Financial Stability Report 38

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• Financial Stability Report 38 (PDF, 3 MB) December 2019

Studies and Analyses

• Call for applications: Klaus Liebscher Economic Research Scholarship (PDF, 59 kB) en Dec 2, 2019, 12:00:00 AM

• Recent developments (PDF, 914 kB) en Dec 2, 2019, 12:00:00 AM

• Nontechnical summaries in English (PDF, 88 kB) en Dec 2, 2019, 12:00:00 AM

• Nontechnical summaries in German (PDF, 93 kB) de Dec 2, 2019, 12:00:00 AM

• Climate change as a risk to financial stability (PDF, 436 kB) Pointner, Ritzberger-Grünwald. In this study, we give an overview of risks to financial stability that result from climate change. We classify them according to their sources and show how they affect traditional categories of financial risk. Most financial institutions have yet to acknowledge these types of risk, with only a few having to date recognized climate change as a market opportunity. Over the past few years, both private and public institutions have, however, started to find better ways to identify, assess and manage climate-related risks, especially since the Paris Climate Agreement. Which data and indicators are needed to implement effective risk management in this area? While metrics and methods are available to financial intermediaries for this purpose, they are not yet widely used in practice. In the latter part of our study, we explore the awareness of Austrian financial intermediaries of climate-related financial risks empirically. Based on survey data, we find that some institutions have already integrated climate change into their business strategy and risk management systems, while a large share of institutions has not yet identified climate change as a financial risk at all. The fact that a majority of financial intermediaries had cited regulations and norms as effective motives for better adapting to the risks of climate change calls for future action by policymakers and regulatory authorities. en climate change, financial risk, risk management G18, G32, Q54 Dec 2, 2019, 12:00:00 AM

• Small but buzzing: the Austrian fintech ecosystem (PDF, 468 kB) Boss, Richter, Timel, Weiss. This study aims to enhance transparency on the Austrian fintech industry by collecting firsthand industry data provided by Fintech Austria – the country’s largest fintech interest group – and subjecting the data to statistical analysis conducted by the Oesterreichische Nationalbank (OeNB). The analysis of key features of Austrian fintechs across various dimensions reveals that the domestic fintech industry is a small but rapidly growing industry. While being based on a diverse – and increasingly specialized – range of business models, most fintechs still operate in the payments sector. Typically, fintechs are established in larger cities by men who have already pursued a previous career. As a rule, their ownership structures are divided between a broad domestic shareholder base and a more concentrated investor base abroad.
  The dynamics in the fintech industry need to be closely monitored. If not identified in a timely manner, strong growth and the tendency of online industries to form oligopolies or monopolies may lead to systemic implications and financial stability risks. Moreover, increasing cooperation between incumbent banks and fintechs as third-party providers may impose outsourcing risks. Should the latter fail, this may have negative spillover effects on the financial sector as a whole. Therefore, it is all the more important that policymakers and market participants alike keep track of the fintech industry’s structure and trends. With this in mind, the analysis presented in this study was largely automated to allow for periodic updates and thus continuous monitoring of the Austrian fintech industry in the future. en nonbank financial institutions, technological innovation, e-commerce, innovation and invention, technological innovation management, technological change G23, Q55, L81, O31, O32, O33 Dec 2, 2019, 12:00:00 AM

• The recent upswing in corporate loan growth in Austria – a first risk assessment (PDF, 458 kB) Greiner, Steiner, Waschiczek. With Austrian banks having significantly expanded their lending to domestic nonfinancial corporations in 2017 and 2018, we are witnessing the fifth period of significant loan growth since 1982. While the recent rise in loan growth rates was broadly in line with past increases in magnitude, the year-to-year variation was generally much higher. This paper provides stylized facts on the latest increase in loan growth and a first assessment of potential systemic risks for the Austrian banking system. Developments in the real economy in 2017–2018 broadly followed those during past periods of loan growth – only investment grew at a stronger pace. Bank loans were losing importance in the financing mix of nonfinancial corporations and in banks’ balance sheets throughout the review period. The most recent upturn started from historically low levels and has been more pronounced in some banking sectors as banks have been adjusting their business models following the financial crisis. A potential deterioration in loan quality would especially hit banks with currently high lending rates that have structurally low margins and weaker risk bearing capacity. From an industry-level perspective, the main borrowers were industries with high value-added growth, high profitability and low insolvency rates, yet with a concentration on real estate activities. Such a concentration on real estate business may pose risks given the ongoing buoyancy of the Austrian real estate market. en bank lending, corporate finance, industry structure, credit quality, financial stability G21, G32 Dec 2, 2019, 12:00:00 AM

• Nonbank financial intermediation in Austria – developments since 2008 (PDF, 737 kB) Pöchel, Schober-Rhomberg, Trachta, Wicho. Nonbank finance is an alternative to bank finance that fosters competition in the supply of financing and supports economic activity. However, nonbank finance may also become a source of systemic risk, both directly and through its interconnectedness with the banking system, if it involves activities that are typically performed by banks, such as maturity or liquidity transformation and the creation of leverage. While in the EU, the relative importance of nonbank finance vis-à-vis traditional banking has increased noticeably in the past decade, the Austrian financial system is still dominated by the bank finance model. Overall, the fractional growth of nonbank finance assets is not seen as a concern in itself, as the risks from nonbank financial intermediation seem contained. Neither the structure nor the size of nonbank financial intermediation in Austria are currently considered to pose a threat to financial stability. en nonbank finance, nonbank financial intermediation, nonbank financial institutions, investment funds, insurance corporations, pension funds, other financial institutions, finance leasing, systemic risk, financial stability G23 Dec 2, 2019, 12:00:00 AM

• OeNB Macroprudential Policy Conference – Financial stability in 2030: Maintaining effectiveness while reducing regulatory complexity (PDF, 152 kB) Posch, Schmitz. Regulatory complexity is becoming a concern and top priority for policymakers and the financial industry, both at the global and European level. The speed of the debate has gained pace very recently as the political pressure to deregulate has increased. In light of this, the Oesterreichische Nationalbank (OeNB) hosted a Macroprudential Policy Conference on May 9, 2019, where policymakers discussed the tradeoff between reducing the complexity of financial regulation and maintaining financial stability. At this one-day conference, high-level representatives from finance, politics and academia shed light on the drivers of complexity and explored ways to address them. In three panel discussions, the speakers drew on national and international experience with macroprudential policy to investigate what the future regulatory framework, one that also includes nonbank financial intermediaries, could and should look like. The main conclusion of the conference was a call for a high-level expert group at the EU level to explore the main sources of regulatory complexity and measures to reduce it. With less distortionary incentives for banks as well as effective macroprudential supervision and reliable resolution frameworks in place, supervisors should be able to put more emphasis on reducing the systemic costs of banks’ market exit. Less emphasis could be put on keeping all banks in business and regulatory complexity could be reduced without jeopardizing financial stability. en regulatory complexity, financial stability, macroprudential supervision G28, F36 Dec 2, 2019, 12:00:00 AM

• Annex of tables (PDF, 282 kB) en Dec 2, 2019, 12:00:00 AM