduction in the
‘in exchange for an
interest rates for one product
agreement’ (86) on another product, had been put for-
ward (and sometimes for the time being ‘supported by
all those present’ (87) or ‘flatly rejected by almost all
those present’ (88)), negotiations began on the joint
manner of proceeding. Occasionally, individual banks
had already ‘fully coordinated’ their positions in advance
of
the ‘[...]
talks’ prior to a Deposit Rates Committee meeting in
July 1995 (89). Finally, the proposals would be ‘put to
the vote’ (90) or agreement would be reached on a
‘compromise’ (91).

the cartel meeting, as in the case of

(66) The negotiations regularly produced concrete results.
The banks then stated in minutes and memoranda, for
example, that ‘after tough negotiations (...) the following
result was achieved’ (92); ‘agreement was reached on a

(79) The key lending rates are the rates at which the National Bank
makes central bank money available to credit institutions. See,
for example, footnotes 144, 153, 157, 216, 217, 244, 261, 285
and 319.

(80) See, for example, footnote 144.
(81) 38.174.
(82) See, for example, 26.489, 26.491, 38.174 or 31.640 et seq.
(83) 14.439.
(84) 20.801.
(85) See footnote 246.
(86) 26.726.
(87) See, for example, footnote 224.
(88) See, for example, footnote 160.
(89) 15.431; 20.755.
(90) See, for example, footnote 160.
(91) See, for example, footnote 225.
(92) 26.726.

‘a general

general cut in rates’ (93); maximum interest rates ‘were
agreed’ (94);
loans was
the rate rise for commercial
‘agreed between the big Vienna banks as follows’ (95);
‘for Austria as a whole, (interest rates were) agreed’ (96);
specific minimum rates were ‘fixed or endorsed’ (97) or
‘coordinated’ (98)‘as guidelines’; a ‘consensus’ was reached
on the reduction of rates (99); after fairly lengthy dis-
cussions,
finally
interest
imposed’ (100); ‘there was unanimity’ on an interest rate
cut (101);
‘agreement’ was reached on the cutting of
deposit rates and on the introduction of a ‘minimum
handling fee’ (102); it was decided ‘to stop advertising
interest rates’ (103); the ‘following interest rate cuts were
decided’ on the deposit side (104); the ‘following agree-
ments were made’ for foreign currency loans (105); and
participants would ‘put the agreed recommendations
into practice in their respective areas’ (106).

rate cut was

(67) The banks did not always succeed in reaching a consen-
sus immediately. The common decision-making process
often went, for purposes of ‘preliminary decision-mak-
agreement’ (108),
ing’ (107),
‘reaching
‘pre-coordination’ (110) or ‘final coordi-
‘refining’ (109),
nation’ (111),
committee meetings
through several
(involving mostly the Vienna Lending and/or Deposit
Rates Committee,
the
Federal Lending and/or Deposit Rates Committee and
the Lombard Club) (112).

the Minilombard Committee,

further

(68)

If the close, intensive coordination within the network
itself proved insufficient, interest rates had to be ‘finally
negotiated’ (113) outside the competent committees, eith-
‘various discussions and agreements’,
er as part of
‘further telephone conversations’ (114),
‘telephone con-
tacts between the institutions’ (115), or ‘(senior staff)
phoning each other and discussing a coordinated
approach as soon as possible’ (116).

(93) See, for example, footnote 144.
(94) See, for example, footnote 154.
(95) See, for example, footnote 195.
(96) See footnote 210.
(97) See footnote 217.
(98) See footnote 292.
(99) See footnote 217.
(100) See footnote 247.
(101) See footnote 262.
(102) See footnotes 279 and 309.
(103) See footnote 288.
(104) See footnote 342.
(105) See footnote 344.
(106) 23.178.
(107) See footnote 216.
(108) See footnote 216.
(109) See, for example, footnote 271.
(110) See, for example, footnote 210.
(111) See footnotes 216 and 304.
(112) See, for example, recital 187 et seq.
(113) See footnote 264.
(114) See, for example, footnotes 262 and 332.
(115) See footnote 263.
(116) See, for example, footnotes 277 and 189.

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(69)

If agreement was reached for each banking product
‘implementation dates’ or the particular
concerned,
‘deadline for
implementing interest-rate cuts’ was
‘agreed’ (117). Sometimes, before implementation took
place there was a further ‘telephone consultation with
the other sectors’ (118).

(70)

Even the provision of information to the public on the
particular measures that had been agreed was the subject
of a ‘coordinated approach’ (119) on the part of the banks.

(71)

Sometimes, however, the banks were unable to reach
agreement in the end, recording this, for example, as
follows:
‘No agreement on rates (was) reached at the
Lombard meeting’ (120); with respect to capital savings
accounts, ‘initially no unanimous agreement’ could be
reached (121); the banks were in the end unable ‘to
come to any unanimous decision’ and therefore had to
‘negotiate further’ at another meeting (122); the joint
attempt to make reductions in cash advances seemed
‘for the time being to have failed’ (123); and it was ‘on the
whole not possible to achieve the ambitious goals set
(for lending rates) at the last talks’ (124).

(72) Those institutions, which from time to time changed
interest rates without prior coordination, caused ‘tur-
moil’ in the relevant committee and were subjected to
some sharp criticism from competitors. Such ‘com-
pletely surprising’ measures, because they were ‘obvi-
ously kept secret’, were ‘regarded as not very appropriate
by all the other banks’ inasmuch as they ‘contradicted
the stated objective of all the relevant committee meet-
ings’ (125). If therefore an institution thought it necessary
to carry out ‘surprising interest rate changes’, then at
least ‘immediate information should be provided to all
members of the Lending Rates Committee’. In such
cases, all the other institutions could do was agree on a
common reaction to such steps, described as a ‘breaking
of ranks’. The anger at this occasional ‘breaking of ranks’
by BAWAG was so great in one instance that the bank
was even threatened with exclusion from the cartel (126).

(117) See footnotes 155 and 226.
(118) 14.634.
(119) See, for example, footnote 155.
(120) See, for example, footnote 167.
(121) See footnote 218.
(122) See footnote 244.
(123) See footnote 311.
(124) See footnote 351.
(125) See footnote 233.
(126) See, for example, footnotes 210, 215, 233, 234, 242 and 283.

5.4. The object

(73) The object of the agreements at issue was to restrict and
distort competition between the undertakings concerned
in relation to the matters dealt with by the committees.
The agreements and concerted measures were intended,
at the expense of consumers, to improve the banks’
earnings. A departure from the cartel agreements, which,
in the banks’ view, safeguarded ‘reasonable competition’,
lead to an ‘erosion of
would, on the other hand,
margins’ (127).
repeatedly
themselves
banks
expressed this aim in as many words, as can be seen
from the following examples.

The

(74) The strategy paper referred to at (34) drawn up jointly
by BA, CA, Erste, RZB, ÖVAG, PSK and BAWAG
suggests a ‘displacing and limiting’ of competition ‘to a
bearable level’. As a ‘mistake’ to be ‘jointly avoided’ in
future, the banks identify ‘price competition’ inasmuch
as it can be ‘immediately engaged in by competitors’.
The measures which should be ‘jointly taken’ included
‘new charges and
in particular the introduction of
commissions’ (such as a handling, transaction or custody
charge) (128).

(75) The Federal Deposit Rates Committee meeting of 22 Feb-
ruary 1995 was declared open with the following words:
‘The exchange between banks of experience in relation
to interest rates has in the past repeatedly proved to
be a useful means of avoiding uncontrolled price
competition. Today’s Federal Deposit Rates Committee
meeting (...) should thus likewise ensure a purposive and
reasonable manner of proceeding in shaping all banks’
terms of business. The way in which interest rates are
currently being set shows very clearly that it is again
necessary for us to sit down together and counteract
problematic price developments. I hope that you will
succeed today (...) in stopping these upward trends in
interest rates. (I) hope, in the interests of your insti-
tutions, that constructive solutions will be found’ (129).

(76) With a view to ‘easing the existing cut-throat compe-
tition’ (130), it was necessary, through ‘disciplined market
behaviour’ and in particular through ‘full compliance’
with ‘coordinated (...) minimum interest rates’, to restrain
‘exaggerated competition’ (131).

(77) The express ‘object’ of the Federal Lending Rates and
Deposit Rates Committees was, among other things, ‘to
establish as far as possible a coordinated approach both
in the lending and in the deposit sphere’ (132) and ‘to find
as uniform an approach as possible to reducing lending
rates’ (133).

(127) e.g. 2560.
(128) 108; 136 to 138.
(129) 1991.
(130) 3507 et seq.
(131) 2535 et seq.
(132) See recitals 190.
(133) See recitals 241.

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(78) The banks’ economic interest in these agreements was
set out
in a memorandum concerning the Special
Consumer Lending Rates Committee meeting of 30 April
1996: ‘Should the specified minimum rates be enforced,
this would be de facto tantamount to a rate increase and
a widening of margins’ (134). A further example of the
benefits derived by the banks to the detriment of
consumers is provided by the ‘asymmetrical’ passing-on
of key lending rate reductions (135) in the form of an
immediate cut in deposit rates without a simultaneous
cut in lending rates. The banks were aware that ‘against
a background of changing interest rates’ they could
‘earn a profit only through asymmetrical interest rate
adjustments’ (136). Such coordinated delays in reducing
lending rates resulted in substantial interest earnings for
the banks and was thus the ‘stated objective of all the
relevant committee meetings’ (137).

(82) The competition-restricting purpose of the committees

is not even disputed by some banks.

(83) To sum up, it is clear from their own evidence that
the banks concerned strove to bring about among
through their ‘useful’ and ‘constructive’
themselves,
agreements,
‘standardised’,
‘reasonable’,
‘controlled’,
‘disciplined’, ‘eased’, ‘sensible’, ‘displaced’, ‘limited’, ‘mod-
erate’ and ‘orderly’, all euphemisms for distorted and
restricted, competition.

6. CHRONOLOGY OF EVENTS: INTRODUCTION

(84) The following sections describe how the institutionalised
and interconnected network of numerous, wide-ranging
committees led to a situation where the institutions
concerned regularly and continuously jointly coordi-
nated their behaviour on the market.

(79) The renunciation of advertising lending and deposit
rates, agreed by the banks, was aimed at ‘counteracting
the heated competitive situation’ and ‘avoiding’ compe-
tition between banks ‘at this information level’ (138).

(85) The description takes the form of a chronology of
events, starting in January 1994, the point at which
Austria acceded to the European Economic Area.

(80) According to a file note dated 7 March 1997 the
committees served to ‘advise on measures to stem
competition in the field of private financing, which has
since become highly undisciplined once more. (...) All
bank representatives therefore wish to see a return to
rather more orderly competition’ (139).

(81)

In a file note on the Vienna Lending Rates Committee
meeting on 5 May 1997 it is stated that: ‘On 5 May 1997
a Vienna Special Lending Rates Committee meeting took
place with a view to setting once more minimum limits
for lending rates in the case of personal
loans and
minimum margins for fixed-interest loans and foreign-
currency loans in order to optimise income’ (140). In
another note on this meeting it is stated that:
‘The
dramatic decline in the lending margin has induced
the representatives of the Vienna institutions to hold
countless “coordination meetings” aimed especially at
coming to grips with the recent “hyperactivity” and
dumping prices’ (141).

(134) 2582.
(135) See, for example, 26.489, 26.491, 38.174 or 31.640 et seq.
(136) 38.174.
(137) 14.439.
(138) 13.704 and evidence at recital 128.
(139) 2565.
(140) 36.030 et seq.
(141) 20.682.

(86)

It focuses on those committees which were broadest in
scope and the most closely interlinked in operational
terms: the ‘Lombard Club’, the ‘Minilombard Committee’,
the ‘Federal Lending and/or Deposit Rates Committees’,
and the ‘Vienna Lending and Deposit Rates Committees’
(including the ‘Consumer Lending Rates Committee’ and
the ‘Liberal Professions Lending Rates Committee’). The
other committees are either dealt with alongside these at
the relevant points or mentioned in a separate section
after the chronology of events. For reasons of space,
however, it is not possible within the confines of this
Decision to mention or describe all the committees in
the network, and less still all the meetings (142).

7. CHRONOLOGY OF EVENTS: 1994

February to March: ‘asymmetrical’ passing-on of the cut in the
key lending rates — agreement to cut deposit rates and
maintain lending rates; avoidance of competition in respect of
building loans

(87) After the Austrian National Bank cut

the discount
rate (143) on 12 February, a Vienna Deposit Rates Com-
mittee meeting was held on 18 February on BA’s

(142) A footnote, the reference is at the end of the last paragraph
dealing with the relevant committee in each case,
indicates
where to find quotes (the arabic numerals refer to the page
numbers of the investigation file).

(143) i.e. the interest rate paid by the national bank on the purchase
of bills of exchange or securities which are not yet mature, for
the period running from the date of purchase to the date of
maturity. The Austrian National Bank’s discount rate has not
existed since 1 January 1999, when it was replaced by the base
rate.

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premises ‘for the joint clarification of measures to be
taken in respect of savings and current account deposits’.
At the meeting ‘agreement was reached on a general cut
in rates’: base rate to be cut to 2,25 % (BAWAG 0,25 %
above that), premium-aided savings products to 4,75 %,
capital savings accounts by 0,25 %, substitute products
by 0,25 % each, special rates to 4,75 % in Vienna and
5 % in the provinces, and current account interest rates
by 0,25 % on the debit and credit sides (144).

(88)

It was decided to start implementing these cuts in the
week beginning 7 March. By cutting interest rates in a
coordinated manner the banks were in a position to
reap substantial additional profits (145). On 8 March
[senior representatives of Erste] decided, expressly refer-
ring to the need to keep in step with the bank’s
competitors, to cut the overdraft and credit rates by the
agreed 0,25 %. [Senior representatives of BAWAG] also
referred in [their] reduction decision to the ‘round of
interest cuts’. CA also cut its rates during the agreed
period. According to an internal memo to [senior
representatives of NÖ Hypo] entitled ‘Cut in savings
deposit rates by 9 March 1994’, a telephone survey
among the banks involved had shown ‘that competitors
will stick essentially, with small variations, to this target
[set by the Deposit Rates Committee]’ (146).

(89)

Following the Vienna Deposit Rates Committee meeting,
(...) representatives of the various banks met on 23 Febru-
ary in the Minilombard Committee. They agreed not to
cut lending rates and to ‘put a limit of five years if
possible, seven or eight years at the most, on the
fixed interest rates increasingly demanded by customers
...’ (147).

(90) An internal report of 22 February to [senior representa-
tives of CA] states: ‘The eight main Vienna banks (148)
have agreed, even in emergencies, not to pay above
cash-market rates for option contracts (if this can be
maintained, a new minimum margin will be intro-
duced)’ (149).

(91) At their monthly Lombard Club talks on 9 March the
[assembled representatives] agreed that ‘[representatives]
of the five new building loan banks’ should ‘discuss the
principles of a rational lending rates policy’ (150). These
were the banks set up between 1993 and 1995 by BA,

BAWAG, CA and Erste, among others, for the specific
purpose of granting building loans (151). These specialist
banks were set up following the partial exemption from
capital gains tax of securities (debentures)
issued to
refinance commercial building loans. A committee
covering this field was set up in the same spirit as the
existing committees covering all other areas of banking,
in order to ‘avoid destructive competition between
building loan banks’ (152). The first meeting of
the
‘Building Loans Group’ (sometimes also referred to as
the Building Loans Deposit Rates Committee) appears to
have taken place on 6 February 1995.

April to June: discussions on cutting interest rates, ‘divergence’
in savings deposit rates, fixed interest rates — the need for
‘joint decisive action’ to improve earnings

(92) On 15 April the Austrian National Bank cut the key
lending rates again. ‘Individual telephone conversations’
immediately followed between NÖ Hypo, PSK and Erste,
as did an ‘informal consultation’ between CA, BA, Erste,
BAWAG and RBW, during which it was ‘unanimously
found’ that another cut in savings deposit rates should
not follow this key rate cut (153).

(93) Although ‘on the telephone, the sectors agreed not to
take any measures to cut rates for savings and current
account deposits’, Bank Austria used the Vienna Deposit
Rates Committee meeting of 25 April ‘to discuss possible
cuts none the less’. After a lengthy discussion ‘it was
agreed’, ‘so as to steady’ the rates ‘which had recently
been getting out of hand once again’, to ‘keep to a kind
of moratorium’ for new savings deposits and to pay no
more than 4,5 % interest in the Vienna area and 4,75 %
in the provinces. Compliance with this agreement was
to be monitored through ‘closer observation of competi-
tors’ (154).

(94) The matter was also discussed in the Deposit Rates
Committee on 16 May. This episode illustrates how the
banks deliberately acted together to the detriment of
consumers. The banks were particularly concerned to
avoid ‘a widespread’ cut in savings rates, which would
‘exceed the cut posted at the counter’, because they
would then have to lower lending rates and thus pass on
the cut in key lending rates to consumers. If savings
rates had to be cut, then this should be done ‘with as
little publicity as possible’, especially as regards the
‘bonus-carrying’ savings deposits which ‘did not require
posting’. In order to keep consumers in the dark, the

(144) 1310 et seq.; 14.491 et seq.; 12.041 et seq.
(145) In this case amounting to several tens of millions.
(146) 38.167; 38.157; 38.159.
(147) 14.251; 1238.
(148) i.e. CA, BA, RZB, BAWAG, PSK, GiroCredit, Erste and ÖVAG.
(149) 26.398.
(150) 1203.

(151) CA — 3 Banken Beteiligungsfonds Aktiengesellschaften; Bank
Austria Wohnbaubank Aktiengesellschaft; S-Wohnbaubank
Aktiengesellschaft; Hypo-Wohnbaubank Aktiengesellschaft;
Raiffeisen Wohnbaubank Aktiengesellschaft;
IMMO-Bank
Aktiengesellschaft; BAWAG Wohnbaubank Aktiengesellschaft.

(152) 19.565 et seq.
(153) 2474; 14.336.
(154) 14.485; 12.369.

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banks’ representatives agreed on an ‘approach on talking
to the press’ whereby, for example, a general savings
interest rate cut would be said to be ‘impossible’ and
attention would be drawn to the ‘unchanged posted
rates’. In the end, however, the ‘coordinated approach’
was a failure because an ‘apparently unfortunate state-
ment on the subject’ issued by one of the institutions
undermined the joint PR effort and a general cut was
subsequently reported on TV.

(95) The maximum rates for new savings deposits discussed
on 25 April (see recital 93) were confirmed and ‘rec-
ommendations were unanimously adopted’:
interest
rates for savings bonds should be ‘made to diverge’, with
interest rates for one-year savings accounts reduced by
0,25 % and rates for five-year accounts raised by
0,25 %. It was ‘agreed that these measures should be
implemented this week and next, and by Whitsun (i.e.
22/23 May) at the latest’. (PSK had until 26 May) (155).

(96) Things turned out differently, however. There was public
criticism of the prematurely announced (see recital 94)
cut in savings rates, so that it was not possible to
‘implement the recommendations of the Deposit Rates
Committee meeting on 16 May 1994 to the extent
planned’ (156).

(97) The Minilombard Committee (for corporate banking)
met directly after this Deposit Rates Committee meeting
and talked about not lowering lending rates in response
to the cut in key interest rates. The ‘absolute minimum
rate’ for operating loans was set at 8 % (157).

(98) The Deposit Rates/Consumer Lending Rates Committee
meeting (held jointly with a Liberal Professions Lending
Rates Committee meeting) of 21 June illustrates how
information was exchanged between the Vienna com-
mittees and the provinces. As with every lending and
deposit rates meeting, the representative of RZB obtained
data on the current interest rate situation from the

regional offices, in this case with the planned ‘divergence’
in savings bond rates particularly in mind (158). The
logistics of this exchange of information within the
agricultural credit cooperative grouping was described
in a letter from the Carinthia Raiffeisenlandesbank to
‘RZB informs us of
the Vienna head office (RZB):
the progress and conclusions of
the various bank
committees in Vienna, such as the Deposit Rates Com-
mittee and Lombard meetings. So that we can pass on
this information as quickly as possible to the agricultural
credit cooperatives in Carinthia, I would ask you to
ensure that management informs the Carinthia represen-
tative directly and that the agricultural credit cooperative
department of our institution is informed by the same
post or by fax’ (159).

(99) The abovementioned ‘divergence’ was the main subject
of discussion at this Deposit/Consumer Lending Rates
Committee meeting. It was advocated by BA in particu-
lar. Raising the rates for five-year savings accounts,
however, was ‘flatly rejected by almost all those present’,
since they were afraid that this time they would also
have to raise the savings rates for bonus-carrying
deposits, which would ‘nullify the recently implemented
interest rate cuts’. In the end, the proposed ‘divergence’
was ‘put to the vote’. BA and GiroCredit voted in favour,
PSK, BAWAG, RZB and NÖ Hypo against. Erste and CA
would follow the lead given by BAWAG.

(100) Another problem that the banks had to discuss in this
meeting was the growth in demand from consumers for
fixed-interest loans. Setting a fixed interest rate for the
entire duration of the loan would bind the banks to that
rate and they would no longer be able to respond to
changes in the refinancing rates. They therefore needed
to come to an arrangement to deal with the growing
demand for this form of lending, unfavourable from the
banks’ point of view: ‘All the banks represented (...) agree
that where possible fixed interest rates should no longer
be quoted at all’. As regards rates for mortgage loans,
CA, BA and BAWAG, among others, would, in accord-
ance with the ‘opinion of the committee’, raise the rates
to 7,25 % in July. A further increase to 7,5 %, however,
was only ‘agreed on in principle’, since its implemen-
tation was ‘viewed with scepticism’. The discussion was
finally brought to a close with a reference to ‘sticking to
the agreed maximum rate of 4,25 % for fresh funds’ (160).

(155) 14.483; 14.734 et seq.; 491; 12.212 et seq.; 26.473, 26.475

and 38.174.

(156) 2020; 26.499.
(157) 1235.

(158) 2019.
(159) See 2018.
(160) 14.474; 706.

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(101) The Minilombard Committee met two days later. It
found that for fixed advances, instead of the ‘minimum
rate agreed some time previously’ of VIBOR + 0,5 % (161),
more favourable interest rates were occasionally being
offered. The Vienna institutions were therefore urged to
ensure that, as on previous occasions, the ‘[representa-
tives] decide at the next Lombard meeting’‘not to tolerate’
the undercutting of the agreed minimum interest rate
‘any longer’ (162). The handwritten comment ‘too early’
on this memo suggests, however, that it was considered
premature for the [representatives] to deal with this
matter at that time (in fact the [representatives] were
unable to reach an agreement at the following meeting,
see recital 104). Further items discussed were the
maximum fixed-interest period (it was to be seven years,
and in the event of early repayment a suitable penalty
was to be payable) and the 0,5 % house bank margin
(for details see section 12.1), where it was considered
that joint action should be taken to counteract the
‘frequent attempts of exporters’ to ‘bring the margins
down’. Finally ‘it was agreed to make a discreet cut in
the prime rate (...) to around 9,75 % in the course of
July’ (163).

(102) During this phase the institutions seem not to have
stuck very closely to the agreements made in respect of
some products. Although in the case of savings deposits
(employee group rates) ‘all the major banks were sticking
to the agreed interest rates’ (even BAWAG was ‘very
disciplined and very cooperative’), in other areas a ‘lack
of discipline in setting terms’ was observed, which had
again taken ‘the same forms as at the time when the
regulative measures ceased to apply’ (164). ‘Joint decisive
action to improve margins’ therefore seemed necessary.
However, the general assessment was that ‘the right
moment for binding agreements would come only once
the (likely to be rather poor) half-yearly results [1994]
were presented’. Only then could ‘more discipline,
emanating from the Lombard Club, be expected ...’ (165).

(103) This meeting of the Lombard Club took place on 6 July.
One of the subjects discussed by the [representatives] on
this occasion can be identified from the internal memo
written to brief CA’s [representative], which states,
‘Since we (referring to BAWAG and PSK) have not
implemented the proposal of the Deposit Rates Com-
mittee (regarding “divergence”, see recitals 97 and 99),
pending a meeting between yourself and [...] [BAWAG’s
[representative]], the other institutions have not taken

(161) The Vienna interbank offered rate was the rate at which banks
could lend each other money in the short term, i.e. for a period
of 3 to 6 months (three or six month VIBOR); it corresponded
to the monthly average of the short-term rates published by
eight credit institutions in Vienna; it was replaced on 1 January
1999 by the EURIBOR.

(162) 2467 et seq.
(163) 16.328.
(164) 14.249; 491.
(165) 15.773 et seq.; 12.210; 26.577.

any action either. Apparently, [...] [BA’s [representative]]
wants to speak to you’. They also discussed building
advances and loans; CA,
‘in cooperation with Bank
Austria and Erste and in opposition to the findings of
the Deposit Rates Committee’ (see recital 100) proposed
an immediate increase. Lastly, they discussed employee
group rates for personal loans, for which, although the
‘big banks usually stuck to the agreed interest rates’, a
one-off low rate below the agreed interest rates was
being contemplated (166).

(104) However,

‘no agreement on rates was reached at the

Lombard meeting’ (167).

July to September:
retention of lending rates; joint preview of charge increases

joint reduction of deposit rates,

joint

(105) On 11 July the [representatives] of BA and CA met to
talk about lending and deposit rates. In an internal
memo dated 8 July, addressed to BA’s [representative] in
preparation for the meeting, it is stressed, ‘that the price
war in lending and deposit rates’ must be ‘stopped
immediately’. Large-scale financing, rather than being
carried out ‘in destructive competition by one competi-
tor’, should instead be implemented ‘in syndicate by the
leading major banks’ and with higher interest rates.
Deposit rates should be cut (see recital 108) (168). CA’s
[representative] was likewise briefed by his subordinates
before the meeting (169).

(106) On 13 July [a meeting took place at controller level].
[Representatives] for marketing/retail banking in the
various banks also took part in this meeting ‘so that
genuinely feasible action could be discussed’. A ‘rapid
cut’
in deposit rates was considered to be ‘urgently
required’. It was therefore suggested to [representatives]
responsible for deposit rates that preferential rates be
cut by 0,25 % by 1 August and that no more than 4,5 %
interest be paid, coupled with a cut in interest rates for
one-year savings accounts by 0,5 to 4 %. Criticism was
also expressed of the fact that some 20 or 30 companies
(the Top 30) were ‘getting’ the banks ‘to outbid one
another’ (170). In order to prevent this form of compe-
tition in future, it was suggested that they draw up a list
of these companies and deal with them in accordance
with a ‘code of conduct’ or take joint action (syndicated
financing).

(166) 2469 et seq.
(167) 34.645.
(168) 31.673.
(169) 26.588.
(170) This took the form of attempts by creditors to apply pressure
on banks by pointing to more favourable offers by other banks.

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(107) Lastly, ‘the Federal Deposit Rates Committee was asked
to turn its attention to a comprehensive implementation
process from the beginning of August’ (171).

(108) These ‘talks on interest rate adjustments’ (Federal Deposit
Rates Committee) took place, taking express account of
the ‘talks held [at senior management level] [on 6 July]’,
on 25 July. BA presented its views, developed ‘in full
cooperation with Creditanstalt’ (see recital 105) on a rate
cut, on the basis of which the following ‘recommen-
dations were formulated’: cut in the preferential rates by
0,25 % (as discussed a short while previously in the
Controller Committee) — in ‘a meeting between [...], [...]
had also spoken’ in favour of this option (172), ‘diver-
gence’ — in savings bonds (i.e. rate cut for one-year
savings bonds and simultaneous increase for five-year
in employee savings rates by 0,25 %
bonds), cut
and new maximum rates for medium-term notes. As
recommended [at controller level], these measures were
to be implemented as quickly as possible (by 1 August,
if feasible), and it was agreed that mutual checks would
not be undertaken in August ‘so as to ensure smooth
implementation’.

(109) Lending rates were also discussed, and it was found that
in the provincial capitals ‘recommended rates were
largely being followed’, but that in rural areas lower
rates were frequently offered, which practice should be
‘stopped in the coming weeks’. The ‘priority goal’ of
raising building loan rates by 1 August was discussed.
While Erste, GiroCredit and RBW ‘agreed with this
proposal’ or ‘had taken this step’, BAWAG was prepared
to raise rates only together with CA, while CA was
waiting for BAWAG. There was therefore greater need
for coordination or, as the minutes put it, ‘[representa-
tives at senior management
level] would have to
talk’ (173).

(110) Two days later, on 27 July, high-level telephone calls
took place between BA, CA, BAWAG, Erste and GiroCre-
dit on the subject of a concerted cut in deposit rates. In
an internal memo, BA’s representative on the Lending
and Deposit Rates Committees summarised these tele-
phone conversations as follows: ‘[...] thinks that he is
bringing [...] round to the idea of a savings rate cut as
discussed [at
the Federal Deposit Rates Committee
meeting on 25 July, see recital 108], but just wants to
be sure that PSK will lower its rates too. If so, then
BAWAG will cut its rates this coming weekend.’ The
writer of this memo recommends that BA ‘stick to its
schedule, GC (GiroCredit) and EÖ (Erste) are pretty
reliable partners’ (174).

(171) 3669; 15.767; 31.686.
(172) 15.431.
(173) 20.743 et seq.; 2014 et seq.; 700 et seq.; 26.620.
(174) 26.458.

(111) On 2 August APA reported that ‘the Austrian interest
rate scene is changing once again’: the big banks had cut
deposit rates for one-year savings accounts and for
preferential-rate deposits by 0,25 % on 1 August, while
other banks planned to do the same by the middle of
August. BA and BAWAG actually implemented the
agreed ‘divergence’ in capital savings, with Erste due to
follow suit (it did so on 10 August (175)). CA finally
decided after all to raise building loan rates to 7,25 % as
discussed (176). Erste had already raised its rates for
building loans on 29 June, explicitly stating as its reason
that its ‘main competitors’ would ‘also be raising their
rates’ (177).

(112) In September the time had also come for the banks to
jointly discuss raising a number of charges the following
year. At the Payment Transactions Committee meeting
on 14 September the participants informed one another
of the extent and timing of their planned increases in
charges for maintaining accounts, accounting entries,
cheque transactions and payment cards (178).

in July at a meeting of

(113) Following a joint ‘review of the cut in deposit rates’
carried out
the Controller
Committee held on 7 September (179), [representatives]
met in the Minilombard Committee on 22 September.
First, it was noted that for fixed advances, the maximum
duration, agreed in June (see recital 101), of seven years
was now being adhered to as far as possible ‘by all the
institutions’. It was not thought sensible to raise lending
rates, else deposit rates would also have to be raised (180).

(114) The same conclusion was reached unanimously by those
participating in the Vienna Lending and Deposit Rates
Committee meeting the following day. No changes
should be made ‘so that the market remains calm’. It was
counted ‘a success’ that the agreed preferential rates
‘were being kept to’, especially by the big institutions, as
test deposits with competitors proved. As soon as the
secondary market yield (181) exceeded 7,5 %, or by mid-
November at the latest, another Lending and Deposit
Rates Committee meeting should be held (182).

(175) 38.169.
(176) APA, 2 August 1994.
(177) 38.168.
(178) 22.165 et seq.
(179) 3662.
(180) 14.239 et seq.
(181) The secondary market is the market for securities already in
circulation (especially on the stock exchange). An average
secondary market yield is regularly calculated from the yields of
these securities.

(182) 16.358; 649; 15.755 et seq.; 14.470.

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October to December: concerted rise in lending rates, avoidance
of competing by advertising interest rates, confirmation of
minimum charges for securities

(115) At (the) meeting [at controller level] on 25 October (...)
an ‘urgent need for action on the lending side’ [was
identified], where the banks should ‘aim for interest rate
rises for personal and corporate loans’. To this end, BA
would call a meeting of the Minilombard Committee, in
which [representatives at controller level] would take
part. As regards the ‘Top 30’ customers, greater coordi-
nation in the area of syndicate financing was called for,
so that rates could be improved (see recital 106) (183).

(116) The ‘rates table’ for standard products drawn up and
continually updated [at controller level] should be
the industry by means of
disseminated throughout
‘decentralised information initiatives following a snow-
ball system’ (184).

(117) The lending rate rises called for [at controller level] were
then discussed in detail by the banks’ representatives in
respect of both retail and corporate banking.

(118) First, on 8 November, the Vienna Lending and Deposit
Rates Committees met. They criticised the fact that
individual institutions were not sticking to agreements
made (whereas the Vienna banks were ‘keeping to the
agreed rates’ for fixed-interest savings deposits). After an
in-depth discussion it was decided not to change any-
thing on the deposit side, while declarations of intent
followed as regards the lending side: BAWAG’s represen-
tative ‘announced a rise in the interest rates for building
loans’, which ‘decision would be influenced by the
outcome of the Lombard meeting’. If BAWAG really
were to implement this rise, BA announced directly that
it would be prepared to raise its interest rates for building
loans. The other participants contemplated raising rates
by 0,15 to 0,5 %. Everyone agreed that, if questioned by
the press or by the Association for Consumer Infor-
mation for rate comparison purposes, they should in
future stick to communicating only the (official) rates
the counter and not answer any further
posted at
questions. In any case, those banks which posted the
(higher) rates would ‘be seen as forcing prices up’ (185).

(119) Lastly, the banks should in future avoid altogether
advertising lending and deposit interest rates. To this
end, ÖVAG proposed concluding a ‘gentlemen’s agree-
ment’ (...) in the Lombard Club, which proposal received
‘broad support’ from the other participants (186). The
purpose of these and other measures was ‘to counteract
the heated competitive situation’ (187).

(120) Next the Minilombard Committee members met on
16 November 1994. In agreement with the proposals of
the Controller Committee, the ‘unanimous opinion was
that a general interest rate increase’ of 0,5 % should be
implemented ‘as soon as possible’, and by 1 December
1994. For fixed advances, a minimum margin of VIBOR
+ 0,5 % was ‘considered necessary’ (188). So that these
increases could be ‘pushed through’ by 1 December
1994, [senior management] should ‘coordinate matters
by telephone’ (189).

fees were discussed.

(121) At the ‘Documents Committee’ meeting on 17 Novemb-
er, documentary credit
It was
pointed out that ‘agreement had been reached years ago
to charge rates which at least covered costs’. However,
some banks had in the meantime been offering more
favourable rates. The call for ‘more price discipline’
met with ‘general agreement’ and a ‘special committee
meeting’ was called for to draw up ‘lower limits’ for
these rates (190).

(122) One of the subjects discussed at the Securities Committee
meeting on 22 November was ‘minimum fees’
for
handling shares and bonds. Already at the ‘securities
technique’ working group on 25 November 1993,
‘changes in the fees/minimum charges for buying and
selling, custodian fees for securities, and custodian fees
for own issues’, together with ‘the planned time schedule’
joint dis-
for implementing them were subjects of
cussion (191). BA had initially given the impression that
it wanted to move away from the agreed minimum fees.
At the meeting of 22 November this turned out to be a
‘misunderstanding’; BA, now as ever, gave its ‘full
backing to the minimum fees’. Only for ‘own-account
placements going public’ was BA considering not apply-
ing the agreed minimum fees. The representative of
GiroCredit presented one of the market surveys carried
out by his institution, which revealed that PSK and RBW
(for domestic and foreign bonds), together with RZB
(for domestic bonds) were clearly ‘undercutting’ the
minimum fees (192).

(183) 3971 et seq.
(184) 3971 et seq.
(185) 14.463 et seq.; 26.778; 36.331.

(186) 20.020 et seq.
(187) 13.704.
(188) 2461.
(189) 14.225.
(190) 19.701.
(191) 9683.
(192) 4521 et seq.; 5562.

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(123) On 23 November [a representative of CA] responsible
for financing at the time reported to his [...] colleagues
that in discussions with the members of the management
boards of BA, RZB and GiroCredit on raising lending
rates, they had been ‘unanimous’. As far as CA was
concerned, [a senior representative] would ‘give defini-
tive information on how to proceed after talking with
[...] [a senior representative of BA]’ (193).

(124) The ‘practical arrangements’ for the rate rise for commer-
cial loans agreed on in principle in the Minilombard
Committee on 1 December were then ‘agreed between
the big Vienna banks as follows’: a 0,5 % rate rise for all
commercial loans by 1 January 1995 and a minimum
interest rate for operating funds loans and investment
loans of 8,5 % (194). Only BAWAG did not commit itself
yet; the subject was to be discussed at the Lombard Club
meeting on 7 December (195).

(125) The subjects discussed at the Lombard Club meeting of
7 December can be identified from two internal memos
to [the representative of CA] in preparation for the
meeting. The authors first refer to the ‘agreed’ new rates
and then raise the question of whether this has already
been ‘discussed in the local interest rate committees’. As
regards deposit substitutes, BA had ‘lowered’ its rates ‘to
the agreed level’, though BAWAG had been threatened
with the issue of higher-interest CA medium-term fixed-
rate notes, if it did not adjust its rates. BAWAG had
responded by ‘promising to adjust’. CA’s [representative]
was urged to ‘speak to’ BAWAG’s [representative] again
about ‘lowering its savings-deposit substitutes to the
agreed level’ (196). Finally the [representatives] agreed
that the Minilombard Committee should discuss the
adjustment of debit rates for commercial loans and cash
advances (197).

(126) On the same day as the Lombard Club meeting, a
Controller Committee meeting took place, at which the
0,5 % rate rise for commercial loans decided on by the
Minilombard Committee was reported. It was noted that
the participants in the Treasurer Committee and Key
Account Management Committee were not sticking to
the ‘principles’ agreed [at controller level]. [Representa-
tives at controller level] should therefore take part in
Treasurer Committee meetings in future.

(193) 2466.
(194) 1226; 2343.
(195) 172.
(196) 1226; 2343; 36.334.
(197) 1197.

8. CHRONOLOGY OF EVENTS: 1995

January and February:
avoidance of an increase in deposit rates

joint increase in lending rates and

(127) On 5 January Erste made an offer to a potential
customer, who subsequently quoted it to CA in order to
obtain a similarly favourable offer from it. The relevant
CA employee noted in writing beside the Erste offer of
‘special deposit rate of 5 %’ that there was an ‘agreement
E (i.e. Erste), BA, CA’ to pay only 4,25 % for such special
deposits (Dispo deposits). The Erste employee had agreed
to reduce the ‘special deposit rate as from 3,3. to
4,25 %’ (198).

(128) In terms of ‘formal’ agreements, 1995 began with a
Vienna Lending and Deposit Rates Committee meeting
held at 10.00 on 10 January. As far as special variable
interest rates are concerned, a maximum interest rate of
5 % or, as from ATS 1 million in new funds, 5,25 % was
‘agreed’, so as ‘not to further stoke up competition’,
though reference was also made to the lack of discipline
in implementing agreements. Reference was likewise
made to the ‘decision’ of the Vienna Lending and Deposit
Rates Committee on 8 November 1994 (see recitals 118
and 119) according to which, in response to enquiries
from the media and consumer representatives, only the
(official) posted rates, and not the (lower) special rates,
should be made public, so as to ensure that competition
between the banks was ‘avoided via this information
level’.

(129) As far as lending rates were concerned, the majority of
the participants favoured an increase of 0,5 %. Only
BAWAG had problems with building loans and con-
sumer instalment loans and said it would therefore not
be prepared to see an increase until the end of the
quarter. The ‘final decision’ on the increase was therefore
to be taken ‘at the Lombard Club meeting on 18 January
1995, so that a uniform increase is introduced in respect
of existing and new positions. The increase is to be
applied as from the beginning of February 1995’. In
sending the report on this committee meeting to [a
senior representative], the CA participant accordingly
added the following handwritten note: ‘Important item
on agenda 18.1. Lombard’ (199).

(130) The Treasurer Committee was then convened for 14.30.
‘In order to get the new year off to a productive start’,
the meeting was to include discussion of ‘short-term
lending and deposit rates’. Those participants who did
not themselves have any direct influence on the shaping
of rates for fixed advances should take with them
‘an appropriate person responsible for key account
management’, for example the relevant member of the
Key Account Management Committee (200).

(198) 36.335.
(199) 1998 et seq.; 12.086; 2321; 2325; 14.455; 1296 et seq.
(200) 1318.

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(131) With a view to the ‘increase of 1/2 % in personal loans,
which is to be dealt with in the Lombard’, the CA on
11 January sent a fax marked ‘urgent, confidential’ to
Oberbank (Salzburg), BTV (Tyrol) and BKS (Carinthia) ‘to
be coordinated in the local interest rate committees’ (201).

(132) The Lombard Club meeting on 18 January agreed on the
interest rate increase proposed by the representatives of
the Vienna Lending and Deposit Rates Committees. The
Erste [representative] reported in an internal memo on
the meeting that ‘old and new commercial loans are to
be raised by 0,5 % and new personal loans by 0,25 to
0,5 %’ (202). Erste itself introduced the agreed 0,5 %
increase for old and new commercial loans on 1 Februa-
ry, but did not introduce the increase on personal loans,
since BAWAG was ‘prepared to discuss this’ only as
from February (203).

(133) This was done at the beginning of February: BAWAG
decided on the increase in interest rates, so that BA,
Erste, RBW, PSK-B and other banks were also able to
‘introduce an increase for old and new loans of up to
1/2 %’ (204).

(134) On 24 January the members of the Securities Committee
decided to set up a ‘working party BA, EÖ, RZB,
BAWAG, GIRO and PSK’ which, at the invitation of CA,
was to provide advice on the fees to be charged for the
ad hoc business appraisals carried out by the banks (205).

(135) At the Controller Committee meeting on 7 February, the
banks reported on the agreed 0,5 % interest rate increases
for commercial and personal loans. As regards deposit
rates, the ‘current specimen calculation’ was first dis-
cussed. Satisfaction was expressed at the fact that in
Vienna the agreed terms for savings deposits were
‘holding’, though the ‘lack of price discipline’ outside
Vienna as regards special rates was criticised. BA suggest-
ed that this problem should be solved by partitioning off
individual regional markets and, for example, ‘regarding
Tyrol and Carinthia as individual markets and not
transferring the price policy there to Austria as a whole’.

(136) Since in the [...] estimation [made at controller level] the
interest rate curve for 1995 and 1996 would be less
favourable than in 1994, there was ‘a need for action in
order to avoid a deposit rate increase’. The ‘decision’
was therefore taken to ‘prevent deposit interest rate
increases’. The personal loan increase should be ‘pushed
through’, and the banks should ‘exchange by fax’ and
then ‘discuss on 2.3.1995 [date of the next Controller
Committee meeting]’ proposals concerning deposit rat-
es. Lastly, Erste requested ‘exchange of experience’ on
cost control and investment budgeting: ‘BA and PSK will
carry out exchange of experience’ (206).

(137)

‘Interest rate developments regarding deposit rates’ were
also discussed at the Lombard Club meeting held on
8 February (207).

(138) On 8 February, [representatives] responsible for corpor-
ate customers at BA, CA, Erste, GiroCredit and RZB held
‘informal discussions’. As a ‘direct objective’ for fixed-
date advances, it was decided to set a lower limit of
VIBOR + 3/8 %. The participants wanted ‘to win the
others over as well’ to this project at the forthcoming
Minilombard meeting on 23 February (see recital 145)
and subsequently make sure that the result achieved was
‘safeguarded by holding committee meetings in the
provinces’. The minimum rate thus established and
secured should then ‘be maintained for at least two
months’, and if there were any problems in individual
there would have to be ‘increased coordi-
cases,
nation’ (208).

(139) On the same day, what was evidently the first meeting
of the Building Loans Committee also took place. The
Commission does not have any minutes or memos
relating to it (209).

(140) On 17 February, the bank representatives met in the
Vienna Lending and Deposit Rates Committee ‘to pre-
coordinate the forthcoming Federal Deposit Rates Com-
mittee meeting on 22.2.’ (see recital 142). They reached
‘agreement regarding bonus-carrying savings deposits’.
‘For Austria as a whole’, interest rates of 5 % for newly
acquired customers and 5,25 % where a competing offer
had to be fended off were ‘agreed’. BAWAG also
informed its competitors that it would raise savings
account rates at the same time as the personal loan
increase. Since BAWAG had evidently taken this decision
without prior agreement with its competitors, this piece
of information came as a ‘complete surprise’ to the other
participants at the meeting (210).

(201) 2327; 2333.
(202) 1194.
(203) 1195.
(204) 12.387.
(205) 19.185.

(206) 3618 et seq.
(207) 17.308; 17.311.
(208) 36.338.
(209) 19.532.
(210) 2993; 1292.

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(141) CA made a slip-up in February. Despite the proposal,
discussed on several occasions with competitors, that
advertising would no longer make reference to interest
rates, CA’s advertising department (acting against the
objections of the personal loans department) advertised
building loans with interest rates. In the estimation of
the personal
loans department, this could have the
undesired consequence of leading to a ‘new round of
interest rate competition’ between the banks, quite apart
from the loss of ‘credibility’ on the part of CA with its
competitors, since CA had always advocated a policy of
no advertising. However, things were perhaps not so
bad, since the advertising that had been criticised was
confined to Carinthia and since, on ‘the principal market
of Vienna’, (as agreed) ‘interest rates were no longer
being advertised in newspapers’ (211).

February and March: negotiations on an increase in deposit
rates, agreement on fixed advances and erosion of confidence
in assurances given by BAWAG

(142) The abovementioned meeting of the Federal Lending
and Deposit Rates Committee was held on 22 February.
As some time had elapsed since the previous meeting of
the Federal Lending and Deposit Rates Committee on
25 July 1994 (see recital 108), RZB, acting as the host,
made a few introductory remarks in which it stated that
‘interbank exchanges of experience regarding rates’ had
so far proved to be ‘a useful instrument for preventing
uncontrolled price competition’. Although the banks
had been able to improve their earnings through their
coordinated increase in lending rates ‘implemented
(see in particular
throughout almost all of Austria’
recital 132), there was now a need to ‘get together’
and, as far as deposit rates were concerned,
‘counter
problematic price trends’,
in particular ‘stop upward
trends in interest rates’.

(143) The bank representatives accordingly set about finding
‘constructive solutions’ together, ‘for the good of their
institutions’. The issue was the ‘completely surprising’,
because, unusually, it had not been agreed with competi-
tors, 0,5 % increase in the rate on savings accounts
carried out by BAWAG (see recital 140). CA and Erste
said that they would ‘fully match’ this increase. BA tried
to get these two banks to ‘retreat from this position’, but
‘failed’ to persuade them to do so. BA then informed the
other participants that it would not match the BAWAG
interest rate increases if other banks so decided. The
credit unions and PSK supported the BA position, while
NÖ Hypo adopted a ‘wait-and-see position’. Following
‘detailed discussion’ all the participants finally ‘agreed’ to
go along with the increase, while BA said it would
‘decide only in the afternoon’.

(144) In addition, as regards special rates (savings accounts) in
the Vienna area, ‘a maximum interest rate of 5 %’ (for
new and old capital) was ‘laid down’. As regards cash
bonds, ‘the participants in the discussion agreed’ that
they would not at present introduce any rate increases.
The ‘overall position’ ultimately reached ‘by agreement’
was to try to get customers to opt for the savings
account segment so as to ‘try to prevent’ an interest rate
increase in the bonus-carrying area (212).

(145) The next day, 23 February, a Minilombard meeting
took place. As decided at the ‘informal discussion’ on
8 February (see recital 138), the participants ‘agreed’ to
‘apply rigorously’
fixed advances a
in the case of
minimum premium of 3/8 %, a minimum period of one
month and a minimum volume of ATS 10 million per
transaction, starting on 8 March and initially limited to
a few weeks (to be extended if there was ‘appropriate
discipline’). The ‘local area of application’ of this ‘agree-
ment’ would, by means of ‘regional agreements’, also be
‘extended to the eastern provinces’: branches in the
provinces ‘should reach agreement in regional com-
mittee meetings’ (213).

(146) [A meeting took place at controller level] on 2 March in
order to deal with the ‘situation regarding lending
and deposit rates’ and reach agreement on whatever
‘countermeasures’ were necessary (214).

(147) The Vienna Lending Rates Committee meeting on
13 March confined itself on this occasion to a detailed
exchange of information on the current interest rate
situation, since none of the banks thought a change in
interest rates would be ‘possible and opportune’ in the
immediate future. Instead, it was considered necessary
to ‘re-establish eroded confidence in the statements of
the BAWAG representatives’. As has been seen, BAWAG
had made changes to interest rates without the prior
agreement of its competitors (see recitals 140 and 143),
and these had of course been ‘regarded as not very
appropriate by all the other banks’. If therefore any
‘surprising interest rate changes’ were made in future,
then at least ‘immediate information should be provided
to all members of the Lending Rates Committee’ (215).

(148) On 14 March the [representatives] of Erste and BA met
over an ‘informal lunch’. ‘In preparation’ for this meeting,
the relevant Erste senior staff were asked to state which
issues from their respective business areas should be
discussed at the meeting by the Erste [representative],
e.g.
‘aggressive rates policy’ or ‘allocation quotas for
issues’.

(211) 12.388.

(212) 14.326 et seq.; 1991; 1290 et seq.
(213) 14.223; 1221 et seq.
(214) 3610 et seq.
(215) 20.117; 1454.

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April to June: joint reduction of deposit rates and avoidance of
a reduction of lending rates

(149) On 30 March the Austrian National Bank cut the key
lending rates (discount rate by 0,5 %, lombard rate by
0,25 %, with effect from 31 March). In response to this,
the major Austrian banks did not take independent
decisions, but convened a Vienna Deposit Rates Com-
mittee meeting on 31 March, at which (in coordination
with the meeting of the Federal Lending and Deposit
Rates Committee held on 7 April (see recital 152), the
joint reaction to the cut
in key lending rates was
‘essentially agreed’. The participants were ‘unanimously
of the opinion’ that the cut in key lending rates was the
‘last chance’ this year for a lowering of interest on
savings deposits. The following approach was therefore
agreed on: a 0,5 % cut in special rates and employee
savings products, a 0,5 % to 0,25 % cut in capital savings
accounts and a 0,5 % cut in premium savings products.
PSK was reproached for its three-month savings account
(because it was not in accordance with the agreements);
‘this product was
it
conceived as a special scheme and will be discontinued’.

justified itself by arguing that

(150) The next steps were laid down as follows: ‘The prelimi-
nary decision-making process aimed at achieving this
reduction’ should,
the participants,
in the view of
‘also involve the [controller level]’. Following discussion
there should then be
within the individual banks,
‘telephone consultation at management board level’ and,
by the end of the 14th calendar week,
‘transfer of
information between those responsible’. The reductions
were to be introduced during Holy Week.
‘For the
purpose of reaching further agreement’ on the steps to
be taken by the banks, a meeting of the Federal Lending
and Deposit Rates Committee was convened on 7 April
(see recital 152). ‘Confirmation’, or, in the event of any
problems, the ‘final coordination’, was to be provided
(...) at the next Lombard Club meeting on 19 April
1995 (216).

(151) Amongst [the bank representatives], there was ‘unani-
mous agreement’ at the Minilombard meeting on 6 April
that, despite the cut in key lending rates, interest rates
on loans should not be reduced. The ‘forthcoming
reduction in deposit rates’ (see the decisions taken at the
meeting of
the Federal Lending and Deposit Rates
Committee held on 7 April (see recital 152) should ‘as
far as possible not be reflected in lending rates’. In the
case of individual types of financing (current account
and investment loans, bill discount,
fixed advances,
fixed-interest loans and credit by way of bank guarantee,
house bank margin in export financing), specific mini-
mum rates were ‘fixed or endorsed as guidelines’ (217).

(216) 1288 et seq.; 250 et seq.; 14.447; 38.153; 20.139 et seq.; 4101.
(217) 2316; 14.219.

(152) At the meeting of the Federal Lending and Deposit Rates
Committee held on 7 April, a ‘consensus’ was reached
on the 0,5 % reduction in special rates (a reduction of
only 0,375 % by BAWAG). In addition,
‘in order to
steady markets’, ‘maximum rates’ were agreed in respect
of special rates for new business (4,25 % as from
ATS 500 000, 4,5 % as from ATS 1 million and 4,75 %
as from ATS 5 million), and these maximum rates were
also not to be exceeded by branch managers. The actual
dates for the reduction ‘vary somewhat, but are mostly
concentrated in the next week’. BAWAG later reported
that it wanted to introduce the reduction only after the
Lombard Club had met on 19 April 1995.

(153) As regards capital savings accounts, by contrast, ‘initially
no unanimous agreement’ could be reached. Although
BAWAG held out the ‘prospect’ of a 0,375 % interest
rate reduction, it would announce its final decision only
on 10 April ‘by fax to the other sectors, which will then
take their lead from it’. Lending rates should remain
unchanged (218).

(154) At the Controller Committee meeting on 25 April there
was also agreement that lending rates should remain
unchanged. It was decided to pursue a joint extrapolation
of earnings;
for this purpose, the individual banks’
extrapolations should be combined (219). A meeting of
experts should also work out a ‘uniform approach’ for
the calculation of remaining maturities. Another group
of experts should examine securities accounts statistics/
market shares. As regards internal calculation methods
in respect of special rates for savings accounts, Erste
would draw up a discussion paper. A ‘common solution’
should also be found for the uniform classification of
the 1 000 largest corporate customers (220).

(155) At

the Securities Committee meeting held on the
same day (25 April) the subject of discussion was the
‘arrangement fees’ charged to stock exchange partici-
pants by the OeKB, in its capacity as the clearing and
settlement house for transactions on the Vienna stock
exchange included in the arrangement (221). The [...]
OeKB [representative] ‘called on everyone to accept the
proposed arrangement fees [to be adjusted as a result of
the introduction of the fully automatic trading system
EQOS]’. The meeting then reached ‘agreement with

(218) 36.339; 14.321; 1286 et seq.; 2314.
(219) See 2626.
(220) 3598 et seq.
(221) All securities listed on the Vienna stock exchange for official
dealing or regulated unofficial dealing are included in the
arrangement. The transactions must therefore as a rule be settled
in accordance with the provisions of the Arrangement Order.
The execution of arrangement transactions is ensured by an
arrangement security deposited by participants.

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L 56/25

representatives of CA, RZB, BA, GC and Erste on the
adjustment of arrangement fees’. In addition, the ‘annual
flat fees were agreed with the [representatives] of CA,
BA, GC, Erste, RZB and ÖVAG’ (222).

(156) Although the Commission does not have any minutes
of
the Building Loans Committee meeting held on
23 May, the agenda drawn up on 9 May includes
reference to ‘current developments’ and to ‘further
common measures’ (223).

(157) On 10 May, at their monthly Lombard Club meeting,
the [representatives] discussed what from their point of
view was the rather unsatisfactory trend in the interest
margin. They agreed that ‘deposit rates were at present
too high (Bank Austria: in general, 1 % too high)’. For
this reason ‘[...] [BA [representative]] proposed a Deposit
Rates Committee meeting to cap maximum interest
rates’. This proposal was ‘supported by all those pre-
sent’ (224). As regards commercial
it was also
proposed that uniform risk premiums be established.
For this purpose, the ‘Controller Committee should
make suggestions’.

loans,

(158) The Federal Deposit Rates Committee meeting which
the [Lombard Club] thought appropriate with a view to
bringing about a coordinated interest rate reduction
took place on 19 May. Those present shared the opinion
interest rate
of [the Lombard Club] that ‘a general
reduction for deposits could not be avoided’.

(159) BA began by proposing that special interest rates should
be reduced immediately, but could get
‘no general
agreement’ on the matter. Similarly, its second sugges-
tion, that there should first be a reduction in special
interest rates and then a reduction in interest rates for
capital savings accounts, ‘was not accepted’. Finally, the
following ‘compromise’ was agreed on: as from 20 June,
all deposit rates should be reduced by 0,5 %. As from
that time, the ‘maximum rate’ for special interest rates
should be 4,5 or 4,75 %. ‘Already now’, moreover, the
‘5 % rate’ should no longer be used for acquisition
purposes. As a back-up measure, it was decided that, in
the area of
‘no further advertising
measures based on low interest rates or reductions in
fees and charges’ would be undertaken.

lending activity,

(160) So as to ensure that these decisions were also implement-
ed in the provinces, it was agreed that the decisions
would be ‘passed on to the provincial committees and
acknowledged by them’. Lastly, the measures decided on
were to be ‘coordinated once again and laid down’‘at the
next Lombard meeting’ on 7 June.

(161) As far as timing was concerned, BA would ‘give the lead’
and make a 0,5 % cut probably at the end of May. The
other banks would, as agreed,
‘have completed this
measure’ by 20 June. CA would follow BA’s timing,
includes the
an internal CA memo on the subject
handwritten remark that it should be clarified ‘for when
[CA] [representative] has agreed the reduction with [...]
[BA [representative]]’. BAWAG once again broke ranks,
since it wished to introduce the cut no earlier than the
end of June. It should therefore be ‘clarified at [senior
management] level’ whether it would be ‘possible to
ensure prompter
taking
account of BAWAG’.

implementation without

(162) As far as lending rates were concerned, there was a
should be

that no cuts

‘minimum consensus’
implemented (225).

(163) Only a few days after the Federal Deposit Rates Com-
mittee meeting, a Vienna Deposit Rates Committee
meeting was ‘called at short notice’ on 24 May in order
to ‘bring forward as far as possible’
the ‘originally
envisaged date for the savings interest rate reduction’
regarding the ‘agreements reached at the Federal Deposit
Rates Committee meeting’ (see recital 161). The extent
of the reduction should, ‘as planned’ and ‘already firmly
promised by most of the institutions’, amount to 0,5 %
and should result in the following savings account
interest rate scale: 4 % for one year, 4,25 to 4,325 % for
two years, 4,75 % for three years, 5,25 % for four years
and 5,75 to 6 % for five years.

(164) For these ‘interest rates cuts agreed at the last committee
meeting’,
the ‘following implementation dates were
agreed’: BA, CA and ÖVAG (for existing customers)
1 June, GiroCredit and NÖ Hypo 6 June, Erste 7 June at
the latest, ÖVAG (posted rate) 9 June, and BAWAG and
PSK in the second week of June (226).

(165) On the same day,

top-level representatives of BA,
BAWAG, GiroCredit, RZB and PSK met ‘as a smaller
group in the Minilombard Committee’ for an informal
‘exchange of banking experience’ and to discuss ‘the
current situation’. Since the ‘planned cuts’ in deposit
rates were likely to be ‘the last ones for some consider-
able time’, the increased margin which this made possible
should ‘be used to improve profits’ and should on no
account be passed on to consumers (i.e. there should be
no reductions in lending rates). Although it was also
important to ‘increase margins on fixed advances’, which
would mean ‘an improvement of a few million schillings
in profits’ for each bank, it was of ‘greater importance’
to avoid cuts in lending rates.

(222) 4657 et seq.; 38.171; 38.172.
(223) 19.534.
(224) 1189 et seq.; 914 et seq.

(225) 14.315 et seq.; 1284 et seq.; 914 et seq.; 26.500.
(226) 14.445; 2308; 1282.

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(166) There was

discipline

in
dissatisfaction with
implementing the decisions jointly taken. ‘Interest rate
discipline’ would therefore be the ‘theme of the Lombard
Club meeting in June’. It was generally agreed that better
discipline could be expected only ‘if compliance with
minimum margins became a “point of honour” for
management board members’. An internal CA ‘confiden-
tial memo’ refers to this issue as being a ‘matter for the
bosses’ (227).

(167) Lastly,

‘the following items should be discussed and
decided on at the Lombard meeting’: 1. no lending rate
cut; 2. no overdraft loans with interest rates based on
VIBOR day-to-day money rates; 3. maximum seven-year
term for fixed-interest loans; 4. maximum 10 year term
for loans tied to secondary market yields; 5. no roll-over
loans with short-term indicators; 6. minimum margins
for fixed advances; and 7. lower limits for the house
bank margin on export promotion loans (228).

(168) In an internal memo sent to [...] [senior representatives
of] CA [...] on 29 May, it is stated that current account
interest rates of VIBOR day-to-day money +0,5 % must
‘be prevented’. ‘Contacts for this purpose’ amongst banks
had ‘already [taken place] in the Minilombard and in the
Treasurer Committee’,
in both of which ‘there was
agreement’. This should also be ‘a priority topic’ at the
Lombard Club meeting on 7 June 1995 (229).

(169) On 1 June 1995, BA and CA reduced their interest rates
on savings deposits by the agreed (average) 0,5 %, and
Erste followed suit on 6 June (230).

(170) On 2 June, a meeting of the Controller Committee took
place. On the agenda item ‘interest rate developments,
interest rate policy’, the participating banks began by
bringing one another up to date on the ‘already
implemented or ... planned cut in savings deposit rates
by an average of 0,5 %’. It was then reported that
customers had ‘approached the banks’ with a request for
roll-over financing on a day-to-day money or three-
month basis. This desire on the part of customers should
not, however, be complied with, since otherwise a
‘dangerous erosion of the margin in current account
business’ was to be feared. RZB ‘declared itself ready’ to
draw up a proposal for calculating long-term loans on a
VIBOR basis for the next meeting. GiroCredit presented
its internal estimates of operating results (including a
detailed breakdown) for the current year (231).

(171) The planned (232) discussion of the above topics which
was to have taken place at the Lombard Club meeting
on 7 June (which the BA and CA [representatives] did
not attend) was apparently deferred to the Lombard
Club meeting held on 12 July.

June: breaking of ranks by BAWAG, general scolding and
coordinated reaction

(172) A little later, events took an unusual turn. On 19 June,
‘without prior notice’, BAWAG cut interest rates on
personal loans, this measure having been ‘obviously kept
secret’
from its competitors. This prompted CA to
‘convene a Consumer Lending Rates Committee meeting
at short notice’ in order at least to ensure ‘coordination’
of the reaction to this measure amongst the other
competitors. The meeting took place on CA’s premises
on 21 June (in joint session with the Liberal Professions
Lending Rates Committee) (233).

(173) Feelings ran high at the meeting. BAWAG, which had
already ‘not complied with the dates prescribed’ at the
last Deposit Rates Committee meeting and which in
addition had not provided appropriate information to
competitors on the measures taken, was fiercely attacked
by the other banks, particularly BA, CA and Erste. It was
‘the unanimous opinion’ that there was ‘no justification’
for this measure taken by BAWAG and that it ‘contradict-
ed the stated objective of all the relevant committee
meetings’ i.e. ‘not to go along with’ any cuts in interest
rates on loans. Any ‘such senseless competition’ was
downright dangerous.

(174) The BAWAG representative attempted to justify himself
by referring to ‘underbidding allegedly routinely prac-
tised by other banks in the case of works council
members loans’, an argument which in turn triggered a
series of mutual accusations and counter-accusations.

(175) BAWAG’s justification was rejected by the other partici-
pants. If there actually were any ‘undercutting of the
agreed rates’, then it was ‘more purposeful’ to ‘deal with
them at the next committee meeting’ and subsequently
to ‘make adjustments’ than to ‘break ranks’ and thus
‘further complicate’ the already difficult profit situation.
CA threatened to have BAWAG excluded from all
Lending and Deposit Rates Committee meetings. Those
present were asked ‘to request [that steps be taken at
senior management level] [...] to ensure’ [...] that interest
rates were ‘laid down on the basis of the widest possible
coordination within the industry’.

(227) 3984; 2389 et seq.
(228) 3984; 15.832 et seq.
(229) 2310.
(230) 3594.
(231) 2626; 27.014.

(232) 38.161.
(233) 2516.

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L 56/27

(176) The practical outcome of this meeting was that BA, CA,
Erste, RBW and others would ‘at all events follow suit’
on works council members loans, but would no doubt
also have to reduce the other products by about 0,5 %
as a result of the precedent set by BAWAG. It was also
‘agreed’ not to exceed the 6,75 % mark in the case of
loans to the self-employed (234).

(177) At the Minilombard meeting the next day, no such
feelings were evident amongst [the bank representatives].
In particular, ‘there was unanimity’ in concluding that
there should be ‘no general cut in interest rates in the
commercial sphere’ in the wake of the interest rate cut
introduced by BAWAG in the consumer lending sphere.
Those present ‘decided’ that they would submit to their
respective [representatives] ‘for the Lombard meeting’
the ‘recommendations for the laying-down of minimum
interest rates’ already agreed at their ‘informal meeting’
on 24 May (see recital 165) (235).

(178) At the Vienna Deposit Rates Committee meeting held
on 29 June, BA suggested ‘using the summer break for a
further cut for bonus-carrying savings deposits’, namely
to 4,5 or 4,25 % (existing deposits) and to 3,5 % (others).
Two variants were put forward for new business; of the
two, ‘the remaining representatives of the large Viennese
banks’‘preferred’ the moderate variant (4,5 %). In the
provinces, ‘a similar approach should be urged in the
local committee meetings’. A ‘corresponding agreement
[...] should be arranged at the next Lombard Club
meeting (12 July)’ (236).

July: agreement [at senior management level] on interest rate
‘recommendations’, criticism of CA

(179) On 3 July, [...] BA, CA, RZB and Erste [representatives]
responsible for lending held a meeting. They ‘confirmed
the proposals of the Minilombard meeting on 22.6.1995
[see recital 177], i.e. at all events to comply with the
relevant minimum margins’.
In the case of option
contracts, it should be endeavoured ‘to impose a sensible
minimum margin’, since banks’ interest rate policy in
this area was at present ‘senseless’. The subject should be
discussed at the next Lombard meeting (237).

(180) Before the Lombard Club meeting on 12 July, the CA
[representative] received a ‘list of desiderata’ and a memo
from his staff setting out topics which should be ‘brought
up for discussion’ at the Lombard Club meeting. In the
case of municipal funding, for example, a minimum
mark-up of 3/8 % should be charged, and customers
should not be granted any unilateral right of termination.

As regards building loans, neither indicator-linked terms
coupled with interest rate ceilings nor fixed-interest
agreements with interest rate ceilings should be offered.
Lastly, the agreement not to carry out any general cut in
lending rates was ‘accepted as altogether practicable’,
though pressure would increase as a result of
the
reduction for bonus-carrying savings deposits discussed
at the Vienna Deposit Rates Committee meeting on
29 June (see recital 178) (238).

on

agreed

following

(181) At the Lombard Club meeting on 12 July, the [represen-
‘recommen-
the
tatives]
dations’: 1. 4,75 % ceiling for interest on savings
deposits (special rates); 2. no lower-of clauses in loan
agreements; 3. no operating loans tied to VIBOR;
and 4. no SMY discounts. The 6,25 % ceiling for
long-term capital savings accounts still needed ‘further
discussion’, and the Erste [representative] accordingly
instructed a relevant Erste [representative]
to enter
into ‘talks with other CIs [credit institutions]’ in this
connection (239).

(182) Two days later the [representatives at controller level]
held their regular committee meeting. It was confirmed
that the abovementioned ‘recommendations from the
Lombard meeting should be implemented’. There then
followed a detailed exchange of information on the
banks’ forecast annual profits for 1995. The meeting
agreed, ‘with a view to ensuring mutual comparability’
in the assessment of opportunities,
to come to ‘a
common understanding’. A calculation proposal was
long-term loans based on
also exchanged for
VIBOR (240).

(183) At the Consumer Lending Rates Committee meeting on
19 July, the lack of interest rate discipline was deplored,
with the recommended minimum interest rate of 6,75 %
being undercut in loans to the self-employed in particu-
lar. There was criticism of CA’s practice of using funds
from the building loans bank to finance not only large-
volume housing projects, but also the construction of
private houses. This had not ‘been provided for’. The
other banks therefore ‘demanded’ that CA should no
longer offer private customers such loans. The CA
representative refused, but in an internal memo to [...]
CA [senior representatives] pointed to the danger of
‘being held up increasingly as the scapegoat for interest
rate excesses’ (241).

(234) 14.439 et seq.; 786 et seq.; 2398.
(235) 14.218; 2407.
(236) 27.037.
(237) 36.443 et seq.

(238) 2391 et seq.; 2387.
(239) 1184; 3555.
(240) See footnote 239.
(241) 14.437; 27.054.

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July and August: breaking of ranks by BA and coordinated
reaction

since a cut had been introduced only in July (see
recital 184). However, they made it clear that they would
‘immediately match’ any interest rate cut by BA.

(184) On 15 July it was BA which ‘broke ranks’ and, without
prior agreement, cut interest rates on bonus-carrying
savings deposits by 0,5 %. The bank representatives
accordingly met on 25 July 1995 for a Vienna Deposit
Rates Committee meeting for joint ‘discussion on further
interest rate cuts’. The other banks agreed that they
would ‘follow this example’ and implement a general
‘slight’ reduction (i.e. without changing the official
posted rates) of 0,25 % for all existing holdings. At the
high-interest end (5 % and above), each bank could ‘at
its own discretion’ make whatever cuts it wanted. The
cuts should be introduced by the end of the first week in
August. BAWAG reckoned on saving ATS 40 million as
a result of this coordinated interest rate cut.

(185) This episode exemplifies the close relationship between
the committee meetings in Vienna and those in the
provinces. At
the Vienna Deposit Rates Committee
meeting at issue here it was reported that the ‘local
discussions’ in the capitals of the provinces had already
‘indicated willingness to carry out the proposed interest
rate cut’. It was therefore ‘expected’ that the banks in the
provinces would ‘fall in with this approach’ and CA
subsequently sent the minutes of the meeting ‘to all the
regional [representatives]’. Four days later the person
hosting the Graz committee meeting proposed to his
assembled competitors that ‘in accordance with last
week’s Vienna Deposit Rates Committee meeting’ they
should cut rates ‘also in Styria’ (242).

August and September: joint cut in lending and deposit rates

(186) The reaction of the banks to the cut in key lending rates
by the Austrian National Bank on 25 August illustrates
once more how the joint decision-making process on
changes in interest rates was carried out.

(187) On that very day, 25 August, possible reactions as
regards deposit rates were discussed in an internal CA
memo. However, the measures which CA would actually
take depended ‘on the decisions taken at the Vienna
Lending and Deposit Rates Committee meetings’ (243).
On 30 August, CA called an ‘informal Vienna committee
meeting’ in order to ‘clarify the reactions of the individual
banks’. While BA (with the support of GiroCredit)
proposed cuts in both lending and deposit rates, the
other banks were in favour of ‘soldiering on’, especially

(188) After fairly lengthy discussion, the banks were in the
end unable ‘to come to any unanimous decision’. The
‘relevant decision’ should therefore be taken at the
meeting of
the Federal Lending and Deposit Rates
Committee specially convened for this purpose on
7 September.
‘Opinion formation in the individual
sectors should be completed’ by then, so that it would
be possible to ‘negotiate further’ on 7 September. If at
that meeting it was ‘decided to cut deposit rates in
general’, the Minilombard meeting scheduled for 8 Sep-
tember 1995 would work out a proposal [...] to be
discussed at the Lombard Club meeting on 13 Sep-
tember (244).

(189) Two days later, on 1 September, top-level representatives
of BA, BAWAG, RZB, GiroCredit and Erste met on CA’s
premises for ‘informal discussions’. There was ‘general
acceptance of the proposals made’ earlier at the informal
Vienna committee meeting. Savings interest rates (and
the interest rates on sight deposits and special ‘Dispo’
accounts) should be cut first, by 0,25 to 0,5 %, followed
by selective cuts in interest rates on loans. The Minilom-
bard meeting on 8 September should then ‘work out the
final proposal for the Lombard meeting in the following
week’ (245). On the same day, an Erste [representative]
responsible ‘officially’ informed his opposite number in
CA that Erste now ‘preferred an interest rate cut variant
covering lending and deposit rates’, though this was of
course ‘subject
to agreement with the other insti-
tutions’ (246).

(190) The ‘objective’ of the meeting of the Federal Lending and
Deposit Rates Committee held on 7 September was ‘to
establish an approach, based on as much agreement as
possible, for both loans and deposits’. It emerged that
the general feeling had changed substantially since the
last discussion. Whereas most of the banks then had
been in favour of ‘soldiering on’, the majority now (CA,
Erste [as already evident above, recital 189], RBW, PSK-
B, NÖ Hypo, Salzburger Sparkasse, WIF-Bank) was in
favour of a general cut in interest rates for both loans
and deposits. BA, GiroCredit, ÖVAG and Erste even
for bonus-carrying savings
advocated a 0,5 % cut
deposits, ‘but did not receive majority backing for this’.
After fairly lengthy discussions, ‘a general interest rate
cut was finally imposed’: a 0,25 % cut for all forms of
savings deposit (including basic interest rate) followed
by a similar cut in the current account area, and a
0,25 % cut for bonus-carrying savings deposits. The new
maximum rates would therefore be 4 to 4,25 % (Vienna)
and 4,25 % to 4,5 % (provinces).

(242) 488 et seq.; 36.344; 38.175; 23.632.
(243) 36.345 et seq.

(244) 1278; 790; 13.175; 1972; 14.431; 12.102.
(245) 2371; 1149.
(246) 2374.

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(191) Interest rates on works council members loans were to
be cut from 8,5 to 8 % or 8,25 %. However, BAWAG
‘threatened’ that, if the cut were 0,5 %, it would also cut
the rate for building loans, with the result that the
meeting decided on a cut of only 0,25 %. A ‘clarification’
regarding this matter was to be achieved the same day
by means of ‘tel. agreements Bank Austria, CA, PSK and
Erste’.

(192) As regards implementation dates, ‘there were differences
of opinion’: BA wanted quick cuts, while the other banks
wanted ‘to await an appropriate decision (recommen-
dation) from the Lombard on 13.9.1995’ (247).

(193) At the Minilombard meeting the following day, there
was little to discuss in view of the ‘earlier decisions taken
in the Consumer Lending Rates Committee’. In the light
of the cuts decided on, the standard and minimum rates
for operating and investment loans were reset (248).

(194)

its deposit rates by 0,25 %.

‘Pursuant to the interest rate cut of generally 1/4 %
decided on at the Deposit Rates Committee meeting on
It
7.9.1995’, CA cut
considered internally the deposit rate for cash bonds
agreed with the other banks to be ‘too high, but the
competition (was) not ready for lower rates’. CA also cut
its lending rates ‘in view of the planned measures by our
main competitors’, in particular BA’s intention, since
confirmed, of cutting interest rates for operating loans,
though only by 0,25 % (249). The interest rates for
employee groups were also cut by 0,25 % ‘in coordi-
nation with BAWAG, Bank Austria and Erste’ (250). Erste
also made the agreed 0,25 % cut in lending and deposit
rates on 13 September, making express reference to the
parallel approach adopted by ‘all competitors’. NÖ Hypo
likewise cut its rates on 14 September after the ‘[...]
Lombard on 13.9’ (see recital 195) had not decided
otherwise (251).

(195) At the Lombard Club meeting on 13 September, the
[representatives] discussed the interest rate cuts jointly
decided on at the abovementioned meetings (252).

(247) 14.309 et seq.; 36.058; 243 et seq.
(248) 16.327; 14.310.
(249) 2358 et seq.
(250) 12.644.
(251) 38.151; 38.170.
(252) 11.600 et seq.

(196) In an internal NÖ Hypo memo drawn up in September,
the author discusses whether any ‘deviation from the
approach essentially coordinated in the Deposit Rates
Committee meetings’ made sense: in his opinion, any
such conduct would not only lead to ‘pointed remarks
by competitors’ representatives at various committee
meetings’, but ‘could also result in action being taken,
e.g. in sales of securities by our bank or in money market
borrowings by our bank’. In view of these consequences,
the author recommended ‘going along with the cut both
in savings deposits and also in the current account
sphere’ (253).

(197) The Vienna Deposit Rates Committee meeting on
27 September provided the banks with their first
opportunity for a joint assessment of the success of the
interest rate cuts agreed. Except
for ‘a few minor
exceptions’, namely BAWAG and PSK, which had
‘offered more than the agreed 41/4 %’ for new money,
the banks were ‘essentially satisfied’ with the implemen-
tation of their decisions. BAWAG promptly initiated the
‘appropriate steps’ to deal with the three branch offices
which had offered more than the agreed 4,25 %. No
precise conclusions could yet be drawn about
the
situation in the provinces because of a lack of ‘handy
overviews’.

(198) There was, however, also criticism of the fact that some
banks, BA and BAWAG were mentioned, had not yet
implemented the agreed cuts for works council members
loans and for special rates. These banks claimed that the
delay was due to computer problems, but gave an
assurance that they would ‘catch up in the next few
days’. The RBW representative, whose bank together
with CA, ÖVAG, NÖ Hypo, PSK and Erste had cut rates
on schedule, speculated that the regional sectors might
‘not keep discipline’ if the ‘rates and terms agreed’ in the
Vienna Deposit Rates Committee, especially employee
the
group rates, were not complied with by all
banks (254).

October: need for joint action on lending to the self-employed
and building loans: minimum rates and handling fee

(199) In the meantime, ‘interest rate discipline had unravelled
somewhat’ as regards lending to the self-employed and
building loans. The culprit was identified as Erste, which
was charging only 5,625 % interest for a fixed-interest
mortgage loan (one-year term). Erste defended itself by
claiming that this was a ‘temporary measure’ which
would ‘not be extended’. Nevertheless, the other banks
took the view that such interest rates were ‘no longer
justifiable’. There was therefore a need to ‘settle the
market’.

(253) 38.158.
(254) 908 et seq.; 14.430.

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(200) For this purpose, at the Vienna Lending Rates Committee
(meeting in joint session with the Liberal Professions
Lending Rates Committee) on 25 October, the leading
banks ‘agreed on the minimum interest rates set out
below’. In the case of fixed-interest building loans, the
minimum rate should be 7 % (three-year term), 7,5 %
(five years) and 8 % (10 years). If the borrower did not
offer any mortgage collateral, an additional 0,5 % should
be charged. In the case of lending to the self-employed,
the minimum interest rates were 6,875 % for investment
loans and 7,25 % for operating loans. ‘Agreement was
also reached on the following points’: 1. no fixed interest
rates for maturities under three years; 2. handling fee of
at least 1 %, except for large amounts, where a flat-rate
fee could be charged; and 3. no advertising of interest
rates in the media. There was also discussion of charging
an extra 1 % where loans were tied to secondary market
yields.

(201) Those present promised to ‘pass on to the provincial
banks not represented at the meeting’ the conclusions
arrived at. In view of the fact that these interest rates
were still being undercut by a few banks, the minimum
interest rates discussed should ‘be the subject of the next
meeting [at senior management level]’ (255).

(202) Since, at that time, more and more banks were offering
their customers cash bonds with identical maturities
instead of fixed-interest savings accounts, the banks
‘agreed’ to keep the interest rates for cash bonds close to
those for similar fixed-interest savings accounts (not
more than 0,125 % above them) (256).

(203) Shortly thereafter, the CA department responsible for
personal finance sent [...] CA [senior representatives] the
‘draft on the setting of minimum rates for personal
loans and loans to the self-employed’. The aim of this
recommendation, which was ‘to be discussed with the
other banks and, if there is a consensus, adopted’, was
the ‘calming-down’ of
the ‘exaggerated competition’
found to exist at that time. If the major banks stuck to
these recommendations, this would also ‘set an example’
for smaller banks, although the latter must be expected
to express ‘constant disapproval’. However that may be,
it would already be a positive step if only a few of the
large banks (together with their subsidiaries) were to
‘decide on a disciplined approach’ (257).

(204) At their meeting on 15 November, in an exchange of
information regarding the forecast annual results for
1995, [representatives at controller level] gave a rather
gloomy portrayal of the market situation. Within their
respective banks, they would therefore ‘try to push a
deposit rate cut’. There would also have to be discussion
of the ‘interest rate problem ... at the next Lombard

(255) 12.112; 2530; 793; 797 et seq.
(256) 1996 et seq.
(257) 2535.

meeting’. As far as account maintenance charges were
concerned, there would be ‘banking discussions between
BA and CA’ in December with the aim of achieving a
‘price increase’ (258).

(205) At the Building Loans Committee meeting on 5 Decemb-
er, following a detailed exchange of information on
actual and planned issues and their terms of issue, the
participants ‘agreed’ to ‘keep unchanged’ the relevant
maturities (12/15 years) (259).

December:
discussion, in deposit rates

joint cut in lending rates and, after a heated

(206) The reduction in the GOMEX rate (260) prompted the
convening of a meeting of the Vienna Lending and
Deposit Rates Committee on 5 December in order to
jointly ‘discuss the possibility of a cut in deposit rates’.
If, as expected, the Austrian National Bank were to cut
the key lending rates on 14 December, all the banks
with the exception of BAWAG were in favour of a cut
both in lending rates (by 0,25 %) and in deposit rates
(by 0,375 to 0,5 %) before the end of 1995. It was
agreed to convene a meeting of the Federal Lending and
Deposit Rates Committee on 15 December, in order to
establish a joint reaction to the expected measure to be
taken by the Austrian National Bank and ‘work out the
final recommendation’. The possibility of an interest rate
cut should also ‘be discussed at the Lombard meeting
[...] on 13.12.1995’ (261).

(207) On 14 December the Austrian National Bank did in
fact reduce the discount rate by 0,5 %, and this led
immediately to the convening of the Federal Lending
and Deposit Rates Committees on 15 December, as
previously agreed (see recital 206).

(208) As far as lending rates were concerned,

‘there was
unanimity’ on an interest rate cut. There was less
agreement on deposit rates. The discussion of
this
topic became ‘increasingly aggressive’, with BAWAG in
particular becoming the ‘main target of the aggression’
on account of its ‘inactivity’. BAWAG was the only bank
to refuse to cut deposit rates before the end of the year.
In view of BAWAG’s obstinacy, the other banks took
the view that they could ‘no longer take BAWAG into
consideration’. They therefore ‘agreed’ on the following
measures: 1. no cut in current account rates (only BA
was in favour of a 0,25 % cut), 2. reduction of some

(258) 3543 et seq.
(259) 19.540.
(260) Interest rate for short-term money market and open market

transactions.
(261) 905; 1967; 4104.

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0,5 % for bonus-carrying savings deposits at the top end
and 3. maximum interest rates for new money as from
ATS 1 million of 3,75 % (Vienna) and 4 % (provinces).
On capital savings accounts, however, it was possible to
reach ‘agreement only on a spread’.

(213) The ‘banking discussions’ regarding a ‘price increase’ for
account maintenance charges (see recital 204) probably
also went smoothly. CA and BA increased their account
maintenance charges on 1 January 1996 (270).

(209) A number of details, not least the implementation date,
had to be left in abeyance.
‘Various discussions and
agreements’, in particular a ‘further round of telephone
coordination’, were therefore still necessary. In order
to ensure the ‘coordination of
the implementation
measures’, it was decided to set up for this purpose ‘a
contact point in CA’, which was to start operating on
18 December (262).

(210) As regards the ‘telephone contacts by the Vienna banks’
planned for 18 December, CA’s internal recommen-
dation was ‘to envisage the last week of December’ as
the period for holding the ‘discussions on cuts’ (263).

(211) At the Minilombard Committee meeting also held on
18 December ‘all the institutions went along’ with [the
agreements reached at the Federal Lending and Deposit
Rates Committee Meetings], though with the proviso
that the ‘decisions taken by the Deposit Rates Committee’
had in most cases not yet been endorsed by the
management boards. Furthermore, the final details of
these decisions would be ‘finally negotiated’ only during
the course of the day [i.e. during the ‘round of telephone
coordination’, see recital 209] (264). Subject to the con-
dition that deposit rates would also be cut, the partici-
pants finally ‘decided the following’: 1. lowering of the
minimum rate for operating and investment loans to
8 %, 2.
lowering of the prime rate by 0,25 % and
3. selective lowering of rates for existing holdings by up
to 0,25 % (265).

(212) On 20 December an Erste representative on the Deposit
Rates Committee informed his BAWAG opposite num-
ber of Erste’s ‘planned approach’ (lowering of interest
rates for capital savings accounts on 8 January 1996 and
lowering of special rates on 15 January 1996) (266). PSK
cut the basic interest rate and special interest rates on
19 January 1996 (267). CA cut the rates for personal
loans (by 0,375 %) on 28 December 1995 (268). By
‘all the institutions had cut their
17 January 1996,
standardised savings deposits’ (with the exception of
BAWAG and ÖVAG, which would lower rates only
between 19 and 21 January) (269).

(262) 14.299; 12.530; 236; 2547.
(263) 36.143 et seq.
(264) 895.
(265) 1214 et seq.; 16.326.
(266) 496.
(267) 4144.
(268) 12.775.
(269) 27.388.

9. CHRONOLOGY OF EVENTS: 1996

February and March: joint reduction of deposit rates

(214) The first formal round of talks in 1996 took place on
6 February on Erste’s premises. After the heated and
very emotional discussions in December 1995 (see
recital 208), the atmosphere at the talks of the Vienna
Lending and Deposit Rates Committee was ‘surprisingly
friendly’. BA and BAWAG avoided any discussion of
‘recent events’. As regards substance, the participants
were ‘agreed’ that as far as deposit rates were concerned
there was an ‘immediate need for a reduction’,
in
particular in the case of savings deposits. Specifically,
the base interest rate should be lowered to 1,75 % and
current accounts by 0,25 %, and in the case of capital
savings accounts the reduction should be between 0,25
and 0,5 %. For new funds, the maximum interest rate
should be 4 %.

(215) The measures were to be put into practice ‘in the first
half of March’. Before then they were to be ‘refined, in
consultation with the lending rates representatives and
the provinces’ representatives’ in the Federal Lending
and Deposit Rates Committee on 26 February (see
recital 221). The [...] measures [were also discussed] at
the Lombard Club on 7 February. If ‘this approach were
to be speeded up’,
‘BAWAG would coordinate an
appropriate acceleration [of the deadline for implemen-
tation] and also act as the convening bank’. As regards
the Federal Lending and Deposit Rates Committee, RZB
as usual requested the ‘product [representatives] of the
provincial central offices to report back’ on the interest
rate situation in the provinces and to give their opinion
on the ‘lower interest rate proposals touched on’.

(216) On the lending side, interest rates were not to be lowered
(only BAWAG was contemplating a 0,25 % reduction).
‘After a lively discussion’, the proposal to press for the
‘charging of a handling fee’ as compensation for the low
lending rates was accepted. This was to be initially at
least 1 %, and subsequently at least 2 % (see recital 263).
Here too, ‘appropriate decisions in principle’ (271) were
expected from the Lombard Club on 7 February.

(270) See footnote 268.
(271) 1963 et seq.; 14.423; 2554; 230; 36.055.

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(217) On 29 (or 30) January BA’s [representative] invited his
opposite numbers from Erste, PSK, RZB and CA to
dinner. The [representative] of BAWAG, who had also
been invited, made his apologies at the last moment.
The purpose of the meeting was to have a ‘preliminary
discussion’ of the upcoming ‘Lombard’ (272).

(218) However, since the [representatives] of BA and BAWAG
were not present at the Lombard Club meeting on
7 February, no decisions could be taken. Instead, the
talks were moved back one level. The Federal Lending
and Deposit Rates Committee (273) was to secure ‘as
much approximation as possible to 33/4 to 4 %,
especially with regard to the interest rate paid on savings
deposits’. An ‘adjustment to the basic rate of interest on
savings’ was also to be discussed in that forum. CA’s
[representative] was criticised by his Erste opposite
number because CA in Salzburg had offered loans, inter
alia, at VIBOR + 0,25 %. CA’s [representative] announced
that [senior representatives] had not authorised this rate
and had moreover already issued an ‘order to stop it
immediately’ (274).

(219) At the Building Loans Committee meeting on 6 February
there was first the usual detailed exchange of information
about existing and proposed issues and the rates applied
to them. The Hypo representative put forward a new
loan product ‘for discussion’, the ‘details to be discussed
at the next Deposit Rates Committee meeting’. A specific
‘working party’ should be set up ‘to discuss new
financing models’ (275).

(220) To offset the increased withholding tax on building
loans, the CA representative proposed that they should
‘raise the discount to SMY to 1 %’. The amount of the
discount for building loans was discussed at the follow-
ing Building Loans Committee meeting on 27 February.
CA proposed a discount of 0,875 %, and Erste, RZB, NÖ
Hypo and BA (‘if all banks apply 0,875 %’) agreed;
BAWAG argued for 0,75 %, as did ÖVAG, which
however said it would ‘also follow the other banks’ (276).

(221) At the Federal Lending and Deposit Rates Committee
meeting on 26 February different variants of a reduction
in savings interest rates were discussed. BA announced
that it intended, from the end of the first week in March,
to reduce the preferential rates by 0,25 %, the basic
interest rate to 1,75 % and capital savings accounts by

(272) 38.164.
(273) The record refers erroneously to the Minilombard, but it is the
Federal Lending and Deposit Rates Committee of 26 February
1996 which is meant (see recital 221).

(274) 1181.
(275) 19.543.
(276) 19.545.

at least 0,25 %. Such a reduction ‘would be supported
by all competitors’. The deadline for implementation
would be fixed by ‘agreement between Bank Austria’s
and BAWAG’s [representatives]’. To secure as early a
deadline as possible for this reduction, BA proposed that
‘the [representatives] should phone each other and
discuss a coordinated approach as soon as possible’.
They would then ‘communicate’ the results achieved
‘by telephone to the [representatives] of
the other
institutions’. If it were not possible to reach agreement,
discussions should be held on the subject ‘at the next
Lombard Club meeting on 13.3.1996’.

(222) In the provinces too the banks were to ‘hold negotiations
with their competitors’, for instance on the reduction of
the maximum interest rate in Carinthia to 4,25 %, and
in Styria to 4 % (277).

(223) At the Lombard Club meeting on 13 March BAWAG’s
[representative] explained that he did not want the basic
interest rate to fall below 2 %, although BAWAG had
been ‘urgently requested also to reduce the basic interest
rate by 0,25 %’. CA’s [representative], too, said that his
institution would not go below the 2 % limit. In the case
of the higher rates, a reduction of 0,25 % was to have
been made by the end of April. However, agreement
could not be reached on this point, which is why the
discussion was again referred back to the experts:
‘How to proceed will be decided by the Deposit Rates
Committee on the morning of Friday 15.3’ (278).

(224) At the Deposit Rates Committee meeting on 15 March
the first item was the ‘approval’ of BA’s interest rate cut.
Subsequently, ‘agreement’ was reached to the effect that
‘all large institutions’ would reduce ‘the interest rates for
savings deposits’ as follows: basic interest rate to 1,75 %
(except BAWAG and CA, which had already insisted on
2 % at the Lombard Club meeting on 13 March), savings
deposit preferential rates generally by 0,25 % (maximum
interest rate 4 % in Vienna and 4,25 % in the provinces),
group rates and sight deposit preferential rates generally
by 0,25 %, and capital savings accounts generally by
0,25 %. BAWAG promised it would clarify by 20 March
whether it was not after all prepared to reduce the basic
interest rate to 1,875 %, since a joint maximum interest
rate of only 3,75 % (instead of 4 %) would then appear
realistic. With regard to CA’s attitude to the base interest
rate, Erste’s representative considered in his report to
[senior representatives] that a ‘talk with [...]’ [then a [...]
CA [representative]] would be ‘very useful’.

(277) 12.125; 889 et seq.; 1296 et seq.; 27.405.
(278) 38.165 et seq.; 1962; 21.639.

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(225) The following deadlines for implementation were given:
20 March (ÖVAG), 22 to 29 March (BAWAG), 22 to
23 March (Erste), by end March (CA, GiroCredit and
RLB-NÖ), and 22 March (PSK). However, it was agreed
‘to hold further telephone conversations with each other
about coordination’ on 20 March 1996. At the next
Vienna Lending and Deposit Rates Committee meeting
on 17 April
the
measures’, especially with regard to the lowering of the
the
basic interest rate, and ‘a further reduction of
maximum preferential rate from 4 % to 3,75 %’ were to
be discussed (279).

(see recital 229),

‘acceptance of

March to May: ‘exaggerated’ competition makes joint ‘coun-
termeasures’ at the highest level essential; the ‘May Agreement’:
minimum rates for loan interest, reduction of deposit interest
rates and other ‘restrictive measures’

(226) On 22 March the [Controller Committee] found at [its]
regular meeting that there was too much competition
between banks on interest rates. It was therefore appro-
priate jointly to draw up a ‘proposal for the alleviation
of cut-throat competition’ (280) addressed to the [senior
management] of each institution.

(227) [Senior management] admittedly were themselves aware
of this situation. On 29 March the [representatives] of
BA, CA, RZB and Erste met for ‘talks initiated by [...]
[the [representative] of BA]’, at which they said they
were prepared on behalf of their institutions in view of
the marked downturn in the interest margin ‘to stop
[certain] rate variants where possible’ (inter alia, over-
drafts and investment loans on a VIBOR basis and lower-
of rates) and in this respect ‘to work on other large
institutions’ as well. They also promised ‘to inform each
other’s management boards of any infringements’ (281).

(228) At the Lombard Club meeting on 10 April, too, the
[representatives] complained about the decline in earn-
ings. Among the large institutions, therefore, there was
‘an increasingly recognisable readiness to return to
minimum banking principles’ (282).

(229) In the Vienna Lending and Deposit Rates Committee
on 17 April the first thing to be analysed was the
implementation of ‘the round of interest cuts agreed’ in
March (see recital 224). It emerged that all institutions
had stuck ‘essentially to the agreements reached at that
time’. Most institutions saw ‘no room’ for a further
lowering of interest rates. On the lending side, the
preferential measures started by some institutions had
put pressure on retail lending interest rates. In particular,
the reduction by BAWAG in the case of consumer
instalment loans and loans to works council members
led to ‘turmoil in the interest rate talks’.

(230) The bank representatives complained that competition
had ‘in the meantime’ assumed ‘ruinous proportions’.
The chief criticism was that the agreements on posted
interest rates would be circumvented by granting gener-
ous powers to the respective branch [representatives].
This ‘hyperactivity’ in the lending sphere therefore had
‘at least to be checked’. To this end, BA presented a list
(by fax) of ‘minimum interest rates’ for each category of
loan (e.g. consumer instalment loans 7 %, home loans
6,5 %, mortgage loans with a term of five years 6,5 %,
investment loans for the self-employed 6,5 %). The
remaining competitors were to ‘communicate their
agreement or non-agreement without delay to Mr [...] of
Bank Austria’. Accordingly, the minimum interest rates
were ‘also [to be] discussed by [representatives] at the
next Lombard and if need be agreed’, in order to ‘reduce
hyperactivity in this segment’ (283).

(231) On 18 April the Austrian National Bank unexpectedly
lowered the discount and lombard rates by 0,5 % each,
which resulted in a ‘meeting arranged at short notice’ of
the Vienna Deposit Rates Committee on 19 April.

(232) The participants were first able to observe that as regards
deposit interest rates ‘all institutions (had) carried out in
March the round of interest-rate reductions agreed at the
time [see recital 224] and basically kept to the agree-
ments made then’. The ‘current structure of interest rates’
could therefore be ‘described as basically satisfactory’
from the banks’ point of view.

(233) BA then referred to ‘the meeting [at senior management
level] arranged for next Wednesday, at which in view of
the unsatisfactory earnings situation of Austrian banks
[...] countermeasures are to be discussed, at the highest
level therefore’. Accordingly, BA informed the meeting,
‘as a sign of
its determination to improve interest
margins’, that it intended to discontinue its 7,25 % Super
Protection Scheme (Super-Schutzaktion) as of 30 April
and subsequently raise the interest rate to 7,75 %. It also
announced that it intended to reduce preferential rates
by 0,5 %, capital savings accounts by 0,5 %, the base
interest rate by 0,25 % (to 1,5 %) and the current account
standard rate to zero. The deadline for implementation
was given as the period from 4 to 10 May. The remaining
banks ‘were basically of the same opinion’ as regards
preferential rates and savings accounts; by ‘at the latest
10 May 1996 all sectors should have taken this step’.

(279) 12.127; 12.407; 1958 et seq.; 14.420; 1267 et seq.
(280) 3507 et seq.
(281) 1147.
(282) 1178.

(283) 12.129; 2577; 36.053; 1954 et seq.

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(234) As regards action to be taken, ‘great importance [was]
naturally attached to the meeting [at senior management
level]’, at which BA’s [representative] would ‘advocate
earnings-oriented measures’. This ‘special summit [...]’
was, on 24 April, to ‘decide parameters for an improve-
ment in margins, the utmost importance [being attached]
to competition in commercial business as well as
to retail
lending and deposit rates’. Subsequently, a
‘nationwide lending and deposit rates committee’ on
26 April (see recital 241) would ‘in consultation with
the provinces, clarify the room for manoeuvre regarding
interest rates in the deposits sector’ (284).

(235) In an internal memo of 19 April an [...] Erste [representa-
tive] responsible for corporate banking, [...], was infor-
med that preparations had been made to reduce the rates
for old and new loans by 0,5 %. With regard to the
Minilombard Committee meeting arranged for 23 April,
however, [...] added a handwritten note on the internal
memo to the effect that ‘nothing had yet been decided,
so there was nothing to implement’. On 23 April,
[representatives of] the large banks [...] did jointly
consider whether and how they should react to the cut
in the key lending rates. It was ‘unanimously established
that following the cut in the key lending rates the
previous week there was no need (and also no scope) to
reduce lending rates in the commercial sector’. [...]
therefore added in manuscript on the abovementioned
memo: ‘As decided at the Minilombard on 23.4.96: no
reduction of interest rates’ (285).

(236) Furthermore, the Minilombard participants too were
agreed that the ‘perverse competition on rates should be
normalised by drawing in lower limits ... within a year’.
The individual institutions ‘still differed however’ about
‘specifics’. Restriction of rate-setting power was men-
tioned as a ‘reasonable approach’, whereby only the
respective management boards and senior management
(and no longer the provincial directorates) would hence-
forth be allowed to undercut the break-even rates. It was
also agreed that neither foreign currency loans nor
VIBOR commitments in small-volume business (there
was no agreement however as to how this should be
defined) had anything ‘to worry about’, ‘even in the retail
sector’.

(237) The ‘restrictive measures’ to be decided at the special
Lombard Club meeting on 24 April were to include:
reduction of the current volume of cash advances from
ATS 170 million to ATS 70 million, avoidance of lower-
of clauses, foreign currency loans only in large-volume

commercial business, reduction of the rate-setting pow-
er,
improvement of the house bank margin (export
promotion), and avoidance of LIBOR commitments in
small-volume business. Further action was to be taken
as follows: after the special Lombard Club meeting on
24 April a Minilombard Committee meeting would
draw up ‘specific measures’, which would then ‘be
decided’, after the Federal Lending and Deposit Rates
Committee meeting on 26 April, in the Minilombard on
2 May (286).

(238) On 23 April [a representative] of CA’s Retail Banking
Division requested [representatives] in CA’s City and
Country Directorates ‘to see that the reduction of savings
deposit interest rates is implemented as consistently as
possible’. A minimum rate lower than the agreed
minimum rate was to be granted ‘really in exceptional
circumstances only’ and ‘in no circumstances passed on
to branches’. The precise implementation deadlines
would be made known ‘after the talks with the other
institutions’. Lastly, regional [representatives] in the
provinces were requested ‘to organise regional talks as
soon as possible and to agree an identical level of interest
rates. Better profit margins would benefit all of us!’ (287).

(239) The Commission was unable to find any record of the
special Lombard Club meeting of 24 April itself. The
RZB representative in the Federal Deposit Rates Com-
mittee recorded in his note of 26 April that at the special
Lombard ‘the current interest-rate situation in the retail
and corporate customers sectors [had been] discussed’
and ‘[it had been] decided as an initial step to stop
advertising interest rates’. ‘Further measures’ would be
drawn up by a ‘retail lending working party in close
cooperation with the Lombard Club’ (288). An entry in
BAWAG’s [representative’s] list of people to phone for
29 April shows, furthermore, that a ‘round of bank talks’
took place on 24 April,
in which apparently the
[representatives] of BA, RZB, CA and PSK (but not,
according to its own information, BAWAG)
took
part (289).

(240) An internal memo from this period submitted by BA
records: ‘Rates talks/[senior management] level (CA, BA,
RZB, PSK)
the [...]
agreements’ by other banks were to be notified immedi-
ately, but at the same time the bank concerned was also
to be tackled about the breach without delay (290).

in the bag’. Any ‘breaches of

(284) 14.411; 882; 36.051.
(285) 36.048.

(286) 14.201 et seq. 1206 et seq.
(287) 36.160.
(288) 1952.
(289) 38.163.
(290) 27.337.

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(241) Two days after the special Lombard Club meeting, the
Federal Deposit Rates Committee met,
‘whose main
purpose was to find as uniform a modus operandi as
possible for the reduction of deposit rates’. BA had ‘taken
over the lead’ and notified the reduction of the basic
interest rate by 0,25 % to 1,5 %, savings deposits
preferential rates by 0,5 %, capital savings accounts by
0,5 %, the posted interest rate for sight deposits by
0,125 %, sight deposit preferential rates by 0,5 % and
employee group savings deposits also by 0,5 %. CA
explained that it ‘intended to follow with a general
interest-rate cut’. Erste and BAWAG too would make
appropriate cuts. The maximum interest rate for new
funds (in Vienna) was ‘agreed’ at 3,5 % (3,75 % for
existing deposits). By 11 May ‘all sectors are to be
reduced’, and in the ‘regional banks’ as well. A lending
rates committee would ‘advise further’ on 30 April, in
particular about fixed interest offers for retail customers,
refraining from advertising interest rates, and minimum
interest rates for lending (291).

(242)

‘In preparation for the Lombard planned for 8 May’ and
‘on the basis of the [...] talks’ in the special Lombard
Club meeting, ‘minimum rates [were] agreed’ on 30 April
at the Special Lending Rates Committee meeting in
which ‘80 % of the Vienna market’ (BA, CA, BAWAG,
Erste, PSK and RBW) took part. The purpose, in view of
the ‘escalating competition’ was to restore ‘sense’.

(243) The minimum rates devised for both variable and fixed
to be undercut by any
interest business were not
institution. To this end,
the institutions had first
announced their individual ‘calculable minimum rates’,
on the basis of which a common ‘general proposal’ was
then determined for each product (consumer instalment
loans 7,25 %; loans to works council members 7 %;
building loans 5,75 %, mortgage loans 6,35 %; operating
and investment loans for the self-employed 6,5 %;
current accounts 9,5 %). Admittedly, an institution
might be lower than the common general proposal for
a particular product, but this appeared to be ‘manageable
on the whole’.

(244) In fixed interest business a common procedure for
setting rates was to be applied, whereby a premium of
0,25 % would be added to the lowest variable interest
rate in a current year. Although this would bring ‘good
margins’,
it had to be acknowledged that for those
institutions ‘which do not want to keep to the agree-
ments ... undercutting [was] made fairly easy’.

(245) If

these minimum rates were to be agreed by the
[Lombard Club] on 8 May, they could come into effect
as soon as 20 May and thus lead ‘de facto to more

interest and greater margins’, even if ‘smaller institutions
[could be] expected to break ranks’. Further, the Lombard
Club of 8 May had still to discuss the cessation of all
special schemes by 30 June and the raising of posted
interest rates to the March level, it being possible ‘to live
with small differences’.

(246) To ‘implement the result’ of the 8 May Lombard Club
meeting, finally, a Lending Rates Committee meeting
was arranged for 10 May (see recital 251) (292).

(247) On 8 May,

immediately before the Lombard Club
meeting on the same day, the ‘round of bank talks’
between [...] BA, RZB, CA and PSK (of 24 April; see
recital 238) was continued, this time with BAWAG
taking part. Among the subjects covered was the avoid-
ance of fixed advances to retail customers, since this was
not very attractive economically for the banks. A further
informal round of talks on this subject took place on
18 July (see recital 270) (293).

(248) At the meeting of the Lombard Club itself, the [represen-
tatives], on the basis of a proposal from BA, ‘agreed [the
following] basic matters’: 1. a house bank margin (export
financing) of not less than 0,25 % [the participants in
the Export Financing Committee had already agreed this
on 16 March 1995; see recital 340]; 2. advances in ATS
or in foreign currency only from ATS 30 million (294)
(minimum premium 3/8 %), above ATS 200 million
minimum premium of 0,25 %, with maturing fixed
tranches under ATS 30 million a minimum rate of
5,5 %; 3. no operating fund rates below 7 %; 4. no one-
sided call facility for customers on fixed loans; 5. no
lower-of clauses; 6. no fixed interest rates for maturities
of more than 10 years; 7. no operating fund financing
on a roll-over basis; 8. no lending schemes with
aggressive rates, all current preferential rates to terminate
by 30 June; 9. no advertising of interest rates in the
media, mailings or window displays; 10. calling of a
special meeting on building loans; 11. minimum rates
for retail lending and loans to self-employed persons in
the following categories: works council
loans (7 %),
consumer instalment loans (7,25 %), building loans
(6,75 %), mortgage loans (6,25 %) and current accounts
(9,5 %); 12. a handling fee of at least 2 %; 13. use of a
loans in
new formula for calculating fixed interest
accordance with the proposals put
the
Consumer Lending Rates Committee; 14. preparation of
a minimum fees proposal for securities business and
payments; and 15. rapid introduction of a new funding
indicator (295).

forward at

(292) 2046; 1144; 2582 et seq.
(293) 38.162.
(294) According to a document submitted by BA, the [representatives]

agreed to ATS 20 million instead of ATS 30 million; 27.300.

(291) 14.287 et seq.; 12.131 et seq.; 12.140; 1952; 36.049.

(295) 1172; 27.472; 14.407.

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(249) At [their] meeting on 13 May [senior representatives of]
BA adopted these measures, which had been agreed with
the other credit institutions (296).

agreed 0,25 % was valid ‘only for new business’ and that
existing agreements remained unaffected (‘minimum
margin however 12,5 basis points’ (300)) (301).

(250) Two days later the package of measures decided by the
Lombard Club was discussed by the Linz Interest Rate
Committee, which was responsible for Upper Austria.
The BA representative reported that ‘instructions had
already been given in BA’ to implement the package,
and that a named member of BA’s management board
‘would not be allowing any exceptions for the present’.
The representatives of BAWAG and GiroCredit also
confirmed the content of the package. To ratify the
decisions of the Lombard Club ‘the Linz Interest Rate
Committee should meet as quickly as possible and either
decide to implement the paper referred to in Upper
Austria or possibly decide to amend it’ (297).

level]

implementation of

(251) As already agreed at the Special Lending Rates Com-
mittee on 30 April (see recital 246), the banks’ represen-
tatives met on 10 May in order to discuss the basic
decisions [taken at senior management
(and
the earlier proposals from the Special Lending Rates
Committee) concerning the specific ‘implementation
measures’. The following were discussed in detail:
1.
in fixed-interest
transactions to add a premium of 0,25 % to the lowest
variable interest rate in a current year (see recital 244)
by 20 May (except for current schemes); 2. foreign
currency loans only above an equivalent of ATS 1 mil-
lion, with at least a 2 % premium and a 2 % handling
fee; 3. termination of all schemes by 30 June; 4. no
advertising of interest rates; and 5. a handling charge of
at least 2 % when granting loans. As regards items 1. to
4. ‘all the institutions present promised to stick to and
implement the above points’ (298).

the proposal

(252) On 31 May CA’s Central Office informed retail customer
[representatives] in the regional offices about the individ-
ual minimum rates which from 1 July should ‘no longer
be undercut’. This would lead to a ‘normalisation’ of the
recently ‘very exaggerated competition on rates’. CA
intended to make its contribution to this ‘normalisation
of
situation’ by also
the overheated competitive
implementing the advertising ban (299).

(253) The extraordinary Export Financing Committee meeting
of 15 May concerned itself with the ‘fixing of the house
bank margin’ agreed [at senior management level] (see
recital 248). It was ‘unanimously emphasised’ that the

(254) On 24 May APA quoted a ‘member of a bank manage-
ment board who wishes to remain anonymous’ as saying
amongst other things that although it was not possible
‘for reasons of antitrust law apart from anything else’ to
return to the formal interest rate agreements common
in the 1980s (see recital 27), ‘there is, in view of current
market conditions, a growing desire in banking circles
for definite agreements’. This ‘desire’ stemmed from low
interest rates and weak demand for credit. These and
other factors, APA went on, ‘are, according to banking
circles, feeding the call for a new code of conduct’ (302).

June: joint debriefing, countermanding the latest cut in lending
rates, (new) agreement about minimum interest rates, after
heated discussion, and about the introduction of the minimum
handling charge

(255) At the meeting [...] in the Minilombard Committee on
4 June ‘initial experience of the new system of rates [was
already] available’. It emerged that the arrangements for
fixed-interest advances were being ‘adhered to’ by the
larger banks. Only the agricultural credit cooperatives
were ‘could not be kept under control’: there was ‘only
70 % observance’ of the new arrangements in that sector.
A further criticism was that ‘in Salzburg, Upper Austria
and Carinthia local committees [had] agreed other
(lower) rates’, which in part ‘seriously’ differed from the
‘agreed rates’.
It was therefore ‘agreed’ to push the
‘regional interest rate talks ... to implement the agreed
rates nationally’.

It was

(256) The banks’ representatives subsequently discussed a
few problems concerning the implementation of the
agreements on fixed-interest advances.
for
instance ‘agreed’ that the agreed minimum volumes
could be undercut in the case of individual tranches
which together attained the minimum volume, or if the
borrowers had strong links with each other. Further, the
allocation of the minimum thresholds had hitherto been
handled differently according to whether the credit line
or the actual take-up was taken as the reference. This
resulted in different premiums, which could ‘naturally
lead to distortions of competition’. What banks wanted
to do was ‘to proceed pragmatically’ and henceforward
take the estimated total volume as a basis. In addition,
in Austrian schillings between
for
ATS 10 million and 20 million there was to be a
minimum premium of 1,5 % to prevent ‘customers
increasingly [switching] to foreign currency advances’.

fixed advances

(296) 36.171.
(297) 42.234 et seq.
(298) 12.142; 14.407 (see footnote 295).
(299) 2585.

(300) NB: One basis point equals one hundredth of a percentage

point.
(301) 1171.
(302) 39.

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Lastly, a ‘strictly limited number’ of customers known as
‘money market participants’ (large insurance companies,
subsidiaries of
foreign groups, energy suppliers, oil
groups and certain companies with links to the Federal
authorities were mentioned by name) were to be
excluded from these agreements; these were to be able
to negotiate different rates (303). A little later, however,
this agreement was again withdrawn (see recital 262).

municipalities, and emphasised that these should ‘be
pushed through’. To this end, BA was to prepare a ‘paper
setting out the objectives in this respect’, in order ‘to
give appropriate substance to the efficiency of these
bank talks’ (305). The ‘paper setting out the objectives
as regards rate-setting’ was drafted at the Mortgages
Committee meeting on 27 June: minimum premiums
and minimum rates were established for each sector (306).

(257) At the Consumer Lending Rates Committee meeting on
11 June the banks’ representatives first reported on the
implementation of the previously agreed measures. A
handling fee of 2 % had already been introduced by
GiroCredit, BAWAG (better than raising the interest
rate), BA and Erste, or was about to be introduced very
soon. Like the corporate customer [representatives]
before them (see recital 255), the participants in the
Consumer Lending Rates Committee were critical of the
fact that the minimum lending rates in the provinces
were lower than those agreed. All sectors were therefore
requested ‘to get the provincial talks going so as to
achieve as wide an effect as possible’.

(258) There was also ‘a general wish’ that the May interest rate
cut should be ‘made retroactive as widely as possible’.
Specifically, during July (BA from 1 July, BAWAG at the
beginning of August), interest rates were to be raised for
consumer instalment loans to 9,25 %, for loans to works
council members to 7,25 %, for home loans to 7,25 %
(BAWAG to 6,875 %) and for building loans to 6,875 %.
BAWAG would submit ‘written offers tomorrow’ in the
Lombard Club. Lastly, it was complained that there were
still ‘problems’ as regards the self-employed, who ‘were
still getting preferential treatment’. A stop should be put
to this now: here too, as in the case of investment loans,
interest of at least 6,5 % ‘including handling fee’ should
from now on be charged. Foreign currency loans should
be offered only from an equivalent of ATS 2 million, the
premium up to ATS 5 million being 2 % on VIBOR and
thereafter at least 1,5 %.

(259)

‘Final agreement on how to proceed’ should be reached
at the Consumer Lending Rates Committee on 27 June
(see recital 263) (304).

(260) The participants at the Mortgages Committee meeting
on 18 June discussed ‘reasonable rates’ for assisted
housing construction, commercial housing construction,
existing loans and the Federal Government/provinces/

(261) As early as April CA had been criticised in certain
media for charging an ‘early repayment penalty’, which
borrowers have to pay if they repay a loan early. While
this penalty in other banks was merely between 2 and
5 %, CA charged at least 5 % (in a specific case 18,5 %
of the residual amount). The [representative] of CA’s
Retail Financing Division explained this problem in a
memo to his [senior management], which for its part
brought up the subject at the Lombard Club meeting on
12 June. The other [representatives] agreed in principle
that their institutions’ practice of simply demanding a
small compensatory payment was ‘wrong’. They were
‘of course not fully informed’ about the technical details,
which was why an ‘experts committee’ would look into
the problem. The [representatives] further agreed that
preferential lending rates would terminate ‘in general by
the end of July’ (307).

(262) On 25 June the participants in the Minilombard talks
confirmed that the specific exemption for ‘money market
participants’ agreed on 4 June (see recital 256) had in
the meantime been cancelled. On this point they were
to ‘approach [senior management] and request agree-
ment’. As an alternative to the specific exemption it was
proposed, where credit was granted to a company which
could raise capital without difficulty on the international
markets as well, to take ‘a joint decision in individual
cases’ (308).

lending products (instead of

(263) At the Consumer Lending Rates Committee meeting on
27 June the first business was the reaching of ‘agreement’
on the introduction of a ‘2 % minimum handling fee’ for
all retail
the previous
1 %, see recital 216). No agreement could be reached,
however, on the minimum interest rate for loans to
works council members, since BAWAG was not pre-
pared to raise the handling fee or the interest rate. In
view of this, the other banks withdrew their proposal. A
new joint attempt was to be made in the autumn.

(303) 14.195 et seq.; 15.826; 37.681 et seq.
(304) 14.405; 773; 12.148.

(305) 19.778.
(306) 19.780.
(307) 1167; 776 et seq.
(308) 37.683 et seq.

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(264) The discussion on fixed interest rates was heated. Erste
‘corrected the agreement on fixed interest rates’ by
putting forward an amended interest table and making
this the ‘condition’ for sticking ‘further to the agreements
made’ (see recital 242 et seq.). This behaviour ‘aroused
much indignation among those present’. Erste justified
its conduct on the basis of apparent undercutting of the
agreed minimum rates by individual competitors, to
which the latter replied that in their case admittedly ‘the
measures were slower to take effect’ but that basically
everything was running to plan and that they should
‘therefore stick to the agreements made in May’. After
‘heated discussions it was agreed’ to apply the minimum
rates referred to by Erste to self-employed persons only
and to do so only for a ‘transitional period of 2 to
3 months’. In the case of building loans, however, Erste
was not successful, since BAWAG had threatened in that
case to withdraw ‘its promise’ to demand 6,75 % in
interest for this type of lending, which in turn ‘would
have blown the May agreement apart’. Here too a new
joint attempt was to be made at the beginning of
September.

(265) A further topic was the early repayment penalty already
discussed in the Lombard Club (see recital 261). CA
offered to make its calculation model available to the
other banks. Towards the end of these talks, the banks
discussed the introduction of a new ‘handling fee’ both
for lending and for securities business. Lastly, there was
dissatisfaction, as before, with the implementation of
the agreements in the provinces.
‘Repeated regional
interest rate talks in each province’ were to take place so
as to discuss ‘how to proceed in the regions’. BA stated
in this connection that it had ‘urged [its] provincial
directorates to see that retail lending talks take place
regularly’ (309).

June and July: joint successes and failures

(266) At the Controller Committee meeting on 28 June the
bank representatives reported unanimously that
the
competitive situation in Vienna had ‘calmed down’, but
that in particular in the western provinces ‘commercially
incomprehensible pricing was [still] to be found’. The
domestic customer spread had reached an historic low.
[A] detailed analysis [was made at controller level] on
29 July, in which [it was] explained that the measures
jointly carried out
in April and May had been an
‘important first step towards stopping the collapse of
the S-customer spread’ but that the rise in fixed advances
had been ‘counterproductive’.

(309) 36.041; 12.151; 773; 14.396.

(267) The ‘introduction of the second stage of the rates policy’
was therefore ‘absolutely essential’. In particular, cash
advances would have to be restrained. The ‘agreements
made concerning minimum rates’ must moreover not
result in ‘those minimum rates becoming the standard
rates on the market’. The Minilombard Committee
should therefore ‘carry out the second stage of the new
rates policy in August.’ (310).

(268) The Minilombard Committee met three days later and
was ‘characterised by general helplessness’ in the face of
the remarks [at controller level]. Those banks which had
implemented the ‘recommendations of the [Lombard]’
had to accept ‘clear setbacks’. The joint attempt to make
large reductions in cash advances also seemed ‘for the
time being to have failed’. More specific measures were
to be discussed at the next Minilombard Committee
meeting (311).

(269) At their meeting on 4 July the representatives of the
building loan banks, after the usual detailed exchange of
information on current and proposed issues and the
associated rates, discussed the possibility of agreeing to
the lending rates proposed by their parent institutions
in the building finance sector. The participants con-
cluded that it would be possible to reach ‘an agreement
only in the top-level talks or in the Mortgages Com-
mittee’. Increasing competition with the building societi-
es was also discussed (312). To avoid a ‘confrontation’,
‘talks between the building loan banks and the savings
banks’ should be arranged (313).

(270) On 18 July CA’s [representative] invited high-ranking
representatives from BAWAG, BA, GiroCredit, Erste and
RZB to further talks, earlier ones had taken place on
8 May (see recital 247), on the unfavourable develop-
ments from the banks’ standpoint in fixed advances.
These were being increasingly granted, contrary to
their original purpose, to small firms and with short
maturities, which in the banks’ view made little econ-
In future, this type of practice should
omic sense.
therefore be stopped (314).

(310) 4298 et seq.; 4306 et seq.; 4299 et seq.; 3487.
(311) 14.192.
(312) In January 1999 APA reported that Raiffeisen Bausparkasse had
carried out an interest-rate cut and a rate comparison which
was severely criticised by its competitors (s-Bausparkasse, Wüs-
tenrot). The five building societies had ‘agreed not to publicise a
comparison of their savings products. Raiffeisen had broken
this agreement by publishing in the previous week and opened
the way to fresh competition. With this policy, the building
societies would beat even the banks, which themselves do not
advertise rate comparisons’, APA 21 January 1999; Die Presse
22 January 1999.

(313) 19.556 et seq.
(314) See footnote 292.

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(271) As part of a ‘competition monitoring exercise’, on
23 July CA staff obtained credit offers from seven banks
in Vienna. ‘Satisfactory results: minimum rates were not
being undercut in a single instance. Clearly, competitors
in Vienna are showing good discipline on rates’ (315).

the competitive pressure from
lerbank taking part:
Schoellerbank was ‘still manageable’, and it would be
‘seen negatively’ if ‘Schoeller knows exactly what is being
discussed in these committees’.

(272) On 9 August BA convened a Vienna Deposit Rates
Committee meeting ‘to agree [preferential] interest rates’;
the raising of interest rates for capital savings accounts
was also discussed. After a few ‘small corrections’ (Erste,
BA, CA and RBW had raised the two and three-year
savings accounts by 0,25 %), the capital savings account
market now presented ‘a very uniform rates picture’. In
the case of preferential rates for new business the agreed
maximum rate of 3,5 % (in exceptional circumstances
3,75 %; see recital 240) was holding, and there had
been only a few ‘interest-rate deserters’. CA’s proposal
concerning the introduction of a new ‘savings account
fee’ was also discussed. The date of introduction contem-
plated was 1997. BA, CA and Erste wanted to print a
reference to this already in the savings account docu-
ment. It was finally ‘agreed’ that this subject should be
discussed again at the next Federal Lending and Deposit
Rates Committee meeting in September 1996 (316).

September: ‘Aggressive rates’ from Germany’s Schoellerbank
and the latter’s possible inclusion in the talks as a response to
this; correction of the agreement on lower limits to foreign
currency loans

(273) In response to a reduction in the GOMEX rate the
Consumer Lending Rates Committee met on 3 Septemb-
er: all the participating banks ‘agreed’ not to reduce
interest rates in the retail lending sector.

(274) There was satisfaction at the fact that ‘the interest rates
agreed in June [had been] largely observed’ and that
‘aggressive rates’ would be offered only by relatively
small or regionally active institutions. A particularly
awkward operator here (since its takeover by the Bayeris-
che Vereinsbank (317) in 1992) was Germany’s Schoeller-
bank (318), which in its attempts to gain a foothold on
the market was resorting ‘exclusively to aggressive rates’.
Because it was not present at the talks, it was a ‘foreign
bank’, there was however ‘no possibility of agreement at
all’, which was why the Austrian banks were considering
whether now to invite a representative of Schoellerbank
to the next Consumer Lending Rates Committee meet-
ing. However, the banks finally decided against Schoel-

(275) In the case of foreign currency loans, the agreed lower
limit of ATS 2 million was proving to be ‘achievable
only with difficulty’. A new minimum loan amount of
ATS 1 million was therefore ‘agreed’. There was also
‘agreement’ that in the case of fixed interest loans ‘the
recently agreed rates would not hold’. The ‘following
new minimum rates [were therefore] decided’. 6,375 %
for a term of three years, 7 % for five years, 7,5 % for
seven years and 7,75 % for 10 years. For self-employed
persons the rates would be 0,25 % lower. In reply to
media inquiries a 0,5 % higher rate of interest was always
to be given.

(276) Lastly, BA stated that it intended to offer a higher
interest special
loan from the end of September to
mid-November. Since this was in breach of the May
agreement to stop special schemes (see recital 248), the
announcement met with ‘strong objections from the CA,
Erste and ÖVAG representatives’ (319).

(277) In an internal memo from [a representative] of CA’s
Retail Financing Division to a member of the manage-
ment board dated 6 September 1996, [a representative
of] BAWAG, is described as ‘an important interlocutor
on rates’ and ‘a shrewd tactician and highly-skilled
negotiator’ in this field (320).

(278) At the Lombard Club meeting on 11 September, the
[representatives] discussed the practice of granting cash
advances to social security organisations. The provincial
agricultural credit banks were criticised for not charging
a premium, which was seen as ‘aggressive pricing’. In
future, minimum premiums were to be charged (321).

September:
opportunity

the ‘savings account

fee’ as a joint earnings

(279)

‘The main item for discussion’ at the Vienna Deposits
Rates Committee meeting on 24 September was the
introduction of a new savings account fee. So that this
‘new joint earnings opportunity’ could be taken, BA set
out the most important details in a discussion document:
it must be ‘earnings optimal’, must not allow ‘exceptions’
or ‘opportunities for flight’ and should be introduced
‘immediately’ and ‘jointly’. In view of the ‘great sensitivity’
of this topic, only the principle was discussed at first
(e.g. the amount of the fee to be between ATS 30 and
ATS 60). Since the new fee aroused interest all round,

(315) 2522.
(316) 1259; 20.457.
(317) Since 1998, Bayerische Hypo- und Vereinsbank AG.
(318) Since 1998, SKWB Schoellerbank Aktiengesellschaft.

(319) 14.391 et seq.; 718; 2540.
(320) 2526.
(321) 1450.

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the subject was to be discussed in more detail at the
forthcoming Federal Deposit Rates Committee meeting
on 12 November. Until then specific ‘proposed solutions’
were to be developed and, if need be, customer accept-
ance already explored ‘carefully and to a limited extent’.
The ‘[representatives] in the Lombard Club’ were also to
be contacted (322).

September: debriefing — joint successes with lending and
deposit rates for retail customers, dissatisfaction with the
situation as regards corporate customers

(280) The participants at the Vienna Deposit Rates Committee
meeting on 24 September were also ‘satisfied with the
current savings deposits situation, particular emphasis
being given to the discipline adhered to on the Vienna
market [maximum interest rate 3,5 %]’. The ‘deserters’
in the regions were ‘not felt to be dramatic’. Those
institutions which ‘contrary to the original consensus’
had brought higher interest savings accounts onto the
market ‘now regret this step and are thinking of suitable
corrections’ (323).

(281) The banks had grounds for satisfaction not only in
the deposits field but also where retail
lending was
concerned. At the Consumer Lending Rates Committee
meeting on 8 October it was ‘generally stressed that the
agreed interest rates are holding. The minimum handling
fee can also be implemented’ (324).

(282) The situation was different, however, in the corporate
customers sector, where the banks had not succeeded
despite the ‘efforts since the beginning of the year’ in
‘improving rates on a broad scale’. It was of course
possible to achieve ‘successes especially in the Vienna
area’, but the ‘aggressive’ rate policy of, in particular,
local banks was leading to a ‘crumbling of the agreed
minimum margins’. Furthermore, the usual practice
hitherto of agreeing minimum interest rates was proving
to be counterproductive, since the market saw these as
standard rates, as had been feared [at controller level]
(see recital 267). For this reason,
‘no specific rate
recommendations (were) agreed this time’ at the Mini-
lombard meeting on 2 October (325).

(283) At

the Lombard Club meeting on 9 October the
[representatives] expressed their annoyance at the ‘lack
[the [representative] of
‘[...]
of discipline on rates’.
GiroCredit] will invite the 20 largest banks — more
serious talks’ (326).

October to December:
‘savings account fee’ for the time being

joint reduction of deposit rates; no

(284) On 25 October the bank representatives met at an
extraordinary Vienna Deposit Rates Committee meeting
to discuss a reduction of the interest on capital savings
accounts. A reduction of 0,25 to 0,5 % was approved by
all except, once again, BAWAG, which was not ready to
accept any reduction. The other banks, however, wanted
to reduce the interest only if BAWAG could ‘be induced
[at senior management level] to change its mind’. The
meeting therefore broke up this time without ‘specific
results’. The deliberations were to serve as a basis for the
Federal Lending and Deposit Rates Committee meeting
on 12 November (see recital 286), where ‘an Austria-
wide consensus’ was to be found and ‘suitable rec-
ommendations [prepared] for the [...] Lombard on
13 November’ (327).

(285) At the Controller Committee meeting on 8 November
Erste’s representative reported that his bank’s [senior
representatives] had been requested in view of
the
‘aggressive rate policy of BAWAG and PSK to talk with
BAWAG’s and PSK’s [...] [senior representatives]
...
(Lombard Club?)’. Erste then suggested a reduction of
savings interest by 0,25 to 0,5 %, which was ‘gladly
received’ by the other banks. BA also volunteered ‘to
make an attempt along these lines at the next [senior
management level] talks (mid-November)’ (328).

(286) In ‘preparation for the Lombard meeting on 13.11.1996’
a Federal Lending and Deposit Rates Committee meeting
took place on 12 November. BA announced, as it
already had at the Controller Committee meeting (see
recital 285), that it intended in the ‘Lombard to propose
a reduction of all savings deposit rates by a quarter of a
percentage point (...)’ After thorough discussions the
institution representatives agreed that the [representa-
tives] in the Lombard Club should decide the following
interest rate cut for savings deposits: bonus-carrying
savings deposits by 0,25 %, short-term capital savings
accounts by 0,25 % and long-term ones by 0,5 %. The
result of the ‘[...]’
in the Lombard Club would then
‘be discussed’ the following week at a Deposit Rates
Committee meeting (see recital 289).

(287) Another topic of discussion was the introduction of the
savings account fee (see recital 279). Internal discussions
on this subject had shown that the introduction of such
a fee would encounter legal difficulties and there was
only ‘any question of it in the context of a measure
agreed at the broadest level’. There was also the danger
that this fee could develop ‘into a competition policy
instrument’. There was no desire therefore to pursue the

(322) 14.387 et seq.; 2497 et seq.; 1257.
(323) See footnote 321.
(324) 37.300.
(325) 14.181; 864; 15.831.
(326) 1713.

(327) 1946; 14.282; 854; 1257.
(328) 4250; 4320.

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project for the time being. Furthermore, if the anonymity
of savings accounts was withdrawn, new savings account
documents would have to be drawn up anyway, which
would represent an ‘ideal opportunity’ for the introduc-
tion of such a fee (329).

(288) At the [...] Lombard Club meeting on 13 November the
already discussed reduction of capital savings account
interest by 0,25 to 0,5 % and a general reduction
of bonus-carrying savings deposits by 0,25 % was
‘agreed’ (330). [A representative] of CA’s Retail Lending
Division reported on the same day to a member of CA’s
management board that there was ‘as much agreement
as possible between CA and BA on rates’ (331).

(289) After the ‘Lombard Club [had] given the green light to a
savings deposit reduction this year’, ‘talks on agreement
in this area’ took place on 18 November, as had already
been agreed at the Federal Lending and Deposit Rates
Committee meeting on 12 November (see recital 286).
At these, ‘virtually all’ bank representatives announced
that they intended to implement the 0,25 % reduction
(for long maturities) ‘as soon as possible’. The maximum
preferential rate was therefore to be 3,25 % (in the
Vienna area) or 3,5 % (in the provinces). The following
implementation deadlines were given: Erste 30 Novem-
ber to 4 December, CA 5 December, BA 25 to 29 Nov-
ember, PSK by mid-December, GiroCredit end of Nov-
ember/beginning of December, Hypo-Verband 30 Nov-
ember to 5 December, ÖVAG 1 December and RBW
4 December. BAWAG would ‘go along with the plan by
the end of the year, after a short delay’ (332).

(290) The next day, 19 November, saw the first meeting for
some time of the Liberal Professions Lending Rates
Committee: its ‘inclusion in the Consumer Lending Rates
Committee had not proved very worthwhile’. It was
discussed whether ‘to adhere to yesterday’s decisions by
the Deposit Rates Committee’,
to reduce the
maximum preferential rates to 3,25 % or 3,5 % (see
recital 289). As regards lending rates, the intention was
to try not to grant operating loans under 6,25 % and
other financing under 6 %, to charge an advisory fee of
at least 1 %, and to offer no fixed interest loans with less
than three years’ maturity and no foreign currency loans
with an equivalent value of less than ATS 1 million. NÖ
Hypo was criticised for its ‘current rates for doctors’, but

i.e.

was able to refute this criticism by pointing out that
‘the material was sent out to Vienna doctors without
specifying rates’ (333).

(291) On the same day the participants in the bank talks on
securities discussed possible dual valuation/pricing (both
in ATS and in euro) for portfolio lists. This would lead
basically to more transparency for customers but also to
higher costs for banks. The participants were ‘agreed
that in this area competition between banks should be
avoided and an effort made to apply a uniform course
of conduct for Austrian banks’ (334). For the period up to
31 December 1998 a ‘joint proposal’ was made a little
later to the effect that portfolio lists were to be valued
only in ATS and any reference to the euro was to be
dropped. For the period up to December 2001 the banks
ultimately could not agree on a common line, but dual
valuation/pricing was ‘recommended by the majority’
(i.e. all banks except CA) (335).

(292) At their meeting on 28 November the representatives of
the building loan banks were worried about future new
areas of business, since it was to be expected that in
future the volume of credit issued by building loan banks
would be smaller. To ‘avoid destructive competition
between building loan banks’, the latter would switch to
other areas of business such as the financing of municipal
infrastructure (336).

(293) On 11 December [a meeting took place at controller
level] in order to exchange detailed information concern-
ing the ‘expected results for 1996, and budgets and
general conditions for 1997’ (337).

10. CHRONOLOGY OF EVENTS: 1997

January: a good start

(294) 1997 began for the banks with the welcome realisation
that ‘the cuts agreed’ at the end of 1996 (see recitals 288
and 289) had ‘in the meantime been implemented by all
sectors’. The ‘interest rate cuts’ had also been ‘implement-
ed’ in the provinces. The market situation was therefore
‘considered’ by the participants in the Vienna Deposit
Rates Committee meeting on 27 January ‘to be essen-
tially satisfactory’ and the ‘interest rate talks at the start
of the year went smoothly on the whole’ (338).

(329) 848 et seq.; 14.285 et seq.; 3301 et seq.; 1942 et seq.; 1253;

27.543.
(330) 842 et seq.
(331) 2544.
(332) 842 et seq. (see footnote 330); 14.282.

(333) 14.498.
(334) 4471.
(335) 35.837.
(336) 19.565 et seq.
(337) 2637; 1376 et seq.
(338) 4231; 14.370.

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rates and
February and March: uniform cut
concerted measures to ‘contain excessive competition’ in respect
of lending rates, readiness to return to a moderate rates policy

in deposit

brief discussion not to touch’ the current rate, which as
a rule was 1,5 %. The public should be put in the picture
‘by means of “confidential” information from APA.
Coordination by BA’s marketing department’.

(295) On 6 February representatives of the building loan banks
held their regular meeting. BA’s representative suggested
raising to 1 % the secondary market yield markdown of
0,875 % as applied up to then by all building loan banks
in accordance with their agreement (see recital 220). The
participants ‘agreed that an adjustment of this kind
should be made uniformly by all the building loan
banks. The beginning of 1998 was mentioned as a
possible date for implementation.’ All participants also
‘agreed that early return [of a loan] by a customer should
be linked to a deduction’. Lastly, the banks announced
the volumes they planned to loan in 1997 (339).

(299) Concerning lending rates, complaints were made that
the fixed interest rates of some institutions, ‘contrary to
what was discussed and agreed in spring 1996, in talks
which took place at the wishes of [senior management]’,
lay under the variable rates (instead of adding a 0,25 %
deduction for each year of duration to the lowest
variable interest rate, see recitals 244 and 248). A
‘separate meeting’ would therefore be called in March in
order to ‘work out a solution’ (see recital 301). CA had
already produced an internal memo listing some ‘blatant
violations of the competition principles’ formulated ‘in
the summer of 1996’ in respect of lending rates, for
example, spreads for foreign currency loans of below
1,5 % (342).

(296) The Vienna Special Deposit Rates Committee, meeting
on 14 February, discussed the preparation of a further
cut in savings deposit rates of between 0,25 % and 0,5 %
at the end of March. The banks were to come up with
an internal position in time for the Federal lending and
deposit rates talks on 24 February (340).

(297) At the Lombard meeting [...] on 19 February ‘it was
agreed to work towards a cut of up to 1/2 % in high-yield
savings deposit rates in the Deposit Rates Committee’.
There is a good example here of the flow of information
between the Lombard Club and the specialised com-
mittees, in this case the Federal Lending and Deposit
Rates Committees: RZB’s
informed
RZB’s representative on the Deposit Rates Committee of
the conclusion reached by the Lombard Club, since it
was to be ‘considered at the Federal lending/deposit rates
meeting’ (341).

[representative]

(298) Accordingly, at the Federal lending/deposit rates meeting
on 24 February, the ‘following interest rate cuts were
decided’ on the deposit side, which were to take effect
‘throughout Austria’ in the week 10 to 14 March: 0,25 %
cut in fixed rates (0,5 % where maturity exceeded four
years), 0,25 % cut in special rates and in group and
employee savings rates (maximum rate for new business
3 %, or 3,5 % in the provinces, and for old business
3,25 %). As regards the base rate, ‘it was agreed after a

(300) CA also complained about an advertising campaign
by BAWAG which mentioned rates. This was in breach
of
(see
recital 248) (343).

‘[senior management’s]

decision’

the

(301) Since competition between banks in the retail banking
sector had ‘meanwhile (become) very undisciplined
again, it was necessary to meet again shortly after the
talks’ [see recital 299] in order to ‘discuss
Federal
ways of containing’ this competition.
‘All the banks’
representatives wished to return to a somewhat more
orderly competitive situation’. The participants in the
Vienna lending rates meeting on 7 March 1997 next
identified a number of ‘disturbing offers’ on the market,
whose negative impact was ‘intensified’ by the fact that
these ‘disturbing’ interest rates were being advertised in
‘violation of previous agreements’.

(302)

‘In the light of the above, the following agreements
(were) made’: for foreign currency loans, the minimum
amount of ATS 1 million, as it was then, was to be
increased to ATS 1.5 million (mid-year) and then
ATS 2 million (end of the year), and a handling fee of at
least 2 % was to be charged. The minimum margin
should be 2,5 %.

(303) The joint decisions were then implemented. PSK, for
example, set its maximum rate for new special-rate
business at 3 % for Vienna and 3,25 % in the provinces,
‘in line with the agreement in the Deposit Lending Rates
Committee’ (see recital 298) (344).

(339) 19.573.
(340) 1247.
(341) 1914.

(342) 2560.
(343) 1631 et seq.; 1245; 14.274; 14.360 et seq.; 15.716.
(344) 15.716 (PSK).

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(304) Fixed-interest loans posed a particular problem since the
new ‘interest escalation clause’ made it impossible to
pursue the previous practice of ‘attracting customers
with a low entry-level rate and later increasing the initial
margins by raising the interest rate’. A final interest rate
therefore had to be determined at the time the contract
was first concluded. The participants could ‘not agree’
on the wording or the amount of the future margin to
be decided. Since, however, an agreement on the margin
would ‘irreversibly determine future interest-rate levels’,
it was agreed that a Special Lending Rates Committee
meeting would be held on 21 March (see recital 306).
At the same time, a ‘specific recommendation’ was to be
‘prepared for the next Lombard meeting’ (345).

(305) At their meeting on 14 March the Securities Committee
discussed the rates which should be charged in connec-
tion with new stock-exchange listings. The ‘view was
put
these should lie between 5 and
6 %’ (346).

forward that

(306) At the Special Lending Rates Committee meeting of
21 March, convened to produce ‘specific recommen-
dations to contain excessive competition’, participants
were first able to ‘reach agreement’ on the subject of
foreign currency financing (see recital 302): the mini-
to be increased from
mum amount
ATS 1 million to ATS 1,5 million by 1 July and to
ATS 2 million by 1 October, there was to be a minimum
margin of 2,5 % (in the eastern provinces 2 % at the
branches’ discretion, in the Tyrol and Vorarlberg 1,5 %)
and a handling fee of 2 % as a rule. Confirmation ‘[...]
at
the next Lombard meeting was not considered
necessary’.

loaned was

(307) The negotiations on fixed-interest loans and compliance
with the advertising ban were less successful. BAWAG’s
position on the advertising of rates proved to be
‘particularly entrenched’. It was not possible to come to
an agreement.

(308) Lastly, BA proposed introducing a new fee of ATS 50,
which should be charged at any interest adjustment
date (347).

(309) At the Federal Lending and Deposit Rates Committee
meeting on 11 April, criticism was expressed of the fact
that the cut in deposit rates agreed in February (see
recital 298) had ‘not’ been ‘implemented uniformly’,
especially as far as preferential rates were concerned.
The ‘usual recriminations’ ensued. In the end, it was
‘agreed’ that ‘from now on they would stick strictly’ to
the maximum interest rates agreed.

(310) As for lending, where ‘poor market discipline’ continued
to prevail and joint interest rate fixing had ‘slipped’ from

the banks’ grasp, a series of ‘rescue proposals’ to ‘resolve
matters’ were discussed. BAWAG appeared to be willing
to withdraw its ‘jubilee project’, repeatedly criticised by
the other institutions, in mid-1997, if the other banks
also ‘took steps to resolve the situation’. On the subject
of raising rates for works council members loans, there
should ‘be separate talks between BA and BAWAG’ and
the other institutions would then follow suit, since the
‘rate for works council members loans was always
‘In line
the credit
equally high in all
with BA’s proposal’ (see recital 308) an ‘interest rate
monitoring fee’ of ATS 50 should be charged. It should
be possible to undercut the maximum rate of 3,25 %
with central authorisation only. No fixed/variable inter-
est rate combinations should be offered, and fixed-
interest loans to private individuals should be available
only for mortgage loans and only for the full term
(except when loan maturity is more than 10 years).

institutions’.

(311) The ‘specific measures’ were to be ‘established’ at a
Special Lending Rates Committee meeting at the begin-
ning of May (348).

(312) This Special Lending Rates Committee meeting took
place on 5 May ‘with a view to re-setting minimum debit
interest rates for private credit and minimum margins
for fixed-interest loans and foreign currency loans in
order to optimise income’. Since all those present were
prepared ‘to return to a reasonable rates policy’, they
were able to confirm or to formulate for the first time
the following recommendations: the agreement reached
at the Special Lending Rates Committee meeting on
21 March (see recital 306) in respect of foreign currency
loans was confirmed. Fixed interest rates should be
offered only for the full maturity (except for loans of
more than 10 years, see recital 310) and only at the
minimum rates (7 % for five years, 7,5 % for seven years,
8 % for 10 years, disparities not to exceed 0,5 %). As
regards the interest rate monitoring fee of ATS 50, some
institutions preferred to increase the existing ‘loan
account maintenance fee’ by the same amount, rather
than introduce a new fee (see recital 310). For variable-
interest loans, a minimum of 6 % was to apply from
1 June or, for loans to self-employed people, 5,5 % or
6 % from 1 October 1997. New works council members
loans were from then on no longer to be granted at less
than 7 % (from 1 July). Lastly, they ‘agreed that, as from
1.6.1997, no interest rates below the recommended
minimums should be communicated to the media’. The
banks thus hoped to ‘control dumping prices’ (349).

(345) 2565; 14.360.
(346) 4450.
(347) 12.172; 36.168.

(348) 2581; 14.270; 4383; 1600; 1243; 12.173.
(349) 36.030 et seq.; 38.179 et seq.; 20.682, see footnote 141.

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(313) In an internal memo apparently written to brief CA’s
[representative]
for the Lombard Club meeting on
11 June, [a representative] of CA’s private financing
department analysed the situation in this area and noted
‘exaggerated rates competition’. Implementation of the
‘package of measures to improve market discipline’
discussed in the Special Lending Rates Committee meet-
ing on 5 May was likely, in the author’s opinion, ‘to fail
as a result of BAWAG’s refusal’ to raise works council
rates to 7 % and to discontinue the ‘jubilee project’ (as
promised at the Federal Lending and Deposit Rates
Committee talks on 11 April, see recital 310) (350).

June to September: joint success as regards deposit rates, but
continuing problems with lending rates necessitate a new, step-
by-step approach

(314) At the Federal Lending and Deposit Rates Committee
meeting on 20 June, the usual story was to be heard.
While the agreements on deposit rates (maximum
interest for special-rate deposits 3,25 %, see recital 298)
were ‘largely holding’, it was ‘on the whole not possible
to achieve the ambitious goals set [for lending rates] at
the last talks’. The ‘attempt to steady the lending-rate
price war’ was not crowned with success, the ‘agreements
were not being adhered to’. Only the ‘agreements on
foreign currency loans seem to be holding and therefore
do not pose any problem at present’.

(315) In view of this, ‘everyone agreed that impressive-sound-
ing packages of measures did not hit their mark and it
would be better to implement small-scale measures’.
the ‘following measures were agreed’:
Accordingly,
BAWAG was now to allow the much criticised jubilee
project to ‘peter out’ after all; no more press announce-
ments were to be made without prior ‘coordination’; and
rates below 5,5 % were not to be announced.

(316) BA pointed out that directly before the changeover to
the euro,
to
implement’ and that they should therefore be carried out
‘as quickly as possible’ (351).

fee increases would be ‘very difficult

(317) At the Liberal Professions Lending Rates Committee
meeting on 24 June, BAWAG’s special rate of 4,75 %
offered to doctors for operating loans was criticised.
Otherwise, ‘considerable unity’ prevailed on the subject
of minimum rates to be charged: 5,75 % for operating
loans, 5,5 % for investment loans, for loans linked to the
secondary market yield, a 1,25 % spread, and for fixed-
interest loans, a 1,5 % spread in relation to each reference
rate (352).

(318) At the Federal Lending and Deposit Rates Committee
meeting on 26 September, ‘satisfaction’ was expressed
with the ‘[deposit] rate discipline’, with only the Tyrol
and Vorarlberg named as ‘breakaway’ provinces. How-
ever, as before, there was no cause for satisfaction
with the development of the lending market, where
‘agreements (had) not (been) adhered to’. It was highlight-
ed as a ‘problem’ that ‘not all participants were respon-
sible for rates’ and therefore were ‘not solely authorised
to take decisions’ with respect to the agreements con-
cluded at
it was
important for all participants to discuss specific rates
with the representatives of their competitors who were
also responsible in their own institutions for the setting
of the rates discussed.

committee meetings. However,

(319) Since, from the banks’ point of view, the situation since
the Federal Lending and Deposit Rates Committee talks
on 20 June (see recital 314) had not improved, it was
suggested that a meeting of the Controller Committee
be convened to ‘draw up an interest-rate scenario’. The
result should then ‘be presented at a Lombard meeting
so that the market situation (can be) discussed at board
In
level’. This proposal was ‘unanimously accepted’.
addition, the banks wanted,
‘after
prior concertation in another meeting’, to try, by increas-
ing deposit rates by 0,5 %, to ‘signal a rise’, so that they
could then implement an ‘urgent increase’ in lending
rates. A ‘detailed discussion of how to implement this
was [scheduled for] mid-November’ (see recital 323).

in mid-November,

(320) Lastly, fees were again discussed in the light of the
changeover to the euro, which was already looming. BA
pointed out that fee increases would ‘be very difficult to
implement’ just before the changeover, given the greater
vigilance that was to be expected from ‘price com-
missions’, and should therefore be introduced ‘as quickly
as possible’ (353).

November to January: concerted rise in long-term savings
deposits, special rates and lending rates, ongoing discussion of
the base rate and measures to conceal the agreements

(321) At their meeting on 4 November, the members of the
Vienna Lending and Deposit Rates Committee came to
the ‘unanimous opinion’ that the rates for capital savings
accounts opened for a five-year term or longer should
be raised by between 0,125 and 0,25 %. The banks also
wanted to attempt to cut the base rate of 1,5 % by
between 0,125 and 0,25 % and bonus-carrying savings
deposits by 0,25 %, on the subject of which ‘opinions

(350) 36.362.
(351) 954; 1241 et seq.
(352) 16.335; 21.132.

(353) 1033; 14.262 et seq., 21.159.

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were not absolutely identical’. On 13 November there-
fore, the Federal Lending and Deposit Rates Committee
(see recital 323) should ‘try to come to a unanimous
opinion, giving reasons’.

(322) The banks then discussed the possible consequences of
a complaint about suspected agreements lodged with
the European Commission on 30 June 1997 against
certain banks and subsequently commented on in detail
by the Austrian media (see recital 14). In this connection,
BA’s representative recommended that they ‘no longer
Internal
keep any minutes’ of committee meetings.
records of the talks should also be ‘avoided or renamed’
with unsuspicious-sounding names like ‘market obser-
vations’. The legal department of a participating insti-
tution finally also advocated the ‘destruction of all
existing records’. In order to carry out such ‘destruction’,
the writer of Hypo’s internal report on the meeting asked
all its recipients ‘after reading [the report] to return it to
the writer, who will see to its subsequent destruc-
tion’ (354).

(323) At the Federal Lending and Deposit Rates Committee
meeting on 13 November, the ‘measures contemplated
at the last meeting in the area of savings deposits’ (see
recital 318) were discussed again. The ‘following results’
were obtained. The committee was ‘unanimously in
favour’ of raising the rates for capital savings accounts
of five years or more by around 0,25 %. BA again
suggested lowering the base rate to 0,25 %. As at the last
Vienna Lending and Deposit Rates Committee talks on
4 November (see recital 321) ‘no agreement’ could be
reached. However,
the subject was ‘not considered
closed’ but was ‘still to be settled’ and would ‘be pursued
further’. Lastly, BA, CA, Erste, PSK and BAWAG were
determined to cut bonus-carrying deposits by 0,25 %
before the end of the year. The agricultural credit sector,
NÖ Hypo, ÖVAG and the representatives from the
provinces (Carinthia, Styria and Salzburg), on the other
hand, were ‘sceptical’. However, what initially came out
of the ‘partly bilateral discussions’ held alongside the
committee meetings was that even these ‘sceptics (would
be) prepared to go along with this measure’, if the big
institutions were to implement the rise as agreed.

(324) As regards lending rates, all the institutions announced
that they would raise the rate by between 0,25 % and
0,5 % for all private loans granted after 1 March 1998.
Existing loans would be raised by 0,375 %, with the
ceiling lying between 7 and 8 %. For private building
loans the ‘absolute minimum’ was to be 6 % (355).

(325) At the payment transactions talks on the same day, as
previously at the Federal Lending and Deposit Rates
Committee meeting on 26 September (see recital 320),
reference was again made to the ‘major problem’ of
‘Consumer Association (356), Chamber of Labour (357)
and EU price monitoring commissions in connection
with the changeover to the euro’, which would make
price increases ‘more problematic’ as of the summer of
1998. The representatives of all participating banks thus
announced that they would increase fees for cheque
cards to at least ATS 250 from 1998, for payment slips
to ATS 10 (customer’s bank) or ATS 20 (other bank)
and for paying in cheques to ATS 9 to ATS 10 (358).

(326) In an interview given on 20 November 1997, BA’s
[representative] announced the planned rise in lending
rates, likely to be 0,5 %. However, this announcement
in response to which BA’s
received public criticism,
[representative] declared that lending rates would not
be raised any further that year. According to BA’s
[representative], the cut in the base rate, proposed by
BA at the Federal Lending and Deposit Rates Committee
meeting on 13 November 1997, was not an issue either.

(327) The press expressed suspicion, in connection with this
the banks had
planned rise in lending rates,
concluded agreements. However, ‘the banks denied the
existence of interest rate agreements’ (359).

that

(328) On 18 December, CA’s private financing department
reported that ‘most major competitors (BA, Erste, and
BAWAG) (had) already [implemented] interest rate rises’,
as discussed at the Federal Lending and Deposit Rates
Committee meeting on 13 November (see recital 324),
and therefore proposed that CA also raise its lending
rates. These rises would be carried out ‘taking account
of the approach intended by our main competitors’ (360).

11. CHRONOLOGY OF EVENTS: 1998

(329) In the internal memo titled ‘Information on the Lombard
Club, 11.2.1998’ to PSK’s [representative], those respon-
sible reported that all the Vienna institutions (with the
exception of BAWAG) had lowered rates for savings
deposits in January. The rates for long-term savings
accounts were raised at the same time, as were the
standard rates for consumer loans (up 0,5 %)
(see
recital 323) (361).

(356) VKI — Verein für Konsumenteninformation.
(357) AK — Arbeiterkammer.
(358) 22.189.
(359) Die Presse on 21 November and Salzburger Nachrichten on

(354) 14.342; 12.175; 1564.
(355) 12.178; 16.582; 1553; 14.258; 823.

25 November.

(360) 36.365.
(361) 3884.

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March: successful concerted cut in preferential rates, but too
great a discrepancy between Vienna and the provinces

Committee meetings in the light of competition reser-
vations’. ‘Therefore, no minutes of these talks would be
kept’ (363).

(330) On 5 March the banks’ representatives met in the Vienna
Lending and Deposit Rates Committee and were able to
establish that the 0,25 % cut in preferential rates had, at
‘been implemented and
least on the Vienna market,
adhered to by practically all market participants in
January/February’, so that the situation in the Vienna
area could ‘be described as stable and uniform’. However,
as regards group and works council member rates, the
cut had ‘not [been implemented] completely as planned’.
Participants were ‘relatively uniformly’ moving towards
an interest rate cut for long-term capital savings accounts
(maximum interest rate for seven-year capital savings
accounts of 5 %). For loans, the banks’ representatives
reported that lending rates had been raised by around
0,5 % (see recital 324).

the banks’

(331) At the Federal Lending and Deposit Rates Committee
meeting on 22 April,
representatives
expressed satisfaction with the relatively uniform 3,25 %
level of preferential deposit rates. While in the Vienna
area special rates remained ‘within the recently agreed
parameters’, the maximum interest rates agreed in the
provinces were sometimes 0,5 % above them. This
discrepancy was considered ‘too wide’; they should thus
attempt ‘in regional talks to narrow the gap between
Vienna and the provinces ’. Specifically, the ‘regional
committees [should] make cuts in the provinces’ and ‘if
possible, influence should be brought to bear at [senior
management] level’.

(332) Lastly, BA and RBW were considering a cut in the base
rate, although only ‘in cooperation with all the other
banks’. If ‘all major institutions pursued a concerted
course of action, a cut could likewise be made in
the summer months’. The ‘Fourth Vienna Committee’,
consisting of BA, CA, Erste and BAWAG, was to meet
to discuss this subject. According to BA, however, this
meeting did not take place. The next meeting was
scheduled for 25 June 1998 (362).

(333) At the Controller Committee meeting on 19 May, BA’s
representative informed the other participants that his
attention had been brought by his institution’s legal
department to ‘the problem of minutes of Controller

12. SPECIAL COMMITTEES

12.1. Export Financing Committee, Export Lombard

(334) These committees dealt with issues, especially rates, in
connection with export financing. Besides the main
banks, which also sat on the other committees, foreign
banks were represented at these talks by Centro Interna-
tionale Handelsbank AG (Centro), whose responsibility
it was, following discussions in the Export Financing
Committee, to ‘brief the foreign banks accordingly’.
Applications to take part from individual foreign banks
were therefore rejected (364).

(335) The only exception (besides Schoellerbank, which was
accepted owing to its intensified activities in this area)
was the Internationale Bank für Außenhandel
(IBA),
which initially acted as a ‘rate violator’ and was sub-
sequently included (in early 1994) in the Export Finan-
cing Committee, whose members thus hoped ‘to make
IBA see reason’ (365).

(336) An important subject at many of the meetings was what
was known as the house bank margin. This is the
maximum margin (since 1994, 0,5 %),
imposed by
OeKB or by the Export Fund as the funding bodies for
assisted loans, on the refinancing interest rate. Banks can
offer their customers (exporters) rates below this margin,
in which case it is naturally the banks which must make
up the difference to OeKB/the Export Fund. The extent
to which they undercut the maximum margin was thus
an important factor of competition. The banks were
therefore concerned to set ‘minimum margins’ among
themselves, so as to bring about a ‘certain abatement’ of
competition in this area too (366).

(363) 4359.
(364) 19.855; 19.858.
(365) 19.797; 19.801; in 1992, they had already considered whether
to invite ABN Bank Austria and West-LB, since at the time these
institutions were ‘particularly “actively” involved in export
financing’ and were undercutting the minimum margins agreed
by the other banks (see recital 336). The problem was solved,
however, by talking directly to the banks concerned, West-LB
making a ‘definite promise’ to stop undercutting the agreed
margins; 34.148; 38.177.

(362) 2049; 2480; 38.173; 4009.

(366) 19.805; 19.839.

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(337) Back in 1992 the Export Financing Committee had
‘concluded agreements on future minimum rates (house
bank margin) for export credits’, with a view to raising
the rate from 0,125 to 0,25 % initially and 0,5 %
ultimately. At the Export Financing Committee meeting
on 27 January 1994 the participants first reported their
‘success’ in ‘increasing the margins’ and in introducing
the ‘guarantee commission’ and the ‘commitment com-
mission’, as ‘recommended by the Lombard [...]’. How-
ever, there were still a number of ‘offenders’ and ‘price
violators’, of which IBA was the most important (see
recital 335). CA complained that it had lost a customer
because two other institutions had operated ‘with extre-
me (not agreed) rates’ (367).

(338) The Austrian members of the Export Financing Com-
mittee were sceptical about the undertakings given by
the foreign banks. Although their representative, Centro,
had reported that ‘the foreign banks, with one exception,
had declared that they would likewise not undercut the
minimum rates’, the other banks had to recognise that
some foreign banks ‘occasionally undercut’ the agreed
margins. The promise communicated by Centro was
‘therefore questioned’ (368).

to new business’ and that existing
‘only [applied]
arrangements remained unchanged (minimum margin
still 12,5 basis points). For all other export credit
business
the ‘full house bank margin’ of 0,5 %
applied (371).

12.2. Payment transactions

(342) The Austrian banks kept up a regular exchange of
information on both domestic and cross-border pay-
ment transactions. At the regular discussions in the
Cross-Border Transactions Committee, made up of the
big banks and representatives of the provincial and
foreign banks, the levels of transfer charges, documen-
tary credit fees and interbank fees, among other things,
were set. The Organisational Committee of the Austrian
Association of Credit Institutes (ORG) also discussed the
level of transfer charges and interbank fees.

(339) At

the meeting on 23 November 1994, criticism
increased of those institutions which undercut ‘agreed
margins’ to ‘win over’ new customers, and offered ‘house
bank bonuses’. CA complained that
losing
business to competitors because, unlike other insti-
tutions, it adhered ‘strictly to the agreements’ (369).

it kept

(340) At the meeting on 16 March 1995 the participants
emphasised the ‘following minimum margins’: 0,25 %
for financing not requiring equity backing and 0,5 %
where equity backing was required, in exceptional cases
at least 0,375 % in any event; 0,375 % for G3/G9
loans (370) with an equity backing requirement of 20 %.

(341) The Export Financing Committee, meeting on 15 May
1996, discussed the ‘fixing of the house bank margin’
undertaken
(see
recital 248). It was ‘unanimously stressed’ that the agreed
rate of 0,25 % for business not requiring equity backing

senior management

level]

[at

‘all

(343) At the Cross-Border Transactions Committee meeting
on 21 April 1994, the participants came out in favour
of increasing the transfer charges from ATS 70 to
ATS 80. On 23 June 1994,
institutions (were
to) agree and to set a date for implementation’ (see
recital 344). Adjustments in the fees for simple docu-
mentary credit in schillings and in foreign currency
(interest rate and minimum fee in each case) were also
‘unanimously adopted’. This outcome was communi-
cated to ORG (see recital 347). The common ‘rate of
collection for cross-border payment transactions’ (rate
of collection) was to ‘enter into force on 1 September
1994’‘following further discussion’ at the next meeting
of the committee. Lastly, rates for interbank fees and
charges and settlements for cross-border payment trans-
actions
‘unanimously
adopted’ (372).

residents were

between

(344) At the Cross-Border Transactions Committee meeting
on 23 June 1994, the participants first decided to
increase the charges for transfers between domestic
banks from ATS 70 to ATS 80 (see recital 343). The
‘antitrust aspects were highlighted’. The discussions on
the rate of collection advanced so well that ‘agreement
(could be) reached’ at the next meeting (22 September
1994, see recital 345) and the ‘final setting of the rate of
collection (would) no longer (be) an obstacle’ (373).

(367) 19.792 et seq.; 38.176; 26.256.
(368) 19.795; 19.800.
(369) 19.808; 19.811.
(370) The export financing system distinguishes 11 types of liability.
G3 refers to tied loans and G9 to purchases of receivables
(which together made up some 53 % of the National Bank’s
liability undertakings in 1997).

(371) See footnote 295.
(372) 21.229 et seq.
(373) 21.235.

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(345) The participants in the Cross-Border Transactions Com-
mittee on 22 September 1994 did indeed decide on the
rate of collection. This sets the collection charge for
cheques, exchange transactions and other simple remit-
tances together with the value date for these instruments.
The cheque collection fees set also apply to the direct
debiting system in cross-border payment transactions. In
connection with the collection rate, BA’s representative
pointed out that the rise in the collection fee for cheques
drawn on domestic banks had ‘already (been) discussed
two years ago’, but had then been ‘postponed until after
the increase in transfer charges’. Now that transfer
charges had been increased (see recital 344), ‘the Com-
mittee finally agreed to implement the increase [from
ATS 30 to ATS 40] by 1.2.1995’ (374).

pricing was coordinated between the Austrian banks,
were questionable from an antitrust point of view’. The
report concludes that these arrangements qualify as
restrictive agreements under both Austrian and EU
competition law and refers finally to the possibility
of the ‘initiation of investigation proceedings by the
European Commission and the imposition of heavy
fines’ (378).

(350) On 15 April 1997 the members of the ORG ‘unani-
mously’ agreed to increase exchange charges
for
interbank transactions in the context of the ‘collection
rate’ (379).

(346) The question ‘whether the banks, in setting an interbank
rate, were infringing the Restrictive Practices Act’ was
discussed at the meeting of the Cross-Border Trans-
actions Committee held on 24 November 1994, but
could not ‘be answered immediately’. Separate talks were
to be held on the subject (375).

(351) At their meeting on 22 April 1997, the members of
the Cross-Border Transactions Committee ‘unanimously
decided’ on the ‘cross-border direct debiting system’, as
it was known (380).

(347) At its meeting on 4 October 1994, the ORG, aware of
the ‘antitrust aspects’, took note formally of the agreed
increase in transfer charges (see recital 345). Those
institutions ‘not represented on the various bank com-
mittees’ were also to be informed of the increase. At this
meeting too, a member ‘referred to the antitrust problem’
and stressed that ‘in the EU in principle a different legal
interpretation of the issue prevailed’. The banks’ legal
departments
should therefore ‘look into this EU
issue’ (376).

(348) In the Cross-Border Transactions Committee meeting
on 2 March 1995 the participants agreed ‘to examine in
due course the possible consequences of EU antitrust
law’ on the rounds of talks (377). This was done in the
context of an internal legal report produced by GiroCred-
it on 13 April 1995 (see recital 349).

(349) At the Cross-Border Transactions Committee meeting
on 11 May 1995, the ‘antitrust aspects of an interbank
price agreement’ were discussed on the basis of an
internal
legal report dated 13 April 1995 obviously
produced by GiroCredit. The report looked into the
question whether the ‘regular discussions in the Cross-
Border Transactions Committee, during which interbank

(374) 21. 246 et seq.
(375) See footnote 52.
(376) For evidence in the file, see footnote 51.
(377) See footnote 52.

12.3. Regional committees

(352) The network established by the banks covered the entire
country. In order to ‘extend the geographical scope’ of
the agreements reached in Vienna ‘to the provinces’ and
to ensure by way of such ‘comprehensive’ application
that they had the ‘widest possible effects’, the banks set
up numerous committees in all the provinces (381). The
task of these committees was to conclude restrictive
agreements for their local areas, whether this involved
implementing the agreements reached in the Lombard
Club and the Vienna meetings or adapting them to the
local situation, or acting on their own initiative.

(353) Sometimes the hierarchy of the Lombard Club and
the specialist committees was exactly reflected in the
provinces. For example, the banks’ representatives with
responsibility for rates in Upper Austria came together

(378) 8523 et seq.; 8569 et seq.; 8573 et seq.
(379) 7569 et seq.; 7503, 7507 et seq.
(380) 8249 et seq.
(381) See recitals 145 and 257. These committees met in Burgenland,
Carinthia (e.g. Klagenfurt, Villach), Lower Austria (e.g. Stockerau,
Wr Neustadt, Hollabrunn, St Pölten), Upper Austria (e.g. Linz,
Steyr, Wels), Salzburg, Styria (e.g. Graz, Weiz, Bruck/Mur), the
Tyrol (e.g. Innsbruck) and Vorarlberg (e.g. Bregenz). Naming, or
even more so describing, all the regional cartel meetings is
beyond the scope of this Decision. This section therefore focuses
on the functioning of the regional committees in the overall
context of the network and their links with the talks organised
in Vienna.

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‘in the Linz Lombard Committee’ to ‘coordinate building-
loan rates’. Having reached agreement on that, they
mentioned the need to cut the savings rate by 0,25 %,
‘although (they would have to) wait for the conclusions
of the next rates talks in Vienna and Linz’ (382).

(354) In principle the rates agreed in the relevant regional
committees, in the context of ‘local agreements’, applied
in the provinces; as a rule they were somewhat lower
than the rates agreed in Vienna. This disparity was from
time to time considered by the banks to be ‘too wide’, so
that it was decided to attempt ‘in regional talks to
narrow the gap between Vienna and the provinces’.
Specifically, the ‘regional committees (were to) make
cuts in the provinces’ and ‘if possible, influence should
be brought to bear at [senior management] level’ (383).
At the Minilombard meeting on 25 June 1996 it was
‘jointly decided that the rates agreed on the spot would
apply in the provinces’ and that, despite diverging
from the agreements reached in Vienna, they could
be ‘accepted as a provisional solution’. However, the
them to the Vienna
objective remained to ‘adapt
system’ (384).

(355) To ensure systematic and seamless feedback, and thus a
continuous and reciprocal flow of information, between
the Vienna and Federal Lending and Deposit Rates
Committees on the one hand and the regional com-
mittees on the other, the banks set up efficient communi-
cation channels. A distinction should be made in this
respect between the single-tier and multi-tier bank
groupings.

(356) Within the single-tier big banks operating across Austria,
information was exchanged between the head office in
Vienna and the regional head offices in the provinces.
‘The Vienna institutions encourage regional representa-
tives to implement gradually the terms agreed on the
Vienna market’ (Minilombard talks in Vienna on 25 June
1996) (385). To this end the ‘provincial branches [of the
big banks] (were to) hold regional talks’ (Minilombard
meeting in Vienna on 23 February 1995) (386). Infor-
mation was exchanged, for example, by sending minutes
of the Vienna meetings to regional [representatives] (e.g.
Vienna Deposit Rates Committee meeting on 25 July
1995) (387). On 23 April 1996 [a representative] of CA’s
retail banking department (in Vienna) requested [CA
representatives] in the provinces ‘to organise regional
committees as soon as possible and to agree an identical

(382) 23.178.
(383) See footnote 362.
(384) See footnote 308; 25.486.
(385) See footnote 384.
(386) See recital 145.
(387) See footnote 242; 38.1754.

level of interest rates’. With regard to the ‘1/2 % increase
in retail lending rates to be discussed in the Lombard’,
CA (in Vienna) sent an ‘urgent, confidential’ fax on
11 January 1995 to Oberbank (Salzburg), BTV (the
Tyrol) and BKS (Carinthia) ‘requesting agreement in the
local interest rate talks’ (388). Lastly, BA had ‘urged (its)
regional managers to ensure that retail
lending talks
were held regularly’ (389).

(357) In the multi-tier sectors, each bank grouping had set up
its own internal information and representation system.

(358) In the agricultural credit cooperative grouping, the flow
of information was managed by the lead institution,
RZB. Its representative obtained information from all
the regional offices, prior to every Vienna Lending
and Deposit Rates Committee meeting, on the current
interest rate situation in the provinces (390). The results
of the Vienna talks were in turn passed on to the central
banks in the provinces ‘as quickly as possible’ (391). RLB
passed on the results of talks attended by it to all
agricultural credit cooperatives in Vienna and Lower
Austria by way of circulars.

(359) The considerable logistics of this exchange of infor-
mation within the agricultural credit cooperative group-
ing was described in a letter from the Carinthia central
agricultural credit cooperative to the Vienna head office
(RZB): ‘RZB informs us of the progress and conclusions
of the various bank committees in Vienna, such as the
Deposit Rates Committee and Lombard meetings. So
that we can pass on this information as quickly as
possible to the agricultural credit cooperatives in Carin-
thia,
I would ask you to ensure that management
informs the Carinthia Agricultural Credit Association
directly and that our department responsible for the
agricultural credit cooperatives is informed by the same
post or by fax’ (392). Sometimes RBW took on this
function, in which case the other banks considered it to
represent the entire agricultural cooperative grouping.
At the Vienna Deposit Rates Committee talks on 25 July
1995,
the following statement was
addressed to RBW: ‘the agricultural cooperative sector
(is) requested to do more to reduce offers by small
cooperatives’ (393).

for example,

(388) 2327; 2333.
(389) See footnote 287 and recital 265.
(390) 2019.
(391) See recital 98; however, the RZB representative also passed on
the results of the Federal Lending and/or Deposit Rates Com-
mittee talks to other banks (such as WiF-Bank or Kathrein & Co
Bank AG).
(392) See 2018.
(393) 20.210 et seq.

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(360) Likewise, Erste (or GiroCredit), as the lead institution in
the savings bank sector, provided for the flow of
information to and from the regional savings banks.

(361) ÖVAG, as lead institution, represented the credit union
grouping in the Vienna committees and passed on their
conclusions to the credit union banks in the provinces
by way of ‘sector faxes’ (called sector info) (394).

(362) The following examples, from Carinthia, Upper Austria
and Styria respectively, illustrate how the decisions taken
in Vienna sent a strong signal to the provinces and how
much the Vienna/Federal Lending and Deposit Rates
Committees and the regional committees mutually influ-
enced each other.

(363) On 22 May 1995, three days after the Vienna Federal
Deposit Rates Committee talks, the regular ‘exchange of
information’ was held in Klagenfurt between banks
operating locally. In January of that year, it had been
agreed by this regional committee ‘to wait for the Vienna
decisions’, and participants were now informed of the
cuts and maximum interest rates decided in Vienna, and
of the advertising ban. Regarding charges for payment
transactions, they were still waiting for recommen-
dations from Vienna, or more specifically for the results
of the payment transaction talks to be held on 7 June
1995 (395).

(364) A few days after the May 1996 Lombard Club meeting,
the package of measures adopted there were brought up
in the Linz Interest Rate Committee responsible for
Upper Austria. BA’s representative was able to report
that this package ‘(had) already (been) the subject of
instructions issued within BA and [...] [a member of BA’s
management board]’ would ‘approve no exceptions at
present’. The representatives of BAWAG and GiroCredit
also confirmed the content of the package. To ratify the
Lombard decisions, ‘the Linz Interest Rate Committee’
should ‘meet as promptly as possible and decide either
to implement
the abovementioned paper in Upper
Austria or at most to amend it’ (396).

(365) At the July 1995 Vienna Deposit Rates Committee
meeting, it was reported that ‘local talks’ in the regional
capitals had already ‘indicated that there was a willing-
ness to cut interest rates as proposed’. It was therefore
‘expected’ that institutions in the provinces would ‘follow
this approach’ and as a result CA sent the minutes of the

meeting ‘to [...] [regional representatives]’. Four days
later, the person ‘hosting’ the Graz talks suggested to his
assembled competitors that they cut rates ‘in Styria too,
following the Vienna deposit rates meeting held last
week’ (397).

13. THE PARTIES’ MAIN ARGUMENTS REGARDING THE
FACTS

(366) The banks concerned do not contest the facts as set out
in sections 7 to 12 above. However, they argue that the
Commission has failed to take account (a) of the specific
historical, societal, economic and social aspects of the
cartel and (b) of the lack of discipline demonstrated by
its members in implementing their agreements. These
two key criticisms made by all
the banks will be
addressed in detail here. Their legal arguments are
considered as part of the legal assessment.

13.1. The specific historical, societal, economic and
social aspects of the Lombard network

3) The functioning of the committees

4) The banks’ arguments

(367) The banks argue that some of the committees were set
up decades before Austria’s accession to the European
Economic Area, when they had had a legal basis. They
were typical of the political system existing in Austria at
the time. It was therefore unrealistic to expect the banks
simply to abandon these committees, rich in tradition
and rooted deep in their understanding of their econ-
omic functioning, on Austria’s accession to the European
Economic Area. On the contrary, ‘fear of the negative
consequences of a too rapid, and in particular, a poorly
prepared transition to free competition’ was widespread.
Without restrictive agreements, the banks would have
‘driven’ each other ‘to ruin’ (398), all the more so since
the relevant bank managers were not in a position ‘to
take sufficient account in their commercial policy of
calculation criteria that were self-evident
in them-
selves’ (399).

(368) In the banks’ view, the committees should be seen in
terms of a social phenomenon with a group dynamic,
rather than as a forum for restrictive agreements. The
banks refer to the ‘social significance’ (400) of the cartel
talks and even identify ‘social pressure’ to take part. All

(394) e.g. 21.159, 21.111, 20.944, 20.682.
(395) See 643, 23.027.
(396) 43.234 et seq.

(397) 488 et seq.; 36.344; 38.175, 23.632.
(398) 41.916 (Erste).
(399) 42.290 (RLB).
(400) 41.875 (Erste).

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the banks would like their involvement in the cartel to
be understood as a purely passive, commercially irrel-
evant (or in any event neutral as to its effects) presence
at ordinary (but basically tiresome) sector events that
they were obliged to attend. They ‘wanted to be there’ or
‘take part’ for reasons of social prestige (401).

(372) Moreover, the Commission does not find it credible that
the banks spent years sending numerous members of
staff to several hundred cartel meetings merely to boost
individuals’ social prestige. Whether the talks had social,
psychological or group-dynamic aspects in addition to
their (proven) anticompetitive object and effect can, in
the Commission’s view, be left open.

(369) ÖVAG and NÖ Hypo also argue that the Commission
should have brought out more clearly in its description
of the facts that in many instances the cartel decisions
had already been taken by a ‘narrower circle’ consisting
of BA, CA, RZB, Erste, GiroCredit and BAWAG prior to
each committee meeting and then had merely been
passed on to the smaller institutions at the talks. BA
contradicted this view, stressing that (despite occasional
coordination among the big banks before the meetings)
the actual decisions were indeed taken at each committee
meeting, with the active involvement of the smaller
institutions.

Commission’s standpoint

(370) While the Commission is aware of the historical origin
of many of the committees (see recital 27 et seq.), it
notes that there had been no more general measures or
agreements affecting competition on interest rates since
the expiry of the regulative agreements in 1989, i.e. long
before Austria’s accession to the European Economic
Area (402). There can therefore be no question of a
sudden disappearance of such measures for the banks
(allegedly unprepared at 31 December 1993 and ‘used
to regulation from outside’).

(371) In the Commission’s view, the numerous records of
meetings that were obtained clearly show that the sole
purpose of the talks was to restrict competition, seen as
destructive and harmful, for the shared financial benefit
of the banks. The documented statements by bank
representatives in this context are numerous and will
not be repeated here (403). There are also numerous
examples of internal instructions to keep to the cartel
decisions (404).

5) The role of the Austrian National Bank

6) The banks’ arguments

(373) All the banks consider it to be particularly important
that the [representative] of the Austrian National Bank
(OeNB) took part in the [representatives’] lunches in the
context of the Lombard Club. The OeNB, they claim,
approved the agreements made by the Lombard network
(in which as good as all Austrian banks took part) and
even actively promoted them by repeatedly calling for
greater awareness of costs and earnings among the
banks. The banks could only take such exhortations
from the OeNB as a call for restrictive agreements and
thus assume that their conduct was unobjectionable.

7) Commission’s standpoint

(374) The OeNB [representative] did take part in the monthly
Lombard lunches [...], where a number of competition-
neutral subjects were also discussed. However, the OeNB
was not regularly represented on the numerous other,
and at any rate on the central, committees in the
network (405).

(375) The OeNB’s statements as recorded in the minutes,
urging the banks not to endanger their earnings capacity
by an economically questionable commercial policy, can
in no way be reinterpreted after the event as a call for
restrictive agreements. The banks concerned remain
responsible for all statements to the effect that an
economically sound commercial policy could be achiev-
ed only through agreements with competitors to the
detriment of the customer.

(401) According to the representatives of ÖVAG and NÖ Hypo at the

oral hearing in January 2000.

(402) With the exception of the base rate and competition agreements,

which lost their legal basis only at the end of 1993.

(403) See section 5.4.
(404) See 36.048, 36.316 and the examples given in section 14.3.3.

(405) Vienna and Federal Lending and/or Deposit Rates Committees
(including the Consumer Lending Rates and Liberal Professions
Lending Rates Committees), the Minilombard and Controller
Committees.

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13.2. The effects of the Lombard network on the Austri-
an banking market

(379) Nor can it be concluded that the proven cartel had no
impact in Austria because the Austrian banks achieved
yields that on average were no higher than in Germany.

8) The banks’ arguments — Report

(376) The banks argue that the (uncontested) restrictive agree-
ments, which were comprehensive and had been in
place for years, had no influence at all on the Austrian
banking market. A report commissioned by the banks
concludes ‘that between 1994 and 1998 the Austrian
banking market corresponded to what would be expect-
ed in a situation of intense competition’ (406).

(377) The report used a number of methods to reach its
conclusion. First, market results (credit and savings
interest) in Austria were compared with market results
in Germany. Since, on average, they were found to be
no less favourable for Austrian customers than for
German, it was concluded that the agreements could not
have had an effect in Austria. Moreover, Austrian banks
were found to be less profitable than their German
counterparts. While this was also true of the banks’
productivity, this was claimed to be because staff costs
were higher and institutions were small, and not because
of anticompetitive agreements in Austria. Lastly, the
report found that the interest rates actually charged to
Austrian bank customers were (statistically speaking)
based on the interbank rates and not on the target rates
agreed in the cartel talks.

9) Commission’s standpoint (407)

(378) In the Commission’s view, a comparison of the banking
markets in two countries cannot produce a conclusion
as to whether one of those two markets would have
developed differently without the (proven) existence of
agreements. The fact that Austrian bank customers, as
regards one or other product, were no worse off
on average than customers in Germany may seem
comforting at first sight. However, it does not mean
that, had competition not been restricted in Austria,
customers would have found the same rates as under
the impact of the proven restrictive agreements.

(406) Report (43.186), recital 163.
(407) The Commission obtained the opinion of an economist on the
report. This opinion indicates a number of methodological
and academic weaknesses in the report. The report’s writer
subsequently refuted this criticism. The Commission will not
take account of the dispute between the experts in the following
considerations, and will thus not go into the banks’ criticisms
of the quality of the opinion.

(380) In the Commission’s view, the only factor that can
decide the question of the agreements’ impact is whether
and if so to what extent the banks participating in the
cartel were influenced by them when formulating their
commercial policies, and especially when setting interest
rates and charges/fees. The report finds (on the basis of
sample surveys and statistical calculations of averages)
that there was no noticeable influence.

(381) It must first be pointed out that the report does not
consider all cartel discussions during which specific
agreements were adopted (408). In one instance, it looked
at changes in interest rates which had not been the
subject of an agreement at all (409). As regards deposit
rates, the report takes no account whatsoever of capital
savings accounts and savings accounts with a minimum
interest rate; it also focuses on the date of the cartel
meeting instead of the agreed implementation time.
However, the Commission’s objections go beyond such
shortcomings. Even supposing that the report were free
of them, the banks gain nothing from its conclusions.

(382) On the basis of agreements for which there is documen-
tary evidence (seven as regards lending rates, and thirteen
as regards deposit rates), the report looks at whether the
average values for consumer instalment
loans and
savings and loan schemes contracted by the banks
(average values) corresponded to the target interest rates
(target values).

(383) An analysis of the random samples shows, for consumer
instalment loans, that on four reporting dates the average
values were below the relevant target values, and on
three dates, above them. However, the divergence was
very small in each case (between 0,35 % and 1,22 %).
The report obtained a similar result for savings and loan
schemes.

(384) However, the report does not attribute the very clear
alignment between the target and average values to the
agreements, but to the fact that, in each of the cases
examined, the interbank rate (reference interest rate) had
also changed. It finds that the average values were geared
solely to the interbank rate and not to the agreed target
values. Its central assertion is thus that the target values

(408) e.g. to increase consumer lending rates by 0,5 % in January 1995

or to cut savings rates in November/December 1996.

(409) At the deposit rates talks on 19 May 1995 it was expressly

decided not to change lending rates.

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had ‘no independent effect’ on the average values and
were ‘in themselves’ of no relevance to those values (410).
The proven alignment between the target and average
values, it claims, is explained purely by the fact that both
are causally related to the reference interest rate. A direct
causal relationship between the target and average values
cannot therefore be statistically proven.

(385) In this (central) point, the report refutes an assertion that
the Commission never made. The Commission never
argued that the banks reached their agreements without
taking any account of the reference interest rate. On the
contrary, as a rule the agreements were geared precisely
to coordinating reactions to changes in the reference
rate (triggered by a change in the key lending rates). It is
not contested that the reference interest rate is an
important cost factor for deposit and lending rates. The
Commission’s reproach is not that the banks set agreed
prices without taking account of external cost factors.
Rather, the Commission (supported by an overwhelming
volume of written evidence) accuses the banks of
reacting in concert to changes in the reference interest
rate.

(386) One of the objectives of their concerted approach was
to pass on cuts in key lending rates to customers as early
as possible where deposit rates were concerned but as
late as possible where lending rates were concerned. The
documentary evidence contains several examples of this
practice, which the banks euphemistically referred to as
an ‘asymmetrical cut in interest rates’.

(387) On this point,

the report merely makes estimates,
according to which the delay in passing on cuts in key
lending rates was on average much the same for both
lending and deposit rates. It finds on balance that the
banks did not make any earnings this way.

(388) The Commission would comment first that, as the report
itself states,
it was obliged to work with estimates.
Second, these estimates relate exclusively to statistical
averages. Third, the report is based on the false premise
that the banks faced unrestricted competition and were
not informed in advance of the plans of their competi-
tors. Under such circumstances, the length of the delay
in passing on changes in the key lending rates would
indeed have been determined by the free play of market
forces. As the report rightly states, ‘when it is not known
how competitors will react, it is always problematic to
raise interest rates’ (411). Here, the report hits the nail on

the head since it was precisely this uncertainty about the
conduct of competitors that the banks systematically
eliminated,
in particular as regards their reaction to
changes in the key lending rates.

(389) Nor does the report’s premise that the banks faced
intense, hidden competition correspond with the evi-
dence in the file. As already mentioned above, the banks
made great efforts regularly to monitor, through test
deposits, their competitors’ compliance with the agree-
ments. As far as charges/fees are concerned, the banks
themselves refer in their written statements to the
‘natural transparency’ or ‘full transparency’ of the bank-
ing market (412).

(390) For all these reasons, the Commission cannot accept the
report’s conclusion that the regular restrictive agree-
ments, of several years’ standing and comprehensive in
terms of both content and geographical scope, had no
effect whatsoever on the Austrian banking market. It
would be highly paradoxical
if the banks had spent
thousands of man-hours in several hundred cartel meet-
ings agreeing on exactly the deposit rates, exactly the
lending rates and exactly the charges/fees which free
competition would have itself produced anyway.

(391) It is correct to say that, for a considerable proportion of
the agreed interest rates, one or more of the cartel
members did not implement the exact rate agreed or did
not implement it at the exact time agreed. However, in
the case of the Lombard network, this objection misses
the point. Where target prices are agreed, we can speak
of implementation when the actual prices applied move
towards the target values (and not merely when they
reach them exactly).

14. LEGAL ASSESSMENT

14.1. Applicability of competition law to the banking
industry

(392) In the banks’ view, the rule that horizontal agreements
on prices represent in principle a clear and particularly
serious breach of Article 81 of the EC Treaty should ‘be
seen in perspective’ as far as the banking industry is
concerned. The ‘special economic context of the banking
industry’ made it ‘necessary to adopt a more differen-
tiated approach than is otherwise the case with price
agreements’. In particular, the Commission had in its
legal assessment overlooked the fact that the legal and
economic considerations that in all other cases apply to
competition ‘understood in a neutral sense’ must ‘not
be applied without closer scrutiny to the banking
industry’ (413).

(410) In recitals 103 and 104.
(411) Report, recital 77.

(412) See recital 7.
(413) 42.303 (RLB), 42.229 (RZB).

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(393) In other words, the banks claim that they have a special
role to play. In contrast to the conduct of undertakings
in all other branches of the economy, their actions could
‘not be assessed in terms of “normal” market-economy
criteria’ (414).

(397) Finally, the banks also argued that the Commission had
adopted an ‘unclear’ attitude to interest rate agreements
in the past and that it was ‘uncertain to this day whether
the ban on agreements should apply to the banking
industry’. This had created ‘a situation of trust’ in favour
of the banks and had led to a ‘confusing legal situation’
for the banks (421).

(394) This argument is not new. In the initial proceedings
underlying the judgment of the Court of Justice of the
European Communities of 14 July 1981 in the Züchner
case, the relevant bank argued that, because of the vital
role it played in international payments, the allegation
against it was that it had imposed a concerted increase
in transfer charges, it was, to a large extent, not subject
to the competition rules. The Court of Justice expressly
rejected this argument (415).

(395) Nor is the banks’ objection that they must not be
exposed to the free play of market forces or assessed on
the basis of market-economy criteria, since this would
result in insolvencies and hence ‘disastrous consequences
for the economy’ (416), convincing. Rather, the Com-
mission shares the view of the participants at the OECD
Round Table on this subject (1998), namely that it
is desirable for unprofitable banks to exit from the
market (417). The Member States have adequate instru-
ments at their disposal to ensure the orderly liquidation
of even a large credit institution and to prevent a crisis
in the system (418). Community legislation also covers
the eventuality of the market exit of credit institutions
which are in crisis, with the adoption of a Directive on
the winding-up of such credit institutions (419). If a major
insolvency should in fact threaten to develop into a
crisis affecting the whole system, the Member States can
provide direct support, within the limits set by the rules
governing State aid (420).

(396) However, it is certainly not permitted, and this is the
only point at issue here, for undertakings themselves to
limit competition through cartel agreements to a level
which appears reasonable to them and thus, allegedly in
the general interest, to improve their economic situation.

(398) However, a look at case-law and administrative practice
gives a different picture.
In its Second Report on
Competition Policy (1973), the Commission made it
clear that Article 81 of the EC Treaty is applicable to
agreements between banks,
for example, as regards
‘general terms’, and that the question of the general
application of Article 86(2) of the EC Treaty in this area
does not arise (422). At all events, any doubts in this
respect were removed in 1981, when the Court of Justice
ruled that Article 86(2) could apply only if banks were
operating a service of general economic interest with
which they had been entrusted by a measure adopted by
the public authorities (423). In response to this judgment,
the Commission made it clear in the Eleventh Report on
Competition Policy (1981) that agreements or concerted
practices relating to interest rates, charges and similar
parameters of competition were now definitely subject
to Article 81(1) of the EC Treaty (424).

(399) Accordingly, the Commission has consistently and clear-
ly opposed horizontal agreements between banks relat-
ing to prices charged to bank customers.
In 1989,
for example, the Commission Member with special
responsibility for competition publicly made clear his
opposition to interest rate agreements between banks,
stating that, as price agreements,
they infringed
Article 81(1) of the EC Treaty (425). In its Decision in the
Eurocheque: Helsinki Agreement case (426), the Com-
mission imposed a fine on the participants in an
agreement relating to the charging of a commission.

(414) 42.082 (BAWAG).
(415) Case 172/80 [1981] ECR 2021, paragraphs 6 et seq.
(416) 42.228 (RZB).
(417) OECD, Enhancing the role of competition in the regulation of

banks, DAFFE/CLP (98) 16, p. 9.

(418) Crédit Lyonnais, Commission Decision 98/490/EC of 20 May

1998, OJ L 8, 8.8.1998, p. 28.

(419) Directive 2001/24/EC of 4 April 2001, OJ L 125, 5.5.2001,

p. 15.

(420) See, for example, Banco di Sicilia, Commission Decision 2000/
600/EC of 10 November 1999, OJ L 256, 10.10.2000, p. 21;
Crédit Lyonnais, cited above; Crédit Foncier, Commission
Decision 2001/89/EC of 23 June 1999, OJ L 34, 3.2.2002,
p. 36.

(421) 41.579 (BA), 42.106 (BAWAG).
(422) Second Report on Competition Policy, point 52.
(423) Case 172/80 Züchner [1981] ECR 2021, paragraph 6.
(424) Although,

in three subsequent decisions (1986), the Com-
mission did not expressly adopt a position on interest rate
agreements, the Court of Justice confirmed in Case 267/86 Van
Eyke [1988] ECR 4769 that Article 81(1) was applicable to
interest rate agreements between banks.
(425) Press release, 16 November 1989, IP/89/869.
(426) OJ L 95, 9.4.1992, p. 50, essentially upheld by the Court of
First Instance in Cases T-39/92 and T-40/92 CB and Europay v
Commission [1994] ECR II-49.

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(400) There was therefore no doubt that the ban on agreements
applied fully to price agreements between credit insti-
tutions long before Austria acceded to the European
Economic Area. Even if Article 81 of the EC Treaty were
being applied for the first time to the banking industry
in this Decision (which is not the case), the banks
could not cite this fact
in their defence, since the
incompatibility of price agreements between competi-
tors is expressly stipulated in Article 81(1)(a) of the EC
Treaty and confirmed by established case-law (427).

14.2. Commission’s competence in respect of 1994

Argument put forward by the banks

(401) The banks argue that the Commission is not competent
to take action on an infringement of Article 53 of the
EEA Agreement committed in 1994 and, broadly, try to
substantiate this as follows.

(402) Pursuant to Article 56 of the EEA Agreement, only the
EFTA Surveillance Authority, and not the Commission,
is competent to deal with cases relating to trade between
the Community and an EFTA Member State (as opposed
to between EU Member States) if the relevant undertak-
ings have achieved more than 33 % of their EEA-wide
turnover in the territory of the EFTA States. This was the
case as regards the Austrian banks.

(403) Since the EFTA Surveillance Authority did not initiate
any proceedings in 1994 against the relevant banks,
there were no ‘pending cases’ (Article 172(2) of the Act
of Accession of Austria, Finland and Sweden) which
could have been transmitted to the Commission when
Austria joined the Community. Consequently, the Com-
mission was competent to deal with the agreements in
question only as from 1 January 1995.

10) Commission’s view

(404) The legal

interpretation put

forward by the banks
would mean granting immunity for cartel infringements
committed in the past. The Commission would be
prevented from taking action on infringements of Com-

(427) See, for example,

judgment of the Court of First Instance
delivered on 20 March 2002 in Case T-16/99 Lögstör Rör
(Deutschland) GmbH v Commission, [2002] ECR II-1633,
paragraph 327.

is part,
munity law, of which the EEA Agreement
committed by undertakings in new Member States (428).

(405) Any such interpretation would thwart the full effective-
ness of
the EEA Agreement, and in particular the
competition rules laid down in it. The setting-up of a
system ensuring that competition is not distorted and
that the rules thereon are equally respected is one of the
objectives and principles specifically referred to in
Article 1 of the EEA Agreement.

(406) However, the Court of Justice of the European Com-
munities has not yet had to deal with this question (429).
Since the legal situation here has not yet been clarified,
the Commission will waive the right
to find that
Article 53 of the EEA Agreement has been infringed in
respect of 1994.

14.3. Article 81 of the EC Treaty

(407) The comments below on Article 81(1) of the EC Treaty
and on the subsumption under that provision of the
facts as set out in the previous sections are based on the
following structure.

(408) By way of introduction, the case-law of the European
lawcourts on the concepts of ‘agreement’ and ‘concerted
practice’ is discussed (section 14.3.1). Particular attention
is paid to the assessment of a ‘complex infringement’.

(409) Building on this, there follows the legal qualification of
the facts as a complex infringement of considerable
duration comprising both agreements and concerted
practices (section 14.3.2).

(410) In section 14.3.3 it is explained that the undertakings
participating in the practices intended to restrict compe-
tition. The specific impact of the practices on the market
is discussed.

(428) The EFTA Surveillance Authority itself has no longer been able
to take action on the matter since 1995; see Article 4 of the
Agreement on Transitional Arrangements for a period after the
Accession of certain EFTA States to the European Union,
reproduced in Tichy/Dedichen, Securing a Smooth Shift
Between the Two EEA Pillars, 32 CMLRev (1995), pp. 131, 136,
and judgment of
Justice in Case C-321/97
Andersson v Sweden [1999] ECR I-3551.

the Court of

to suggest

(429) Court judgments relating to the implementation of directives by
EFTA States before their accession to the EU seem in the present
the Commission does not have
instance,
competence in respect of 1994; see opinion of Advocate
General Saggio in Case C-290/98 Commission v Austria, in
which it was assumed that Austria was obliged to comply with
Community law only as from the time of its accession to the
EU.

that

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(411) This is followed by comments on the effect of the
practices on trade between Member States
(sec-
tion 14.3.4), on the undertakings found to have commit-
ted an infringement (section 14.4) and on the duration
of the infringement (section 14.5).

contact between such operators the object or effect of
which is either to influence the conduct on the market
of competitors or to disclose to any such competitor the
course of conduct which they themselves have decided
to adopt or contemplate adopting (432).

14.3.1. Agreement and concerted practice: case-law

(412) According to the established case-law of the Court of
Justice of the European Communities and of the Court
of First Instance, there can be said to be an agreement
within the meaning of Article 81(1) of the EC Treaty
even if
the parties have merely reached a general
consensus regarding the course of action concerned. It
is sufficient that the undertakings in question should
have expressed their joint intention to conduct them-
selves on the market in a specific way. The agreement
need be neither written nor formal, nor does it have to
have express penalties attached to it or be backed by
implementing measures (430).

(413) By contrast, a concerted practice within the meaning of
Article 81(1) of the EC Treaty does not presuppose that
the parties have concluded an agreement on what each
of them should or should not do specifically on the
market. Instead, this concept focuses on those forms
of coordination which knowingly substitute practical
cooperation for the risks of competition, without the
stage being reached where an agreement as described
above (at recital 412) has been concluded (431).

(414) Such cooperation does not require the working-out of
an actual plan, but must be understood in the light of
the concept inherent in the competition provisions of
the EC Treaty according to which each economic
operator must determine independently the policy he
intends to adopt on the market. Although this require-
ment of independence laid down in the established case-
law of the Court of Justice does not deprive economic
operators of the right to adapt themselves intelligently
to the existing and anticipated conduct of their competi-
it does strictly preclude any direct or indirect
tors,

(430) Case T-1/89 Rhône-Poulenc v Commission [1991] ECR II-867,
paragraph 120; Joined Cases T-25/95 etc. Cimenteries CBR and
Others v Commission [2000] ECR II-491, paragraph 2061.
(431) Case 48/69 ICI v C ommission [1972] ECR 619, paragraph 64.

(415) Conduct can therefore be caught by Article 81(1) as a
concerted practice if, although they have not agreed or
decided beforehand how each of them should behave on
the market, the parties deliberately follow or adapt
themselves to a common strategy which promotes or
facilitates the coordination of their conduct on the
market. It is sufficient for the competitor, through his
declaration of intention, to have removed or at least
substantially reduced uncertainty as to the market
conduct to be expected from him, which is to be assumed
even where the declaration of intention ultimately proves
to be not fully correct (433).

there must be a presumption that

(416) Although the concept of a concerted practice presup-
poses conduct on the market, it does not necessarily
imply that that conduct should produce the concrete
effect of restricting competition. Subject to proof to the
is for the relevant undertakings
contrary, which it
to adduce,
the
undertakings participating in concerting arrangements
and remaining active on the market take account of the
information exchanged with their competitors when
determining their conduct on that market. This is all the
more so when they concert together on a regular basis
over a long period, and also applies in cases where the
participation of one or more undertakings in meetings
with an anticompetitive purpose is limited to the mere
receipt of information concerning the future conduct of
their market competitors (434).

(432) Established case-law; see Joined Cases 40/73 etc. Suiker Unie
and Others v Commission [1975] ECR 1663, paragraphs 173
and 174; Case T-7/89 Hercules Chemicals NV-SA v Commission
[1991] ECR II-1711, paragraph 258;
Joined Cases T-305/
94 etc. Limburgse Vinyl Maatschappij [1999] ECR II-931,
paragraph 720.

(433) Joined Cases T-25/95 etc. Cimenteries CBR and Others v

Commission [2000] ECR II-491, paragraphs 1852 and 1898.

(434) Case C-49/92 P Commission v Anic Partecipazioni [1999] ECR
I-4125, paragraph 121; Joined Cases T-202/98 etc. Tate & Lyle
and Others v Commission [2001] ECR II-2035, paragraph 58;
Joined Cases T-45/98 and T-47/98 Krupp Thyssen Stainless and
Others v Commission, judgment delivered on 13.12.2001, not
yet reported, paragraph 152; Case T-9/99 HFB and Others v
Commission, judgment delivered on 20.3.2002, not yet report-
ed, paragraph 284.

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(417) According to established case-law, the Commission is
not obliged, in the event of an infringement extending
over a lengthy period, to classify it exclusively as an
agreement or as a concerted practice, as in any event
infringement are covered by
both those forms of
Article 81(1) of the EC Treaty, or to divide it into
separate infringements (435). Such a distinction may
in fact prove unworkable or impractical because the
infringement simultaneously displays features of both
types of prohibited conduct, even if some of its manifes-
tations may, looked at in isolation, fall into one category
rather than the other. Both concepts subjectively involve
forms of collusion which are of the same type and differ
only in their intensity and forms of expression. It would
in particular make no sense to divide a continuous,
integrated and institutionalised pattern of behaviour
which serves one purpose and one purpose only into
several individual infringements.

(418) The Commission is therefore entitled to classify such a
complex infringement as an agreement ‘and/or’ concert-
ed practice, where, as a complex whole, the infringement
includes elements which are to be classified as an
‘agreement’ and elements which are to be classified as a
‘concerted practice’ (436).

(419) The divergent interests of the cartel members may result
in a consensus not being reached on all matters or in
some points being vaguely formulated or glossed over.
Formal agreement may never be reached on every issue.
Moreover, there may be internal conflicts, breaches of
the rules by members and, in some cases, stiff compe-
tition, going as far as outright price wars. None of these
factors results, however, in the conduct in question not
constituting an agreement and/or concerted practice if
these pursue a single, common and lasting purpose.

14.3.2. Agreement and concerted practice: nature of the

infringement in the present case

(420) As explained at length above (437), the banks concerned
had created a dense network of more than 20 different
committees which communicated with one another and
some of which had overlapping terms of reference.

There were in addition a large number of regional
committees throughout Austria. During the period
covered by this investigation, over 300 different meet-
ings, on average one every four working days, can be
shown to have been held in Vienna alone (i.e. without
taking the regional committees
In
addition, it has been possible to prove that numerous
contacts outside this institutionalised network took place
between representatives of the undertakings concerned,
sometimes at the highest level.

into account).

(421) Especially at meetings of those committees which dealt
explicitly with interest rates, participants always tried to
reach a consensus on the setting of rates. The proceed-
ings at these cartel meetings are summarised above in
section 5.3 and described at length in sections 7 to 12
and will not be gone into again here.

(422) From a legal point of view, it is evident that those aspects
of the practices which, as stages on the road to reaching
a consensus, may not in themselves be qualified as an
agreement within the meaning of Article 81(1) of the EC
Treaty are at all events covered by the concept of
concerted practice. What is involved in fact is a large
number of actions with one and the same anticompeti-
tive objective, each of which in itself meets the concept
either of agreement or of concerted practice and takes
the form of a single infringement of Article 81 of the EC
Treaty.

(423) Through the ongoing, regular,

institutionalised and
comprehensive exchange of usually confidential infor-
mation, the participating banks established a very high
degree of mutual understanding, reciprocity and, at least
conditional and partial, agreement on their current
and future market conduct and thus systematically
eliminated or at least very considerably reduced any
uncertainty as to the competitive conduct of the other
banks. Interest rate increases and decreases were actually
negotiated between the banks. This applied not only to
interest rates, but also to charges of all kinds, common
calculation bases or advertising on the basis of interest
rates.
‘Going it alone’ by individual banks was the
exception here and drew immediate criticism, sometimes
fierce, from the other banks.

(424) All these meetings and contacts had one and the same
purpose, namely the distortion of competition (see
section 14.3.3).

(435) Joined Cases T-305/94 etc. Limburgse Vinyl Maatschappij
[1999] ECR II-931, paragraph 696; Case T-9/99 HFB and
Others v Commission, judgment delivered on 20.3.2002, not
yet reported, paragraph 186.

(436) Joined Cases T-305/94 etc. Limburgse Vinyl Maatschappij

[1999] ECR II-934, paragraph 697.

(437) See section 5.2.

(425) The Commission therefore takes the view that the facts
described in this Decision reveal a complex infringement
of considerable duration to which the undertakings
found to have committed an infringement were party.

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Those undertakings themselves participated in the main
committee meetings (438) and knew, or must have
known, of the existence of other committee meetings. It
would not make sense to divide this ongoing, common
and, from the point of view of both subject matter and
organisation, interconnected system of practices, which
in its entirety was directed at distorting competition,
artificially into its, in fact closely interwoven, component
parts and thus to try to construct several separate
infringements out of it.

14.3.3. Object or purpose of the restriction of competition

issue sought

in the practices at

(426) As explained at length in section 5.4, the banks taking
part
through the
agreements, characterised by themselves as ‘useful’ and
‘constructive’, to avoid ‘ruinous’ competition with one
another and instead to bring about among themselves
‘disciplined’,
‘controlled’,
‘moderate’ and
‘eased’,
‘orderly’, all euphemisms for distorted and restricted,
competition (439). The purpose of the practices was the
agreeing and/or concertation of prices (interest rates and
charges) and the restriction of advertising measures.

‘standardised’,
‘limited’,

‘reasonable’,

‘displaced’,

‘sensible’,

(427) The anticompetitive purpose is expressly admitted by

some banks (440).

(428) According to established case-law, for the purposes of
applying Article 81(1) of the EC Treaty, there is no need
to take account of the actual effects of an agreement or
concerted practice once it appears that
its aim is
to prevent, restrict or distort competition within the
common market (441).

(429) In principle, therefore, the actual effects do not have to

be examined in this case.

(430) For the sake of completeness and clarity, however, it
should be noted that the practices at issue did in fact
have an effect on the Austrian banking market. In this
context, it should be borne in mind that, in instances in
which target prices are agreed, it may be said that they

have been implemented if the prices actually charged
approach these target values (and not just if the targets
are precisely achieved) (442).

(431) In the first place, reference should be made to the
specific examples of the implementation of various
cartel decisions specified in the Facts.
In addition,
numerous internal memos demonstrate how the banks
implemented cartel decisions or took the information
obtained in the discussions into account in setting their
own rates. For example, PSK set maximum interest rates
‘in accordance with the agreement in the Deposit Rates
Committee’ and planned its marketing ‘in relation to the
fee considerations of fellow competitors’ (443), BAWAG
raised credit interest rates ‘in line with’ the measures
taken by the other banks in accordance with the
agreement (444), NÖ Hypo lowered its savings interest
rates ‘on the basis of the cuts agreed in the Federal
Lending and Deposit Rates Committee and following
telephone consultations with the other sectors’ (445) and
‘in accordance with the measures recommended in the
last two Deposit Rates Committee’ meetings (446), Erste
lowered its lending interest rates ‘in the light of the prior
agreement in the Lending/Deposit Rates Committee’ and
changed its savings interest rates ‘in line with fellow
competitors’ (447) and increased the volume for fixed
interest rate loans as ‘agreed in the treasury round’ (448),
GiroCredit lowered its lending interest rates ‘in the light
of the expected [because agreed in the Federal Lending
and Deposit Rates Committee] behaviour of the other
market participants’ (449), CA cut the interest rates for
employee groups ‘in coordination with BAWAG, Bank
Austria and Erste’ by 0,25 % (450), CA’s regional office in
Salzburg cut its savings interest rates ‘as agreed with the
Salzburg institutions’ (451) and CA Oberösterreich cut its
savings interest rates in line with ‘the agreed action of
the Upper Austria banks’ (452).

(432) The banks themselves accordingly conceded that they
tailored their own policies on rates to the knowledge on
their competitors’ plans obtained during the dis-
cussions (453). One of the banks further expressly con-
ceded in its comments that it had ‘adapted’ its competi-
tive conduct to the plans of the other banks and had
‘followed suite on the agreed arrangements’ (454).

(442) See, for example, Commission Decision of 21 November 2001

in the Vitamins case, paragraph 728.

(438) Including the Vienna and Federal Lending and/or Deposit Rates
Committees, the Consumer and Liberal Professions Lending
Rates Committees, the Minilombard Committee and the Con-
troller Committee.

(439) For evidence, see the documents cited in section 5.4.
(440) 42.206 (RZB).
(441) Joined Cases T-305/94 etc. Limburgse Vinyl Maatschappij
[1999] ECR II-931, paragraph 741;
Joined Cases T 45/98
and T-47/98 Krupp Thyssen Stainless GmbH and Others v
Commission, judgment delivered on 13.12.2001, not yet report-
ed, paragraph 152.

(443) See footnote 344; 22.165 et seq.
(444) 394.
(445) 14.634.
(446) 14.694, 14.648.
(447) 47.135, 47.138.
(448) 47.137.
(449) 47.139
(450) 12.644.
(451) 23.493.
(452) 23.239.
(453) 16.893.
(454) 42.742, 42.751 (ÖVAG).

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(433) There was further conclusive evidence in the form of
those documents secured in which the banks themselves,
on the basis of checks on other banks regularly carried
out by them, assessed the actual implementation of their
agreements. In these, it is stated, for example, that ‘all
the major banks are sticking to the agreed interest rates
[and] our policy [is] basic compliance with the reference
figures’ (455), all institutions had ‘carried out the agreed
interest rate cuts and stuck essentially to the agreements
made’ (456), ‘recommended rates are being followed’ (457),
the banks were ‘essentially satisfied’ with the implemen-
tation of their joint decisions (458), there was ‘not a
single instance’ of the agreed ‘minimum rates being
undercut’ (459), the ‘cuts agreed had in the meantime
been implemented’ (460),
‘the interest rates agreed had
been largely observed’ (461), the rates remained ‘within
the recently agreed parameters’ (462) and the market now
presented a ‘very uniform rates picture’ (463). The fact
that compliance by one banking group amounted to
‘only 70 %’ was viewed critically (464). In its written
comments, one of the relevant banks actually admits
that the cartel participants ‘only occasionally broke
“interest rate discipline”’ (465).

(434) Lastly, it seems improbable that the banks would have
met regularly and so often, on average every four
working days, if the meetings were entirely futile and
ineffectual.

(435) As regards the regular and detailed exchange of infor-
mation concerning calculation methods and parameters,
particularly in the Controller Committee,
its compe-
tition-restricting effect has to be deemed to be all the
more significant as the banks’
interest margins are
thin (466).

(436) In the Commission’s view, it is therefore established that
the agreements at issue have had an effect on the market.
It is neither possible nor necessary to quantify this effect
precisely, that is, to determine what rates and charges/
fees the banks would have applied had they determined
their conduct on the market autonomously and indepen-
dently of one another under conditions of undistorted

competition. As stated above, the report commissioned
by the banks failed to show that the cartel had had no
effect (467).

(437) The Commission is not unaware of the fact that in
some areas of lending the much-vaunted ‘interest rate
discipline’ frequently left much to be desired. Sometimes
the banks had to endure setbacks in their common
endeavour to improve margins or even admit to failure.
A ‘lack of discipline’ led in some cases to ‘price wars’.
This does not mean, however, that the agreements did
not have an effect on the market.

14.3.4.

Effect on trade between Member States

(438) It is established case-law that, in order that an agreement
between undertakings may affect trade between Member
States, it must be possible to foresee with a sufficient
degree of probability on the basis of a set of objective
factors of law or fact that it may have an influence,
direct or indirect, actual or potential, on the pattern of
trade between Member States, such as might appreciably
prejudice the realisation of the aim of a single market in
all the Member States (468).

(439) In order to establish the existence of such an influence
on the pattern of trade, detrimental as it is to the
attainment of the objectives of the single market between
Member States, a comparison must be made between
the actual situation and the hypothetical situation that
would obtain if there were no restriction of competition,
that is, assuming that there is undistorted competition.
The question is solely one of whether the restriction, be
it indirect and potential, may deflect the pattern of trade
from its natural course (469). It is immaterial whether
such influence is unfavourable, neutral or favourable. A
prevention of imports is not necessary (470).

(455) See footnote 165.
(456) See footnote 282.
(457) See footnotes 173, 180 and 185.
(458) See footnote 254.
(459) See footnote 314.
(460) See footnote 338.
(461) See footnotes 319 and 323.
(462) See footnote 362.
(463) See footnote 315.
(464) See recital 255.
(465) See footnote 530.
(466) See Commission Decision 96/438/EC of 5 June 1996 Fenex,

paragraph 51, OJ L 181, 20.7.1996, p. 28.

(467) See paragraphs 380 et seq.
(468) Case C-219/95 P. Ferriere Nord v Commission [1997] ECR I-
4411, paragraph 20; Joined Cases C-215/96 and C-216/96
Carlo Bagnasco and Others [1999] ECR I-135, paragraph 47.

(469) Case 22/78 Hugin v Commission [1979] ECR 1869, para-
graph 22; Joined Cases C-209 to 215/78 and 128/78 Van
Landewyck v Commission [1980] ECR 3125, paragraph 172;
Carlo Bagnasco and Others, ibid., paragraph 48.

(470) Case T-143/89 Ferriere Nord v C ommission [1995] ECR II-
917, paragraph 33; Case C-219/95 P Ferriere Nord v Com-
mission, cited above, paragraphs 18 et seq.

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(440) In this analysis, an overall assessment must be made as,
although individual
factors taken separately cannot
result in such an influence, they can do so in their
context (471). In particular, the agreements or practices
must be viewed as a whole (472). Account must be taken
of
the economic factors peculiar to the sector in
question (473).

isolation for each individual committee. The banks refer
here to the judgment of the Court of First Instance in
VGB and Others v Commission, which states that
Article 81 of the EC Treaty ‘applies only to agreements
which contribute significantly to any closing-off of the
market’ (476).

(441) According to established, and recently confirmed, case-
law, a cartel that covers the entire territory of the
Member State is liable by its very nature to affect trade
appreciably between Member States (474). In assessing
the appreciability of any such effects, the importance of
the subject of the agreement/practice and the market
position of the cartel members are relevant (475).

(442) The Lombard network, consisting of a number of closely
interwoven committees, covered the whole of Austria,
included almost all Austrian banks, covered the whole
range of banking products and services available in
Austria, altered the conditions of competition through-
out Austria, thus influenced market entry decisions
taken by foreign banks and was consequently liable to
influence trade between Member States to an appreciable
extent.

11) Argument put forward by the banks

(443) The banks begin by complaining that the Commission
has wrongly focused on the liability of the network to
affect trade between Member States. In the banks’ view,
any such liability should be examined and proved in

(471) Case C-250/92 Gøttrup Klim [1994] ECR I-5641, paragraph 54;

Carlo Bagnasco and Others, cited above, paragraph 47.

(472) Case T-77/94 VGB and Others v Commission [1997] ECR II-

759, paragraph 126 among others.

(473) Case 22/78 Hugin v Commission, cited above, paragraph 25.
(474) Case C-309/99 Wouters and Others, judgment delivered on
19.2.2002, [2002] ECR I-1577, paragraph 95 with references
to case-law. See also Case C-35/96 Commission v Italy [1998]
ECR I-3851, paragraph 49 (That effect is all the more appreciable
in this case because the various types of import or export
operations within the Community, as well as transactions
between Community traders, require customs formalities to be
carried out; emphasis added).

(475) See, for example, Joined Cases T-213/95 and T-18/96 SCK and
FNK v Commission [1997] ECR II-1739, paragraph 181, where
a market share of around 40 % was deemed sufficient for there
to be an appreciable effect.

(444) The banks go on to argue that the Court of Justice had
developed a specific test for assessing banking services
in its judgment of 21 January 1999 in Bagnasco. The
test had been applied by the Commission in its Decision
in Nederlandse Vereniging van Banken (477). Assessing
discussions in each committee in isolation would, apply-
ing the criteria of the specific test, ultimately lead to the
conclusion that most of the committees could not have
had any appreciable effect on trade between Member
States and should consequently be disregarded.

12) Commission’s view

(445) The banks’ argument is based on the premise that there
was no interconnected system of agreements, but only a
number of committees that were completely indepen-
dent of one another. However, in view of the documen-
tary evidence available, this premise is untenable. View-
ing each individual committee in isolation, as the banks
demand, would be possible only in the form of a
intellectual experiment, since, as amply
hypothetical
demonstrated in the Facts,
the committees were
extremely closely interconnected with one another in
terms of subjects covered and organisation. This is also
evident from the fact that the distinction between the
individual committees was not always strictly adhered
to and sometimes topics from one area were dealt with
in the committee responsible for another area. Any
artificial division of the network into its individual
components would bear no relation to the real facts and
the impact of the cartel.

(446) As far as the judgment in VGB and Others v Commission,
cited by the banks, is concerned, it demonstrates just the
opposite of what the banks are arguing. The subject
matter assessed by the Commission in the disputed
Decision and subsequently by the Court of Justice was a
whole body of decisions and agreements on the supply
of floricultural products on the plaintiff’s premises in
Aalsmeer (Netherlands). This body of rules included
provisions on user fees and trade agreements.

(476) e.g. 41.887 (Erste); joint submission at hearing of 18 January

2000 (43.443).

(477) Decision of 8 September 1999 (Cases IV/34.010, 33.793,
34.234 and 34.888, Nederlandse Vereniging van Banken and
others), OJ L 271, 21.10.1999, p. 28.

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(447) The Court of First Instance held that the ‘rules as a whole
are liable to affect trade between Member States [...].
Since the trade agreements form an integral part of those
rules, it is of no importance whether or not, in isolation,
they affect trade between Member States to a sufficient
extent’ (478). This is precisely the situation which exists
in the Lombard network.

(448) The Court of First Instance then went on to look at five
separate exclusive purchasing agreements which the
plaintiff had concluded with Dutch wholesalers.
In
contrast to the parts of the body of rules mentioned in
recital 446, the exclusive purchasing agreements did
not, in the Court’s view, have any direct link with the
body of rules. The Court of First Instance therefore
considered whether the five agreements might appreci-
ably affect trade between Member States on the basis of
the criterion usually applied to vertical agreements,
namely the possible closing-off of the market. It was in
this context, and not with regard to the body of rules as
a whole, that the Court of First Instance, citing the
judgment in Delimitis, discussed the possible ‘significant
[...] closing-off of the market’ referred to by the banks.

(449) Nor do the judgment in Bagnasco and the Decision in
Nederlandse Vereniging van Banken provide any support
for the legal view taken by the banks. In those cases,
only comparatively minor services on the banking
market, namely clauses in the general conditions of
business regarding general guarantees (Bagnasco) and
acceptance giros (Nederlandse Vereniging van Banken),
were involved. The banking service constituted by
‘general guarantees’ does not, in and for itself, by its
nature have any cross-border dimension and is, once
again in and for itself, too minor to be able to affect
trade between Member States. The same applies to
acceptance giros, which the Commission expressly
describes in its Decision as being a product of ‘relatively
limited importance’.

(450) The difference compared with the Lombard network,
which comprised not just one or other relatively minor
marginal product, but all the closely interwoven aspects
of banking, in particular savings interest rates, lending
interest rates and charges, and did not allow free
competition in respect of any fundamental parameter of
competition, is in fact considerable.

(451) To summarise, and on the basis of settled case-law, the
proven comprehensive geographical and substantive
coverage of the network, its undisputed anticompetitive
purpose and its similarly proven impact throughout
Austria, support the Commission’s legal interpretation
that the network consisting of a number of interconnect-
ed committees was liable to appreciably affect trade
between Member States.

(478) VGB, cited above, paragraph 126.

(452) Contrary to the view taken by the banks, it is irrelevant
in this context whether the individual participation of
one or other undertaking in the practices appreciably
affected trade between Member States. Since the Lom-
bard network as a whole was liable to affect trade
between Member States,
the Commission does not
need to show that the individual participation of one
undertaking or another in and for itself also appreciably
affected such trade (479).

(453) The liability of the Lombard network to appreciably
affect trade between Member States, as described above,
will be illustrated below by a number of specific
examples. These examples of the liability to have both a
direct and an indirect impact concern the demand and
the supply side.

The demand side level

to

(454) As stated above, deposits by foreign non-banks with
Austrian credit institutions in 1999 amounted to some
EUR 26 billion and loans granted by Austrian credit
some
institutions
EUR 36 billion. The comprehensive agreements by
Austrian banks,
in particular as regards savings and
lending interest rates, were consequently liable to affect
individuals and firms from other Member States, as
savers and as borrowers, directly and to an appreciable
extent.

non-banks

foreign

to

(455) Parts of the practices at issue either concern services of
a cross-border nature, and for that reason alone are
therefore capable of affecting trade between Member
States (480), or are by their very nature closely related to
cross-border goods flows. Agreements relating to cross-
border payment transactions (481), documentary busi-
ness and the buying and selling of securities also fall
within this category (482).

(479) Case T-17/99, KE KELIT Kunststoffwerk GmbH v Commission,
judgment of the Court of First Instance delivered on 20.3.2002,
not yet reported, paragraph 58 among others.

investment

involving international

(480) Case 172/80 Züchner [1981] ECR 2021, paragraph 18.
(481) See, for example, 8166 et seq., according to which foreign
transactions
funds are
increasing disproportionately. Austrian residents transfer small
amounts direct to foreign funds. The latter also receive small
amounts by direct debit. See also 4660 and 4663 on the results
of a cost comparison with the Federal Republic of Germany, in
which distant giro transfers come out better than the Austrian
giro system. No information that refers to the more favourable
terms available in using such distant giro transfers is therefore
to be passed on to customers.

(482) In 1998, foreign nationals purchased ATS 205 billion worth of
Austrian
purchased
and Austrian
ATS 147 billion worth of foreign securities; Die Presse, 21 April
1999.

securities,

nationals

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(456) Although other aspects of the practices do not have any
natural connection with cross-border transactions, they
do exercise an indirect influence thereon inasmuch as
lending rates necessarily affect investment, and hence
production, decisions both of subsidiaries of foreign
firms and of Austrian firms in Austria.

(457) In this connection, account should be taken not only of
Austria’s very high export ratio (483), but also of the
traditionally close relationship between Austrian under-
takings and their ‘house bank’, and hence of its particular
importance as far as the raising of capital
is con-
cerned (484).
In 1998, direct investment by Austrian
entrepreneurs in other Member States came to more
than ATS 16 billion (485).

(458) In the case of those undertakings which, because of their
size, are able to turn to the international capital markets,
the agreements at issue were,
it is true, only ‘to be
adhered to to a limited extent’. The Austrian banks
therefore discussed whether to expressly exclude such
customers from the general agreements applying to all
others and instead to take ‘a joint decision in individual
cases’ (486).

(459) The considerations set out at recital 456 above also
apply to those aspects of the conduct which relate to
interest rates for consumer lending. Such lending serves
in particular to finance the purchase of consumer
durables which are not made in Austria but are imported
from other Member States, such as motor vehicles. It
can therefore be assumed that such lending rates influ-
ence goods flows between Member States.

The supply side level

(460) The effects of the practices at issue are, however, not
confined to the demand side. As will be shown in the
paragraphs that follow, the practices may also influence
competitive conditions on the supply side and hence
affect trade between Member States.

(461) As already indicated at length above (487), the practices
related to almost all banking products and services.
Moreover, almost all the Austrian banks were involved
in at least some (and the largest banks in all) of the
practices. The object of these comprehensive, country-

(483) In 1998, exports accounted for 29,3 % of GDP; 64 % of all

exports went to other EU countries; see footnote 482.

(484) The Austrian capital market, on the other hand, traditionally
plays no more than a subordinate role as far as the raising of
capital is concerned.

(485) See footnote 482; Der Standard, 27 April 1999, p. 21.
(486) See footnote 308; 37.685.
(487) See recital 8 and, more exhaustively, sections 7 to 12.

long-term agreements was, departing from the
wide,
optimum factor allocation to be expected under normal
competitive conditions, to keep prices, and hence profits,
at a level above that which would have prevailed
under conditions of undistorted competition (488). As
the documents cited above at recital 433 by way of
example show, according to their own estimates the
banks succeeded in doing so to a not inconsiderable
degree (489).

(462) It is clear, therefore, from the comprehensive exposition
in section 5.4 and sections 7 to 12 that the agreements
had both as their object and, in some cases, as their
effect the bringing-about or the maintenance, through
collectively monopolistic pricing behaviour, of an exag-
gerated increase in prices and hence in profits. At the
same time, the agreements preserved a clearly inefficient
market environment. Foreign competitors have to take
this into account when deciding whether and, if so, to
what extent they should enter the Austrian market under
these conditions. The agreements are accordingly also
liable to deflect the pattern of trade from its natural
course by influencing decisions to enter the market.

(463) Since the agreements had both as their object and, in
some cases, as their effect the bringing-about or the
maintenance of an exaggerated increase in prices and
hence in profits, it is to be expected that the (domestic)
cartel members will react to any undercutting of agreed
interest rates by (foreign) non-members. Should, as a
result of such competition, prices (and hence the cartel
members’ profits) threaten to come under pressure, the
cartel members will seek to neutralise the competition,
and hence to sustain the exaggerated price/profit
increase, by tying in the foreign competitors. If there
is no such threat, however, e.g. because the foreign
competitors’ market share is too small, no such tying-in
will take place.

(488) It is clear from their own documents that the banks wished to
replace unrestricted, in their view ‘destructive’, competition by
restricted, in their words ‘controlled’, ‘reasonable’, ‘disciplined’,
‘eased’, ‘limited’, ‘moderate’ or ‘orderly’, competition. For evi-
dence, see the documents referred to in section 5.3.

(489) See the following quotations from the documents obtained: all
the major banks were sticking ‘to the agreed interest rates’ or
were ‘essentially sticking to the agreements reached’,
‘rec-
ommended rates were [...] being followed’, the banks were
‘essentially satisfied’ with the implementation of their decisions,
there was ‘not a single instance’ of the agreed ‘minimum rates
being undercut’, the ‘cuts agreed had in the meantime been
implemented’ and ‘the interest rates agreed had been largely
observed’, which meant that the market now presented a ‘very
uniform rates picture’.

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(464) In the export financing segment, foreign banks threat-
ened, by undercutting the interest rates agreed between
the Austrian banks, to ‘soften their margins’. The Austri-
an banks accordingly felt bound either to include foreign
banks, e.g. West-LB, ad hoc in the agreements or to
formally admit them, first of all via the participation of
a foreign-bank representative, to membership of the
relevant committee (the Export Financing Committee,
see section 12.1 for details). In the case of another
foreign bank, the German Schoellerbank, the Austrian
banks decided to admit it to the Export Financing
Committee, as Schoellerbank had ‘fairly strong activities’
in this area.

(465) The matter was viewed differently in the personal
banking field, where the German bank Schoeller tried to
increase its market share by offering favourable interest
rates. Owing, however, to its exclusion from the cartel
in 1992, there were for the Austrian banks ‘no possibiliti-
es of coordination’ with Schoellerbank. The cartel mem-
bers therefore considered reversing the exclusion and
inviting Schoeller Bank
discussed the possibility ‘of
representatives to the next Consumer Lending Rates
Committee meeting’. Since Schoellerbank’s market share
in this segment was small, the banks ‘came to the
conclusion that the competitive pressure was still bear-
able for the large banks’ and that on the whole ‘it would
be a bad thing if Schoeller knew exactly what was
discussed at the meetings’ (490).

In the first place, it is not necessary under established
case-law for trade between Member States to be affected
in an adverse sense. All that matters is whether there is an
effect, whether favourable or unfavourable. Furthermore,
the Commission is not required to prove the actual
effect. The capacity to divert cross-border flows of goods
from the natural direction is sufficient. Lastly, the banks
are incorrect in taking the view that the capacity to
produce such an effect exists only if market access is
made more difficult for foreign competitors, i.e. if the
market is closed off. Here once again, pursuant to the
case-law cited above, the point is not whether market
entry is prevented, but whether foreign undertakings are
influenced in their market entry decisions (491). In this
context too, it should be noted that the agreements have,
for a long time, prevented the development of efficient
market conditions.

(469) To sum up, it can be said therefore that the network
consisting of a number of closely interconnected com-
mittees was liable to have an appreciable effect on
trade between Member States in view of its proven
comprehensive geographic and substantive coverage, its
undisputed anticompetitive purpose and its similarly
proven impact throughout the territory of Austria. In
addition, the network was liable, on the one hand, to
affect behaviour on the demand side directly or indirectly
geared to cross-border flows of goods and, on the other,
market entry decisions on the supply side.

13) Argument put forward by the banks

14.4. Undertakings

found to have committed an
infringement

(466) The banks do not consider these examples significant.
As far as the demand side is concerned, they argue that
the link between financing and cross-border flows of
goods is purely speculative. As regards the supply side,
the Commission had not proved that trade between
Member States was affected as a result of the closing-off
of the market vis-à-vis foreign competitors.

14) Commission’s view

(467) In the Commission’s view, these arguments do not hold.
In view of the major importance of the banks for the
raising of capital by Austrian companies, the very high
export ratio of such companies and the obvious link
between financing costs and investment decisions, the
possibility that comprehensive agreements on financing
terms have a direct effect on cross-border flows of goods
is sufficiently plausible.

(468) As far as the argument concerning the absence of any
closing-off of the market is concerned, the legal view
taken by the banks is misconceived in several respects.

14.4.1.

Selection

(470) A very large number of banks were parties to the
practices at issue. The addressees of this Decision have
been singled out because of the particular frequency of
their participation in meetings of the major committees:
the Vienna and Federal Lending and/or Deposit Rates
Committees (including the Consumer Lending and Lib-
eral Professions Lending Rates Committees), the Mini-
lombard Committee and the Controller Committee. In
addition, with the exception of NÖ Hypo and RBW as
from July 1997 RLB) (492), they play an important role
in the Austrian banking market because of their size.

(471) Individual banks object to the selection made by the
Commission and argue that they are being discriminated
against compared with those banks on which it is
decided to impose no fine.

(490) For evidence, see recital 274.

(491) See footnote 470.
(492) RLB did not

(prior to the merger)

committees mentioned.

itself take part in the

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(472) The Commission cannot accept this argument. Contrary
to the view taken by the banks, there is no infringement
of the right to equal treatment if the Commission does
not carry out proceedings against all the undertakings
that may be involved in an infringement (493), but that
makes a selection on the basis of objective criteria.

(476) According to case-law, the natural or legal person in
charge of the relevant undertaking at the time of the
infringement is liable for its actions, even if at the time
of adoption of the decision finding that there has been
an infringement another person is responsible for the
operation of the undertaking (496).

14.4.2. Questions of attribution

(473) In the event of legal succession, for example, following
a merger, the attribution of infringements of competition
law committed by the defunct company devolves upon
the legal successor (494). Accordingly, for the purposes
of this case, CA’s conduct is to be attributed to BA, PSK-
B’s conduct to PSK and RBW’s conduct to RLB. These
attributions were not called into question by the relevant
undertakings during the proceedings.

(474) As regards BAWAG/PSK and HVB/BA, the question of
attribution does not arise, since the process of acquisition
occurred after the infringement had ended and since PSK
and BA were not, following their acquisition by BAWAG
and HVB, simply incorporated into those undertakings,
but continued and still continue their activity as their
subsidiaries. PSK and BA are therefore liable themselves
for their infringements and are themselves addressees of
the decision to impose fines (495). This too was not called
into question during the proceedings.

(475) By contrast, attribution of the conduct of GiroCredit up
to the time of acquisition of the majority of its shares by
Erste in October 1997 (referred to hereinafter as the
‘relevant time’) is in issue. In the statement of objections,
the Commission took the view that liability for the
infringement committed independently by GiroCredit
had, in view of the merger with Erste, been transferred
to the latter. However, Erste asserts that the conduct by
GiroCredit had to be attributed to BA, to whose group
GiroCredit had belonged up until the relevant time and
which itself had participated in the cartel.

(477) Under certain circumstances, however, the anticompeti-
tive conduct of an undertaking can also be attributed to
its parent company. This is possible where the subsidiary
does not independently determine its market behaviour,
but, mainly because of economic and legal ties to its
parent company, has essentially followed its instructions.
In such instances, the Commission can choose whether
to attribute the infringement committed by the subsidi-
ary to it or to the parent company (497).

(478) In the present case, therefore provided that, up until
the relevant time, GiroCredit did not independently
determine its behaviour, but, primarily because of econ-
omic and legal ties to a parent company, essentially
followed its instructions, the Commission could have
chosen whether to attribute the infringement committed
by GiroCredit to GiroCredit itself or to a parent com-
pany.

(479) The very numerous documents in the case-file do not
provide any evidence that GiroCredit’s business policy
was influenced, or indeed determined, by a parent
company. Analysis of the documents available, minutes
of cartel meetings and internal GiroCredit documents,
particularly in connection with its internal decision-
making, shows clearly, in the Commission’s view, that
GiroCredit acted independently, on its own responsi-
instructions in its own interests
bility and without
and in the interests of the savings bank group (498).
GiroCredit was thus solely responsible for the infringe-
ment committed by it.

(493) See Joined Cases T-45/98 and T-47/98, Krupp Thyssen Stainless
GmbH and Others v Commission,
judgment delivered on
13.12.2001, [2001] ECR II-3757, paragraph 298 among others,
and Case T-17/99, KE KELIT Kunststoffwerk GmbH v Com-
judgment delivered on 20.3.2002, [2002] ECR II-
mission,
1647, paragraph 101 among others.

(494) Case T-6/89 Enichem Anic SpA v Commission [1991] ECR II-

1623.

(495) Case C-279/98 P Cascades SA v Commission [2000] ECR I-

9693, paragraph 79.

(496) Joined Cases T-45/98 and T-47/98, Krupp Thyssen Stainless
judgment delivered on
GmbH and Others v Commission,
13.12.2001, [2001] ECR II-3757, paragraph 57 with other
references.

(497) Case T-65/89 BPB Industries Plc and British Gypsum Ltd v
Commission [1993] ECR II-389, paragraph 154; Joined Cases
6 and 7/73 Instituto Chemioterapico Italiano SpA and Commer-
cial Solvents v Commission [1974] ECR 223, paragraph 41;
Case C-286/98 P Stora v Commission [2000] ECR-9925,
paragraph 26; Case C-297/98 P SCA Holding v Commission
[2000] ECR I-10101, paragraph 11.

(498) See, for example, the documents cited in recital 431.

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(480) In the light of these facts, the Commission therefore
imputed GiroCredit’s infringement to GiroCredit itself.
Attribution to a parent company was not considered
even as an alternative (499). GiroCredit’s responsibility
for the infringement committed by it was subsequently,
upon merger with Erste, transferred in full, under the
rules of succession in title, to Erste.

(481) It follows from all these considerations that, under the
rules on succession in title, Erste is liable for the fine
which would have had to be imposed on GiroCredit in
respect of an infringement committed by it on its own
account. This liability is in addition to the liability for
the infringement committed by Erste itself prior to the
merger.

(482) NÖ Hypo has since January 1997 been an ÖVAG group
member company. The Commission could, provided
that NÖ Hypo had since that time not determined
its conduct independently, but, mainly because of its
economic and legal
ties to ÖVAG, had essentially
followed its instructions, have chosen whether to attri-
bute the infringement committed by NÖ Hypo to it or
to ÖVAG. However, there is no indication in any of the
very numerous documents in the file of any influence
over, or outside determination of, NÖ Hypo’s business
policy by ÖVAG. Analysis of the documents available,
minutes of cartel meetings and internal NÖ Hypo
documents, in particular in connection with its internal
decision-making, shows clearly in the Commission’s
view that NÖ Hypo represented its own interests
independently, on its own responsibility and without
instruction (500). It is also evident from the minutes of
the meetings that representatives of NÖ Hypo took part
in the committee meetings even after January 1997 until
the end of the infringement. NÖ Hypo was therefore
solely responsible for the infringement committed by it.
The same applies to PSK-B in relation to PSK (before the
merger) (501).

14.5. Duration of the infringement

(483) The practices at issue fell as of 1 January 1995 under

Article 81(1) of the EC Treaty.

(484) The Commission assumes that no further committee
meetings have taken place since the time of the investi-
gations (June 1998) and that the infringement therefore
ended at that time.

15. THE EXTENT OF AN UNDERTAKING’S DUTY TO REPLY

(485) The banks contend that they were under no obligation
to reply to a large proportion of the questions asked in
the requests for information, so that when they did
answer the questions asked, or supply the papers
requested, they did so voluntarily for purposes of the
Commission notice of 18 July 1996 on the non-
imposition or reduction of fines in cartel cases (the 1996
Leniency Notice), which applied at that time (502).

(486) The banks argue broadly that the questions went beyond
what was proper by asking for ‘interpretation of the
subject matter and purpose’ of the talks between banks.
The demand that they produce certain documents, such
as entries in records or minutes of talks, was likewise
inadmissible, because the production of such documents
to the Commission would constitute a ‘direct admission’
on their part (503).

(487) The Commission does not accept this view. It is settled
case-law that, in order to ensure the effectiveness of
Article 11(2) and (5) of Regulation No 17, the Com-
mission is entitled to compel an undertaking to provide
all necessary information concerning such facts as may
be known to it and to disclose to the Commission, if
necessary, such documents relating thereto as are in its
possession. This is so even if those documents may be
used to show that it or another undertaking has engaged
in anticompetitive conduct (504). An undertaking has a
right to silence only to the extent that it would be
compelled to provide answers which might involve an
admission on its part of the existence of an infringement
which it is incumbent upon the Commission to prove.

(488) It follows that the undertaking must comply with all
requests for (a) factual information, such as details of
those taking part in talks, and (b) documents already in
existence, such as copies of invitations, agendas, minutes,
internal records, reports, etc (505).

(499) In view of this fact, it does not matter whether BA itself or its
share management company (Anteilsverwaltungsgesellschaft),
Anteilsverwaltung-Zentralsparkasse Wien (AVZ), should have
been regarded as the parent company. At the relevant time,
AVZ held (a), including the undertakings controlled by it, 49,8 %
of BA’s voting capital and (b) 56,1 % of the voting capital of
GiroCredit.

(500) See, for example, the documents cited in recital 431.
(501) See management board minutes, file p. 3054 et seq.

(502) OJ C 207, 18.7.1996, p. 4.
(503) Joint presentation on the 1996 Leniency Notice at the hearing

of 18 January 2000.

(504) Judgment of the Court of First Instance in Case T-112/98
Mannesmannröhren-Werke v Commission [2001] ECR II-729,
paragraph 65, with further references.

(505) Mannesmannröhren-Werke, cited above, paragraph 70.

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(489) The information and documents sought in the request
for information made here were of precisely this kind.
The Commission asked for dates and details of partici-
pants for precisely identified committees, the Lombard
Club, the Controller Committee, or the Regional Com-
mittees as the case might be, and for other committees
that were not identified by name. It also asked for
existing documents that had been drawn up in connec-
tion with the talks. These questions referred to strictly
factual matters: there can be no question of a ‘blanket
demand on the part of the Commission to admit that
infringements had been committed’ (506), as the banks
contend. In the Commission’s view, therefore, the ques-
tions without exception remained within the bounds
traced out by the Court of Justice and Court of First
Instance of the European Communities.

(490) In the light of the same case-law, the questions asked
regarding the subject matter of cartel talks, as opposed
to the decisions taken there, were likewise admissible.
But there is no need to consider this point further here,
since in this Decision the Commission in fact bases itself
entirely on pre-existing documents (507).

16. REMEDIES

16.1. Article 3 of Regulation No 17

(491) Article 3 of Regulation No 17 states that where the
infringement of
that
Commission finds
Article 81(1) of
the EC Treaty it may require the
undertakings concerned to bring such infringement to
an end.

there

is

(492) The Commission takes it that since the inspections were
carried out there have been no further talks. However,
in case it should prove that contrary to the Commission’s
understanding this is not so, the addressees should
nevertheless be required to bring the infringement to an
end (508).

(493) The addressees should also be required to refrain in
future from any agreement or concerted practice which
may have the same or a similar object or effect as the
practices identified in this Decision.

16.2. Article 15(2) of Regulation No 17

16.2.1.

Fault: intent

(494) The banks deny that there was any fault on their part, as
they could not have known that the practices in which
they engaged would infringe European antitrust law. In
support of this contention they argue that:
(a) the
practices were approved and supported by the Austrian
National Bank, and were merely a product of typically
Austrian consensus politics; (b) until 1 January 2000
Austrian antitrust law did not specifically ban restrictive
practices (Verhaltenskartelle); (c) the existence of the
Lombard Club was a matter of public knowledge, and
no action had ever been taken against it by the Austrian
authorities; (d) the Commission’s administrative practice
with respect to interest-rate agreements, and conse-
quently the legal position itself, had been unclear;
(e) Austria is a recent Member State of the Community,
and is still poorly acquainted with Community law; and
(f) they could not have been aware that the agreements
might affect trade between Member States. They claim,
therefore, that they made an unavoidable error regarding
the unlawfulness of the agreements.

(495) The Commission cannot accept this submission.

(496) On the historical origins of the committees and the
participation of the Austrian National Bank the Com-
mission has already stated its view (recital 370 et seq.).
It will be sufficient here to point out once again that the
Austrian National Bank’s call to the banks to calculate
their prices in a commercially responsible fashion cannot
be reread as a demand that they conclude restrictive
agreements. Furthermore, committees that were quite
central to the network were not as a rule attended by the
Austrian National Bank.

(497) As is explained in more detail in section 5.1, even before
Austria entered the European Economic Area there were
articles being published that discussed the application to
banking of European competition law (509), including
the concept of the potential effect on cross-border trade,
which has traditionally been interpreted broadly. It is
difficult to see why the banks in particular should have
been unaware of these discussions, especially as every
undertaking in an Member State of the Community,
irrespective of the date of the accession of that country,
is under an indisputable obligation to acquaint itself
with the law in force, which may well differ in some
respects from the domestic law.

(506) 42.470 (BAWAG).
(507) Joined Cases T-305/94 etc. Limburgse Vinyl Maatschappij NV

[1999] ECR II-931, paragraphs 451 et seq.

(508) Case T-62/98 Volkswagen v Commission [2000] ECR II-2707,

(509) On the law and administrative practice, which are neither

paragraph 195.

unclear nor confusing, see section 14.1.

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(498) In fact the documents cited in section 5.1 show that the
banks were fully aware that what they were doing was
suspect from the point of view of competition law.
Among other things, it is difficult to explain why else
they should have decided to ‘rename’ and even to
‘destroy’ the records of the cartel.

(499) For the same reasons the Commission rejects the
accusation put forward by the banks that the Com-
mission wanted ‘to make an example of the banking
sector in one of the most recent Member States’ (510).
Nor does it agree with the banks that that to impose a
fine as a ‘demonstration of its way of dealing with new
Member States’, given the planned accession of countries
in central and eastern Europe, would in fact be ‘counter-
productive’.

(500) The regular lunches [at senior management level] in the
Lombard Club framework may have been a matter of
public knowledge. But that was not as a rule true of the
very many other committees in the network. Nor is it
the Commission’s role to discuss whether action might
or might not have been taken by national authorities.
None of these factors releases the banks from fault.

(501) For an infringement to be intentional, it is sufficient that
the undertaking could not have been unaware that
the conduct complained of was aimed at restricting
competition (511). But in this case not only were the
relevant undertakings aware that their conduct had a
restrictive object, they were also aware that it was
incompatible with EC competition law. There can be no
doubt, therefore, that the banks were acting intentionally
for purposes of Article 15(2) of Regulation No 17 and
the related case-law (512).

16.2.2. General considerations

(502) Under Article 15(2) of Regulation No 17, the Com-
mission may, by decision, impose on undertakings fines
of from EUR 1 000 to EUR 1 000 000, or a sum in
excess thereof but not exceeding 10 % of the turnover in
the preceding business year of each of the undertakings
participating in the infringement, where, either inten-

tionally or negligently, they infringe Article 81(1) of the
EC Treaty. In fixing the amount of the fine regard is to
be had both to the gravity and to the duration of the
infringement.

(503) The role played by each of the undertakings that took
part in the infringement has to be assessed individually.
In setting any fines account will have to be taken of any
aggravating or mitigating circumstances. The 1996
Leniency Notice may also apply.

16.2.3. Basic amount of fines

(504) The basic amount of any fine is calculated to reflect the

gravity and duration of the infringement.

16.2.3.1. G r a v i t y

(505) The courts have consistently held that the gravity of
infringements has to be determined by reference to
numerous factors, such as the circumstances of the case,
its context and the dissuasive effect of fines. There is no
binding or exhaustive list of criteria that must be taken
into account in every case (513).

15) Nature of the infringement

(506) By their nature, price agreements constitute very serious
infringements of Article 81(1) of the EC Treaty (514). The
Commission has to take account not only of the specific
circumstances but also the general context of
the
infringement, especially if it is a manifest infringement
of a particularly harmful type such as a horizontal price
agreement. Banking services are of vital importance both
to consumers and to businesses and hence to the whole
economy. In so important a sector no tolerance can be
shown to cartels, especially cartels as comprehensive
and institutionalised as the Lombard network.

(507) The Commission accordingly considers the infringement
of Article 81(1) of the EC Treaty to be of a very serious
nature.

(510) 43.460 (written record of the hearing of 18.1.2000).
(511) Case T-143/89 Ferriere Nord v Commission, cited above,
paragraph 41; Case T-176/95 Accinauto v Commission [1999]
II-1635, paragraph 119; Joined Cases T-202/98, T-204/98 and
T-207/98 Tate & Lyle and Others v Commission [2001] ECR II-
2035, paragraph 127.

(512) See footnote 510.

(513) Order of the Court of Justice in Case C-137/95 P SPO and
Others v Commission [1996] I-1611, paragraph 54; Case
C-219/95 P Ferriere Nord v Commission, cited above, para-
graph 33.

(514) It is irrelevant in this respect whether the practices at issue were

also aimed at market sharing or quantity restriction.

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16)

Implementation and impact of the cartel on the
market

(508) The implementation and impact of the cartel may be
taken into account, amongst a number of aspects, in
cases where the practices at issue are not aimed directly
at the restriction of competition, and consequently are
caught by Article 81 of the EC Treaty only as a result of
their practical effects (515).

(509) The banks concerned took part regularly and frequently
in several rounds of talks. The documents from the
relevant period which have been seized clearly show
how the banks implemented the agreements reached at
those talks, or took account of the information they had
obtained from their competitors at the talks when they
came to take their own business decisions (516).

(510) The same documents also show that the wide-ranging
agreements reached over many years did have an impact
on the market. The parties to the cartel had to accept
reverses, and sometimes had to admit to one another
that their efforts had failed, but this does not mean that
the agreements had no effect on the market. It has
already been explained, too, that the report drawn up
for the banks does not show that the cartel had no
impact (517).

17)

Size of the geographic market

(511) In view of the special circumstances of the present case
and the context of the infringement, the comparatively
limited size of the territory of Austria does not prevent
the infringement being considered a very serious
one (518).

18)

Submissions of the banks and the Commission’s
conclusion on the gravity of the infringement

(512) The banks put forward a number of arguments which in
their view tend to reduce the gravity of the infringement:
(a) it was concerned only with prices, and did not involve
market sharing or quota arrangements; (b) its effect was
felt only on the market of a small Member State; (c) its
impact was only limited; (d) the Austrian National Bank

took part in the infringement; and (e) as a recent Member
State, Austria was in a ‘period of adjustment’, and the
Austrian banks could not adapt to the principle of
unrestricted competition that applied in the Community
‘from one day to the next’ (519).

(513) The nature of the infringement and its implementation
and impact have already been discussed above. For
reasons which have likewise already been set out, neither
the very limited participation on the part of the Austrian
National Bank nor the comparatively recent membership
of Austria in the Community is a factor which would
tend to reduce the gravity of the infringement (520).

(514) The Commission accordingly concludes that the under-
takings to which this Decision is addressed have commit-
ted a very serious infringement of Article 81(1) of the
EC Treaty.

19) Differentiation of the parties to the cartel

(515) The infringement is thus to be classified as a very serious
one; within that category, the scale of the fines to be
imposed makes it possible to differentiate between
their effective
offenders so as to take account of
economic capacity. At the same time it allows a fine to
be set at a level which ensures that it has a sufficiently
dissuasive effect. A differentiated approach of this kind
is especially desirable here, because there is a wide
variation in the size of the undertakings or groupings
that took part in the infringement.

(516) In this case account has to be taken of the special
It would be quite
features of the Austrian market.
unrealistic to confine the importance of Erste, RZB and
ÖVAG in the network, and their effective capacity to
restrict competition at the expense of consumers, to the
volume of their own individual business as commercial
banks.

these undertakings,

(517) The documents in the case make it impressively clear
in line with their role as
that
leaders of their respective groupings, made an essential
contribution to the effectiveness of the network through-
out Austria via intensive flows of information within
those groupings. They did not represent their own
interests only, but those of their groupings as well, and
were regarded as representatives of their groupings by
the other parties to the cartel. The agreements were not
just between the individual institutions but between the
groupings as a whole (521).

(515) Opinion of Advocate General Mischo in Case C-283/98 P Mo
och Domsjö v Commission [2000] ECR I-9855, paragraph 101,
and the argument in Joined Cases T-45/98 and T-47/98 Krupp
Thyssen Stainless and Others v Commission, judgment delivered
13.12.2001, [2000] ECR II-3757, paragraph 199.

(516) See recital 430.
(517) See recitals 380 et seq.
(518) Case C-279/98 P Cascades v Commission [2000] ECR I-9693,

paragraph 62.

(519) The banks take the view that the infringement is only a ‘minor
infringement’, or at most a ‘serious infringement’, within the
meaning of the Commission guidelines on the method of setting
fines imposed pursuant to Article 15(2) of Regulation No 17
(the guidelines), OJ C 9, 1998, p. 3; see 43.459 (written record
of the hearing of 18.1.2000).

(520) See recital 374.
(521) See paragraphs (58) et seq.

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(518) To ignore the groupings behind the institutions that
headed them, that is to say the savings banks grouping,
the agricultural credit cooperative grouping and the
credit union grouping, would result in the fines being
set at a level which did not do justice to the facts, which
was out of
touch with reality, and which had no
dissuasive effect. The dissuasive effect will be sufficient
only if
in future the lead institutions refrain from
engaging in cartel conduct as representatives of their
groupings.

(519) The banks and banking groupings concerned can be
divided into five categories on the basis of the available
information on market shares (522). The first category
consists of GiroCredit (after the merger: Erste) including
the savings banks grouping, and RZB including the
agricultural credit cooperative grouping. The second
category consists of BA and CA. The third consists of
BAWAG, ÖVAG including the credit union grouping
and Erste (before the merger with GiroCredit). PSK and
PSK-B form the fourth category, while the fifth category
consists of the smallest of the undertakings concerned,
NÖ Hypo and RBW/RLB.

(520) On the basis of the relative importance on the relevant
market of the undertakings and groupings of undertak-
ings in each category, the Commission arrives at the
following initial figures for the calculation of the fines:

GiroCredit/Erste
er) (523)

(after merg-

RZB

BA

CA

EUR 25 million

EUR 25 million

EUR 12,5 million

EUR 12,5 million

ÖVAG

PSK

PSK-B

NÖ Hypo

RWB/RLB (525)

16.2.3.2. D u r a t i o n

EUR 6,52 million

EUR 3,13 million

EUR 3,13 million

EUR 1,25 million

EUR 1,25 million.

(521) For purposes of

the conduct

in
these proceedings,
question lasted from 1 January 1995 to the end of
June 1998, i.e. three-and-a-half years. The initial figures
for the fines arrived at on the basis of the gravity of
the infringement should accordingly be increased for
duration by 35 %.

(522) Special considerations apply to GiroCredit and Erste. Up
until the merger with GiroCredit in October 1997, Erste
participated in the infringement only as a commercial
bank, but after the merger it was involved also as the
leading institution of
the savings bank sector. The
duration of
the infringement by Erste solely as a
commercial bank therefore amounts to only three years
(1995 to 1997), whereas GiroCredit and, after the
merger, Erste, also participated as the leading institution
of the savings bank sector throughout the duration of
the infringement.

16.2.3.3. C o n c l u s i o n

r e g a r d i n g

b a s i c

a m o u n t s o f f i n e s

(523) The basic amounts of the fines should therefore be as

follows:

Erste (before merger): (524)

EUR 6,25 million

GiroCredit/Erste (after merger)

EUR 33,75 million

BAWAG

EUR 6,25 million

(522) The market shares that the Commission has referred to here are
shares of the market in private and corporate customer business
(both lending and deposits), calculated on the basis of figures
from the public versions of Commission decisions,
from
company reports, from publications and from other public
sources. Private and corporate business are the banks’ main
product markets. Market shares calculated in this way conse-
quently give a representative picture of the overall market
position of the banks and banking groupings concerned, and
provide an appropriate basis on which to divide them into
categories.

(523) With the merger between Erste and GiroCredit, Girocredit’s role
as leading institution of the savings bank sector, and hence also
Girocredit’s role in this respect within the Lombard network,
was also transferred to Erste.

(524) Erste had taken part in the cartel even before the merger with
GiroCredit. Since during that period Erste had taken part in the
cartel only as a commercial bank and not also as the leading
institution of the savings bank sector, it was to be classified in
the third category up to the merger on the basis of its own
market share.

RZB

BA

CA

EUR 33,75 million

EUR 16,875 million

EUR 16,875 million

Erste (before merger)

EUR 8,125 million

BAWAG

ÖVAG

PSK

PSK-B

NÖ Hypo

RWB/RLB

EUR 8,438 million

EUR 8,438 million

EUR 4,129 million

EUR 4,219 million

EUR 1,688 million

EUR 1,688 million.

(525) Up until the merger with RWB, RLB is not found to have
committed any infringement of its won, since RLB did not itself
take part in the main committee meetings prior to the merger.

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(524) The next step is to take account of any aggravating or
mitigating circumstances for each undertaking, and to
apply the Leniency Notice if appropriate.

16.2.4. Mitigating circumstances

Mitigating circumstances invoked by all banks

(525) Here again the banks draw attention to Austria’s recent
membership of the Community, the allegedly confusing
legal position, and the participation of state bodies. The
Commission has discussed these arguments above: for
the reasons it set out there, it does not see mitigating
circumstances in any of them (526).

(526) All of the banks also draw attention to the difficult
economic situation in the industry. They say that in their
business policy they were not accustomed to pay
sufficient attention to methods of calculation which
might be quite evident in themselves (527). They also
argue that they did not obtain any return from their
participation in the cartel, and point out that they put
an end to the talks once the inspections had been carried
out.

20) The Commission’s view

(527) The Commission takes the view that any shortcomings
there may be in the management of an undertaking do
not constitute mitigating circumstances, even where
they affect the earnings position of the undertakings
concerned. In such a situation each undertaking ought
to take steps independently to improve its own profita-
bility, rather than entering into a restrictive agreement.
Price cartels are inadmissible even if the undertakings do
not receive cartel profits. In setting fines the Commission
is under no obligation to take account of the poor
financial position of an undertaking: to acknowledge
such an obligation would be to confer an unjustified
competitive advantage on those undertakings which are
least well adapted to market conditions (528).

(528) Furthermore, the characteristic of a competitive market
is not that all undertakings will secure a return on
capital, but that badly run undertakings will not be able
to maintain their market position. Cartels retard the
necessary restructuring of supply which takes place as
unprofitable undertakings leave the market and the
more profitable ones consolidate, something the banks
themselves have conceded in this case. There is no
mitigating circumstance here.

(526) See Sections 14.1 and 16.2.1.
(527) 42.290 (RBW).
(528) Case T-9/99 HFB v Commission, judgment delivered 20.3.2002,

[2002] ECR II-1487, paragraph 596.

(529) The ending of an infringement after inspections have
taken place is something the Commission has to consider
from case to case, in the light of the specific circum-
stances. There is no automatic relationship: the ending
of an infringement is not always a mitigating circum-
stance, and its continuation is not always an aggravating
circumstance (529). In view of the manifest character of
the infringement, the fact that it was brought to an end
following the inspections cannot be regarded as a
the
mitigating circumstance within the meaning of
guidelines.

(530) Nor is it a mitigating circumstance that during the period
in question there were repeated instances of ‘lack of
discipline’ or indeed price wars. Like many other cartels,
the Lombard cartel went through good times and less
good times, and had to endure crises on occasion. Some
banks did repeatedly attempt to gain market share by
undercutting or exceeding the agreed rates for short
periods. But such conduct is typical of many cartels, and
cannot be considered a mitigating circumstance. All the
participants, including the occasional ‘price breakers’,
profited to the same extent from the action decided
jointly, and from the information they regularly
exchanged on the future conduct on the market of their
competitors. Even those banks that on occasion took
commercial decisions that departed from the agreements
were exploiting the cartel to their advantage.

Mitigating circumstances invoked individually by the
undertakings concerned

(531) Most of the banks argue either that they were not
present at all committee meetings or that they had no
real economic interest in the talks. Almost all the banks
also represent themselves as small and insignificant.

(532) RZB submits that it does only a limited amount of
private customer or retail business, and consequently
played only a passive role in the Lombard network. RZB
concedes, however,
that by organising the flow of
information inside the agricultural credit cooperative
grouping it helped to make the restrictive agreements
effective.

(533) Erste says it is indeed the second biggest banking group
in Austria, but holds only small market shares, and was
consequently without influence in the talks.

(529) Case T-31/99 ABB Asea Brown Boveri v Commission, judgment
delivered 20.3.2002, [2002] ECR II-1881, paragraph 213.

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(534) PSK argues that it or its subsidiary PSK-Bank has only a
minor role in credit business, and that its participation
in the relevant committees was consequently meaning-
less and ineffective.

(535) BAWAG argues that it took part in the talks only
‘extremely reluctantly’ and only ‘owing to material
constraints’; it ‘did not really want to cooperate in the
agreements’. ‘Unlike most of the other participants in
the committees’ BAWAG followed its own policy on
interest rates and prices, and ‘while the other banks
agreed a uniform reduction in interest rates’ BAWAG
‘never really allowed itself to be tied into the agreements’.
In other words, it resisted all temptations, ‘unlike some
of its competitors, such as PSK, who broke loose from
the “interest rate discipline” only occasionally’ (530).

(536) RLB draws attention to its small size, and the limited
radius of action of RBW, which is confined to Vienna; it
explains its participation in the federal committees by
saying that RBW’s representative was a universally
esteemed specialist who for more or less altruistic
reasons was only ‘brought in as an expert for the Vienna
market, and did not specifically represent the interests
of RBW’ (531).

(537) ÖVAG and NÖ Hypo say they confined themselves to
passively taking note of the decisions already arrived at
by the ‘smaller banking circle’
in the run-up to the
committee meetings, and profiting by the social prestige
associated with participation in the cartel talks.

The Commission’s view

(538) As has already been explained, it would not be realistic
to confine the importance in the network of Erste, RZB
and ÖVAG to the volume of their own business as
commercial banks (532). The documents in the case make
it amply clear that,
in line with their role as lead
institutions in their respective groupings, these undertak-
ings made an essential contribution to the effectiveness
of the network through the groupings’ internal systems
of communication. They did not represent their own
interests only, but those of their groupings as well, and
were regarded as representatives of their groupings by
the other parties to the cartel. They cannot rely in their
defence on the size of their own business.

(530) 42.405, 42.407, 42.411, 42.419, 42.426 and 42.437

(BAWAG).
(531) 42.294 (RLB).
(532) See recitals 58 et seq.

(539) In order better to evaluate the role in the network of
each of the banks concerned, the Commission has
carried out a detailed analysis of the most important
committees in this respect too (533). BA/CA convened
almost 60 % of all Vienna Lending Rates and Deposit
Rates Committee meetings, over 40 % of all Federal
Lending Rates and Deposit Rates Committee meetings,
and about 30 % of all Minilombard and Controller
Committee meetings. It is followed by Erste/GiroCredit
with 20, 25 and 30 % respectively. RZB, PSK, BAWAG
and ÖVAG convened about 10 % of all these meet-
ings (534). An analysis of the documented proceedings of
the cartel talks also indicates that the big banks or
banking groupings played a comparatively greater part.

(540) But this division of roles in the cartel meetings is not a
factor that could be considered a mitigating circum-
stance for some or an aggravating circumstance for
others. All participants profited to the same extent as a
result of the action decided jointly and the information
regularly exchanged on the future conduct of their
competitors on the market. Even those banks who may
on occasion have taken business policy decisions that
departed from the agreements were exploiting the cartel
to their advantage. It is true that some banks were
repeatedly criticised by their competitors for departing
from the agreements. But such isolated instances of
aggressive price behaviour are not enough to show
that those banks always acted independently (535). The
documents show that those banks too, when they were
determining their own business policy, took account of
the information they had acquired at the talks regarding
the future conduct of their competitors on the market.

(541) Nor can any distinction be made between banks that
took part in the cartel talks reluctantly and banks that
were happy to do so. In so far as the role of the
individual banks or groupings correlates with their
market position,
the appropriate differentiation has
already been made when the banks were divided into
categories. There is no scope for further increases or
reductions.

(533) The Vienna and Federal Lending and Deposit Rates Committees
(including the Consumer Lending Rates and Liberal Professions
Committees), and the Minilombard and Controller Committees.
(534) Though RZB and ÖVAG never convened Vienna Lending Rates
or Deposit Rates Committees, and BAWAG never convened
Federal Lending Rates or Deposit Rates Committees.

(535) Case T-308/94 Cascades v Commission [1998] ECR II-925,

paragraphs 230 et seq.

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16.2.5.

Intermediate outcome before application of 1996
Leniency Notice

(542) There are therefore neither aggravating nor mitigating
circumstances. The basic amounts determined thus
remain unchanged. Taking account of the corporate
changes described and their implications for the attri-
bution of infringements, the following are the prelimi-
nary basic amounts:

Erste (including GiroCredit and
including Erste before the merg-
er)

RZB

EUR 41,88 million

EUR 33,75 million

BA (including CA)

EUR 33,75 million

BAWAG

EUR 8,44 million

PSK (including PSK-B)

EUR 8,44 million

ÖVAG

NÖ Hypo

EUR 8,44 million

EUR 1,69 million

RLB (including RBW)

EUR 1,69 million.

16.2.6. 1996 Leniency Notice

(543) Under section D of

the 1996 Leniency Notice, a
significant reduction, of 10 to 15 % of the fine that
would have been imposed, may be allowed for example
where (a) ‘before a statement of objections is sent, an
enterprise provides the Commission with information,
documents or other evidence which materially con-
tribute to establishing the existence of the infringement’,
or (b)
‘after receiving a statement of objections, an
enterprise informs the Commission that it does not
substantially contest the facts on which the Commission
bases its allegations’ (536).

(544) All of the banks invoke this provision, claiming ‘cooper-
ation’ in the investigation of the facts in the form of
their replies to the requests for information and their
joint exposition of the facts, or pointing to their decision
not to contest the facts.

was the request that the banks hand over existing
documents relating to committees. Facts and documents
thus supplied may possibly be used to provide evidence
that an undertaking has infringed competition; but
contrary to the view of the banks, they are not equivalent
to an admission.

(546) Consequently, neither the information on the dates of
meetings and persons who attended them nor the
documents handed over were provided voluntarily.
What is required by law cannot be voluntary, and by
definition it does not qualify as ‘cooperation’, which
would refer to voluntary collaboration in the common
interest (537). In this Decision the Commission has based
itself exclusively on documents already in existence, so
that answers to questions regarding the subject matter
of cartel talks did not represent any added value (538).

The joint exposition of the facts

(547) The courts have consistently held that a reduction of the
fine is justified only if the undertaking’s conduct has
enabled the Commission to establish the infringement
more easily (539). The undertaking might for example
have drawn attention to important facts that were not
known to the Commission beforehand, and for which
the Commission had not asked; or it might have given
a particularly exhaustive answer to the request
for
information, if it is precisely that exhaustiveness that
made it easier for the Commission to understand the
significance of facts or documents and to draw the
necessary inferences so as to establish the existence of
the infringement and bring it to an end (540). To assist
the Commission’s investigation in a purely practical
or logistical fashion, for example by submitting the
documents in chronological or some other order, does
not justify any reduction of the fine.

(548) In the past, therefore, the Commission has granted
reductions where an undertaking contributed (a) volun-
tarily, beyond what was legally required, (b) substantially
and (c) to the ascertainment of important facts (541).

The requests for information

(545) As already explained elsewhere, the Commission takes
the view that the request to the banks to state the dates
of committees and the names of those who attended
them was in accordance with the relevant case-law, as

(536) Sections B and C of the Leniency Notice are not relevant here,
section B because the Commission had already carried out
inspections, and section C because those inspections had
provided sufficient evidence.

(537) Commission Decision of 18 July 2001, Graphite electrodes, OJ

L 100, 16.4.2002, p. 1, recital 230.

(538) Joined Cases T-305/94 etc. Limburgse Vinyl Maatschappij NV

[1999] ECR II-931, paragraphs 451 et seq.

(539) See, for example, Joined Cases T-45/98 and T-47/98 Krupp
Thyssen Stainless and Others v Commission, judgment delivered
13.12.2001, [2001] ECR II-3757, paragraph 270; Case T-16/99
Lögstör Rör (Deutschland) v Commission, judgment delivered
20.3.2002, [2002] ECR II-1633, paragraph 351.

(540) Case T-13/89 ICI v Commission [1992] ECR II-1021, para-

graph 393.

(541) See Commission Decision of 21 October 1998, Pre-insulated

pipe cartel, OJ L 24, 30.1.1999, p. 1, paragraph 177.

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(549) In autumn 1998, thus well before the submission of the
joint exposition of the facts, the Directorate-General for
Competition told the banks that the assessment of any
fine would depend on the value added, over and above
what was legally required, by the documents and
information which the banks proposed to provide. The
reduction in any fine would be in direct proportion to
the added value.

(550) The added value is easy to determine: it is the sum of,
first, any facts that were not ascertained from the
inspections, or from the documents that were provided
or ought to have been provided in accordance with the
duty to supply information (new facts), and, second, any
explanations that facilitated the Commission’s under-
standing of the case. Only new facts and explanations
that assist better comprehension will make it easier for
the Commission to establish the infringement.

(551) Of the documents submitted with the joint exposition
of the facts, the Commission has been unable to identify
any which contain new facts. When asked by the
Commission, the banks were likewise unable to identify
any such documents. The documents submitted were
either documents already seized by the Commission, or
to
documents which had been provided or ought
have been provided in response to the requests for
information. The documentation was voluminous, and
was arranged in chronological order, but it contained no
new facts, and for the Commission’s purposes provided
no added value. The same applied to the further
documents supplied by BA shortly after the joint
exposition of the facts had been submitted.

(552) Furthermore, the banks had manifestly not supplied all
of the documents requested by the Commission. The
minutes of the Halle committee meeting, of 25 May
1998, for example, whose authenticity has not been
contested, was supplied to the Commission only in
January 2001, by a person who specifically requested
that their identity be kept secret (542). When answering
the supplementary statement of objections the banks
submitted minutes of meetings which ought to have
been submitted in reply to the requests for information,
and which had not been supplied with the joint expo-
sition of the facts either (543).

(553) The joint exposition of the facts itself does go beyond
the scope of the information requested. First, it gives
a detailed account of the historical background to the
network, something that had not been asked for in
it
the requests

information (544), and second,

for

(542) 45.949.
(543) The fact that the present Decision does not maintain the
objections put forward in the supplementary statement of
objections changes nothing in this respect.

(544) That account alone makes up one third of the joint exposition

of the facts.

summarises what took place at the individual com-
mittee meetings.

(554) But

the summary it gives tends to take the facts
discernible in the documents and cast them in a much
more innocent light, and conveys the impression that
interest rates, charges and similar matters were only
side-issues and seldom discussed. The many proven
agreements and restrictive discussions of interest rates,
charges and other parameters of competition are system-
atically passed over. In the summary of all the meetings
of the Vienna and Federal Lending Rates and Deposit
Rates Committees, Consumer Lending Rates and Liberal
Professions Committees, and Minilombard and Control-
ler Committees, there is not a single reference to a
specific interest rate or charge.

(555) The statement of objections, and the present Decision
thereafter, show quite a different picture, entirely on the
basis of documents form the relevant period. An exam-
ple of the selective and cosmetic approach taken by the
banks is their account of the Lombard Club meeting of
8 May 1996, according to which the meeting discussed
only very general recommendations from the Austrian
National Bank. But there is documentary proof that at
that meeting the [representatives] discussed no less than
15 measures ranging from specific minimum interest
rates for a wide range of banking products to minimum
premiums and advertising restrictions; this fact goes
unmentioned.

(556) The joint exposition of the facts is also structured quite
differently from the statement of objections and the
present Decision: it looks at each committee in isolation,
and in line with the banks’ view that there was no
institutionalised network it omits the many intercon-
nections and cross-links between the committees. It even
expressly denies that the Lombard Club had any steering
function, something which emerges clearly from the
documents.

(557) Thus the joint exposition did not serve to clarify
the facts; given the very numerous and unequivocal
documents in the case that would have been unnecessary
anyway; it seeks rather to evaluate them. But its evalu-
ation is in direct contradiction with that of the Com-
mission. The joint exposition certainly cannot be con-
sidered to constitute cooperation of a kind that might
bring entitlement to a reduction of fines: it was drawn
up for the banks’ defence, and its presentation and
evaluation differ drastically from those of the statement
of objections and the present Decision.

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(558) A decision by an undertaking not to contest the facts set
out in a statement of objections may well expedite the
proceedings, or make it easier to establish and act against
infringements, and may therefore justify a reduction in
the fine (545).

(559) It is only logical in this case that the banks will not be
contesting facts that are described entirely on the basis
of documents which were seized on their premises or
subsequently supplied by them in accordance with their
duty to provide information. In view of the hundreds of
minutes, records and similar documents seized, such a
challenge would in any event be difficult to imagine.
Nevertheless, if the facts had been disputed, and the
Commission had had to argue against such a submission,
Commission resources would have been tied up and the
proceedings would have been prolonged. The banks’
decision not to contest the facts did save work on the
part of the Commission, and consequently justifies a
reduction of the fines by 10 %.

respect of prices, charges and advertising, with the object of
restricting competition on the market in banking products and
services in Austria.

Article 2

The undertakings referred to in Article 1 shall immediately
bring to an end the infringement referred to in Article 1 in so
far as they have not already done so.

They shall refrain in future from repeating any act or conduct
which has the same object or effect as that infringement.

Article 3

16.2.7.

Final amounts

For the infringement referred to in Article 1 the following fines
are hereby imposed:

(560) The Commission accordingly sets the fines imposed
under Article 15(2) of Regulation No 17 as follows:

Erste (including GiroCredit and
including Erste before the merg-
er)

RZB

EUR 37,69 million

EUR 30,38 million

BA (including CA)

EUR 30,38 million

BAWAG

EUR 7,59 million

PSK (including PSK-B)

EUR 7,59 million

ÖVAG

NÖ Hypo

EUR 7,59 million

EUR 1,52 million

RLB (including RBW)

EUR 1,52 million,

HAS ADOPTED THIS DECISION:

Article 1

From 1 January 1995 to 24 June 1998, Erste Bank der
oesterreichischen Sparkassen AG, Raiffeisenzentralbank Öster-
reich Aktiengesellschaft, Bank Austria Aktiengesellschaft, Bank
für Arbeit und Wirtschaft Aktiengesellschaft, Österreichische
Postsparkassen Aktiengesellschaft, Österreichische Volksban-
ken-Aktiengesellschaft, Niederösterreichische
Landesbank
Hypothekenbank Aktiengesellschaft and Raiffeisenlandesbank
Niederösterreich-Wien AG infringed Article 81(1) of the EC
Treaty by taking part in agreements and concerted practices in

(545) Case T-347/94 Mayr-Melnhof v Commission [1998] ECR II-

1751, paragraph 331.

Erste Bank der oesterreichischen Spar-
kassen AG

EUR 37,69 million

Raiffeisen Zentralbank Österreich Akti-
engesellschaft

EUR 30,38 million

Bank Austria Aktiengesellschaft

EUR 30,38 million

Bank für Arbeit und Wirtschaft Aktien-
gesellschaft

EUR 7,59 million

Österreichische Postsparkasse Aktien-
gesellschaft

EUR 7,59 million

Österreichische Volksbanken-Aktien-
gesellschaft

EUR 7,59 million

Niederösterreichische
Hypothekenbank Aktiengesellschaft

Landesbank-

EUR 1,52 million

Raiffeisenlandesbank Niederösterreich-
Wien AG

EUR 1,52 million.

Article 4

The fines imposed in Article 3 shall be paid, within three
months of the date of notification of this Decision, into the
following Commission bank account:

Account No 642-0029000-95
IBAN code BE76 6420 0290 0095
SWIFT code BBVABEBB
Banco Bilbao Vizcaya Argentaria (BBVA) SA
Avenue des Arts/Kunstlaan 43
B-1040 Brussels.

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After the expiry of that period interest shall be automatically
payable at the interest rate applied by the European Central
Bank to its main refinancing operations on the first day of the
month in which this Decision is adopted, plus 3,5 percentage
points, i.e. a total of 6,75 %.

Article 5

This Decision is addressed to:

Erste Bank der oesterreichischen Sparkassen AG
Graben 21
A-1010 Wien

Raiffeisen Zentralbank Österreich Aktiengesellschaft
Am Stadtpark 9
A-1030 Wien

Bank Austria Aktiengesellschaft
Vordere Zollamtsstraße 13
A-1030 Wien

Bank für Arbeit und Wirtschaft Aktiengesellschaft
Seitzergasse 2-4
A-1010 Wien

Österreichische Postsparkasse Aktiengesellschaft
Georg-Coch-Platz 2
A-1018 Wien

Österreichische Volksbanken-Aktiengesellschaft
Peregringasse 3
A-1090 Wien

Niederösterreichische Landesbank-Hypothekenbank Aktienge-
sellschaft
Kremser Gasse 20
A-3100 St.Pölten

Raiffeisenlandesbank Niederösterreich-Wien AG
Friedrich Wilhelm Raiffeisenplatz 1
A-1020 Wien

This Decision shall be enforceable pursuant to Article 256 of
the EC Treaty.

Done at Brussels, 11 June 2002.

For the Commission

Mario MONTI

Member of the Commission