1816–1818

Graf von Stadion is being entrusted with the charter of the Central Bank by His Majesty Francis I, the Emperor 

The foundation of the central bank of Austria dates back to the early 19th century. However, the Habsburgs, the ruling dynasty in the old Austro-Hungarian Empire, had started experimenting with the issuance of paper money already 50 years before: a separate institution chartered in the early 18th century had been entrusted with the issuance and distribution of banknotes. Since it was independent from government, it enjoyed the confidence of the business community. Notwithstanding the fact that the Municipal Bank of Vienna (Wiener Stadtbank) had existed since 1705, it was only in 1762 that it started to issue bank notes known as "Bancozettel."

At the end of the 18th century, during the Napoleonic wars, government stepped in by taking direct control of the banknote issuance process. As a result, the supply of money in circulation increased in fits and starts. To state an example, the total money in circulation amounted to fl (florin, "Gulden") 44 million in banknotes in 1796 and had grown to as much as fl 942 million by 1810. Banknotes increasingly replaced silver and copper coins in business transactions, which illustrated the substitution of good money by bad postulated by Gresham’s Law.

In 1799 the government decreed that paper money was to be the only legal tender in private commercial transactions, and the market responded by trading banknotes at a discount to their face value. As an example, "Bankozettel" at a face value of fl 100 were redeemed for only fl 92 in silver coins in 1799 and due to inflation, their value had dropped to a mere 15% of the face value by December 1810. Soldiers on the battlefield even rebelled against the attempts to be paid with "Bancozettel."

The business community declared that the devaluation of the banknotes at a 5:1 ratio, as decreed by the Habsburgs, was tantamount to national bankruptcy. Despite the assurances of the government to refrain from excessive issuance of banknotes from now on, the currency again depreciated rapidly, compelling the public to label the banknotes "Viennese currency."

When the political balance in Europe was restored at the end of Napoleonic wars, the Austro-Hungarian Empire was faced with enormous challenges. The Habsburg territory spanning many divergent ethnic areas could no longer rely only on the Church, nobility, army, and civil service, the traditional pre-war pillars of support; the Empire also needed a sound economic base in order to function properly. Government therefore had to restore confidence of its business community. The basic economic law of supply and demand could not be tampered with, and even the Emperor had to comply. Well aware of these facts, on June 1, 1816, his Majesty Francis I issued two imperial decrees, the "Highest Finance Patent" and the "Bank Patent"; the very same day, the central bank of Austria ("privilegirte oesterreichische National-Bank") was established. The preparatory work was done by Count Johann Philipp Graf von Stadion, the Austrian Minister of Finance at the time.

Only when the central bank, which had the exclusive right to issue banknotes, was founded was the Austrian monetary system finally stabilized and the confidence of the public restored. By taking these circumspect actions, the bank had at least temporarily achieved its objective of maintaining and making the value of paper money rise. This institution had to remain totally independent from the governmental fiscal objectives. Therefore, the central bank was capitalized by the issuance of shares sold to investors.

The activities of central bank, which had a provisional management at first, were initially limited to the redemption of paper money and the issuance of shares. They were to be extended upon the sale of its 1,000th share when the bank was to become fully operative under a new management appointed by the shareholders.