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Austria
Score Rank
Financial Standards Index 57.50 out of 100 19
Business Indicator Index 10.98 out of 12 12

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Overall Standards Summary

Austria achieves medium overall compliance with international standards and codes, with a score of 57.5 out of 100 in our Standards Compliance Index. Austria's compliance in the areas of macroeconomic fundamentals and financial supervision is high. The one exception is fiscal policy transparency where Austrian authorities have been urged to increase efficiency and transparency. A medium-term framework has recently been adopted and further transparency-related reforms are slated to take place in the period leading up to 2013. In the area of accounting and auditing, as a European Union member state, Austria requires the use of International Financial Reporting Standards only in the consolidated and not the annual accounts of listed companies; and they are not permitted for use in the annual accounts of any type of companies. It will however adopt International Standards on Auditing as required by relevant EU Directives. Similarly, via the adoption of the third EU Money Laundering Directive requiring it to implement the Financial Action Task Force Recommendations, Austria should become compliant in the area of anti-money laundering. Lastly, the Austrian corporate governance regime has benefited from voluntary codes and new binding legislation, but its effective implementation has not yet been assessed.

Choose a standard for a detailed compliance report:
12 Key Standards for Sound Financial Systems

Compliance Level
Special Data Dissemination Standard
CP
Code of Good Practices on Transparency in Monetary Policy
FC
Code of Good Practices on Transparency in Fiscal Policy
ID
Effective Insolvency and Creditor Rights Systems
NC
International Financial Reporting Standards
NC
Principles of Corporate Governance
EN
International Standards on Auditing
ID
Anti-Money Laundering/Combating Terrorist Financing Standard
ID
Core Principles for Systemically Important Payment Systems
FC
Core Principles for Effective Banking Supervision
CP
Objectives and Principles of Securities Regulation
CP
Insurance Core Principles
CP
II = Insufficient Information | NC = No Compliance | ID = Intent Declared | EN = Enacted | CP = Compliance in Process | FC = Full Compliance

Macroeconomic Policy and Data Transparency

CPSpecial Data Dissemination Standard

Austria subscribed to the International Monetary Fund's Special Data Dissemination Standard (SDDS) on September 4, 1996. The 2008 Annual Observance Report, available on the SDDS website, describes Austria's data as "adequate for surveillance purposes." Periodicity, coverage, and timeliness of data are compliant with SDDS specifications, although Austria avails itself of timeliness flexibility for its production index and merchandise trade data. Data access is also compliant. In general, data integrity meets SDDS requirements as well, but the SDDS website discloses a failure to clearly state the provisions by which confidentiality of data is guaranteed in some datasets, and there is no clear identification of ministerial commentary for national accounts data. Data quality also displays some problems, as the SDDS indicates a failure to provide the requisite information on component detail and cross-checks for several data categories.

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FCCode of Good Practices on Transparency in Monetary Policy

Austria adopted the euro at its launch in January 1999. Thus, its monetary policy is no longer governed by the Austrian National Bank. Rather, the Governing Council of the European Central Bank (ECB) determines Austrian monetary policy, and the Eurosystem (consisting of the ECB and the central banks of the member states that have adopted the euro) is responsible for its implementation. According to the International Monetary Fund (IMF), the Eurosystem and the ECB maintain high transparency standards and a commitment to openness. The ECB observes the IMF's codes and standards for monetary policy transparency and pursues an active policy of communication with the public. In 2009, the IMF voiced its support for the ECB’s accommodative monetary policy in response to the global financial crisis and recession in the European Union (EU). The Fund urged continued monetary easing in order to prevent a still-possible deflationary spiral, and called for quicker action from the EU in order to repair the financial system.

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IDCode of Good Practices on Transparency in Fiscal Policy

Fiscal policy-making in Austria is based on the coordination of three levels of government: the federation, the states, and the municipalities. All three levels have elected government institutions, independent decision making powers, and budgetary autonomy. A Fiscal Equalization Law, renewed every four years, provides the framework for the distribution of tax sharing, intragovernmental transfers, and cost bearing among the three government levels. Furthermore, as a member of the euro area, Austria is subject to the constraints of the European Monetary Union's Stability and Growth Pact, which it has incorporated into its own Austrian Stability Pact. For a number of years, Austrian authorities have been urged to adopt a medium-term budget framework to provide clearer objectives in order to increase efficiency and transparency. According to the IMF's 2009 Article IV Consultation, the Austrian authorities implemented such a framework in the 2009-2010 budget, and further transparency-related reforms are slated to take place in the period leading up to 2013, once some measure of economic recovery has been attained.

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Institutional and Market Infrastructure

NCEffective Insolvency and Creditor Rights Systems

According to the European Commission's 2003 Final Report of the Expert Group for the "Best Project on Restructuring, Bankruptcy and a Fresh Start," by 2002 Austria had fully adopted 17, almost fully adopted 14, partially adopted 7, and not adopted 3 of the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank. As a part of the above-mentioned project, A. Klauser developed a country-specific report on Austria, in which Austria’s compliance with the World Bank principles is looked into in detail, disclosing several areas of deficiency in Austria's compliance. Klauser notes that Austria had no legislation covering global security interests, nor did it have a system for recording and registering secured interests in movable assets. Also deficient was the process for realizing security interests. In the area of legal framework for corporate insolvency, Austria fails to observe World Bank standards because of its legislative rigidity, which hinders effective reorganization procedures. In addition, there is no legislative framework to support informal workouts, and there are no formally established organizational or performance standards set for the courts or qualification criteria for judges. Some of these findings are echoed in the more recent 2005 PricewaterhouseCoopers report, which adds that Austria's insolvency framework is still evolving. In 2003, the Act on International Insolvency Law was passed which potentially addresses some of the cross-border insolvency deficiencies noted by Klauser.

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NCInternational Financial Reporting Standards

As part of its efforts to contribute to the harmonization of accounting practices in the European Union (EU), the Austrian Parliament enacted the Accounting Law in 1990 followed by an amendment of the Austrian Commercial Code (HGB) in 1999. While the 1990 Law incorporated the 4th and 7th EU directives on harmonization of accounting practices, the 1999 amendment of the HGB allowed all Austrian companies, listed or unlisted, to use International Financial Reporting Standards (IFRSs) in preparation of their consolidated financial statements. In 2001, the Vienna Stock Exchange made it a requirement for certain listed entities to apply IFRSs or U.S. Generally Accepted Accounting Principles (GAAP) in consolidated financial statements. However, in accordance with the European Commission (EC) Regulation No. 1606/2002, beginning 2005 all listed companies in the EU are required to use IFRSs as endorsed by the EC in their consolidated accounts. The 2008 EC report on the implementation of the Regulation No. 1606/2002 confirms that Austria requires IFRSs in the consolidated accounts of listed companies and permits IFRSs in the consolidated accounts of all other companies. IFRSs, however, are not permitted for use in the annual accounts of any type of company. Therefore, apart from the mandatory application of IFRSs, other companies follow the HGB and financial reporting regulations specified in other laws for financial institutions, insurance companies, and investment funds. Per a 2004 European Committee of Central Balance Sheet Data Offices report on the main differences between IFRSs and national regulations, the Austrian GAAP differ from the international requirements in many respects.

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ENPrinciples of Corporate Governance

In a 2004 Financial System Stability Assessment, the IMF noted that Austria had taken steps to improve governance in the financial sector in line with international best practices. However, gaps were observed and more needed to be done as indicated in several recommendations made by the IMF. Austria has since undertaken many initiatives to remedy the then mentioned gaps. For instance, according to a 2008 Financial Market Authority (FMA) press release, financial market supervision reform came into force on January 1, 2008 with the introduction of a comprehensive legislative reform package. As part of this package, the Company Code was amended to provide supervisory boards with greater powers. The amended Company Code requires increased transparency and disclosure from companies. Also, the obligations of statutory auditors have been laid out more clearly and stricter requirements on independence and professional conduct have been put in place. Furthermore, a Code of Corporate Governance was introduced in 2002 and last amended in 2009. The Code is applied on a comply-or-explain basis and is based on the provisions of Austrian securities and capital markets laws, the European Union recommendations as well as on the principles set out in the OECD Principles of Corporate Governance. In a more recent overview, a 2009 U.S. Country Commercial Guide describes the Austrian legal, regulatory, and accounting systems as “transparent and consistent with international norms.” Also, the Austrian authorities strengthened financial supervision by putting in place a dual-oversight system with banking sector supervisory roles for both the Austrian National Bank and the FMA.

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IDInternational Standards on Auditing

In general, per a 2009 International Federation of Accountants (IFAC) publication on the global adoption of International Standards on Auditing (ISAs), audits in Austria are conducted in accordance with national auditing requirements contained in the Austrian Commercial Code and expert opinions and recommendations of the Chamber of Chartered Accountants (KWT). However, in matters not regulated by national standards ISAs apply. The IFAC report points out that although application of ISAs as issued by the IFAC is permitted, in case of conflicts between ISAs and national auditing standards, the latter take precedence. By virtue of being a European Union (EU) member, Austria has to comply with the EU Directive No. 2006/43/EC which requires all statutory audits of annual and consolidated accounts to be carried out in accordance with international auditing standards as adopted by the European Commission (EC). Although it is not specified which standards constitute international auditing standards, it is widely anticipated that ISAs as issued by the IFAC will be adopted. Per a 2009 EC publication, Austria was expected to fully transpose the above-mentioned Directive into its national legislation by 2009. As of January 2010, there was no further information publicly available whether the above-mentioned directive had been transposed into Austrian legislation. With regards to enforcement, a 2006 presentation by Markus Palmer noted that there is no enforcement mechanism for financial reporting in Austria. As part of its ongoing efforts to create an adequate system, the Financial Market Authority chaired a working group on enforcement set up by the Austrian Financial Reporting and Auditing Committee.

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IDAnti-Money Laundering/Combating Terrorist Financing Standard

In 2009, the Financial Action Task Force (FATF) released its assessment on Austria's compliance with the FATF Recommendations on Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT). Austria was observed to have a comprehensive AML/CFT framework. Overall, the evaluation found that Austria was fully or largely compliant with 25 of the Financial Action Task Force's (FATF) 40 recommendations (R) and 9 special recommendations (SR). Regarding compliance with core recommendations, Austria was found to be compliant with R10, largely compliant with R1 and SRIV, and partially compliant with R5, R13 and SRII. As result of the transposition of the Third EU Money Laundering Directive, Austria’s AML/CFT framework underwent a significant overhaul in January 2008. These amendments introduced new provisions which include those related to customer due diligence, record-keeping and reporting requirements. While the evaluation was not yet able to ascertain the effectiveness of some of these revisions, it stated that some of the new provisions could still be brought closer in line with FATF recommendations. The Banking Act and Criminal Code criminalize activities related to money laundering and financing of terrorism. Austria’s financial intelligence unit was established in 2002 and is located within the Austrian Interior Ministry’s Federal Criminal Intelligence Service. The FATF, in its 2008-2009 Annual Report, names Austria as one of the jurisdictions that have endorsed the FATF's 40+9 recommendations.

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FCCore Principles for Systemically Important Payment Systems

Until recently, Austria’s systemically important payment system was known as the Austrian Real-Time Interbank Settlement (ARTIS) system. ARTIS was Austria's component of the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) system, the euro area payment system. However, in November 2007 TARGET2 replaced TARGET and payment services were harmonized under a single shared platform (SSP) across its member countries. Austria joined TARGET2 with the first wave of countries in November 2007. As a result, ARTIS was deactivated. According to a 2009 European Central Bank (ECB) assessment of TARGET2 against the Core Principles for Systemically Important Payment Systems (CPSIPS) promulgated by the Committee on Payment and Settlement Systems, TARGET2 observes all CPSIPS. Further, information on the Austrian National Bank's website indicates that it fulfills the requirements defined for national payment systems oversight authorities within the Eurosystem, and the implementation measures taken are meant to fulfill both Austrian and European requirements. The ECB points out in a 2007 report that despite the SSP, national legislation and national central banks still maintain primary supervision for their national components of TARGET2.

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Financial Regulation and Supervision

CPCore Principles for Effective Banking Supervision

In 2004, the IMF published a Financial System Stability Assessment (FSSA) for Austria, wherein the country’s banking supervisory framework was assessed against the 1997 Basel Core Principles (BCPs) for Effective Banking Supervision. According to this report, Austria had a high overall level of compliance with the 1997 BCPs. The report also noted that on-and-off-site inspections were of a high standard, and risk management practices were gaining importance. The report did however indicate that some legal changes were required in order for Austria to achieve full compliance. The report pointed to shortcomings regarding consolidated supervision, connected lending, risk management, and investment criteria. Furthermore, the report noted a need for increased transparency and disclosure in market discipline, as well as more detailed and specific prudential guidelines for banks in managing risks. Citing the IMF's unpublished 2005 update of its 2004 FSSA, the Financial Market Authority (FMA) reported in a 2007 press release that the regulatory and supervisory framework in Austria was at a high level, and continued to improve. In 2008, an FSSA Update was published which documented the progress made by the Austrian banking supervisory regime. The notable improvements were restructuring the supervisory framework with clear distinctions in the supervisory remit of the FMA and the Austrian Central Bank (OeNB), delegating more inspection powers to the OeNB and leaving licensing and enforcement powers in the hands of the FMA. The Capital Requirements Directive was also transposed into Austrian legislation along with the adoption of the guidelines and standards issued by the Committee of European Banking Supervisors (CEBS) and these measures signal steps towards converging with the Basel II requirements. The Update, however, assessed Austria against the new more stringent and exhaustive BCPs published in 2006. This report, however, continues to maintain its template based on the 1997 BCPs. The 2009 Article IV report by the IMF applauds Austria for its regulatory reform in the light of the 2008 recommendations, including supervisory cooperation, off-site and on-site monitoring, and FMA’s resources.

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CPObjectives and Principles of Securities Regulation

The IMF's 2004 FSSA also benchmarked securities regulation practices in Austria against the International Organization of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulation. The report concluded that the overall quality of the supervisory framework for Austria's securities markets was very good and that the general preconditions for effective securities regulation were in place. However, shortcomings were identified regarding the FMA's independence from the Federal Ministry of Finance, and a shortage of staff to conduct direct supervision. The IMF report also noted that the FMA relied heavily on the use of external auditors for supervision. Citing the IMF's update of its original 2004 assessment, the FMA reported in a 2007 press release that the regulatory and supervisory framework in Austria was at a high level, and had continued to improve. The FMA further noted that the financial market supervision reform, which entered into force on January 1, 2008, would contribute toward effective and efficient supervision. Many of the relevant European Union Directives were transposed into Austrian law between 2005 and 2007. In 2008, an FSSA Update was published, documenting the progress made by the Austrian securities market supervisory regime. The 2008 Update noted that there was significant progress in implementing the 2004 FSAP recommendations, but also noted weaknesses in the areas of operational independence of the FMA, staff shortage, corrective action, and cross-border cooperation. In this context, the 2009 Article IV report by the IMF applauds Austria for its regulatory reform in the light of the 2008 recommendations, including supervisory cooperation, off-site and on-site monitoring, and FMA’s resources.

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CPInsurance Core Principles

In the IMF's 2004 FSSA insurance supervisory practices in Austria were also benchmarked against Insurance Core Principles (ICPs) and Methodology revised by the International Association of Insurance Supervisors (IAIS) in October 2003. The IMF concluded that Austria had a high level of observance of internationally accepted standards in the insurance sector. Furthermore, it benefited from a well-defined regulatory and supervisory framework, had adequate resources, and a strong auditing, legal, and judicial system. Shortcomings remained regarding the significant reduction in the sector's safety cushion, on-site inspections, and the regulations and guidelines on internal controls and procedures. Citing the IMF's 2005 update of its original 2004 assessment, the Financial Market Authority (FMA), reported in a 2007 press release that the regulatory and supervisory framework in Austria was at a high level, and had continued to improve. The FMA noted in another press release of 2008 that the financial market supervision reform, which entered into force on January 1, 2008, would contribute toward effective and efficient supervision of the insurance sector. The IMF published another FSSA Update in 2008, which finds that insurance supervision by the FMA has been strengthened and many of the 2004 FSSA recommendations have been implemented. Austria is also actively preparing to implement Solvency II - a risk-based, pan-European solvency regime for insurers, and the FMA has started practicing risk-oriented supervision. Nonetheless, the IMF identifies certain areas where improvement is desirable. They include supervisory resources and staff expertise, fit and proper criteria, investments, off-site monitoring and on-site inspections, remedial action, consolidated supervision, and supervisory cooperation. The 2009 Article IV report by the IMF applauds Austria for its regulatory reform in the light of the 2008 recommendations, including supervisory cooperation, off-site and on-site monitoring, and FMA’s resources. It, nonetheless, still calls for greater cross-border cooperation and an increase in supervisory capacity and powers to strengthen regulation.

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Business Indicators

With an overall score of 10.98/12, Austria is at standard on the economic, legal, and political indicators that make up our Business Index. Austria is a market-based economy. Prior to the 1990s, state-owned enterprises played an important role in the Austrian economy, but since that time, these have been subject to significant privatization – a policy that has been continued through successive government administrations. Foreign investment is welcome in Austria, with few ownership requirements and laws that treat foreign and domestic investors equally. One hundred percent foreign ownership of a firm is legally allowed for most businesses. Austria's top income tax rate is 50 percent and the top tax rate on corporate income is 25 percent. This rate reflects a cut in the corporate tax rate that passed in 2005 in an effort to make Austria more competitive. Property rights, including intellectual property, are protected by a sound legal system. Corruption is of no concern, as reflected in Austria's rank of 16th out of 180 countries in Transparency International's 2009 Corruption Perceptions Index.

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Global Indices & Quick Facts

Austria is ranked in the 1st quintile in all but one of the global indices benchmarking political, economic, business, and human capital climates, as shown below. In a stable and well-developed social market democracy with a high standard of living, the Austrian state has traditionally played a dominant economic role. Widespread privatizations over the last decade have reduced the state's role, however, and Austria now generally earns good marks in the indices measuring economic and business freedom, notwithstanding the still-high fiscal burden the government imposes on the economy. Weaknesses in investor protection and some bureaucratic overhang in the registration of businesses are the few evident weaknesses disclosed by the World Bank's Doing Business Index. Corruption is of little concern, as indicated by Austria's ranking in the Transparency International Corruption Perceptions Index.

Name Year Rank Score Quintile
Bertelsmann Transformation Status Index 2010
Heritage Foundation Economic Freedom Index 2010 22/179 71.6% 1
Economic Freedom of the World Index 2009 13/141 7.67/10 1
World Economic Forum Global Competitiveness Index 2009 17/133 5.13/7 1
Milken Institute Capital Access Index 2009 25/122 6.49/10 2
World Bank Ease of Doing Business Index 2009 28/183 N/A 1
UNDP Human Development Index 2009 14/177 0.95/1 1
Transparency International Corruption Perceptions Index 2009 16/180 7.9/12 1
Freedom House Index 2009 Free 1/7

Credit Ratings

AAA/Stable Fitch

Aaa/Stable Moody's

AAA/Stable Standard & Poor's

Macroeconomic Data

2009 GDP (Current Prices): 316.8 billion USD (IMF)

2009 GDP (Per Capita): 43,570 USD (IMF)

2010 GDP (Growth Forecast): 0.3% (IMF)


2009 Inflation (CPI): 0.5% (IMF)

2008 Unemployment: 3.8% (CIA)


2008 Foreign Direct Investment

FDI (Inward): 13.6 billion USD (UNCTAD)

FDI (Outward): 28.20 billion USD (UNCTAD)


2007 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): 1,808 million USD (OECD)

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