Recommendation FMSB/4/2026: guidance on implementing the systemic risk buffer and the other systemically important institutions buffer

In its 50th meeting, the Financial Market Stability Board (FMSB) reviewed the systemic risk buffer (SyRB) and the other systemically important institutions (O-SII) buffer.

Systemic risk buffer (SyRB)

The systemic risk buffer (SyRB) was introduced to prevent costly bank bailouts like those adopted during the 2008–09 global financial crisis and to facilitate the transition to a new regulatory framework for banks’ resolution and market exits without notably raising risk premiums.

Systemic risks and, hence, buffer levels, have fallen continuously since the SyRB’s introduction in 2016. The most recent evaluation found that systemic concentration risk no longer needs to be addressed by the SyRB because the risk situation in the CESEE markets most important for domestic banks has improved and the relevant exposure has been limited to two banks. Also, the aggregate non-performing loan (NPL) ratios of Austrian banks’ subsidiaries in the main CESEE markets have dropped considerably, to levels below those of the Austrian banking sector.

The transition to a functioning resolution regime has progressed without significantly affecting banks’ refinancing capacities and costs. At the same time, better capitalisation and higher profitability have significantly enhanced the Austrian banking sector’s resilience. Despite these positive developments, systemic risks remain elevated: Austria still has an above-average-sized banking sector with specific ownership structures, which, in a crisis situation, would mean a limited capacity to recapitalise banks. Following recent acquisitions and given the need for higher provisions for non-performing exposures (“backstops”), there is not yet conclusive evidence that the improvement in resilience will prove sustainable. Moreover, the European resolution regime has yet to be put to the test, in particular from the perspective of ratings agencies. At the same time, ongoing geopolitical turmoil and reduced fiscal space for support measures have made the real economy more vulnerable to exogenous shocks. This potentially increases credit risk in the banking sector.

The FMSB therefore recommends that the FMA reduce the buffer component for systemic concentration risk to 0% in two steps and leave the component for systemic vulnerability at 0.75% (before overlap with the O-SII buffer).

O-SII buffer

The malfunctioning or failure of a systemically important institution may cause major disruptions in the entire or parts of the financial system, which may have severe negative effects on both the financial system and the real economy. The O-SII buffer addresses this “too-big-to-fail” problem. It aims to reduce the likelihood of large, systemically important credit institutions to malfunction or fail and to limit any related risks to the financial system, the real economy and public finances.

Banks are designated as systemically important on the basis of scores specified in the applicable EBA guideline (EBA/GL/2014/10). The scores reflect ten indicators relating to size, economic significance, cross-border activities and interconnectedness with the financial system and also take the expertise of national supervisory authorities into account. The higher the score, the higher an institution’s systemic importance and the higher the assigned buffer rate.

Banks’ assignments to buckets and related buffer rates (before overlap) have not changed compared to last year. Some banks’ acquisitions that resulted in structural changes in the Austrian banking market were not included in the current evaluation because they were not reflected in the relevant reporting data at the 31 December 2025 reference date.

SyRB and O-SII buffer overlap

The SyRB and the O-SII buffer complement each other. The SyRB strengthens the banking system’s resilience by providing additional capital reserves when a systemically important institution becomes distressed. The O-SII buffer, on the other hand, reduces the likelihood that such an institution may cause a shock for the entire banking system in the first place.

The elimination of the systemic concentration risk component somewhat reduces the banking sector’s resilience to problems in a systemically important institution. This is why the deduction for the O-SII buffer rate declines slightly. After rounding to 5 basis points, the buffer rate in bucket 3 rises from 1.3% to 1.35% (after overlap), while it remains unchanged for the other four buckets. At the moment, no Austrian bank is assigned to bucket 3. The deduction for the SyRB remains unchanged at 25%.

Buffer rates

The FMSB therefore recommends that the FMA implements the following buffer rates for the SyRB and the O-SII buffer at the consolidated and the unconsolidated levels with effect from 1 January 2028. The buffer component for systemic concentration risk is to be reduced to 0% in two steps. This means lower buffer requirements for three banks.