Austrian Banking Sector Must Comply with Stricter Regulations

The Austrian banking sector is facing stricter regulations as part of efforts to strengthen financial stability and prevent future crises.

New Requirements for Credit Institutions

The Banking Act (BWG) has introduced new requirements for credit institutions, including:

Audit Committee Requirements

• Credit institutions with total assets exceeding EUR1 billion or those with transferable securities listed on a regulated market must establish an audit committee.
• The committee will be responsible for:
  • Supervising the audit and issuance of financial statements
  • Ensuring internal control systems are in place
  • Overseeing risk management systems

Remuneration Requirements

• Credit institutions licensed in Austria must establish remuneration policies that:
  • Align employee remuneration with long-term interests of the institution
  • Encourage sustainable behavior and ensure fair compensation practices

Fit and Proper Hearings

• Banks are required to ensure the suitability of their managing directors, supervisory board members, and holders of key functions on an ongoing basis.
• The Financial Market Authority (FMA) and the European Central Bank (ECB) apply a strict assessment procedure to evaluate the professional suitability of functionaries.

AML/KYC Requirements

• The Financial Markets Anti-Money Laundering Act has been in force since 2017, imposing special due diligence requirements on credit and financial institutions.
• Banks must:
  • Verify the identity of customers before establishing a business relationship
  • Conduct ongoing monitoring to prevent illicit activities

Depositor Protection Regime

• The Act on Deposit Guarantee Schemes and Investor Compensation ensures the rapid and comprehensive compensation of depositors’ claims in the event of a guarantee.
• Deposits of up to EUR100,000 per customer and bank are covered by the single deposit guarantee scheme limited liability company (Einlagensicherung Austria GesmbH – ESA).

Bank Secrecy Requirements

• Banks must maintain secrecy regarding certain information and secrets that have come to their attention based on their relationship with customers.
• This includes circumstances where disclosure or exploitation is likely to violate a legitimate interest of the customer.

These regulations aim to strengthen financial stability, prevent money laundering and terrorist financing, and protect depositors’ interests. Credit institutions licensed in Austria must comply with these requirements to maintain their licenses and continue operating in the country.