International and national regulatory frameworks

“Basel III: A global regulatory framework for more resilient banks and banking systems”
After the US housing bubble had burst in summer 2007, a global banking, financial and economic crisis unfolded in several stages, highlighting shortcomings in regulation, above all in the banking sector. To address these shortcomings and enhance banks’ resilience, the Basel Committee on Banking Supervision (Basel Committee) started to review and update the Basel II framework. The outcome of the framework revision was published in December 2010 as “Basel III: A global regulatory framework for more resilient banks and banking systems.” In the years that followed, the Basel Committee reviewed and complemented the 2010 version of the capital adequacy regulations. Overall, Basel III requires banks to hold more and better-quality capital, introduces liquidity standards, implements a more prudent calculation of risk-weighted assets and introduces capital buffers.

Conversion of Basel III into EU law
After the publication of the original Basel III framework, the European Commission issued legislative proposals for its implementation in July 2011, i.e. the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD). Both legal texts have been applicable since January 1, 2014. As an EU regulation, the CRR is directly applicable in the member states. Accordingly, this regulation includes all the provisions that are directly addressed to supervised institutions, such as minimum capital ratios. Conversely, the CRD is an EU directive and therefore had to be written into national law. It contains provisions addressed to the competent national authorities, such as those governing cooperation between home and host supervisors. In Austria, the CRD was implemented by amending the Austrian Banking Act.

In late October 2021, the European Commission presented a comprehensive package of reforms (“2021 Banking Package”) to complete the regulatory agenda proposed in response to the financial crisis. One of the main elements of this package is the introduction of an output floor, which is intended to limit the possible reduction to 72.5% of the risk weighted assets calculated using internal models compared with the standardized approaches. The 2021 Banking Package also explicitly integrated ESG concepts into various areas of the regulatory and supervisory framework, such as reporting, disclosure, stress testing and the Supervisory Review and Evaluation Process (SREP). The adjustments made to the CRR are applicable from January 1, 2025; those made to the CRD will need to be transposed into national law and will be applicable from January 11, 2026. Certain provisions are subject to transitional provisions.

Austrian Banking Act
The Austrian Banking Act, which entered into force on January 1, 1994, contains the key provisions governing banking and banking supervision in Austria. The Banking Act mainly contains general provisions establishing the conditions for running a credit institution and basic provisions of the supervisory regime as well as consumer and creditor protection provisions. Furthermore, the Banking Act gives the Financial Market Authority (FMA) and the Ministry of Finance broad regulatory powers. The regulations issued on the basis of these competences establish clearer definitions to the general provisions of the Banking Act.

Apart from the Banking Act, the CRR and the CRD, there are numerous other special laws (such as the Building Society Act) and regulations in Austria (such as the KI-RMV credit risk management regulation for banks) that relate to banking operations. Compliance with these special laws and regulations must be monitored by the FMA and the OeNB.

The provisions of the Banking Act and regulations based thereon are heavily influenced by EU legislation, but the Banking Act also contains a range of legacy provisions which reflect the characteristics of the Austrian banking industry as it has evolved over time. The directly applicable SSM Regulation governs the transfer of specific tasks related to the supervision of euro area banks to the ECB. This has also changed the banking supervision mandate of the OeNB and the FMA under the Banking Act to some extent.

Regulatory framework for crisis management
The Bank Recovery and Resolution Directive (BRRD) provides the regulatory framework for crisis management in the EU financial sector by setting uniform rules for the recovery and resolution of banks (see Single Resolution Mechanism). On this basis, the Austrian Bank Recovery and Resolution Act (BaSAG) created the national legal framework for dealing with banks that are distressed or failing or likely to fail.

Additional complementary legal acts are also relevant for banks, such as the Digital Operational Resilience Act (DORA) (see TIBER-AT).