Austrian national bank Analysis

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Austrian National Bank
Prepared by:
Amna Zarin
Bachelors of Business Studies
(BABS)
Date of Submission:
December 2, 2018
SZABIST Karachi Campus
90 Campus, Block 6, Clifton, Karachi, Sindh 75600

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Letter of Transmittal
December 2, 2019
Farhan Ahmed
Lecturer / Managing Editor in JISR - MSSE
Department of Management Sciences
SZABIST
Subject: Letter ofTransmittal
Dear Sir,
With due respect, I, the student of BABS7th Semester have reported on “Austrian National Bank” under the
course: Financial Markets and Institutions.
Though I am still in the learning curve,this report has enabled me to gain insight into the core fact of Austrian
central bank. So it becomes an extremely challenging and interesting experience. Thank you for your supportive
consideration for formulating an idea. Without your Inspiring, this report would have been an incomplete one.
Lastly, I would be thankful once again if you please give your judicious advice on the effort.
Yours’ sincerely,
Amna Zarin
Registration No- 1518102
Department of Management Sciences

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Acknowledgments
In the name of "Allah", the most beneficent and merciful who gave me strength and knowledge to complete this
report.
This assignment is a part of my course “Financial Markets and Institutions”. This has proved to be a great
experience.
I would like to express my gratitude to mycourse instructor Sir Farhan Ahmed, who gave me this opportunity to
fulfill this report. He gave me moral support and guided in different matters regarding the topic. He had been very
king and patient while suggesting the outlines of this report. I thank him for his overall support.

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Executive Summary
The report is about Austria’s central bank, this report talks in details about the history of this bank as it was found
in 1816, it has a rich history of policy making and its implementation. Then I have discussed about the structure
and departments of the bank, it has around 12 departments to cater all the financial needs of an economy.
The main part of the report talks about the policy rate of Austria in the last 5 years and the reasons for its
fluctuations, then I have also discussed the major macro-economic indicators to evaluate the performance of the
economy.

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Table of Contents
Letter of Transmittal.......................................................................................................................................3
Acknowledgments ..........................................................................................................................................4
Executive Summary........................................................................................................................................5
1. Introduction & History ................................................................................................................................1
1.1 Foundation of the bank and provisional governance (1816–1818).............................................................2
1.1.1 Historical Background.....................................................................................................................2
1.1.2 Independence guaranteed.................................................................................................................2
1.2 The Privilegirte Oesterreichische National-Bank (1818–1878)..................................................................3
1.2.1 Erstes Privilegium...........................................................................................................................3
1.2.2 Difficulties during establishment......................................................................................................3
1.2.3 The second era from 1841................................................................................................................3
1.2.4 Maintaining price stability ...............................................................................................................3
1.2.5 The “Bank Act” of 1862 and the “Big Crash” of 1873 .......................................................................4
1.3 The Austro-Hungarian Bank (1878–1922)...............................................................................................5
1.3.1 Common ground .............................................................................................................................5
1.3.2 The early 20th century.....................................................................................................................5
1.3.3 World War I heats up inflation.........................................................................................................5
1.3.4 The breakdown of the old order........................................................................................................6
1.4 The Oesterreichische National bank during the First Republic (1922–1938) ..............................................7
1.4.1 A new beginning.............................................................................................................................7
1.4.2 Crisis management..........................................................................................................................7
1.5 The central bank during the Third Reich (1938–1945) .............................................................................8
1.5.1 The Anschluss ................................................................................................................................8
1.5.2 Irretrievable losses ..........................................................................................................................8
1.5.3 Reichsbank offices from 1938 to 1945 in focus: The Vienna Reichsbank head office...........................8
1.6 The Oesterreichische National bank during the Second Republic (1945–1998) ..........................................9
1.6.1 Reconstruction................................................................................................................................9
1.6.2 Independence regained ....................................................................................................................9
1.6.3 Stability guaranteed.........................................................................................................................9
1.6.4 Coordinated policies........................................................................................................................9
1.6.5 Forward-looking integration ..........................................................................................................10

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1.7 The Oesterreichische National bank as part of the European System of Central Banks (From 1999 to the
Present)....................................................................................................................................................11
1.7.1 The OeNB as Part of the ESCB/Euro system...................................................................................11
1.7.2 An Independent Central Bank........................................................................................................11
1.7.3 The OeNB's Role within the Euro system .......................................................................................11
1.8 The euro.............................................................................................................................................12
1.8.1 The history of the euro...................................................................................................................12
1.8.2 Banknotes.....................................................................................................................................13
1.8.3 Coins............................................................................................................................................14
2. Structure...................................................................................................................................................15
2.1 Monetary policy ..................................................................................................................................15
2.2 Financial stability................................................................................................................................15
2.3 Banknotes and coins ............................................................................................................................15
2.4 Statistics .............................................................................................................................................15
2.5 Payments............................................................................................................................................15
3. Departments ............................................................................................................................................16
4. Policy Rate of Last 5 Years.......................................................................................................................17
5. Governors (Last 5 Years)..........................................................................................................................18
6. Resume of The Current Governor ..............................................................................................................18
7. Organizational Hierarchy..........................................................................................................................19
8. Economic Outlook of the Country.............................................................................................................21
8.1 Austria GDP Growth Rate:...................................................................................................................21
8.2 Austria Unemployment Rate:...............................................................................................................22
8.3 Austria Inflation Rate: .........................................................................................................................23
8.4 Austria Balance of Trade:....................................................................................................................24
8.5 Austria Prime Lending Rate:................................................................................................................25
8.6 Austria Government Debt to GDP: .......................................................................................................26
8.7 Financial statements and key figures.....................................................................................................27
8.8 Forecast for year 2020.............................................................................................................................28
8.8.1 Unemployment .............................................................................................................................28
8.8.2 Index of Consumer Prices..............................................................................................................29
8.8.4 Inflation .......................................................................................................................................30
8.8.5 Interpretation ................................................................................................................................31
9. Banking System........................................................................................................................................32
9.1 The Three Pillars of the Banking Union ................................................................................................32

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9.2 List of Banks (Local & Foreign) Regulated by Central Bank..................................................................33
10. References..............................................................................................................................................34

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List of Illustrations
The Euro (Figure 1.8.1) 12
Banknote Design (Figure 1.8.2) 13
Coin Design (Figure 1.8.3) 14
Policy Rate of Last 5 Years (Figure 4.1) 17
Organizational Hierarchy (Table 7.1) 19
Organizational Hierarchy (Figure 7.1) 20
GDP Growth Rate (Figure 8.1) 21
Unemployment Rate (Figure 8.2) 22
Inflation Rate (Figure 8.3) 23
Balance of Trade (Figure 8.4) 24
Prime Lending Rate (Figure 8.5) 25
Government Debt to GDP (Figure 8.6) 26
OeNB indicators over the past five years (Table 8.1) 27
Unemployment (Figure 8.8.1) 28
Index of Consumer Prices (Figure 8.8.2) 29
Inflation (Figure8.8.4) 30
The Three Pillars of the Banking Union (Figure 9.1) 32

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1. Introduction &History
Located in Vienna, the Austrian National Bank (Oesterreichische National bank, abbreviated OeNB),often called
the National Bank of Austria is, as the name suggests, the main central bank of the country. Since the Republic of
Austria’s joining of the European Union, the bank has been part of the European System of Central Banks, as well
as taking on the European currency of the Euro.
Established on June 1, 1816, the bank has been the dominant factor in the monetary and economic policies of the
country and remained independently stable as a stock corporation until 1999 when it was taken over by the
European Central Bank after Austria joined Europe. The bank still exists as its own entity but many of its
functions and operations are controlled and governed by the European CentralBank. The bank’s Governor,
although not obliged, is expected to make informed monetary policy decisions based on the information provided
by Europe.
Under its stock corporation and centralbanking structure half of the bank’s roughly 12 million (Euro) capital
funds are owned by investors, insurance companies, banks and employer and employee organizations, whilst the
other half is held by the Austrian government.
The Austrian National Bank’s primary roles are to help keep a stable money system, promote an effective
monetary policy within the realms of the Euro currency,to oversee the country’s payment systems, to keep fraud
and counterfeiting to an unaffecting minimum and to keep general financial stability in the country. It is also the
bank’s duty to hold assets and reserves to promote the overall stability of the Euro should it fall in to crisis.
The current president of the Austrian National Bank is Herbert Schimetschek, who was appointed in September,
2003.
In 2007 the bank sold a majority shareholding of its “Austria Card” subsidiary to Lykos.

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1.1 Foundation of the bank and provisional governance (1816–1818)
1.1.1 Historical Background
The ruling Habsburg dynasty struggled with the issue of paper money for nearly 50 years before founding a
central bank in Austria: Banknotes – known as “Bancozettel” at the time – were first issued in 1762 by an
institution that enjoyed the confidence of the business community precisely because it was not government-
controlled: The Municipal Bank of Vienna (Wiener Stadtbank), originally founded in 1705.
1.1.2 Independence guaranteed
When the political balance in Europe was restored at the end of the Napoleonic wars,the Austro-Hungarian
Empire faced enormous challenges. With their territory spanning many divergent ethnic groups, the Habsburgs
could no longer rely only on their traditional pillars of societal support – the Church, the nobility, the army and
the civil service – to hold together their Empire: The Empire also needed a sound economic basis for integration
to work. Therefore,the government had to regain the confidence of the business community. The basic economic
law of supply and demand was not to be overridden – it was binding even for the Emperor. Against this backdrop,
the Emperor issued two exclusive rights called “patents” on June 1, 1816, namely the “financial patent” and the
“bank patent,” thus creating a centralbank: The “privilegirte oesterreichische National-Bank” started operation on
the same day. The preparatory work had been masterminded by Count Johann Philipp von Stadion, the Austrian
finance minister at the time.
It took the creation of a central bank, which would in due course have the exclusive right to issue banknotes, for
the Austrian monetary system to stabilize and public confidence in the monetary system to return. The banknotes
appreciated in value once again, thanks to circumspect monetary policymaking. In other words, putting the job of
supplying the economy with cash into the hands of an institution that was committed to maintaining price stability
had been the right move. Yet to be able to maintain price stability, the central bank had to be independent of
government as well – it had to able to prevent the finance minister from firing up the printing press. Independence
was strengthened by capitalizing the bank through the sale of shares to investors.
Initially, the activities of the centralbank were limited to the redemption of the old paper money and the issuance
of shares under a provisional governance structure. For the bank to become operational with full-fledged
management, public subscription of a thousand shares was required.

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1.2 The Privilegirte Oesterreichische National-Bank (1818–1878)
1.2.1 Erstes Privilegium
The imperial patent of July 15, 1817, gave the privilegirte oesterreichische National-Bank the exclusive right to
issue an unlimited amount of banknotes and to determine the rate for discount transactions.
On January 19, 1818, the permanent bank management was set up.
In the next few years,the central bank systematically established a network of branches to guarantee a smooth
money and credit supply. With the head office in Vienna serving as the hub, this network spread to the early
industrial regions and trading centers in Central and Eastern Europe as well as the northern Mediterranean region.
1.2.2 Difficulties during establishment
As a matter of principle, the bank was intent on keeping the share of government securities on the asset side of its
balance sheet as low as possible. The assets of choice were trade bills and coins. The bills of exchange discounted
by the central bank fueled the economic upturn of the monarchy. The banknotes issued were backed by the central
bank’s silver reserves, meaning that they were exchangeable for silver coins on demand. In 1818, the bank had
assets of 11.5 million florins, whereas the direct (or indirect) government debt with the bank came to 2.2 million
florins. Despite the bank’s management long and valiant effort, it eventually failed to prevent its stock of public
securities from rising.
The head of the government used to remind the centralbank management of its “patriotic responsibilities” in
more or less polite words, so the bank was ultimately compelled to buy public securities in times of crisis.
1.2.3 The second era from 1841
The clauses of the founding statutes of the privilegirte oesterreichische National-Bank had not been able to
guarantee continued autonomy from the government. Central bank independence was a moving target, and
maintaining it was a daily challenge for the governors and bank directors. They were forever forced to strike a
balance between the amount of banknotes the bank could issue and the amount of public debt it held. The
government finally succeeded in reducing the central bank’s independence by shifting the influence on
management away from shareholders to the government when it renewed the bank’s monopoly rights in 1841.
During the revolution of 1848, the old order was confronted by a coalition of bourgeois liberals and socialists.
Leading bank officials supported the constitutional aims of the 1848 revolutionaries.
1.2.4 Maintaining price stability
The central bank and stock market building, opened in 1860
The policymakers at the central bank actively monitored the premium to be paid when exchanging banknotes for
silver money. Any increase in the premium was equivalent to a depreciation of the notes issued by the privilegirte
oesterreichische National-Bank. Such a rise had to be prevented, since an increase in the premium was seen as a
harbinger of growing inflationary pressure.
When it tried to stabilize the silver premium, the centralbank rapidly reached a limit, as the premium was
dependent not only on the central bank’s issuing activity but also reflected the silver price (expressed in terms of
gold) and the expected consequences of increased fiscal deficits on money markets. Especially the crises in the
years 1848 and 1849 (revolution), 1850 (Prussian-Austrian conflict) and 1853 to 1856 (general mobilization on
the occasion of Crimean War) caused the silver premium to rise.
Together with Wiener Börse (the stock market), the centralbank moved into a building designed by architect
Heinrich Ferstel in 1860. Café Central – the epitome of the Viennese café for decades – was established on the
ground floor of this building.

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1.2.5 The “Bank Act” of 1862 and the “Big Crash” of 1873
The central bank’s monopoly rights were renewed again (“drittes Privilegium”) on the basis of the law of
December 27, 1862 (Imperial Law Gazette No. 2 ex 1863). The most significant change embodied in this law was
the reestablishment of central bank independence and its anchoring in law. Furthermore, the volume of banknotes
in circulation was limited, mirroring the framework that the Bank of England had introduced under Peel’s Act.
Henceforth,issues of banknotes beyond the fixed amount of 200 million florins would have to be backed with
precious metal. The law of 1862 was referred to as the “Bank Act,” by analogy to Peel’s Act of 1844.
To fund the war in 1866, the government seriously violated the tenet of central bank independence as established
by the Bank Act and the prohibition of issuing banknotes to fund the state. This breach of the centralbank’s
monopoly rights obliged the public administration to pay compensation. In addition, the central bank’s position
was strengthened with the law of March 18, 1872, which authorized the issuance of banknotes up to a maximum
of 200 million florins but required any further issues in excess of this amount to be fully backed with silver or
gold reserves.

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1.3 The Austro-Hungarian Bank (1878–1922)
1.3.1 Common ground
During the negotiations on the compensation between Austria and Hungary in 1867, the central bank issue was set
aside to prevent further complications and to maintain the present conditions until an agreement on a future legal
regulation had been reached. Until such a regulation was passed,the centralbank was free to exercise its
exclusive right of issue in Hungary without restrictions.
After years of prolonged negotiations, in 1878 the central bank was successfully transformed into an institute in
which Austria and Hungary had equal shares. The “Austro-Hungarian Bank” became the central bank of both
parts of the Empire. The management of the centralbank was mainly intent on keeping the governments from
encroaching further on its governance, while the governments of Austria and Hungary mainly disagreed on
questions of liability for their national debts (at the rate of 80 million florins). The central bank monopoly rights
(“Erstes Privilegium”) eventually granted to the Austro-Hungarian Bank represented a compromise between these
conflicting interests.
A general meeting and a general council would reflect the unity of the bank administration, but two governing
boards and separate head offices in Vienna and Budapest reflected the dualistic nature of the institution.
The Austro-Hungarian Bank needed to undertake far-reaching currency reforms, which included the transition
from a silver currency to the gold standard, following a long debate on monetary policy.
After a transitional phase of eight years, the gold crown replaced the silver florin as legal tender in 1900. In
everyday business, the new banknotes proved to be a popular currency. Hence,the gold coins backing the
banknotes could be locked into central bank’s vaults.
Altogether, the 1880s and 1890s proved to be a successfulsynthesis of growth and reduction in prices from the
bank management’s perspective. Per capita output increased,whereas prices fell or remained stable. These
developments made it easier for the centralbank to support the banking sector in funding the new boom of
industrialization.
1.3.2 The early 20th century
When the central bank monopoly rights were renewed on September 21, 1899 (“Drittes Privilegium”), the
autonomy of the Austro-Hungarian Bank was limited somewhat. For example, the state was given the right to
access the centralbank’s funds under a number of conditions.
At the same time, important changes were made in the central bank’s operational framework, which in effect
became the basis for the successfulforeign exchange policy of the Austro-Hungarian Bank. This success was
evidenced by the fact that the Austro-Hungarian currency stayed on the gold parity until 1914 with very little
fluctuation of its external value.
The political developments of the time were crowned with far less success. The conflicts of different nationalities
increasingly paralyzed the work of the parliament. Parliamentary elections in 1911 hardly changed the gridlock.
In March 1914, the parliament was prorogued. Now, the Stürgkh government ruled without being controlled by
parliament. The expansion course which led to the annexation of Bosnia in 1908 was continued, ultimately
resulting in the incidents of August 1914.
1.3.3 World War I heats up inflation
The expansionist foreign policy of the Austrian government confronted the management of the central bank with
the potential consequences of the forthcoming military conflict. Bank officials were well aware of the fact that the

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government would primarily resort to the central bank to finance the fast increasing cost of warfare. The
management of the central bank had already been compelled to contribute to crisis planning during the crisis in
the Balkans in 1912.
Despite its profound skepticism about the optimism of the generals “that considering the state-of-the-art war
technology, a war in Europe would surely be over within three months,” the management of the bank was not able
to defend the stability of the monetary system.
Just a few days after war had been declared, it became patently clear that the currency would depreciate sharply.
The military command ordered that all requisitioned goods should be reimbursed at double their price. After this
bombshell of an announcement, inflation was further fueled by a considerable shortage of products and the
continuously expanding money supply. During the war, the money supplies increased thirteenfold, and the price
level rose to sixteen times the peacetime level.
About 40% of the cost of war was financed by the loans of the central bank and about 60% by war loans.
1.3.4 The breakdown of the old order
What artists and scientists of the fin de siècle had realized well ahead of the general public became clear to
everyone by the end of war: The old order had broken down, and coping with the new situation was not easy.
In its search for stable reference points, the central bank encountered considerable problems, mainly because the
Imperial and Royal Monarchy fell apart into severalsuccessor states from the end of 1918. In spite of the bank
management’s efforts to maintain relations with the administrations of each of the recently founded successor
states,it could not prevent the currency separation.
As a reaction to the political split, a separate “Austrian management body” was set up. Lacking a reliable
guarantee to be able to conduct business independently, the bank’s management was compelled to provide the
state with the financial resources needed to cover the immense budget deficit. In the end, the centralbank
financed about 75% of the federalbudget deficit between 1918 and 1922.
The end of the Austro-Hungarian Bank itself had long been foreshadowed. The Treaty of St. Germain-en-Laye
1919 provided for the complete liquidation of the Austro-Hungarian Bank as well as other painful provisions for
the young Austrian republic. The reparations commission in Paris nominated commissioners, who were charged
with executing the entire liquidation while safeguarding the interests of all successor states.
The last ordinary general meeting of the Austro-Hungarian Bank took place on July 14, 1921, and the last meeting
of the part of the general council that was responsible for Austria was held on December 15, 1922; it was chaired
by Governor Alexander Spitzmüller.

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1.4 The Oesterreichische National bank during the First Republic (1922–1938)
1.4.1 A new beginning
Since the start of the liquidation of the Austro-Hungarian bank, it was clear that Austria, like the remaining
successor states,had to have a bank of issue of its own. But first of all, it was necessary to establish order in the
national budget. The Geneva Protocol of October 1922 provided a basic framework for an orderly budget.
The statutes of the new Austrian central bank were passed as a federallaw on November 14, 1922. The statutes
provided for the business name “Oesterreichische National bank” (OeNB),thus reinstating the venerable name of
the institution that had been accorded the sole right to issue banknotes in line with a modern concept of monetary
policy as early as 1816. The fundamentals of the statutes were in line with the guidelines set up by the League of
Nations for full central bank independence from credit demands of the state,autonomous governance, and an
adequate provision of capital to underpin this independence.
This new beginning was also expressed by a move into new headquarters in Vienna. Even before 1914, the
management of the Austro-Hungarian Bank had commissioned the construction of a new building in the ninth
district of Vienna, but only the shell of the building designed to accommodate the printing works had been
completed by the time the OeNB was reestablished. The OeNB management decided to have the new building
completed to house all departments including the printing works. The inauguration ceremony for the new bank
building was finally held on March 22, 1925.
The first great test for the new central bank was to implement the recommendations of the Financial Committee of
the Council of the League of Nations to stabilize the Austrian currency. To this end, the Schilling Conversion Act
(Schillingsrechnungsgesetz) was passed on December 20, 1924. This law provided for the introduction of the
schilling currency on January 1, 1925. The schilling replaced the Austrian crown, which had been legal tender
since 1892; the conversion rate was 10,000 Austrian crowns to the schilling.
1.4.2 Crisis management
The mastermind behind the consolidation of public finances in the First Republic was Viktor Kienböck, who was
Minister of Finance from 1922 to 1924 and from 1926 to 1929, President of the Oesterreichische National bank
from 1932 to 1938 and OeNB Vice President from 1952 to 1956. Under his management, the Austrian schilling
weathered the Great Depression unscathed and remained a stable currency up to 1938.
This stable framework allowed the OeNB to concentrate on crisis management during the series of bank failures
Austria faced. The crisis of the bank Credit-Anstalt in 1931 marked the climax and finale of this series.
The tragic events of the civil war waged in Austria in 1934 had little effect on the business practices of the OeNB.
In fact,confidence in the so-called “Alpendollar” (Alpine dollar) was so great,even internationally, that the
government and the central bank were able to repay the 1923 League of Nations bond in 1934. But the favorable
monetary situation was marred by the great number of unemployed persons in Austria, a circumstance that had
severe consequences for domestic policy.

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1.5 The central bank during the Third Reich (1938–1945)
1.5.1 The Anschluss
After the end of World War, I, efforts to return to peacefulcoexistence in Austria were doomed. Political camps
formed in all areas,all of which sought to advance their own interests, if necessary by fraudulent means, coercion
or even with armed force. As the corporatist Ständestaat was ruled by an authoritarian government and as it had
banned the Social Democratic Party,it was isolated in domestic and foreign affairs. Thus weakened,the Austrian
government could not muster the power necessary to repudiate the efforts of the National Socialist Third Reich to
annex Austria.
The National Socialists seized power in March 1938, leading to a spate of arrests,abductions and suicides of
Austrian politicians, artists and intellectuals, above all, Jewish Austrians. Sigmund Freud, for example, emigrated
against the background of the looming threat.
Immediately after the occupation of the Austrian territory, the monetary system was also incorporated into the
Third Reich: On March 17, 1938, the Reichsmark was introduced in Austria by decree. The exchange rate was set
at 1.5 Austrian schillings to the Reichsmark.
1.5.2 Irretrievable losses
The war triggered by Germany’s invasion of Poland in 1939 burgeoned into World War II in the next few years
and rapidly put an enormous strain on all of society.
Many centralbank employees were drafted onto the German army. Those who returned in 1945 were confronted
with the legacy of the war: Hundreds of thousands of people had been killed during World War II. Production
plants and residential areas had been laid waste. The Austrian economy had been severely handicapped. After the
war,Austria’s productive capacity had fallen to just over 40% of the 1937 level.
The National Socialists had pumped up money supply enormously to finance the war. According to contemporary
estimates, the amount of money in circulation required to preserve price stability should not have exceeded half a
billion Reichsmark at the end of 1946. In actual fact,at the end of World War II, some 11 billion Reichsmark
were estimated to be in circulation. In addition, the Allies issued paper money: All in all, some 10 billion Allied
military schillings were printed.
1.5.3 Reichsbank offices from 1938 to 1945 in focus:
The OeNB commissioned a team of historians led by Oliver Rathkolb and Theodor Venus to research the history
of the OeNB in the years leading up to Austria’s Anschluss in 1938 and under the National Socialist regime. The
team’s findings have been published in German with an English summary.

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1.6 The Oesterreichische National bank during the Second Republic (1945–1998)
1.6.1 Reconstruction
The disastrous World War II years had taught society and politicians the importance of nonpartisan teamwork as
the basic principle of an inclusive society in Austria. Reconstruction was a success,being driven by the stamina of
all stakeholders and benefiting crucially from the European Recovery Program, known as the Marshall Plan.
After the reestablishment of the Republic of Austria on April 27, 1945, the Oesterreichische National bank could
also resume operation. The CentralBank Transition Act of July 3, 1945, provided the temporary legal basis for
the centralbank’s activities.
At first, the inflationary conditions persisted. Although the one-to-one exchange of Reichsmark banknotes and
Allied military schillings was restricted to ATS 150 per person, the money supply measured in early 1946 totaled
nearly six times the level prevailing at the end of 1937. In May 1947, monthly inflation reached double digits. The
schilling was still clearly undervalued by comparison with foreign currencies.
1.6.2 Independence regained
After severaldecades marked by numerous political breaks, a more open atmosphere was now regaining the upper
hand in Austria’s intellectual, cultural, political and economic life. Increasing material security helped promote
the forces that were seeking a new identity for a modern, post-war Austria. Waves of refugees arriving from
Hungary in 1956 and from Czechoslovakia in 1968 reminded Austrians how fragile their recent progress was.
On September 8, 1955 – in the same year in which the Austrian State Treaty was signed – parliament (the
Nationalrat) passed a new National Bank Act (still applicable as amended in 1984). Though the law contains
provisions that are to a certain extent restrictive – the central bank is obliged to take into consideration the federal
government’s economic policy when exercising monetary and credit policy – it guarantees in particular that the
central bank is independent of any obligation to lend to the public sector. Additionally, the operational framework
of the central bank was expanded to include open market operations and minimum reserves.
1.6.3 Stability guaranteed
For more than a decade up to the end of the 1960s, the key indicators bore testimony to the high internal and
external stability of the Austrian economy, underpinned by a well-balanced fiscal and monetary policy that
allowed for high economic growth along with low inflation while avoiding long-term externalimbalances. Hence,
monetary policymakers were able to focus on refining the institutional framework without being forced to
intervene permanently.
During the second half of the 1960s, it became more and more obvious that the Bretton Woods System (the
international currency system based on gold/dollar convertibility) could not be maintained in the long run. The
U.S.A. was confronted with continuous balance of payments deficits, and the economically and financially most
powerful European countries had to deal with recurring current account imbalances. These circumstances made it
indispensable to reform monetary policy radically. For the moment, a more flexible multilateral adjustment of
exchange rates seemed to be an attractive option.
1.6.4 Coordinated policies
In the 1970s, Austria’s willingness to carry out reforms and its stability consciousness were put to a hard test. A
recession abruptly interrupted the periods of rapid economic growth in 1975. Toward the end of the decade,
skepticism about the “Austrian model,” previously much admired internationally, was on the rise.

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Though Austria took various measures,the inflow of foreign capital had – by the early 1970s – climbed to a level
that was incompatible with the domestic stability objective. Following the unpegging of the schilling’s exchange
rate from the U.S. dollar, policymakers ultimately adopted the strategy of using a basket of “indicator currencies”
as a benchmark for actively determining the schilling’s exchange rate: The European currency “snake” system, so
called because the currencies of the participating countries were only allowed to fluctuate against each other by a
set margin, like the movements of a snake.
After the first oil price shock and the persistent economic slump, Austrian economic policymakers tried to steer
the economy by using a broad and harmonized set of measures including limits on the amount of bank lending,
restraint in wage increases,demand-side and supply-side fiscal stimulation as well as a temporary attempt to
conduct an independent low interest-rate policy. Toward the end of the 1970s, it became more and more obvious
that the system of manifold regulations and interventions hampered necessary structuralchange,also in the
banking sector. In 1979, the authorities finally had to relinquish the effort to conduct an independent policy of low
interest rates.
1.6.5 Forward-looking integration
Strengthening economic efficiency by promoting competitive performance became the leitmotiv of the socio-
political reform ideas of the 1980s. As Eastern Europe opened up at the end of the decade and the map of Europe
was redrawn,Austria found itself in a more centralgeographical position. In this atmosphere, it finally became
possible to openly discuss ways to find a viable solution for a united Europe even if different interests were
involved.
The experience of the 1970s prompted policymakers to align the schilling exchange rate with the rate of the
Deutsche mark to help ensure internal price stability. Such informal integration into a greater monetary area
additionally stimulated structural change in the Austrian economy: Austrian enterprises could survive only by
delivering sustained productivity increases. Under such circumstances,the monetary policy of the 1980s was
directed toward providing for stability while at the same time forcing economic agents to accept compromises.

11
1.7 The Oesterreichische National bank as part of the European System of Central Banks (From 1999 to
the Present)
Austria’s entry into Stage Three of Economic and Monetary Union (EMU) has fundamentally changed the
framework conditions under which the OeNB operates. The adoption of the euro on January 1, 1999, and the
single monetary policy framework have redefined the roles of the participating European national centralbanks
(NCBs). The provisions of the Treaty on European Union (TEU) and of the Treaty on the Functioning of the
European Union (TFEU) are now the main legal basis for the NCBs’ operations.
1.7.1 The OeNB as Part of the ESCB/Euro system
The European System of Central Banks (ESCB) is composed of the European Central Bank (ECB) and the
national central banks (NCBs) of all 28 EU Member States. Together with the ECB, the NCBs of the 19 Member
States that have adopted the euro as the single currency form the Euro system, which has conducted the common
monetary policy of the euro area since the introduction of the euro on January 1, 1999.
The NCBs, while retaining their legal independence under the umbrella of the ESCB, have formed a very close
relationship within the ESCB and follow the common rules and principles laid down in the Treaty on the
Functioning of the European Union (TFEU) and in the ESCB/ECB Statute. According to Article 127(1) of the
TFEU, the primary objective of the ECB and the NCBs is to maintain price stability.
1.7.2 An Independent Central Bank
In fulfilling its function as the central bank of the Republic of Austria and as an integral part of the ESCB and the
Euro system, the OeNB acts on the basis of full personal, financial and institutional independence. Its
independence ensures that monetary policymaking remains free from political and other external influences and is
thus a prerequisite for the maintenance of monetary stability.
1.7.3 The OeNB's Role within the Euro system
The primary objective of the Euro system, and hence of the OeNB,is to maintain price stability in the euro area in
order to guarantee the purchasing power of the euro. Price stability and effective monetary policymaking hinge
fundamentally on financial stability. To ensure financial stability, Austrian banks are subject to continuous
oversight by the OeNB and the Financial Market Authority (FMA). Banks have had to intensify the monitoring
and management of their risks under the Basel II framework,which became operational in 2007.
Since 2008, the OeNB has been solely responsible for conducting on-site examinations and for performing off-
site analyses of banks. Based on the findings reported by the OeNB,the FMA assesses the risk of the banks
examined and takes official action if banks violate the provisions of the legal framework for banking supervision,
as determined by Federal Ministry of Finance.
The OeNB relies on its economic analyses to back up the monetary policy positions it takes within the Euro
system. The OeNB delivers its input on economic issues to the respective Euro system/ESCB working groups and
publishes macroeconomic forecasts for Austria every six months. Moreover, the OeNB is strongly committed to
monitoring the integration process of the Central and Eastern European countries into the EU and EMU,
providing technical cooperation, above all with the NCBs of those countries, and offering training support.

12
1.8 The euro
The introduction of euro banknotes and coins at the beginning of 2002 was a major milestone for the Austrian
economy. Thanks to the meticulous preparations of the OeNB,the changeover was smooth and rapid even though
it represented a logistical challenge of unprecedented proportions.
1.8.1 The history of the euro
The Treaty of Rome (1957) established the objective of founding a common European market to increase
economic prosperity and contribute to “an ever closer union among the peoples of Europe.”
The Single European Act (1986) and the Treaty on European Union (1992) build on this foundation. These
treaties paved the way to the foundation of the Economic and Monetary Union (EMU) and laid the groundwork
for the single currency.
The third stage of EMU started on January 1, 1999, with the introduction of the euro for accounting purposes and
the establishment of fixed conversion rates of the currencies participating in the exchange rate mechanism
ERM II. Since that date,the euro area countries have conducted a single monetary policy.
On January 1, 2002, Greece joined the Euro system. One year later, on January 1, 2002, euro banknotes and coins
were introduced in 12 EU Member States. The launch of euro cash as legal tender was a historic milestone on the
path toward a single market enabling the free movement of goods, capital, services and people.
As the first among the enlargement countries that joined the EU in 2004, Slovenia adopted the euro on January 1,
2007. The euro area has been expanding continuously to include Malta and Cyprus (January 1, 2008), Slovakia
(January 1, 2009), Estonia (January 1, 2011), Latvia (January 1, 2014) and Lithuania (January 1, 2015).
The Euro (Figure 1.8.1)

13
Bulgaria, the Czech Republic, Denmark, Croatia, Hungary, Poland, Romania, Sweden and the United Kingdom
are EU Member States, but are not Euro system members yet at this time.
However,the currency of Denmark participates in ERM II, i.e. the exchange rate may fluctuate against the euro
within a determined bandwidth. Participation in ERM II is a prerequisite for introduction of the euro at a later
time.
1.8.2Banknotes
Banknote Design(Figure 1.8.2)
Euro banknotes exist in seven different denominations. Each banknote is associated with a prescribed period and
architectural feature in a series depicting the “ages and styles of Europe.” Robert Kalina, a graphic artist at the
Oesterreichische Banknoten- und Sicherheitsdruck GmbH in Vienna, designed the banknotes of the first series.
The design of the second series was adapted by German graphic artist and designer Reinhold Gerstetter.
The windows and gateways on the front of each banknote symbolize the spirit of openness and cooperation in
Europe. The 12 stars of the European Union represent the dynamism and harmony of contemporary Europe. The
bridges on the back symbolize communication between the people of Europe and between Europe and the rest of
the world.
Every banknote features an architectural style for a different period in Europe’s history. The designs do not show
existing structures, but rather architectural styles from various periods.
The technical specifications for the banknotes included a requirement that visually impaired persons be able to
handle each banknote with confidence. Therefore,the design was developed in close cooperation with the
European Blind Union.
Europa series
On May 2, 2013, the second series of euro banknotes, the Europa series,was launched. Europa, a figure from
Greek mythology, is the new face of the euro. Her portrait features on the hologram and in the watermark. The
second series of euro banknotes incorporates enhanced security features that draw on advances in banknote
security and technology, making the banknotes even more resistant to counterfeiting than the first series.The
Europa series continues the “ages and styles” theme of the first series and also features the same main colors as
the first series.

14
Following the successfulintroduction of the new EUR 5, 10, 20 and EUR 50 banknotes, the new EUR 100 and
EUR 200 banknotes will be introduced in Mai 2019.
Banknotes of the first series will remain legal tender, and for the time being, banknotes of both series will
continue to circulate in parallel.
 5-euro banknote
 10-euro banknote
1.8.3Coins
CoinDesign(Figure 1.8.3)
Each euro coin has a common European side, which bears the same design across the entire euro area,as well as a
national side. The motifs on the national sides have been designed by national artists and differ from country to
country. All euro coins are accepted throughout the euro area.
Circulation coins
The eight-euro circulation coins have common European sides and national sides for each country within the euro
area. In addition, there are separate national sides for Monaco, San Marino and Vatican City because of special
agreements.
EUR 2 commemorative coins
Each country in the euro area can issue two EUR 2 commemorative coins per year. These coins have the same
features and properties and the same front side as ordinary EUR 2 coins. What makes them different is their
commemorative design on the national side.

15
2. Structure
The Oesterreichische National bank (OeNB) is the central bank of the Republic of Austria and an integral part of
the Euro system. As such, the OeNB fulfills a wide range of tasks and responsibilities, which also involves
participation in international organizations and offering extensive information services to the general public. The
OeNB's core business areas are:
2.1 Monetary policy
The OeNB safeguards price stability and contributes significantly to the stability of money and credit markets. It
contributes to the stability-oriented monetary policy of the Euro system, conducts monetary policy operations
with banks and manages foreign reserve assets.
2.2 Financial stability
The OeNB analyzes and examines banks and contributes to the maintenance of financial stability.
2.3 Banknotes and coins
The OeNB provides Austrian businesses and consumers with high-quality, secure cash.
2.4 Statistics
The OeNB provides comprehensive, high-quality and timely financial statistics.
2.5 Payments
The OeNB facilitates efficient cashless payments.
Apart from fulfilling these core purposes, the OeNB aims at serving as an example and providing impetus in
different spheres of society; it promotes scientific research,contributes to strengthening financial literacy,
supports cultural activities and is committed to sustainability and environmental protection. The OeNB is also
striving to create a family-friendly work environment for its employees and, among other things, participates in
the "work and family" audit scheme.

16
3. Departments
1. Communications, Organization and Human Resources Department
2. Economic Analysis and Research Department
3. Financial Stability, Banking Supervisionand Statistics
4. Department for the Supervision of SignificantInstitutions
5. Department for Financial Stability and the Supervision of Less Significant Institutions
6. Statistics Department
7. Payment Systems, IT and Infrastructure
8. Equity Interests,Payment Systems and Internal Services Department
9. IT and Customer Services Department
10. Financial Markets, International Relationsand Accounting
11. Treasury Department
12. Accounting, Controlling and Cash and GoldInventory Department

17
4. Policy Rate of Last 5 Years
Austria is a member of the European Union which has adopted the euro. Austria's benchmark interest rate is set
by the European Central Bank. The official designation for the rate is main refinancing operation. This page
provides - Austria Interest Rate - actualvalues, historical data, forecast,chart,statistics, economic calendar and
news. Austria Interest Rate - actual data, historical chart and calendar of releases - was last updated on November
of 2018.
PolicyRate of Last 5 Years (Figure 4.1)
Interest Rate in Euro Area is expected to be 0.00 percent by the end of this quarter, according to Trading
Economics global macro models and analysts’ expectations. Looking forward, we estimate Interest Rate in Euro
Area to stand at 0.25 in 12 months’ time. In the long-term, the Euro Area Interest Rate is projected to trend
around 0.75 percent in 2020, according to our econometric models.

18
5. Governors (Last 5 Years)
The recent governor is in power since September 1, 2013, till August 31, 2019
6. Resume of The Current Governor
Ewald Nowotny (Governor of Oesterreichische National bank)
Born: Vienna, 1944
Education and academic background
Studies in law and political science at the University of Vienna and economics at the Institute for Advanced
Studies (IHS), Vienna
 1967 Doctorate in Law,University of Vienna
 1968–1973 Assistant to Kurt W. Rothschild at the Institute for General Economics and Public Economics,
University of Linz
 1972/73 ACSL Fellow, Department of Economics, Harvard University, U.S.A.
 1973 Tenure-track professorship in General Economics and Public Economics, University of Linz
 1973 Call to TH Darmstadt, chair in Public Economics
 1974–1981 Full Professor and Head of the Institute of Finance, Johannes Kepler University Linz
 1981–2008 Full Professor,Vienna University of Economics and Business Administration (successor to
Stephan Koren), partly on leave
 2003–2005 Vice Rector, Financial Affairs, Vienna University of Economics and Business Administration
 2008 Honorary doctorate in Social and Economic Sciences,Alpen-Adria-Universität Klagenfurt
Membership in scientific institutions
 Austrian Economic Association (1995–1999: Vice President)
 Member of Verein für Socialpolitik, Council for Public Finance
 American Economic Association
 Member of the Board, Austrian Institute of Economic Research (WIFO)
 Member of the Board of Directors, Salzburg Global Seminar
 Honorary Life Member of the Board of Governors, Technion IsraelInstitute of Technology, Haifa
Business activities
 1971–1979 Member, later President Supervisory Board of Österreichische Postsparkasse (P.S.K.) Expert
on cartel matters,Cartel Court of the Superior Land Court, Vienna
 September 1, 1999 –August 31, 2003 Vice-President and Member of the Management Committee,
European Investment Bank, Luxembourg
 January 1, 2006 –December 31,2007CEO, BAWAGP.S.K. Bank für Arbeit und Wirtschaft
Österreichische Postsparkasse Aktiengesellschaft
 as of September 1, 2008 Governor, Oesterreichische National bank
Political activities
 1978–1999 Member of the Austrian Parliament, 1985–1999 Chairman of the Finance Committee
 1980–1987 Deputy Chairman of the Scientific Committee
Ewald Nowotny is married to Ingrid Nowotny and has one son, Florian Nowotny.

19
7. Organizational Hierarchy
Name Function
Period
Ewald Nowotny Governor
(September 1, 2013, to August 31, 2019)
Andreas Ittner Vice Governor
(July 11, 2013, to July 10, 2019)
Peter Mooslechner Executive Director
(May 1, 2013, to April 30, 2019)
Kurt Pribil Executive Director
(July 11, 2013, to July 10, 2019)
Organizational Hierarchy (Table7.1)

20
Organizational Hierarchy (Figure 7.1)
President
Vice
President
Central Bank Policy
Statistics Department
Equity Interests, Payment Systems and Internal Services
Department
Payment Systems, IT and Infrastructure
Department for the Supervision of Significant
Institutions
Financial Stability, Banking Supervision and Statistics
Economic Analysis and Research Department
Communications, Organization and Human Resources
Department
Accounting, Controlling and Cash and Gold Inventory
Department
Treasury Department
Financial Markets, International Relations and
Accounting
IT and Customer Services Department
Department for Financial Stability and the Supervision
of Less Significant Institutions

21
8. Economic Outlook of the Country
8.1 Austria GDP Growth Rate:
GDP Growth Rate (Figure 8.1)
Austria's economy expanded 0.5 percent on quarter in the three months to September 2018, down from a 0.6
percent growth in the previous period and below market expectations of 0.6 percent,preliminary figures showed.
It was the slowest expansion since the third quarter of 2016, as household consumption (0.4 percent from 0.5
percent in Q2), government spending (0.4 percent from 0.5 percent) and fixed investment (0.8 percent from 1.2
percent) advanced at a slower pace. Meantime, net external demand contributed positively to growth. Despite
easing, exports (0.6 percent from 0.7 percent in Q2) continued to rise above imports (0.3 percent from 0.7 percent
in Q2). On a yearly basis, Austria's gross domestic product grew 2.4 percent, the least since the fourth quarter
2017, compared to a 2.7 percent advance in the prior quarter. GDP Growth Rate in Austria averaged 0.47 percent
from 1996 until 2018, reaching an all-time high of 1.10 percent in the fourth quarter of 1997 and a record low of -
1.50 percent in the fourth quarter of 2008.

22
8.2 Austria Unemployment Rate:
UnemploymentRate (Figure 8.2)
The unemployment rate in Austria declined to 7.3 percent in October 2018 from 7.9 percent in the same month of
the previous year. The number of unemployed persons decreased by 19.5 thousand to 296.2 thousand. By genders,
the number of women unemployed fell by 5.2 thousand to 141.9 thousand and the number of men unemployed
went down by 14.3 thousand to 154.3 thousand. Unemployment Rate in Austria averaged 4.95 percent from 1960
until 2018, reaching an all-time high of 10.90 percent in January of 2016 and a record low of 0.80 percent in
August of 1974.

23
8.3 Austria Inflation Rate:
InflationRate (Figure 8.3)
Inflation rate in Austria increased to 2.2% in October of 2018 from 2% in the previous month. Prices rose faster
for transport (5% from 3.8% in September), due to fuels (15.8% from 13.9%) and repairs of private transport (3%
from 2.9%); housing & utilities (2.8% from 2.1%),particularly heating oil (30.1% from 24.8%) and electricity
(3.9% from 0.1%); restaurants & hotels (3.3% from 3.1%) and education (3.3% from 2.7%). On the other hand,
cost slowed for food & non-alcoholic beverages (1.2% from 1.3%); household equipment (1.7% from 2.2%);
health (2.1% from 2.7%) and alcoholic beverages & tobacco (3.7% from 3.9%). Meanwhile, inflation was steady
for miscellaneous goods & services (2.1%, the same as in September) and prices fell for recreation & culture (-
0.2% from 0.2%). On a monthly basis, consumer prices went up 0.3%, easing from a 0.8% gain in September.
Inflation Rate in Austria averaged 3.24 percent from 1958 until 2018, reaching an all-time high of 10.20 percent
in September of 1974 and a record low of -3 percent in March of 1959.

24
8.4 Austria Balance of Trade:
Balance of Trade (Figure 8.4)
The trade deficit in Austria narrowed to EUR 587 million in August 2018 from EUR 815 million in the same
month a year earlier. Exports advanced 5.0 percent year-on-year to EUR 11.32 billion, as sales to countries
outside the EU edged up 0.8 percent and to the EU countries jumped 7.0 percent. Meanwhile, imports went up 2.7
percent to EUR 11.90 billion, as purchases from countries outside the EU advanced 2.3 percent and those from
EU countries increased 2.9 percent. Considering the first eight months of the year, the trade gap decreased to EUR
3.17 billion from EUR 3.85 billion in the same period of 2017, as exports advanced 6.5 percent and imports went
up 5.5 percent. Balance of Trade in Austria averaged -287.41 EUR Million from 1953 until 2018, reaching an all-
time high of 581 EUR Million in November of 2014 and a record low of -1256 EUR Million in April of 1991.

25
8.5 Austria Prime Lending Rate:
Prime LendingRate (Figure 8.5)
Bank Lending Rate in Austria increased to 1.75 percent in September from 1.69 percent in August of 2018. Bank
Lending Rate in Austria averaged 3.54 percent from 1999 until 2018, reaching an all-time high of 7.02 percent in
November of 2000 and a record low of 1.64 percent in October of 2017.

26
8.6 Austria Government Debt to GDP:
GovernmentDebttoGDP (Figure 8.6)
Austria recorded a government debt equivalent to 78.40 percent of the country's Gross Domestic Product in 2017.
Government Debt to GDP in Austria averaged 69.04 percent from 1988 until 2017, reaching an all-time high of
84.60 percent in 2015 and a record low of 56.10 percent in 1990.

27
8.7 Financial statements and key figures
OeNB posts operating profit of EUR 286 million
The OeNB’s total assets expanded in 2017 year on year to EUR 143.7 billion, reflecting above all the monetary
policy asset purchase program. The OeNB’s net currency position decreased to EUR 18.3 billion, with gold and
gold receivables accounting for EUR 9.7 billion thereof. The OeNB’s operating profit for 2017 came to EUR 286
million, up EUR 18 million against the previous year. Transfers to risk provisions had an impact of EUR 275
million in 2017. After EUR 72 million in corporate income tax plus, in line with the National Bank Act, the
transfer of both EUR 21 million to the pension reserve and EUR 174 million to the centralgovernment (equaling
the latter’s 90% share of profit), the OeNB’s profit for the year 2017 amounted to EUR 19 million.
OeNB indicators over the past five years
2017 2016 2015 2014 2013
EUR million
Net currency position 18,347 20,005 14,324 18,531 13,430
of which gold and gold receivables 9,739 9,885 8,761 8,892 7,843
Banknotes in circulation 30,035 28,893 27,795 26,237 24,497
Total assets 143,716 122,556 106,987 92,827 97,485
Operating profit excluding selected items 748 529 1,171 811 662
Staff costs 147 157 142 139 136
Administrative expenses 81 84 85 84 82
Operating profit 286 268 753 341 298
Corporate income tax 72 67 188 85 75
Transfer to the pension reserve 21 20 − − 22
Central government’s share ofprofit 174 163 508 230 181
Profit for the year 19 18 56 26 20
Staff in full-time equivalents (FTEs)1
1,227.5 1,227.5 1,229.2 1,234.8 1,232.9
staff employed in core business areas1, 2
1,100.0 1,091.8 1,085.9 1,084.0 1,089.1
OeNBindicatorsoverthe pastfive years (Table 8.1)

28
8.8 Forecast for year 2020
8.8.1 Unemployment
Unemployment(Figure8.8.1)
Labor market conditions are characterized by exceptionally strong employmentgrowth, and payroll employment
will increase by 2.2% in 2018. Higher employmentgrowth rates were last recorded in 1991. As the current
business cycle runs itscourse, employment growth is expected to slow down significantly, namely to1.4% in 2019
and to 1.1% in 2020. However,owing to the strong increase in laborsupply, the unemployment rate will dip only
slightly. The unemployment rate(Eurostat definition) will sink from 5.5% in 2017 to 5.0% in 2018 and to 4.9%
in2019, and remain at this level thereafter. The brisk economic activity is increasingly leading to a scarcity of
skilled labor in a number of occupations.

29
8.8.2 Index of Consumer Prices
Index of ConsumerPrices(Figure8.8.2)
Private consumption will grow by 1.5% in 2018, which is modest given thefavorable framework conditions. In
2019 and 2020, private consumption is expected to decelerate slightly to 1.4% and 1.3%, respectively.

30
8.8.4 Inflation
Inflation(Figure8.8.4)
At 2.2%, HICP inflation will remain unchanged in 2018, equaling the raterecorded in 2017. By 2020, inflation
will have eased to 1.9%. This decline in the pace of price increases is largely ascribable to the development of
energy prices.Oil prices are expected to drop over the projection horizon, and the HICP energycomponent will
decline accordingly. Unit labor costs will experience only a moderaterise, and will therefore not fuel inflation.

31
8.8.5 Interpretation
The general government budget is projected to be balanced in 2018. Eventhough the new government decided to
scale back several proactive measures (particularly various labor market subsidies), Austria is pursuing an
expansionaryfiscal policy course in 2018. This can be attributed, in particular, to measurestaken by the previous
government (above all reduction of contributions to theFamily burdens equalization fund, abolition of public
long-term care providers’recourse to patients’ assets and termination of the “employment bonus”
program).The resulting effects,which are responsible for an increase in the deficit, will,however, be offset by the
healthy economic environment as well as a furtherdecline in interest expenditure. In 2019 and 2020, the fiscal
stance will be broadlyneutral as major expansionary measures initiated by the new government willenter into
force (particularly the “Familienbonus”) and as expenditure increasestemporarily introduced by the previous
government will phase out. The budgetbalance is expected to improve further also in 2019 and 2020, thanks to
thecontinuedfavorable economic and interest rate environment; based on the assumptionthat there will not be any
change in policy, the general government budget balanceis projected to post surpluses.
The debt ratio is forecast to decline to 67.5% of GDP by 2020, owing mainlyto the budget surpluses (or a
balanced general government budget in 2018), highnominal GDP growth as well as the continued reduction of
debt of public wind-downvehicles through the sale of assets and the liquidation of cash reserves.

32
9. Banking System
9.1 The Three Pillars of the Banking Union
The banking union is the biggest milestone in the integration of EU economies and institutions since the
Economic and Monetary Union (EMU) was launched. It provides the essential underpinnings for financial
stability and helps build crisis resilience and enhance risk monitoring and assessment. Moreover,the banking
union addresses the fragmentation of financial markets within the euro area and contributes to breaking the
negative feedback loop between bank debt and sovereign debt. The banking union benefits above all smaller
countries with a large share of cross-border banking activities, such as Austria.
The banking union is based on three pillars:
 the Single Supervisory Mechanism (SSM)
 the Single Resolution Mechanism (SRM)
 the European Deposit Insurance Scheme (EDIS)
The Three Pillarsof the BankingUnion (Figure 9.1)
The first pillar of the banking union, the SSM, increases the effectiveness of supervision and enhances cross-
border cooperation and coordination. Under the SSM, the European Central Bank (ECB) is responsible for the
supervision of significant banks, i.e. of those banks on which the euro area’s financial stability hinges in the first
place. The second pillar, the SRM, ensures an orderly resolution of failing banks. The proposal for the third pillar,
EDIS, builds on the current system of national deposit guarantee schemes,which have been harmonized to ensure
that all deposits are protected across the EU up to EUR 100,000 per person and bank. Ultimately, these bank
deposit guarantees are to be fully financed by EDIS.
The consistency of supervisory practices within the banking union is ensured with the help of a single rulebook
and a single supervisory handbook. Moreover, the ECB issues regulations, guidelines, recommendations and

33
instructions for the banking system as a whole and is ultimately accountable for the effectiveness and consistency
of the SSM.
9.2 List of Banks (Local & Foreign) Regulated by Central Bank
No. Bank Name No. Bank Name No. Bank Name
1 Adria Bank 21 BKS Bank 41 Intermarket Bank
2 Allianz Investment
bank
22 BNP Paribas 42 Kathrein & Co.
Privatgeschäftsbank
3 Alpen bank 23 Capital Bank-GRAWE Gruppe 43 Kommunalkredit Depotbank
4 American Express
Bank Ltd
24 Capital Bank International-GRAWE
Group
44 LGT Bank
5 Anglo Irish Bank 25 Coface Austria Bank 45 Meinl Bank
6 Austria
Wirtschaftsservice
Gesellschaft
(AWS)
26 Commerzbank (Schweiz) Private
Banking
46 Oberbank
7 Banco do Brasil 27 Commerzialbank Mattersburg im
Burgenland
47 Österreichische
Verkehrskreditbank
8 Bank Austria 28 Constantia Privatbank 48 Österreichische Volksbank
9 Bank Burgenland 29 Deniz Bank 49 Privatinvest Bank
10 Bank für Ärzte
und Freie Berufe
30 Deutsche Bank 50 Raiffeisen Zentralbank
11 Bank für Tirol und
Vorarlberg
31 Dexia Kommunalkredit Bank 51 Schoellerbank
12 Bank Gutmann 32 easybank 52 Spar - Finanz - Investitions-
und Vermittlungs-AG
13 Bank
Sal.Oppenheim jr.
& Cie
33 ecetra CentralEuropean e-Finance 53 Sparda Bank
14 Bank Vontobel
Österreich
34 Erste Bank 54 Svenska Handelsbanken
15 Bank Winter & Co 35 European American Investment Bank 55 UniCredit CAIB
16 Bankhaus Carl
Spängler & Co
36 Factor-Bank 56 Vakifbank International
17 Bankhaus
Krentschker & Co
37 GE Money Bank 57 Volkskreditbank
18 Bankhaus
Schelhammer &
Schattera
38 Generali Bank 58 VTB Bank
19 BankPrivat 39 Austrian Anadi Bank 59 Western Union International
Bank
20 BAWAGP.S.K. 40 ING Group 60 Wiener Privatbank
Immobilieninvest

34
10. References
[1] (2018). Austria - Economic Indicatorshttps://tradingeconomics.com/austria/indicators
[2] (2018). The history of the Oesterreichische National bankhttps://www.oenb.at/en/About-Us/History.html
[3] (2018). The three pillars of the banking unionhttps://www.oenb.at/en/financial-market/three-pillars-banking-
union.html

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