Financial Stability Report 34

Downloads

• Financial Stability Report 34 (PDF, 4.5 MB) December 2017

Studies and Analyses

• Call for applications: Visiting Research Program (PDF, 1.4 MB) en Dec 11, 2017, 12:00:00 AM

• Management summary (PDF, 1.5 MB) en Dec 11, 2017, 12:00:00 AM

• International macroeconomic environment: strengthening global and European growth outlook (PDF, 1.8 MB) en Dec 11, 2017, 12:00:00 AM

• Corporate and household sectors in Austria: benign financing conditions (PDF, 2.1 MB) en Dec 11, 2017, 12:00:00 AM

• Austrian financial intermediaries: reaping the benefits of improving market conditions (PDF, 2.2 MB) en Dec 11, 2017, 12:00:00 AM

• Profitability of Austrian banks ’ domestic business from 1995 to 2016: driving forces, current challenges and future opportunities (PDF, 2.1 MB) Ebner, Endlich, Greiner, Gruber, Kavan, Kraihammer, Ohms, Redak, Schober-Rhomberg, Widhalm. This study analyzes how Austrian banks generated profits in their domestic business over the last two decades, i.e. from 1995 to 2016, while paying close attention to the heterogeneity in business models. We focus on the period after the global financial crisis (GFC) and the challenges it entails, in order to highlight the most important trends and their potential repercussions on the medium-term sustainability of banks’ profits and consequently Austria’s financial stability. We find that banks and their income grew strongly before the GFC at the expense of their margins, whereas this trend went into reverse after the crisis hit. Operating expenses increased steadily until recently, when cuts in staff-related expenses started to show effects. Higher credit risk costs were another consequence of the GFC, but the sector-wide ratio of nonperforming loans never surpassed 5%. All of these developments resulted in strong volatility in the return on (average) assets (ROA) after the onset of the GFC and – supported by historically low loan loss provisioning – a recent return to pre-crisis levels. Overall, smaller local banks generated above-average ROAs. Large banks underperformed, while large regional banks performed in line with the banking sector average. In the near future, improvements in operating profitability in a highly competitive market are likely to depend on banks’ pricing power and their ability to use the currently calmer environment to address structural cost issues, to tap new sources of income whose pricing adequately reflects risks and to ready themselves for the digitalization of their business. en banking, financial crisis, Austrian banks, bank profitability, net interest income, net interest margin, investment income, fees and commissions income, operating expenses, cost-income ratio, credit risk, nonperforming loans G01, G21 Dec 11, 2017, 12:00:00 AM

• Comparability of Basel risk weights in the EU banking sector (PDF, 2 MB) Döme, Kerbl. Our aim is to quantify the variability across EU countries evident in the risk weights (RW) applied by banks to their exposures. To this end, we use a publicly available panel dataset which provides granular portfolio-by-portfolio data for major EU banks and covers six periods between 2013 and 2016. In line with the Basel regulatory capital framework, RW should adequately mirror the risk of the obligations. One meaningful indicator of the underlying risk is the share of nonperforming loans (NPLs) in a given portfolio. We show that a good portion of RW variability can be explained by portfolio- and destination-specific risk indicators such as macroeconomic indicators and NPL ratios. In our analysis, we find that it is not statistically significant that large banks are better able to push down RW (after controlling for underlying credit risks). It is of marginal statistical significance that banks with low common equity tier 1 (CET1) ratios employ RW that are lower than would be expected from the underlying credit risk. We observe, however, statistically significant and economically important differences with regard to the country where a bank is headquartered. The paper sets forth evidence that implementation standards differ from jurisdiction to jurisdiction, thus motivating initiatives by the EBA and the ECB to strengthen harmonization. en bank capital, regulation, risk weights, Basel regulatory capital frameworks G21, G28, E61, G38 Dec 11, 2017, 12:00:00 AM

• Annex of tables (PDF, 1.6 MB) en Dec 11, 2017, 12:00:00 AM

• Annex of tables (XLSX, 82 kB) de