“Austria’s financial sector has managed to address the massive fall-out of the COVID-19 pandemic to society and the economy to date, and is on a stable footing. However, increasing geopolitical tensions as well as the turning point towards a new European order for security as a consequence of Russia’s war of aggression on neighbouring Ukraine present great challenges for the European economy and politics,” stated the FMA’s Executive Directors, Helmut Ettl and Eduard Müller, at the presentation of the FMA’s Annual Report for 2021, today: “Some economic structures need to be realigned to some extent, while rapidly rising energy and commodity prices and shortages of materials are driving inflation, which in monetary policy terms is expected to force an increase in interest rates, and which will in particular challenge financial market participants. At the same time, in light of ever advancing climate change, the transformation to a more sustainable economic model must be pushed rigorously.” Ettl and Müller remarked that there are serious implications for Austria’s financial market and all of its participants, necessitating a forward-looking and prudent adjustment of the business policy of financial service providers, as well as in regulation and supervision.
2021: turbulence in the real economy, stable financial markets
During the reporting year, despite difficulties presented by the COVID-19 crisis, Austria’s banks were able to retain Common Equity Tier 1 capital at a continuing stable level of around double the level held during the Global Financial Crisis. While Common Equity Tier 1 capital fell slightly, from 16.1% to 15.7%, this level remains the second highest level of all-time. “In view of the substantial challenges mentioned that we are facing, we would again urge a particularly prudent and forward-looking distribution policy, to prevent the manifestation of a change in this trend, which would undermine crisis resilience and stability,” remarked the FMA’s Executive Board. The volume of non-performing loans fell further – supported predominantly by the continuing large-scale COVID-19 support measures from the public sector – to between 1.4% and 2.0% of all borrowing. To date, insurance undertakings have managed to come through these difficult times unscathed, and have an average Solvency Capital Ratio (SCR) of around 230%, more than double the amount of financial means necessary for the fulfilment of their contractual obligations, even in the event of a dramatic deterioration of economic conditions. In addition, there has even been a significant over-endowment of the additional interest provision in life insurance prescribed by the FMA in 2013, with more than € 1.5 billion having been paid in, thereby ensuring that guaranteed interest rates during the high interest rate phase also appear to be covered. Investment funds, Pensionskassen and occupational severance and retirement funds have recovered from the impact of stock market turbulence in 2020, and closed 2021 at a new high in terms of the assets that they manage. The Vienna Stock Exchange (Wiener Börse), which was particularly strongly affected by the turbulence in 2020 arising from COVID-19, recovered with some delay, and returned to its pre-crisis levels in 2021.
20 years of the FMA, 20 years of efficient and effective supervision
In 2021, the Austrian Financial Market Authority (FMA) and its 390 employees supervised 938 licensed or registered undertakings, which collectively manage assets of around € 1,383 billion. The FMA’s total budget in 2021 stood at approx. € 74.6 million, of which € 10.7 million were collected as transitory items for the Oesterreichische Nationalbank (OeNB) for the partial reimbursement of the services that the latter provided. € 4.5 million of these costs are covered by a lump-sum from the Federal Government, with € 9.3 million being covered by fees and other income, with the remaining amount being borne on a usage-related basis by the supervised entities. The breakdown of costs is as follows: banks 55.6%; securities supervision 24%; insurance undertakings 18.8% and Pensionskassen 1.6%.
“The model of integrated supervision, uniting regulation and supervision of the entire Austrian financial market in a supervisory one-stop shop, has proven itself,” concluded Ettl and Müller with regard to the first two decades of operation of the FMA since 2002: “We have earned the trust of politicians and the respect of market participants by working in a consequent manner. This is best illustrated by the fact that having been established to conduct supervision in relation to 16 financial market laws, the FMA has had the supervision of a further 22 laws conferred upon it to date.” At the time it was established, the supervision of around 660 pages of legal text were conferred upon the FMA, in the mean time this expanded more than tenfold to over 7,000 pages. “Furthermore, the FMA is no longer a strictly national supervisory authority, but instead is an integral component of financial market supervision of the European Union in general, and the Single Supervision Mechanism and Single Resolution Mechanism for banks in the euro Area,” remarked Ettl and Müller: “We are particularly proud of the fact that this massive broadening and deepening of regulation and supervision has been achieved with only a moderate increase in budget and headcount, by continuously increasing potential for synergies as well as improving efficiency and effectiveness, in particular by means of the digitalisation of all processes in a consistent manner.”
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