FMA Executive Directors: “Austria’s financial services providers are strong and stable, and they are able to provide powerful support to the real economy on its way out of the crisis.”
Due to the Coronavirus crisis, today’s FMA supervisory conference was held in a virtual format for the first time, being shown on the FMA website via a livestream. Under the general topic of “The financial market between COVID-19 and climate risks – different challenges, the same solutions?” key figures from the world of politics and the economy, regulation and supervision, academic and research discussed the major current challenges and threats for the financial markets. José Manuel Campa, Chair of the European Banking Authority (EBA), and Leonore Gewessler, Minister for Climate Action, Environment, Energy, Mobility, Innovation and Technology provided provocative impulses in their virtual keynotes for ensuing lively debates in both panel sessions. The first panel focussed on the challenges presented by the COVID-19 pandemic, while the second addressed the challenges for the financial markets in light of the climate crisis.
The Crisis has not yet been overcome – impact on the financial market is still ahead of us
“In light of the massive current challenges the Austrian financial market is still both strong and stable,” emphasised FMA Executive Director Helmut Ettl: “Austria’s financial services providers are far better prepared for tackling the economic consequence arising from the COVID-19 pandemic than they were for the Global Financial Crisis of 2008. Back then they were the trigger for the crisis, whereas today they are able to make a large contribution towards at least solving the economic challenges.” As his fellow Executive Director, Eduard Müller, added: “Although we are currently in the midst of the recession, banks still have almost € 40 billion in available own funds, with which they are able to absorb losses sustained, or are able to generate a credit volume of up to € 300 billion. The solvency of insurers is also strong. The Austrian capital market has also recovered to a considerable extent following the massive turbulences experienced in March.” However, it is still far too early to sound the “all clear”, as Müller stated, “The crisis has not yet been overcome. Its effects on the real economy will only become apparent for the financial market once support measures have been phased out.”
The FMA Executive Director praised the public sector’s massive support and assistance packages for the real economy, private households and enterprises in his statement: “The have bought the real economy time to be able to get through the crisis, are relieving the financial economy, so that it is able to provide powerful financing for overcoming the crisis.”
In addition to the European Union’s massive COVID-19 recovery package, Ettl and Müller identify the “EU Action Plan for Financing Sustainable Growth” for fighting climate change as Europe’s potential for emerging from the economic crisis caused by the COVID-19 pandemic with particular momentum and vigour: “In light of the global recession, a vision is needed, a powerful motor, that is able to allow the economy and the markets to emerge strongly from the depths. Global action on climate change can prove to be this motor. And it is good that Europe is leading the way here.”
Structural policy and steering of the economy is not the financial market supervisor’s job
Regulators and supervisors must continue to focus on risk management and transparency. Financial market supervisors and regulators are however in any case working intensively towards fulfilling their contribution towards the implementation of the EU Action Plan for Financing Sustainable Growth: we must adjust financial markets and the business models of financial services providers to have greater sustainability. To do so, however, we require clear and reliable criteria about what is to be classified as sustainable. Furthermore, we must also ensure that there is the corresponding level of transparency, so that all market participants are able to align themselves accordingly. And we must do everything in our power to develop and establish markets for financial products and financing products,” remarked Müller. Ettl, however, warned against changing the purpose of regulation and supervision into a steering instrument for investments, such as promoting them through lower own funds requirements for banks with ecological financing options under the mantra of “green supporting factors”. He remarked, “Regulators and supervisors must continue to focus on risk management and transparency, the steering of the economy and incentives for investment must be made using fiscal and structural policy means.”
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