VfGH: KIM-V Complies with Law

Feb 2, 2024 Benn-Ibler Rechtsanwälte

The Austrian Constitutional Court (Verfasssungsgerichtshof, hereinafter VfGH) has dismissed a complaint against the Austrian Financial Market Authority's (FMA) Real Estate Financing Measures Ordinance (Kreditinstitute-Immobilienfinanzierungsmaßnahmen-Verordnung, hereinafter KIM-V) on the grounds that there is no prospect of success. The KIM-V is thus in compliance with the law.

Section 4 of the KIM-V sets certain limits for newly agreed private residential property financing, namely a maximum loan-to-value ratio of 90% (Section 4(1)); a maximum debt service ratio of 40% (Section 4(2)); and a maximum term of 35 years (Section 4(3)). The complaint alleged that Sections 4(1) and (2) of the KIM-V are unlawful because the conditions for the enactment of the ordinance had not been met or no longer existed.

The VfGH has now found that the FMA has complied with the procedure laid down in Sections 23h (1) and (2) of the Austrian Banking Act (Bankwesengesetz, hereinafter BWG) (i.e., the recommendation of the Financial Market Stability Board [Finanzmarktstabilitätsgremium] to the FMA to use suitable instruments to reduce the extent of systemic risks arising from debt financing of real estate for the purpose of financial market stability; expert opinion of the Oesterreichische Nationalbank (OeNB) on the existence of systemic risks arising from debt financing of real estate; and, finally, approval by the Austrian Federal Minister of Finance). The recommendations of the Financial Market Stability Board and the OeNB as well as the recommendation of the European Systemic Risk Board (ESRB) of 2 December 2021 show that the conditions required by Section 23h of the BWG for the issuance of the ordinance had been met both at the time of the issuance of the ordinance and at the time of the VfGH’s decision (December 2023). Pursuant to Section 23h (5) of the BWG, the enactment of the ordinance requires evidence of systemic risks arising from the debt financing of real estate that threaten the stability of the financial markets and information on the existence of such systemic risks to be provided to the ESRB.

The VfGH also made it clear that the FMA must review the necessity of the KIM-VO pursuant to Section 23h (6) of the BWG on an ongoing basis.

VfGH V 329/2023 (13 December 2023)