Banking supervision rules that apply to large exposures are intended to prevent the occurrence of concentration risks in credit institutions that lead to sudden large losses. The Austrian Financial Market Authority (FMA) reminds supervised entities that it is essential to identify groups of connected clients as such, and to report them accordingly to avoid such concentration risks and channels of contagion. In practice economic linkages, especially in the area of commercial real estate, are not apparent at first sight. As the second edition of the FMA’s publication series “Reden wir über Aufsicht” (Let’s talk about supervision) states, Guidelines issued by the European Banking Authority (EBA) and a Commission Delegated Regulation in force since this summer have created greater clarity regarding definitions and application. It will no longer be possible to continue the frequently observed practice of withholding information when determining that a group has been formed. In the future, the FMA’s occasional publication series will explain supervisory expectations about current issues.
“Credits institutions must take a peek behind the facades of their large borrowers to recognise their dependencies”, remarked the FMA Executive Directors Helmut Ettl and Eduard Müller. “Economic dependencies can be concealed by means of nested structures of shell companies that take on many forms, such as mutual guarantees, the same persons in their management and shareholders or opaque shareholding structures. In recent months we have seen on multiple occasions in the retail estate sector, that apparently independent firms have toppled like dominoes.”
The FMA’s series “Let’s talk about supervision” targets supervised entities and an interested professional audience and is intended in a clear manner to clarify the FMA’s expectation about the existing legal basis and therefore to improve compliance with it. Practice-based examples and questions relating to their application are intended to simplify their implementation and ensure that legals standards are met.
“Let’s take about supervision” about groups of connected clients (in German only): Reden wir über Aufsicht - Gruppe verbundener Kunden (GvK) (Format: pdf, Size: 247,6 KB, Language: German)
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]