In accordance with the Federal Act on the Recovery and Resolution of Banks (BaSAG; Bundesgesetz über die Sanierung und Abwicklung von Banken), the Austrian Financial Market Authority (FMA) takes over the additional role of national resolution authority as of 1 January 2015. In future, if an institution fails or threatens to fail, the FMA must ensure that it is resolved in an orderly fashion to safeguard financial market stability. “By installing the FMA as national resolution authority, Austria is taking another important step forward towards achieving the European Banking Union, which is made up of three pillars, the Single Supervisory Mechanism, the Single Resolution Mechanism and a uniform deposit guarantee scheme. The FMA is thus making an important contribution to ensuring that no longer the state, i.e. the taxpayers, will have to pick up the bill if a bank starts to go under but the institution’s owners and creditors,” the FMA’s Executive Directors Helmut Ettl and Klaus Kumpfmüller explained.
In its role as national resolution authority, the FMA is given extensive responsibilities. Specifically, the FMA must develop and prepare preventive resolution plans as well as implement them in the event of actual resolution, by applying the powerful instruments available to the authority. More specifically, the FMA may in particular use the following resolution instruments:
- selling the institution,
- setting up a bridge bank,
- spinning off assets,
- bailing in creditors.
The ‘bailing-in’ instrument is considered especially significant in this context. It allows the resolution authority to use, as appropriate, an institution’s allowable liabilities to cover losses or to convert them into loss-bearing equity. The only exceptions to this by law are secured deposits, liabilities towards employees, secured liabilities and interbank liabilities with an original term of less than seven days. In addition, the FMA may separate any recoverable assets from impaired assets or from such under threat of default, in order to ensure that services can be continued and any negative effects on financial market stability are prevented. To this end, the FMA may transfer shares in an institution or all or part of an institution’s assets to a private buyer or a bridge bank without the owners’ consent.
The Oesterreichische Nationalbank is mandated to closely cooperate with the FMA, also with regard to the latter’s role as national resolution authority.
As national resolution authority, the FMA will become part of the European Single Resolution Mechanism as of 1 January 2016. For banks that are under direct supervision by the European Central Bank (ECB) within the Single Supervisory Mechanism (SSM), a specific resolution authority will be established at the European level. That authority will then – together with the European Council and the European Commission – be responsible for major decisions concerning such banks but will have to go through the national resolution authorities to implement the decisions.
“An ordered resolution process should ensure that critical functions will continue to be fulfilled, extensive negative effects on financial market stability avoided, and public funds and secured customer deposits protected, in cases where these goals cannot be achieved as effectively through bankruptcy proceedings,” the FMA Executive Directors said in summary.
Journalists may address further enquiries to:
Klaus Grubelnik (FMA Media Spokesperson)
+43/(0)1/24959-6006
+43/(0676)/882 49 516