“As an integrated supervisory authority, the FMA is well positioned according to cutting-edge, international models”, the two FMA Executive Directors Kurt Pribil and Heinrich Traumüller stated at the presentation of the FMA annual report for 2006. The annual report on activities on the – now already – fifth business year of the FMA impressively showed how trend-setting the establishment of the FMA in 2002 as an independent, autonomous and integrated supervisory authority for the entire Austrian financial market was. “Today, with our 211 employees we supervise around 1,350 licensed companies and the trade in listed securities, and we can make use of cost and knowledge synergies”, says Traumüller. “The fact alone that the government has assigned further competencies to us over the years, such as the supervision of staff provision funds and financial conglomerates, the fight against the grey and black sheep in the capital market as well as the supervision of securities prospectuses, proves that it is backing the approach of integrated supervision”, Pribil adds.
However, the FMA Executive Director also reflected self-critically that the authority must continue to work on improving itself. “Supervision is a dynamic thing”, says Pribil, “We have to continually adapt to the developments in the market and follow the supervised businesses into new markets.” Even though the FMA succeeded in considerably increasing the number of on-site inspections, the frequency and intensity of the inspections must be further raised. The FMA Executive Director pointed out that prior to the FMA’s foundation only some 14 on-site inspections were carried out in the banking sector. Today the number already stands at 55. Furthermore, he noted that prior to the FMA’s foundation there were de facto no on-site inspections in the insurance and pension company sectors. In contrast, in the reporting year 34 on-site inspections and inspections were carried out at insurance companies and four at Pensionskassen. In the case of investment services providers, the number of on-site inspections could only be kept stable at about 15 a year.
With its new strategy concept ‘Better Regulation’, the FMA wishes to increase the frequency and intensity of on-site inspections. “We have to institutionalise the follow-ups, during which we examine whether the measures laid down by the authorities have been appropriately implemented. We must put greater emphasis on money laundering, IT systems or operational risks. And we have to look at it in a risk-oriented manner and increase the frequency of inspections, which means that we have to ensure that the intervals between inspections become much shorter”, says Pribil.
“The Supervisory Board already approved our ‘Better Regulation’ package last autumn and positively acknowledged the hiring of an additional 45 employees”, says Traumüller, “We will recruit the first 25 before the end of this year.” Apart from stepping up on-site inspections, the ‘Better Regulation’ package primarily focused on further strengthening the approach of integrated supervision as well as international cooperation with sister authorities. “Industry, sector and product boundaries are increasingly becoming blurred. The supervisory authority is therefore called upon to create a level-playing field and to ensure fair competition conditions. We also notice an increasing risk transfer overstepping sector and industry boundaries and making an integrated supervision approach indispensable”, says Traumüller. In view of the significant market position Austrian financial service providers hold in Central and Eastern Europe, cross-border supervision is gaining in importance. After all, there are not only opportunities to be tapped into but also risks that might backfire on Austria.
“The founding of the FMA placed financial market supervision in Austria on an entirely new footing”, the two Executive Directors agree, “It is not only about an integrated approach but about a completely new supervisory philosophy: moving away from mere legal supervision towards economically oriented supervision, away from quantitative supervision that focuses on figures towards qualitative supervision that focuses on risk management systems.” The keywords that can be named in this context are Basel II and Solvency 2, the new capital regime for banks and insurers. The other EU Directives, which are to be implemented in the course of the Financial Services Action Plan, are also clearly taking this direction.
The FMA reacted to all of these challenges rapidly, efficiently and effectively. “In practically all areas we modernised reporting, developed new analysis tools and created new framework conditions with our FMA Minimum Standards together with the regulations to be issued based on them”, says Traumüller. He cited as examples SRP, the new analysis tool for banks, the Market Abuse Detector (MADe), the new monitoring tool for securities trading, as well as stress tests, which can now be used at insurance companies throughout Austria.
“Today we are well positioned as an integrated supervisory authority, but as a ‘supervisory authority with a bite’ we must continually sharpen our teeth. Therefore, we are optimistic about the outcome of the negotiations concerning a reform of financial market supervision in Austria, and we are positive that we will emerge stronger still”, the two FMA Executive Directors Kurt Pribil and Heinrich Traumüller concluded.
For further information please contact
Klaus Grubelnik (FMA Media Spokesperson)
+43/(0)1/24959-5106
+43/(0676)/882 49 516