Recommendation concerning the adjustment of the systemic risk buffer (FMSG/4/2017)

13th meeting, September 15, 2017

In its 12th and 13th meetings, the Financial Market Stability Board (FMSB) reviewed the systemic risk buffer (SRB), which in 2015 it had recommended activating with a view to strengthening the Austrian banking sector.

Since the SRB was activated on January 1, 2016, structural systemic risks have gone down, in particular as Austrian banks both improved their capitalization (without scaling back lending in Austria) and downsized their foreign business, which has resulted in a decrease in the overall size of the Austrian banking sector. Risk-mitigating factors notwithstanding, the structural systemic risk in the Austrian banking sector continues to be elevated. Central risks for the Austrian banking system emanate above all from the still substantial exposures to emerging markets in Europe and from banks’ specific ownership structures, which would not fully ensure the adequate recapitalization of banks in the event of a crisis.

Given that these systemic risks may manifest themselves both at the consolidated and the unconsolidated level and that, in particular within cross-border banking groups, capital allocation in crisis situations would not be flexible, the FMSB recommends that the SRB be applied also at the unconsolidated level, namely for seven credit institutions (see table).

Two credit institutions – DenizBank and Volksbanken Verbund – have been added to the list of banks that are subjected to an SRB. Volksbanken Verbund had been exempt from the evaluation in 2015 given its ongoing restructuring at the time, while DenizBank had not yet exceeded the proportionality criteria when it was first evaluated. For both credit institutions, the systemic risk analysis results in an SRB of 1%. For Volksbanken Verbund, which under the Single Supervisory Mechanism (SSM) is directly supervised by the ECB, the FMSB recommends a transitional provision (maintaining a 0.25% SRB from January 1 to December 31, 2018, and a 0.5% SRB from January 1 to December 31, 2019).

The overall SRB evaluation will be completed by the end of the first half of 2018.

Identified credit institutions, unconsolidated
  Level of systemic risk buffer
  January 1, 2018 January 1, 2019 January 1, 2020
  % of risk-weighted assets
Erste Group Bank 1,00 2,00 2,00
Raiffeisen Bank International 1,00 2,00 2,00
UniCredit Bank Austria AG 1,00 1,00 1,00
Raiffeisenlandesbank Oberösterreich 1,00 1,00 1,00
Raiffeisen-Holding Niederösterreich-Wien 1,00 1,00 1,00
Sberbank Europe 1,00 1,00 1,00
DenizBank AG 1,00 1,00 1,00