AUSTRIA Trends and Developments Contributed by: Jasna Zwitter-Tehovnik and Martin Navara, DLA Piper Weiss-Tessbach
branches periodically report their liquidity levels and funding structures to ensure alignment with Austria’s financial stability goals. The implemen - tation of these liquidity requirements reinforces Austria’s commitment to reducing systemic risk and safeguarding the local financial market. For international banks, compliance with these liquidity requirements may necessitate adopting specific funding strategies, such as diversifying funding sources or holding more liquid assets. The cost of meeting these liquidity ratios can be considerable, particularly for banks with sig - nificant exposure to Austrian clients or those managing large portfolios of complex financial instruments. Governance standards for foreign banks in Austria Austria has implemented corporate governance standards that are applicable to both domestic and foreign banks, with an emphasis on trans - parency, accountability and risk management. Banks operating in Austria, including TCBs, must establish governance frameworks that pro - mote effective decision-making, risk oversight and ethical business conduct. The FMA requires these banks to appoint local representatives who are responsible for ensuring compliance with Austrian regulations and who can be held accountable for governance failures. A notable development in Austria’s governance standards is the requirement for foreign banks to integrate environmental, social and govern - ance (ESG) considerations into their risk man - agement processes. This expectation aligns with Austria’s national goals of fostering sustainable finance and supporting the EU’s broader ESG agenda. Banks are encouraged to assess ESG risks within their portfolios and consider these factors when making investment decisions.
Risk management and ESG compliance Austria’s emphasis on ESG in banking gov - ernance has led the FMA to establish specific guidelines for assessing and managing ESG risks. Banks are expected to incorporate ESG factors into their risk assessments, particular - ly those related to climate change and social impact. For international banks, this may entail adapting existing risk management frameworks to meet Austria’s standards, potentially requir - ing investment in specialised ESG expertise and technology. The FMA’s oversight extends to verifying that banks adequately address both traditional finan - cial risks and emerging ESG-related risks. This dual focus reflects Austria’s proactive approach to ensuring that its banking sector remains resil - ient in the face of both market volatility and soci - etal pressures for sustainable finance. Austria’s role in EU-wide supervisory efforts Austria collaborates closely with the European Banking Authority (EBA) and other EU regula - tory bodies to align its banking regulations with EU standards. The FMA participates in EU-wide stress testing and regulatory benchmarking exercises, which provide insights into the resil - ience of Austrian banks relative to their European counterparts. These co-ordinated efforts sup - port Austria’s objectives of maintaining a stable and competitive banking environment that can withstand cross-border shocks. Supervisory approaches to cross-border banking In practice, Austria’s involvement in the EU’s supervisory architecture means that the FMA adopts a harmonised approach to overseeing cross-border banking activities. The FMA has implemented the EU’s Single Supervisory Mech - anism (SSM), which establishes a framework for
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