“For the financial markets, 2011 was a year of disappointed hopes. In the fifth year following the onset of the global financial crisis, the difficult situation continued – despite the positive development of the real economy in Austria. There is no end to the crisis in sight.” This was the summary given by the Executive Directors of the Financial Market Authority (FMA), Helmut Ettl and Kurt Pribil, on presenting the FMA 2011 Annual Report. The FMA, with a staff of just over 300 and a €44.8 million budget, was able to further step up supervisory activities in this challenging environment. One example is the number of on-site inspections, which increased by some 75% within five years. “Our consistent efforts have led to noticeable improvement in the quality of Austria’s financial market. Risk management has become more widespread, the providers’ ability to withstand crises is stronger, and the quality of advice offered to customers has been enhanced,” the FMA Executive Directors observed. They added that appropriate and consistent sanctioning of rule infringements had contributed significantly to reinforced confidence in the financial market. Examples included administrative penal proceedings, which had almost quadrupled in number since 2007, and an almost 500% increase in the number of offences reported to the public prosecutor’s office. “We have achieved a great deal in recent years and are in a good position compared with other countries as well. Consistently implementing the lessons learned from the financial crisis at national and international level will additionally reinforce supervision’s contribution towards prevention,” the FMA Executive Directors announced.
Measures to further step up supervision in 2011 are reflected in detail by the statistics:
- The number of instances of on-site presence as part of the supervisory system could be increased to 235. Compared with 133 such cases in 2007, the year before the last supervision reform in Austria, the figure represents a 75% increase in just five years. This means that the FMA appeared at one in five licensed companies to conduct a brief or more thorough inspection.
- The number of administrative penal proceedings rose from 184 to 708 during this period. Compared with the previous year, there was a slight decrease in the number of sanctions imposed. After 302 penal orders in 2010, 268 were imposed the following year, while 224 penal decisions were issued in 2011 compared with 240 the previous year. Underlying the decrease is the additional possibility, existing since 2011, of issuing admonitions (77 cases) in the form of administrative decisions.
- A total of €1.1 million in fines were imposed in 2011 (2010: €1.4 million). Of this total, penal decisions accounted for €1.0 million, with the average fine amounting to €4,524 (2010: €5,167). The total sum of penal orders imposed amounted to €140,400.
- In a total of another 34 cases in 2011, roughly €58.1 million in interest was skimmed off due to exceeding limits on large loans or exposures or to falling below minimum capital thresholds.
- The number of offences reported to the public prosecutor’s office increased to 131 after 74 in 2010.
The FMA achieved this substantial step-up in supervisory activities during the year under review supported by a staff of 309 (2010: 283) and a budget of €44.8 million (2010: €38.4 million). The federal government contributed a lump sum of €3.5 million towards covering these costs, and an additional €3.2 million (2010: €3.7 million) was covered by fees and other income. As stipulated by law, the majority of the remaining costs of supervision is to be contributed by the supervised entities according to the share incurred in each case. Of these costs, totalling about €38.1 million (2010: €31.2 million), banks contributed a 52% share, insurance undertakings and Pensionskassen 23%, and investment firms 25%.
The FMA Executive Directors insisted that more effort be made to consistently implement the lessons learned from the financial crisis, stating: “We have already achieved a great deal, such as limiting the risk entailed in foreign currency loans, enhancements to the rules for corporate governance as defined in supervisory legislation, and in the way of transparency requirements in the interests of consumer protection.” Yet, they observed, important elements were still lacking. These range from the new supervisory systems for the banking and insurance sectors (referred to as Basel III and Solvency 2), which they called for to be implemented quickly and efficiently in undiluted form, and the establishment of a regulatory system for providers of alternative investments, to the Europe-wide standardisation of market infrastructure, as well as EEA-wide harmonisation of the system of sanctions that would include minimum amounts for maximum penalties and administrative penal legislation applying to companies. The two FMA Executive Directors specifically made a plea for appropriate legislation regulating bank reorganisation, a deposit guarantee scheme involving funding sources that are covered even before any guarantee claim, and the establishment of an enforcement office for accounting standards. “We need these instruments in order to be able to intervene quickly, effectively and in a timely manner, to keep taxpayers from having to foot the bill in every crisis,” Ettl and Pribil said.
Journalists may address further enquiries to:
Klaus Grubelnik (FMA Media Spokesperson)
+43/(0)1/24959-5106
+43/(0676)/882 49 516