The Austrian financial market faces major changes and challenges in 2014. In the coming year, banking regulation and supervision within the euro area will be put on a completely new footing, with the European Central Bank (ECB) and national supervisory institutions working closely together within the framework of a decentralised system. The new supervisory system will be supplemented by EU-wide rules applying to the recovery and resolution of banks, as well as by harmonised regulations governing deposit guarantees. Furthermore, in Austria a new macroprudential authority, the “Financial Market Stability Board”, will be responsible for the analysis of systemic risks. In addition, the FMA will take up operative supervision of alternative investment fund managers (AIFMs) and begin enforcement of the accounting standards applying to capital market-based companies, in this way closing major gaps within the regulatory system.
“2014 will be an especially challenging year for us as regulators. Legislators have entrusted us with a number of new responsibilities, the Europeanisation of the supervisory system is taking place rapidly and at full force, and the work of drawing regulatory lessons from the global financial crisis will be fully finalised,” FMA Executive Directors Helmut Ettl and Klaus Kumpfmüller commented, adding that, “We have done our homework properly and are well prepared to meet these challenges.”
Europeanisation of banking supervision
As of November 2014 the European Central Bank will assume supervision of all banks within the euro area as part of the Single Supervisory Mechanism (SSM); the ECB will subsequently conduct supervision in close cooperation with national supervisory institutions within the framework of a decentralised system. Yet, prior to this a comprehensive assessment of the balance sheets and risk situations of Europe’s major banking groups will need to be completed.
In future the most significant credit institutions within the euro area, numbering roughly 130, will be subject to direct supervision by the ECB, while all other banks will remain the direct responsibility of national supervisors. Yet, in accordance with the principle of proportionality, the same supervisory criteria will apply to all banks. It is anticipated that six Austrian groups of credit institutions (comprising in total 150 independent banks) will come under direct supervision by the ECB. Conversely, roughly 650 banks will continue to be under the direct oversight of the FMA. Supervision at both levels will nonetheless be conducted in very close cooperation between the ECB and the national institutions. This step will utilise existing expertise to the best possible extent and take full advantage of synergy effects.
New bank restructuring regime
The Banking Intervention and Restructuring Act (BIRG; Bankeninterventions- und restrukturierungsgesetz), passed by Austrian legislators in 2013, is a first step at national level towards establishing a single European regime for the restructuring and resolution of banks. According to the new law, banks are required as a preventive measure to draw up recovery and resolution plans, while the FMA is authorised to order appropriate recovery and restructuring measures at an early stage. The legal basis for a Europe-wide regime and system for bank resolution is currently under final negotiation within the EU legislative process. Ongoing efforts are also aimed at finalising harmonised rules for deposit guarantees to apply Europe-wide.
Financial Market Stability Board
The Financial Market Stability Board, a macroprudential authority, will become operative in 2014. Its mandate is to identify and analyse systemic risks and to respond to any developments in Austria that might threaten stability. The Board is made up of representatives of the Ministry of Finance, the FMA, the Oesterreichische Nationalbank (OeNB) and the Fiscal Council (Fiskalrat). The Board may also initiate appropriate measures to combat systemic risks, for example by proposing higher capital requirements for financial institutions of major systemic importance as a means of combating speculative bubbles or of bolstering the risk-bearing capacity of the financial system.
Supervision of AIFMs
The Alternative Investment Fund Managers Act (AIFMG; Alternatives Investmentfonds Manager-Gesetz) specifies the conditions under which managers of alternative investment funds (i.e. hedge funds, private equity funds, venture capital funds, real estate funds and similar funds) may carry out business. The transition period for registering as an AIFM expires on 21 July 2014. As of that date, every AIFM must be registered or, with funds beyond a specified volume, licensed and will be subject to supervision by the FMA; in all other cases it will be illegal to manage or sell units of an AIF after that date.
Accounting control of listed companies
As the enforcement authority responsible for the accounts published by capital market-based companies, the FMA will become operative in the enforcement of due compliance with the International Financial Reporting Standards (IFRS) as of 2014. As specified in the Accounting Control Act (RL-KG; Rechnungslegungskontrollgesetz), the financial statements covering the 2013 financial year will be the first due for review. The aim in this case is to further strengthen the capital market and the capacity of Austrian issuers to compete in international markets. When verifying the compliance of accounts, the FMA is to draw on assistance from the Austrian Review Panel for Financial Reporting (OePr), a body approved by the Federal Ministry of Finance. For this purpose, the FMA and its European sister authorities have prepared and published a set of priorities to be applied in accounting enforcement. The review plan, which will be decided by the FMA based on the OePR’s proposals, will entail some 30 individual reviews in 2014.
Journalists may address further enquiries to:
Klaus Grubelnik (FMA Media Spokesperson)
+43/(0)1/24959-6006
+43/(0)676/882 49 516