The FMA and the Austrian Market for Building Societies

1. The FMA and the Austrian Market for Building Societies Annual Meeting of the EFBS Salzburg, 1 October 2009

2. Agenda • Austrian Financial Market Authority (FMA) • Austrian Banking Sector • Austrian Market for Building Societies • Austrian Building Societies in CESEE • Crisis-related Lessons Learned Annual Meeting of the EFBS Salzburg, 1 October 2009

3. Austrian Financial Market Authority I • FMA commenced operational activities on 1 April 2002 • institution under public law • independent and integrated supervisory authority • Areas of Financial Market Supervision: • Banking Supervision • Insurance Supervision • Pension Fund Supervision • Securities Supervision • Supervision of Financial Conglomerates • Supervision of Grey Capital Market Annual Meeting of the EFBS Salzburg, 1 October 2009

4. Austrian Financial Market Authority II • Staff of the FMA: • number of staff as of 31 December 2009: 290 (target figure) • two third have a university degree • personnel costs account for about 60% of the total costs of the FMA • Budget of the FMA: • 2009: 39.7 mio. EUR (target figure) • costs are borne by the supervised entities themselves (government contribution: 3.5 mio. EUR p.a.) • direct and indirect allocation of the supervision costs according to accounting groups (FMA Cost Regulation) Annual Meeting of the EFBS Salzburg, 1 October 2009

5. Organisation Chart FMA Annual Meeting of the EFBS Salzburg, 1 October 2009

6. Austrian Financial Market Authority IV • FMA contributes towards financial market stability in Austria • FMA reinforces confidence in the ability of the Austrian financial market to function • FMA monitors and takes any measures necessary to ensure compliance with provisions of law • FMA protects investors, creditors and consumers in accordance with provisions of law • FMA issues regulations and minimum standards • FMA conducts administrative penal proceedings • strong cooperation with the Austrian National Bank (OeNB) with regard to Banking Supervision Annual Meeting of the EFBS Salzburg, 1 October 2009

7. Austrian Banking Sector I Number of Credit Institutions 859 (as of 30 June 2009): • Raiffeisen Credit Cooperatives 549 • Volksbank Credit Cooperatives 68 • Savings Banks 55 • Joint Stock Banks and Private Banks 51 • State Mortgage Banks 11 • Building Societies 4 • Other Special Purpose Banks 92 • Member State Branches 29 Annual Meeting of the EFBS Salzburg, 1 October 2009

8. Austrian Banking Sector II Annual Meeting of the EFBS Salzburg, 1 October 2009

9. Austrian Market for Building Societies I • saving with building societies is very popular in Austria • ~ 5 million contracts (8.1 million inhabitants) • Austrian Building Society Act entered into force on 1 January 1994 • tax importance (total bonus on building society deposits paid out to home purchase savers: 134 million EUR in 2008) • financial crisis and fear of investors have fostered the investment in home loan and savings contracts in 2009, however total financing by the building societies has declined Annual Meeting of the EFBS Salzburg, 1 October 2009

10. Austrian Market for Building Societies II Annual Meeting of the EFBS Salzburg, 1 October 2009

11. Austrian Market for Building Societies III Annual Meeting of the EFBS Salzburg, 1 October 2009

12. Austrian Market for Building Societies IV Annual Meeting of the EFBS Salzburg, 1 October 2009

13. Austrian Market for Building Societies V • building societies in Austria are special purpose credit institutions • licence is limited to certain banking activities and auxiliary activities • legal framework is laid down in the Austrian Building Society Act and in the related regulation • act and regulation are currently in amendment: • scope of the licence • investment rules • risk hedging / hedging instruments • limits for building society loans • balance sheet format Annual Meeting of the EFBS Salzburg, 1 October 2009

14. Austrian Market for Building Societies VI • Savings purposes according to law: • financing housing • education (as of 2005) • (home) care (as of 2005) • buiding society deposits are covered by the deposit guarantee schemes (limited to 100,000 EUR as of 1 January 2010) • building society terms need approval by the FMA (as regards e.g. interest rates) • granting loans solely against mortgage registration (limit according to law: 80%) or other securities, loans without securities are limited to the amount of 25 000 EUR (as of 1 January 2010) Annual Meeting of the EFBS Salzburg, 1 October 2009

15. Austrian Building Societies in CESEE Raiffeisen Bausparkasse S-Bausparkasse Wüstenrot Annual Meeting of the EFBS Salzburg, 1 October 2009

16. Crisis-related lessons learned I • building societies in Austria are also affected by the crisis • they need to improve their risk management procedures • focus on the core activity (financing housing) makes the system work • amendments to the legal framework in Austria form one measure • increasing transparency for the savers and consumer protection Annual Meeting of the EFBS Salzburg, 1 October 2009

17. Crisis-related lessons learned II 6 theses for the strengthening of financial market supervision • We need 1. the globalization of the regulatory framework 2. a „European Financial Supervisory Authority“ 3. a consistent and integrated supervisory approach • We have to 1. prevent the excessive use of special purpose vehicles not consolidated and therefore not covered by risk management 2. balance system-relevant significance and acceptable risk exposure 3. ensure risk-based and anticyclical capital backing Annual Meeting of the EFBS Salzburg, 1 October 2009

18. www.fma.gv.at Annual Meeting of the EFBS Salzburg, 1 October 2009