Recommendation FMSB/5/2024: 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 first quarter of 2024, nominal GDP growth was 4.6% year on year, with negative growth of –1.6% in real terms. The gap between the credit-to-GDP ratio and its trend, i.e. the credit-to-GDP gap, stagnated at –15.4 percentage points in the first quarter of 2024. 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.

In the first quarter of 2024, the average risk weights of corporate loans, which include a high share of commercial real estate loans, were at an all-time low. This is aggravated by the fact that there are more insolvencies than prior to the pandemic. The large number of insolvencies has started to negatively affect credit quality. What is more, the corporate sector’s debt ratio is approaching a historical high. The OeNB fundamentals indicator for residential property prices and the price-to-rent ratio have continued to decrease and are no longer at critical levels.

With prudent risk provisioning and capital levels that are adequate by European standards, banks mitigate effects from cyclical risks.