Borderless freedom

Banks, brokers or CASPs registered abroad are allowed to operate in Austria – provided they hold a licence in the EEA and you can find them listed in the FMA’s Company Database.

“Passporting” means: A company with a valid licence in an EEA country is allowed to also provide its services in Austria, without requiring an additional authorisation from the Austrian Financial Market Authority (FMA).

It all works similarly to a passport when travelling: Anyone with an authorisation from an EEA country is allowed “freedom of movement” throughout the entire internal market and can be active on a cross-border basis.

This is based on two European basic freedoms:

• The freedom to provide services:a company is allowed to provide its services in all EEA countries without a physical branch network.
• The freedom of establishment:the company is also allowed to open physical branches in other countries in the EEA.

Authorisation and supervision

Authorisation is granted by the supervisory authority in the company’s home country. This also is responsible for most of the ongoing supervision.
This is very efficient for financial services providers: One licence covers the entire EEA area. The FMA is notified that such a company starts operating in Austria, but the FMA does not have comprehensive supervisory powers.

Guarantee schemes

There is a particularly important question: What happens if a financial company falls into difficulties or goes bankrupt? There are different guarantee schemes depending on the type of provider.

In the case ofbanksyour credit balance held in current accounts or savings accounts throughout the EU are legally secured up to the amount of EUR 100,000 per person and bank. The deposit guarantee scheme is always the one of the country in which the bank’s registered office is located. While the protective framework is the same throughout the EU, if something goes wrong, communications and processes might get more complicated.

Similarly, forinvestment firmsThere is also coverage: In the event of a provider becoming insolvent and customer deposits or securities not being able to returned, the investor compensation scheme kicks in with up to EUR 20,000 per person. For investment firms with a registered office abroad within the EEA you would need to contact that country’s competent investor compensation scheme.

InAustriainsurers are obliged to form a cover pool (Deckungsstock) for survival and life insurance policies. The insured persons’ money is held separately to the insurer’s other assets, and is predominantly used in an insolvency event to pay-out the insured persons. Caution: such a cover pool system does not exist in all EEA countries.

Summary

There are advantages to passporting – as well as responsibility

Financial services providers that operate on a cross-border basis ensure greater competition and more options. For you, there is a wider choice, but with it comes a greater individual responsibility to inform yourself precisely. Consumer protection is not equally strong in all countries, while legal enforcement if problems arise sometimes being regulated differently.

Even if the publicity or website is in German (or English), this does not automatically mean that customer service is easy to reach, or that problems are able to be handled without any difficulties.

What you ought to be aware of:

• Where is the company’s registered office?
• Who is the competent supervisory authority?
• What guarantee facility is there?
• Are you able to communicate with them without any problems?

When it comes to your money, it’s not just the charges or interest rates that matter, but also that you know what to do in an emergency and that it is clear who is responsible and what rules apply.

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