FMA Guidance on Rapid Reduction of Problematic Lending for Banks

Austrian FMA News

Published March 11th, 2026

Detected March 16th, 2026

Summary

The Austrian Financial Market Authority (FMA) has issued guidance urging banks to rapidly reduce non-performing loans (NPLs), particularly in commercial real estate financing. The guidance outlines expectations for clear objectives, honest cost appraisals, and robust implementation plans to strengthen banks' financial resilience and lending capacity.

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What changed

The Austrian Financial Market Authority (FMA) has published guidance emphasizing the need for banks to accelerate the reduction of non-performing loans (NPLs). The document highlights that NPLs, especially in commercial real estate where the ratio stands at 8.4% (€8.6 billion), tie up capital and restrict lending. The FMA expects banks to set clear objectives with deadlines, conduct honest appraisals of costs and resources, and ensure reliable implementation and monitoring.

This guidance implies that banks must proactively develop and execute strategies for NPL reduction, including restructuring, sale, or write-offs. Failure to do so can lead to increased capital burdens and reduced lending capacity. While not a binding rule, adherence is crucial for maintaining financial stability and regulatory compliance, as the FMA will likely scrutinize banks' plans and progress in this area. The publication serves as a supervisory expectation, signaling the FMA's focus on this critical aspect of bank resilience.

What to do next

Review current NPL reduction strategies and targets.
Develop clear, ambitious, and realistic NPL reduction plans with defined deadlines.
Ensure adequate resources and management oversight for NPL reduction initiatives.

Source document (simplified)

FMA: Rapid reduction of problematic lending strengthens banks’ financing power and resilience

March 2026

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- Press Release
Non-performing loans (NPLs) tie up capital, impact results and restrict banks’ ability to grant new loans to healthy businesses and households. The longer problematic loans remain in balance sheets, the greater the burden on their capital; institutions with high NPL ratios are also required to submit plans for reducing them. A speedy reduction of NPLs frees up capital, stabilises returns, and improves the lending channel’s ability to function.

In the latest edition of its series “Let’s talk about supervision” (Reden wir über Aufsicht), the Austrian Financial Market Authority (FMA) highlights the most pressing issues: In Austria, NPL portfolios have a strong concentration in commercial real estate financing. The NPL ratio is largest in this business area, at 8.4% (Q3 2025), or €8.6 billion in absolute terms. A speedy reduction in this area is hampered by large individual exposures, complex projects and lengthy recovery processes. However, choosing to wait instead makes it more expensive as additional provisions and impairments also tie up capital.

The Supervisor’s Expectation:

Clear objectives and plans: Ambitious and realistic targets with deadlines – all the way down to the most important individual cases (restructuring, utilisation, sale, write-offs).
An honest appraisal of costs and resources: Realistic, verifiable cost estimations, as well as sufficient staffing and organisational resources to implement plans.
Implementation and Management: Reliable responsibilities, ongoing monitoring as well as transparent reporting to the management body. Early and decisive action reduces losses, lowers capital deductions, and makes banks more resilient – in turn strengthening lending and supporting the real economy, as the latest edition of the FMA’s publication series for supervised entities “Let’s talk about supervision” states.

This edition and previous editions of “Let’s talk about supervision” can be found on the FMA website.