Financial Stability Report 19

Downloads

• Financial Stability Report 19 (PDF, 9 MB) June 2010.

Studies and Analyses

• Fragile Recovery of Austria's Financial System (PDF, 1.5 MB) en Jun 15, 2010, 12:00:00 AM

• Return to Growth (PDF, 2.3 MB) en Jun 15, 2010, 12:00:00 AM

• Real Economy Financing Remains Weighed Down by Crisis (PDF, 1.7 MB) en Jun 15, 2010, 12:00:00 AM

• Austria's Financial System Benefits from Improvement in Eastern Europe, but Economic Environment Remains Challenging (PDF, 1.8 MB) en Jun 15, 2010, 12:00:00 AM

• From Stormy Expansion to Riding out the Storm: Banking Development in Kazakhstan (PDF, 1.7 MB) Barisitz, Lahnsteiner. Barisitz, Lahnsteiner – Financial Stability Report 19 Pushed by expanding income (on the back of rising oil prices) and by rapid external debt accumulation, the Kazakh banking sector featured one of the most dynamic credit booms in CESEE until 2007. Following the U.S. subprime crisis, banks’ access to external funding plummeted and credit expansion ground to zero. The global financial and economic crisis that broke out in late 2008 forced credit institutions to drive down their external debt. Moreover, the collapse of the oil price in late 2008 and the devaluation of the Kazakh tenge in February 2009 cut domestic demand, liquidity and solvency. The share of nonperforming loans (NPLs) skyrocketed from 7% at end-2008 to 38% a year later. Large losses stemming from real estate exposure (burst of the housing bubble), lending to dubious partners and fraud played a role. Loan loss provisions were sharply ramped up, profitability was all but wiped out in 2008 and hefty losses incurred in 2009 (ROA at end-2009: –24%). Sector capital even turned negative. The authorities’ crisis response measures included the nationalization of two of the country’s largest banks and the recapitalization of two others (together accounting for two-thirds of banking sector assets). The two nationalized banks then defaulted on their high foreign liabilities and initiated debt restructuring negotiations that are currently in the process of completion, promising steep haircuts for creditors, which should reduce the sector’s debt burden and positively impact its capital. Very high credit risk and a weak institutional environment weigh on investor sentiment. But there are also important shock-absorbing factors: the (oil price-driven) recovery of the real economy, depositor confidence, record-level official foreign currency reserves, the record-level oil stabilization fund and modest public debt. en Jun 15, 2010, 12:00:00 AM

• Stress Testing Austrian Households (PDF, 2 MB) Albacete, Fessler. Albacete, Fessler – Financial Stability Report 19 Over the past decades, household debt has increased sharply, both in absolute and relative terms, in almost all OECD countries. As the U.S. subprime crisis recently showed, even a relatively small number of indebted households can produce considerable turmoil if the sustainability of their debt is in question. The scope of aggregate data for analyzing these risks to financial stability is very limited, because it is neither possible to differentiate between households that hold debt and those that do not, nor is it possible to combine the data on household debt with data on their assets in a reasonable way. Therefore, many authorities concerned with financial stability are increasingly using microdata to analyze such types of financial stability risks. Combining different microdata sources, we assess financial stability risks arising from indebted households in Austria. We define a financial margin for indebted households and stress test each indebted household against a range of financial shocks (changes in interest rates, unemployment rate, asset prices, exchange rates and repayment vehicle yields). en Jun 15, 2010, 12:00:00 AM

• Effects of the Payment Services Act on the Austrian Financial Market (PDF, 1.9 MB) Freitag, Schimka. Freitag, Schimka – Financial Stability Report 19 On November 1, 2009, the Directive on Payment Services in the Internal Market (Payment Services Directive), which defines the legal framework for the establishment of a single market for payment services in the European Economic Area2 and introduces a new category of payment service providers (known as “payment institutions”), was implemented in Austrian law by means of the Austrian Payment Services Act (Zahlungsdienstegesetz). The essential areas governed by the Payment Services Act are market access and licensing requirements for payment institutions (including the relevant supervisory provisions) as well as the issues of transparency, liability and recourse in the execution of payment services. The definition of payment institutions now allows nonbanks to provide payment services (subject to certain licensing and supervisory provisions), which – as classic banking transactions – were previously the exclusive domain of credit institutions in Austria. From the European Commission’s perspective, this change should facilitate access to the financial market for new payment service providers. Against this backdrop, this article provides an overview of the most important supervisory provisions in the Payment Services Act. The article then assesses the current significance of these newly defined payment institutions for the Austrian financial market and takes a look beyond Austria’s borders to discuss the situation in selected countries. en Jun 15, 2010, 12:00:00 AM

• Assessing the Relevance of Austrian Investment Companies and Mutual Funds for Financial Stability (PDF, 1.8 MB) Kavan, Sedlacek, Seliger, Ubl. Kavan, Sedlacek, Seliger, Ubl – Financial Stability Report 19 This paper looks at the role Austrian investment companies and the mutual funds managed by them play in the context of financial stability. At the end of the third quarter 2009, the 30 Austrian investment companies (of which 5 manage real estate funds) had invested around EUR 114 billion in the market. Given the repercussions arising from interlocks between investment companies and other financial intermediaries (such as credit institutions, insurance companies, pension funds and severance funds) in the event of a financial crisis, this study explores the underlying risks and makes an attempt at quantifying the mutual dependencies, focusing above all on market and reputational risks. Areas that are relevant for financial stability include the contribution of investment companies to the profitability of banks and the potential risks related to the role of custodian banks. Furthermore, the distribution and administration of mutual funds issued by investment companies affiliated with banks is a source of commission income for the banking sector. Finally, the use of mutual funds (in unit-linked life insurance plans) as repayment vehicles for foreign-currency bullet loans may cause funding gaps in the event of poor fund performance, which could increase the credit risk exposure of the banks involved. en Jun 15, 2010, 12:00:00 AM

• Annex of Tables (PDF, 1.7 MB) en Jun 15, 2010, 12:00:00 AM

• Notes (PDF, 1.6 MB) en Jun 15, 2010, 12:00:00 AM