“In spite of a challenging international environment, Austria’s finance industry was able to reinforce its capital base in 2007,” FMA Executive Directors Helmut Ettl and Kurt Pribil stated in a summary of the past financial year at the presentation of the 2007 FMA Annual Report. Despite the sub‑prime crisis, banks were able to increase creditable own funds by 23.6%, from €13 billion to €68 billion, thus raising the capital ratio to 12.05%, compared to 11.61% in 2006 and the legal minimum of 8%. In the case of the insurance industry, the solvency ratio, which is comparable to the capital base for banks, also increased considerably to 261%, against a figure of 235% in 2006. Wiener Börse was also able to hold its own in the face of turbulence on the global capital market. While the Austrian blue-chip index ATX finished the year only 1.11% above the previous year’s level, the index has in fact tripled in value since 2002. Average monthly trading volumes at Wiener Börse rose by about 40% in 2007, representing an increase of ten times within the past four years.
“As our stress tests in recent years indicated, Austria’s finance industry has also proven stable and shock-resistant in a ‘reality test’,” Ettl and Pribil noted. “Together with our partners in supervision, Oesterreichische Nationalbank and the Federal Ministry of Finance, the FMA and its staff have contributed in a major way toward ensuring this stability. Isolated issues which arose in the past should not distract from the accomplishments of supervision.” In this regard, the Executive Directors cited the most recent update of the country assessment for Austria (2007/2008) by the International Monetary Fund (IMF), which has once again found Austria’s supervision system to comply with highest international standards and noted continued improvement since assessment took place for the first time in 2003.
FMA in 2007
During the year under review, the FMA and its 217 employees supervised more than 1,300 licensed companies as well as trading in listed securities, which has increased more than fivefold since the founding of the FMA, when measured in terms of transactions (19.3 million). Expenditures by the FMA for these efforts amounted to a total of €22.4 million in 2007, of which the federal government contributed a fixed sum of €3.5 million, another €3.2 million being generated by fees and other income and €15.7 million being contributed by the supervised companies themselves according to their obligation to bear the costs incurred. Of the latter costs, the 871 credit institutions contributed a share of 39.70% or €6.2 million, the 106 insurance undertakings 27.47% or €4.3 million, the securities sector, with its three separate accounting groups, a total share of 28.99% or €4.6 million and the 20 Pensionskassen a share of 3.84% or about €600,000. “In the end, when the resources provided by our partners OeNB and the Ministry of Finance are additionally taken into account, about 50% of supervision costs are publicly funded,” Pribil noted, citing the Court of Audit report on financial market supervision in response to criticism levelled by supervised companies at having to accept these costs. “International comparisons, such as those prepared within the framework of the International Financial Supervisors Conference, attest to the fact that Austria’s system of supervision is lean, efficient and effective when compared at the international level,” Executive Director Ettl added.
Supervisory reform on track
Speaking to current progress in implementing the reform of financial market supervision, which went into effect on January 1, 2008, the FMA Executive Directors announced that “all projects are now on track and any interface problems and redundancies with the OeNB in conducting banking supervision will be consistently eliminated.” Ultimately, the decisive point was that the reform would now make it possible to appropriately develop resources for the supervision system, the FMA Executive Directors pointed out. In developing resources, the focus would be on banking supervision and securities supervision, they announced. It is planned to increase staff numbers in securities supervision by 50% in order to meet rising demands caused by a drastic increase in securities trading as well as by more stringent legislation introduced through the implementation of the EU Market Abuse Directive and the new Wertpapieraufsichtsgesetz (Securities Supervision Act) 2007.
Addressing the topical focus of the supervisory reform, Pribil and Ettl announced plans to generally intensify on-site inspections, “both in terms of frequency and of depth, with follow-up checks becoming institutionalised and the focus being placed on the topics of money laundering, activities in offshore centres, commercial relationships with foundations and exposures in alternative financial instruments. Efforts will also be focused on intensifying international cooperation, in particular on close cross-border cooperation with sister authorities in order to monitor Austrian institutions as they continue to internationalise.” The FMA Executive Directors noted with satisfaction the improvements in regulatory framework conditions which had been introduced in the course of supervisory reform: “We fully support the tier model of supervision.” In this connection they pointed out the great importance of certain measures, including additional powers for the Internal Audit department, stringent obligations for auditors, the improved deployment of state commissioners and the Corporate Governance Package which should enhance the system of checks and balances existing between the Executive Board and the Supervisory Board.
“Almost all of the proposals we had developed on the basis of the FMA’s first five years of experience have been adopted,” Ettl and Pribil announced with satisfaction. “We are also glad that, in adopting the reform, all of the decision-makers involved have renewed their commitment to an independent, autonomous and integrated supervisory authority. This model has proven itself by bundling synergies in an optimum manner, by amassing expertise and by ensuring conditions for fair competition, in other words a level playing field, within the Austrian financial market.”
For further information please contact
Klaus Grubelnik (FMA Media Spokesperson)
+43/(0)1/24959-5106
+43/(0676)/882 49 516