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The FMA’s priorities for supervision and inspections 2025 amidst economic crises, digital transformation and the new world (dis)order

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“The Austrian financial sector’s environment will not become any friendlier in the coming years,” remarked Austrian Financial Market Authority (FMA) Executive Directors Helmut Ettl and Eduard Müller, when presenting the priorities for supervision and inspections for the coming year, and the FMA’s annual publication Facts and Figures, Trends and Strategies 2025. “The economic crisis and increased interest rates have left substantial marks in the corporate balance sheets – and meanwhile has spilled over beyond the commercial real estate.” The closure of production facilities and corporate insolvencies will also affect unemployment figures in the near future, and will increase financial pressure on households massively.

In light of this headwind, the FMA’s Executive Board urges supervised entities to use the healthy profits of the past two years for shoring up and strengthening their capital base, and to be cautious in distribution of profits. In this phase appropriate value adjustments and a conservative valuation of collateral are also important, remarked Ettl and Müller.

Austria’s financial system has remained stable to date

The Austrian financial system has proven itself to be resilient and stable despite the challenges it has faced in recent years. By way of a snapshot, here are a few figures as of mid-2024:

  • At around just under 18 %, Austria’s banks have higher levels of Common Equity Tier 1 capital than ever before. Consequently, there are above average for the Euro area, which frequently was not the case in the past. Earnings are at a record level, with returns of 1.2 % of total assets, significantly higher than the Euro area average of 0.7%.
  • Insurance undertakings have a strong level of solvency. On average, they meet their Solvency Capital Requirement (SCR) by over 300%. Their level of own funds, for being able to absorb unforeseen losses, is therefore more than three times as high as necessary.
  • Asset managers like Pensionskassen (pension companies), corporate provision companies or investment funds have been able in the meantime to absorb the massive capital market slumps due to turbulence in recent years, and have been slowly able to recover the losses sustained.

The material reasons have been reforms in supervision and regulation following the financial crisis 15 years ago. This does not mean however, that we can rest on our laurels that the lines of defence and capital buffers were a one-off endeavour that we are permanently able to rely on. Amidst constantly changing challenges, maintaining the financial system’s resilience and stability is a permanent task.

Key risks in the coming years

The following key risks have emerged for the Austrian financial system for the coming years against this backdrop:

  • Deglobalisation, protectionism, deregulation: The geopolitical and economic trends observed in recent years have heralded far-reaching changes to the world order, the flows of goods and money, and the international trade and financial system. A new era of protectionism is dawning.
  • Financial crisis and credit risks: Defaults on loans are increasing, and the trend is likely to continue, especially in the case of commercial real estate and corporate lending. To date, the KIM-V has ensured resilience in residential real estate funding – once it is phased out loans must continue to be granted sustainably.
  • Ailing public finances: Government debt is again becoming a cause for concern. Increased levels of debt combine with increased interest rates to form a toxic mix. Even in countries where there are healthy balance sheets, austerity measures are on the cards that could casue sever economic upheaval.
  • Disruption due to digital transformation: While digital transformation provides an opportunity for increased efficiency and innovation in the financial system, it also brings risks for disruptive developments.

Guiding Principles and Priorities for Supervision and Inspections 2025

The FMA has derived the following priorities for supervision and inspections in 2025 among others from these trends, challenges and risks:

  • Real estate financing risks: Risks for residential real estate financing and new measures once the KIM-V is phased out; risks from commercial real estate financing and implementation of the sectoral systemic risk buffer
  • Credit risks: Increasing levels of defaulting loans amidst a backdrop of economic crisis and a changing environment for financing
  • Crypto-assets: Implement of the EU Markets in Crypto-Assets Regulation (MiCAR) and new authorisation procedures for crypto-asset service providers (CASPs)
  • Cybersecurity: Implementation of the EU Digital Operational Pesilience Act (DORA)
  • Sustainable Finance: Combating greenwashing, sustainability reporting; climate stress tests for sustainability risks and business models
  • Collective consumer protection: Extended awareness about investment fraud
  • A clean financial centre: Taking of supervision of financial sanctions
  • Data-Driven Supervision: Implementation of the FMA’s 360° supervision supervision IT project

The specific instruments, projects and initiatives being used to address these thematic areas are presented in detail in the FMA’s latest publication Facts and Figures, Trends and Strategies 2025. The FMA’s “Medium-term Risk Analysis 2025-2029” can also be found in this publication. This publication can be downloaded from the FMA website at:https://www.fma.gv.at/en/publications/facts-and-figures-trends-and-strategies/.

The presentation from the press conference held on 9 December 2024 are available for download (in German only) at:

Journalists may address further enquiries to:

Boris Gröndahl (FMA Media Spokesperson)

Telephone: +43 (1) 249 59-6010

Mobile: +43 676 8824 9995

E-Mail: [email protected]