Austria: Publication of Financial Sector Assessment Program Documentation-Technical Note on Financial Stability Analysis, Stress Testing, and Interconnectedness
IMF Staff Country Reports, March 2, 2020
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Bibliographic details
- Published: March 2, 2020
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513535852.002
Financial stability assessment — key findings
- Austria’s banking sector presents unique structural vulnerabilities.
- Private credit growth has supported the cyclical boom without jeopardizing household and corporate indebtedness.
- Profits of Austrian subsidiaries in Central, Eastern, and South-eastern Europe have increased recently; however, the cycle is turning and the ability of the sector to maintain a solid net interest margin may be further challenged.
- Institutional cooperation arrangements act as a shock absorber for idiosyncratic shocks.
- Holdings among participating members of respective IPSs may lead to substantial inward stability risks in a systemic event.
- Under favorable economic conditions inverse ownership contributes strongly to capital generation by allowing partial redistribution of profits higher tier banks in the Raiffeisen sector earn on their more profitable international business.
Stress testing and solvency/liquidity analysis
- The technical note presents Financial Stability analysis, stress testing, and interconnectedness (scope: Asset and liability management; Banking; Commercial banks; Financial institutions; Liquidity; Solvency stress testing; Stress testing).
- Stress testing emphasizes liquidity and solvency channels and sensitivity analysis relevant to Austria’s bank sector structure.
- Key modeling and diagnostic foci include balance sheet, bank default, banks' liquidity profile, cash flow, cash-flow liquidity analysis toolkit, funding rollover, interest rate risk, credit risk, and fair value considerations.
Interconnectedness and systemic buffers
- The Austrian authorities have targeted vulnerabilities related to interconnectedness by imposing Other Systemically Important Institution buffers also at the unconsolidated level.
- Institutional protection schemes (IPSs) and cross-holdings can mitigate idiosyncratic shocks but raise inward contagion risks in systemic episodes.
- Inverse ownership structures can materially influence capital flows within banking groups under different economic conditions.
Policy implications and priorities
- Monitor private credit growth to ensure household and corporate indebtedness remains sustainable.
- Continue use and calibration of Other Systemically Important Institution buffers at unconsolidated and consolidated levels to address interconnectedness risks.
- Strengthen oversight of IPSs and cross-holdings to limit inward stability risks from intra-group exposures.
- Integrate scenario-based stress tests that capture turning cycles in foreign subsidiary profitability and pressures on net interest margins.
- Enhance liquidity stress testing tools (cash-flow liquidity analysis toolkit) and contingency planning for funding rollover events.
Key publication statistics
- Pages: 92
- Volume: 2020
- Issue: 066
- Series: Country Report No. 2020/066
- DOI: https://doi.org/10.5089/9781513535852.002
- Stock No: 1AUTEA2020006
- ISBN: 9781513535852
- ISSN: 1934-7685
- Publication date: March 2, 2020
International Monetary Fund. Austria: Publication of Financial Sector Assessment Program Documentation-Technical Note on Financial Stability Analysis, Stress Testing, and Interconnectedness (IMF Staff Country Report No. 2020/066, March 2, 2020).
Content in this bundle
- Executive Summary