Opinion of the European Central Bank of 17 March 2009 at the request of the German Ministry of Finance on a draft law on the further stabilisation of the financial market (CON/2009/24)
Date: 2009-03-17
Institutions: European Central Bank
Subjects: Germany, credit guarantee, expropriation, financial institution, financial intervention, financial stability, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 17 March 2009 

at the request of the German Ministry of Finance 

on a draft law on the further stabilisation of the financial market 

(CON/2009/24) 

Introduction and legal basis 

On 10 March 2009, the European Central Bank (ECB) received a request from the German Ministry of 

Finance for an opinion on a draft law on the further stabilisation of the financial market (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  sixth  indent  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 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 purpose of the draft law is to make the instruments introduced by the law on financial market 
stabilisation  in  October  20082  more  flexible  and  to  provide  for  additional  options  for  action.  In 

particular, the draft law provides for an extension of the maximum maturity period for guarantees 

from 36 months to 60 months. Furthermore, it amends provisions of takeover and company law, in 

particular  as  regards  the  convening  of  shareholders’  meetings  and  amendments  to  the  voting 

procedure for capital increases. 

1.2  Moreover, the draft law provides for the possibility of expropriation of shares and other rights in 

financial  sector  institutions  (hereinafter  ‘expropriation’)  and  nationalisation  of  such  institutions. 

Expropriation and nationalisation will be restricted to cases where there is no other solution and it 

is necessary to ensure the stability of the financial system. Expropriation as a stabilisation measure 

1  
2  

OJ L 189, 3.7.1998, p. 42.  
Law  on  the  implementation  of  a  package  of  measures  to  stabilise  the  financial  market  of  17  October  2008  ((2008) 
Bundesgesetzblatt. I p. 1982). 

 
 
 
 
                                                 
under  the  draft  law  requires  the  adoption  of  a  Federal  statutory  order  in  respect  of  the  specific 

expropriation.  Expropriation  is  subject  to  the  payment  of  compensation,  the  nature  and  extent  of 

which  are  to  be  determined  in  accordance  with  current  market  value,  which  is  principally 

calculated based on the average stock exchange price during the two weeks before the day of the 

expropriation decision. The Federal Ministry of Finance may only initiate expropriation procedures 

before 30 June 2009 and must adopt a regulation on specific expropriations by 31 October 2009. 

The expropriated object needs to be reprivatised as soon as it has been stabilised. 

2. 

General observations 

2.1  The ECB notes that the draft law amends the law providing for State intervention in the financial 
sector to mitigate the current financial turmoil3 on which the ECB was consulted in October 2008, 
and accordingly reminds the consulting authority of its views expressed in its previous opinion4.  

2.2 

In line with the ‘Declaration on a concerted European action plan of the euro area countries’ issued 
by the Heads of State of the euro area on 12 October 2008 (hereinafter the ‘Declaration’)5, the ECB 

has highlighted in its opinions that close coordination at the European Union level of Government 
measures  intended  to  alleviate  tensions  in  the  financial  markets  is  of  crucial  importance6.  This 

coordinated  approach  includes  initiatives  aimed  at  ensuring  appropriate  liquidity,  facilitating  the 

funding of banks by various means, providing additional capital resources to financial institutions 

and recapitalising distressed banks.  

In line with the Declaration, the ECB emphasises that the support measures brought in by Member 

States should be temporary in nature and harmonised throughout the EU. Furthermore, and in line 
with previous ECB opinions7, it should be ensured that such measures are in accordance with the 

requirements of Community competition law, in particular State aid rules, and that the State’s role 
as shareholder is limited in time8. 

3  
4  

5  
6  

7  

8 

See footnote 2. 
ECB Opinion CON/2008/57 of 21 October 2008 on a Law on the implementation of a package of measures to stabilise 
the  financial  market  and  an  order  on  its  implementation.  All  ECB  opinions  are  available  on  the  ECB’s  website  at 
www.ecb.europa.eu. 
The Declaration is available on the French Presidency’s website at www.ue2008.fr. 
See  the  Recommendations  of  the  Governing  Council  of  the  European  Central  Bank  on  the  pricing  of  recapitalisations 
issued  on  20  November  2008,  available  on  the  ECB’s  website  at  www.ecb.europa.eu.  See  also  ECB  Opinion 
CON/2008/79  of  27  November  2008  at  the  request  of  the  Greek  Ministry  of  Economy  and  Finance  on  a  draft  law  on 
enhancing liquidity of the economy to address the impact of the international financial crisis and on a draft decision on its 
implementation,  as  well  as  ECB  Opinion  CON/2009/3  of  8  January  2009  at  the  request  of  the  Slovenian  Ministry  of 
Finance on a draft decree laying down criteria and conditions for the implementation of State capital investments and for 
the conversion of State claims into capital shares under Article 81.a of the Law on public finance. 
See  e.g.  paragraph  3.8  of  ECB  Opinion  CON/2008/68  of  13  November  2008  at  the  request  of the  Finnish  Ministry  of 
Finance on a draft government proposal for laws amending the Law on the Government Guarantee Fund and the Law on 
credit institutions. 
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’  (OJ  C  208  of  25.10.2008,  p.  8). Also  ‘Communication 
from the Commission – The recapitalisation of financial institutions in the current financial crisis: limitation of aid to the 
minimum necessary and safeguards against undue distortions of competition’, available on the Commission’s website at 
www.ec.europa.eu. 

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3. 

Specific observations 

3.1  Extension of duration of debt guarantees 

The  ECB  notes  that  the  European  Commission  in  its  decision  of  12  December  20089  approved 

modifications  of  the  German  rescue  package  for  financial  institutions  which  it  had  originally 
approved on 27 October 200810. These approved modifications concern, inter alia, the possibility 

of  extending  the  duration  of  debt  guarantees  to  a  maximum  of  five  years  under  certain 

circumstances.  The  ECB  understands  that  Article  1  §  6  a) of  the  draft  law  aims  at  implementing 
this particular modification. As stated in its previous opinions11, the ECB emphasises in line with 

the  Declaration  that  harmonisation  regarding  the  duration  of  national  financial  support  schemes 

across the EU is of crucial importance. 

3.2  Expropriation and the relationship with the single monetary policy of the euro area 

3.2.1  In line with the Declaration, the ECB reiterates that uncoordinated decisions among Member States 

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

possibility  for  expropriation  pursuant  to  Article  3  of  the  draft  law  raises  questions  as  to: 

(a) evaluation  from  the  point  of  view  of  a  market  economy;  (b)  its  factual  scope  of  application; 

(c) its  temporal  scope  of  application;  (d)  the  pricing  for  compensation  paid  for  the  assets  of  a 

nationalised  institution;  and  (e)  an  adequate  exit  strategy.  In  this  respect,  the  ECB  would  like  to 

make the following observations. 

3.2.2  Expropriation is a severe measure with far-reaching effects on market participants. For this reason, 

expropriation  by  the  State  in  relation  to  companies  in  distress  should  remain  a  tool  for  use  in 

clearly defined and exceptional circumstances. The ECB stresses that it should be ensured that such 

measures  are  only  used  as  a  last  resort,  that  the  disturbances  to  the  level  playing-field  are 

minimised  and  that  the  State’s  role  is  limited  in  time.  Due  to  the  importance  of  the  impact  of 

expropriation on the credit institutions concerned and on their shareholders as well as on the market 

in  general,  it  is  crucial  to  achieve  absolute  legal  certainty  in  relation  to  such  measures.  In  this 

connection,  the  ECB  notes  that  individual  expropriation  measures  may  raise  Community  and 

international private law questions due to their possible cross-border impact. 

3.2.3  Concerning the factual scope of application of the proposals, the ECB notes that the draft law in 

Article 3 § 1(4) no 1 limits expropriation to cases where it is ‘necessary to ensure financial market 

stability and other legal and commercially reasonable solutions are no longer available in the period 

necessary  to  ensure  financial  market  stability  to  the  same  extent  but  in  a  less  radical  way.’ 

Moreover,  under  Article  3  §  1(4)  no  2,  expropriation  will  only  concern  systemically  relevant 

institutions,  institutions  for  which  stabilisation  measures  under  the  Fund  have  proved  to  be 

9  
10  
11  

European Commission, N 625/2008, K (2008) 8629, available on the Commission’s website at www.ec.europa.eu. 
European Commission, N 512/2008, K (2008) 6422, available on the Commission’s website at www.ec.europa.eu. 
ECB Opinion CON/2009/6 of 26 January 2009 at the request of the Danish Ministry of Economic and Business Affairs 
on  a  proposal  for  a  Law  on  State  investments  in  credit  institutions  and  a  proposal  for  a  Law  amending  the  Law  on 
financial stability. 

3 

 
                                                 
insufficient  for  stabilisation  and  cases  where  the  expropriating  authority  has  previously  made 

serious but unsuccessful endeavours to find an alternative solution. The ECB understands that these 

provisions effectively restrict the scope of expropriation to cases  of last resort and subject it to a 

detailed proportionality test.  

3.2.4  On the temporal scope of application, the ECB welcomes the introduction of precise deadlines in 
the draft law12 both for the decision to initiate an expropriation (30 June 2009) as well as for the 

adoption of a legal order by which the expropriation is effected (31 October 2009). 

3.2.5  As  regards  the  pricing  of  compensation,  even  in  a  case  of  expropriation  the  ECB  reminds  the 

consulting authority of the importance of pricing that reflects appropriately the goals of enhancing 

the stability of the financial system, facilitating a return to normal market conditions and ensuring 

the proper financing of the economy. In order to monitor the preservation of a level playing-field, 

transparency of valuation is of the essence.   

3.2.6  As  concerns  an  exit  strategy,  according  to  the  explanatory  memorandum  to  the  draft  law, 

expropriation is only meant to be temporary. The ECB understands that the draft law provides in 

Article 3 § 6(2) for reprivatisation once the institution in question has been sustainably stabilised. 

As mentioned in previous ECB opinions, it is important to ensure that the State’s involvement is 
limited in time13. In this respect, the ECB welcomes that the abovementioned provision already set 

outs different methods of reprivatisation and stipulates that former shareholders have the first right 
to purchase14.  

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

Done at Frankfurt am Main, 17 March 2009. 

[signed] 

The Vice-President of the ECB 

Lucas D. PAPADEMOS 

12  
13  
14  

See Article 3 § 6(1) of the draft law. 
See footnote 11. 
See Article 3 § 6 (2) of the draft law. 

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