21 January 2014

IMF: Austria - Publication of FSAP documentation

The IMF published four technical notes under Austria's Financial Sector Assessment Programme: Stress-testing the banking sector; Assessment of Basel core principles; Crisis preparedness and management framework; Insurance sector.

Technical Note on Stress Testing the Banking Sector

Stress testing results suggest that Austrian banks, on aggregate, have sufficient capital buffers to withstand severe but plausible shocks from adverse macro-economic developments. Under the most severe scenario, the estimated total capital shortfall amounts to 1 percent of GDP.

The banking sector appears well positioned to meet Basel III capital requirements. On aggregate, the banking sector would comfortably pass the hurdle rates laid out by the Basel III phase-in arrangements for CET1 under the most severe scenario.

The analysis also provides some evidence for the need to combine a micro-prudential and macro-prudential perspective in the regulation of systemic institutions given the weak link between large European banks’ individual solvency risk and their estimated contribution to systemic risk.

Full report

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Detailed Assessment of Basel Core Principles for Effective Banking Supervision

Austria has started a discussion on possible national measures and instruments on early intervention and bank resolution. As of 1st January 2014, legislation will come into force that will require credit institutions to set up recovery and resolution plans and will provide the FMA with a set of early intervention tools.

The Austrian deposit guarantee scheme mirrors the sectoral structure of the banking system with each of the five banking sectors (joint stock banks, saving banks, cooperatives, etc.) operating a separate scheme, with each deposit/group of related deposits carrying a guarantee of up to €100,000.

The tasks, objectives and responsibilities in Austrian legislation with respect to macro-prudential supervision are still under discussion, taking into account the ESRB Recommendation of December 22, 2011 advising EU Member States to enshrine the responsibility for macro-prudential policy in their national legislation. At the moment in practice both the FMA and the OeNB undertake activities in the area of macro prudential supervision, focused on systemic risk monitoring.

Full report

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Technical Note on Crisis Preparedness and Management Framework

The global crisis revealed weaknesses in Austria’s financial stability policy framework, and recent changes at the European levels provide an opportunity to address them. These would include setting up a macro-prudential policy framework with a clear mandate and a range of instruments that would effectively address system risks, and establishing a full-fledged framework for bank resolution that would allow Austria to deal more efficiently with failing banks, while reducing the risk of future bank bailouts.

Full report

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Technical Note on Insurance Sector

As part of Austria’s Financial Sector Assessment Programme (FSAP), the insurance industry has been reviewed every 5 years since 2003. This note provides an update on the Austrian insurance industry and an analysis of its regulatory and supervisory regime.

Key points:

• The structure of the domestic insurance sector has remained largely stable since the last update.
• The insurance market is concentrated.
• Slow domestic growth has encouraged Austrian insurers to expand into the CESEE region, where they now have a prominent presence.
• While insurance portfolios are largely concentrated in high-quality bonds, they have significant exposure to European banks.
• Most insurance companies appear well-capitalised under the Solvency I regime.
• The industry remains profitable though margins have come under some pressure recently.

Full report

© International Monetary Fund