FMA’s 2025 Priorities for Supervision: Navigating Economic Headwinds & Digital Disruptions

As the global financial landscape grapples with a series of profound challenges, the Austrian Financial Market Authority (FMA) is preparing for a busy and transformative year ahead. In a recent briefing, FMA Executive Directors Helmut Ettl and Eduard Müller highlighted their strategic priorities for 2025, emphasizing that Austria’s financial environment is unlikely to improve in the short term.

"The economic crisis, coupled with rising interest rates, has left a significant mark on corporate balance sheets, and these pressures are spilling into areas beyond commercial real estate," said Müller. These ongoing strains are expected to increase unemployment and further tighten financial conditions for households in the near future.

Despite the turbulent economic backdrop, both Ettl and Müller expressed confidence in the resilience of Austria's financial system. As of mid-2024, the country’s banks have reached unprecedented capital levels, with Common Equity Tier 1 (CET1) capital at just under 18%, a figure that comfortably exceeds the Eurozone average. This strong capital foundation, along with robust solvency in Austria’s insurance sector, has helped to stabilize the financial system through recent global uncertainties.

Yet, the FMA is quick to caution that this stability should not lead to complacency. “We must avoid the belief that the lines of defense and capital buffers put in place after the financial crisis are permanent,” Ettl said. “Financial stability is a constant effort, one that requires adaptation to an ever-changing landscape."

Navigating a Complex Web of Risks

Looking ahead, the FMA is preparing to confront a broad range of risks that could challenge the financial system’s stability in the coming years. Among the most pressing concerns is the rise of protectionism and deglobalization, which could disrupt global trade and financial flows, reshaping the international landscape. At the same time, increasing defaults on loans, particularly in commercial real estate and corporate lending, are raising alarms. The situation is further complicated by public debt levels that continue to rise across many countries, creating a volatile mix that could spur austerity measures and economic upheaval.

Adding to these concerns is the ongoing digital transformation of the financial sector. While technological innovation presents significant opportunities for efficiency and growth, it also introduces new risks. As digital tools and platforms become more integral to financial services, the threat of cyberattacks and operational disruptions grows more pronounced. Navigating these challenges will require the FMA to exercise even greater vigilance.

FMA's Strategic Focus for 2025

In response to these challenges, the FMA has set clear supervisory priorities for 2025 that reflect both the current risks and the evolving nature of the financial landscape. Among the key areas of focus is real estate financing, where risks have emerged from both residential and commercial sectors. The expiration of the KIM-V framework will demand careful attention to how loans are structured, ensuring that financial institutions remain resilient and sustainable as they navigate these changes.

Credit risks also loom large, with defaults continuing to rise amidst an uncertain economic environment. The FMA will prioritize the promotion of sustainable lending practices to ensure that institutions are equipped to handle increasing defaults without jeopardizing long-term stability.

Another area receiving significant attention is the rapidly evolving crypto-assets market. With the implementation of the EU Markets in Crypto-Assets Regulation (MiCAR), the FMA is focusing on bringing greater regulation and oversight to this fast-growing sector. This includes tightening authorisation procedures for crypto-asset service providers (CASPs) and ensuring that the sector adheres to robust standards.

Cybersecurity will also be a top priority in 2025, particularly as the EU’s Digital Operational Resilience Act (DORA) is rolled out. The FMA is committed to ensuring that financial institutions are well-prepared to withstand the growing risks posed by cyber threats. This will include strengthening operational resilience and reinforcing the financial system's capacity to respond to digital disruptions.

Beyond these specific risks, the FMA is also focused on the broader issue of sustainable finance. With the global emphasis on climate change and environmental risk, the FMA is taking a proactive stance on combating greenwashing and enhancing sustainability reporting. The authority will also conduct climate stress tests to assess the sustainability risks embedded in financial institutions' business models.

The FMA’s commitment to protecting consumers also remains a central part of its supervisory approach. As investment fraud becomes an increasing concern, the authority is expanding its efforts to raise awareness and provide safeguards to protect investors from deceptive practices. In a similar vein, the FMA will continue its efforts to enforce financial sanctions and ensure that Austria’s financial sector maintains a clean record.

Finally, the FMA is embracing a more data-driven approach to supervision, with the launch of its 360° supervision IT project. This initiative will enhance the authority’s ability to track emerging risks and monitor financial entities in real-time, improving the effectiveness of its oversight.

As the FMA sets its sights on 2025, the message for financial institutions is clear: the road ahead will require resilience, adaptability, and proactive action. In a world marked by economic uncertainty, digital transformation, and geopolitical upheaval, institutions must remain agile, continually strengthening their risk management frameworks and capital buffers.

For the FMA, 2025 will be a year of vigilance and strategic foresight. The authority’s focus on these key areas will help ensure that Austria’s financial system remains stable, secure, and ready to face the challenges of an increasingly complex world. Financial institutions are encouraged to align their strategies with these priorities, ensuring they are well-equipped to meet the evolving demands of both regulators and the market.

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