Tasks of the FMA
The tasks of the supervisory system are governed by a range of individual laws, such as the Finanzmarktaufsichtsbehördengesetz (Financial Market Authority Act), Nationalbankgesetz (Nationalbank Act), Versicherungsaufsichtsgesetz (Insurance Supervision Act), Börsegesetz (Stock Exchanges Act) and the Kapitalmarktgesetz (Capital Market Act). In order to carry out these activities, two distinct approaches are required to the supervisory system – referred to as solvency supervision and market and conduct supervision.
The goal of solvency supervision is to ensure that the banks, insurance undertakings and financial service providers are able to pay out at all times and to meet their contractual obligations.
The market and conduct supervision should ensure that business conducted on the markets is fair and transparent, and should monitor compliance with minimum standards in corporate management as well as in the advice and information provided to customers.
Particular importance is also accorded to the statutory tasks of the supervisory system, such as dealing with unauthorised banking, insurance and financial services transactions, and taking preventive measures aimed at fighting money laundering and terrorist financing.
Fields of Supervision
The three core departments of supervision of the Austrian financial market are the Banking Supervision department, the Insurance Supervision department and the Securities Supervision department.
The tasks of the Banking Supervision department include in particular the performance of licensing, authorisation and notification procedures, the performance of supervisory procedures, the official supervision of intra-bank models, commissioning the OeNB to carry out on-site inspections, officially monitoring action taken by the credit institution to remedy shortcomings, the interpretation of the law with regard to banking supervision, collecting and analysing qualitative information, evaluating analysis results with respect to official measures and the involvement in legislation related to banking supervision, sending departmental representatives to international bodies, supervising branches and representative offices of foreign credit institutions, as well as cross-border supervision within the scope of the Consolidating Supervision concept.As the term “banking supervision” implies, the main focus of supervisory activity is on credit institutions. Since the entry into effect of the Zahlungsdienstegesetz (Payment Services Act), however, the licensing and ongoing monitoring of payment institutions now also falls within the remit of the Banking Supervision department. This is fairly obvious, given the supervisory requirements for payment institutions are heavily based on those for credit institutions, albeit slightly attenuated.
The department of Insurance and Pension Supervision includes in particular the continued supervision of all business activities of insurance undertakings and Pensionskassen, including on-site inspections, proposals for the continued development of legislation applying to insurance and pension supervision, sending representatives to international bodies within the scope of this department, as well as licensing issues and legal supervision.
The department of Securities Supervision includes in particular monitoring credit institutions to ensure that they meet reporting obligations involving instruments subject to reporting obligations, supervising markets and the stock exchange, supervising issuers, licensing and the continued supervision of investment service providers and collective investment undertakings, investigations in the securities sector and corresponding cooperation with the Austrian Federal Office of Criminal Investigation (BKA), the Federal Police Headquarters of Vienna (BPD Wien), the public prosecutor’s office, the courts and other authorities, ensuring the observance of the rules of conduct and of compliance regulations, making proposals for the continued development of legislation applying to securities supervision, as well as sending representatives to international bodies within the scope of this department.
Under the “Federal Act on the Recovery and Resolution of Banks”, the Austrian Financial Market Authority assumed the additional function of the national resolution authority with effect from 1 January 2015. Consequently, in the event of the default or the threat of default of an institution, it is responsible for the institution’s order resolution to ensure financial market stability.
The Banking Resolution department is currently developing and drawing up preventive resolution plans to allow their implementation in the event of a bank being placed into resolution by applying the instruments at their disposal.
Since 1 January 2016, the FMA as the national resolution authority, has also been part of the European system for bank resolution. A separate resolution authority – the Single Resolution Mechanism – has been established on a European level for banks that are subject to direct supervision by the European Central Bank within the Single Supervisory Mechanism. The SRM makes significant decisions for the significant institutions (in cooperation with the European Council and the European Commission), but in the execution of these decisions has to draw upon the respective national resolution authority.
Protecting Consumers, Investors and Creditors
The most important contributions of the FMA to the protection of consumers, investors and creditors are in its work on solvency and in monitoring of compliance with the statutory rules of conduct for banks, insurance undertakings, Pensionskassen and investment service providers, as well as in its standing up for transparency and fairness within the Austrian capital market. Nevertheless, the FMA is not a traditional consumer protection organisation. In order to guarantee it maintains the required equal distance from all market participants that is incumbent on a supervisory authority, the FMA has no legal basis on which it can assist complainants in pursuing claims for compensation in the civil courts.
However, the FMA does take all complaints it receives about market participants seriously – whether from consumers, investors or creditors. Such complaints form an important source of intelligence for its supervisory activities. Therefore, the FMA’s complaints management and consumer hotline teams provide information on the statutory options that are open to complainants. They also ensure that any information relating to relevant undesirable developments or potential breaches of supervisory standards are investigated.
As the legislation does not grant complainants the status of parties in administrative penal proceedings conducted by the FMA, they do not have any right to inspect files. For this reason, the official secrecy imposition on the bodies and employees of the FMA forbids them from providing information on the progress or findings of investigations. Nevertheless, a court may obtain such information by exercising its rights to seek official assistance.