The package of measures that was passed by the Austrian parliament known as the “Supervisory Reform Package 2017” (Aufsichtsreform 2017) enters into force on 3 January 2018. The reform package increases the transparency associated with supervisory activities, brings material simplifications in terms of administrative practices, improves legal clarity, while also furthering developing risk-based and proportionality-based approaches to supervision. “This reform package is a milestone in the ongoing development of the integrated supervision system in Austria, and optimises cooperation between the partners involved in supervision: the BMF, the OeNB and the FMA. It streamlines supervisory processes, reducing the burden in particular for smaller credit institutions by strengthening the principle of proportionality, and acts in a more preventive manner due to improved transparency and optimised legal clarity,” remarked the FMA’s Executive Directors, Helmut Ettl and Klaus Kumpfmüller.
Anchoring proportionality within supervisory processes for banks
The concept developed by the FMA to strengthen the risk-based and proportional approach to supervision is applied on a national level as broadly as possible as broadly as possible under European law. From the start of 2018, seven Austrian banking groups are subject to direct supervision by the European Central Bank (ECB), with around 550 credit institutions continuing to be directly supervised by the FMA. In implementing the FMA’s concept of proportionality the reform package provides material simplifications for smaller institutions (with total assets of less than € 5 billion): As a result, the previous legal obligation to establish a nominations committee, a remuneration committee and a risk committee below this amount is fully eliminated, while the audit committee is only required to meet once a year for total assets up to € 5 billion. The requirement to establish a separate independent risk management department, also ceases to exist where total assets do not exceed € 5 billion. Equally for smaller banks, and those that form part of a group of credit institutions or which are part of a sectoral association, the requirements in relation to the organisation of the internal audit function have been simplified.
The FMA’s initiative to strengthen the principle of proportionality in European and international committees, both in regulation and supervision, is also bearing fruits: Both the European Banking Authority (EBA) and the European Central Bank (ECB) as well as the global standard setter, the Basel Committee on Banking Supervision, have made the strengthening of the principle of proportionality in supervision their objectives. European institutions have also placed a focus, during their evaluation and revision of the supervisory regime for banks, CRR/CRD IV (Capital Requirement Regulation / Capital Requirement Directive IV), on the proportional design of legal bases for supervision.
Within Austria, the supervisory reform package also creates legal bases to simplify and streamline the on-site inspection process for banks: It optimises cooperation between the FMA and the Oesterreichische Nationalbank (OeNB), accelerates the process for taking corrective action, improves the flow of information between the management body, bank auditors, the state commissioner and the supervisory board of the bank between one another as well as with the supervisory authority. The function of the state commissioner, a supervisory body of the FMA, is strengthened. The outsourcing of material functions from the bank, are now required to be notified to the supervisor.
The risk-based and proportionality-based approach to supervision is not only intended to be used for banks, but also for asset managers, investment firms and market infrastructure.
Transparency and Legal Clarity
The FMA will in the future be required to determine thematic focuses for inspections for the respective coming year for all areas of supervision and to publish these. The consultation procedure for the FMA’s Regulations, Circulars, Guidelines and Minimum Standards has been extended: All drafts are publicly consulted on the FMA’s website, with all opinions received also being published there.
A legally binding legal interpretation by the FMA has been introduced in the form of the administrative decision in response to a request for information (Auskunftsbescheid) based on the model set out in the Fiscal Code (BAO; Bundesabgabenordnung). The previously adopted administrative practice of the FMA, that supervised entities could obtain legal information free of charge, will not however be affected by this. Further information about administrative decisions in response to requests for information (Auskunftsbescheide) can be found on the FMA website at: https://www.fma.gv.at/en/cross-sectoral-topics/administrative-decisions-in-response-to-a-request-for-information-pursuant-to-article-23-fmabg-from-3-january-2018/.
The supervisory reform package also enables the “accelerated termination of proceedings” (both in relation to administrative proceedings as well as administrative penal proceedings), in the event that the party waives its right of appeal in advance. In addition, the FMA’s discretionary powers to desist from imposing a fine for less significant infringements have been substantially extended. In addition the possibility has also been extended, to desist from the prosecution and fining of responsible natural persons, if the entity, i.e. the legal person, has already had a sanction imposed against it. Furthermore, financial market penal law the “principle of accumulation” i.e. the additive imposing of several fines for every individual infringement, has been removed and replaced by the “principle of absorption” i.e. the imposing of a single administrative penalty, even in the case of multiple infringements. In the future this should prevent the imposing of disproportionately high fines.
Optimisation of the Organisation of the FMA
Managerial positions for second level senior management of the FMA shall in the future be legally obliged to be publicly advertised, and an internal recruiting procedure to be conducted for third level senior management positions. Only in the case of appointments for deputising on a short-term basis and reappointments is this not necessary.
The FMA’s Supervisory Board has been extended by two members; it now comprises of eight voting members, with half each being appointed by the BMF and the OeNB, as well as there continuing to be two co-opted members of the supervisory board nominated by the Austrian Economic Chamber, who do not have voting rights.
Journalists may address further enquiries to:
Mr. Tiemon Kiesenhofer, MBA
+43/(0)1/24959-6010
+43/(0)676/882 49 610