Austrian Government Bolsters Grip on Bank Oversight

(Bloomberg) — Austria’s government plans to take more control of banking oversight in a sweeping revamp streamlining procedures and increasing political influence.

Finance Minister Hartwig Loeger will rejig banking supervision by taking powers away from the country’s central bank — shielded from political influence by European rules — while giving the government in Vienna a bigger role in issuing rules for lenders.

Key Insights

• The measure will reassign around 170 central bank staff, who audit and analyze lenders, to the Financial Market Authority, Loeger told reporters in Vienna. The measure should increase efficiency and reduce costs by about 10 million euros per year, he said.
• The ministry will take over from the FMA the drafting and issuing of some rules and regulations. The FMA’s oversight bodies include more outside experts and get more say about the authority’s budget, supervisory focus, and long-term planning to “strengthen democratic control,” according to Loeger’s proposal.
• While Loeger pledged to stick to European Union rules, he also said Austria will apply rules without “gold plating” them. He highlighted “proportionality,” hinting at a principle that scales back rules for smaller institutions.
• Oversight by the FMA shouldn’t focus on imposing penalties, but also have an “advisory role” for banks, Loeger said.
• Outside experts from business, ministries and academics will advise the FMA on regulation, supervision strategy.

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• Separately, the central bank held a briefing on financial stability. Governor Ewald Nowotny said Tuesday he doesn’t think the reforms are efficient, but pledged to work with Loeger “in a constructive manner.”
• Austrian banks came in below the average in the EU’s stress test, whose results were published earlier this month.
• Austria’s biggest banks, including Erste Group Bank AG, Raiffeisen Bank International AG and Bawag Group AG, are supervised by the ECB.

(Updates with details from finance ministry’s proposal.)

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