21st meeting of the Financial Market Stability Board
At its 21st meeting on September 9, 2019, the Financial Market Stability Board (FMSB) discussed the effectiveness of its guidance on sustainable real estate financing and the availability of data on commercial real estate, renewed its recommendation regarding the buffer for other systemically important institutions (O-SII buffer) and recommended that the countercyclical capital buffer (CCyB) be kept at 0% also in the first quarter of 2020.
FMSB evaluates effectiveness of guidance on sustainable real estate financing
The FMSB has conducted a preliminary review of the effectiveness of its guidance on sustainable lending published in September last year (press release 17th Meeting of the FMSB). Overall, the loan-to-value ratios and maturities of new loans have declined somewhat. At the same time, the share of new real estate loans with unfavorable debt service-to-income ratios remained high in the first half of 2019. The Financial Market Authority (FMA) and the Oesterreichische Nationalbank (OeNB) continue to center their supervisory activities on the review of sustainable lending standards and are prepared to take appropriate action if the need arises. Given current systemic risk developments in real estate financing, work in this area will remain one of the FMSB’s priorities. The FMSB underlines that sustainable real estate lending policies, and in particular sustainable debt service-to-income ratios, are a crucial prerequisite for averting the necessity of intrusive supervisory measures. Ensuring that real estate financing remains affordable in the long run not only contributes to financial stability in Austria but is also in the interest of banks and borrowers.
FMSB sees necessity for improving availability of data on commercial real estate
With a view to following recommendation ESRB/2016/14 of the European Systemic Risk Board, the FMSB pointed out that improvements in the availability of data on commercial real estate are essential for the analysis of systemic risks. Such data should also include a conclusive index for commercial real estate prices. The FMSB has thoroughly evaluated feasible options and proposed that the FMA and the OeNB take the necessary steps to achieve the desired improvements.
FMSB affirms its recommendation on the O-SII buffer
The FMSB has renewed its recommendation on the O-SII buffer following its annual review of banks identified as O-SIIs in Austria. Both the list of identified institutions and the level of the buffer remain unchanged. For details and bank-specific information, see recommendation FMSB/4/2019.
FMSB recommends that countercyclical capital buffer be left at 0%
The growth of credit to domestic borrowers in Austria is still robust but not excessive. Therefore, the FMSB decided to recommend that the FMA apply the countercyclical capital buffer (CCyB) at its current level of 0% of risk-weighted assets also from January 1, 2020 (Recommendation FMSG/3/2019).
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.