At EUR 341 million, the OeNB records second best operating profit since 2006(, Vienna)
Austria’s central bank adopts 2020 gold storage policy
“Despite the difficult economic conditions and the very low level of interest rates in particular, the Oesterreichische Nationalbank (OeNB) once again posted a remarkable result in 2014,” OeNB President Claus J. Raidl pointed out at the beginning of the press conference at which the Austrian central bank presented its annual report and financial statements following its General Meeting. At EUR 811 million, the OeNB’s operating profit before writedowns and transfers was almost one-quarter higher than in 2013. Following an allocation of EUR 325 million to risk provisions, and writedowns on foreign currency assets and securities totaling EUR 145 million, the operating profit for the 2014 business year came to EUR 341 million. At 14% or some EUR 42 million above the OeNB’s operating profit for 2013, this was the second best result (after 2012) since 2006.
OeNB Governor Ewald Nowotny continued to explain that “the central government receives EUR 315 million of the OeNB’s operating profit after writedowns and transfers (2013: EUR 256 million), which consists of EUR 85 million in corporate income tax and EUR 230 million as its statutory after-tax profit share of 90%.” Over the past ten years, the OeNB has thus transferred to the central government a total of EUR 2.6 billion in profit share and corporate income tax.
In light of the very low interest rate level, the OeNB’s net interest income declined by 7% against the previous year to about EUR 778 million. By contrast, income from equity shares and participating interests increased markedly owing to a one-off effect. The financial statements 2014 include both the 2013 dividends (EUR 67.7 million) and the 2014 dividends (EUR 184.8 million) of Münze Österreich AG, as an amendment of the 1988 Coinage Act which became applicable for the first time in 2014 resulted in the same-period capitalization of the dividend claim.
From 2006 to 2014, the OeNB earmarked EUR 3.2 billion for risk provisions, with total risk provisions (including loss-absorbing capital) presently running to EUR 6.7 billion.
The profit for the year 2014 came to EUR 25.6 million. By resolution of today’s General Meeting, EUR 1.2 million of this amount will be appropriated to pay the maximum 10% dividend on the OeNB’s capital stock of EUR 12 million to the Republic of Austria, which holds 100% of the OeNB’s shares, and EUR 10 million will be allocated to the OeNB Anniversary Fund for the Promotion of Scientific Research and Teaching. The remaining EUR 14.4 million will be transferred to the profit-smoothing reserve.
Although the OeNB had to further increase capacities in supervision, its overall staff costs (current employees) mounted only slightly from EUR 136 million in 2013 to EUR 139 million in 2014. This rise was in part also due to pay increases under collective wage agreements and higher statutory social charges. Charged with fulfilling new banking supervisory tasks under Europe’s Single Supervisory Mechanism (SSM), the OeNB therefore continued to hire staff in this area. The OeNB’s expenses related to on-site inspections and the analysis of individual banks augmented to EUR 25.3 million (2013: EUR 24.5 million). However, the annual reimbursement the OeNB receives from the Financial Market Authority (FMA) under Article 19 paragraph 5a of the Federal Act on the Institution and Organisation of the Financial Market Authority (Finanzmarktaufsichtsbehördengesetz – FMABG) has, since the year 2011, remained unchanged at EUR 8 million, i.e. the statutory maximum amount. The number of the OeNB’s full-time equivalent employees stood at 1,084 at end-2014 (2013: 1,089).
At just under EUR 84 million, administrative expenses in 2014 had edged up by 2.8% year on year, with the establishment of the SSM having been the main driver of this increase.
The OeNB’s net currency position augmented to EUR 18.5 billion in the reporting year, up from EUR 13.4 billion in 2013. Unrealized valuation gains on gold of EUR 1.0 billion, which did not enter the profit and loss account, contributed to this rise. Gold and gold receivables account for EUR 8.9 billion of the net currency position.
The OeNB adopts 2020 gold storage policy
In May 2015, the gold reserves held by the OeNB amounted to 280 tons, having remained unchanged since 2007. Austria’s gold reserves are fully owned by the OeNB, which maintains and manages them with utmost care. In line with the OeNB’s current gold storage policy, 17 % of its gold holdings are at present kept in Austria, 80 % in the United Kingdom and 3 % in Switzerland.
Recently, the Governing Board of the OeNB adopted the 2020 gold storage policy following a regular in-house gold strategy and storage policy review, while also considering the recommendations made by the Austrian Court of Audit. The cornerstones of this policy are as follows:
- By the year 2020, 50% of Austria’s gold reserves are to be held in Austria (OeNB and Münze Österreich AG), 30% in London and 20% in Switzerland.
- Starting from mid-2015, the new storage policy will be gradually implemented in keeping with security and logistical requirements.
- A comprehensive review and, if need be, adaptation of the storage policy is scheduled for 2019.
- The OeNB will regularly report on the progress in its upcoming annual reports.
Challenging environment for maintaining price and financial market stability
“In the reporting year, the OeNB and its staff once again faced manifold challenges in all of its business areas,” said Governor Nowotny, and “there is no letup in sight in 2015.” Maintaining price stability and safeguarding financial stability continue to be demanding tasks for the Eurosystem and the OeNB. The Eurosystem responded to sluggish economic growth and rapidly declining inflation rates by adopting a number of additional nonstandard monetary policy measures. Resolved to kick-start the economy and maintain price stability, the Eurosystem has reduced interest rates to historically low or even negative levels, adjusted liquidity-providing operations and launched comprehensive asset purchase programs. Current economic forecasts predict that the Eurosystem will be able to reap the fruits of its labor by 2016. In combination with the establishment of a new European supervisory framework and the prior comprehensive assessment of banks’ balance sheets, these activities placed high demands on the OeNB’s divisions in charge of economic research, banking supervision, reserve management and statistics.
The year 2014 witnessed further milestones in establishing banking union: The Single Supervisory Mechanism (SSM) entered into force, and legal and institutional measures were taken in preparation of the Single Resolution Mechanism (SRM). Progress was also made in harmonizing deposit guarantee schemes. At the beginning of 2015, the OeNB took on new responsibilities related to the resolution of banks in line with the Federal Act on the Recovery and Resolution of Banks (Bankensanierungs- und Abwicklungsgesetz – BaSAG). Furthermore, macroprudential supervision has come to play a much greater role, which, in Austria, resulted in the establishment of the interinstitutional Financial Market Stability Board (FMSB) in 2014. Hosting the Secretariat of the FMSB, the OeNB is in charge of preparing the FMSB meetings.
Moreover, the year 2014 saw the completion of the Single Euro Payments Area (SEPA). In addition, TARGET2-Securities (T2S), which is going to provide a single Europe-wide platform for securities settlement in central bank money, is about to be launched shortly. Also, the EUR 10 banknote of the new Europa series saw the light of day in 2014, and the new EUR 20 banknote will be put into circulation in November 2015.
The OeNB undertakes an optimization and reorganization project
“The OeNB has met head-on the challenges it faces in fulfilling its main responsibilities,” said Governor Nowotny, “and it has also implemented a number of initiatives and further reforms within its organization.” Indeed, as Nowotny went on to point out, with the OPAL optimization and reorganization project, the OeNB had initiated the first ever bank-wide external review aimed at exploiting synergies and cutting costs. Moreover, the OPAL project has provided guidance for the OeNB as an efficient and profitable enterprise that is well equipped to serve the Eurosystem and Austria in fulfilling its mandate to maintain price stability and safeguard financial stability. The main focus of OPAL is on the sustainable reduction of expenses, namely by EUR 20 million per year as from 2020 at the latest.
To carry out this review, the OeNB partnered with international consultancy Roland Berger Strategy Consultants. Launched on June 1, 2014, the OPAL project is going to be concluded as planned on June 30, 2015, after which the results will be communicated to the public.
In recent years, the OeNB has successfully implemented substantial reforms, streamlining both, its cost and organizational structures as well as business processes, focusing on its core tasks and adjusting and reforming the employment and pension conditions of its staff. The Act to Limit Specific Pension Benefits (Sonderpensionenbegrenzungsgesetz) has been fully implemented as from January 1, 2015. For staff members employed under the first two generations of the OeNB’s Conditions of Service (i.e. employees who joined the OeNB up to and including April 30, 1998) this implies a rise in the retirement entitlement age, significantly higher pension contributions while in active employment, the introduction of an averaging period for calculating pension benefits, significantly higher pension contribution rates for retired staff members, and annual pension benefit adjustments in line with the provisions of the General Social Security Act. At present, staff benefits and amenities are being critically evaluated and adjusted.
President Claus J. Raidl and Governor Ewald Nowotny concluded the press conference by extending their thanks to the Governing Board and each and every staff member of the OeNB for their outstanding work. Credit is due to all of them, they stressed, for strengthening the OeNB as a key economic and financial market policy institution in Austria.
For more details about the financial statements for 2014 and about the activities of the OeNB in 2014, see the OeNB’s Annual Report 2014. As the OeNB’s Sustainability Report, the Annual Report also contains the Intellectual Capital Report 2014 and the Environmental Statement 2014.