Brussels, 19th October 2004
Free movement of capital: Commission refers Austria to Court for investment restrictions on certain types of banks
The European Commission has decided to refer Austria to the European Court of Justice because of restrictions on investment of banks’ liquidity reserves in the savings and co-operative bank sector. The Commission considers that a provision of the Austrian Banking Law - stipulating that local banks (“Primärbanken”) in that sector, which are affiliated to a common central institution (“Zentralinstitut”) must hold a part of their liquidity reserve with the latter - constitutes a disproportionate and unjustified restriction on the free movement of capital.
According to par. 25 (13) of the Austrian Banking Law (‘Bankwesengesetz’), local banks (“Primärbanken”) affiliated to a common central institution must hold with this central institution a liquidity reserve equivalent to 10% of savings deposits and 20% of other euro deposits (14% of total euro deposits as a maximum). Under this provision, these local credit institutions are therefore not free to place a part of their liquid resources with other financial institutions, including those of the euro-zone. Instead, they are forced to hold this part of their reserves with their central institution, according to terms set by it.
The Commission considers that, while it is certainly legitimate, and even compulsory under EU law, for a Member State to ensure that banks operating on its territory have sufficient liquidity to meet their payment obligations at all times, the particular obligation imposed on some types of credit institutions to hold a substantial part of the liquidity reserve with a common central banking institution they are affiliated to is disproportionate and cannot be justified by an imperative requirement in the general interest. Such an obligation therefore is in breach of the free movement of capital (Article 56 of the EC Treaty).
The Commission's "Communication on certain legal aspects concerning intra-EU investments" (see IP/97/477) specified that, according to Community law, restrictions on the free movement of capital should be applied without discrimination, be justified on imperative requirements in the general interest, be suitable for securing the attainment of the objective that they pursue and, finally, must not go beyond what is necessary in order to achieve the defined objective. This has been confirmed by the Court of Justice in various rulings, such as those of 4 July 2002 in cases C-367/98 Commission v Portugal, C-483/99 Commission v France and C-503/99 Commission v Belgium.