Opinion of the European Central Bank of 5 November 2007 at the request of the Austrian Ministry of Finance on a draft law amending the Law on banking, the Law on savings banks, the Law on the Financial Market Supervisory Authority and the Law on the Oesterreichische Nationalbank (CON/2007/33)
Date: 2007-11-05
Institutions: European Central Bank
Subjects: Austria, banking supervision, central bank, financial supervision, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 5 November 2007 

at the request of the Austrian Ministry of Finance  

on a draft law amending the Law on banking, the Law on savings banks, the Law on the Financial 

Market Supervisory Authority and the Law on the Oesterreichische Nationalbank 

(CON/2007/33) 

Introduction and legal basis 

On 8 October 2007, the European Central Bank (ECB) received a request from the Austrian Ministry of 

Finance for an opinion on a draft law amending the Law on banking, the Law on savings banks, the Law 

on  the  Financial  Market  Supervisory  Authority  and  the  Law  on  the  Oesterreichische  Nationalbank 

(Bundesgesetz zur Reform der Finanzmarktaufsicht – 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  contains  provisions  concerning 

the 

Oesterreichische Nationalbank (OeNB), the collection, compilation and distribution of banking statistics 

and  rules  applicable  to  financial  institutions  which  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  is  intended  to  further  improve  the  supervisory  system  set  up  in  2001  and  to 

strengthen the position of Austria as a financial centre through financial market supervision that is 

as effective and efficient as possible. Whilst the statement of reasons explains that the supervisory 

instruments of the Financial Market Authority (FMA) have been extended since the establishment 

of  the  FMA,  the  consulting  authority  stresses  the  need  for  a stronger network of individual bank 
and credit institution group supervision and macroeconomic analysis by the OeNB2. 

1  
2  

OJ L 189, 3.7.1998, p. 42. 

See page 1 of the statement of reasons. 

 
 
                                                          
 
 
 
1.2  The  draft  law  is  intended  to  optimise  financial  market  supervision  of  banking  and  to  clarify  the 

allocation of tasks between the FMA and the OeNB. In so doing, the OeNB's technical competence 

and experience in banking supervision, particularly regarding on-site inspections and analyses are 

intended  to  be  used  to  a  greater  extent,  which  also  makes  it  possible  for  both  institutions  to  use 
their resources more efficiently3.  

1.3  The  draft  law  will  transfer  the responsibility for  all on-site bank inspections to the OeNB. These 

inspections will take place on the basis of an inspection plan agreed between the two institutions, as 

well  as  on  a  request  from  the  FMA.  In  addition,  the  OeNB  may  carry  out  on-site  inspections  in 
cases of macroeconomic necessity without a request from the FMA4. However, the FMA remains 

the competent authority for banking supervision. 

1.4  The draft law also expressly regulates, for the first time, the OeNB’s responsibilities for banking 

analysis  and  a  jointly  fed  and  used  FMA/OeNB  database  to  ensure  the  availability  of  a 
comprehensive, complete and uniform level of information at any time5.  

1.5  Furthermore,  the  proposal  provides  for  express  legislative  recognition  of  the  OeNB’s  formal 

responsibility  for  contributing  to  financial  stability  by  monitoring  and  assessing  the  financial 
system in Austria as a whole, and for reporting to the FMA and the Ministry of Finance thereon6.  

1.6  Finally,  the  draft  law  is  intended  to  enhance  corporate  governance  requirements  for  credit 
institutions,  including  qualitative  requirements  for  the  supervisory  boards  of  credit  institutions7, 

and provides for the establishment of an auditing committee to control and inspect accounting, the 
annual accounts and auditing among others things8. 

2. 

Financial stability and the prudential role of a central bank  

2.1  General observations 

2.1.1  Article  105(5)  of  the  Treaty  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.  

2.1.2  In  line  with  this  Article,  the  ECB  has  consistently  stated  the  following  when  consulted  on  draft 

national  legislation  reforming  the  institutional  framework  for  prudential  supervision  in  Member 

States:  (i) central  banks  have  traditionally  been  closely  involved  in  the  prudential  supervision  of 

credit  institutions  due  to  their  pivotal  role  in  the  financial  system,  in  particular  regarding  the 

3  
4  
5  
6  
7  
8  

See page 1 of the statement of reasons. 

Draft amendments to Article 70 of the Law on banking. 

Draft amendments to Article 79 of the Law on banking. 

New Article 44b of the Law on the OeNB. 

New Article 28a of the Law on banking. 
Draft amendment to Article 63a of the Law on banking. 

2 

 
                                                           
implementation of monetary policy and ensuring the proper functioning of payment systems9; and 

(ii)  the  maintenance  of  a  close  involvement  of  national  central  banks  (NCBs)  in  prudential 

supervision is an important condition for allowing the Eurosystem to contribute adequately – also 

through  the  availability  of  relevant  statistics  on  financial  institutions  -  to  monitoring  the  risks  to 
financial  stability  in  the  euro  area10,  in  accordance  with  Article  105(5)  of  the  Treaty,  and  to 

safeguarding  a  smooth  coordination  between  the  central  banking  functions  exercised  at  the 
Eurosystem’s level and the supervisory functions carried out at national level11. 

2.2  Legislative recognition of the central bank’s financial stability role  

2.2.1  In  keeping  with  the  position  taken  by  the  ECB  in  previous  opinions  on  draft  national  legislation 

proposing  supervisory  reforms,  including  the  ECB  opinion  on  the  2001  reform  of  the  Austrian 
financial supervision framework12, the ECB considers that central banks are in general in the best 

position to take on responsibility for financial stability, given their insight into money and financial 

market developments and their involvement in payment systems and monetary policy operations. 
This  applies  both  to  the  normal  conduct  of  business  and  in  crisis  situations13.  The  central  banks’ 

remit on systemic stability means that they concentrate on the potential impact of macroeconomic 
shocks or disturbances and other factors influencing the stability of financial system as a whole14. 

Therefore,  the  ECB  welcomes  the  express  legislative  recognition  of  the  OeNB’s  formal 

responsibility  for  contributing  to  financial  stability  by  monitoring  and  assessing  the  financial 

system  in  Austria  and  reporting  to  the  FMA  and  the  Ministry  of  Finance,  as  a  separate  function 

from  hands-on  supervision  and  financial  regulation,  as  provided  for  in  the  new  Article 44b(1)  of 

the Law on the OeNB. In this respect, the adequate access of central banks to information and data 

on prudential and financial stability, and cooperation between financial supervisory authorities and 

central banks, are essential for the accomplishment of their respective missions and conducive to 

reducing the prudential and statistical reporting burden imposed on institutions. 

2.3  Operational involvement of the OeNB in prudential supervision  

2.3.1  The ECB welcomes the fact that the proposed amendments to Articles 70 and 70a of the Law on 

banking are intended to give the OeNB the sole responsibility for conducting on-site inspections of 

the banking sector as part of the ongoing banking supervision in Austria, while at present the FMA 

is obliged to mandate the OeNB only concerning credit and market risk. According to the draft law 

9  

10  

11  

12  
13  
14  

See, e.g. paragraph 6 of ECB Opinion CON/2003/23 of 24 October 2003 at the request of the Ministry of Finance of the 
Netherlands  on  a  draft  law  on  provisions  concerning  the  merger  of  De  Nederlandsche  Bank  and  the  Pensions  and 
Insurance Supervisory Authority Foundation.  

See, e.g. paragraph 4 of ECB Opinion CON/2001/10 of 25 May 2001 at the request of the Austrian Ministry of Finance 
on a draft law establishing and organising the financial market supervisory authority [title shortened]. 

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. 

See, e.g. paragraph 7 of ECB Opinion CON/2001/10. 

See, e.g. paragraph 7 of ECB Opinion CON/2001/10. 

See, e.g. paragraph 10 of ECB Opinion CON/2004/31 of 22 September 2004 at the request of Národná banka Slovenska 
on a draft law on supervision of the financial market and on amendments to certain laws. 

3 

                                                           
the  scope  of  the  OeNB’s  on-site  examination  powers  will  cover  all  relevant  risks,  including  in 
particular operational risks15. These new tasks also encompass the verification of credit institutions’ 

compliance  with  money  laundering  obligations  and  following  up  on-site  inspections  of  credit 

institutions.  This  will  allow  the  OeNB  to  better  contribute  to  supervisory  activities  and  lead  to  a 

more  efficient  use  of  resources  with  positive  consequences  for  the  efficacy  of  the  Austrian 

supervisory  system.  Moreover,  the  ECB  welcomes  the  proposed  amendments  to  Articles  21,  21d 

and  77a  of  the  Law  on  banking,  which  further  strengthen  cooperation  between  the FMA and the 
OeNB in relation to banking supervision16. 

2.3.2  Pursuant  to  the  new  paragraph  4b  of  Article  79  of  the  Law  on  banking  in  connection  with 

Articles 18 and 19 of the Law on the Financial Market Supervisory Authority (FMABG), the direct 

costs  incurred  by  the  OeNB  for  on-site  inspections  and  microeconomic  analyses  of  banks  will 

ultimately be borne – up to a cap, the exact level of which has not been indicated in the draft law 

received by the ECB – by the supervised entities (while the charges are collected by the FMA). The 

OeNB, and ultimately the Government via the OeNB’s results, would have to bear out of its own 

budget  any  OeNB  costs  which  exceed  the  cap  or  are  not  directly  related  to  the  OeNB’s  banking 

supervisory tasks. In the statement of reasons, it is explained that this cap is necessary to prevent 

the supervised entities having to bear an unreasonable share of the costs incurred by the FMA and 

the OeNB in the execution of their banking supervisory tasks. In this respect, the ECB notes that 

the OeNB has specific nomination rights in relation to the appointment of members of the FMA’s 

Executive  Board  and  Supervisory  Board  (Articles  5  and  8  of  the  FMABG),  providing  the  OeNB 

with influence over the organisation and management of the FMA. Nevertheless, if there is a wish 

to  expose  the  OeNB  to  part  of  the  costs  for  on-site  inspections  conducted  for  reasons  other  than 

financial stability (in particular, if the cap is set at a level not reflecting the costs incurred for those 

inspections),  it  must  be  ensured  that  the  OeNB  has  sufficient  financial  resources  to  carry  out  its 

Eurosystem tasks under Article 105(5) of the Treaty. Finally, the ECB notes that, according to the 

draft Article 26(b) of the FMABG, the costs of banking supervisory tasks borne by the OeNB for 

2008 will be refunded in 2010.  

2.3.3  First,  the  ECB  notes  that,  in  principle,  the  OeNB  may  conduct  on-site  inspections  only  at  the 

request  of  the  FMA.  In  general,  on-site  inspections  are  to  be  conducted  in  line  with  an  annual 

inspection plan to be agreed between the FMA and the OeNB (new paragraph 1b of Article 70 of 

the Law on banking). The ECB understands that the two institutions will draw up a plan that takes 

into  account  priorities  and  resources  available,  without  prejudice  to  the  fulfilment  of  their 

supervisory mandates, and that the FMA would deviate from that plan and request additional on-

site inspections from the OeNB only to the extent necessary. 

2.3.4  Second, the ECB welcomes the proposed introduction of paragraph 1c into Article 70 of the Law 

on banking pursuant to which the OeNB may conduct on-site inspections of credit institutions on 

15  
16  

See paragraph 10 of ECB Opinion CON/2001/10. 

See paragraph 8 of ECB Opinion CON/2001/10. 

4 

                                                           
its own initiative if it considers them necessary for macroeconomic reasons. However, according to 

the wording of the draft law, the OeNB would only be able to carry out on-site inspections without 

a  request  from  the  FMA  ‘if  the  inspections  in  the  inspection  programme  under  paragraph  1b  or 

other FMA inspection requests are not affected’. In view of the OeNB’s overall responsibility for 

contributing to the stability of the financial system in Austria, the ECB considers it crucial that the 

OeNB  should  be  able  to  give  priority  to  conducting  on-site  inspections  for  financial  stability 

reasons, irrespective of other ongoing or planned inspections that may be requested by the FMA. 

Therefore the proposed new paragraph 1c of Article 70 of the Law on banking should be amended 

accordingly.  

2.3.5  Third,  the  ECB  notes  that,  for  the  extension  of  the  initial  scope  of  an  inspection  as  deemed 

necessary by the OeNB, the procedure provided for by Article 70 of the Law on banking requires a 

request to be made to the FMA. In this respect, the ECB recommends that the OeNB should be able 

to  extend  inspections  without  requesting  the  authorisation  of  the  FMA,  where  this  is  justified  on 

financial stability grounds. Such an extension might also be critical for the successful completion 

of an on-site inspection. 

2.4 

Information-sharing between the OeNB and the FMA 

2.4.1  As  emphasised  in  previous  ECB  opinions17,  central  bank  access  to  prudential  information  and 

cooperation  between  financial  supervisory  authorities  and  central  banks  are  essential  for  the 

conduct of macro-prudential monitoring, the oversight of payment systems and the safeguarding of 

other market infrastructures, which are in turn essential for the smooth conduct of monetary policy. 

In  particular,  from  a  financial  stability  perspective,  a  central  bank  would  inevitably  need  to  be 

involved  in  the  event  of  any  crisis  in  financial  markets.  In  that  context,  the  ready  availability  of 

relevant information and the ability to interpret it are crucial. The Consolidated Banking Directive 

provides that, subject to confidentiality and professional secrecy requirements, information may be 

shared  between  supervisory  authorities  and  central  banks  and  vice  versa,  for  the  purposes  of  the 
exercise  of  their  respective  tasks18.  Therefore  the  legislation  of  virtually  all  Member  States  that 

have adopted supervisory models based on an independent financial supervisory authority include 

provisions  authorising  the  exchange  of  information  between  central  banks  and  supervisory 
authorities19. 

17  
18  

19  

See, e.g. paragraph 9 of ECB Opinion CON/2001/10. 

Article 49 of Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking 
up and pursuit of the business of credit institutions (recast) (OJ L 177, 30.6.2006, p. 1).
See, e.g. Belgium: Article 56 of the Statute of the Nationale Bank van België/Banque Nationale de Belgique; Article 35 
of the Law of 22 February 1998 establishing the Organic Statute of the Nationale Bank van België/Banque Nationale de 
Belgique; Article 74 of the Law of 2 August 2002 on the supervision of the financial sector and on financial services; 
Denmark:  Article  354(5)  of  the  Law  on  financial  services;  Article  22  of  the  Law  on  deposit  guarantees  and  investors; 
Article 20 of the Law on Danmarks Nationalbank; Estonia: Section 2(5) of the Law on Eesti Pank; Sections 48(2), 54(2) 
of  the  Law  on  the  Financial  Supervision  Authority;  Ireland:  Sections  33C(1)(c)  and  33C(8)  of  the  Central  Bank  Act 
1942;  Latvia:  Article  6  of  the  Law  on  Latvijas  Banka;  Article  10  of  the  Law  on  the  Financial  and  Capital  Market 
Commission; Luxembourg: Article 33(2) of the Law of 23 December 1998 concerning monetary status and the Banque 
centrale  du  Luxembourg;  Article  16,  third  paragraph  of  the  Law  of  23  December  1998  on  the  establishment  of  a 
commission  for  the  supervision  of  the  financial  sector;  Hungary:  Article  44  of  Law  No  LVIII  of  2001  on  the  Magyar 

5 

                                                           
2.4.2  Against this background, the ECB welcomes the proposed introduction of paragraph 4a into Article 

79 of the Law on banking and the new Article 44b of the Law on the OeNB. Pursuant to paragraph 

4a,  the  FMA  has  to  enter  all  relevant  information  on  credit  institutions  which  it  collects  in  the 

course of its banking supervisory work in a central database operated by, and fully accessible to, 

the OeNB. The OeNB will be able to use these data for the preparation of analyses in relation to 

specific  credit 

institutions  and  macroeconomic  analyses  and  for 

its  financial  stability 

responsibilities, as the statement of reasons expressly recognises. However, the ECB does not see 

any valid reason for limiting the information the FMA has to feed into the database to information 

relevant  to  on-site  inspections  and  the  analytical  tasks  of  the  OeNB,  as  the  statement  of  reasons 

suggests.  Such  a  limitation  would  increase  the  risk  of  impediments  to  an  efficient  flow  of 

information  between  the  FMA  and  the  OeNB,  which  the  statement  of  reasons  indicates  is  a  key 

objective of the reform of the financial market supervision. Instead, all information on the banking 

sector  within  the  FMA’s  control  should  be  shared  with  the  OeNB  on  an  ongoing  basis  via  that 

database. 

2.4.3  Pursuant to the new Article 44b of the Law on the OeNB, the FMA has to provide all information 

on entities in the financial sector and pension funds to the OeNB at the latter’s request, provided 

that the information is relevant to financial stability in Austria. Given that the traditional borders 

between  the  banking,  securities  and  insurance  sectors  of  the  financial  market  are  becoming 

increasingly  blurred,  and  given  the  risks  that  this  development  entails,  the  ECB  welcomes  the 

extension  of  the  OeNB’s  right  to  information.  However,  the  automatic  insertion  of  all  relevant 

information  into  the  database  by  the  FMA,  possibly  by  linking  any  FMA  databases  containing 

relevant information with the new shared database (without prejudice to applicable data protection 

law), and thus without the need for a specific request by the OeNB, might reduce the risk of gaps in 

the information flow and avoid unnecessary administrative procedures between the FMA and the 

OeNB.  

3. 

Specific issues 

3.1 

Strengthening the corporate governance of credit institutions  

The  ECB  welcomes  the  enhanced  corporate  governance  requirements  for  the  appointment  of  the 

chair  to  the  supervisory  boards  of  credit  institutions.  In  particular,  the  ECB  welcomes:  (i)  the 

cooling-off period of two years if a person has previously served as a member of the management 

board  –  ‘Geschäftsleiter’  –  before  that  person  may  be appointed as chair; (ii) the stricter ‘fit and 

proper’ requirements – (new Article 28a of the Law on banking); (iii) the strengthening of credit 

institutions’  internal  audit  function  (amended  Article  42(3)  of  the  Law  on  banking);  and  (iv)  the 

mandatory  installation  of  an  audit  committee  for  credit  institutions  of  particular  relevance  to  the 

Nemzeti Bank; Malta: Section 38A of the Central Bank of Malta Act; Section 18 of the Malta Financial Services Act; 
Austria: Articles 79 to 80 of the Law on banking; Finland: Section 26 of the Law on Suomen Pankki, No 214/1998. 

6 

 
                                                                                                                                                                                           
financial market (new paragraph 4 of Article 63a of the Law on banking). 

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

Done at Frankfurt am Main, 5 November 2007. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

7