The Austrian Financial Market Authority (FMA) and the Oesterreichische Nationalbank (OeNB) welcome yesterday’s adoption by the European Council and the Euro Summit of the Heads of State or Government of a comprehensive set of measures aimed at restoring confidence in the financial markets. “These measures are addressing the right issues to restore confidence in the financial markets. Adjustment of risks and strengthening of banks’ capital positions, as well as securing term funding, will increase the banking sector’s resilience,” says FMA Executive Director Helmut Ettl. His Executive Board colleague Kurt Pribil adds: “The figures on European banks’ capital needs provided by the European Banking Authority EBA and the promise of national and European support given at the same time should also re-open private capital markets to strengthen banks’ capitalisation. We are convinced that Austrian credit institutions will be able to tackle this challenge.” “Austrian banks are only marginally affected by the problems caused by sovereign debt, but will of course participate in the general measures to strengthen capital positions. In this respect, when considering overall economic effects it will be important to secure the stable supply of credit,” states OeNB Governor Ewald Nowotny.
The European Banking Authority (EBA) together with the national supervisory authorities has surveyed the effects of the sovereign debt crisis on capital levels as well as the term funding needs of the 70 largest cross-border banks in the European Economic Area (EEA). The Austrian institutions Erste Group Bank, Raiffeisen Zentralbank (RZB) as well as Österreichische Volksbanken AG (ÖVAG) were included in the sample. As a benchmark figure the European Council agreed on a 9% capital ratio of Core Tier 1, as measured by risk weighted assets. According to the EBA analysis, banks are required to raise additional Core Tier 1 totalling € 106bn on this basis, approximately € 2.9bn of which falls to Austrian banks.
With regard to the capital needs of Austrian banks, the EBA expressly notes that a substantial part of this amount is attributable to ÖVAG and should be considered as pro-forma as this group is currently under deep restructuring after which ÖVAG will merely be a regional bank.
The EBA survey comprises 70 of those 90 banks which had taken part in the EBA stress test exercise in June 2011, and each account for at least 50% of the national banking market (smaller, only regionally active institutions were not considered this time). The definition of Core Tier 1 is essentially the same as the one used in this EBA stress test (paid-in capital, retained earnings and participation capital subscribed by governments). The estimation of capital buffers and EEA sovereign exposures was made as at 30 June 2011, while the market values of EEA sovereign exposures were set as at 30 September.
However, these are only preliminary indicative figures, as final capital needs will be computed based on September figures. Based on these final figures, which should be available in the course of November, banks will be required to submit their plans detailing the action they intend to take to achieve the required capital buffer by mid-2012. Banks then have until 30 June 2012 to reach the set target.
In addition to the capital measures, it was also agreed – where appropriate – to set in place public guarantee schemes for issues to ensure that banks also have adequate liquidity in the medium term so that they will continue to be able to pursue their lending business. The entry criteria and other conditions will be worked out at EU level in a coordinated approach.
More details on this package can be found at the EBA website in their news & communications section:www.eba.europa.eu/News–Communications/Year/2011.aspx
Journalists may address further enquiries to:
Klaus Grubelnik (FMA)
+43/(0)1/24959-5106
+43/(0)676/882 49 516
Dr. Christian Gutlederer (OeNB)
+43/(0)1/404 20-6609
+43/(0)664/515 36 18