Opinion of the European Central Bank of 21 October 2008 at the request of the German Ministry of Finance on a Law on the implementation of a package of measures to stabilise the financial market and an order on its implementation (CON/2008/57)
Date: 2008-10-21
Institutions: European Central Bank
Subjects: Germany, State aid, financial stability, institutional activity, national law, public institution

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 21 October 2008 

at the request of the German Ministry of Finance 

on a  Law on the implementation of a package of measures to stabilise the financial market and 

an order on its implementation  

(CON/2008/57) 

Introduction and legal basis 

On  17  October  2008,  the  European  Central  Bank  (ECB)  received  a  request  from  the  German  Federal 

Ministry  of  Finance  for  an  opinion  on  a  draft  law  on  the  implementation  of  a  package  of  measures  to 

stabilise the financial market (Law on financial market stabilisation, FMStG), adopted on the same day 

(hereinafter the ‘Law’); the original draft law of 13 October 2008 was accompanied by a new Article 1 

Section 3a and an amended Article 1 Section 4. Subsequently, also on 17 October 2008, the ECB received 

a  request  from  the  German  Federal  Ministry  of  Finance  on  an  Order  on  the  Implementation  of  the 

Financial Market Stabilisation Fund Law (Financial Market Stabilisation Fund Order) which was adopted 

on 20 October 2008 (hereinafter the ‘Implementing Order’). 

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

European Community and the third and sixth indents of Article 2(1) of Council Decision 98/415/EC of 

29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft 
legislative provisions1, as the Law and the Implementing Order relate to the Deutsche Bundesbank 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 Law and the Implementing Order 

1.1  The Law and the Implementing Order are motivated by the current financial market crisis. In order 

to  stabilise  the  financial  market,  safeguard  the  supply  of  capital  for  the  German  economy  and 

protect  consumers  and  investors,  the  Federal  Government  will  establish  the  Financial  Market 
Stabilisation  Fund2  (hereinafter  the  ‘Fund’)  under  the  Law,  for  which  it  will  be  liable.  The 
competence  to  manage  the  Fund  lies  with  the  Ministry  of  Finance3;  however,  the  Ministry  of 

Finance  may delegate this responsibility to the Financial Market Stabilisation Authority (FMSA), 

1  
2  
3  

OJ L 189, 3.7.1998, p. 42.  
Article 1 Section 1 of the Law. 
Article 1 Section 4(1) of the Law. 

 
 
 
 
                                                 
a body that is organisationally separate from the Deutsche Bundesbank, under the legal and expert 
supervision of the Ministry of Finance4. The Fund has no legal capacity5 . 

1.2  The  Fund’s  task  is  to  secure  the  refinancing  of  German  financial  institutions6,  including 

safeguarding newly issued refinancing instruments up to 36 months. For this purpose, the Ministry 

of  Finance  will  be  authorised  to  assume  guarantees  for  the  Fund  up  to  an  amount  of 

EUR 400 billion for debt securities issued by financial sector entities as from entry into force of the 

Law until 31 December 2009, as well  as for  created  obligations from deposits of financial sector 

companies  with  a  maturity  of  up  to  36  months,  in  order  to  eliminate  liquidity  shortages  and  to 
support  refinancing  in  the  capital  market7.  Furthermore,  the  Fund  can  participate  in  the 

recapitalisation  of  financial  sector  companies,  in  particular  it  may  purchase  shares  or  dormant 

equity holdings and acquire other items constituting own funds of these companies, including those 
created by state law, against the payment of a contribution8. 

1.3  Financing of the Fund will be raised by the Ministry of Finance, which is authorised to borrow up 

to  an  amount  of  EUR  100  billion  to  cover  expenditures  under  the  Fund  and  measures  under 
Article 1  Sections  6  to  8  of  the  Law9;  the  Federal  Government  shall  bear  the  costs  related  to  the 
management of the Fund10. 

1.4  The Law provides that the Fund will expire on 31 December 2009. 

2. 

General observations  

2.1  The  ECB  notes  that  there  are  ongoing  discussions  at  both  the  international  and  European  levels 

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

the international financial markets. More specifically, 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’ 
(hereinafter  the  ‘Declaration’)11,  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: (i) ensuring appropriate liquidity; (ii) facilitating the funding of banks through various means; 

(iii)  providing  additional  capital  resources  to  financial  institutions;  and  (iv)  recapitalisation  of 

4  
5  
6  
7  
8  
9  
10  
11  

Article 1 Section 3a(2) of the Law. 
Article 1 Section 3 of the Law. 
Article 1 Section 7(1) of the draft law (after adoption Article 1 Section 6(1) of the Law). 
Article 1 Section 7(1) of the draft law (after adoption Article 1 Section 6(1) of the Law). 
Article 1 Section 6(1) of the draft law (after adoption Article 1 Section 7(1) of the Law). 
Article 1 Sections 9(1)(4) and (5) of the Law. 
Article 1 Section 12(1) of the Law. 
The Declaration is available on the French Presidency’s website at www.ue2008.fr. 

2 

 
                                                 
distressed banks. These principles were also endorsed by the European Council on 16 October 2008 

for  all  Member  States.  Against  this  background,  the  ECB  highlights  that  all  the  initiatives  put  in 

place  by  national  governments  to  restore  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  ECB  wishes  to  draw  attention  to  the  recent  ECB  opinions  issued  at  the  request  of  other 

Member  States,  in  which  the  ECB  has  commented  on  legislative  proposals  sharing  some  of  the 
features  of  the  present  arrangements12.  The  ECB  intends  to  facilitate  coordination  of  the  various 

national  efforts  addressing  the  current  financial  situation,  inter  alia,  through  timely  adoption  and 

publication of ECB opinions on such draft national legislation.  

2.3  The ECB understands the application of an accelerated legislative procedure, but would appreciate 

receiving future consultations with more time allowed for the ECB to prepare its opinion. 

3. 

Specific comments 

3.1  Prohibition of monetary financing and the role of the central bank 

With regard to the role of the central bank, the ECB reminds the German authorities that a number 

of elements must be observed in order to comply with the monetary financing prohibition laid down 

in the Treaty.  

First,  the  ECB  notes  that  the  Law  suggests  that  the  Fund  should  be  considered  as  a  public 

undertaking  within  the  meaning  of  Article  101(1)  of  the  Treaty  and  Council  Regulation 

(EC) 3603/93  of  13  December  1993  specifying  definitions  for  the  application  of  the  prohibitions 
referred  to  in  Articles  104  and  104b(1)  of  the  Treaty13.  Indeed,  the  Fund  is  established  under  the 

designation  ‘Financial  Market  Stabilisation  Fund  –  FMS’  as  a  special  fund  pursuant  to 
Article 110(1) and Article 115(2) of the German Basic Law and has no legal capacity14. The ECB 

understands  that  the  Fund  will  be  managed  by  the  Ministry  of  Finance  with  the  possibility  of 

12  

13  

14  

See, e.g. ECB Opinion CON/2008/44 of 3 October 2008 at the request of the Irish Minister for Finance on a draft Credit 
Institutions (Financial Support) Bill 2008, ECB Opinion CON/2008/46 of 8 October 2008 at the request of the Belgian 
Ministry of Finance on a preliminary draft law on measures promoting financial stability and in particular establishing a 
State  guarantee  for  the  provision  of  credit  in  the  context  of  financial  stability,  ECB  Opinion  CON/2008/48  of 
15 October 2008 at the request of the Irish Minister for Finance on a draft Credit Institutions (Financial Support) Scheme 
2008, ECB Opinion CON/2008/50 of 17 October 2008 at the request of the Belgian Ministry of Finance on a draft royal 
decree  adopted  under  Article  117bis  of  the  Law  of  2  August  2002  on  the  supervision  of  the  financial  sector  and  on 
financial  services;  ECB  Opinion  CON/2008/52  of  17  October  2008  at  the  request  of  the  Spanish  State  Secretary  for 
Economic Affairs on a Royal Decree-Law creating a Fund for the acquisition of financial assets and on a Royal Decree-
Law adopting urgent financial and economic measures in relation to the concerted European action plan of the euro area 
countries,  and  ECB  Opinion  CON/2008/56  of  21  October  2008  at  the  request  of  the  Banque  de  France  on  a  draft 
amending  finance  law  for  the  financing  of  the  economy.  The  opinions  are  available  on  the  ECB’s  website  at 
www.ecb.europa.eu. 
OJ  L  332,  31.12.1993,  p.  1.  In  order  to  qualify  as  a  ‘public  undertaking’  within  the  meaning  of  Article  101(1)  of  the 
Treaty, the State must exercise dominant influence over the company by controlling its financial resources and governing 
bodies in accordance with Article 8(1) of Regulation (EC) No 3603/93. A dominant influence on the part of the State or 
other regional or local authorities is presumed when these authorities, directly or indirectly in relation to an undertaking: 
(i) hold the major part of the undertaking’s subscribed capital; (ii) control the majority of the votes attaching to shares 
issued  by  the  undertaking;  or  (iii)  can  appoint  more  than  half  of  the  members  of  the  undertaking’s  administrative, 
managerial or supervisory body.  
Article 1 Section 3 of the Law. 

3 

 
 
                                                 
delegating  such  management  to  the  FMSA,  a  public  law  authority  established  at  the  Deutsche 

Bundesbank  that  is  organisationally  separate  from  the  Deutsche  Bundesbank.  The  ECB  also 

understands  that  the  Fund’s  resources  will  be  financed  through  public  debt  issuance  and  that  the 

Fund  will  bear  its  own  management  costs.  The  ECB  notes  that,  to  ensure  compliance  with  the 

prohibition of monetary financing, the Fund may not benefit from overdraft facilities or any type of 
credit facility15 with the Deutsche Bundesbank (or any other central bank of the European System 

of Central Banks), while ESCB central banks are also prohibited from purchasing debt instruments 

directly from the Fund. By contrast, the acquisition by an ESCB central bank of debt instruments 

issued for the benefit of the Fund in the secondary market is, in principle, allowed. However, such 

purchases must not be used to circumvent the objectives of Article 101 of the Treaty. 

Second, the ECB notes that the involvement of the Deutsche Bundesbank in the context of the Fund 

must be compatible with the Treaty provisions. As regards the Law, the ECB understands that the 

Deutsche Bundesbank will not be involved in the actual management of the Fund, but may be used 

as an agent in the performance of the FMSA’s tasks. In this regard, it should be ensured that if the 

State requests the Deutsche Bundesbank to perform certain activities for the Fund, the arrangement 

must  also  comply  with  the  monetary  financing  prohibition  as  regards  the  remuneration  for  these 

activities  and  the  Deutsche  Bundesbank’s  institutional  and  financial  independence  must  be 

respected.  

Third, the arrangement must also safeguard the proper performance of the Deutsche Bundesbank’s 

existing tasks under the Treaty and the Statute of the European System of Central Banks and of the 

European  Central  Bank.  For  this  purpose,  the  ECB  recommends  that  the  Fund’s  tasks  be  clearly 

separate from the Deutsche Bundesbank’s tasks, and that services of the Deutsche Bundesbank to 

be  provided  to  the  Fund  are  performed  with  due  regard  to  the  principle  of  cost-coverage  and  the 

avoidance of conflicts of interest.  

3.2  Eligibility for support 

The  institutions  covered  by  the  Fund  under  Article  1  Section  2(1)  of  the  Law  comprise: 

(i) institutions established under Section 1(1)(b) of the Law on banking; (ii) insurance corporations 

and pension funds established under Sections 1(1) (1) and (2) of the Law on insurance supervision; 

(iii) asset management companies pursuant to the Law on investment; and (iv) operators of stock 

exchanges and derivatives exchanges; and their respective parent companies, in so far as these are 

financial  holding  companies,  mixed  financial  holding  companies  or  supervised  financial 
conglomerate companies and the abovementioned companies have their seat in Germany16. These 

institutions  qualify  as  ‘financial  sector  companies’  under  the  Law.  Additionally,  special  purpose 
vehicles  are  eligible  for  support17.  The  ECB  notes  that,  in  accordance  with  the  Declaration,  the 

15  
16  

17  

to 

In accordance with Regulation (EC) No 3603/93. 
According 
www.bundesfinanzministerium.de, this also covers subsidiaries established in Germany of foreign institutions. 
See Article 1 Section 7(1) of the draft law (after adoption Article 1 Section 6(1) of the Law) and Article 1 Section 8(1) of 
the draft law. 

the  Federal  Ministry  of  Finance’s  website 

text  presented  on 

explanatory 

the 

at 

4 

 
                                                 
Fund  will  have  to  operate  with  the  aim  of  avoiding  any  distortion  in  the  level  playing  field  as 

regards both domestic financial institutions and subsidiaries of foreign institutions. 

3.3   Community rules with regard to State aid and financial services  

The  ECB  notes  that  it  should  be  ensured  that  the  beneficiary  institution(s)  will  not  be  unfairly 
advantaged by making undue use of their guaranteed status18. In this context, the ECB draws the 

consulting authority’s attention to the Commission’s recently adopted guidance on compliance by 
the  financial  sector  support  schemes  with  EU  State  aid  rules19,  which  includes  in  the  specific 

context  of  the  provision  of  State  guarantees,  detailed  rules  on  setting  eligibility  criteria  for  the 
beneficiary  institutions20.  Further,  in  line  with  its  previous  opinions21,  the  ECB  reiterates  the 

importance  of  ensuring  that  the  regulatory  practice  under  the  proposed  arrangements  will  be 

conducted in full compliance with the relevant Community law provisions, including EU financial 

services legislation and the single market principles. 

3.4  The relationship with the single monetary policy of the euro area 

The ECB notes that, in line with the Declaration, Member States must act in a coordinated manner 

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

and creating distortions in global banking markets. The Declaration acknowledges the need to work 

in cooperation with the ECB to ensure consistency with the Eurosystem’s management of liquidity 

and  compatibility  with  its  operational  framework.  Against  this  background,  the  ECB  notes  that 

uncoordinated  decisions  among  Member  States  should  be  avoided  as  they  may  involve 

a fragmentation  of  the  euro  area  money  market.  In  this  respect,  the  ECB  makes  the  following 

observations  which  are  important  from  a  monetary  policy  perspective,  as  regards  the  measures 

contained in the Law and the Implementing Order. 

First,  under  Article  1  Section  8(1)  of  the  Law,  the  Fund  may  acquire  assets  from  financial 

institutions,  to  be  defined  in  more  detail  in  subsequent  implementing  legislation.  Although  such 

measures  should  restore  confidence  in  the  German  banking  system,  it  is  important  for  the 

conditions applied by the Fund to its transactions to be determined in a coordinated manner within 

the  euro  area  and  the  EU.  In  particular,  the  financial  conditions  of  the  acquisitions  should  be 

determined  by  market  conditions.  The ECB  notes  the  importance  of  price  determination  of 

transactions  conducted  by  the  Fund  and  their  potential  implications  for  the  transmission  of  the 

single  monetary  policy  decisions  within  the  euro  area.  Indeed,  uncoordinated  price  determination 

between  all euro area Member States  could lead to segmentation of the euro area  money market. 

18  
19  

20  

21  

See, e.g., paragraph 3.4 of Opinion CON/2008/48 and paragraph 3.1 of Opinion CON/2008/50. 
See  the  ‘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 at www.ec.europa.eu (hereinafter the ‘Commission’s guidance’). 
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’. 
See paragraph 2.3 of Opinion CON/2008/44 and paragraph 3.5 of Opinion CON/2008/48. 

5 

 
 
                                                 
Moreover, the transactions conducted by the Fund should not interfere with the transmission of the 

single monetary policy.  

Second, it is the ECB’s view that the extension of the State guarantees to cover interbank deposits 

should  be  avoided.  It  could  entail  a  substantial  distortion  in  the  various  national  segments  of  the 

euro area money market by potentially increasing short-term debt issuance activity across Member 

States  and  thereby  impairing  the  implementation  of  the  single  monetary  policy,  which  is  an 

exclusive  competence  of  the  Eurosystem  under  Article  105(2)  of  the  Treaty.  In  this  context,  the 

ECB notes Article 1 Section 7(1) of the Law, according to which the Federal Minister of Finance is 

authorised to take over guarantees provided by the Fund with respect to bank obligations related to, 

inter  alia,  interbank  deposits  with  a  maturity  of  up  to  36  months.  In  this  context,  it  is  crucial  to 

ensure the coordination of the price determination of such guarantees within the euro area and the 

EU, as a level-playing-field is of essence. 

Third, the ECB also notes that, under Sections 2(1) and (2) of the Implementing Order, a precise 

deadline  is  set  for  guarantees  by  the  Fund,  which will  expire  on  31  December  2012  at  the  latest. 

The  ECB  notes  that  this  feature  meets  the  principles  stated  in  the  Declaration  pointing  to  the 

temporary feature of such scheme. However, it also notes that harmonisation regarding the end of 

such scheme across euro area and EU Member States is also crucial. The ECB should be involved 

in  such  concertation  and  coordination,  and  would  welcome  the  explicit  provision  for  this  in 

subsequent legislation. 

3.5  Conditions for stabilisation measures 

 The  ECB  welcomes  the  fact  that,  in  accordance  with  the  principle  stressed  by  the  Declaration  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 Law empowers the Federal Government 

to  set  in  details  the  conditions  to  be  complied  with  by  the  financial  sector  companies  which  use 

stabilisation  measures,  whereby  such  conditions  have  been  further  specified  in  the  Implementing 
Order22. 

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

Done at Frankfurt am Main, 21 October 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

22  

The Implementing Order requires that financial sector entities benefiting from support will be subject to requirements to 
ensure a solid and prudent business policy as regards their operations. The companies will be required, inter alia, to: (i) 
examine  their  business  policy  and  its  sustainability;  and  (ii)  grant  the  Fund  appropriate  contractual  information  rights. 
The beneficiary company will also grant the Fund a right of audit and the Fund should require the beneficiary company to 
have the fulfilment of the requirements audited by the annual auditor and included in the audit report (see Section 5(1), 
Section 5(2)(1)  and Section 5(7) of the Implementing Order). 

6