The financial industry in Austria is substantial. It includes for example 543 licensed credit institutions, 64 investment firms, 48 investment service providers and over 10.000 investment funds. All these financial institutions must be supervised, regulated, monitored and held accountable for their conduct. The Financial Market Authority (FMA) integrates supervision throughout the full life cycle of these institutions starting from issuing industry standard, to licensing, supervision and where needed eventually the correction or even dissolution of the financial institution. This makes the FMA the first authority to intervene in times of financial distress.
Financial market activity is integrated in all layers of society. This originates in the escalation of supply and demand in a global setting. It is furthered by the constant state of evolution of the interlinked disciplines of banking, investment, and insurance. To ensure financial stability and public confidence, regulators implement a range of rules. Accounting standards, monitoring bank capital requirements, and controlling money laundering are just a few examples of the rules involved that also include measures for creditor, consumer and investor protection. In addition to prevention efforts, the FMA consistently sanctions violations of supervisory standards. A robust financial regulatory environment, further protect creditors, investors and consumers through strict resolution planning and the mandatory implementation of the available Austrian Bank Deposit Guarantee Schemes.
Market participants are subject to three steps of supervisory control. These are the internal audit of the institution itself, the supervisory board and auditors, and governmental supervision. Joint operations with the Central Bank of Austria, the OeNB allow the FMA to tighten the links between micro- and macroprudential supervision. Institutional and systemic risk can thus be identified and addressed to enable early intervention and swift resolution. This collaboration is strengthened by the way on-site inspections at supervised credit institutions take place and data relating to this supervision is shared in a single database.
The Bankwesengesetz is the Austrian Banking Act. The Act defines the framework under which credit and financial institution may operate in Austria. It provides the FMA and the Central Bank of Austria, the OeNB, with extensive powers to supervise the financial sector. Section II of the Act describes the licensing requirements for financial institutions and in particular the granting, revocation and lapsing of such a license. These are important parameters for financial institutions in distress and provide creditors and bank account holders with particular insights on how failure of their bank is likely to be handled.
Austria is a member state of the European Union. As a result they participate in the European single market and the free market for financial products and services including the Banking Union. The Single Resolution Mechanism gives a mandate to the European Central Bank (ECB) for credit institutions of significant importance where less significant credit institutions are subject to national regulation and control. The license of Austrian credit institutions can therefore be revoked by the FMA or the ECB.