“Austria’s financial economy faces very large challenges. The abrupt reversal of interest rates, the significant inflation risk, as well as the globally bleak economic prospects massively increase the pressure of the financial ability to pay and to service debts that exists for many households and companies,” remarked the FMA's Executive Board members, Helmut Ettl and Eduard Müller, at the presentation of the FMA’s annual publication “Facts and Figures, Trends and Strategies 2024” as well as the priorities for supervision and inspections for the year ahead. Due to the difficult situation in the real economy as well as on the financial markets, the FMA Executive Directors urged supervised entities to “operate a proactive risk management, to form the corresponding reserves and to act calmly over distribution policies, and to continue to strengthen the capital base and risk bearing capacity.” In addition, management of costs must be improved further by exploiting the opportunities offered by digitalisation in a consequent manner.
Forward-looking risk policy and a calm distribution policy urged
The FMA's Executive Board emphasised that the Austrian financial market had weathered the series of exogenous shocks well – from the Covid-19 pandemic through to Russia’s war of aggression against Ukraine and continues to be on a stable and crisis-resilient footing. This demonstrates that the right lessons were learned from the Global Financial Crisis: The regulatory framework has been evaluated and overhauled, gaps duly closed, and supervision is now on a European basis. Banking Union in Euro countries with single supervisory and resolution mechanisms have proven it value. However, the warning signals are multiplying: “There have been significant losses of value in various asset classes, such as long-term fixed interest bonds as well as real estate, which further increase the pressure on financial service providers,” remarked Ettl and Müller. The difficult position in the real estate sector will continue to challenge the Austrian real and financial economy for a long time to come. In addition, it will not be possible for the banks to continue to pass on the interest rate increases, which are the main reason for their vastly improving profitability, in an asymmetric manner to the detriment of savers and deposits to borrowers. In addition, due to the tense situation in the Middle East, there is also a threat of a further escalation of geopolitical tensions, which might trigger further exogenous shocks in the global financial system. “The great danger is that the risks will materialise at the same time, thereby accelerating and increasing each other,” remarked Ettl and Müller.
These medium-term challenges for the real and financial economy will be superimposed with longer-term geopolitical, technological, ecological and societal trends:
- the way towards a new geopolitical order, exacerbated by the prevailing crisis of multilateralism, which necessitates a rethink over global economic relations;
- digital transformation and the far-reaching changes that it heralds for the economy and society;
- the struggle against global warming, which requires a global re-orientation of the economy, but where progress is slow;
- changing consumer behaviour, which increasingly renders established protection mechanisms useless and which require new solutions;
- the increasing requirements for ethical and compliant conduct by all financial market participants, placing a focus on a clean financial venue.
Priorities for supervision and inspections 2024
The FMA has derived six thematic areas as priorities for supervision and inspections in 2024 from these trends, challenges and risks:
- Resilience and Stability: strengthening the crisis resilience of supervised financial service providers as well as safeguarding the stability of the Austrian financial market as a whole.
- Digital transformation: exploiting the opportunities of digitalisation, while at the same time consistently addressing the associated risks
- New business models: accompanying innovative business models in terms of supervision from as early a stage as possible, in order to promote the innovative power of the Austrian financial market, ensuring fair competitive conditions and guaranteeing appropriate consumer protection.
- Collective consumer protection: further development of consumer protection in a rapidly changing environment under the buzzwords: digital transformation, changing consumer behaviour, demographic development, the change in interest rates.
- Sustainability: to provide regulatory and supervisory support to the financial market and all its participants as they make the transition to a sustainable economic model
- A clean financial centre: to ensure that the Austrian financial market is a clean market at every level.
The specific instruments, projects and initiatives being used to address these thematic areas are presented in detail in the FMA’s latest publication “Facts and Figures, Trends and Strategies 2024”. The FMA’s “Medium-term Risk Analysis 2024-2028” can also be found in this publication. This publication can be downloaded from the FMA website (currently in German only) at:https://www.fma.gv.at/publikationen/fakten-trends-strategien/.
Journalists may address further enquiries to:
Klaus Grubelnik (FMA Media Spokesperson)
+43 (0)676 88 249 516
+43 (0)1 249 59 – 6006