Austria’s Financial Sector Thrives Despite Global Turmoil, Says FMA 2024 Report

Key Takeaways

• Stable Financial System: Austria's financial system remained resilient in 2024, with Austrian banks posting consolidated profits of €11.5 billion despite challenges such as rising non-performing loans (NPLs) and geopolitical instability.
• Strong Insurance Sector: Austrian insurers maintained a high solvency ratio (254%), ensuring their ability to meet obligations even in adverse economic conditions, with slight growth in premiums for life insurers.
• Digital Transformation: The FMA’s “Fit for Future – FMA 2025” program is modernizing the authority's operations, incorporating AI and advanced data analytics to enhance supervision and improve decision-making.
• Sustainability Focus: The FMA has updated its Guide for Managing Climate and Sustainability Risks, ensuring that the financial sector is better equipped to address climate-related risks while combating greenwashing in investment funds.
• Market Growth: Austrian investment funds saw a 9.3% increase in volume, totaling €221 billion, with net inflows of €3.1 billion, reflecting strong performance in an otherwise volatile global market.

Deep Dive

In a year marked by economic challenges and global uncertainty, Austria’s financial sector has shown impressive resilience. The Austrian Financial Market Authority (FMA) 2024 Annual Report paints a picture of a financial system that is not just surviving, but thriving amid the storm. Executive Directors Helmut Ettl and Eduard Müller highlighted how Austria’s banks and insurers managed to weather the storm, with a steady focus on stability and profitability—key pillars for navigating the turbulence ahead.

"We’ve learned from the past," Ettl remarked, drawing a sharp contrast between today’s financial landscape and the crises of 2008 and the early 2010s. "This time, the financial system isn’t part of the problem; it’s part of the solution."

This confidence stems from over 15 years of rigorous work by Austria’s financial institutions and regulatory bodies to build resilience—a resilience that the FMA is determined to preserve, despite the pressures to deregulate and "take the easy road.”

Steady Banking and Insurance, Stronger Oversight

Austrian banks ended 2024 with consolidated profits of €11.5 billion, just shy of the previous year's €12.6 billion. This success story is largely driven by strong interest income, which continues to buoy the sector. Yet, it’s not all smooth sailing. Non-performing loans (NPLs) have seen an uptick, rising to 3% from 2.2% in the previous year. This is a reflection of the continued stress in sectors like commercial real estate, where NPLs jumped from 3.3% to 5% (a trend the FMA is closely monitoring as it moves into 2025).

The FMA remains steadfast in its supervisory role, with Ettl and Müller emphasizing that Austria’s financial system must not take its resilience for granted. "It’s not the time to loosen the reins. We need to keep pushing forward," said Müller. The authority is committed to ensuring that financial institutions remain agile, strong, and above all, stable.

Austrian insurers are also weathering the storm with remarkable fortitude. With an average Solvency Capital Ratio (SCR) of 254%, insurers are well-positioned to meet their obligations, even in the face of economic instability. While life insurers are starting to feel the benefits of a stabilizing interest rate environment, the broader picture remains mixed. Storm damage in Central Europe slightly affected the industry's performance, but insurers still posted a solid €1.6 billion in earnings from ordinary activities.

Despite the challenges, the Austrian insurance sector is proving to be a cornerstone of the financial economy, offering stability and long-term security in an otherwise volatile world.

A Rollercoaster Year with Positive Results

The Austrian stock market had a thrilling ride in 2024, with the ATX index climbing 6.6%, but not without its share of ups and downs. The early months of 2025 saw significant volatility, with the global political landscape adding uncertainty to investor sentiment. However, Austria’s investment funds remained buoyant, benefiting from the overall market recovery. The funds saw an impressive 9.3% growth, reaching €221 billion in assets under management, with net inflows of €3.1 billion. Pension and corporate provision companies also reported solid returns, underscoring the overall strength of Austria’s investment landscape.

While Austria’s financial system has maintained its strength, it’s clear that the future lies in digital innovation. The FMA has been working tirelessly to modernize its operations through the “Fit for Future – FMA 2025” program, which aims to revolutionize the way the authority supervises the financial market. At the heart of this transformation is the use of data and advanced technologies, with the FMA now fully embracing supervisory technology (SupTech) to optimize its processes.

"AI is already playing a role in shaping the future of financial supervision," said Ettl. The FMA has introduced cutting-edge tools like Natural Language Processing (NLP) and Large Language Models (LLMs) to enhance data analysis, making it easier to process vast amounts of information. These tools allow for faster, more accurate decision-making, enabling the FMA to stay ahead of emerging risks and trends.

One of the standout projects of this transformation is the “360° Supervision” IT initiative, which provides a holistic, integrated view of the entire financial market. This will help the FMA identify risks earlier and intervene more effectively, keeping Austria’s financial ecosystem secure as it evolves.

Two Sides of the Same Coin

As the financial landscape shifts, sustainability is becoming an increasingly prominent focus. The FMA has been working closely with financial institutions to integrate climate and sustainability risks into their operations, ensuring that the sector moves towards a more sustainable future. In March, the FMA released an updated version of its Guide for Managing Climate and Sustainability Risks, which helps firms assess and mitigate these risks in their business activities.

Consumer protection is also at the forefront of the FMA’s efforts. In a rapidly changing financial environment, the FMA is ensuring that consumers are safeguarded, particularly as digital transformation reshapes the market. The authority has introduced new regulations to combat “greenwashing” in investment funds, enforcing stricter guidelines on the use of sustainability-related terms in fund names.

As Austria’s financial sector faces both opportunities and challenges, the FMA is positioning itself to be as agile and forward-looking as possible. The authority’s “Fit for Future” transformation has laid a strong foundation, but the work doesn’t stop here. The FMA wants to remain at the cutting edge of financial supervision, always ready to adapt to the changing landscape.

"The transformation is ongoing," concluded Müller. "We’ll continue to evolve, staying flexible, innovative, and prepared for whatever comes next."

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