19th meeting of the Financial Market Stability Board

Convening for the 19th time, the Financial Market Stability Board (FMSB) met on February 18, 2019, to discuss its Annual Report for 2018 and adopt a preliminary work plan for 2019. Moreover, the FMSB issued a recommendation to leave the countercyclical capital buffer (CCyB) rate at 0% for the third quarter of 2019.

FMSB Annual Report for 2018 to be published in late April

The 19th meeting of the FMSB addressed the Annual Report for 2018 and thus the central aspects of its work in 2018 – notably an evaluation of macroprudential capital buffers and sustainable lending standards for real estate financing.

The use of capital buffers proved to be effective in reducing systemic risks without scaling back lending to the real sector in Austria. This reduction of systemic risks was also reflected in a rating upgrade of the Austrian banking system, which in turn caused the funding costs of banks, and hence of the Austrian real economy, to go down.

Having continued to direct considerable efforts toward the analysis of systemic risks associated with the financing of private residential real estate, the FMSB concluded that these risks remained limited due to the risk resilience of both borrowers and lenders. To keep such risks at bay also in the future and thus reduce the likelihood of having to use intrusive instruments, the FMSB identified sustainable lending criteria in the press release following its 17th meeting.

Once the final finance sector data for the year 2018 can be included, the Annual Report will be submitted to the Finance Committee of parliament and the Federal Minister of Finance, and subsequently published on the FMSB’s website in late April.

Outlook for 2019: FMSB celebrates fifth anniversary and addresses sustainable real estate lending

In 2019, the FMSB will continue to address the issue of sustainable lending standards in real estate financing, focusing, in particular, on compliance with sustainability criteria specified for residential real estate loans and on the monitoring of systemic risks arising from real estate funding. The FMSB’s periodical activities will include quarterly decisions on the adoption of the CCyB rate as well as an annual evaluation of other systemically important institutions (O-SII) and systemic risks resulting from the use of leverage by alternative investment funds.

Furthermore, 2019 will mark the 5th anniversary of the FMSB’s establishment. The experience gained in macroprudential supervision over the past five years will feed into the review of the macroprudential policy strategy, which, once adopted, will also be published on the FMSB’s website.

FMSB recommends keeping the countercyclical capital buffer rate at 0%

As lending to domestic borrowers does not indicate excessive credit growth, the FMSB’s recommendation to the FMA is to leave the CCyB rate for risk-weighted assets at 0% from July 1, 2019 (FMSG/1/2019).

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. In particular, the FMSB may issue recommendations to the Financial Market Authority and provide risk warnings.