The systemic risk buffer is intended to mitigate the vulnerability of institutions against risks emanating from the financial system as a whole or a part thereof by holding additional own funds in order to increase the loss-absorbing capacity of these institutions. This is intended to reduce the risk in the future of a severe disruption to the financial system as a result of systemic risks or macroprudential risks in advance. The higher than average size of the banking sector for a small open economy, the large levels of exposures towards emerging market economies in Europe, the low levels of own funds in comparison to credit institutions with similar business models and their specific ownership structures (i.e. the high proportion of non-listed/non-joint-stock entities, e.g. co-operatives), which in some cases would only partially be able to recapitalise credit institutions in the event of a crisis, have all been identified as material systemic risks for Austrian financial market stability.
The requirement for the systemic risk buffer applies to all of the institution’s exposures regardless of their geographical location.