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

41st meeting, June 10, 2024

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.