Austria Strengthens Banking Regulations: New Requirements for Credit Institutions

Introduction

Vienna, Austria - In an effort to increase transparency and stability within the Austrian banking sector, the country’s financial authorities have introduced new regulations governing credit institutions.

New Requirements for Credit Institutions

According to the new rules:

• Management boards of credit institutions with total assets exceeding EUR1 billion or those with transferable securities listed on a regulated market must establish an Audit Committee. This committee will oversee:
  • Audit and issuance of financial statements
  • Internal control systems
  • Audit functions
  • Risk management systems
• Credit institutions with total assets exceeding EUR5 billion are required to set up three additional committees:
  • Nomination Committee: ensures senior management is properly assessed for suitability
  • Remuneration Committee: ensures remuneration policies align with long-term interests
  • Risk Committee: ensures banking risks are effectively managed

Fit and Proper Hearings

A new fit and proper hearing process has been introduced to assess the professional suitability of governing bodies and key functionaries. This includes:

• A theoretical knowledge test covering:
  • Financial expertise
  • Austrian and European supervisory laws
  • Basic understanding of corporate law and institution structure

Remuneration Requirements

Credit institutions must adopt remuneration policies that encourage sustainable and long-term behavior among employees. The new regulations require banks to have administrative procedures in place for:

• Identifying, assessing, managing, and monitoring banking business and operational risks
• Related to remuneration policies

Anti-Money Laundering and Counter-Terrorist Financing

The Financial Markets Anti-Money Laundering Act (FM-GwG) has been in force since 2017, imposing due diligence requirements on credit institutions to prevent money laundering and terrorist financing. Banks must:

• Identify customers
• Verify customer identity before conducting business

Depositor Protection

Austria’s Depositor Protection Regime ensures the rapid and comprehensive compensation of depositors’ claims in the event of a guarantee. The regime covers deposits up to EUR100,000 per customer and bank, with all credit institutions required to belong to a protection scheme.

Bank Secrecy

Credit institutions are obligated to maintain secrecy over sensitive information and secrets that come to their attention through their relationship with customers. This includes facts known only to the institution or a limited circle of persons, which may not be accessible to others without violating a legitimate customer interest.

Conclusion

The new regulations aim to increase transparency, stability, and trust in the Austrian banking sector, ensuring a safer and more secure environment for customers and investors alike.