Opinion of the European Central Bank of 20 October 2008 at the request of the Austrian Ministry of Finance on draft legal measures to ensure the stability of the Austrian financial market (CON/2008/55)
Date: 2008-10-20
Institutions: European Central Bank
Subjects: Austria, State aid, financial stability, guarantee, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 20 October 2008 

at the request of the Austrian Ministry of Finance 

on draft legal measures to ensure the stability of the Austrian financial market 

(CON/2008/55) 

Introduction and legal basis 

On 15 October 2008, the European Central Bank (ECB) received a request from the Austrian Ministry of 

Finance (hereinafter the ‘Ministry’) for an opinion on a draft Federal law adopting a Federal Law on the 

strengthening of the interbank money market and a Federal Law on measures for ensuring the stability of 

the financial market, as well as amending the Law on the Austrian Investment and Privatisation Agency 

(the ‘OIAG’) 2000, the Law on banking, the Law on the stock exchange, the Law on the Financial Market 

Supervisory Authority and the Law on the Federal budget 2008 (hereinafter the ‘draft law’). The Ministry 

has  informed  the  ECB  that  the  first  chamber  of  the  Austrian  Parliament  will  discuss  the  draft  law  in  a 

special session on 20 October 2008 and that the second chamber of Parliament will convene several days 

later,  implying  that  the  Ministry  is  invoking  the  exemption  under  Article  3(2)  of  Council  Decision 

98/415/EC  of  29 June 1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities 
regarding  draft  legislative  provisions1,  which  allows  for  a  reduction  in  the  minimum  time  limit  for 

consultation of one month in case of extreme urgency.  

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

European Community and on the sixth indent of Article 2(1) of Council Decision 98/415/EC, as the draft 

law relates 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  is  motivated  by  the  current  financial  market  crisis  and  comprises  a  number  of 

different legal measures to ensure the stability of the Austrian financial market. In its letter to the 

ECB, the Ministry stresses that the draft law is in line with the decisions taken at the summit of the 

euro-area Member States held on 12 October 2008.  

1.2  The  main  purpose  of  the  first  part  of  the  draft  law  is  to  revive  the  interbank  money  market.  It 

therefore  envisages  that  financial  institutions,  i.e.  banks,  insurance  companies  or  their  respective 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                 
interest groups established by law, may set up a company that will operate as a ‘clearing house’, as 

it  is  referred  to  in  the  explanatory  memorandum  to  the  draft  law,  between  financial  institutions, 

i.e. borrow money from financial institutions and lend money against collateral and at a market rate 

to financial institutions. According to the submission of the Minister to the Council of Ministers of 

14 October 2008, which is not repeated in the draft law or the explanatory memorandum, however, 

the  collateral  must  not  qualify  as  eligible  collateral  for  receiving  central  bank  liquidity.  The 

clearing house has to provide access to all banks as defined in Section 1(1) of the Law on banking 

and to all Austrian insurance companies on equal terms. The Minister is empowered to provide a 

state  guarantee  to  the  clearing  house  for  its  lending  and  borrowing  operations,  which  would  be 

effective  for  a  limited  period  only,  and to  act  as  guarantor  to  credit  institutions  that  issue  certain 

securities  for  refinancing  operations.  The  beneficiaries  of  the  measures  have  to  pay  adequate 

compensation for such guarantees. The measures may not exceed the amount of EUR 85 billion in 

total. Finally, the Minister has sole discretion to take any of the measures, although he has to report 

to  the  main  committee  of  Parliament  on  a  regular  basis  regarding  any  measures  taken.  The  draft 

law  on  the  strengthening  of  the  interbank  money  market  provides  that  it  will  expire  on 

31 December 2009. 

1.3  The main purpose of the second part of the draft law is to support financial institutions in distress. 

The Minister is empowered to act as guarantor for the liabilities of a financial institution or towards 

a  financial  institution,  to  provide  loans  or  own  funds  to  financial  institutions,  to  acquire  shares 

either  by  way  of  a  capital  increase  or  by  contract  and  to  take  over  the  assets  of  a  financial 

institution. If this proves insufficient, the Minister may also temporarily take over ownership rights 

by adoption of a decree, thereby making all other ownership rights null and void, while providing 

for adequate compensation of the previous owners, i.e. nationalisation. The ownership rights of the 

State may be held by the Austrian Investment and Privatisation Agency. Once the measures prove 

successful, the re-privatisation of the nationalised companies will begin. The measures under this 

part of the draft law may not cost more than EUR 15 billion total, unless the measures to support 

the interbank money market have not been used up to the maximum amount permitted. Again, the 

Minister of Finance has to report to Parliament on the measures taken under this part of the draft 

law. 

1.4  Regarding  the  proposed  amendments  to  the  Law  on  banking,  the  deposit  guarantee  for  natural 

persons, which is currently EUR 20 000 per account holder and per bank, will become an unlimited 

guarantee with retroactive effect from 1 October 2008. This applies to all banks that are members 

of  the  Austrian  deposit  guarantee  mechanisms,  participation  in  which  is  mandatory  for  all  banks 

with a licence from the Financial Market Supervisory Authority (hereinafter the ‘FMA’). As a last 

resort, if a deposit guarantee mechanism is unable to meet this obligation, it has to take out loans or 

issue  debt  certificates,  which  the  State  can  guarantee.  The  State  has  –  up  to  a  certain  amount  - 

recourse to the deposit guarantee mechanism concerned.  Moreover, the FMA’s powers to require a 

bank to have additional capital in specific circumstances, where the bank concerned is subject to an 

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increased risk that is not adequately covered by the generally applicable capital requirements have 

been strengthened. 

1.5  The proposed amendments to the Law on the stock exchange provide a legal basis for the FMA to 

prohibit short selling of financial instruments. 

1.6  Finally,  as  regards  the  proposed  amendments  to  the  Law  on  the  FMA,  the  FMA  is  required  to 

report  to  the Minster  if  it becomes  aware  that  it  is possible  that measures  under  the  draft  law  on 

measures for ensuring the stability of the financial market could be necessary. 

2. 

General observations 

2.1  The ECB notes that there is an ongoing discussion at both international and European level with a 

view to coordinating the actions of countries aimed at preserving confidence in and stability of the 

international  financial  markets.  More  specifically,  the  ECB  notes  that  on  12  October  2008  the 

Heads of State of the euro area issued a ‘Declaration on a concerted European action plan of the 
euro area countries’2 (hereinafter the ‘Declaration’), in which they confirmed their commitment to 

act  together  in  a  decisive  and  comprehensive  way  in  order  to  restore  confidence  and  proper 

functioning  of  the  financial  system,  aiming  at  restoring  appropriate  and  efficient  financing 

conditions for the economy. They agreed on common principles to be followed by the EU and euro 

area governments, central banks and supervisors to avoid national measures adversely affecting the 

functioning of the single market and the other Member States. Such coordinated approach includes 

initiatives aimed at ensuring appropriate liquidity, facilitating the funding of banks through various 

means,  providing  additional  capital  resources  to  financial  institutions  and  recapitalisation  of 

distressed  banks.  These  principles  were  also  endorsed  for  all  Member  States  by  the  European 

Council  on  16  October  2008.  Against  this  background,  the  ECB highlights  that  all  the  initiatives 

put in place by national governments to restore the confidence in financial markets should be aimed 

at  implementing  such  common  principles,  in  the  spirit  of  close  cooperation  with  other  Member 

States and EU institutions.    

2.2  The draft law was agreed by the Council of Ministers on 14 October 2008, i.e. two days following 

the summit of euro area Member States. In line with the Declaration, Member States have to act in 

coordinated manner to avoid significant differences in national implementation having a counter-

productive effect, creating distortions in global banking markets. The euro area Heads of State also 

acknowledged the need to cooperate with the ECB to ensure consistency with the management of 

liquidity by the Eurosystem and compatibility with the operational framework of the Eurosystem. 

The ECB appreciates the fact that the Ministry consulted it on the draft law on 15 October 2008, 

five  days  before  the  discussion  in  the  first  chamber  of  Parliament.  It  understands  that  the 

application  of  an  accelerated  procedure  during  the  preparation  and  adoption  of  the  draft  law  left 

insufficient  time  for  the  normal  consultation  process.  This  does  not,  however,  prejudice  the  duty 

under  Article  105(4)  of  the  Treaty  to  consult  the  ECB  on  national  draft  legislative  provisions 

2  

See the Declaration of 12 October 2008, available on the website of the French Presidency, www.ue2008.fr. 

3 

 
                                                 
falling within its advisory fields of competence, and perhaps the ECB could have been consulted on 

a previous version of the draft law a few days earlier. 

3. 

Specific observations  

Eligibility for support 

3.1   The ECB notes that both the draft law on the strengthening of the interbank money market and the 

draft law on measures for ensuring the stability of the financial market refer to support measures to 

credit institutions and ‘domestic insurance undertakings’. the ECB understands that the institutions 

potentially addressed by these measures comprise all credit institutions licensed in Austria and all 

insurance companies having their seat in Austria and being licensed by the Austrian FMA as well. 

Thereby  any  distortion  in  the  level  playing  field  as  regards  the  treatment  of  domestic  financial 

institutions  and  subsidiaries  of  foreign  institutions  should  be  avoided.  The  ECB  draws  the 

Ministry’s  attention  to  the  recently  adopted  Commission  guidance  on  compliance  by  financial 
sector support schemes with EU State aid rules3, which includes in the specific context of provision 
of State guarantees detailed rules on setting the eligibility criteria for the beneficiary institutions4.  

3.2  Moreover,  the  ECB  would  draw  attention  to  the  conclusions  adopted  by  the  Declaration  which 

highlighted  some  common  principles  to  guide  the  action  of  euro  area  Member  States  when 

providing  for  recapitalisation  of  relevant  financial  institutions,  in  particular  stressing  the  need  to 

ensure  that  financial  institutions  to  which  Member  States  make  available  additional  capital 

resources should be obliged to accept additional restrictions, notably to preclude possible abuse of 

such arrangements at the expense of non-beneficiaries. The ECB would therefore suggest that the 
draft law should include specific terms in accordance with the abovementioned principles5. 

Relationship with the central bank 

3.3  The  ECB  understands  that  the  Oesterreichische  Nationalbank  (OeNB)  will  not  be  among  the 

possible  shareholders  of  the  ‘clearing  house’  to  be  established  under  the  draft  law  on  the 
strengthening  of  the  interbank  money  market.  In  line  with  its  previous  opinions6,  the  ECB 

considers  that,  with  a  view  to  ensuring  the  compatibility  of  the  envisaged  structure  with  the 

financial  independence  of  the  European  System  of  Central  Banks  and  the  monetary  financing 

prohibition laid down in Article 101 of the Treaty, the OeNB, not being involved in the operation 

3  

4  

5  

6  

See ‘Communication from the Commission – The application of State aid rules to measures taken in relation to financial 
institutions  in  the  context  of  the  current  global  financial  crisis’  of  13  October  2008,  available  on  the  Commission’s 
website, www.ec.europa.eu. 
See paragraph 18 of the Commission’s guidance, specifying that ‘The eligibility criteria of financial institutions … must 
be  objective,  taking  due  account  of  their  role  in  the  relevant  banking  system  and  the  overall  economy,  and  non-
discriminatory  so  as  to  avoid  undue  distortive  effects  on  neighbouring  markets  and  the  internal  market  as  a  whole.  In 
application  of  the  principle  of  non  discrimination  on  the  grounds  of  nationality,  all  institutions  incorporated  in  the 
Member State concerned, including subsidiaries, and with significant activities in that Member State should be covered 
by the scheme’. 
On 20 October 2008 the Austrian authorities informed the ECB that it will adjust the draft legislation in order to include 
this point. 
See paragraph 5 of ECB Opinion CON/2003/27 of 2 December 2003 at the request of the Austrian Federal Ministry of 
Finance on a draft Federal law on the National Foundation for Research, Technology and Development. 

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of the ‘clearing house’, should be under no obligation to contribute to its finances, either under the 

draft law or otherwise. The OeNB has confirmed that no OeNB contribution is envisaged or under 

discussion.  

Relationship of the proposals under the draft law to the single monetary policy of the euro area 

3.4   The  ECB  notes  that,  in  line  with  the  Declaration,  Member  States  have  to  act  in  a  coordinated 

manner  to  avoid  significant  differences  in  national  implementation  having  a  counter-productive 

effect,  creating  distortions  in  global  banking  markets.  The  euro  area  Heads  of  State  also 

acknowledged  the  need  to  work  in  cooperation  with  the  ECB  to  ensure  consistency  with  the 

management of liquidity by the Eurosystem and compatibility with the operational framework of 

the  Eurosystem.  The  ECB  therefore  notes  that  uncoordinated  decisions  among  Member  States 

should  be  avoided  as  they  may  involve  a  fragmentation  of  the  euro  area  money  market.  The 

Declaration states that the euro area Governments would make available a Government guarantee 

of new medium-term (up to 5 years) bank senior debt issuance. Against this background, the ECB 

has a number of observations to make in relation to the draft law. 

3.5  Regarding  the  draft  law  on  measures  for  ensuring  the  stability  of  the  financial  market,  the  ECB 

understands  that  the  Minister  of  Finance  is  empowered  to  act  as  guarantor  for  liabilities  of  a 

financial  institution  without  limitation  in  time.  Although  such  measures  should  have  a  positive 

impact to restore confidence in the Austrian banking system, it should also be noted that an open-

ended scheme of this nature does not seem to be in line with the Declaration, which pointed to the 

temporary  nature  of  such  schemes.  Moreover,  it  is  the  ECB’s  view  that  the  extension  of  the 

guarantee to cover all interbank deposits should be avoided. Otherwise there could be a substantial 

distortion  in  the  various  national  segments  of  the  euro  area  money  market  due  to  a  potential 

increase  in  short-term  debt  issuance  activity  across  Member  States,  which  would  impair  the 

implementation of the single monetary policy, which is an exclusive competence of the Eurosystem 

under Article 105(2) of the Treaty. It also appears crucial to ensure the harmonisation of the price 

determination  of  such  guarantee  within  the  euro  area  and  the  EU,  where  a  level-playing-field  is 

essential. The ECB should be involved in such coordination, and the ECB would welcome that this 

is explicitly provided for in any subsequent legislation.  

3.6  Regarding the draft amendments to the Law on banking, while recognising that the extension of the 

deposit  guarantee  for  natural  persons  from  EUR  20  000  to  an  unlimited  amount  should  improve 

consumer confidence in Austrian financial institutions, the ECB would also remind the Ministry of 

the need for coordinated measures in this matter, as stated in the Declaration. 

4. 

Information obligations of the FMA 

The ECB understands that under the draft amendments to the Law on the FMA, the FMA must report to 

the Minister if it becomes aware of the possibility that measures under the Law on measures for ensuring 

5 

 
the stability of the financial market could become necessary. As emphasised in previous ECB opinions7, 

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. Even though it is understood 

that the Austrian system of banking supervision and the safeguarding of financial stability requires close 

cooperation and information exchange between the FMA and the OeNB, with the OeNB being in charge 

of all analyses and on-site inspections in the banking area and entrusted with an explicit financial stability 

monitoring responsibility. However, the draft law could further underline this interaction andprovide for a 

similar reporting obligation to the OeNB. 

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

Done at Frankfurt am Main, 20 October 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

7  

See,  e.g.  paragraph  2.4  of  ECB  Opinion  CON/2007/33  of  5  November  2007  on  the  reform  of  financial  supervision  in 
Austria (title shortened).  

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