Recommendation FMSB/3/2024: guidance on applying the countercyclical capital buffer

The latest recommendation of Austria’s Financial Market Stability Board (FMSB) to the Financial Market Authority (FMA), in line with Article 23a para. 1 Austrian Banking Act, is to leave the countercyclical capital buffer (CCyB) unchanged at a rate of 0% of risk-weighted assets.

In the fourth quarter of 2023, nominal GDP growth was 6.7% year on year, with negative growth of –0.8% in real terms. The gap between the credit-to-GDP ratio and its trend, i.e. the credit-to-GDP gap, stagnated at –16.6 percentage points in the fourth quarter of 2023. This indicator therefore remains well below the critical threshold of 2 percentage points.

In its analysis, the FMSB also takes into account other indicators because there may be risks from the credit cycle even if the credit-to-GDP gap is negative.

Recent average risk weights of corporate loans, which include a high share of commercial real estate loans, are at a historically very low level. In addition, insolvencies are above pre-pandemic levels. The OeNB fundamentals indicator for residential property prices and the price-to-rent ratio have continued to decrease but remain at elevated levels by historical standards. As a precautionary measure, the FMSB recommends that banks aim for capital levels that are adequate by European standards and embrace prudent risk provisioning, to help mitigate the impact of cyclical risks.