Opinion of the European Central Bank of 18 July 2007 at the request of the German Ministry of Finance on a draft law amending the Law on investment and other laws (CON/2007/21)
Date: 2007-07-18
Institutions: European Central Bank
Subjects: Germany, financial stability, financial supervision, investment, investment company, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 18 July 2007 

at the request of the German Ministry of Finance 

on a draft law amending the Law on investment and other laws  

(CON/2007/21) 

Introduction and legal basis 

On  14  June  2007  the  European  Central  Bank  (ECB)  received  a  request  from  the  Federal  Ministry  of 

Finance  for  an  opinion  on  the  draft  law  amending  the  Law  on  investment  and  other  laws  (Gesetz  zur 

Änderung des Investmentgesetzes und zur Anpassung anderer Vorschriften) (hereinafter the ‘draft law’). 

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

European  Community  and  the  third,  fourth  and  sixth  indents  of  Article 2(1)  of  Council  Decision 

98/415/EC  of  29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities 
regarding  draft  legislative  provisions1,  as  the  draft  law  relates  to  national  central  banks  (NCBs),  the 

collection, compilation and distribution of monetary, financial, banking, payment systems and balance of 

payments  statistics,  as  well  as  to  rules  applicable  to  financial  institutions  insofar  as  they  materially 

influence  the  stability  of  financial  institutions  and  markets.  In  accordance  with  the  first  sentence  of 

Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted 

this opinion. 

1.   Purpose of the draft law 

1.1  The draft law aims at enhancing competitiveness of the investment fund industry in Germany. To 

this  end,  it  envisages  a  large  number  of  measures,  in  particular,  deregulation,  modernisation  of 

open-ended property funds, promotion of product innovation and improved investor protection and 

corporate governance. 

1.2  The  draft  law  will  align  the  Law  on  investment  with  Council  Directive  85/611/EEC  of 

20 December 1985 on the coordination of laws, regulations and administrative provisions relating 
to  undertakings  for  collective  investment  in  transferable  securities  (UCITS)2.  As  a  consequence, 

investment  management  companies  (Kapitalanlagegesellschaften)  will  no  longer  qualify  as credit 

institutions  or  be  subject  to  the  German  Law  on  banking.  This  entails  important  changes  in  their 

regulation  and  supervision.  Henceforth,  investment  management  companies  will  be  exclusively 

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OJ L 189, 3.7.1998, p. 42.  
OJ L 375, 31.12.1985, p. 3.  

 
 
 
 
                                        
subject  to  supervision  by  the  Federal  Financial  Supervisory  Authority  (Bundesanstalt  für 

Finanzdienstleistungsaufsicht (BaFin)) as sole regulator and supervisory authority, since the draft 

law  abolishes  the  Deutsche  Bundesbank’s  supervision  of  investment  management  companies,  as 

well as their supervisory reporting requirements vis-à-vis the Bundesbank. 

1.3  For instance, investment management companies will no longer be obliged to report their intention 
of  forming  a  branch  in  another  Member  State  or  member  of  the  European  Economic  Area3.  The 
same  would  apply  to  changes  related  to  branches4.  Furthermore,  investment  management 

companies would no longer be required to provide the Deutsche Bundesbank with annual financial 
statements,  management  reports,  audit  reports5  and  to  notify  reductions  in  their  start-up  capital6. 
Similarly, investment management companies would not have to transmit their prospectus7, interim 
reports,  annual,  semi-annual  and  dissolution  reports  on  the  funds  under  their  management8. 
Moreover, the Deutsche Bundesbank would no longer be informed of the nomination of an auditor9, 

and  the  auditors  of  the  investment  management  companies  would  no  longer  have  any  duties 
towards  the  Deutsche  Bundesbank10.  As  far  as  queries  and  investigatory  powers  regarding  the 

prosecution of unauthorised investment deals by investment management companies are concerned, 

the supervisory powers rest with the BaFin and the Deutsche Bundesbank would not play any role 
in this context11. 

1.4  The draft law also restricts the rules concerning information exchange between the BaFin and the 

Deutsche Bundesbank. The amended § 18 of the Law on investment provides that the BaFin must 

provide  the  Deutsche  Bundesbank  with  information  and  documents  which  it  has  received  on  the 

basis  of  the  Law  on  investment  only  if  this  information  is  indispensable  for  the  Deutsche 

Bundesbank to comply with its obligation of ensuring the stability of the financial system and if the 

Deutsche Bundesbank cannot obtain such information in another manner.  

1.5  Furthermore,  the  draft  law  intends  to  abolish  the  need  for  prior  consultation  of  the  Deutsche 

Bundesbank by the Ministry of Finance with regard to the issue of the latter’s statutory regulations 

containing more specific rules in the fields of accounting, valuation of any unit classes or any sub-
funds12, interim reports13, derivatives14, nature of risk management systems15 etc.  

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Article 1 of the draft law amending first sentence of § 12(1) of Law on investment. 
Article 1 of the draft law amending first and third sentences § 12(4) of the Law on investment. 
Article 1 of the draft law amending § 19 of the Law on investment. 
Article 1 of the draft law amending § 97 of the Law on investment. 
Article 1 of the draft law amending § 42(6) of the Law on investment 
Article 1 of the draft law amending § 45 of the Law on investment. 
Article 1 of the draft law amending § 19 of the Law on investment. 
Article 1 of the draft law amending § 19 of the Law on investment. 
Article 1 of the draft law amending § 19 of the Law on investment. 
Article 1 of the draft law amending first sentence of § 34(3) of the Law on investment. 
Article 1 of the draft law amending § 44 of the Law on investment. 
Article 1 of the draft law amending the first sentence of § 51(1), (2), (3) of the Law on investment. 
Article 1 of the draft law amending the first sentence of § 119 of the Law on investment. 

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1.6 

In addition, several constraints deriving from the German Law on stock corporations (Aktiengesetz) 

would no longer apply to investment stock companies. 

2. 

Financial stability and prudential role of a central bank 

2.1  General observations  

2.1.1  Article 105(5) of the Treaty establishing the European Community assigns to the European System 

of  Central  Banks  the  task  of  contributing  to  the  smooth  conduct  of  policies  pursued  by  the 

competent authorities relating to the prudential supervision of credit institutions and the stability of 

the  financial  system.  The  ECB  has  consistently  favoured  the  involvement  of  central  banks  in 

prudential  supervision  due  to  their  pivotal  role  in  the  financial  system,  in  particular  regarding 
implementing  monetary  policy  and  ensuring  the  proper  functioning  of  payment  systems16. 

Moreover,  maintaining  a  close  involvement  by  NCBs  in  prudential  supervision  is  an  important 

condition for allowing the Eurosystem to contribute adequately to monitoring the risks to financial 

stability  in  the  euro  area,  in  accordance  with  Article  105(5)  of  the  Treaty,  and  to  safeguard  a 

smooth coordination between the central banking functions exercised at the Eurosystem level and 

the supervisory functions carried out at national level. 

2.1.2  In  this  respect,  the  access  of  central  banks  to  prudential  information  and  cooperation  between 
financial  supervisory  authorities  and  central  banks  are  essential17.  In  particular  from  a  financial 

stability perspective, the central bank would inevitably need to be involved in any crisis in financial 

markets. In that context, the ready availability of relevant information and the ability to interpret it 

are crucial. 

2.1.3  In  view  of  these  considerations,  the  ECB  supports  the  coordination  and  cooperation  framework 

currently in force between the BaFin and the Deutsche Bundesbank, encompassing matters relating 

to the stability of the German financial system, the development of supervisory practice, as well as 

aspects  of  the  day-to-day  supervision  of  credit  and  financial  services  institutions.  This  is  in  line 

with the ECB’s view that maintaining the close involvement of NCBs in prudential supervision is a 

mandatory  condition  to  allow  the  Eurosystem  to  contribute  adequately  to  monitoring  the  risks  to 
financial stability in the euro area18. 

2.2 

Specific observations 

2.2.1  The ECB notes with concern that the draft law – particularly with regard to the abolishment of the 

direct  reporting  of  information  to  the  Deutsche  Bundesbank  and  the  prior  consultation  of  the 

Deutsche  Bundesbank  by  the  Ministry  of  Finance  –  would  introduce  considerable  legal 

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See, e.g. paragraph 2.1.2 of ECB Opinion CON/2006/15 of 9 March 2006 at the request of the Polish Minister of Finance 
on a draft law on the supervision of financial institutions and ECB Opinion CON/2006/20 of 25 April 2006 on the Dutch 
draft law concerning financial sector supervision.  
See, e.g. paragraph 2.3 and 2.4 of ECB Opinion CON/2006/15 and paragraph 2.4 and 2.5 of ECB Opinion CON/2006/20. 
See  e.g.  paragraph  5  of  ECB  Opinion  CON/2001/35  of  8  November  2001  at  the  request  of  the  German  Ministry  of 
Finance on a draft law establishing an integrated financial services supervision. 

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impediments  to  the  Deutsche  Bundesbank’s  access  to  information  and  information  sharing on  all 

matters relating to financial stability. Given the enhanced integration of financial services, the ECB 

deems that it is necessary to maintain the Deutsche Bundesbank’s involvement in the definition of 

the scope of information to be reported by institutions and its up-to date access to the information 

that  may  be  needed  to  perform  its  functions.  The  central  bank  should  have  the  means  to  assess 

possible  systemic  implications  for  the  money  and  capital  markets  as  well  as  for  payment  and 

settlement  systems  stemming  from  cross-sectoral  linkages  and  from  the  behaviour  of  complex 

financial groups. 

2.2.2  The  ECB  is  not  in  favour  of  the  introduction  of  the  condition  in  §  18  of  the  draft  law  that  the 

Deutsche  Bundesbank  may  acquire  information  from  the  BaFin  only  if  there  are  no  other  means 

available to obtain such information. The introduction of this condition could materially impair the 

Deutsche  Bundesbank’s  discharge  of  its  obligations  covered  by  its  ESCB-related  tasks,  in 
particular in the field of financial stability19. In addition, the ECB proposes clarifying in the draft 

law  that  the  information  currently  reported  to  the  Deutsche  Bundesbank  is  necessary  and 

appropriate for the fulfilment of its tasks and that this information should continue to be received 

from the BaFin under § 18. 

3. 

Statistical reporting requirements  

The  draft  law  does  not  have  an  impact  on  the  Deutsche  Bundesbank’s  statistical  reporting 

requirements. In this regard, the ECB understands that the amendment made to § 18 of the Law on 

the  Deutsche  Bundesbank,  which  acknowledges  the  role  of  the  Deutsche  Bundesbank  in  the 

collection  of  statistics  from  investment  companies  and  investment  stock  companies,  is  a  mere 

technical adaptation since these companies would no longer qualify as credit institutions.  

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 18 July 2007. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

19   Moreover, even the explanatory memo attached to the amendment of § 18 of the law does not specify how the term ‘by 
other means’ has to be interpreted, i.e. whether it requires the Deutsche Bundesbank to seek the information from ‘public 
sources’  only  or  whether  Deutsche  Bundesbank  has  to  liaise  with  other  public  authorities  who  might  possess  the 
information in question. 

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