Recommendation FMSB/4/2023: guidance on adjusting the other systemically important institution (O-SII) buffer
38th meeting, October 2, 2023In its 38th meeting on October 2, 2023, the Financial Market Stability Board (FMSB) evaluated the other systemically important institution (O-SII) buffer. Steiermärkische Bank und Sparkassen AG was for the first time identified as an O-SII on an individual basis. All credit institutions previously identified as O-SIIs and their buffer rates (after the phase-in period) remain unchanged. The phase-in of the combined O-SII buffer and systemic risk buffer (SyRB) rate started in early 2023 is therefore set to continue (see also Recommendation FMSB/5/2022).
| Buffer rate in % of risk-weighted assets | O-SII buffer 2023 | SyRB 2023 |
O-SII-buffer + SyRB 2023 |
O-SII buffer 2024 | SyRB 2024 |
O-SII buffer + SRYB 2024 |
|---|---|---|---|---|---|---|
| Erste Group Bank | 1.25 | 1.00 | 2.25 | 1.50 | 1.00 | 2.50 |
| Raiffeisen Bank International | 1.25 | 1.00 | 2.25 | 1.50 | 1.00 | 2.50 |
| UniCredit Bank Austria | 1.75 | 0.50 | 2.25 | 1.75 | 0.50 | 2.25 |
| BAWAG | 0.75 | 0.50 | 1.25 | 0.90 | 0.50 | 1.40 |
| RLB OÖ | 0.75 | 0.50 | 1.25 | 0.90 | 0.50 | 1.40 |
| Raiffeisen-Holding NÖW | 0.75 | 0.50 | 1.25 | 0.90 | 0.50 | 1.40 |
| Volksbanken Verbund | 0.75 | 0.50 | 1.25 | 0.90 | 0.50 | 1.40 |
| Addiko | 0.00 | 0.25 | 0.25 | 0.00 | 0.50 | 0.50 |
| HYPO NOE | 0.00 | 0.50 | 0.50 | 0.00 | 0.50 | 0.50 |
| Oberösterreichische Landesbank | 0.00 | 0.50 | 0.50 | 0.00 | 0.50 | 0.50 |
| HYPO Tirol Bank | 0.00 | 0.50 | 0.50 | 0.00 | 0.50 | 0.50 |
| Hypo Vorarlberg Bank | 0.00 | 0.50 | 0.50 | 0.00 | 0.50 | 0.50 |
| Buffer rate in % of risk-weighted assets | O-SII buffer 2023 | SyRB 2023 |
O-SII buffer + SyRB 2023 |
O-SII buffer 2024 | SyRB 2024 |
O-SII buffer + SRYB 2024 |
|---|---|---|---|---|---|---|
| Erste Group Bank | 1.75 | 0.50 | 2.25 | 1.75 | 0.50 | 2.25 |
| Raiffeisen Bank International | 1.75 | 0.50 | 2.25 | 1.75 | 0.50 | 2.25 |
| UniCredit Bank Austria | 1.25 | 0.50 | 1.75 | 1.50 | 0.50 | 2.00 |
| RLB OÖ | 0.75 | 0.50 | 1.25 | 0.90 | 0.50 | 1.40 |
| RLB NÖ-Wien | 0.75 | 0.50 | 1.25 | 0.90 | 0.50 | 1.40 |
| BAWAG | 0.50 | 0.25 | 0.75 | 0.50 | 0.50 | 1.00 |
| Erste Bank der österreich. Spark. | 0.75 | 0.00 | 0.75 | 0.90 | 0.00 | 0.90 |
| HYPO NOE | 0.00 | 0.25 | 0.25 | 0.00 | 0.50 | 0.50 |
| Oberösterreichische Landesbank | 0.00 | 0.25 | 0.25 | 0.00 | 0.50 | 0.50 |
| HYPO Tirol Bank | 0.00 | 0.25 | 0.25 | 0.00 | 0.50 | 0.50 |
| Hypo Vorarlberg Bank | 0.00 | 0.25 | 0.25 | 0.00 | 0.50 | 0.50 |
| Steiermärkische Bank und Sparkasse | 0.00 | 0.00 | 0.00 | 0.25 | 0.00 | 0.25 |
O-SIIs can pose a risk to a country’s financial system. Their systemic relevance and anticipation of bailout in the event of a crisis may cause moral hazard. O-SII buffers reduce the likelihood of bank failures and therefore (partly) offset the higher social costs that would result from the malfunctioning or failure of a credit institution.
European Banking Authority guidelines (EBA/GL/2014/10) establish a two-step process for identifying O-SIIs. In the first step, banks are given a score according to the following indicators: (1) size, (2) importance for the economy of the EU or of the relevant EU member state, (3) complexity/cross-border activity, and (4) interconnectedness of the institution or group with the financial system (see Article 23d Austrian Banking Act). In the second step, the national authorities use supervisory judgment, i.e. they draw on their expertise on the relevant banking sector to ensure that any further systemically important banks are identified as O-SIIs even if they were not identified as such in the first step.
The OeNB’s website provides details on the methodological approach underlying the O-SII buffer and legal and economic background information (German only). This information has been disclosed in 2023 to meet stakeholder requests for greater transparency.
The FMSB makes the following recommendations:
The FMSB confirms the list of identified O-SIIs and recommends continuing the phase-in period as decided in 2022 for the time being, while limiting the increase in the combined buffer requirement to 50 basis points against 2022 (Recommendation FMSB/5/2022).
This year, Steiermärkische Bank und Sparkasse AG was for the first time identified as an O-SII, based on the indicator “deposits guaranteed under deposit guarantee scheme” in accordance with Annex 2 of EBA/GL/2014/10. This additional indicator is used in Austria in accordance with Title III of EBA/GL/2014/10. Steiermärkische Bank und Sparkasse AG has exceeded the relevant threshold for a second year in a row. In line with the one-year observation period that is generally applied, Steiermärkische Bank und Sparkasse AG now has to be classified as an O-SII. Under the phase-in regime that is applicable until 2024 (buffers will be increased by a maximum of 0.25 percentage points per year in 2023 and 2024), Steiermärkische Bank und Sparkasse AG’s 2024 O-SII buffer rate will be limited to 0.25% for the time being.
The FMSB therefore recommends applying the following O-SII buffer rates at the consolidated and unconsolidated levels.
| 2022 score | 2023 score | Recommended O-SII buffer rates for 2024, considering SyRB overlap and uncertainty | |||
|---|---|---|---|---|---|
| Consolidated level | |||||
| Erste Group Bank | 2,615 | 2,703 | 1.50% | ||
| Raiffeisen Bank International | 1,978 | 1,996 | 1.50% | ||
| UniCredit Bank Austria | 1,050 | 1,037 | 1.75% | ||
| Raiffeisenlandesbank Oberösterreich | 507 | 478 | 0.90% | ||
| BAWAG | 568 | 571 | 0.90% | ||
| Raiffeisen-Holding Niederösterreich-Wien | 263 | 304 | 0.90% | ||
| Volksbanken Verbund | 196 | 179 | 0.90% | ||
| Unconsolidated (solo) level | |||||
| Erste Group Bank | 1,188 | 1,168 | 1.75% | ||
| Raiffeisen Bank International | 1,195 | 1,234 | 1.75% | ||
| UniCredit Bank Austria | 1,160 | 999 | 1.50% | ||
| Raiffeisenlandesbank Oberösterreich | 514 | 497 | 0.90% | ||
| BAWAG | 572 | 583 | 0.50% | ||
| Raiffeisenlandesbank Niederösterreich-Wien | 260 | 324 | 0.90% | ||
| Erste Bank der oesterreichischen Sparkassen | 235 | 245 | 0.90% | ||
| Steiermärkische Bank und Sparkasse | 101 | 106 | 0.25% | ||
| Source: OeNB. | |||||
In line with Article 23d para 1 Austrian Banking Act, the FMSB recommends that the Financial Market Authority (FMA) prescribe O-SII buffer rates as specified in the table.
To keep the list of O-SIIs rather stable, the FMSB recommends that the one-year observation period that is already generally applied to identifying O-SIIs be made a permanent rule. Accordingly, credit institutions are included in and removed from the list of O-SIIs, and buffer rates are changed only if the relevant threshold has been exceeded two years in a row. So far, this rule has proven to be an effective criterion both for including new O-SIIs in the list and removing credit institutions from the list. However, the one-year observation period does not apply when changes are likely to be permanent, e.g. due to acquisitions, mergers, sales or liquidations.