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 notable exception is fiscal policy transparency, where a medium-term framework has yet to be adopted and a lack of available assessments prevents the assignment of a level of compliance for this standard. In the area of accounting and auditing, as a EU member state, Austria requires the use of the 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 been assessed yet.

Macroeconomic Policy and Data Transparency

Austria subscribed to the International Monetary Fund's Special Data Dissemination Standard (SDDS) on September 4, 1996. Per the IMF's 2007 Article IV Consultation report, Austria's data are adequate for surveillance purposes. Based on information provided on the IMF's SDDS website, Austria meets requirements for periodicity, coverage, and timeliness of data, although it does avail of the flexibility option with regards to timeliness for merchandise trade and production index data. Further, Austria fulfills SDDS requirements for the access dimension. Information on the IMF's SDDS website also shows that Austria meets most requirements for integrity of data. It does not, however, clearly state the confidentiality of individually identifiable information for a few data categories, and there is no clear identification of ministerial commentary for national accounts data. With regards to the quality of data, information provided on the IMF's SDDS website indicates that Austria does not provide the requisite information on component detail and cross-checks for several data categories. More »

Austria adopted the Euro with 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 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. More »

Coordination between the three layers of government in Austria - federal, state, and municipal - is the essential feature of Austrian fiscal policy making. 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-Zone, 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 2007 Article IV Consultation, the Austrian authorities have now made progress toward achieving and implementing a medium-term budget framework. However, there is insufficient publicly available information addressing Austria's overall compliance with the IMF's Code of Good Practices for Fiscal Transparency. More »

Institutional and market infrastructure

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. In Austria, there are two primary pieces of legislation governing insolvency and bankruptcy: the Bankruptcy Code and the Composition Code. The former deals with liquidations, the latter with reorganizations. According to a PricewaterhouseCoopers (PwC) report of 2005, the law is thought to be more favorable to creditors. Although the law appears on principle to prioritize restructuring of financially troubled firms, a report by Philippe & Partners and Deloitte and Touche (PP&DT) published in 2002 suggests that rigidities in the legislation actually make recourse to such proceedings unlikely. This finding is echoed in the more recent 2005 PwC report. Nonetheless, the PwC report notes that Austria's insolvency is still evolving. In 2003, the Act on International Insolvency Law was passed which potentially addressed some of the cross-border insolvency deficiencies noted in the PP&DT report. More »

As part of its efforts to contribute to the harmonization of accounting practices in the 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 in their consolidated accounts. The 2006 EC report on the implementation of the Regulation No. 1606/2002 confirmed 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 companies. 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. More »

In a 2004 Financial System Stability Assessment the IMF noted that Austria has taken steps to improve governance in the financial sector in line with international best practices. A Corporate Governance Code, mandatory for listed companies on the stock exchange, was first introduced in 2002. The IMF report recommended making the Code fully mandatory for financial institutions. Amendments to the Joint Stock Companies Act and the Act on Companies with Limited Liability were adopted in 2005 to reflect certain provisions of the Corporate Governance Code. Comprehensive amendments were also introduced to the Stock Exchange Act and the Securities Supervision Act as a result of the transposition of the EU Market Abuse Directive into Austrian law in 2005. Furthermore, the EU Transparency Directive was incorporated into Austrian law in April 2007, and the Code was expected to be amended accordingly. The Corporate Governance Code was last revised in June 2007. On January 1, 2008, the financial market supervision reform entered into force to provide for a comprehensive corporate governance package, according to a 2008 press release from the integrated supervisory authority, the Financial Market Authority. More »

Requirements for conducting audits of financial statements in Austria are contained in the Austrian Commercial Code, supplemented by recommendations issued by the Chamber of Chartered Accountants (KWT). According to the 2007 KWT self-assessment, although application of International Standards on Auditing (ISAs) is accepted, national legal requirements take precedence. However, in instances where no national guidance exists, ISAs have to be applied. There is insufficient publicly available information on whether the national regulations conform to or differ from the international standards. Austrian auditing practices, however, are likely to change due to the enactment of Directive 2006/43/EC of the European Parliament and the Council, which came into force in May 2006. Per this directive, all statutory audits of annual and consolidated accounts in EU countries are required to be conducted on the basis of ISAs as adopted by the European Commission. EU member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. More »

In 2004 the IMF released its assessment on Austria's compliance with the Financial Action Task Force (FATF) Recommendations on Anti-Money Laundering and Combating the Financing of Terrorism. The overall legal and institutional framework is comprehensive, and Austria has achieved a good level of compliance with the FATF Recommendations. This assessment was based on the 2002 methodology for assessing compliance with the FATF recommendations. However, in 2004, the FATF released its revised methodology to assess compliance with FATF recommendations and since, there has been no comprehensive assessment publicly available as to Austria's compliance with FATF requirements. A 2007 report by the U.S. Department of State indicates that the Austrian authorities facilitated the implementation of the third EU Money Laundering Directive in 2006, which contains the requirement for all EU member states to implement the FATF's recommendations. However, there is little subsequent information publicly available as to whether Austria adopted the third EU Money Laundering Directive into legislation. The Banking Act and Criminal Code criminalize activities related to money laundering and financing of terrorism, and Austria's Financial Intelligence Unit, the Federal Criminal Police Office was established within the Interior Ministry in 2002. More »

The ECB assessed the Austrian Real-Time Interbank Settlement (ARTIS) system in 2004, which was at the time the designated systemically important payment system in the country. ARTIS was Austria's component of the Euro area's Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) system. The ECB's 2004 report concluded that the system observed nine of the ten Core Principles for Systemically Important Payment Systems (CPSIPS) as stipulated by the Committee on Payment and Settlement Systems. However, in November 2007, the ARTIS system was replaced by TARGET2, the successor to TARGET, which harmonized payment services under a single shared platform (SSP) across its member countries. In its 2002 report on TARGET2, the ECB did indicate that the system is expected to fully comply with the 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. However, apart from rather general statements, there is little information assessing TARGET2's compliance with the CPSIPS. The ECB points out in its 2007 report that despite the SSP, national legislation and national central banks will still maintain primary supervision for their national components of TARGET2. Despite the lack of information on TARGET2, it is generally believed that TARGET2 is an improvement over its predecessor and its component systems. Therefore the level of compliance assigned to Austria's payment system by past assessments is maintained until TARGET2 is fully implemented in all the member countries and assessed against the CPSIPS. More »

Financial Regulation and Supervision

In accordance with the IMF's 2004 Report on the Observance of Standards and Codes, Austria has a high overall level of compliance with the Basel Core Principles. The report also noted that on-and-off-site inspections are of a high standard, and risk management practices are gaining importance. The 2004 ROSC did 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. The legal framework for banking supervision in Austria is mainly based on the 1993 Banking Act. The Financial Market Authority (FMA) is an independent, autonomous, and integrated financial supervisory authority for the Austrian financial sector. 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 continues 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. More »

As a result of the transposition of the EU's Market Abuse Directive into Austrian law in 2005, comprehensive amendments were introduced to the Stock Exchange Act and the 1996 Securities Supervision Act, which was last revised in 2007. Furthermore, the EU Transparency Directive was incorporated into Austrian law in April 2007. The IMF's 2004 Financial System Stability Assessment 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. Austria's Financial Market Authority was established in 2002 as an integrated financial supervisory authority for the securities, banking, insurance, and pension funds sector. However, shortcomings were identified regarding the FMA's independence from the Federal Ministry of Finance, and 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. More »

The IMF's 2004 Financial System Stability Assessment also assessed Austria's practices against the 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. More »

Legend:

Credit Ratings

Moody's Aaa/Stable

Fitch AAA/Stable

Standard & Poor's AAA/Stable

Macroeconomic Data

2007 GDP (Current Prices): 373.943 billion USD (IMF)

2007 GDP (Per Capita): 45,181 USD (IMF)

2008 GDP (Growth Forecast): 1.9% (IMF)

2008 Inflation (CPI): 2.8% (IMF)

2007 Unemployment: 4.3% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 0.248 billion USD (UNCTAD)

FDI (Outward): 4.087 billion USD (UNCTAD)

2006 Official Development Assistance

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

ODA (Disbursed): 1498 million USD (OECD)