In its medium-term risk assessment 2022 – 2026, the Austrian Financial Market Authority views economic development in the year ahead as being beset with “substantial uncertainties and unknown factors” in light of the issues that remain open regarding the further development of the COVID-19 pandemic. The strong economic recovery in the intervening period over the summer months has also been accompanied by serious economic dislocation factors like fragile supply chains, shortages in materials such as microchips and construction materials, surging commodity and energy prices as well as a significant spike in inflation, that are also causes for concern. “We are not out of the woods yet in addressing the COVID crisis. There is still a hard and rocky road ahead of us,” said FMA Executive Directors Helmut Ettl and Eduard Müller at the presentation of the priorities for supervision and inspections for 2022 and the publication “Facts and Figures, Trends and Strategies 2022″.
The financial market is stable, but there is a threat of cliff effects
Müller remarked that Austria’s financial economy had weathered the crisis to date well and stably. This was firstly due to the right lessons having been learned from the Global Financial Crisis, with the consequences of the past like non-performing loans (NPLs) having been addressed in a consistent manner, and the fact that financial services providers now have sound levels of capital in place. However, it is due in particular to the fact that the public sector has provided the real economy – both enterprises and private households – with massive support and assistance programmes in order to try to bridge the crisis until the upturn occurs, and consequently it has been possible to prevent the crisis from spreading to the financial market. In any case, it is paradoxical that the number of insolvencies has fallen by 40% despite the serious upheavals in the real economy, and that the already historically low NPL ratios have also even fallen slightly during the crisis. It remains essential to avoid cliff effects in resolving the backlog of problems.
Austria’s financial market faces major challenges
In its medium-term risk assessment, the FMA has identified major challenges for Austria’s financial market, for providers and consumers alike. “In addition to the COVID-19 health crisis and the problems in the real economy and the business cycle that have been triggered, the challenges are the persisting low interest environment, which is causing massive structural changes, digital transformation, which represents a profound technological breakthrough, as well as the fight against the climate crisis, which necessitates a shift towards a sustainable economic model, to which the financial markets will have to make a significant contribution,” remarked Müller. The persistently low interest rate environment also leads to mispricing and excessive reactions in certain assets and financial products. Ettl explicitly referred to the real estate boom and an excessively loose lending practices for residential mortgages, which may lead to risks for financial market stability. In addition he also listed the outperformance of cryptoassets, and sustainable financial products. The FMA will specifically address these challenges in 2022 that are embedded in EU and national regulatory initiatives through its priorities for supervision and inspections. “We will issue minimum standards for the granting of residential mortgages, will focus on sustainability risks in risk and asset management, as well as pressing on with the inclusion of cryptoassets in regulation and supervision,” remarked Ettl.
Priorities for supervision and inspections 2022
The FMA has defined the following six thematic areas as strategic priorities for supervision and inspections:
- Resilience and Stability: to address the economic fallout of the COVID-19 pandemic, to implement the learn lessons from it and to strengthen preventive crisis management.
- Sustainability: to support and accompany financial service providers and markets in their migration towards a sustainable economy in the struggle against climate change.
- Digitalisation: strengthening Austria’s future sustainability as a financial centre, exploiting the opportunities presented by digital transformation and to address the risks associated with it.
- Accompanying new business models in regulatory and supervisory terms.
- Ensuring Austria’s orderliness as a financial centre.
- Further developing of collective consumer protection.
The instrument of defining priorities for supervision and inspections for the coming year and to communicate them on the one hand raises awareness for the material risks and challenges for the years ahead. On the other hand, publishing them makes a valuable contribution towards ensuring the transparency and clarity of supervision activities, and also increases confidence in the Austrian financial market. A specific and detailed presentation of all the measures covered in the “Priorities for supervision and inspections for 2022” is published in the FMA’s publication “Facts and Figures, Trends and Strategies 2022” that can be downloaded from the FMA website.
Journalists may address further enquiries to:
Klaus Grubelnik (FMA Media Spokesperson)
+43 / (0)1 / 24959-6006 or +43 / (0)676 / 88 249 516