In its 21st meeting on September 9, 2019, the Financial Market Stability Board (FMSB) evaluated the other systemically important institution (O-SII) buffer. Other systemically important institutions can create risks to a country’s financial system. Their systemic relevance and anticipation of bailout in the event of a crisis can cause moral hazard. The O-SII buffer reduces the likelihood of bank failure and therefore (partly) offsets the higher social costs that result from a malfunctioning or failure of a credit institution (Article 23c Austrian Banking Act). The Austrian Bank Recovery and Resolution Act (BaSAG)1 likewise contributes to addressing these risks, as it allows banks to exit the market at lower social cost.
