In view of the current low-interest environment, the Austrian Financial Market Authority (FMA) wishes to make it easier for insurance undertakings to directly grant long-term loans to companies. A draft amendment to the Regulation on Investments (KAVO; Kapitalanlageverordnung), containing corresponding changes, was sent out for review today. “Such an amendment would offer insurers an additional form of investment with higher yields and would also provide large companies and SMEs in Austria with additional funds for investments,” FMA Executive Directors Helmut Ettl and Klaus Kumpfmüller pointed out. This would generate an investment volume of some € 4.2 billion, according to a conservative estimate based on results from Germany, where such an option has been available for several years now.
It is planned for the amended KAVO to expressly allow corporate loans to be taken out without any suitable assets being specifically required as collateral to cover the technical provisions. To ensure compliance with the principles of security, profitability and liquidity, the amended Regulation will require certain conditions to be met in order for loans to be granted: loans must not be subordinated, the company must have a credit rating of at least investment grade as well as a stable cash flow, and the loan itself must be subjected to an annual standardised risk assessment process, as well as other requirements.
Such loans must not, however, exceed 5 per cent of the technical provisions, with any individual loan not exceeding 2 per cent. As well as defining clear conditions for this new investment opportunity, the KAVO amendment also sets out the legal basis to ensure better monitoring of this additional and new form of investment.
Journalists may address further enquiries to:
Klaus Grubelnik (FMA Media Spokesperson)
+43/(0)1/24959-5106
+43/(0)676/882 49 516