Austria’s Financial Market Authority (FMA) has today, 4 January 2011, published a “Circular on the design of savings certificates pursuant to Articles 31 and 32 of the BWG” (Banking Act). In this Circular, the FMA clearly states that the way in which savings passbooks are designed, given the requirements in terms of their security and the fact that they are particularly worthy of protection, is subject to statutory restrictions. It must, for example, always be possible to calculate the interest rate payable on a savings passbook, which is why components that involve “betting” on future developments or a rate of return based on the future performance of, for instance, a basket of shares, is not permitted. “In Austria savings passbooks are synonymous with security, reliability and predictability. Consequently, Austrians have a high level of confidence in this investment product. It was therefore all the more important to us that we put a stop to an emerging trend of extreme product design, which was incorporating an ever greater speculative element into a product that is particularly deserving of protection,” explain FMA Executive Directors Helmut Ettl and Kurt Pribil.
Deposits from savings certificates are subject to statutory deposit protection and also enjoy special protection from specific provisions in the Banking Act (BWG) in relation to their name, deposits and withdrawals, and rate of interest. The Circular clarifies the fact that products that involve a rate of return based on the performance of individual securities or indices do not fulfil the statutory requirements. This similarly applies in cases where a minimum rate of interest is guaranteed with only an additional bonus payment being based on the development of a speculative component. Such a form of product design is not a valid annual rate of interest as defined in Article 32 para. 6 BWG. Additionally, other speculative elements or elements similar to betting such as basing the rate of interest paid on the number of goals scored during a football season do no comply with the statutory rules. In contrast, savings products with a variable rate of interest are permitted if a standard interest escalation clause based on market rates is included and the applicable annual rate of interest is stated in each case.
Klaus Grubelnik (FMA-Mediensprecher)
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