Court of Auditors sees “problem areas” in banking supervision

“The FMA and the OeNB fundamentally fulfill their tasks and continually develop banking supervision. However, there are problem areas that require improvements,” says the report on banking supervision presented today, Friday. This includes, for example, sometimes too long intervals between on-site inspections or limited exchanges with other actors who monitor the credit institutions.

The Court of Auditors examined the joint supervision of the FMA and the OeNB based on five credit institutions. Two of them were banned from doing business. The period reviewed covered the years 2018 to 2021; relevant developments from previous years and 2022 were also taken into account.

This apparently also includes the Commerzialbank Mattersburg banking scandal – called “Credit Institute 5” in the report. The Burgenland bank went bankrupt in 2020. Those responsible for ex-boss Martin Pucher must answer in court.

“Less significant” banks

The FMA and OeNB are particularly relevant for these “less important” banks, as the large credit institutions (with total assets of more than 30 billion euros) are audited by the European Central Bank (ECB) in Frankfurt, according to the Court of Auditors report.

The “less significant” included around 400 credit institutions, including large and important Austrian credit institutions with total assets of several billion euros. For the audit, the Court of Auditors primarily selected institutions where there was an increased risk that negative developments might go unnoticed.

The banking supervisory authority did not carry out any on-site inspections at Commerzialbank Mattersburg between 2003 and 2014. However, this should have been done by 2010 at the latest. “During the on-site inspection of the OeNB in ​​2015, the FMA received a whistleblower tip that the chairman of the board of this credit institution was acting fraudulently with the knowledge of several employees, withdrawing financial resources from the credit institution for private purposes and using false accounts for this purpose,” says the Court of Auditors. The OeNB checked the information and sent the FMA a document in which it stated that the FMA could “only incompletely assess” the truth of the allegations.

Criticism of “incomplete information”

The Court of Auditors criticizes that the FMA only incompletely informed the Economic and Corruption Prosecutor’s Office (WKStA) about the whistleblower’s tip. Another point of criticism: During the on-site inspections, the OeNB documented defects with a very high risk. “However, the audit report in 2017 contained no reference to corporate transactions or conflicts of interest, although a member of the supervisory board was the owner or co-owner of two companies that were borrowers of the credit institution.”

Although bank examiners are not part of state banking supervision, their reports still serve as an important source of information. They must report to the FMA and OeNB “immediately if the credit institution is at risk or if there are violations of the law.” The Court of Auditors recommends that the FMA and OeNB pay attention to the quality of audit services and to strengthen cooperation with bank auditors within the scope of legal possibilities.