Financial Stability Report 25

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• Financial Stability Report 25 (PDF, 4,3 MB) Juni 2013.

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• Management Summary (PDF, 416 kB) en 30.06.2013, 00:00:00

• International Macroeconomic Environment: Central Bank Action Supports Economic Outlook and Reduces Financial Tensions in the Euro Area and in CESEE (PDF, 1,8 MB) en 30.06.2013, 00:00:00

• Corporate and Household Sectors in Austria: Subdued Growth of Indebtedness (PDF, 1017 kB) en 30.06.2013, 00:00:00

• Austrian Financial Intermediaries: Further Strengthening of Financial System Is Needed for Sustainable Recovery (PDF, 2,6 MB) en 30.06.2013, 00:00:00

• The Single Supervisory Mechanism within the Banking Union – Novel Features and Implications for Austrian Supervisors and Supervised Entities (PDF, 454 kB) Huber, Pföstl. Dieter Huber & Elisabeth von Pföstl – Financial Stability Report 25 Over the past decades, the internal market for banking services has flourished. The financial crisis and contagion from banks to sovereigns and across borders has underlined the need to match the size and level of cross-border activities of banks with the integration of banking supervision. To align supervisory and political responsibilities with the competence to provide a financial backstop, the heads of government of the euro area have proposed a three-pillar model for a banking union. As a first step in implementing banking union, supervisory responsibility for banks in participating Member States will be conferred on the ECB. Within the framework of a single supervisory mechanism (SSM), the ECB will share duties with the national authorities. The ECB will be responsible for the overall functioning of the SSM. At the same time, national authorities retain certain responsibilities, including the supervision of less significant banks. The changes to the supervisory process require a suitable organizational setup and procedures that account for the roles and responsibilities of the ECB and national authorities within the SSM and vis-à-vis supervised institutions. en single supervisory mechanism, banking union, ESM, banking supervision, joint supervisory team, ECB framework regulation K230, K330 30.06.2013, 00:00:00

• Household Vulnerability in Austria – A Microeconomic Analysis Based on the Household Finance and Consumption Survey (PDF, 1,8 MB) Albacete, Lindner. Nicolás Albacete & Peter Lindner – Financial Stability Report 25 This study analyzes the indebtedness and vulnerability of households in Austria using data from the Household Finance and Consumption Survey (HFCS), a new source of microdata. The HFCS allows us to investigate potential risks household debt may pose to financial stability. Following the recent literature on indebtedness, we look first at the intensive as well as extensive margin of credit. The data show that debt participation and the level of debt in general increases with wealth and income, which points toward a relatively low risk to the financial sector. Additionally, our analysis identifies vulnerable households and estimates the financial sector’s potential exposure at default and loss given default. We find that the estimates for loss given default range from 0.2% to 10% and are in line with similar studies for other countries. Combining these estimates with important other financial stability indicators, such as the development of initial loan-to-value ratios, we are able to conclude that at present, the risk to financial stability stemming from households in Austria is relatively low. en household indebtedness, vulnerability, exposure at default, loss given default, HFCS D10, D14, E44, G21 30.06.2013, 00:00:00

• Stress Test Robustness: Recent Advances and Open Problems (PDF, 1,4 MB) Breuer, Summer. Thomas Breuer & Martin Summer – Financial Stability Report 25 This paper reviews recent advances made in improving the robustness of stress-testing models against potential misspecification or risk-factor-distribution misestimation, including conceptual advances in measuring robustness against pricing-model misspecification. In addition, we address an important open problem of stress tests as they are carried out today: the endogeneity of financial risks. Traditional stress-testing frameworks model a single-person decision problem in the face of an exogenous source of risk. Yet financial risks arise from the complex interaction between individuals, firms and financial institutions. A stress-testing framework that falls short of incorporating this risk endogeneity will ultimately only be able to capture the financial stress of individual institutions in a non-crisis environment. en stress testing, financial stability, systemic risk, robustness G01, G28, G38, C02 30.06.2013, 00:00:00

• Macroeconomic, Market and Bank-Specific Determinants of the Net Interest Margin in Austria (PDF, 1,4 MB) Gunter, Krenn, Sigmund. Ulrich Gunter, Gerald Krenn & Michael Sigmund – Financial Stability Report 25 The objective of this article is to identify key determinants of the net interest margin (NIM) in the Austrian banking sector. In Austria, the NIM is one of the most important income drivers of banks given the importance of relationship banking, where interest income dominates other sources of revenue. However, the NIM differs substantially among Austrian banks. Drawing on a unique supervisory dataset for the Austrian banking sector of around 42,000 observations between the first quarter of 1996 and the second quarter of 2012, we analyze under which circumstances a bank has a relatively high or low NIM. We contribute to the empirical literature on the NIM by factoring in a bank’s business model in terms of its balance sheet structure and by accounting for the financial crisis from the third quarter of 2007 onward. Our estimation results suggest that not only the determinants identified in the existing empirical literature (different types of non-interest income and expenses, various risk measures, competition, macroeconomic environment) have a significant influence on the NIM, but also our two innovations (balance sheet structure, financial crisis). en Net interest margin, balance sheet structure, panel estimation E43, G21, D40, L11 30.06.2013, 00:00:00

• Measuring Financial (In)Stability in Emerging Europe: A New Index-Based Approach (PDF, 1,5 MB) Jakubík, Slacík. Petr Jakubík & Tomáš Slacík – Financial Stability Report 25 The importance of assessing financial stability in emerging Europe has increased rapidly since the recent financial crisis. Against this background, in the present paper we contribute to the existing literature in a twofold way: First, by using a broad range of indicators from money, bond, equity and foreign exchange markets, we develop a comprehensive financial instability index (FII) that gauges the level of financial market stress in some key Central, Eastern and Southeastern European (CESEE) countries. In a second step, we perform a panel estimation to investigate which macroprudential indicators that cover both internal and external imbalances explain the evolution of our FII over the past more than 15 years. Our analysis suggests that both the levels and changes of some indicators (such as credit growth and the level of private sector indebtedness) play an important role for financial stability. Moreover, we find that the impact of some key indicators on financial (in)stability is nonlinear and varies over time depending on market sentiment. en Financial stability, crisis, macroprudential framework, emerging Europe, external and internal imbalances G28, G32, G33, G38 30.06.2013, 00:00:00

• Annex of Tables (PDF, 708 kB) en 30.06.2013, 00:00:00

• Notes (PDF, 261 kB) en 30.06.2013, 00:00:00