Twelfth meeting of the Financial Market Stability Board

June 30, 2017

In its twelfth meeting on June 30, 2017, the Financial Market Stability Board (FMSB) evaluated the application of the systemic risk buffer. The FMSB confirmed its recommendation to leave the countercyclical capital buffer at 0% of risk-weighted assets.

Evaluation of the systemic risk buffer

In its twelfth meeting, the FMSB reviewed the systemic risk buffer, which was activated on January 1, 2016. In the meantime, structural systemic risks have gone down as the Austrian banks have both improved their capitalization (without scaling back lending in Austria) and downsized their foreign business, which has resulted in a decrease in the overall size of the banking sector. Risk-mitigating factors notwithstanding, the structural systemic risk in the Austrian banking sector continues to be elevated. Risks for the banking system emanate in particular from the still substantial exposures to emerging markets in Europe and from banks’ specific ownership structures, which do not ensure the adequate recapitalization of banks in the event of a crisis.

Buffer levels will be set on a case-by-case basis for individual banks in the FMSB’s next meeting.

FMSB recommends keeping the countercyclical capital buffer rate at 0%

The FMSB recommends that the Financial Market Authority (FMA) maintain the countercyclical capital buffer rate of 0% of risk-weighted assets also in the fourth quarter, i.e. as of October 1, 2017. Given that the main indicator (credit-to-GDP gap) for all credit aggregates used remains negative (as in previous quarters), there are no signs of excessive credit growth. The other indicators used paint a mixed picture.

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.