The Organization for Economic Co-operation and Development said on Tuesday that Austria needs to take steps to strengthen the resilience of its banking sector. The organization said this in its 2013 economic survey of the Alpine country.

Large size and exposure to countries in Central, Eastern and South-Eastern Europe characterizes the Austrian banking sector compared to the Austrian economy. The OECD said that profitability of Austrian banks depends on these activities. But, they could also have higher risks as because of the increase in loan loss provisions.

OECD said that Austrian banking sector is exposed to considerable contagion risks. It added that a better capitalization of these banks can be warranted by tighter regulatory requirements and repaying aid received during the financial crisis.

The large internationally active Austrian banks have a lower Tier 1 capital adequacy ratio than their peers, despite improvements in the capital bases of Austrian banks.

OECD said that Austria's banks need to strengthen their capital bases that are exposed to emerging economies in central and Eastern Europe. Moreover, there is a need to improve shortfalls versus international peers.

"A severe shock in one or several countries to which Austrian banks are substantially exposed may lead to a deterioration of domestic lending conditions", said the 34-member OECD in its 2013 economic survey of Austria on Tuesday.