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VIENNA, Dec 5 (Reuters) - The Austrian National Bank (ONB) on Monday disputed a finding by the European Union's financial risk watchdog that Austria's residential property market risks overheating, at least partly as a side-effect of ultra-low interest rates.
Austria and seven other countries face a medium-term risk either from overvaluation or excessive household debt levels, a systemic risk to EU financial stability that requires regulatory attention, the European Systemic Risk Board said last month.
"The ONB takes a more differentiated approach in its risk assessment; in the ONB's view, the current systemic risks emanating from housing finance in Austria are limited," the central bank said in a statement on its half-yearly Financial Stability Report without elaborating.
Austrian banks have managed to reduce the amount of bad loans on their books but must continue those efforts and bolster their capital ratios, the central bank said.
Many Austrian banks have made countries in central, eastern and southeastern Europe (CESEE) the core of their business, and the ONB said that was where the most work remained to be done.
"The amount of nonperforming loans, which are to a large part in the books of Austrian banks' CESEE subsidiaries, remains a burden for some banks that should be addressed proactively in order to support new lending," the ONB said.
Banks had also continued to bolster their capital buffers but they remained below the European average at the middle of this year, it added. (Reporting by Francois Murphy; Editing by Kirsti Knolle)