## 1autea2026003

## Source details

**Canonical URL:** [1autea2026003](https://www.imf.org/-/media/files/publications/cr/2026/english/1autea2026003.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2026/english/1autea2026003.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2026/english/1autea2026003.pdf.json)

---

### Executive summary — background and macrofinancial context
- FSAP conducted amid "a highly uncertain global geopolitical and economic environment and the slow recovery of the domestic economy."
- Austria started to recover from 2025 after two years of recession; pickup in 2026 growth revised downward due to the Middle East conflict.
- Key external downside risks:
  - Further escalation of geopolitical tensions.
  - Trade policy uncertainty and higher barriers to trade.
  - A sustained energy shock that could resume high inflation dynamics and pressure energy intensive industries.
- Domestic two-sided growth risks partly hinge on whether currently high household savings rates normalize gradually as expected.
- Financial sector composition:
  - Dominated by a "large and complex banking sector with significant exposure to CESEE countries."
  - Investment funds and insurance sectors are smaller but growing.

### Banking sector strength, risks, and vulnerabilities
- Current system strengths (end-2025 / relevant datapoints):
  - Banking sector described as "well capitalized, highly profitable, and liquid."
  - Return on Equity: 9.7 percent (end-2025).
  - Average common equity tier 1 (CET1) ratio: 19 percent (end-2025).
  - Weighted liquidity coverage ratio (LCR): 185 percent (September 2025).
  - Consolidated banking sector balance sheets: 255 percent of GDP (end-2025).
  - Consolidated ratio of nonperforming loans (NPL) to total gross loans: 3 percent (end-2025).
  - NPL ratio on CRE loans: 8.3 percent (end-2025).
- Key risks and vulnerabilities:
  - Subdued economic activity and persistent weak domestic demand.
  - Elevated exposure to CRE lending and construction sector stress.
  - Shocks in CESEE countries affecting profitability and asset quality.
  - Potential further rise in NPLs on CRE loans could materially impact bank profitability.
  - NBFI interconnectedness with banks and exposures to CRE and CESEE warrant attention.

### Solvency and liquidity stress testing — scenarios, sample, and horizon
- Scenarios:
  - Baseline and two adverse scenarios: a recessionary scenario and a geopolitical (inflationary) scenario; both include international trade frictions, lower aggregate demand, financial stress, endogenous monetary policy, and additional CESEE shocks.
  - Adverse scenarios include severe and sustained real estate price shocks calibrated as in the 2025 EBA stress tests.
  - Adverse scenarios were defined prior to the 2026 Middle East conflict and are "more severe than the 2026 Article IV forecasts."
- Sample and data:
  - 311 banks: 7 SIs, Unicredit’s subsidiary in Austria, and 303 Austrian LSIs.
  - Data vintage: October 2025 regulatory data; stress test horizon: 3-year (2026–28).
  - OeNB’s ARNIE stress testing infrastructure used.

### Aggregate solvency stress test results and drivers
- Aggregate outcomes:
  - Aggregate capital ratio remains above minimum capital requirement in both adverse scenarios.
  - System-level CET1 ratio decline:
    - 465 basis points under the recessionary scenario.
    - 391 basis points under the geopolitical scenario.
  - CET1 decline for SIs:
    - 500 basis points under the recessionary scenario.
    - 424 basis points under the geopolitical scenario.
  - The capital ratio decline is smaller in the geopolitical scenario than in the recession scenario because net interest income compresses more in the recessionary scenario despite larger credit risk in the geopolitical scenario.
- P&L and risk drivers:
  - Net interest margins decline more in the recession scenario.
  - Fees and commission income decline in adverse scenarios.
  - Provisions increase substantially, especially in 2026 in both adverse scenarios.
  - Market risk shocks are comparatively small but remain significant.
- Forced-sale valuation exercise (top eight exposure countries per bank, 24 countries total) — aggregate averages (percent of RWA and percent of CET1) and aggregate cumulative net (EUR billions) reported:
  - In percent of RWA, averages: 2 weeks outflows: 1.0%; 30 days outflows: 1.3%; idiosyncratic columns: 2.4% and 3.9%.
  - In percent of CET1, averages: 5.6%, 7.7%, 13.7%, 22.2%.
  - In percent of RWA, standard deviations: 2.9%, 3.7%, 3.7%, 5.0%.
  - In percent of CET1, standard deviations: 16.3%, 21.2%, 20.7%, 28.1%.
  - Aggregate cumulative valuations (EUR billions): 23, 35, 75, 109 (figure summary).

### Banks breaching requirements and buffer usage
- Breaches and buffer usage:
  - Geopolitical scenario: three small LSIs breach Total SREP Capital Requirement (TSCR), accounting for 0.36 percent of banking assets.
  - Recession scenario: one small LSI breaches TSCR, accounting for less than 0.2 percent of banking assets.
  - Banks breaching requirements including buffers:
    - Geopolitical scenario: twelve banks (including three SIs), accounting for 9.5 percent of total banking assets of the sample.
    - Recession scenario: twelve banks (including three SIs), accounting for 9.1 percent of total banking assets of the sample.
  - Weighted average gaps to the requirement for those banks:
    - Geopolitical scenario: 1.4 percent of risk weighted assets on average.
    - Recession scenario: 2.2 percent of risk weighted assets on average.

### Liquidity testing and cash-flow stress tests
- LCR results:
  - Reported asset-weighted system LCR: 185 percent (September 2025).
  - Under two stress scenarios:
    - Scenario 1: asset-weighted LCR falls to 149 percent.
    - Scenario 2: asset-weighted LCR falls to 133 percent.
  - Market share of banks with LCR below 100 percent:
    - Scenario 1: 7 percent (only LSIs).
    - Scenario 2: 35 percent (LSIs and SIs).
  - Asset-weighted LCRs in EUR and in CZK remain above 100 percent across all scenarios.
- Cash-flow stress tests:
  - General risk aversion scenario: aggregate net liquidity position remains positive; market share of banks with liquidity shortfalls limited to 10 percent at the 12-month horizon.
  - Idiosyncratic bank-run scenario: system maintains positive aggregate net liquidity position up to three months; position turns negative beyond this horizon, with market share of shortfall banks accumulating 81 percent by end of 12-month period.
- Role of systemwide support:
  - Reallocating liquidity surpluses in liquidity associations and utilizing pre-contributed IPS funds reduce liquidity shortfalls in the decentralized sector.
  - In LCR stress tests, systemwide support restores regulatory compliance for all member banks with LCR below 100 percent.
  - In cash-flow tests, support closes shortfalls under general risk aversion at all horizons and fully offsets member shortfalls in the first two months under idiosyncratic runs; limits reached by end of sixth month as buffers deplete.

### Liquidity-to-solvency interaction and fire-sale impacts
- Solvency impacts of forced sales of amortized cost fixed income securities (seven SIs and Unicredit’s subsidiary):
  - Milder scenario: solvency loss about 1 percent of RWAs.
  - Idiosyncratic scenario with outflows sustained for a month: solvency loss reaches 3.9 percent of RWAs.
- Such liquidity shocks could cause additional banks to breach their hurdle rate including buffers.
- Country-specific term premium shocks during 2026Q1 (recession scenario) include examples: AT 1.46, FR 2.3, DE 1.42, IT 4.6, ES 4.8, PL 4.94, US 2.29.

### Non-financial private sector stress tests and household micro-simulations
- Publicly listed NFCs:
  - Debt-at-risk (Interest Coverage Ratio below one) would increase to about 60-70 percent of total debt for two years under adverse scenarios and decline in the third year.
- Households:
  - Mortgages without limits on LTVs at origination:
    - Starting default probability: 1.27 percent.
    - After three years: 2.12 percent (geopolitical scenario); 2.67 percent (recession scenario).
  - Micro-simulation HFCS 2023 severe scenario:
    - About 10 percent of households become overburdened, putting 10 percent of household debt at risk.
    - Impact on bank capital could be around 20 bps.
- Policy counterfactual on LTV limits:
  - A binding 90 percent limit on LTVs at origination would materially reduce credit risk:
    - 3.02 percent decline in cumulative defaults after 5 years in the baseline.
    - 4.03–4.64 percent decline in cumulative defaults after 5 years in the adverse scenarios.
    - Assuming no cures, reduction in defaulted mortgages could reach up to 8.68 billion euros in the recession scenario after 5 years.

### Contagion, interconnectedness, and CESEE exposures
- Interbank network:
  - Austrian interbank exposures are highly concentrated, but the system can absorb most hypothetical defaults; contagion risks originate from a limited number of large banks.
  - Loss from hypothetical default of the most contagious bank is about four times that of the second most contagious bank and about ten times the average of the most contagious twenty banks.
  - Amplification via cascade effects is large for the most contagious bank.
- IPS effects:
  - IPS mechanisms generally dampen vulnerabilities for smaller members but can amplify interconnections and contagion risks when larger banks are stressed due to disproportionate contribution requirements and potential fire-sale losses.
  - Recommendation: develop dedicated mitigation framework within resolvability assessments to address contagion risks from solvency and liquidity channels and from MREL cross-holdings.
- CESEE exposure magnitudes (SIs’ total assets before credit mitigation — Grand Total 18.5 percent of assets):
  - Czech Republic: 7.2
  - Hungary: 3.0
  - Romania: 2.7
  - Slovakia: 2.0
  - Croatia: 1.5
  - Poland: 0.9
  - Serbia: 0.5
  - Slovenia: 0.2
  - Ukraine: 0.2
  - Albania, Bosnia and Herzegovina, Bulgaria, Montenegro, North Macedonia: 0.1 or 0.0 as reported.

### Macroprudential framework, governance, and policy recommendations
- Institutional recommendations:
  - Increase the formal influence of the central bank (OeNB) in macroprudential policy decisions.
  - Expand the power to set precautionary policies in law (enable precautionary policies without requiring clear evidence of risk build-up).
  - Reintroduce BBMs as permanent binding tools (LTC, DSTI, loan term limit).
  - Specific: "Macroprudential decision-making of the Financial Market Stability Board (FMSB) should be enhanced by reducing the voting power of the Fiscal Advisory Council (FAC) and increasing the voting power of the OeNB, as a minimum."
- Transparency and buffers:
  - Strengthen guidelines-based framework short term by increasing transparency on banks’ mortgage credit standards.
  - Consider adopting a positive neutral rate (PNR) countercyclical buffer (CCyB) so banks have adequate releasable buffers.
- Current macroprudential settings:
  - CCyB: Set at 0 percent; new method applied as of October 2025.
  - SyRB: 14 banks: 0.5 - 1 percent.
  - Sectoral SyRB for CRE: 1 percent (all banks) introduced July 2025; will be 2 percent from July 2026 and 3.5 percent in July 2027.
  - O-SII buffer: 7 consolidated; 8 unconsolidated: 0.45 percent - 1.75.
  - CCoB: Set at 2.5 percent.
  - Borrower-based tools (status): Binding measures expired July 2025 and replaced by Supervisory Guidelines; previous binding limits: Maximum LTV ratio of 90 percent; DSTI maximum 40 percent; Maximum loan term 35 years; Exemption quota 20 per cent overall.

### LSI regulation and supervision — effectiveness and gaps
- Supervision:
  - Supervision of LSIs strengthened since prior FSAP; credit risk and operational resilience prioritized; proportionality applied.
  - FMA and OeNB have strong credibility and effective moral suasion.
- Governance and resourcing concerns:
  - Composition of the FMA Supervisory Board raises concerns about operational independence due to Ministry and industry representation.
  - February 2026 legal amendment increased FMA’s budget cap by 20 percent, but resource constraints persist, especially for on-site inspections; OeNB industry-funding reduced after amendment.
  - Recommendation: conduct forward-looking, joint assessment of staffing and budget needs for FMA and OeNB to preserve supervisory effectiveness and crisis readiness.
- Remaining shortcomings:
  - Gaps in prudential requirements and supervision of LSIs’ major acquisitions and related-party transactions (to be addressed with CRD VI transposition).
  - No legal disclosure requirement for reasons for dismissal of FMA Executive Board members (to be addressed by CRD VI transposition).
  - FMA lacks legal right to access working papers of LSIs’ external auditors.

### Insurance sector supervision — priorities and recommendations
- Sector profile:
  - Assets: 27 percent of GDP (medium-sized EU market).
  - Highly concentrated: top six of 32 Solvency II insurers hold 60 percent of premiums.
  - Non-life insurance (without health) accounts for 64 percent of gross premiums.
- Risks:
  - Persistent inflation, volatile interest rates, rising liquidity and interconnectedness risks, climate-related exposures, digitalization challenges.
  - Liquidity pressures from negative technical cash flows and higher holdings of less liquid assets.
- Supervisory recommendations:
  - Strengthen resources, governance, and supervisory tools to meet Solvency II review and IRRD requirements.
  - Apply structured reviews of control functions in smaller insurers.
  - Upgrade assessment tools for board members and key functions; introduce model drift analysis.
  - Strengthen supervision of internationally active groups and cross-border information-sharing.
  - Broaden macroprudential reporting for insurance sector.

### Investment funds (IFs) and Real Estate IFs — findings and recommendations
- IF sector:
  - IFs manage 16 percent of total assets in the Austrian financial system.
  - Most IF managers are part of banking groups.
  - IFs largely invested in fixed income, followed by equities and other IFs.
- Liquidity management:
  - Austria lagged peers in adoption of Liquidity Management Tools (LMTs); asset managers selected redemption gates and extension of notice periods as national market practice to comply with EU rules requiring selection of at least two LMTs per fund.
  - Recommendation: continue monitoring adoption and effective implementation of LMTs by asset managers and depositaries; emphasize communication strategy to investors.
  - Medium-term recommendation: encourage and support industry adoption of anti-dilution LMTs where appropriate.
- REIFs:
  - REIF sector size: EUR 7 billion.
  - Retail REIFs (EUR 5.7 billion NAV) must hold minimum 10 percent liquid assets; as of end-2024 only 14 percent of their portfolio could be liquidated within a year while offering daily liquidity.
  - REIF net outflows since end-2022: EUR 4 billion (nearly 40 percent of AUM).
  - Compulsory 12-month notice periods and a 12-month holding period for REIFs will enter into force in January 2027.
  - Recommendation: authorities should "refrain from introducing a redemption hurdle rate" for REIFs.

### Financial integrity, AML/CFT, and supervisory enhancements
- FATF developments:
  - FATF adopted the Fund Staff-led Assessment of Austria’s AML/CFT framework as FATF’s Mutual Evaluation Report of Austria in February 2026; the Mutual Evaluation Report was published in April 2026.
- Progress noted:
  - Strengthened legal and regulatory framework.
  - Highly effective approach to ensure transparency of beneficial ownership information.
  - Strengthened supervision of the financial sector and of virtual asset service providers.
- Remaining recommendations:
  - Increase risk-based inspections and strengthen group-wide supervision.
  - FMA should systematically collect information to deepen sector-risk understanding, including activities of financial groups in the CESEE region.
  - Enhance oversight of gatekeepers (lawyers, accountants, real estate agents) by designated supervisors.
  - FMA recently took over monitoring and enforcement of targeted financial sanctions; FSAP recommends adequate resourcing for this function.

### Financial safety net, crisis preparedness, Deposit Insurance Scheme (DIS) and ELA
- Crisis management and recovery/resolution:
  - Crisis management responsibilities are well defined across FMA, OeNB, and BMF with handbooks, recovery and resolution planning, and regular crisis simulations.
  - Recovery planning for LSIs is risk-based and proportionate; resolution regime is comprehensive and increasingly operational.
- Recommendations to strengthen framework:
  - Establish a permanent crisis management forum at senior level (standing interagency Crisis Management Forum — CMF).
  - Strengthen DIS payout capacity by:
    - Shifting to quarterly contributions.
    - Prohibiting DIS placements with member institutions.
    - Establishing a public backstop from the BMF.
    - Removing provisions that allow DIS funds to be used for preventive measures ("open bank assistance").
  - Explicitly provide for purchase and assumption transactions in the bankruptcy regime as an alternative to depositor payouts.
  - OeNB should enhance ex-ante operational preparedness for Emergency Liquidity Assistance (ELA), including collateral prepositioning and documented solvency/viability assessment methodology; ELA without sufficient collateral should only be provided under an explicit government guarantee.

### Institutional Protection Schemes (IPS) — structure, benefits, and risks
- Two IPSs covering cooperative and savings bank sectors; approved under Article 113(7) CRR:
  - Raiffeisen IPS (ÖRS): includes RBI, eight regional Landesbanken, and 265 local Raiffeisen primary banks.
  - Sparkassen IPS (s-Haftung): comprises Erste Group Bank AG, Erste Bank der Österreichischen Sparkassen AG, and 48 savings banks.
- IPS features:
  - Risk-based early-warning systems, preventive liquidity and solvency support financed by prefunded resources and member contributions.
  - IPS and DIS funds are legally and operationally segregated.
  - Prudential benefits (e.g., 0 percent risk weight for qualifying intragroup exposures) lower funding costs but increase interdependence and contagion risks.
- Recommendations:
  - Incorporate IPS channels in solvency and liquidity stress tests and contagion analysis (OeNB — ST).
  - Develop dedicated mitigation framework within resolvability assessments to address contagion risks from solvency, liquidity channels, and MREL cross-holdings (FMA — MT).

### Timing and categorization of selected key recommendations (I: <1 year; ST: 1–2 years; MT: 3–5 years)
- Systemic Risk Analysis and Stress Testing:
  - Include IPS channels in solvency and liquidity stress tests and contagion analysis — OeNB — ST
  - Broaden use of OeNB stress testing framework beyond classical stress tests — OeNB — ST
  - Enhance risk monitoring of banks’ large exposures to NBFIs — OeNB — MT
  - Enhance monitoring of CESEE large exposures and improve surveillance/reporting — OeNB, FMA — ST
- Macroprudential Framework and Policies:
  - Strengthen macroprudential framework by increasing OeNB voting power and reducing FAC voting power — BMF — ST
  - Amend Banking Act to allow FMA to set macroprudential regulations on a precautionary basis for capital and BBMs — BMF — ST
  - Make borrower-based measures (LTC, DSTI, loan term limit) permanent regulation — BMF — ST
- LSI Regulation and Supervision:
  - Review legislation to narrow BMF’s oversight role and remove ministry/industry participation in FMA Supervisory Board — BMF — I
  - Reconsider staffing and funding strategy affecting LSI supervision; conduct forward-looking review of resource needs — BMF / FMA / OeNB — I
  - Substitute state commissioner function with enhanced FMA and OeNB engagement with LSIs’ supervisory boards — BMF / FMA — ST
  - Introduce provisions requiring supervisory approval/notification of major acquisitions by LSIs; upgrade prudential regulation on related-party transactions — BMF / FMA / OeNB — ST
- Insurance Regulation and Supervision:
  - Implement Solvency II review and IRRD changes to add macroprudential tools and improve resolution/recovery — BMF / FMA — ST
  - Continue in-depth assessment of control functions, including smaller insurers — FMA — I
  - Expand regular insurance sector macroprudential reporting — FMA — I
- Investment Funds:
  - Continue monitoring adoption and implementation of LMTs — FMA — ST
  - Encourage adoption of anti-dilution LMTs, where appropriate — FMA — MT
  - Refrain from introducing a hurdle rate or any exemption to the notice period for REIFs — BMF — ST
- Financial Integrity:
  - Address recommendations in the 2026 FATF Mutual Evaluation Report, including strengthened supervision of CESEE activities and gatekeepers — BMF — MT
- Bank Resolution, Crisis Management, Financial Safety Net:
  - Designate a standing interagency crisis management forum at senior level — BMF, FMA, OeNB — ST
  - Strengthen DIS payout capacity by moving to quarterly contributions, prohibiting placements with members, establishing BMF public backstop, and removing DIS use for preventive measures — FMA, BMF, DISs — ST
  - Provide for purchase and assumption transactions in the bankruptcy regime as alternative to costly payouts — FMA, MoJ, BMF — MT
  - Develop dedicated mitigation framework for resolvability assessment of IPS to cover contagion risk from solvency, liquidity, and MREL cross-holdings — FMA — MT

*Source: IMF Financial Sector Assessment Program (FSAP) — Austria: Executive Summary and selected sections from 1autea2026003*

### EXECUTIVE SUMMARY __________________________________________________________________________ 7

### EXECUTIVE SUMMARY

### Background and macrofinancial context
- FSAP took place against "a highly uncertain global geopolitical and economic environment and the slow recovery of the domestic economy."
- Economy started to recover from 2025 after two years of recession; pickup in 2026 growth has been revised downward as a result of the Middle East conflict.
- Key external downside risks: further escalation of geopolitical tensions, trade policy uncertainty, higher barriers to trade, and a sustained energy shock that could resume high inflation dynamics and pressure energy intensive industries.
- Domestic two-sided growth risks depend in part on whether currently high household savings rates normalize in a gradual manner as expected.
- Financial sector composition: "large and complex banking sector with significant exposure to CESEE countries" dominates; investment funds and insurance sectors are smaller but growing.

### Banking sector strength, risks, and vulnerabilities
- Despite headwinds and a rise in NPLs in recent years in commercial real estate (CRE), the banking sector is "well capitalized, highly profitable, and liquid."
- Bank credit growth: low due to weak demand and tight monetary policy.
- Key risks: subdued economic activity, exposure to CRE lending, and shocks in the CESEE region.
- CESEE disruptions could affect Austrian banks' profitability; broad geographic exposure also provides diversification benefits.
- Further rise in NPLs on CRE loans could have a more pronounced impact on banks’ profitability.
- Risks from relatively small NBFI sector appear contained but warrant attention because of interconnectedness with banks and CRE and CESEE exposures.

### Solvency and liquidity stress testing and systemic analysis
- Bank solvency stress tests: banks are resilient under "severe but plausible adverse macroeconomic scenarios," with "the aggregate capital ratio of the banking system remaining above the capital requirements."
- Capital ratio outcomes:
  - "The capital ratio decline is smaller in the inflationary geopolitical shock scenario than in the severe recession scenario."
  - "The decline in capital ratios is larger for significant institutions (SIs) than for LSIs."
- Stress tests were based on information available prior to the recent Middle East conflict; the FSAP notes stress test scenarios are more severe than the recent downgrade of economic forecasts.
- Liquidity position:
  - "Banking system maintains high liquidity buffers and can withstand significant liquidity outflows."
  - Standard liquidity metrics are above regulatory requirements for SIs and LSIs and remain so under stress scenarios.
  - Cash-flow stress tests: banks can withstand significant liquidity outflows by drawing down counterbalancing capacity over extended horizons exceeding 30 days under a generalized risk aversion scenario and an idiosyncratic bank run scenario.
- Additional analyses:
  - IPS ex-ante funds appear sufficient to recapitalize banks to minimum requirements under adverse scenarios.
  - Large banks have significant large exposures to NBFIs, but concentration risks are mitigated by credit risk mitigation measures.
  - Counterfactual analysis shows borrower-based measures (BBMs) "notably reduce credit risk over time."
  - Contagion stress test: Austrian interbank exposures are highly concentrated, but the system can absorb most hypothetical defaults; only a limited number of large banks would create interconnectedness risks.

### Macroprudential framework and policy recommendations
- Recommended institutional changes:
  - Increase the formal influence of the central bank (OeNB) in macroprudential policy decisions.
  - Expand the power to set precautionary policies in law.
  - Reintroduce BBMs as a permanent tool.
- Specific recommendation: "Macroprudential decision-making of the Financial Market Stability Board (FMSB) should be enhanced by reducing the voting power of the Fiscal Advisory Council (FAC) and increasing the voting power of the OeNB, as a minimum."
- Legal constraint: ability to take certain precautionary actions is precluded in the law, requiring clear evidence of risk build-up; amend law to enable a more forward-looking approach.
- Data and buffers:
  - Recently introduced comprehensive real estate data dashboards are welcomed.
  - Consider adopting a positive neutral rate (PNR) countercyclical buffer (CCyB) so banks have adequate releasable buffers.

### Regulation and supervision of LSIs
- Supervision has been strengthened since the previous FSAP, with appropriate prioritization of credit risk and operational resilience and effective use of proportionality.
- Governance and resourcing issues:
  - Composition of the FMA Supervisory Board raises concerns relative to international standards on operational independence because of its role in budget approval and senior appointments.
  - February 2026 legal amendment increased FMA’s budget cap, but resource constraints persist, especially for on-site inspections, and the OeNB has seen industry-funding reduced.
- Recommendation: conduct a forward-looking, joint assessment of staffing and budget needs for FMA and OeNB to preserve supervisory effectiveness and crisis readiness.
- Additional recommendations: address gaps in prudential requirements and supervision of LSIs’ major acquisitions and related-party transactions; phase out state commissioners on banks’ boards.

### Insurance sector supervision
- Insurance supervision should be strengthened by enhancing resources, governance, and supervisory tools to address rising risks and upcoming regulatory demands.
- Implementation needs: close cooperation with government for effective implementation of IRRD and Solvency II review.
- Supervisory priorities:
  - More structured reviews of control functions in smaller insurers.
  - Upgraded assessment tools for board members and key functions.
  - Introduction of model drift analysis.
  - Strengthen supervision of internationally active groups and enhance cross-border information-sharing.
  - Broaden macroprudential reporting for the insurance sector.

### Investment funds (IFs) and Real Estate IFs
- IF sector is adequately supervised overall; recent increased focus on liquidity risk management.
- Lagging adoption of Liquidity Risk Management Tools (LMTs) compared to European peers.
- Recommendations:
  - Continue monitoring adoption and effective implementation of LMTs by asset managers and depositaries, including communication strategy to investors.
  - Encourage and support industry adoption of anti-dilution LMTs where appropriate (medium-term).
  - For Real Estate IFs: the introduction of mandatory 12-month notice periods is welcome; authorities should "refrain from introducing a redemption hurdle rate."

### Financial integrity and AML/CFT
- FSAP reflects findings of the 2026 FATF Mutual Evaluation Report.
- Progress noted in improving AML/CFT effectiveness via legal/regulatory enhancements and strengthened supervision.
- Targeted recommendations to further improve risk identification and mitigation, including stronger risk-based supervision of financial groups’ activities in the CESEE region and significantly enhanced oversight of gatekeepers (e.g., lawyers, accountants, real estate agents).

### Financial safety net, crisis preparedness, and Deposit Insurance Scheme (DIS)
- Crisis management responsibilities: well defined across FMA, OeNB, and BMF, supported by handbooks, recovery and resolution planning, and regular crisis simulations.
- Recovery planning for LSIs: risk-based and proportionate; resolution regime: comprehensive and increasingly operational.
- Recommendations to strengthen framework:
  - Establish a permanent crisis management forum at senior level.
  - Strengthen DIS payout capacity by: (i) shifting to quarterly contributions, (ii) prohibiting placements with member institutions, (iii) establishing a public backstop from the BMF, and (iv) removing provisions that allow DIS funds to be used for preventive measures ("open bank assistance").
  - Explicitly provide for purchase and assumption transactions in the bankruptcy regime as an alternative to depositor payouts.
  - Establish a credible BMF public backstop.

### Institutional Protection Schemes (IPS) and interconnectedness risks
- IPS aim to safeguard member liquidity and solvency and prevent insolvency.
- Mutual support arrangements and preferential prudential treatment increase financial interdependence within IPS and between members and the central institution.
- While interconnectedness may enhance going-concern stability, it "gives rise to material contagion risks in stress scenarios."
- Recommendation: develop a dedicated mitigation framework within resolvability assessments to address contagion risks arising from solvency and liquidity channels and MREL cross-holdings.

### Timing and categorization of key recommendations (selected from Table 1)
- Definitions: I: Immediate (I): less than one year; Short-term (ST): 1–2 years; and Medium-term (MT): 3–5 years.
- Systemic Risk Analysis and Stress Testing:
  - 1 Include IPS channels in solvency and liquidity stress tests and contagion analysis, and integrate liquidity channels in the contagion analysis — OeNB — ST
  - 2 Broaden the use of the OeNB stress testing framework for scenario analyses beyond classical stress tests — OeNB — ST
  - 3 Enhance risk monitoring of banks’ large exposures to NBFIs — OeNB — MT
  - 4 Enhance monitoring of CESEE large exposures and further improve surveillance and reporting — OeNB, FMA — ST
- Macroprudential Framework and Policies:
  - 5 Strengthen macroprudential framework by increasing OeNB voting power and reducing FAC voting power — BMF — ST
  - 6 Amend the Banking Act to allow FMA to set macroprudential policy regulations on a precautionary basis for capital and borrower-based measures — BMF — ST
  - 7 Make borrower-based measures (LTC, DSTI and loan term limit) a permanent regulation — BMF — ST
- LSI Regulation and Supervision:
  - 8 Review legislation to narrow BMF’s role in oversight and remove ministry and industry participation in FMA Supervisory Board — BMF — I
  - 9 Reconsider restrictive staffing and funding strategy affecting LSI supervision at FMA and OeNB; conduct forward-looking review of resource needs — BMF / FMA / OeNB — I
  - 10 Substitute the state commissioner function with enhanced FMA and OeNB engagement with LSIs’ supervisory boards — BMF / FMA — ST
  - 11 Introduce provisions requiring supervisory approval/notification of major acquisitions by LSIs, upgrade prudential regulation on related-party transactions — BMF / FMA / OeNB — ST
- Insurance Regulation and Supervision:
  - 12 Implement European legislative changes (Solvency II review and IRRD) to add macroprudential tools and improve resolution and recovery — BMF / FMA — ST
  - 13 Continue in-depth assessment of control functions including smaller Solvency II insurers and develop a structured risk-based proportionate approach — FMA — I
  - 14 Expand regular insurance sector macroprudential reporting to include analysis of broad trends — FMA — I
- Investment Funds:
  - 15 Continue to monitor adoption of LMTs and effective implementation — FMA — ST
  - 16 Encourage and support industry adoption of anti-dilution LMTs, where appropriate — FMA — MT
  - 17 Refrain from introducing a hurdle rate or any exemption to the notice period for REIFs — BMF — ST
- Financial Integrity:
  - 18 Address recommendations in the 2026 FATF Mutual Evaluation Report, including strengthened supervision of CESEE activities and gatekeepers — BMF — MT
- Bank Resolution, Crisis Management, and Financial Safety Net:
  - 19 Designate a standing interagency crisis management forum at a senior level — BMF, FMA, OeNB — ST
  - 20 Strengthen DIS payout capacity by moving to quarterly contributions, prohibiting placements with members, establishing BMF public backstop, and removing DIS use for preventive measures — FMA, BMF, DISs — ST
  - 21 Provide for purchase and assumption transactions in the bankruptcy regime as an alternative to costly payouts — FMA, MoJ, BMF — MT
  - 22 Develop a dedicated mitigation framework for resolvability assessment of IPS to cover contagion risk from solvency and liquidity and MREL cross holdings — FMA — MT

*Source: IMF Financial Sector Assessment Program (FSAP) — Austria: Executive Summary*

### 1.      The Austrian economy experienced two years of recession in 2023–24, triggered by the

### 1.      The Austrian economy experienced two years of recession in 2023–24, triggered by the

### Macroeconomic shock, recession, and fiscal impact
- Austria experienced two years of recession in 2023–24, triggered by the energy-price shock, subsequent EA monetary tightening, and weak growth in Germany.
- The downturn in activity was broad-based with declines in manufacturing, construction, and key services.
- Core inflation remained high and wages rose rapidly adjusting to past high inflation.
- Strong policy responses to the shocks led to a significant rise in the fiscal deficit, with public debt rising to nearly 82 percent of GDP in 2025.
- Growth staged a modest recovery in 2025.
- The Middle East conflict resulted in a downward revision of economic growth by 0.5 percentage points for 2026.
- A somewhat stronger recovery is projected from 2027 onwards as domestic demand strengthens with monetary policy normalization and exports gradually recover.
- External downside risks highlighted:
  - Further escalation of geopolitical tensions.
  - Trade policy uncertainty and higher barriers to trade that could reduce demand for Austrian exports and for sectors that supply exporters.
  - A sustained energy price shock from the Middle East conflict could set off resumed high inflation dynamics and put energy intensive industries under pressure.
- Domestic risks to growth are two-sided, in part hinging on whether elevated household savings rates normalize gradually as expected.
- Upside potential: sustained fiscal reforms could increase fiscal space and create room for structural reforms to lift weak medium term potential growth.

### Household and corporate demand, savings, and indebtedness
- The recovery in demand is projected to be subdued in both the household and corporate sectors.
- The persistently high household savings rate helped reduce household indebtedness significantly.
- Household debt relative to net disposable income declined from 94 percent in 2019 to 74 percent at end-June 2025.
- Household debt is relatively low in international comparison.
- Investment growth: gradual strengthening is anticipated from 2026 onwards with monetary policy normalization.

### Macro-financial developments (key indicators and trends)
- Overall credit growth was 2.6 percent y-o-y in March 2026, with tentative signs of a recovery emerging, including in house purchases.
- Mortgage lending seems to have bottomed out, and corporate lending growth has been picking up slowly.
- The share of variable rate loans in total new loans (H1 2025):
  - Households: 39 percent.
  - Companies: 77 percent.
- Banking sector consolidated balance sheets stood at 255 percent of GDP at end-2025.
- Assets under management at end-2025:
  - Investment funds: 50 percent of GDP.
  - Insurance companies: 27 percent of GDP.
- Unconsolidated banking sector assets amounted to 192 percent of GDP at end-2025.
- Profitability and capital (end-2025):
  - Return on Equity: 9.7 percent.
  - Average common equity tier 1 (CET1) ratio: 19 percent.
  - Weighted liquidity coverage ratio (LCR): 185 percent (September 2025).
- Credit quality (end-2025):
  - Consolidated ratio of nonperforming loans (NPL) to total gross loans: 3 percent.
  - NPL ratio on CRE loans: 8.3 percent.
- Real estate and lending:
  - Borrower-based measures (BBMs) for RRE financing introduced August 2022 were allowed to expire in July 2025 and replaced by legally non-binding lending guidelines in line with previous BBM limits.
- Private sector credit growth and sectoral notes:
  - Bank credit growth had been low due to weak demand and tight monetary policy, but corporate lending growth has been picking up slowly due to weakness particularly in demand for long-term loans to finance investments.

### Financial sector structure and segmentation
- The financial sector is dominated by banks; investment funds and insurance sectors are smaller but interconnected.
- Banks’ consolidated balance sheets: 255 percent of GDP at end-2025.
- Investment funds and insurance assets under management: 50 and 27 percent of GDP, respectively, at end-2025.
- The financial system composition (2025) components (in billions of EUR): Banks (consolidated), Insurance companies, Investment funds, Pension funds, Severance funds (exact values not provided in the excerpt).
- Banking market structure:
  - Three main segments: (i) Sparkassen forming Erste Bank Group AG; (ii) Raiffeisen segment; (iii) Volksbanken segment.
  - 7 Significant Institutions (SIs) and around 300 Less Significant Institutions (LSIs) accounting for around 28 percent of banking sector assets.
  - Number of LSIs has declined significantly over the last 10 years.
  - LSIs often have complex ownership structures and interlinkages via institutional protection schemes, cross-guarantee schemes and liquidity associations.
- CESEE exposures:
  - Austrian SIs have strong focus on CESEE markets, with key exposures in the Czech Republic, Slovakia, Romania, followed by Hungary, Croatia and Slovenia.
  - CESEE operations comprised about a quarter of the assets and around 40 percent of the total profits of the Austrian banking sector in 2025.
  - A recent acquisition will increase the presence of Austrian banks in Poland.

### Institutional Protection Schemes (IPS)
- Austria has two IPSs covering cooperative and savings bank sectors; both approved by competent authorities (ECB and FMA for Raiffeisen IPS; ECB for Sparkassen IPS) under Article 113(7) CRR.
- Raiffeisen IPS managed by Österreichische Raiffeisen-Sicherungseinrichtung eGen (ÖRS):
  - Includes Raiffeisen Bank International AG (RBI), eight regional Landesbanken, and 265 local Raiffeisen primary banks.
  - Centralization completed by 2021 yields a single IPS with extended aggregated reporting and monitoring.
- Sparkassen IPS managed by s-Haftungs GmbH (s-Haftung):
  - Comprises Erste Group Bank AG, Erste Bank der Österreichischen Sparkassen AG, and all Austrian savings banks (Sparkassen) for a total of 48 institutions.
- IPS features:
  - Risk-based early-warning systems with continuous monitoring, peer reviews, and escalation procedures.
  - Provide preventive liquidity and solvency support financed by prefunded resources and member contributions.
  - Recognized as a deposit guarantee and investor compensation scheme (DIS); IPS and DIS funds are legally and operationally segregated.
- Structural considerations:
  - Raiffeisen sector has an “inverted pyramid” ownership structure (primary banks own central institutions, which own RBI) eliminating consolidation requirement; ÖRS prepares extended aggregated balance sheet per Article 113(7)(e) CRR.
  - Erste Group Bank AG consolidates prudential reporting for the Sparkassen sector with s-Haftung as separate legal entity.
  - IPS membership confers prudential benefits such as zero percent risk weight for qualifying intragroup exposures, lowering funding costs, but increases financial interdependence and contagion risks in stress scenarios.

### Insurance sector and investment funds
- Insurance sector:
  - Assets at 27 percent of GDP: a medium-sized EU market.
  - Highly concentrated: top six of 32 Solvency II insurers hold 60 percent of premiums.
  - Non-life insurance (without health) accounts for 64 percent of gross premiums and grew 7 percent annually over four years, with motor coverage as the primary segment.
  - Life insurance and health grew 1.75 percent per year on average, remain profitable, maintain strong solvency, and adopt conservative investments.
  - Five insurance groups operate in Austria; three considered domestically systemically important. One is an IAIG; another is an insurance-led financial conglomerate; one is a bank-led financial conglomerate.
  - Since 2022, premiums from foreign operations have exceeded domestic ones, with the difference growing.
- Key insurance sector risks:
  - Persistent inflation, volatile interest rates, rising liquidity and interconnectedness risks.
  - Growing exposures to climate-related events and digitalization challenges.
  - Liquidity pressures increased due to negative technical cash flows and greater exposure to less liquid assets; overall resilience remains solid.
  - Climate change identified as a major emerging risk leading to intensified supervisory reviews and stress testing.
- Investment fund (IF) sector:
  - IFs manage 16 per cent of total assets in the Austrian financial system.
  - Almost all IF managers are part of a banking group, with a few small venture capital and private equity managers.
  - IFs are largely invested in fixed income securities, followed by equities and other IFs; REIF sector invests mainly in Austrian market.
  - Households are main investors in IFs, followed by insurers, pension funds, and other IFs.
- Real estate investment funds (REIFs):
  - REIF sector size: EUR 7 billion (small size yet most systemic subsector of IFs due to structural liquidity mismatch).
  - Retail REIFs (EUR 5.7 billion NAV) must hold minimum 10 percent liquid assets; as of end-2024 only 14 percent of their portfolio could be liquidated within a year while offering daily liquidity.
  - There are 12 REIFs managed by five Alternative Investment Fund Managers, mainly invested by retail investors.
  - After positive flows historically, net outflows started end-2022; REIFs lost EUR 4 billion since end-2022, nearly 40 percent of Assets Under Management.
  - Only one REIF suspended subscriptions and redemptions and is now under liquidation.

### Banking sector structure, performance, and vulnerabilities
- Bank concentration and segmentation:
  - Three main segments: Sparkassen (Erste Group Bank AG), Raiffeisen, Volksbanken.
  - 7 SIs and ~300 LSIs; LSIs account for around 28 percent of banking sector assets.
- Performance indicators (end-2025 / relevant dates):
  - Return on Equity: 9.7 percent at end-2025 (declined from a peak in 2023).
  - CET1 ratio: 19 percent at end-2025.
  - Weighted LCR: 185 percent in September 2025.
- Credit quality deterioration since 2023 linked to major bankruptcies in construction and CRE sector.
  - Consolidated NPL ratio: 3 percent at end-2025.
  - CRE NPL ratio: 8.3 percent at end-2025.
  - Bulk of CRE credit quality deterioration related to commercial developers of residential real estate projects.
- Lending characteristics:
  - The overall share of variable rate loans in Austria remains above the European average.
  - New loan maturities show declining share of variable and varying shares across fixed terms (charts referenced).
- CESEE exposures both a source of profit and risk:
  - CESEE operations accounted for about a quarter of assets and around 40 percent of profits in 2025.
  - Disruptions in CESEE (lower growth from external factors) could impact Austrian banks’ profitability, though geographic diversification provides benefits.
- LSIs complexity:
  - LSIs often feature mutual cooperation arrangements, complex ownership, and interlinkages that can amplify stress transmission.

### Key risks, vulnerabilities, and outlook for financial stability
- Principal risks to the financial sector:
  - Subdued economic activity and persistent weak domestic demand.
  - Elevated exposure to CRE lending and risks from the construction sector.
  - Shocks in CESEE countries affecting profitability and asset quality.
  - External risks: global trade policy uncertainty, geopolitical tensions, and slowdown in euro area trading partners.
  - Potential for further rise in NPLs on CRE loans, including lagged responses to sector downturns, with pronounced impact on bank profitability.
- Mitigants and current strengths:
  - Banking sector well capitalized, profitable, and liquid as of end-2025.
  - Policy and supervisory measures implemented (e.g., BBMs earlier, replaced with non-binding guidelines July 2025).
  - Household debt reductions and high saving rate lower household sector vulnerability.
- Financial interconnections warrant attention, including NBFI interconnectedness with banking sector and exposures to CRE and CESEE.

### Systemic risk analysis and next steps (excerpt)
- The document proceeds to a Systemic Risk Analysis and Bank Solvency Stress Tests (section starting “Bank Solvency Stress Tests”) to assess resilience under adverse scenarios (content beyond excerpt).

*Source: IMF staff report excerpt on Austria (selected sections).*

### 15.      The scenario-based solvency stress tests assessed the stability of the Austrian banks

### 15.      The scenario-based solvency stress tests assessed the stability of the Austrian banks

### Scenarios and shock design
- Stress tests assessed stability against a baseline scenario and two adverse scenarios (recessionary and geopolitical).
- Both adverse scenarios feature: international trade frictions, lower aggregate demand, financial stress, endogenous monetary policy, and additional shocks in CESEE countries.
- Recessionary scenario additionally includes: increased government borrowing costs and term premia, a structural negative shock to productivity growth, increase in uncertainty, and a zero lower bound on monetary policy. Fiscal consolidation was assumed for middle and high debt eurozone countries.
- Geopolitical scenario includes: a rise in inflation expectations, tightening of monetary policy together with fiscal support in euro area countries with fiscal space, and heightened volatility in commodity prices.
- Both adverse scenarios include severe and sustained shocks to real estate prices calibrated as in the 2025 EBA stress tests.
- The adverse scenarios were defined prior to the 2026 Middle East conflict; they remain relevant and are more severe than the 2026 Article IV forecasts and 2026 Spring WEO severe scenario for shocks to real GDP growth, unemployment and inflation.

### Sample, data, and horizon
- Stress tests included 311 banks: 7 SIs, Unicredit’s subsidiary in Austria, and 303 Austrian LSIs (unless otherwise noted).
- Conducted based on October 2025 regulatory data at the highest level of consolidation.
- Stress test horizon: 3-year (2026-28).
- OeNB’s permanent stress testing infrastructure (ARNIE) was used with inputs estimated from FSAP team’s granular satellite model estimations.

### Aggregate solvency results
- Aggregate capital ratio remains above the minimum capital requirement in both adverse scenarios.
- Baseline: banking system remains well capitalized; high net interest margins and fees and commission income more than offset credit risk and other expenses.
- Decline in system-level CET1 ratio:
  - amounts to 465 basis points under the recessionary scenario;
  - amounts to 391 basis points under the geopolitical scenario.
- CET1 decline for SIs:
  - 424 basis points under the geopolitical scenario;
  - 500 basis points under the recessionary scenario.
- The capital ratio decline is smaller in the geopolitical scenario than in the recession scenario because net interest income compresses more in the recessionary scenario despite larger credit risk in the geopolitical scenario.

### P&L and risk drivers
- Net interest margins and fees and commission income:
  - Net interest margins decline more in the recession scenario.
  - Fees and commission income decline in the adverse scenarios.
- Provisions increase substantially, especially in 2026 in both adverse scenarios.
- Market risk shocks are comparatively small but remain significant.
- For aggregate solvency impacts from forced sales of amortized cost fixed income securities (top eight exposure countries per bank, 24 countries total):
  - In percent of RWA, averages:
    - 2 weeks outflows: 1.0%
    - 30 days outflows: 1.3% (general risk aversion) and 2.4%/3.9% for idiosyncratic (table shows multiple columns)
  - Standard deviations (percent of RWA): 2.9%, 3.7%, 3.7%, 5.0% (as shown)
  - In percent of CET1, averages: 5.6%, 7.7%, 13.7%, 22.2%
  - In percent of CET1, standard deviations: 16.3%, 21.2%, 20.7%, 28.1%
  - Valuation shocks and aggregate cumulative net (EUR billions) shown as 23, 35, 75, 109 in the figure (aggregated valuations from forced sell-off exercise).

### Banks breaching requirements and buffer usage
- Few small LSIs breach their Total SREP Capital Requirement (TSCR); several banks dip into additional buffers, including three SIs.
- Breaches:
  - Geopolitical scenario: three small LSIs breach TSCR, accounting for 0.36 percent of banking assets.
  - Recession scenario: one small LSI breaches TSCR, accounting for less than 0.2 percent of banking assets.
- Banks breaching requirements including buffers:
  - Geopolitical scenario: twelve banks (among which three SIs), accounting for 9.5 percent of total banking assets of the sample.
  - Recession scenario: twelve banks (three SIs), accounting for 9.1 percent of total banking assets of the sample.
- Weighted average gaps to the requirement for those banks:
  - Geopolitical scenario: 1.4 percent of risk weighted assets on average.
  - Recession scenario: 2.2 percent of risk weighted assets on average.
- TSCR definition notes: minimum CET1 ratio plus Pillar 2 requirement; hurdle rate with buffers includes capital conservation buffer plus systemic buffers (O-SII buffer plus general and the current sectoral systemic risk buffer for exposures to commercial real estate).

### Concentrated exposures and credit risk mitigation
- Large banks’ exposures to NBFIs:
  - Aggregate exposures to NBFIs account for about 100 percent of their CET1 (direct or indirect exposures).
  - After netting out credit risk mitigation measures (CRM), these exposures account for 30 percent of banks’ CET1.
- Analysis includes 6 SIs plus Unicredit’s subsidiary in Austria.
- OeNB additional analysis: most NBFIs to which banks are exposed are Other Financial Institutions (OFIs), a substantial portion of which are intra-group.

### Decentralized sector, IPS recapitalization capacity, and hypothetical counterfactual
- Members of IPS can access ex-ante IPS funds if CET1 falls below TSCR; banks with CET1 surplus can participate in ex-post recapitalization as long as CET1 remains above TSCR plus 10 percent.
- Under TSCR hurdle rate, local IPS funds in all regions are more than sufficient to recapitalize banks with a capital shortfall in each adverse scenario.
- Counterfactual hypothetical: recapitalizations to TSCR + buffers would render some local ex-ante IPS funds insufficient for complete recapitalizations.

### Bank liquidity stress tests (LCR and cash-flow)
- Reported asset-weighted system LCR: 185 percent in September 2025.
- LCR remains resilient under two stress scenarios:
  - Scenario 1: asset-weighted LCR falls to 149 percent.
  - Scenario 2: asset-weighted LCR falls to 133 percent.
- Market share of banks with LCR below 100 percent:
  - Scenario 1: 7 percent (involving only LSIs).
  - Scenario 2: 35 percent (including both LSIs and SIs, with SIs being the larger contributor).
- Asset-weighted LCRs in EUR and in CZK remain above 100 percent across all scenarios (EUR and CZK are the only currencies accounting for more than 5 percent of aggregate outflows).
- Cash-flow stress tests:
  - General risk aversion scenario: aggregate net liquidity position remains positive; market share of banks with liquidity shortfalls limited to 10 percent at the 12-month horizon.
  - Idiosyncratic bank-run scenario: system maintains positive aggregate net liquidity position up to three months; position turns negative beyond this horizon, with market share of shortfall banks accumulating 81 percent by end of 12-month period.

### Role and effects of systemwide support (IPS and liquidity associations)
- Reallocating liquidity surpluses in liquidity associations and utilizing pre-contributed IPS funds reduce liquidity shortfalls of member banks in the decentralized sector.
- In LCR stress tests, systemwide support restores regulatory compliance for all member banks with LCR below 100 percent.
- In cash-flow stress tests:
  - Under general risk aversion scenario, support closes member banks’ liquidity shortfalls at all time horizons.
  - Under idiosyncratic scenario, member banks’ shortfalls are fully offset in the first two months.
- Reverse stress tests (50-scenario continuum from baseline to extreme doubling of haircuts and outflow runoff rates) show:
  - Market share of banks facing liquidity shortfalls rises with shock severity.
  - Systemwide support consistently reduces share of shortfall banks across shock severities and timeframes.
  - Limits of systemwide support are reached by the end of the sixth month as systemic liquidity buffers used early deplete capacity for later periods.

### Liquidity-to-solvency interaction and fire-sale analysis
- Analysis assessed solvency impact of hypothetical sell-off of amortized cost fixed income securities to cover remaining funding gaps after selling fair value fixed income securities (top eight countries’ exposures per bank; 24 countries covered).
- Results (for seven SIs and Unicredit’s subsidiary in Austria):
  - Milder scenario: solvency loss about 1 percent of RWAs.
  - Idiosyncratic scenario with outflows sustained for a month: solvency loss reaches 3.9 percent of RWAs.
- Such liquidity shocks could cause additional banks to breach their hurdle rate including buffers.
- Country-specific term premium shocks during 2026Q1 (recession scenario) shown for 24 countries (examples in figure include AT 1.46, FR 2.3, DE 1.42, IT 4.6, ES 4.8, PL 4.94, US 2.29).

### Stress tests for non-financial private sector (NFCs and households)
- Publicly listed NFCs:
  - Debt-at-risk (Interest Coverage Ratio below one) would increase very significantly under adverse geopolitical and recession scenarios to about 60-70 percent of total debt for two years and decline in the third year.
- Households:
  - Under the two adverse scenarios, household default probabilities increase but remain small.
  - For mortgages without limits on Loan-to-Value Ratios (LTVs) at origination:
    - Starting default probability: 1.27 percent.
    - After three years under geopolitical scenario: 2.12 percent.
    - After three years under recession scenario: 2.67 percent.
  - These default probabilities are used in solvency stress tests for exposures to households in Austria, Germany and the CESEE countries.

*Source: IMF staff calculations and OeNB, as presented in the stress-testing chapter.*

### 28.      A policy counterfactual analysis based on this micro-simulation approach shows that,

### 28.      A policy counterfactual analysis based on this micro-simulation approach shows that,

### Mortgage LTV counterfactual and micro-simulation findings
- A 90 percent limit on LTVs on mortgages at origination would significantly reduce credit risk in the banking system.
- A binding LTV limit at 90 percent would result in a 3.02 percent decline in cumulative defaults after 5 years in the baseline.
- The same binding 90 percent LTV limit would result in a decline of 4.03-4.64 percent in the adverse scenarios.
- Assuming no cures of defaulted mortgages over these 5-year periods, the corresponding reduction in defaulted mortgages would reach up to 8.68 billion euros in the recession scenario after 5 years.
- The analysis confirms that LTV limits at origination can contribute to banking sector stability by containing credit risk on housing loans.

### Household stress and spillovers
- A stress test using 2023 Household Finance and Consumption Survey microdata applies the 2026 Spring WEO severe scenario, with higher debt servicing costs and living expenses.
- About 10 percent of households become overburdened, putting 10 percent of household debt at risk.
- The impact on bank capital could be around 20 bps.

### Interconnectedness and contagion analysis — concentration and system resilience
- Austrian interbank exposures are highly concentrated, but the system can absorb most of the hypothetical defaults; only a limited number of banks would create contagion risks.
- Contagion risks are highly concentrated to originate from a few larger banks.
- The loss from a hypothetical default of the most contagious bank is around four times that of the loss resulting from the second most contagious bank.
- The loss from the most contagious bank is around ten times the average of the most contagious twenty banks’ impact.
- Amplification through cascade effects is large in the case of the most contagious bank, while less important for other banks.
- The most vulnerable banks are smaller in size.

### IPS scheme effects on interconnectedness
- The IPS scheme in the decentralized sector generally dampens vulnerabilities and may amplify interconnections in case of stress to larger banks.
- The scheme generally lowers the vulnerability of participating institutions.
- Smaller LSIs’ potential capital losses arising from stress of other IPS member banks are generally dampened by the scheme.
- For larger banks, the IPS scheme tends to strengthen interconnections due to their significant size, making it more likely that stress in these banks will increase spillover effects to lower-tier banks due to some potential fire-sale losses.
- The strengthening of interconnectedness is due to that larger banks would have to contribute relatively more than their pro-rata share than smaller ones.
- Induced capital losses are limited by capital regulatory limits of contributing institutions.

### CESEE exposures and amplification
- 18.5 percent of SIs’ total assets (before credit mitigation) are exposed to the CESEE region, mostly in the form of government and central bank assets.
- Largest exposures by country (Percentage of Total Assets, Grand Total row): Grand Total 18.5
  - Czech Republic: 7.2
  - Hungary: 3.0 (noted as around 3 percent)
  - Romania: 2.7 (noted as around 3 percent)
  - Slovakia: 2.0
  - Croatia: 1.5
  - Poland: 0.9
  - Serbia: 0.5
  - Albania: 0.1
  - Bosnia and Herzegovina: 0.1
  - Bulgaria: 0.0
  - Montenegro: 0.0
  - North Macedonia: 0.0
  - Slovenia: 0.2
  - Ukraine: 0.2
- An exercise where capital is lowered by potential losses on NFC large exposures from CESEE demonstrates that these losses would be amplified in the network, making the most contagious banks even more contagious; the vulnerability of the most vulnerable banks is less impacted.

### Macroprudential framework: governance and recommended changes
- Current macroprudential oversight is a shared responsibility of the FMA, the OeNB and the BMF; the FMSB is the macroprudential authority composed of members of the three bodies and the Fiscal Advisory Council (FAC).
- The voting structure in the FMSB gives the BMF and the FAC four votes in total while the OeNB and FMA have one vote each, giving the central bank limited formal influence compared to European peer countries with Financial Stability Councils.
- Recommendation: Reduce the voting power of the FAC and increase the voting power of the OeNB, as a minimum, to strengthen the formal influence of the central bank in macroprudential policy decisions.
- Recommendation: Amend the law to enable a more forward-looking and permanent approach to macroprudential policy implementation (enable precautionary policies in the law), addressing current requirements for clear evidence of risk build-up that can delay or discontinue policy action.

### Borrower-based measures and transparency
- The recent expiration of mandatory BBMs (loan-to-collateral, debt-service-to-income caps, and maturity limits) has shifted the regulatory approach to guidelines-based supervision.
- Short-term recommendation: Strengthen the guidelines-based framework by considering greater transparency on banks’ mortgage credit standards.
- Medium-term recommendation: Reintroduce permanent, binding BBMs to ensure robust and sustainable lending practices.
- Additional recommendation: Rely more on expert opinion and enhanced timely indicators alongside model-based evidence to shorten policy response lags.
- Positive step noted: Launch of detailed residential and commercial real-estate dashboards.

### Macroprudential buffers and measures (current settings and changes)
- CCyB: Set at 0 percent. A new method for analysing procyclical systemic risks is applied for setting the CCyB as of October 2025. The new method includes additional indicators, broadening the scope from the traditional Basel credit-to-GDP gap indicator.
- SyRB: 14 banks: 0.5 - 1 percent.
- Sectoral SyRB: All banks: 1 percent for CRE exposures. Sectoral SyRB introduced in July 2025. The buffer will be 2 percent from July 2026 and 3.5 percent in July 2027.
- O-SII buffer: 7 consolidated; 8 unconsolidated: 0.45 percent - 1.75.
- CCoB: Set at 2.5 percent.
- Borrower-based tools status:
  - LTV limit: Supervisory Guidelines; Binding measures expired in July 2025: Maximum LTV ratio of 90 percent.
  - DSTI limit: Supervisory Guidelines; Binding measures expired in July 2025: A DSTI ratio of a maximum of 40 percent.
  - Maximum loan term: Supervisory Guidelines; Binding measures expired in July 2025: A maximum term of 35 years.
  - Exemption quota: With one overall exemption quota for all three limits of 20 per cent.

### LSI regulation and supervision — effectiveness and areas for improvement
- The FMA acts as the National Competent Authority (NCA) for LSIs, coordinating with the OeNB which is responsible for “fact finding” through risk assessment and on-site inspection.
- The 2026 FSAP found the FMA and OeNB to have strong credibility and a demonstrated track record of effective use of moral suasion vis-à-vis LSIs.
- Supervisory focus appropriately targets credit risk (especially exposures on commercial real estate) and operational resilience.
- Improvements noted: Internal organization and efficiency at the FMA and OeNB; enhanced cross-fertilization of specialized expertise; development of SupTech systems and applications to enhance automated data processing and analysis for risk-based supervision.
- Risk-based supervision and proportionality are used to calibrate supervisory intensity and granularity; “focus banks” are subject to enhanced scrutiny; smallest and non-complex LSIs have streamlined programs.
- Recommendation: Carry out an objective and comprehensive forward-looking assessment of staffing and budget needs for LSI supervision at both the FMA and the OeNB to ensure supervisory effectiveness and maintain a sufficient “human capital buffer.”

### Governance, legal gaps, and proposed legal changes
- Composition of the FMA Supervisory Board may potentially undermine supervisory independence: out of ten board members, the Ministry is represented by the chairperson and three BMF officials; the banking and insurance industries each have a non-voting representative.
- Concerns: Right of the BMF to commission the FMA to conduct examinations and the obligation on the FMA to consult the BMF before issuing regulations.
- Recommendation: Consider enlarging the composition of the two-member FMA Executive Board to improve internal discussion and decision-making.
- Recommendation: Phase out the Austrian-specific framework of state commissioners appointed by the BMF to banks’ boards of directors.
- Legal change: An amendment to the Banking Act was published in February 2026, raising the legal cap on the FMA’s budget for banking supervision by 20 percent; this provided welcome flexibility for the FMA only, though not the OeNB.
- Note: Following this amendment, the OeNB saw a reduction in the industry-funded reimbursement it receives from the FMA for its supervisory activities.

### Remaining supervisory shortcomings for LSIs
- Gaps persist in prudential requirements and supervision applicable to major acquisitions by LSIs of non-financial undertakings, and transactions with related parties (to be addressed with CRD VI transposition).
- No legal disclosure of the reasons for the dismissal of a member of the FMA Executive Board (to be addressed by the transposition of CRD VI in 2026).
- The FMA has no legal right to request access to the working papers of LSIs’ external auditors.
- Empirical evidence indicates supervisory staffing at both the FMA and OeNB has become increasingly constrained; current number of on-site inspections is likely at the lower bound of what is adequate.

### Insurance regulation and supervision — capacity and recommended enhancements
- The evolving macroeconomic landscape, emerging risks, and regulatory changes will heighten the supervisory responsibilities of the FMA.
- Regulatory developments with significant implications include the Solvency II Review, the IRRD, and the EU’s Digital Operational Resilience Act.
- Recommendations for the FMA:
  - Evaluate resource requirements to remain operationally efficient.
  - Collaborate with Government on effective implementation and administration of the Solvency II Review and IRRD.
  - Apply a structured method to review control functions in smaller, low-risk Solvency II insurers.
  - Upgrade interview tools for statutory board members and key control functions.
  - Consider, together with EIOPA, implementing a floor to internal model calculations of capital, consistent with the Basel III reforms in banking.
  - Implement model drift analysis by comparing standard formula and internal model Solvency Coverage Ratio.
  - Establish protocols for sharing information with foreign supervisors of Austrian insurers with operations abroad.
  - Publish the new risk-based supervision framework and introduce quality assurance measures for risk assessments.
  - Broaden macroprudential reporting across the insurance sector.

*Source: IMF staff analysis as presented in the provided content unit.*

### 44.      The FSAP found an overall sound approach to investment funds regulation and

### 1autea2026003 - 44.      The FSAP found an overall sound approach to investment funds regulation and

### Investment funds regulation — overall assessment
- The FSAP found an overall sound approach to investment funds regulation and supervision, recommending improvements most notably regarding liquidity risk management.
- Recent reviews of relevant European Directives require asset managers to select at least two liquidity management tools (LMTs) for each fund they manage.
- Austria was behind peers in adoption and use of LMTs; only suspensions, side pockets, and redemptions in kind were available at the time of the FSAP.
- To comply with new rules, Austrian asset managers selected redemption gates and extension of notice periods for all funds as a national market practice because these tools were considered the easiest to implement and understand given implementation time constraints.
- The FSAP recommends continued engagement between authorities and industry on LMT implementation, with emphasis on appropriate communications to investors to manage expectations and address misunderstandings about tool usage, and on public education about liquidity risks arising from open-ended investment funds.

### Liquidity Management Tools — medium-to-long-term recommendations
- The FSAP recommends asset managers adopt anti-dilution LMTs in the medium-to-long-term.
- The Financial Stability Board recommends that daily dealing funds mainly invested in liquid assets that could become illiquid under stressed market conditions should use anti-dilution LMTs; otherwise those IFs should offer less frequent redemption opportunities.
- Calibration needs:
  - Swing pricing and anti-dilution levies calibration requires development of a model to calculate the cost of liquidity dynamically, considering net fund flows and potential market impact of associated asset purchases or sales.
  - Depositaries must automate processes to implement these tools effectively without increasing operational risks.

### REIFs, notice periods, and hurdle rate
- Amendments to legislation introduced compulsory 12-month notice periods and a 12-month holding period for REIFs; these measures will enter into force in January 2027.
- There has been sector discussion of introducing a hurdle rate (a monetary amount per year, below which the notice period would not apply). Industry views this could deter redemptions and give retail investors confidence they could redeem in a few days if needed.
- OeNB analysis concluded the hurdle would only delay mitigation of risks created by liquidity mismatch.
- The FSAP recommends authorities refrain from introducing a hurdle rate for REIFs because:
  - It would nullify or dampen the effectiveness of the pending notice period.
  - It could act as an incentive to redeem pre-emptively should a shock materialize.

### Financial integrity — AML/CFT framework and supervision
- The Austrian AML/CFT framework has undergone significant changes since the 2016 FATF mutual evaluation.
- The FATF adopted the Fund Staff-led Assessment of Austria’s AML/CFT framework as FATF’s Mutual Evaluation Report of Austria in February 2026; the Mutual Evaluation Report was published in April 2026.
- The evaluation focused on measures to prevent money laundering, terrorist financing, and financing the proliferation of weapons of mass destruction.
- Noted progress:
  - Strengthened legal and regulatory framework.
  - Development of a highly effective approach to ensure transparency of beneficial ownership information.
  - Progress in strengthening supervision of the financial sector and of virtual asset service providers.
- Remaining improvements:
  - Increase risk-based inspections.
  - Strengthen group-wide supervision.
  - FMA should incorporate more systematically collected information to deepen sector-risk understanding and better inform risk-based AML/CFT supervision, including financial groups in the CESEE region.
  - Enhance oversight of gatekeepers (e.g., lawyers, accountants, real estate agents) by designated supervisors.

### FMA responsibilities and resourcing
- The FMA recently took over monitoring and enforcement of targeted financial sanctions in the Austrian financial sector.
- The FSAP views this as positive and recommends ensuring the FMA is equipped, including appropriate resourcing, to effectively fulfill this function.
- The FMA’s AML/CFT risk assessment methodology has been substantially developed since the last FSAP, but requires further enhancements to systematically collect information on sector risks.

### Financial safety net and crisis preparedness — key recommendations
- Authorities should designate a standing inter-agency Crisis Management Forum (CMF), anchored in the existing institutional framework, to coordinate national contingency planning and response to stressed institutions or emerging crises.
  - CMF membership should include the FMA, OeNB, and the BMF at a senior level.
  - Options to operationalize CMF:
    - Expand the FMSB’s legal mandate to explicitly include systemic financial crisis management and formally designate it as the CMF, with a crisis-management subcommittee and defined membership/responsibilities; or
    - Mandate the existing National Crisis Management Team at a senior level to serve as CMF during “peace time” alongside its active crisis role.
  - The CMF should develop a multi-annual work plan for crisis management coordination ensuring institutional preparedness, operational readiness, and follow-up.
- Contagion risk mitigation for the concerned IPS:
  - Address contagion from solvency and liquidity channels within the resolvability assessment.
  - FMA, in close coordination with the Single Resolution Board (SRB), should mitigate equity participation contagion risks given inverted pyramid ownership and absence of an IPS group-level resolution plan.
  - Ensure equity contagion risks can be addressed in terms of loss absorption capacities in going concern and enforced within a realistic timeframe.
  - Develop a complementary framework to manage liquidity contagion risks from central IPS institutions acting as liquidity hubs, including scenarios where IPS resource depletion occurs during resolution.
  - In the medium term, broaden the IPS mitigation framework to explicitly capture second-round effects from bail-in triggered by MREL cross-holdings.

### Deposit Insurance Scheme (DIS) and payout capacity
- Recommendations to strengthen DIS payout capacity:
  - Shift to quarterly contributions.
  - Prohibit DIS placements with member institutions; align IPS investment policy with conservative standards that limit such placements.
  - Establish a public backstop based on a pre-agreed operational framework to support DIS liquidity when private sources are insufficient or delayed.
  - Remove statutory provisions allowing DIS to be used for preventive measures (“open bank assistance”).
  - Enhance payout system capacity and implement robust protocols for high-quality data reporting by member institutions, including mechanisms to flag deposits with missing information for targeted withholding to allow prompt payout to unaffected depositors.
  - Ensure fast access to and verification of depositor data and standing protocols for close coordination with relevant authorities.

### Legal framework for resolution and ELA
- Amend the legal framework to explicitly provide for purchase and assumption transactions in the bankruptcy regime as a cost-effective alternative to costly payouts, subject to a robust least-cost test and exclusion of DIS from “open bank assistance.”
- OeNB should enhance ex-ante operational preparedness for Emergency Liquidity Assistance (ELA):
  - Consider collateral prepositioning as part of early intervention.
  - Develop a clear, documented solvency and viability assessment methodology for ELA, specifying criteria, information inputs, and decision-making responsibilities for borrower viability under stress, including pre-resolution and resolution-adjacent scenarios.
  - Establish specific procedures to govern ELA use in funding resolution, ensuring ELA is provided under strict conditions—such as restored solvency in resolution, credible prospects of viability ensured by resolution scheme and absorption of losses and recapitalization by MREL—and availability of sufficient collateral.
  - In absence of sufficient eligible collateral and under uncertain solvency, ELA should only be provided under an explicit government guarantee, supported by clear coordination arrangements between OeNB and BMF.

### Authorities’ views — summary of responses
- Authorities welcomed the FSAP dialogue and detailed analysis and will assess staff recommendations.
- They broadly agreed with the systemic risk assessment and stress test findings that the banking system is resilient to severe but plausible macrofinancial shocks, and supported inclusion of the IPS mechanism in the analysis.
- They agreed with recommendation to broaden OeNB stress testing beyond classical stress tests to include macroprudential scenario analysis.
- Authorities welcomed improved real estate data, reinforced macroprudential policy and institutional framework, and implementation of relevant European recommendations.
- On the FMSB composition and OeNB role:
  - Authorities view FMSB composition as adequate and stressed OeNB’s pivotal analytical role despite not chairing the FMSB.
  - Adoption of FMA regulations for Borrower Based Measures requires explicit consent by the BMF and must be justified by systemic risks, regularly reviewed, and confined within sunset clauses.
- Regarding LSI regulation and supervision:
  - Authorities welcomed broadly positive assessment but disagreed with staff on supervisory independence and effectiveness; they highlighted recent legal amendments clarifying Supervisory Board independence, risk-oriented/proportionate approach, increased FMA resources, multi-year strategic budget planning, and the importance of state commissioners in LSIs.
- Authorities supported FSAP recommendations on insurance regulation and supervision and acknowledged strengthened supervisory framework.
- On investment funds, authorities welcomed the positive FSAP assessment noting the FMA’s holistic and risk-based approach and its ability to react proactively.
- Authorities considered the existing crisis management framework under BaSAG effective and well-coordinated, saw no pressing need for additional crisis committees, and reaffirmed that Austria’s deposit insurance schemes fully complied with EU directives and that mutual financial support among DIS schemes enhances capacity and stability.

### Selected numeric facts and timelines
- Asset managers must select at least two LMTs per fund (per recent European Directives).
- Compulsory 12-month notice periods and a 12-month holding period for REIFs will enter into force in January 2027.
- FATF adopted Fund Staff-led Assessment as FATF’s Mutual Evaluation Report of Austria in February 2026; the Mutual Evaluation Report was published in April 2026.
- Pension Companies (2024 Q4 vs. 2024 Q3 vs. 2023 Q4):
  - Assets under management (billion Euro): 28.7; +2.1%; +8.9%
  - Beneficiaries (thsd.): 1099; +1.1%; +3.1%
  - Performance: +1.7%; +7.8%

*Source: IMF staff summary of FSAP findings and authorities’ views contained in the provided content.*

### 2. Channels of Risk

### 2. Channels of Risk

### Propagation — Methodology
- Derived from the 2025 EA and France FSAP methodology, enriched with Austrian FSAP specific models.  
- For internally modelled exposures (IRB), projection of PiT and TTC PDs, PiT and DT LGDs, EAD, and RWA. For SA exposures, Projection of new flows of defaulted exposures and RWA based on risk weights for performing and non-performing loans separately. For SIs, provisioning for IRB and SA portfolios, and for LSIs under national GAAP using standard NPL modeling.  
- Balance-sheet regulatory approach.  
- Provisioning for IRB and SA are modeled using an expected loss approach.  
- Traded risk impact from the revaluation of trading assets (FVPL) and securities classified as fair value thorough other comprehensive income (FVOCI) or available for sale (AFS) securities assessed using a modified duration approach or sensitivities to market risk factors (Greeks) with hedging strategy considered based on ITS and STE data if available.  
- Time-to-repricing approach for Interest income and expense from IRRBB J-template.  
- Inclusion of a participation risk channel, reflecting dividend reductions and a write-down of participation book values for banks with equity stakes in other banks, based on OeNB’s methodology.

### Satellite models for macro-financial linkages
- Models for credit losses, funding costs, lending rates, and assumptions for other P&L components.  
- Household and corporate PD analysis using micro-data: individual household HFCS survey and commercial corporate database. Credit risk from Credit register data considered for sectoral shocks of domestic exposures, with default probabilities specific to Austria’s real estate sectors estimated. Cross-border credit risk models based on household survey model and corporate stress test model. LGDs for collateralized exposures linked to paths for real estate prices in the scenario using a smoothing factor to account for the TTC regulatory approach.  
- Interest income projected at portfolio level and country of exposure using a structural approach applying interest rate shocks on new originations and loans’ repricing ladder to outstanding volumes.  
- Funding costs projected at portfolio level using funding structure by counterpart (retail, wholesale) and maturity bucket (overnight vs. term), and by product (deposit, borrowings), and country of exposure.

### Tail Shocks — Scenarios and Horizon
- Stress test horizon: 2026 Q1– 2028 Q4 (three years).  
- Scenarios for Austria and main cross-border exposures (Germany and four CESEE countries):  
  - Baseline scenario updated from the February macroeconomic projections.  
  - Adverse scenario 1 derived from the EA FSAP: A geopolitical scenario (or higher-for-longer) featuring an escalation of geopolitical conflicts.  
  - Adverse scenario 2 derived from the EA FSAP: A recessionary scenario showing a synchronized global slowdown amplified by sovereign debt distress in the EA.  
- The two adverse scenarios rely on GFM, a structural macro-econometric model disaggregated into forty national economies (documented in Vitek (2018)), except for Hungary, Slovakia, Romania and Croatia for which a BVAR model was developed to simulate macro variables under the adverse scenarios.

### Second-round effects and Sensitivity analysis
- Second round effects of recapitalizations to Institutional Protection Schemes (IPS) for solvency.  
- Household borrower-based instruments and mortgage default – counterfactual analysis.  
- Severe assumptions of real estate prices declines.  
- Dividend and market losses on participations.  
- Solvency and liquidity risk interactions, mainly through fire sales and funding costs and based on 2023 GFSR methodology.

### Risks Covered and Behavioral Adjustments
- Risks covered: credit (on loans to households and non-financial corporates, floating and fixed rate instruments for Austrian exposures), market (P&L impact of net open positions in market risk factors such as foreign exchange risks) and interest rate risk on the banking book (IRRBB). Domestic exposures and main cross-border exposures (Germany, Hungary, Czech Republic, Slovakia, Romania and Croatia).  
- Behavioral adjustment: quasi-static approach for balance-sheet growth over the stress-test horizon; asset allocation and funding composition remain the same; balance sheet static in nominal Euro terms. FX shock from revaluation effects on foreign currency loans specified in the stress test scenario. No cures in the adverse scenarios. No write-offs.  
- In projecting RWAs, standardized and IRB portfolios are differentiated: standardized portfolios change RWAs due to balance sheet growth, new inflows of NPLs, exchange rate movements, and conversion of off-balance sheet items; IRB portfolios use through-the-cycle-PDs, downturn LGDs and EAD for each asset class/industry.  
- Interest income from nonperforming loans is not accrued.  
- Dividends are paid out by banks that remain profitable and adequately capitalized throughout the stress. The dividend rate will be the average ratio between observed dividends and profits after tax over recent years. The tax rate will be aligned with 2025 EBA methodology.

### Regulatory and Market-Based Standards and Parameters
- National regulatory framework: Basel III regulatory minima on CET1 (4.5 percent) plus Pillar II requirements (total SREP capital requirement), and include any requirements due to systemic buffers (SyRB, G-SII buffer, O-SII buffer), and capital conservation buffer. Leverage ratio during the stress test horizon against the 3 percent Basel III minimum requirement.

### Reporting Form for Results — Solvency Outputs
- Output presentation includes:  
  - Capital path under various scenarios by groups of banks, aggregate and categorized by type of bank (SIs, LSIs).  
  - System-wide capital shortfall.  
  - Number of banks and percentage of banking assets in the system that fall below regulatory minima or breach capital buffers.  
  - Information on impact of different result drivers, including profit components.

### Banking Sector: Liquidity Stress Test (Top-Down by IMF)
- Institutional perimeter: 7 SI banks, plus Unicredit subsidiary in Austria, and 306 LSI banks.  
- Market share: More than 95 percent of the deposit-taking institutions.  
- Data and horizon:  
  - Data vintage: 2025Q3.  
  - Data frequency and time span: monthly from 2020-2025.  
  - Data sources: Supervisory data (FINREP, COREP), MFI interest rates data from the national authorities and the ECB.  
  - Scope of consolidation: Consolidated level.  
- Methodology: LCR-based tests using regulatory parameters and more severe scenarios; cash flow-based liquidity stress test focusing on net aggregate cash balance after use of counterbalancing capacity; breakdown by aggregate currency and significant currencies. Includes systemwide support from IPS and liquidity associations in the decentralized sector.  
- Stress test horizon: 30 days for LCR-based tests; Up to 12 months for cash flow-based tests with varying time buckets.  
- Scenario analysis: Stress scenarios derived from the 2025 Euro Area FSAP, examining general risk aversion shocks and idiosyncratic bank run shocks; reverse stress tests.  
- Behavioral adjustments and buffers: Liquidity from the central bank is not considered. Capacity of banks to generate liquidity from inflows and from assets under stress (counterbalancing capacity).  
- Regulatory standards: For LCR-based analysis, hurdle rate set at 100 percent at the aggregate currency level (per Basel III and domestic regulation). For cash flow-based analysis, outcomes of interest are the Net Liquidity Position after use of counterbalancing capacity and the survival period.  
- Reporting format: Outputs include (1) Average LCR, Net Liquidity Position, and survival period, (2) Market share of institutions with LCR below regulatory limits and with negative net liquidity position.

### Contagion and Interconnectedness Analysis (Top-Down by IMF)
- Institutional perimeter: 7 SI banks, plus Unicredit subsidiary in Austria, and up to 325 LSI banks.  
- Market share: More than 95 percent of the deposit-taking institutions.  
- Data and horizon: Data vintage: December 2024; Data: Gross interbank exposures including participation instruments; Data source: OeNB; Scope: Consolidated level.  
- Methodology: Model calibrated for the Austrian banking system (CoMap framework). IPS mechanism modelled through LGDs: for decentralized sector individual (Tier 1) banks assumed to be 0.9 (no IPS scenarios) or actual data (with IPS scenarios). Stress test horizon: 1 month.  
- Scenario analysis:  
  - “Baseline scenario”: IPS in place for the decentralized sector (lower LGDs for Tier 1 decentralized sector banks), with central bank support (credit and liquidity channel).  
  - “No IPS” scenario: amended by higher LGDs for Tier 1 decentralized sector banks.  
  - “CESEE loss” scenario: shocking capital to the nonfinancial corporate large CESEE exposures multiplied by 5 times the PDs in ARNIEs.  
- Buffers and behavioral adjustments: Simulates cascading defaults and counterparty credit losses; counterfactual modelling of lack of IPS in decentralized sector. Buffers include CET1 over bank specific regulatory leverage ratio (solvency), and counterbalancing capacity minus non tradable assets eligible for central banks minus HQLA.  
- Regulatory standards: Bank specific minimum CET1 ratio (Pillar 1+Pillar 2R) and liquidity reserves (HQLA) minimum net outflows (liquidity).  
- Reporting format: Outputs include (1) Capital depleted due to triggered defaults; (2) Normalized Contagion Index; and (3) Normalized Vulnerability Index.

### Analysis on Large Exposures to CESEE (Top-Down by IMF)
- Institutional perimeter: 7 SI banks, plus Unicredit subsidiary in Austria.  
- Market share: 68 percent of the deposit-taking institutions.  
- Data and horizon: Data vintage: December 2024; Data: Large exposures to CESEE countries with and without credit mitigation; Data source: COREP, FINREP; Scope: Consolidated level.  
- Methodology: Reporting large exposures data.  
- Type of analyses: Data reporting and scenario analysis in Contagion and Interconnection Analysis — analyzing large exposures by country, by counterparty (General government, non-financial corporations, households, other financial institutions).  
- Reporting format: Table without credit mitigation, by country, by counterparty.

### Risk Assessment Matrix — Key Risks, Likelihood, Impact, and Policy Responses
- Conjunctural risks highlighted include: Geopolitical tensions and intensification of conflicts (Likelihood: High; Impact if Realized: High). Policy responses: secure supply chains, build energy reserves, monitor cross-border financial sector risks, diversify energy sources, accelerate energy transition.  
- Trade-related risks: Protectionism and Trade Disruptions (Likelihood: High; Impact: High). New Trade Agreements (Likelihood: Low; Impact: High). Policy responses: participate in global initiatives to support multilateralism, secure supply chains.  
- Commodity Price Volatility (Likelihood: High; Impact: Medium). Policy responses: diversify energy sources, accelerate energy transition, provide targeted fiscal support to vulnerable households, allow automatic stabilizers to operate freely.  
- Disorderly AI Correction (Likelihood: High; Impact: Medium). Policy response: allow automatic stabilizers to operate freely.  
- Domestic risks highlighted include: Persistent weak sentiment (Likelihood: High; Impact: High) — policy: allow automatic stabilizers, consider more gradual fiscal consolidation if economy weakens considerably relative to baseline.  
- Contagion from CESEE (Likelihood: Medium; Impact: High) — policy: adjust bank-wise systemic risk buffers, monitor and mitigate sanctions-related risks.  
- Hard landing in real estate sector (Likelihood: Medium; Impact: Medium) — policy: strengthen monitoring of CRE risks, maintain prudent lending standards for mortgage lending, reduce regulatory barriers to increasing housing supply, encourage banks to hold adequate capital buffers, allow automatic stabilizers to operate fully.  
- Faltering domestic reforms (Likelihood: Medium; Impact: Medium) — policy: implement reforms to boost labor supply among women and elderly, remove regulatory barriers to increase firm dynamism, sharpen R&D incentives, strengthen Pillar 2 pensions.

### Additional Result Snippet
- Figure 17 fragment from Appendix I: "Capital ratios of SIs decline to 13.3 percent (respectively"

*Source: 1autea2026003 - 2. Channels of Risk.*

### 12.5 percent) in the geopolitical scenario (respectively

### 1autea2026003 - 12.5 percent) in the geopolitical scenario (respectively

### Capital adequacy and leverage — SIs and LSIs
- Corresponding capital ratios of LSIs fall to 16.3 percent and 15.6 percent, reflecting higher starting values and smaller depletions than for SIs.  
- Leverage ratios remain above regulatory limits for SIs and for LSIs.  
- Charts indicate CET1 and Total Capital Ratio trajectories for 2025–2028 under three scenarios: Baseline, Geopolitical, Recessionary. Hurdles shown: CET1 hurdle and CET1 + CCoB. (Graphical series labeled for SIs and LSIs; exact series names preserved in source.)

### Waterfall chart findings — drivers of capital changes
- Baseline (SIs, percent of 2024 RWA, except of Ending CET1): 17.5, 21.5, 14.3, 5.9, 0.3, 1.9, 11.4, 2.9, 0.5.  
- Baseline (LSIs, percent of 2024 RWA, except of Ending CET1): 19.5, 21.6, 9.8, 3.3, 0.2, 1.3, 8.1, 1.3, 0.6.  
- Geopolitical (SIs, percent of 2024 RWA, except of Ending CET1): 17.5, 13.3, 12.4, 4.7, 1.8, 6.5, 11.5, 0.8, 0.8.  
- Geopolitical (LSIs, percent of 2024 RWA, except of Ending CET1): 19.5, 16.3, 8.5, 2.7, 0.1, 4.7, 8.2, 1.1, 0.6.  
- Recessionary (SIs, percent of 2024 RWA, except of Ending CET1): 17.5, 12.5, 10.7, 4.7, 1.9, 6.3, 10.7, 0.7, 0.8.  
- Recessionary (LSIs, percent of 2024 RWA, except of Ending CET1): 19.5, 15.6, 7.2, 2.7, 0.1, 4.6, 7.6, 1.1, 0.6.  
- Interpretation from source: In the geopolitical scenario, SIs capital depletion reflects credit risk losses, lower net interest income and market risk. LSI’s credit risk increases by less and net interest income declines by less. SIs experience stronger decline of net interest income in the recession scenario than in the geopolitical scenario; LSIs also decline but by less than SIs.

### Risk analysis — large non-financial corporates (NFCs)
- Debt-at-risk of large NFCs increases significantly in the adverse scenarios (Baseline, Geopolitical, Recession) with percent of Debt among NFCs with ICR<1 plotted for 2025–2028. (Series labels: Baseline, Geopolitical scenario, Recession scenario.)
- Aggregate PDs (In Percent) series for 2025–2028 available for Baseline, Geopolitical scenario, Recession scenario. (Exact plotted values preserved in source figures.)

### Counterfactual mortgage risk analysis — households
- Aggregate PDs baseline path (2025–2030): Baseline 1.27%, 1.26%, 1.25%, 1.24%, 1.23%, 1.23%; Geopolitical 1.27%, 1.35%, 1.79%, 2.12%, 1.98%, 1.61%; Recession 1.27%, 1.42%, 2.18%, 2.67%, 2.40%, 1.81%. (Source: HFCS 2021 and IMF staff estimates.)  
- Annual default rates, No LTV limits, benchmarked to EBA risk dashboard 2025:Q3 — Baseline 0.73%, 0.73%, 0.72%, 0.71%, 0.71%, 0.71% for 2025–2030; Geopolitical 0.73%, 0.78%, 1.01%, 1.22%, 1.15%, 0.93%; Recession 0.73%, 0.82%, 1.22%, 1.54%, 1.39%, 1.04%. (Sources: HFCS 2021 and IMF staff estimates.)  
- Annual default rates, Only LTV at origination < 90 percent, benchmarked to EBA risk dashboard 2025:Q3 — 2025–2030 values: Baseline 0.54%, 1.06%, 1.57%, 2.07%, 2.55%, 3.02%; Geopolitical 0.54%, 1.10%, 1.85%, 2.69%, 3.44%, 4.03%; Recession 0.54%, 1.14%, 2.05%, 3.09%, 3.99%, 4.64%. (Sources: HFCS 2021 and IMF staff estimates.)  
- Difference in share of cumulative defaulted exposures (no LTV limits - 90 percent LTV limit), 2025–2030: Baseline 1.02 1.99 2.95 3.87 4.77 5.65; Geopolitical 1.02 2.07 3.47 5.03 6.43 7.54; Recession 1.02 2.13 3.84 5.79 7.46 8.68. (Sources: HFCS 2021 and IMF staff estimates.)  
- Policy implication from source: A LTV limit at origination would contain the increase in credit risk, particularly in adverse scenarios. Differences in origination practices regarding LTVs result, after several years, in substantial differences of default risks and large differences in cumulative amounts of defaulted mortgages.

### 2020 FSAP — Key recommendations and status (summary of Table 11)
- Financial Sector Oversight:
  - Review legislation to clarify and narrow BMF’s role in oversight of the FMA and remove industry participation in its Supervisory Board. Time Frame: MT. Status: Not implemented. The composition of the Supervisory Board of the FMA remains unchanged.  
  - Make the OeNB the chair of the Financial Market Stability Board (FMSB) and increase its voting representation. Time Frame: NT. Status: Not implemented.  
  - Strengthen related party risk framework and establish ex-ante approval for LSI significant investments in non-financial undertakings. Time Frame: NT. Status: Not implemented.  
  - Phase-out the role of state commissioners in supervisory boards. Time Frame: MT. Status: Not implemented.  
  - Enhance internal guidelines for supervisory action based on qualitative factors. Time Frame: I. Status: Implemented. (FMA's internal SREP manual continuously updated; SREP developed toward more risk-based approach.)  
  - Stress-test insurance segments/business lines with material future profitability and follow-up with actions, such as capital add-on. Time Frame: NT. Status: Implemented. (FMA performs bottom-up and top-down stress tests; details published in “Report on the state of the Austrian insurance industry (2024)”.)  
  - Review resources for maintenance of Solvency II, insurance market conduct supervision, potential recovery and resolution framework, and AML supervision for all entities, including VASPs. Time Frame: NT. Status: Implemented. (FMA hired additional FTEs in 2022 and 2024; skills enhanced by training.)  
- AML/CFT and supervision:
  - Revise AML/CFT risk scoring reflecting cross-border risks, increase onsite inspections of low-risk banks, branches and subsidiaries and improve non-EU/EEA information exchange. Time Frame: NT. Status: Implemented. (FMA's risk scoring toolkit enhanced; increased onsite inspections; legal basis and MoUs support information exchange.)  
- Macroprudential and sector oversight:
  - Monitor effectiveness of FMSB’s sustainable lending guidance and prepare regulatory actions if risk profile does not improve. Time Frame: NT. Status: Implemented. Binding borrower-based measures introduced in 2022 and amended in 2023; Borrower Based Measures expired as of June 30, 2025. In absence of legally binding measures, FMSB guidelines applied; FMA increased reporting frequency. Note: A footnote in source recommends making borrower-based measures permanent regulation in the 2026 FSAP.  
  - Enhance oversight of inward spillover risks from inverse ownership structure of Raiffeisen sector. Time Frame: NT. Status: Implemented. (Raiffeisen-Institutional Protection Scheme established by end of May 2021; reporting and stress test requirements imposed; simulation tool activated; OeNB systemic risk analysis conducted.)  
- Financial Stability Analysis:
  - Close data gaps, including in real estate and NFC sectors, and improve coverage and granularity of CESEE data. Time Frame: MT. Status: Partially implemented. (Residential real estate gaps addressed; work ongoing for commercial real estate; Financial Stability Cube refined; first submission for reference date September 30, 2024.)  
  - Enhance stress testing framework to consider second round effects, dynamic balance sheets, contagion/spillover effects. Time Frame: MT. Status: Partially implemented. (Dynamic balance sheet perspective implemented in OeNB’s ARNIE; work ongoing on dividend distribution module and growth constraints.)  
  - Ensure resources and organizational structure adequate to meet stress testing framework objectives. Time Frame: NT. Status: Implemented. (One new temporary position created and another redirected to support development.)  
- Financial Crisis Management and Safety Nets:
  - Explicitly provide for purchase and assumption transactions in the bankruptcy regime. Time Frame: NT. Status: Not implemented.  
  - Seek legislation for standing authority to implement stabilization measures, support funding in resolution, and explore mechanisms for prepositioning BMF to support borrowing by DGSs. Time Frame: I. Status: Not implemented.  
  - Consider cross-border spillovers in national crisis contingency plans. Time Frame: NT. Status: Implemented. (Crisis cooperation manual between OeNB and FMA completed Q2 2020 and updated in 2026; coordinated with SSM; resolution colleges used.)  
  - Enhance insurance crisis preparedness, introducing pre-emptive recovery planning for eligible insurers. Time Frame: NT. Status: In progress. (IRRD published January 2025, applicable from January 2027; negotiations with MoF initiated for implementation.)  
- Time frame definitions from source: NT “near-term” is 1–3 years; MT “medium-term” is 3–5 years; I “Immediate” is within one year.

*Sources: IMF staff calculations and OeNB; HFCS 2021 and IMF staff estimates; Datastream, Capital IQ, WEO and IMF staff estimates; Table 11 (2020 FSAP—Key Recommendations and Status).*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1autea2026003.pdf_