Brussels, 5 June 2008
Free movement of capital: Commission closes case against Austria concerning liquidity reserve obligations in certain banking sectors
The European Commission has closed the infringement procedure initiated against Austria on legislation requiring banks in the cooperative and savings banks sector to keep a liquidity reserve exclusively with their central institution in Austria. Following an amendment made to the Austrian legislation in question, these banks are offered the possibility to keep the liquidity reserve with another bank in the EU if they join a scheme of joint liquidity compensation and keep that reserve to provide liquidity in case of need.
The Austrian Banking Act obliged certain credit institutions affiliated to a central institution to hold exclusively with the latter (and according to the terms set by the latter) a liquidity reserve equivalent to a certain percentage of their deposits, and prohibiting the former from placing their liquid resources with other European financial institutions, thus, in the Commission's view, infringing Article 56 (1) EC (IP/04/1244, IP/02/1676).
On 1 January 2008 the Austrian Banking Act was amended. After this modification, banks are still required to join a system of joint liquidity compensation and keep a particular liquidity reserve, but this reserve may also be kept with another bank in the EU, provided this bank assumes the obligation to provide liquidity to the local banks in case of need.
Under the new law local banks may decide with which institution the liquidity reserve is held. They may entrust, as a group, another bank in Austria or in another Member State with the liquidity tasks in question. The possibility that funds could be withdrawn from the central institutions should incite these institutions to offer appropriate conditions to the local banks.
In accordance with its consistent practice, the Commission therefore has decided to close the case as the restriction underlying the infringement procedure has been removed.
The latest information on infringement proceedings concerning all Member States can be found at: