“Risk. Regulation. Resilience.” is the general topic of discussion among senior figures from politics and the economy, regulation and supervisory, academia and research at the Austrian Financial Market Authority’s 14th annual supervisory conference regarding the current situation in the financial markets as well as the major challenges facing the financial economy. The wide range of global and regional challenges – climate change, geopolitical tensions, the new world order of economic relations, the surge in inflation and the abrupt change in interest rates, digital transformation, and fears of a recession – all require innovative answers, fresh new ways of thinking and solutions from the regulator and supervision.
In addition to the FMA’s Executive Board Members, Helmut Ettl and Eduard Müller, the Chair of Europe’s Signal Resolution Board (SRB), Dominique Laboureix, and the Head of the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA), John Berrigan, are among those providing impulses for discussion. The Director of the Austrian Institute of Economic Research (WIFO), Gabriel Felbermayr, will sketch the financial market’s economic development, while Austrian Minister of Finance, Magnus Brunner will elaborate on the government’s political accents for the Austrian financial market in his address to the conference.
FMA Executive Board: fragile geopolitical situation a cause for concern for financial markets
In their statement, the FMA’s Executive Board Members, Helmut Ettl and Eduard Müller, view the current economic situation as being a very challenging one: “The inflation shock, the abrupt about turn in interest rates and sharply dimming economic outlook worldwide are fuelling fears of a recession in Europe and in Austria.” Moreover, the global economic order is being redrawn, with strong polarisation between China and the Western industrialised countries. And above all, the sword of Damocles of massive armed conflicts hangs over us with the Russian war of aggression in Ukraine and the explosive situation in the Middle East following Hamas’ barbaric terrorist act in Israel. “The geopolitical situation is extremely tense, uncertain and fragile. This is a toxic state of affairs for the real economy and the financial markets,” remarked the FMA’s Executive Board. The supervisor’s mantra, “After the crisis is before the crisis!” has seldom been so dramatically reinforced as in recent years which have been marked by the Global Financial Crisis, the European Sovereign Debt Crisis, the COVID pandemic and now several geopolitical crises.
“The good news,” remarked the FMA’s Executive Board, “is that Austria’s financial economy has done its homework in recent years. It is well-prepared for large challenges. Legacy issues have been cleared up, and the capital base significantly improved.” Regulation and supervision have emerged strengthened from these crises. In addition to the geopolitical and economic challenges, the structural challenges to contend with should not be overlooked, such as the struggle against climate change by transforming the economy towards one with greater sustainability as well as the technological upheavals caused by digital transformation.
Conference survey: geopolitical risks are the dominant issue
The traditional survey conducted among conference participants regarding the greatest risks and challenges for the financial markets reinforced last year’s change in priorities. While the low interest environment, fears of a government debt crisis, as well as operational risks like IT and cyber threats and money laundering have dominated the list of the greatest challenges facing the financial sector in recent years, worsening geopolitical risks again head this year’s rankings, being cited by 39.3% of responses. The change in interest rates (26.9%), operational risks (13.9%) and the fear of a property bubble (7.6%) occupy the following positions. In contrast, the fight against climate change as well as the call for greater sustainability continue to play a lesser role (3.3%), while the fear of a new sovereign debt crisis remains a relatively constant threat for around one in ten respondents.
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