Background for setting the buffer
The objective of the capital buffer for systemically important institutions (O-SII buffer) is to identify credit institutions that are particularly significant for the functioning of the national economy, i.e. of national systemic importance.
Methodology for setting the buffer
The methodology for identifying systemically important institutions (O-SIIs) in Austria is primarily determined by the EBA Guidelines EBA/GL/2014/10 (Guidelines on the criteria to determine the conditions of application of Article 131 (3) of Directive 2013/36/EU (CRD) in relation to the assessment of other systemically important institutions (O-SIIs)). In a first step, the Guidelines require scores to be calculated based on nine compulsory indicators that are calculated using consolidated data for all credit institutions (maximum 10,000 points). In Austria, all institutions with a score of over 275 (threshold) are classified as being of systemic importance, since on the basis of the criteria of i) size, ii) relevance for the economy of the European Union or the relevant Member State, iii) significance of cross-border activities, and iv) the institution’s interconnectedness with the financial system that may influence the stability of the financial system in Austria, and therefore in the event of their failure present a significant risk for the stability of the financial system and economy in Austria and the European Union.
In a second step, in line with the EBA Guidelines, national authorities should then assess whether other institutions are also to be classified as O-SIIs (“supervisory judgement”). This is conducted in Austria by way of two further steps.
a) calculation of the score in accordance with the EBA Guidelines (EBA/GL/2014/10), except for substituting EU values for national aggregated values.
The indicators listed in the first step of the EBA methodology have a strong European focus. For example, the significance for the economy is measured on the basis of EU-wide deposits of households and non-financial institutions as well as based on lending to them. There, in addition to calculating the score in accordance with the standardised EBA method, the EU aggregate values are repalced with the corresponding Austrian aggregate values in a parallel calculation. Specifically, the indicator “Private sector deposits from depositors in the EU” is replaced by “Private sector deposits from depositors in Austria”, and the indicator “Private sector loans to recipients in the EU” is replaced by “Private sector loans to recipients in Austria”. The result is a score that adequately represents significance for the domestic financial sector. This score, known as the AT-EBA score, replaces the original (calculator using the usual indicators) only in such cases in which it is higher, i.e. the maximum of the two scores is always applied. The consequence of this additional national assessment is that the scores increase for smaller and medium-sized banks, while the scores of large international banks fall. This additional calculation method has already been used for several years, but has only had a specific impact for the first time in 2025. It is only due to the parallel calculation that the score of UCBA remains over 999 and therefore prior to taking into account overlapping a 2% buffer continues to apply.
b) Consideration together with the C&F Test and risks for the deposit guarantee system
In this step, the findings of the “Credibility and Feasibility Test” as well as the analysis of the potential systemic risks arising from a deposit guarantee pay-out and regarding the ability of allowing individual banks to become insolvent by the bank resolution authority are also considered. Specifically, the indicator about “Deposits guaranteed under deposit guarantee system” pursuant to Annex 2 of EBA/GL/2014/10 is applied as defined in Title III of EBA/GL/2014/10, since institutions that have a high level of eligible deposits may in particular cause a particular burden or over-burdening of the system in the event of payment difficulties. In order to take this circumstance into account, the threshold of 3.00% of the share of eligible deposits for classification as a systemically important institution (which corresponds to a value of 300 basis points).
In addition, a one-year observation rule is also applied when classifying an institution as being systemically important. In the event that an institution exceeds or falls below the threshold of 275 points for the first time, or the threshold for the share of eligible deposits of 3.0 %, then a reclassification does not take place immediately, but only once excess or shortfall persists for longer than one year, i.e. provided that the threshold is again exceeded or fallen below when the following evaluation takes place.
Deducing the buffer amounts
Dependent on the score, or other additional indicators being exceeded, three relevance levels were hitherto defined for Austria (see table below), in order to be able to differentiate accordingly between the applicable level of the buffer rates. The evaluation conducted in 2024 however showed that the classification into these three relevance levels did not permit the adequate differentiation of the extent of systemic relevance of different credit institutions. A more granular differentiation is typical internationally. The classification table has therefore been extended to include two extra levels. The lowest level (relevance level 1) only contains banks that have been classified as systemically important institutions on the basis of the second identification step (“supervisory judgement” – consideration together with the C&F Test and risks for the deposit guarantee system). The introduction of the fifth level permits a better differentiation between institutions with a very high score. Currently there is no Austrian institution that falls into this highest relevance level.
The O-SII buffer and the systemic risk buffer (SyRB) have a complementary effect, i.e. they supplement each other. During the transposition of CRD V into Austrian law, this interplay was taken into account accordingly through the additivity of the two buffers. However, in order to avoid overlaps with the SyRB (the same risk should not be addressed twice), the O-SII buffer sizes were reduced accordingly. Due to the uncertainties arising from the war in Ukraine, increased energy prices and higher inflation, in 2022 the FMSB recommended to limit the additive requirements from the systemic risk buffer and the capital buffer for systemically important institutions to a maximum of 0,5 additional percentage points. In evaluating the buffers in 2024, the board has now determined that these uncertainties have subsided sufficiently, so that this temporary limit may be allowed to expire. The FMSB has therefore issued the Recommendation, taking into consideration the overlap between the O-SII as well as the systemic risk buffer to now prescribe the bufferes in their respective original levels. The setting of buffer amounts as well as the identification of systemically important institutions take place on the basis of an opinion by the Oesterreichische Nationalbank. Detailed descriptions about the methodology applied can be found on the Oesterreichische Nationalbank’s website (in German only).
| Relevance Level | Points score | O-SII buffer prior to consideration of overlapping with the Systemic Risk Buffer | Overlap | O-SII buffer following consideration of overlapping with the Systemic Risk Buffer |
|---|---|---|---|---|
| 1 | Only additional indicator and <275 | 0.5% CET1 | 12.5% | 0.45% CET1 |
| 2 | 275-636 | 1.0% CET1 | 12.5% | 0.9% CET1 |
| 3 | 637-999 | 1.5% CET1 | 12.5% | 1.30% CET1 |
| 4 | 1,000-3,399 | 2.0% CET1 | 12.5% | 1.75% CET1 |
| 5 | ≥3,400 | 2.5% CET1 | 12.5% | 2.2% CET1 |
Identified O-SIIs are notified by the FMA by means of an administrative decision when classified as O-SIIs for the first time.
Pursuant to Article 23d para. 7 BWG, the FMA is required to prescribe a capital buffer requirement for other systemically relevant institutions domiciled in Austria by means of a Regulation, with the approval of the Federal Minister of Finance, taking into account relevant requirements of the European Banking Authority (EBA) and the European Systemic Risk Board (ESRB). In doing so, the FMA bases the buffer level on an FMSB Recommendation as well as an opinion by the Oesterreichische Nationalbank.
In the event that the credit institution fails to meet the combined capital buffer requirement (see Article 24b BWG), then this results in restrictions on distributions (see Article 24 BWG) and the obligation to prepare a capital conservation plan (see Article 24a BWG).
Excerpt from the Explanatory Remarks to the Capital Buffer Regulation (KP-V 2021)
The malfunctioning or failure of a systemically important institution may lead to disruptions in the financial system as a whole or in parts of the financial system, resulting in severe negative effects in the financial system and in the real economy. Especially in times where there is high economic uncertainty, well-capitalised Systemically Important Institutions are an important prerequisite for maintaining Austrian banking system’s very good ratings and therefore comparatively low refinancing costs. The buffer for systemically important institutions aims to reduce the probability of malfunctioning or failure of a large, systemically important credit institution and the associated loss.
The EBA Guidelines (EBA/GL/2014/10) propose a two step process for identifying systemically important institutions. In a first step, institutions are identified based on indicators reflecting (i) size, (ii) relevance to the economy of the Union or the Member State concerned, (iii) importance of cross-border activities, and (iv) the interconnectedness of the institution or group with the financial system. In a second step, it is envisaged that national supervisors will use their expertise on the specific banking sector to ensure that all systemically important banks are identified as such, even if this would not be the case due to the mechanics of the first step. Since 2018, eligible deposits have therefore been taken into account as an additional indicator, as banks that have a high level of eligible deposits and would therefore represent a burden or excessive burden on the deposit guarantee system in the event of a deposit guarantee pay out event, have a high systemic relevance. In addition, banks that seem unremarkable based on the EBA score, but which have a particularly high exposure for one of the indicators applied according to the EBA Guidelines, also represent a potential threat to financial market stability. In addition, a one-year observation rule is also applied when classifying an institution as being systemically important. In the event that an institution exceeds or falls below the threshold of 275 points for the first time, or the threshold for the share of eligible deposits of 3.0 %, then a reclassification does not take place immediately, but only once excess or shortfall persists for longer than one year, i.e. at the time the following evaluation takes place.
|
Institutions identified as being of systemic importance |
Score 2021 |
Score 2022 |
Recommended O-SII buffer not taking uncertainty into account |
identified |
|
|
prior to overlapping |
after overlapping |
||||
|
consolidated level |
|||||
|
Erste Group Bank |
2.512 |
2.615 |
2.00 % |
1.75 % |
i.a. EBA score |
|
Raiffeisen Bank International |
1.835 |
1.978 |
2.00 % |
1.75 % |
i.a. EBA score |
|
UniCredit Bank Austria |
1.172 |
1.050 |
2.00 % |
1.75 % |
i.a. EBA score |
|
Raiffeisenlandesbank Oberösterreich |
522 |
507 |
1.00 % |
0.90 % |
i.a. EBA score |
|
BAWAG |
564 |
568 |
1.00 % |
0.90 % |
i.a. EBA score |
|
Raiffeisen-Holding Niederösterreich-Wien |
293 |
263 |
1.00 % |
0.90 % |
1 year observation |
|
Volksbanken Verbund |
199 |
196 |
1.00 % |
0.90 % |
eligible deposits |
|
|
|
|
|
|
|
|
Unconsolidated – individual level |
|||||
|
Erste Group Bank |
1.096 |
1.188 |
2.00 % |
1.75 % |
i.a. EBA score |
|
Raiffeisen Bank International |
1.125 |
1.195 |
2.00 % |
1.75 % |
i.a. EBA score |
|
UniCredit Bank Austria |
1.076 |
1.160 |
2.00 % |
1.75 % |
i.a. EBA score |
|
Raiffeisenlandesbank Oberösterreich |
471 |
514 |
1.00 % |
0.90 % |
i.a. EBA score |
|
BAWAG |
506 |
572 |
1.00 % |
0.90 % |
i.a. EBA score |
|
Raiffeisenlandesbank Niederösterreich-Wien |
292 |
260 |
1.00 % |
0.90 % |
1 year observation |
|
Erste Bank der oesterreichischen Sparkassen |
220 |
235 |
1.00 % |
0.90 % |
eligible deposits |
In addition, the FMSB’s recommendation is followed to limit the additive requirements from the systemic risk buffer and the capital buffer for systemically important institutions to an additional maximum 0.5 percentage points. Without such a limit, the expiry of the temporary reduction of the buffer in conjunction with the first time introduction of additivity would have led to a stronger increase in effective buffer rates for a few institutions. The reasons for a limit of an additional maximum 0.5 percentage points are both the uncertainties arising from war in Ukraine, increased energy prices, high inflation as well as the expiry of one-off effects from macro and financial policy assistance during the course of the COVID-19 pandemic, that posed new challenges for banks’ business models (e.g. due to borrowers’ reduced ability to service debts and increased operating costs).
From taking current uncertainties into account in the form of a limit on increasing the effective combined buffer rates for the systemic risk buffer and the O-SII buffer of 0.5 percentage points, lower buffers have been set for individual institutions compared with the values contained in the table.