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FMA inspection strategy 2017: 267 on-site measures planned at banks, insurance undertakings and investment firms

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Moderate economic development, the prevailing low interest environment and advancing digitalisation will continue to be the main challenges for Austria as a financial market in 2017. These factors continue to place established business models under pressure and force companies to strike out in new directions in order to ensure their continuing profitability. At the same time, new players are also trying to enter the market. In light of these factors, the FMA has drawn up a comprehensive strategy for inspections for 2017. The companies to be inspected have therefore been selected in accordance with the FMA’s risk-based approach to supervision. In specific terms, the FMA has planned 267 inspection measures across all areas of supervision for the 911 licenced entities that are subject to direct supervision. This figure does not however take into account ad hoc inspections, conducted at short notice during the course of the year.

Among credit institutions, inspections have a thematic focus on credit risk, risk management and internal governance. With regard to the new European resolution regime for banks, the FMA will increase its focus on the sale of issuances eligible for consideration for bail-in purposes to retail customers and shall in such cases shall thematically focus on checking the necessary adequate classification of risk of such products as well as whether investors have received an adequate explanation about the risks associated. In addition the FMA will also check that due diligence obligations are met by credit institutions and investment firms that use tied agents for sales purposes. Such tied agents sell securities under the umbrella of liability of a licenced bank or investment firm. Such an arrangement may not, however, be to the detriment of the customer.

The new requirements of the Solvency II regime form the focal point of inspection measures for insurance undertakings, with the main focus being on “Best Estimate” calculations and provisions. The “Best Estimate” estimates the expected cash flows for the future, both for life assurance as well as non-life and accident insurance. In the area of asset management, the focuses of inspections are on the portfolio and risk management of investment fund management companies, alternative investment fund managers (AIFMs), corporate provision funds, special credit institutions and investment firms. For pension funds (Pensionskassen) the focus is on asset management and risk management.

Furthermore in 2017 there will be a particular focus on inspections in relation to money laundering and terrorist financing, with the FMA increasing the frequency of inspections by 10 per cent by concentrating internal resources in this area. Banks, insurance undertakings and investment firms will also be scrutinised as well as payment institutions and agents. During the planned on-site inspections it is intended in particular to inspect the practical implementation of video-based customer identification in accordance with the new Financial Markets Anti-Money Laundering Act (FM-GwG; Finanzmarkt-Geldwäschegesetz) and the forthcoming Online Identification Regulation (OnlineIDV; Online-Identifikationsverordnung).

The FMA strives to have a preventive effect on these central areas, thereby strengthening investor confidence in the Austrian financial market, as well as ensuring that the European and Austrian legal standards are complied with.

Journalists may address further enquiries to:

Mr. Tiemon Kiesenhofer, MBA
+43/(0)1/24959-6010
+43/(0)676/882 49 610

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