Brussels, 15/11/2002 (Agence Europe) - On 14 November the European Commission officially sent Austria a Reasoned Opinion in which it was requested to lift the restrictions that it imposes on co-operative banks and their cash investment reserves. The Commission considers that the Austrian banking law, which stipulates that credit institutions that are affiliated to the central institution have to place their liquidity reserves in the latter, constitutes an unjustified constraint of capital flows and is in breach of EC treaty rules.
According to Article 25, paragraph 13 of the Austrian banking law (Bankwesengetz), lending establishments affiliated to a central institution must put liquidity reserves to the tune of 10% of their saving deposits and 20% of their other deposits in EUR into the latter, without exceeding 14% of the total deposits in EUR. Local credit co-operatives (Primärbanken) are therefore not free to put their cash reserves into other European financial institutions, notably other institutions in the Euro-zone, of which Austria is a part. According to the Commission, it is necessary to check that these local co-operative banks have always sufficient cash reserves for honouring their obligations for payment but the obligation to put cash reserves into the central institution cannot at all be justified by any reasons deemed to pertain to the public interest. The Commission believes that this obligation is also disproportionate and constitutes unjustified restrictions on the unconditional freedom of capital movements as laid down in Article 56 of the EC treaty. Austria has been given two months to revise these provisions and if it fails to comply, the Commission will take the country to the Court of Justice.