“Despite considerable geopolitical, global economic and business cycle challenges, Austria’s financial economy is a stable, liquid and profitable one,” remarked the FMA’s Executive Board members, Helmut Ettl and Eduard Müller, at today’s presentation of the 2023 FMA Annual Report : “Our forward-looking, consistent and stability-oriented supervisory policy has proven itself in the last few difficult years.” In light of the large challenges that continue to exist – whether in regard to digital transformation, the ongoing gloomy outlook regarding growth – the FMA is required to continue to call for a prudent distribution policy. “Capital bases must be strengthened further, while also strengthening the ability to absorb losses,” remarked the FMA’s Executive Board. The significant increase in insolvencies is currently already being reflected among the banks by an erosion of credit quality. The crisis in the construction, real estate and export economy will still prevail for some time to come, and will leave its mark on the balance sheet of financial services providers.
2023: Austria’s financial economy proves itself in difficult times
During the reporting year, Austria’s banks were able to improve their consolidated CET-1 capital ratio from 16.27% to 17.09%, which is an all-time high. The CET-1 capital ratio is therefore more than double the level it was prior to the Global Financial Crisis and around average in the euro area. The development of the cost-income ratio (C/I ratio) is particularly noticeable, having improved from 70% to 44% over the last five years, which has been due to an increase in operating income during this period from € 18.3 billion to € 25.7 billion, as well as a decrease in operating expenses from € 12.8 billion to € 11.3 billion. The proportion of non-performing loans (NPLs) has increased significantly on a consolidated basis, from 1.7% of all lending to 2.2%. Regarding the financing of commercial real estate, the NPL ratio has increased from 1.1% to 3.3% within one year.
Insurance undertakings have also managed to come through recent years unscathed, and have an average Solvency Capital Ratio (SCR) of around 270%, more than double the amount of financial means necessary for the fulfilment of their contractual obligations, even in the event of a dramatic deterioration of economic conditions. The normalising of the interest rate environment has led to a further easing of the difficult situation faced by life insurers, with the additional interest provision in life insurance, which was ordered by the FMA in 2013 in light of the prevailing low interest rate phase, and which is now well provisioned at around € 1.5 billion, contributing to this. Nevertheless, life insurance posted another fall in premiums, on this occasion by -4.8%.
The US banking crisis at the start of 2023 as well as recurring geopolitical tensions and turbulence in the global economy kept stock markets on edge and challenged asset managers. Nonetheless, all the relevant stock indices closed the reporting year significantly up (ATX: +14.2%). This upwards trend continued during the first quarter of 2024. Government debt issuances reflect the current interest performance due to their long maturities (+6,3% EU Government Bonds). Asset managers’ investment performance profited from this development. Pensionskassen and corporate provision funds posted positive results during the reporting year, of +6.41% and +4.62% respectively) after heavy losses in 2022 (-9.68% and -7.67% respectively).
Effective and efficient supervision
In 2023, the FMA and its 424 employees supervised 884 licensed or registered undertakings, which collectively manage assets of around € 1,360 billion. During the reporting year, the FMA’s total budget stood at approximately € 89.3 million (2022: € 78.4 million) of which € 10.5 million were collected as transitory items for the Oesterreichische Nationalbank (OeNB) as a partial reimbursment of costs for services provided. € 5.1 million of these costs are covered by a lump-sum from the Federal Government, with € 8.0 million being covered by fees and other income, with the remaining amount being borne on a usage-related basis by the supervised entities. The breakdown of costs is as follows: banks 55.4%; securities supervision 24.5%; insurance undertakings 18.4% and Pensionskassen 1.7%. The increase in costs was largely due to the inflation-based salary increased in accordance with the collective agreement for banks, as well as a modest increase in staff by 16 employees, in order to handle newly conferred duties.
“Fit for Future” transformation programme
“The FMA not only places demands on supervised entities, but is also working hard on itself,” remarked the FMA’s Executive Board: “We are putting ourselves to the test in our ‘Fit for Future 2025’ transformation programme, starting with our values, via our organisation and processes, through to harnessing social and technological change.” The objective of this intensive transformation programme, which this year has entered its decisive implementation phase, is to create an adaptive organisation, which addresses future challenges proactively and flexibly.
FMA Annual Reports can be found on the FMA website at: FMA Annual Reports
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