14th meeting of the Financial Market Stability Board

In its 14th meeting on November 29, 2017, the Financial Market Stability Board (FMSB) discussed its recommendations on the other systemically important institution (O-SII) buffer and the countercyclical capital buffer (CCB); outcome: all recommended buffer rates remain unchanged. Moreover, the macroprudential policy strategy for Austria was adjusted to reflect the instruments adopted under Article 22b Austrian Banking Act, which will become available from July 1, 2018.

O-SII buffer rates unchanged

The FMSB evaluated the importance of individual banks for the Austrian financial system and recommended that both the applicable O-SII buffer rates and the list of banks subject to the O-SII buffer requirements remain unchanged. The O-SII buffer is prescribed for banks whose malfunctioning or failure may trigger a systemic risk which could entail serious negative consequences for the financial system and the real economy (Article 23c in conjunction with Article 2 para. 41 Austrian Banking Act). Systemically important institutions in Austria are identified based on the guidelines of the European Banking Authority (EBA). Details on the results can be found in the Recommendation for the application of the O-SII buffer.

Recommended countercyclical capital buffer rate remains at 0%

With regard to the countercyclical capital buffer to be applied from April 1, 2018, onward, the FMSB confirmed its recommendation to the Financial Market Authority (FMA) to leave the rate unchanged at 0% of risk-weighted assets. Given that the main indicator (credit-to-GDP gap¹) for all credit aggregates used remains negative, there are no signs of excessive credit growth. Developments in the main indicator are described in the Recommendation for the application of the countercyclical capital buffer.

New macroprudential instruments complement strategy

The FMSB evaluated and adjusted the macroprudential policy strategy for Austria to incorporate the instruments that the legislators had decided on in summer 2017. These new instruments address systemic risks arising from the debt financing of real estate. With effect from July 1, 2018, the FMA will have the power, based on a recommendation by the FMSB, to impose limits on loan-to-value ratios, debt-to-income ratios and debt service-to-income ratios and maturities of new real estate loans. In addition, the FMA will be able to determine criteria regarding the amortization of these loans. These instruments are only to be applied if systemic risks in connection with immovable property financing are identified, especially risks arising from non-sustainable real estate lending standards. The adjusted strategy can be found under Publications.

Information on the FMSB

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

¹ Difference between the credit-to-GDP ratio and its trend.