Third meeting of the Financial Market Stability Board

In its third meeting, the Financial Market Stability Board (FMSB) discussed the use and calibration of systemic risk buffers and of buffer requirements for systemically important institutions with a view to addressing structural risks in the Austrian banking system. Other items on the agenda included reports on the implementation of recommendations issued by the European Systemic Risk Board (ESRB), the reciprocity of macroprudential policies across EU countries, the design of the FMSB′s website as well as the FMSB′s annual report to the parliamentary financial committee and the minister of finance.

Preparation of a recommendation to apply systemic risk buffers

The FMSB has identified the following major systemic risks to financial stability in Austria: the above-average size of the domestic banking sector, given that Austria is a small, open economy; the large exposures of the domestic banking industry to emerging European economies; the low capital ratios of domestic banks compared with banks with similar business models; and existing ownership structures, with their limited capacity of owners to recapitalize banks in the event of a crisis. Banks with heightened exposures to these structural systemic risks may be required to hold systemic risk buffers with a view to increasing their crisis resilience. The FMSB expects systemic risk buffers to lead to a more risk-adequate pricing of credit risk, without adversely affecting the supply of credit. This enhances the stability of the financial system. The FMSB Secretariat has been tasked with submitting at the fourth meeting of the FMSB a draft recommendation for applying systemic risk buffers.

Preparation of a recommendation to apply buffers for systemically important institutions

Based on a guideline issued by the European Banking Authority (EBA), the FMSB identified and discussed an initial list of systemically relevant financial institutions in Austria. Banks are deemed to have systemic importance when their malfunctioning or failure would constitute a systemic risk. Benchmarks include the size of the institution, its interconnectedness with the financial system, the ease of substitution, and the complexity of cross-border activities. The FMSB Secretariat has been tasked with submitting at the fourth meeting of the FMSB a draft recommendation for applying buffers for systemically important institutions.

FMSB website online

Moreover, the FMSB decided to go live with its website at www.fmsg.at. The website provides basic information on the FMSB and on macroprudential supervision and financial stability, as well as links to other relevant institutions, and the FMSB′s press releases.

Information on the FMSB

The FMSB, which became operational in 2014, works toward strengthening financial stability. The members of the FMSB are representatives of the Federal Ministry of Finance, the Fiscal Advisory Council, the Financial Market Authority (FMA) and the Oesterreichische Nationalbank (OeNB). The FMSB may issue recommendations to the FMA and provide risk warnings.