Seventh meeting of the Financial Market Stability BoardFebruary 12, 2016
In its seventh meeting on February 12, 2016, the Financial Market Stability Board (FMSB) discussed creating the legal basis for new macroprudential instruments relating to mortgage lending. Moreover, the FMSB recommended setting the countercyclical capital buffer rate at 0% of risk-weighted assets. Further issues under discussions were recent developments in the Austrian financial sector with a focus on current banking sector challenges on the one hand and macroprudential measures at the EU level on the other.
New macroprudential instruments in mortgage lending
Unsustainable mortgage lending coupled with a real estate price boom may increase systemic risks to financial stability. To limit the risks arising from mortgage lending, the FMSB considers it necessary to create the legal basis for additional macroprudential instruments in line with international standards. Although there is, currently, no immediate need for the activation of such instruments, the scope of action for macroprudential supervision should be expanded in good time.
Recommendation for the activation of the countercyclical capital buffer
The FMSB recommends that the Financial Market Authority (FMA) maintain the countercyclical capital buffer rate of 0% of risk-weighted assets also in the third quarter, i.e. as of July 1, 2016. Total outstanding loans relative to GDP have fallen well below their long-term trend, and Austrian banks continue to have sound balance sheets in terms of their unconsolidated aggregate leverage ratios (tier 1 capital relative to total assets). Furthermore, the Austrian current account does not point to any major imbalances in terms of economic growth.
Current banking sector challenges
The FMSB continued its discussion of the implications of the current low interest rate environment. Moreover, it examined the systemic risks arising from deposit-based investments in third countries and developments in the prices and volumes of bonds issued by Austrian banks.
Information on the FMSB
The FMSB, which became operational in 2014, works toward strengthening financial stability. Its members are representatives of the Austrian Federal Ministry of Finance, the Fiscal Advisory Council, the Financial Market Authority (FMA) and the Oesterreichische Nationalbank (OeNB). The FMSB may issue recommendations to the FMA and provide risk warnings.