At the 8th FMA Supervisory Conference, taking place in the Austria Center Vienna today on the general topic of “New Risks in Integrated Financial Markets: challenges for market participants and integrated supervision”, the Executive Directors of the Financial Market Authority, Helmut Ettl and Klaus Kumpfmüller, spoke about supervisory and regulatory reforms. Experiences in building the European Banking Union have shown “how important the principles of proportionality is, in ensuring that regulation and supervision does not trigger concentration processes that are to the detriment of financial areas like Austria that are structured towards small and medium-sized institutions.” The increased threats that financial institutions are exposed to as a result of operational risks such as IT risk, cyber risk, legal or reputation risks in turn also prove “the advantages of an integrated approach to supervision, as pursued by the FMA, with prudential supervision and conduct supervision being linked to one another, and with synergies being achieved across the boundaries between industries, sectors and products”, the FMA’s Executive Board remarks.
A plea for reforms and integrated supervision
In his opening address on “Regulation and supervision – the current focus and perspectives” Helmut Ettl welcomed the supervisory reform package, that has been decided upon by the Austrian government in its Council of Ministers, and which is intended to be debated and passed by parliament in the coming weeks: The measures taken “strengthen the principle of proportionality in regulation and supervision that has been developed and propagated by the FMA”, “improve the transparency of regulatory and supervisory action”, “increase efficiency and effectiveness”, “speed up procedures” and “modernise the sanctioning regime”. The European Commission’s proposal on reforming the European supervisory architecture, furthermore aims towards an integrated approach to supervision, by calling for a “massive intensification of the cooperation between the three European Supervisory Authorities – EBA, EIOPA and ESA” as well as a “far stronger EU-wide coordination of supervision”.
Warning against communitising of bad debts
FMA Executive Director Klaus Kumpfmüller spoke generally in favour of European Banking Union, but warned against a regulatory bias in favour of large banks: “It cannot be allowed that a bank falls into bad ways by virtue of the fact that it is a small or medium-sized bank, simply because regulation acts preferentially towards large banks.” He vehemently demanded that in the regulatory reform, in particular the review of the CRD IV, that the FMA’s proposals for the proportional treatment of smaller institutions is taken into account. Furthermore, Kumpfmüller criticised that during the establishing of the Single Supervisory Mechanism (SSM), the issues of some institutions’ bad debts had not been appropriately addressed. “Some problems still remain unsolved, and a danger exists that the taxpayer might once again be involved in the recovery process, which goes against the objective of the Banking Union”, remarked Kumpfmüller: “Existing bad debts must now be addressed without delay, so that we are finally able to make further progress in strengthening the Banking Union, as well as pushing forward with a common European Deposit Guarantee Scheme.”
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