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Annual Report 2022

Foreword by the President

Dear readers,

2022 presented economic and monetary policymakers with a host of challenges. They had to deal with the repercussions from the coronavirus pandemic, the war in Ukraine and its impact on safeguarding energy and raw materials supply, as well as the pressing need to address energy transition and climate change. In these times of demanding change, the Eurosystem – and the OeNB as its member – proceeded with caution in view of mounting inflation pressures, making a gradual exit from accommodative monetary policies in the course of 2022. The resulting balance sheet dynamics have also impacted the OeNB’s annual result.

The strong cyclical momentum observed in the first half of the year 2022 helped Austria’s economy to grow by 4.9% for the year as a whole, despite the singular underlying conditions. Moreover, the Austrian ­government adopted a series of extensive fiscal measures to cushion the persistent price increases. These measures were intended to help Austrian businesses stay competitive, considering that they are battling a continued shortage of labor, including skilled labor, and need to transition to greener production processes. Furthermore, risks to financial stability increased significantly in the course of 2022. The stress tests conducted by the OeNB found the Austrian banking sector to be resilient, though.

2022 also marked the 20th anniversary of the changeover to euro banknotes and coins. Together with its money-handling subsidiaries, the OeNB commemorated this event with a broad range of activities. To this day, cash remains highly popular in Austria, with people appreciating above all the anonymity of cash payments. In line with its commitment to safeguarding the supply of physical cash alongside further digital payment innovations, the OeNB launched a “euro cash platform” in September 2022, which it uses to reach out to stakeholders and money users. To complement cash, the Eurosystem is investigating whether to introduce a digital euro. The investigation phase, which started in October 2021, is expected to end in October 2023. The Governing Council of the ECB will then decide whether to start the process of actually developing a digital euro.

The corporate strategy of the OeNB is increasingly becoming focused on sustainability. Clearly, the only way forward for both the OeNB and its subsidiaries is to ensure sustainable business operations and help protect the environment.

In closing, let me express my gratitude to the entire staff working at the OeNB and at the OeNB’s subsidiaries as well as to the members of the Governing Board and of the General Council of the OeNB for their excellent cooperation in 2022.

Vienna, March 2023

Harald Mahrer, President

Foreword by the Governor

Dear readers,

February 24, 2022, was a watershed moment in politics and for the world economy. Apart from having caused immeasurable suffering since then, Russia’s invasion of Ukraine has been reverberating across the globe.

As to economic developments in Austria, we recall the strong economic momentum in the first half of 2022, driven by pent-up demand after the pandemic-related lockdowns. From mid-2022 onward, however, we witnessed a significant slump in economic growth as the world economy slowed down in view of the war in Ukraine and the highly uncertain outlook for future geopolitics and economic development. For 2022 as a whole, at close to 5%, the Austrian economy nonetheless recorded very strong economic growth that even exceeded pre-pandemic GDP levels. For 2023, in contrast, the OeNB expects only very moderate growth.

After all, the war in Ukraine has been driving a further surge in international energy prices, following the initial rise in commodity prices during the post-pandemic recovery. Yet, at the time of writing, both crude oil and gas prices are already past their peak. Thus, the OeNB expects HICP inflation in Austria to keep declining to about 6.5% in 2023, from 8.6% in 2022.

Across the euro area, the average inflation rate rose significantly in 2022, from 5.1% in January to 9.2% in December, reaching a level well beyond the Eurosystem’s price stability objective of 2%. The Eurosystem did respond to rampant inflation, but given the high level of uncertainty, the monetary policy response was ­cautious in the first half of 2022. As an initial step, the Governing Council of the ECB lowered the monthly volume of net purchases under the pandemic emergency purchase programme (PEPP) and then stopped the purchases at the end of March 2022. Starting from July 1, 2022, net purchases under the asset purchase programme (APP) were discontinued as well. In a second step, the Governing Council of the ECB raised each of the three key interest rates for the euro area by a total of 300 basis points until early February 2023, at a pace unseen ever since European monetary union was created in 1999. Further interest rate hikes are likely to follow in 2023. In this process, the Eurosystem balance sheet was shrinking in 2022, and it will continue to shrink further and more strongly in 2023.

Given the turn of events in 2022, the OeNB’s operating result – like that of many other central banks – has come under pressure. The reasons are manifold, reflecting the monetary policy measures adopted by the Governing Council of the ECB to combat the crisis in the past few years, its decision to start raising the key ECB interest rates in 2022, as well as the significant negative performance and volatility in global financial ­markets in 2022. Some of the crisis-fighting monetary policy measures drove up interest expenses to levels that could not be offset by interest income. Still, the OeNB managed to balance its books in 2022 by partially using its risk provision and thanks to prudent business operations. Ultimately, any policy decisions taken by the ­Governing Council of the ECB are taken with the aim of maintaining price stability over the medium term. Any profit or loss recorded by Eurosystem central banks is thus a corollary to the underlying mandate and the monetary policies adopted to fulfill this mandate.

To conclude, let me express my heartfelt gratitude to all our staff members, the President and Vice ­President, the General Council as well as the other members of the Governing Board for their excellent ­cooperation and outstanding commitment in 2022. When we continue to pull together as a team, as we have in the past, we will accomplish our core tasks effectively also in the times ahead.

Vienna, March 2023

Robert Holzmann, Governor

Members of the OeNB’s General Council

December 31, 2022

Dr. Harald Mahrer

President

Term of office:

September 1, 2018, to August 31, 2023

Dr. Barbara Kolm

Vice President

Term of office:

September 1, 2018, to August 31, 2023

Bettina Glatz-Kremsner

Term of office:
March 1, 2018, to February 28, 2023

Erwin Hameseder

Chairman of the Managing Board, Raiffeisen-Holding Niederösterreich-Wien reg. Gen.m.b.H.

Term of office:

March 6, 2020, to March 5, 2025

Stephan Koren

Chairman, Wüstenrot Wohnungswirtschaft reg. Gen.m.b.H.

Term of office:

September 8, 2018, to September 7, 2023

Franz Maurer

Partner, LIVIA Group

Term of office:

May 23, 2018, to May 22, 2023

Dr. Susanne Riess

Chair of the Managing Board, Bausparkasse Wüstenrot AG

Term of office:

March 6, 2020, to March 5, 2025

Peter Sidlo

Term of office:

March 1, 2018, to February 28, 2023

Christoph Traunig

Executive Partner, St. Stephan Capital Partners

Term of office:

September 1, 2018, to August 31, 2023

Univ.-Prof. Dr. Brigitte Unger

Term of office:

March 6, 2020, to – March 5, 2025

State Commissioner
Director General,

Harald Waiglein

Directorate General Economic Policy and Financial Markets,
Federal Ministry of Finance

First nominated: 2012
Term of office:
July 1, 2022, to June 30, 2027

Deputy State Commissioner

Alfred Lejsek

Head,

Directorate Financial Markets,
Federal Ministry of Finance

First nominated: 2006
Term of office:
April 1, 2022, to March 31, 2027

The following representatives of the Central Staff Council participated in discussions on personal, ­social and welfare matters (Article 22 paragraph 5 Nationalbank Act):

Mag. Birgit Sauerzopf

Chair, Central Staff Council

Mag. Christian Schrödinger

Deputy Chair,
Central Staff Council

The OeNB’s ownership structure and decision-­making bodies

The OeNB’s owner

The OeNB is a stock corporation. However, given its particular status as a central bank, it is governed by a number of special provisions laid down in the Federal Act on the Oesterreichische Nationalbank 1984 (Nationalbank Act). Its nominal capital of EUR 12 million has been held in its entirety by the Austrian central ­government since July 2010.

The General Council of the OeNB

Functions

The General Council is charged with super­vising all business functions not falling within the remit of the European System of Central Banks (ESCB). The General Council shall ­advise the Governing Board in the conduct of the OeNB’s business and in matters of monetary policy. As a rule, it is convened once a month by the President. Joint meetings of the General Council and the Governing Board must take place at least once every quarter (Article 20 paragraph 2 Nationalbank Act).

General Council approval is required for a number of management decisions, e.g. for starting and discontinuing lines of business, ­establishing and closing down branch offices, and acquiring and selling equity interests and real property (Article 21 paragraph 1 Nationalbank Act).

Also, the General Council must approve ­appointments of members of supervisory boards and executive bodies of companies in which the OeNB is a shareholder. ­Appointments of the second executive tier of the OeNB itself must likewise be approved by the General Council. Moreover, the General Council has the exclusive right of decision on e.g. ­submitting to the Austrian federal government a short list of three candidates for appointments to the OeNB’s ­Governing Board by the Federal President, ­defining ­general operational principles in ­matters outside the ­remit of the ESCB, ­approving the annual accounts ­(financial statements) for submission to the General Meeting, and approving the cost ­account and investment plan for the next financial year (Article 21 paragraph 2 Nationalbank Act).

Composition

The General Council consists of the President, the Vice President and eight other members. Only Austrian citizens may be members of the General Council. General Council members are appointed by the federal government for a term of five years and may be reappointed. ­Further provisions pertaining to the General Council are set out in Articles 20 through 30 of the Nationalbank Act.

The Governing Board of the OeNB

The Governing Board is responsible for the overall running of the OeNB and for ­conducting the business of the OeNB. In pursuing the ­objectives and tasks of the ESCB, the ­Governing Board acts in accordance with the guidelines and instructions of the ECB. The Governing Board conducts the OeNB’s business in such a manner that the OeNB fulfills the tasks allocated to it under the terms of the Treaty on the Functioning of the European Union (TFEU), the Statute of the ESCB and of the ECB, the directly applicable EU legislation ­adopted thereunder, and federal law.

The Governing Board is composed of the Governor, the Vice Governor and two other members, all of whom are appointed by the Federal President acting on a proposal from the federal government. Each appointment is made for a term of six years. Persons holding office may be reappointed. The Governor of the OeNB is a member of the Governing Council of the ECB and of the General Council of the ECB. In performing these functions, the ­Governor and his deputy are not bound either by the decisions of the OeNB’s Governing Board or by those of the OeNB’s General Council, nor are they subject to any other instructions.

Further provisions pertaining to the Governing Board are set out in Articles 32 through 36 of the Nationalbank Act. See www.oenb.at for additional information about the Governing Board of the OeNB.

Members of the OeNB’s Governing Board

December 31, 2022

Picture Vice-Gouverneur Gottfried Haber, 

Gouverneur Robert Holzmann, Director Eduard Schock, 

Director Thomas Steiner

From left to right: Vice Governor Gottfried Haber, Governor Robert Holzmann,
Executive Director Eduard Schock, Executive Director Thomas Steiner

The OeNB’s organization

Organization Chart

President Harald Mahrer

Vice President Barbara Kolm





Central Bank Policy

Robert Holzmann, Governor 

Office of the Governor

Markus Arpa, Head

International Affairs, Protocol and 

Media Relations Department

Markus Arpa, Director

Agenda Office – Governing Board, General Council 

and General Meeting

Gabriele Stöffler, Head

Communication Division

Christian Gutlederer, Head

EU and International Affairs Division

Thomas Gruber, Head

Brussels Representative Office

Doris Rijnbeek, Chief Representative

Economic Analysis and Research Department

Birgit Niessner, Director

Monetary Policy Section 

Maria Teresa Valderrama, Head

Business Cycle Analysis Section 

Gerhard Fenz, Head

Central, Eastern and Southeastern Europe Section 

Julia Wörz, Head

International Economics Section

Kirstin Hubrich, Head

Research Section 

Martin Summer, Head

Office of the Fiscal Advisory Council and Productivity Board

Bernhard Grossmann, Head

Financial Stability, Banking Supervision

and Statistics

Gottfried Haber, Vice Governor

Compliance Office

Eva Graf, Head

Internal Audit Division

Axel Aspetsberger, Head

Department for the Supervision of Significant Institutions

Karin Turner-Hrdlicka, Director

Off-Site Supervision Division – Significant Institutions

Gabriela de Raaij, Head

On-Site Supervision Division – Significant Institutions

Martin Hammer, Head

Supervision Policy, Regulation and Strategy Division

Josef Meichenitsch, Head

Department for Financial Stability and the Supervision of Less Significant Institutions

Markus Schwaiger, Director

Off-Site Supervision Division – Less Significant Institutions

Matthias Hahold, Head

On-Site Supervision Division – Less Significant Institutions

Roman Buchelt, Head

Financial Stability and Macroprudential Supervision Division

Michael Würz, Head

Statistics Department

Johannes Turner, Director

Statistics – Data Governance, Master Data and Bank Resolution

Alexander Benkwitz, Head

Statistics – Integrated Reporting Development and Data Management

Ralf Peter Dobringer, Head

External Statistics, Financial Accounts and Monetary and Financial Statistics Division

Gunther Swoboda, Head

Supervisory Statistics, Models and Credit Quality ­Assessment Division

Gerhard Winkler, Head
Payment Systems, Financial Literacy, 

IT and Infrastructure

Eduard Schock, Executive Director

Payments, Risk Monitoring and Financial Literacy Department

Petia Niederländer, Director

Payment Systems Division1

Katharina Selzer-Haas, Head

Payment Systems Strategy Office

Wolfgang Haunold, Head

Risk Monitoring Division

N.N.

Financial Literacy Division

Maximilian Hiermann, Head

OeNB – Western Austria

Armin Schneider, Head

Cash Management, Equity Interests and Internal Services Department

Matthias Schroth, Director

Cashier’s Division

Stefan Varga, Head

Equity Interest Management and Cash Strategy Division

Thomas Grafl, Head

Facilities and Security Management Division2

Florian Friedrich, Head

Procurement and Sales Division

Christa Mölzer-Hellsberg, Head

IT and Customer Services Department 

Christoph Martinek, Director

IT Strategy and Information Security3,4

Martin Durst, Head

IT Operations

Jürgen Schwalbe, Head

IT Development

N.N.

Information Management and Services Division

Bernhard Urban, Head

Treasury, Human Resources and Accounting



Thomas Steiner, Executive Director

Human Resources Division

Susanna Konrad-El Ghazi, Head

Legal Division

Stephan Klinger, Head

Treasury Department

Franz Partsch, Director

Treasury – Markets, Investment Strategy 

and Monetary Policy Operations

Daniel Nageler, Head

Treasury – Back Office

Reinhard Beck, Head

Accounting and Financial Steering Department 

Rudolf Butta, Director

Financial Statements and Tax Matters Division

Lenka Krsnakova, Head

Controlling and Organization Division

Anna Cordt, Head

Middle Office Division

Robert Reinwald, Head

Accounting Division

Markus Kaltenbrunner, Head
The OeNB at a glance



Assets and liabilities related to monetary policy operations:



The column chart shows the assets the OeNB held and the liabilities it incurred in the financial years 2018 to 2022, broken down into three aggregates on the asset side, namely, securities held for monetary policy purposes, refinancing operations and other assets; and two categories on the liability side, namely, monetary policy deposits and minimum reserve holdings as well as other liabilities.  Corresponding data points indicate the total volume of assets and liabilities, respectively, for each of these years. Thus, the OeNB’s assets and liabilities totaled 150 billion euro in 2018, 155 billion euro in 2019, 228 billion euro in 2020, 275 billion euro in 2021 and 261 billion euro in 2022.



Source: Oesterreichische Nationalbank. 



Net interest effect of monetary policy operations:



The column chart shows the amount of net interest income related to the monetary policy operations the OeNB conducted in 2022 and in the previous four years, its net result of pooling of monetary income within the Eurosystem and its share in the distribution of ECB profit. To this effect, the chart contains five columns for the years 2018 to 2022, with subcolumns stacked end to end for five different categories: monetary policy operations and deposits, TARGET2, euro banknotes in circulation and foreign reserve assets, distribution of ECB profit and net result of pooling of monetary income. The respective amounts relate to millions of euro. Corresponding data points indicate the net interest effect of monetary policy operations for each of these years. This effect amounted to 587 million euro in 2018, 591 euro million in 2019, 387 million euro in 2020, 177 million euro in 2021 and minus 254 million euro in 2022.



Source: Oesterreichische Nationalbank.



Risk provisions:



The column chart shows the amount of risk provisions that the OeNB used in 2022 and in the four previous years to cover realized losses and write-downs. To this effect, the chart contains five columns for the years 2018 to 2022, with subcolumns stacked end to end for three different categories: loss-absorbing capital, the risk provision and the reserve for nondomestic and price risks. The respective amounts relate to billions of euro. Corresponding data points indicate the net interest effect related to monetary policy operations for each of these years. Overall, the OeNB’s risk provisions totaled 7.7 billion euro in 2018, 7.8 billion euro in 2019 and 2020, 8 billion euro in 2021 and 6.1 billion euro in 2022.



Source: Oesterreichische Nationalbank.



Staff profile in 2022



The total number of staff in full-time equivalents ran to 1,129 in 2022.



40% of total staff were women.



Women’s share in management positions equaled 29%.



Women’s share in expert career track positions came to 35%.











Austria as a financial location



Selected indicators for the Austrian banking system. The data refer to consolidated figures and relate either to the third quarter of 2022 or December 2022.



The number of credit institutions in Austria amounted to 500. 



Aggregate total assets amounted to 1,251 billion euro.



The period result of Austrian banks totaled 5.5 billion euro. 



Their common equity tier 1 ratio came to 15.8%.



The annual growth of loans extended to nonbanks totaled 5.2%.



Austrian banks’ nonperforming loan ratio came to 1.6%.
Economic indicators for Austria



HICP inflation in Austria, ECB and money market interest rates:



The line chart plots three major time series for the period from January 1, 1999, to early 2023: the inflation rate as measured by the Harmonised Index of Consumer Prices, the interest rates for the ECB’s main refinancing operations, and the three-month EURIBOR rates. The respective figures refer to daily or monthly data. Furthermore, the range between the marginal facility rate and the deposit facility rate is illustrated as a shaded area. In particular, the chart shows a sharp increase in HICP inflation during the last two years, to levels exceeding 10% at the end of 2022, and significant increases in the main refinancing rate and the three-month EURIBOR since 2022.



Source: European Central Bank, Macrobond and Statistics Austria.





Real GDP:



The column chart shows the annual change of Austria’s real gross domestic product in percent for the period from 2018 to 2022. The respective growth rates amounted to 2.4% in 2018, 1.5% in 2019, minus 6.6% in 2020, 4.7% in 2021 and 4.8% in 2022. 



Source: Statistics Austria; 2021: Austrian Institute of Economic Research.





HICP inflation:



The column chart shows the annual change in Austria’s inflation rate in percent, as measured by the Harmonised Index of Consumer Prices, for the period from 2018 to 2022. The respective inflation rates measured are 2.1% for 2018, 1.5% for 2019, 1.4% for 2020, 2.8% for 2021 and 8.6% for 2022.



Source: Statistics Austria.







Unemployment rate according to national definition:



The column chart shows the unemployment rate in percent from 2018 to 2022. Specifically, the unemployment rate amounted to 7.7% in 2018, 7.4% in 2019, 10.1% in 2020, 8.0% in 2021 and 6.3% in 2022.



Source: Statistics Austria.





General government budget balance:



The column chart shows the general government budget balance as a percentage of GDP for the period from 2018 to 2022. The budget balance amounted to 0.2% in 2018, 0.6% in 2019, minus 8.0% in 2020, minus 5.9% in 2021 and, according to the December 2022 economic outlook of the Oesterreichische Nationalbank, minus 2.9% in 2022.



Source: Statistics Austria, Oesterreichische Nationalbank.

The OeNB contributes to safeguarding price stability and financial stability

Making a gradual exit from accommodative ­monetary policies

Monetary policymaking in 2022 driven by inflation

Euro area inflation accelerated markedly in 2021, following many years during which the inflation level had remained well below the ­Eurosystem’s price stability target of 2%. 1 In 2022, inflation continued to climb at a notable pace, with euro area averages rising from 5.1% in January to as much as 10.6% in October. Initially, the mounting price pressures were fueled by the reopening of the economy, i.e. the unwinding of the restrictions imposed to combat the COVID-19 pandemic. The restrictions had caused global output and hence supply to shrink. When the economy was brought back to life, pent-up savings and demand met with limited supply in the aftermath of the pandemic, and prices started to rise. As the year 2022 progressed, historical energy price shocks emerged as the major driver of inflation, with the price shocks being exacerbated by the war in Ukraine. The war also pushed up global food prices and compounded existing supply chain problems, adding to the supply bottlenecks due to China’s tight pandemic response and further driving up prices.

Against this backdrop, Eurosystem monetary policymakers, like their peers in other ­major currency areas, were up against the major challenge of having to adequately gauge the persistence of the inflationary shocks. Before the war in Ukraine broke out, most observers expected price pressures to be only of a temporary nature. The war added a new layer of uncertainty. It was difficult to ascertain how big an impact the war was going to have on price ­developments in the euro area, and how inflation pressures on individual components of the Harmonised Index of Consumer Prices (HICP) would spill over to other goods and services prices contained in the HICP basket. Given the high level of uncertainty, the Eurosystem’s monetary policy response remained cautious in the first half of 2022. At the time, inflation pressures were expected to weaken even without significant monetary policy intervention. Indeed, as a result of the surge in energy prices and negative confidence effects amid the war, domestic demand in the euro area was expected to decelerate strongly in the short term, which would have cooled inflation pressures.

Later in the year, there was mounting evidence that the inflation momentum was much more pronounced and persistent and that ­domestic demand had not dwindled as much as expected. Therefore, the inflation outlook for the euro area was gradually revised upward, to reflect increasing signs that HICP inflation would remain above 2% also in the coming years. The incoming data thus implied that, to control inflation pressures, decisive monetary policy action was called for.

The chief policy goal was to keep medium- to long-term inflation expectations anchored in the price stability objective. The underlying concern was that wage settlements might trigger a wage-price spiral if monetary policy were to lose its credibility, which is the case when businesses and consumers start expecting high inflation rates in the medium to long term. To help calm the economy, monetary policymakers would then have to repeatedly raise interest rates to reverse and normalize inflation expectations.

In order to prevent this from happening and to rapidly realign the high inflation rates with the 2% price stability objective, normalizing monetary policy took priority in 2022 after years of unprecedented monetary policy accommodation. To this effect, the Governing Council of the ECB first decided to reduce and ultimately to discontinue net purchases under the asset purchase programmes. Second, it started raising the ECB’s key interest rates. Third, it took action to gradually reduce, from fall 2022 onward, the size of the Eurosystem’s balance sheet. Overall, it was important to move cautiously; an excessively rapid exit from accommodative monetary policies may trigger financial market turbulence that would put a burden on the economy, thus complicating the exit.

Asset purchase programmes ­discontinued

The normalization of the Eurosystem’s monetary policy started in September 2021, when the Governing Council of the ECB agreed to lower the amount of asset purchases under the pandemic emergency purchase programme ( PEPP ) in the fourth quarter of 2021. The PEPP had been created in March 2020 to counter the serious risks posed to the euro area economy by the outbreak of the coronavirus pandemic. The uncertainty triggered by the pandemic had caused risk premiums in financial markets to rise in the spring of 2020, thus pushing up funding costs in general. Central banks can address such developments by buying assets. Without monetary policy intervention, financial markets would have significantly amplified the adverse pandemic impact on the economy. 2

Pandemic emergency ­purchase programme (PEPP)

The PEPP was the crisis tool with which the Eurosystem helped the euro area economy absorb the impact of the COVID-19 pandemic. The underlying goal was to systematically buy assets, between March 2020 and March 2022, with a view to maintaining favorable financing conditions and supporting the smooth transmission of monetary policy.

After more than one year in crisis mode, market conditions improved over the summer of 2021 and the Governing Council of the ECB ­decided
to reduce the volume of PEPP purchases in the fourth quarter of 2021. Finally, following a further reduction in purchases in the first quarter of 2022, the Governing Council ended net purchases under the PEPP at the end of March 2022. The progress made toward anchoring the economic recovery and achieving the ECB’s inflation target over the medium term was considered sufficiently advanced.

The pandemic has left lasting vulnerabilities in the euro area economy that may contribute to an uneven transmission of the single monetary policy to national funding costs. To preserve the functioning of the transmission mechanism, the Governing Council provided for flexibility in reinvesting redemptions of maturing securities held under the PEPP. In other words, those redemptions can, as appropriate, be invested in euro area jurisdictions where ­orderly transmission is at risk. The reinvestments will continue until the end of 2024 or beyond, with the flexibility being used only if there are signs of pandemic-related distortions in financial markets.

To prevent the March 2022 end of net PEPP purchases from creating new distortions, the existing asset purchase programme (APP) was expanded for a short period. Specifically, higher volumes of APP assets were purchased in April and May 2022. On July 1, 2022, net APP purchases across the euro area were likewise discontinued, however. Maturing securities continued to be reinvested in full.

Through its reinvestment policy, the Euro­system aims to gradually decarbonize its corporate bond holdings in line with the objectives of the climate change-related Paris Agreement. This is only one of many measures adopted by the Governing Council of the ECB in July 2022 to better reflect climate-related financial risks in the Eurosystem balance sheet and to support the green transition of the economy in line with the EU’s climate neutrality objectives (see section Beyond profit: in pursuit of sustainability in investing).

Asset purchase programme (APP)

Under its expanded asset purchase programme, the Eurosystem, between October 2014 and June 2022, bought different types of securities based on four underlying programmes: (1) the covered bond purchase programme (CBPP3),
(2) the asset-backed securities purchase programme (ABSPP),
(3) the public sector purchase programme (PSPP) and (4) the corporate sector purchase programme (CSPP). At just under 80% of the volume, the PSPP accounts for the largest share of the euro area-wide APP portfolio.

Key ECB interest rates raised

July 27, 2022, marked the first increase in the ECB’s key interest rates for the euro area, ­following the discontinuation of net purchases ­under the APP. Thereafter, these rates were ­increased four more times in the second half of 2022 and in early 2023. From mid-2022, the three key ECB interest rates were raised by 300 basis points, at a pace unseen ever since ­European monetary union was created in 1999. As of February 8, 2023, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility stood at 3.00%, 3.25% and 2.50%, respectively.

Key ECB interest rates

The Governing Council of the ECB sets three key interest rates: (1) the interest rate on the marginal lending facility; (2) the interest rate on the main refinancing operations; and
(3) the interest rate on the deposit facility. Money market rates will follow one of these three rates, depending on the amount of central bank liquidity provided to market participants. Lately, market rates have been moving in line with the deposit facility rate, given the prevailing levels of excess liquidity that is in the market.

Rising key interest rates drive up the cost of borrowing for businesses and households in Austria

For inflation to stabilize at 2% over the medium term, the increases in the key ECB interest rates need to feed through to the real economy and, consequently, to consumer price levels. Higher interest rates elevate banks’ funding costs, which they pass on to businesses and households. Apart from making borrowing more expensive, higher bank interest rates also make saving more attractive. Higher interest rates for loans and deposits are an incentive to consume and invest less. As a result, demand for goods and services will go down, which will cause output to be adjusted and ultimately cool inflation pressures.

Chart 1, Higher policy rates affect bank lending and deposit rates, consists of two line chart panels representing the timeline of five different interest rates in percent from January 2021 to December 2022. The timelines illustrate how important retail interest rates in Austria responded to the rise in the key interest rates set by the European Central Bank. The left-hand panel refers to interest rates for Austrian households, and the right-hand panel to interest rates for Austrian businesses, both for new loans. For these two segments, each panel shows a composite cost-of-borrowing indicator, the interest rate offered on deposits with agreed maturity, the interest rate on overnight deposits, the European Central Bank’s deposit facility rate and the three-month EURIBOR. The cost of borrowing increased more or less in tandem for both households and businesses. The only difference is that corporate interest rate averages were slightly more volatile than those for households. The chart also shows that interest rates remained very stable until January 2022, when interest rates started to go up. For further details, please refer to the main text. Note that the composite cost-of-borrowing indicator for loans to households includes only loans for house purchase. To calculate the cost-of-borrowing indicators for new corporate and house purchase loans, the ECB applies a weighting scheme based on the 24-month moving averages of new business volumes in order to filter out excessive monthly volatility. Source: European Central Bank.

Money market rates in the euro area, or more specifically the three-month EURIBOR (chart 1), which we use as an indicator for banks’ funding costs, in fact started to rise in spring 2022 in anticipation of policy rate hikes, causing domestic lending and deposit rates to rise as well.

In Austria, the composite cost-of-borrowing indicator, which combines interest rates on new loans to households for house purchase (chart 1, left-hand panel), started to increase in February 2022 and reached 2.84% in December 2022. A similar picture emerges for the composite cost-of-borrowing indicator for new loans to corporations (chart 1, right-hand panel), which amounted to 2.97% in December. In the variable rate segment, higher EURIBOR 3 rates also have a direct impact on interest rates for existing loans, while in the fixed rate segment, interest rates go up only for new loans. The pattern of borrowing costs in Austria broadly mirrors euro area averages (December 2022: 2.94% for household loans and 3.41% for corporate loans). Based on December 2022 figures, the cost of borrowing was somewhat higher in Germany than in Austria.

The higher key interest rates also impacted deposit rates (chart 1, overnight deposits and deposits with agreed maturity) and made saving more attractive again, especially fixed rate deposits with longer maturities. Following years of negative composite interest rates for corporate deposits with agreed maturity, these rates clearly moved into positive territory (1.96% in December 2022) in line with money market rates (three-month EURIBOR). Likewise, banks started to offer significantly higher interest rates for household deposits with agreed maturity (1.76% in December 2022).

For overnight deposits, by contrast, the composite interest rates had responded only slightly to the policy rates, running to 0.16% for households and to 0.11% for businesses in December 2022. With banks offering significantly higher interest rates for deposits with agreed maturity than in recent years, such deposits have ­become more attractive again for both households and businesses. The deposit pricing strategy pursued by ­Austrian banks may reflect efforts to expand their stable funding base and provide incentives for clients to shift overnight funds, which were much in demand in recent years, back into deposits with agreed maturity.

The first two policy rate hikes in July and September 2022, which brought the deposit ­facility rate back above zero, eliminated the need for the two-tier system for remunerating excess reserves, which had exempted some excess reserves from negative remuneration. Accordingly, the Governing Council of the ECB decided to end the two-tier system of remuneration. Since September 14, 2022, excess reserves have been subject to a single interest rate again, namely the deposit facility rate. In addition, the reserve remuneration regime was changed as well. Previously remunerated with the interest rate on the main refinancing operations, starting from December 21, 2022, minimum reserves have been remunerated with the deposit facility rate. As money market rates used to move in line with the deposit facility rate, the new regime means that holding minimum reserves no longer offers an interest rate advantage.

Anti-fragmentation instrument added to monetary toolkit

After a prolonged period of negative interest rates, increasing the ECB’s key interest rates rapidly and strongly harbors some risks. In particular, there is a risk that long-term interest rates may react differently across euro area countries, which could cause funding conditions to tighten more in some countries than in others. In other words, there is a risk of fragmentation that runs counter to the singleness of the ECB’s monetary policy. In this context, PEPP reinvestment flexibility (see above) will continue to be the first line of defense to counter risks to the transmission mechanism related to the pandemic and its legacy. For those instances where reinvestment volumes are insufficient, or where unwarranted, disorderly market dynamics emerge for reasons other than the pandemic, the Governing Council of the ECB has created a new tool, namely the Transmission Protection Instrument (TPI). The TPI allows for unlimited purchases of ­securities issued in jurisdictions experiencing a deterioration in financing conditions not warranted by country-specific fundamentals. 4 The scale of TPI purchases would depend on the ­severity of the market disruptions. The aim is to ensure a smooth transmission of the monetary policy stance across all euro area countries and to support an effective interest rate pass-through. Safeguarding the transmission mechanism will allow the Eurosystem to deliver on its price stability mandate. The TPI has been available since July 2022 and can be activated at any time, complementing the monetary policy toolkit that the Governing Council of the ECB can use at its discretion. The new tool was not used in 2022.

Transmission Protection ­Instrument (TPI)

When the Governing Council of the ECB started to normalize monetary policy in the euro area, it saw the need to establish a dedicated instrument for ensuring a smooth transmission of the monetary policy stance across all euro area countries. Through asset purchases, the TPI can be activated at any time to counter unwarranted, disorderly market dynamics.

Outstanding amounts of monetary ­policy operations in the OeNB’s balance sheet going down

As outlined above, the Governing Council of the ECB first discontinued net purchases under its APP and PEPP asset purchase programmes in the course of 2022. In the closing balance sheet for 2022, the OeNB’s PEPP portfolio amounted to EUR 37.9 billion, and the significantly larger APP portfolio came to EUR 75.4 billion (chart 2). Furthermore, the ECB started raising its key interest rates. The logical next step in normalizing monetary policy is moderately reducing the size of the central bank balance sheet. Accordingly, the outstanding amounts of monetary policy operations recorded in the OeNB’s balance sheet (chart 2, in particular longer-term refinancing operations) began to contract in the final quarter of 2022.

Chart 2, OeNB balance sheet shrinks as monetary policy is tightened, is a column chart and represents the volume timeline of monetary policy operations in the balance sheet of the Oesterreichische Nationalbank. The data shown are monthly data for the period from 2015 to 2022 and expressed in billion euros. The stacked columns indicate the extent of the weekly main refinancing operations and longer-term refinancing operations, including targeted longer-term refinancing operations and pandemic emergency longer-term refinancing operations. Recourse to the marginal lending facility ranged from zero to EUR 0.25 billion, which is why this type of funding is not visible from the chart. Beyond that, the chart also shows the volumes of the Eurosystem’s asset purchase programme (APP) and pandemic emergency purchase programme (PEPP). In sum, monetary policy operations in 2015 accounted for around EUR 20 billion on average of the balance sheet volume of the Oesterreichische Nationalbank. At the time, the Oesterreichische Nationalbank was conducting main and longer-term refinancing operations and making asset programme purchases. Over the years, the volume of monetary policy operations rose from around EUR 20 billion to around EUR 200 billion, with the peak reached in mid-2022. In parallel, securities purchases became the main monetary policy operations, with assets bought under the APP and the PEPP ultimately accounting for around 57% of the volume of monetary policy operations, and regular refinancing operations for around 43%. For further details, please refer to the main text. Source: Oesterreichische Nationalbank.

The OeNB provides Austrian banks with central bank credit at different terms and maturities. Basically, it offers main refinancing operations with a maturity of one week as well as longer-term refinancing operations with a maturity of three months. The latter are also subject to the interest rate on the main refinancing operations. In response to the COVID-19 pandemic, the ECB’s operating framework was moreover expanded to include emergency ­instruments that provide central bank liquidity at more favorable conditions or for longer ­maturities, namely the third generation of ­ targeted longer-term refinancing operations (TLTROs III) 5 and pandemic emergency longer-term refinancing operations (PELTROs) .

In 2022, no new TLTRO III and PELTRO loans were made available to banks, but loans extended earlier remained on the OeNB’s balance sheet. In 2022, the amount of PELTRO funding provided to Austrian banks shrank from EUR 245 million (opening balance sheet) to EUR 130 million (closing balance sheet) as three operations matured during the year. The last outstanding PELTRO matured in January 2023, which means that this position is no longer on the OeNB’s balance sheet at the time of writing.

The decline in TLTROs III was more pronounced: In October 2022, as part of monetary policy normalization, the Governing Council of the ECB decided to no longer apply the prevailing TLTRO III interest rate conditions with effect from November 22, 2022. As a result, the cost of TLTRO III funding increased on the following day, which created incentives for early repayment. Therefore, three additional repayment dates were offered to accommodate the plans of banks opting for early redemptions. Several Austrian banks used the repayment ­options in November and December 2022. A total of EUR 30.8 billion was returned and, together with regular early repayments and redemptions, the TLTRO III portfolio on the OeNB’s balance sheet declined to EUR 53.5 billion in the closing balance sheet for 2022 (chart 2).

Targeted longer-term ­refinancing operations (TLTROs III)

Targeted longer-term refinancing operations (TLTROs) are collateralized credit operations with a maximum maturity of three years that banks were able to enter into with the Eurosystem between September 2019 and December 2021. The applicable interest rate depends on the amount of onward lending by banks.

In addition to the (early) repayments of amounts borrowed under the longer-term refinancing operations, the Governing Council of the ECB plans to keep reducing the Eurosystem balance sheet by decreasing at a measured pace the portfolios of securities bought under the ECB’s asset purchase programmes . As PEPP reinvestments will remain flexible, APP holdings are set to be reduced in a first step starting in March 2023. In fact, redemptions of maturing APP securities will be reinvested only partially between March and June 2023. As a result, the euro area-wide APP portfolio will, on average, decline by EUR 15 billion per month. The subsequent pace of reduction will be determined at a later stage.

Expectations of more key interest rate hikes

Even though inflation rates persisted at high levels at the turn of 2022/23, the Eurosystem staff macroeconomic projections compiled in December 2022 point to a cooling of inflation in the euro area in 2023. These projections reflect emerging signs of declining wholesale prices for electricity and gas, weakening demand, easing supply bottlenecks and government measures to contain energy inflation. Changes in futures contract prices also point to an upcoming decline in energy and food commodity prices. Ultimately, the aforementioned normalization of monetary policy will help contain overall inflationary pressures. It will, however, take some time for the weakening momentum to pass through to core inflation (HICP excluding ­energy and food) for a number of reasons, including the higher wage settlements agreed for 2023.

According to the Eurosystem staff projections calculated in December 2022, HICP inflation is expected to fall from an average of 8.4% in 2022 to 6.3% in 2023. Thereafter, inflation is expected to decrease further, to annual averages of 3.4% in 2024 and 2.3% in 2025. By contrast, core inflation is expected to keep ­going up to 4.2% in 2023 (from 3.9% in 2022), before declining to 2.4% by 2025. At the same time, the projections showed that the assumed interest rate path – with the three-month ­EURIBOR rising to an average of 2.9% in 2023 – would not suffice to reach the 2% inflation target by 2025. Consequently, the Governing Council of the ECB announced in February 2023 that it intends to raise interest rates by another 50 basis points at its next monetary policy meeting in March 2023. After that, it will evaluate the subsequent path of its monetary policy. In any event, the Governing Council’s policy rate decisions will continue to be data dependent and follow a meeting-by-meeting ­approach. Keeping interest rates at restrictive levels will over time reduce inflation by dampening demand and will also guard against the risk of a persistent upward shift in inflation ­expectations.

Monetary policy affects the OeNB’s profit and loss account

The OeNB’s balance sheet essentially includes gold and foreign reserve holdings and monetary policy operations (asset side) as well as banknotes in circulation and the reserves created through monetary policy operations (liabilities side) (figure 1). Monetary policy operations are recorded on the asset side of the balance sheet ­because the refinancing operations central banks conduct with commercial banks constitute claims against these banks and because the securities portfolios central banks build up are assets by definition. The volume of monetary policy operations (figure 1, dark blue field) in the euro area is set by the Governing Council of the ECB at its own discretion, with a view to achieving price stability. Until very recently, it was generally taken for granted that monetary policy would generate interest income, at times even large amounts of it. However, current monetary policy conditions, which are assessed in more detail here, show that this need not necessarily be the case.

Assuming, in simple terms, that all balance sheet items other than monetary policy operations (figure 1, light blue fields) are subject to exogenous factors and thus beyond the control of monetary policy, the amount of ­excess reserves commercial banks hold with their central bank would be the linchpin that aligns the balances on the asset side with those on the liabilities side. In other words, the amount of reserves (figure 1, white field) held, or to be held, in a currency area by commercial banks or other financial institutions is determined by the volume of monetary policy operations on the asset side. Note that this observation applies to the Eurosystem as a whole, but not necessarily to each individual Eurosystem central bank, because commercial banks’ reserves can move freely among countries.

Figure 1, Diagram of the OeNB’s balance sheet, shows the key features of the central bank balance sheet as an outline of boxes. The boxes are grouped into two columns, labeled assets and liabilities. The assets column consists of three boxes, and the liabilities column is comprised of four boxes. The respective proportions are illustrated by the size of the individual boxes. The three boxes on the asset side represent the OeNB’s gold and foreign reserve assets, its monetary policy operations and other assets. In this segment, monetary policy operations are the largest category, followed by other assets. The four boxes on the liabilities side represent banknotes in circulation, reserves held by commercial banks on central bank accounts, other liabilities, and capital and reserves. Here, commercial bank reserves are the largest category, followed by other liabilities and banknotes. Source: Oesterreichische Nationalbank.

Both monetary policy operations on the asset side and commercial banks’ reserves on the liabilities side of central banks’ balance sheets bear interest. Depending on the level of policy interest rates, central banks may, on both sides or on either side of the ­balance sheet, incur interest expenditures or earn interest income.

2022 is a good example as the pattern ­reversed during the year. The first half of 2022 was characterized by (1) monetary policy securities holdings (related to APP and PEPP purchases), which had grown in times of low interest rates and thus generated low interest income for the OeNB; (2) outstanding amounts of three-year monetary policy lending operations (TLTROs III), which carried a negative interest rate for most commercial banks (special interest rate period), 6 as a result of which the OeNB incurred interest expenses; and (3) excess reserves attributable to the nonstandard monetary policies of recent years, which came with a negative interest rate, thus generating interest income for the OeNB. 7 In the first half of 2022, the OeNB’s balance sheet therefore recorded high interest expenses on the asset side and interest ­income on the liabilities side, with interest expenses being the higher of the two.

By the time the second half of the year ended, in contrast, net interest income continued to be characterized by (1) a low-yielding (APP and PEPP) securities portfolio. However, for longer-term operations (2) and excess reserves (3) the momentum had reversed given rising key ECB interest rates. The end of the special interest rate period on June 23, 2022, and the adjustment of interest rate conditions from November 23, 2022, as part of the ­normalization of monetary policy meant that (2) TLTROs III were now remunerated at positive rates, thus generating interest income for the OeNB. At the same time, (3) existing excess reserves resulted in high interest expenses for the OeNB owing to the gradual increase in the interest rate on the deposit facility to 2%. To highlight the current asset liability mismatch, let us suppose that the OeNB has built up a monetary policy-related portfolio of securities worth about EUR 100 billion that remains unchanged during the year. Subject to an average interest rate of 0.2%, this portfolio would yield EUR 200 million in interest income. Let us further assume that commercial banks’ deposits with the OeNB sum up to EUR 100 million and are remunerated at an interest rate of 2% at year-end. On the assumption that the level of deposits also stays unchanged throughout the year, the OeNB’s ­related interest expenses amount to EUR 2,000 million. As the interest expenses in this simple ­example exceed the interest income, the OeNB would face a loss of EUR 1,800 million. The high interest ­expenses ­incurred on monetary policy operations had major negative repercussions for the OeNB’s 2022 profit and loss account. In a nutshell, these expenses can be explained, first, by the crisis-fighting measures undertaken in the past few years and, second, by the key interest rate increases adopted by the Governing Council of the ECB in 2022. As the asset ­liability mismatch driving interest rate income and expenses is unlikely to change anytime soon, it will continue to affect the OeNB’s profit and loss account – and that of other central banks – in the years ahead. Note, however, that any policy decisions taken by the Governing Council of the ECB are taken with the aim of maintaining price stability over the medium term. Any profit or loss recorded by Eurosystem central banks is thus a corollary to the underlying ­mandate and the monetary policies adopted to fulfill this mandate. Central banks may also operate well with negative equity, as this will affect neither their capacity to act nor the effectiveness of their monetary policy.

1 Between 2009 and 2020, euro area HICP inflation averaged 1.2%.

2 The PEPP is only one of many measures taken by the Eurosystem to combat the economic fallout of the COVID-19 pandemic. In ­addition, fiscal policymakers in Austria adopted a range of support measures , including loan guarantees and hardship funding.

3 In the case of variable rate loans, lending rates are often linked to money market rates, such as the EURIBOR.

4 When assessing the reasons for the deterioration in financing conditions, a cumulative list of criteria is used to determine whether the jurisdictions in which the Eurosystem may conduct purchases under the TPI pursue sound and sustainable fiscal and macroeconomic policies.

5 Euro area banks already had access to TLTRO III funding in September 2019, i.e. before the emergence of COVID-19. However, following the outbreak of the coronavirus pandemic, the terms were changed and TLTROs III became a tool for providing emergency liquidity.

6 Between June 24, 2020, and June 23, 2022, TLTRO III lending rates could be as low as 50 basis points below the average interest rate on the deposit facility prevailing over the same period. This translated into an interest rate of –1% for banks that met all lending conditions.

7 At the beginning of 2022, the interest rate on the euro area deposit facility stood at –0.5% (and it remained at that level until July 26, 2022).

Austria: fast growth and high inflation in 2022, mild recession at year-end

Divergence in economic growth in the first and second half of 2022

In Austria, 2021 ended with a return to comprehensive lockdown measures, given resurging COVID-19 infections and rapidly refilling hospitals and intensive care units. Although the economic impact of the lockdown measures was not nearly as strong as in the early days of the pandemic, economic output did fall in the fourth quarter of 2021 as a result. As the coronavirus continued to mutate in 2022 and Omicron replaced Delta as the COVID-19 variant of concern, infections spread more easily but more people were experiencing milder symptoms – not least because of higher prevalence and vaccination rates. This alleviated the pressure on the healthcare system and obviated the need for further lockdowns in 2022, even though infection rates kept rising. Meanwhile, the economy was driven by pent-up demand in the first half of 2022 (chart 3): (1) Private consumption surged after having been pushed back by the lockdown restrictions in the fourth quarter of 2021. (2) Businesses stepped up their investments as the global economy recovered. (3) The tourism sector, especially winter tourism, was spared another round of shutdowns and recorded exceptionally high year-on-year growth rates. (4) Industrial manufacturing benefited from full order books, which were gradually being processed as supply shortages eased.

Chart 3, Austrian GDP growth remains strong in 2022, is a column chart with line chart overlays showing quarter-on-quarter rates of gross domestic product growth in Austria as compared with the euro area. The chart covers the period from the first quarter of 2019 to the fourth quarter of 2022. The data for Austria reflect the import-adjusted contributions to GDP from domestic demand, exports and changes in inventories (including statistical discrepancies). The timeline illustrates the impact of the COVID-19 pandemic: In Austria, GDP growth contracted by 11.3% in the second quarter of 2020, followed by a rebound of the same size in the third quarter. In both quarters, the development was driven by domestic demand and exports. The quarterly GDP growth rates recorded in Austria in 2022 were as follows: 1.2% in the first quarter, 1.9% in the second quarter, 0.2% in the third quarter and minus 0.7% in the fourth quarter. GDP growth in Austria exceeded euro area growth in the first half of 2022 but was below euro area growth in the second half. Source: Eurostat (euro area), Statistics Austria (Austria, until the third quarter of 2022) and WIFO (Austria, fourth quarter of 2022).

Then came February 24, 2022, and the start of Russia’s war of aggression against Ukraine. Hence, the European Union, the United Kingdom, the United States and their allies imposed extensive sanctions on Russia. In Austria, the subsequent global economic slowdown and the high level of uncertainty about future political and global economic developments led to a significant slump in economic momentum from mid-year onward. The sharp rise in inflation as a result of the increase in ­energy prices reduced real household disposable income and thus household consumption expenditure. Firms invested less in an environment of high uncertainty and rising financing costs. In a year-on-year comparison, real economic growth in Austria slowed from +1.9% in the second quarter to +0.2% in the third quarter to –0.7% in the fourth quarter of 2022. The economic outlook for late 2022 and early 2023 was for a technical recession, i.e. negative growth in two consecutive quarters. Nevertheless, due to the strong cyclical momentum in the first half of the year, in 2022 – for the second year in a row – the Austrian economy ultimately recorded very strong economic growth for the year as a whole (2021: +4.7%, 2022: +4.9%), thus well exceeding pre-pandemic levels.

Energy price surge leads to broad-based rise in inflation in 2022/23

On top of the rise in commodity prices during the economic recovery from the pandemic, the war in Ukraine further fueled inflation in international energy markets. This is clearly reflected in the crude oil price assumptions underlying economic forecasts (chart 4). Gas prices recorded even sharper price increases, as did electricity prices with some lag. The OeNB’s HICP inflation outlook for Austria was adjusted upward repeatedly in view of increased energy price ­assumptions (chart 5), and even more sharply after the start of Russia’s war against Ukraine.

Chart 4, Oil price assumptions revised upward repeatedly, is a line chart that shows the oil price assumptions underlying the OeNB’s outlook for the Austrian economy for the period from the first quarter of 2019 to the fourth quarter of 2024. Oil price assumptions refer to the price per barrel of Brent oil as used in the forecasts made in March, June, September and December of 2020, 2021 and 2022, which adds up to 12 forecasts in the period under review. The timeline shows that the assumed oil prices started to increase in the second quarter of 2020, followed by upward revisions in each forecasting round. The lowest oil price assumption over the entire observation period was USD 27.8 in the second quarter of 2020, and the highest was USD 115.3 in the second quarter of 2022. In June 2020, forecasters had expected an oil price of USD 40.4 for the second quarter of 2022. By June 2022, this assumption had been revised upward to USD 109.95. The latest actual figure is an oil price of USD 105.5 measured for the third quarter of 2022, and the latest assumption, used in the December 2022 forecast, is an oil price of USD 78.1 expected for the fourth quarter of 2024. Source: Eurosystem and European Central Bank.
Chart 5, HICP inflation forecasts for Austria revised continually in 2022, is a line chart combining forecasts for changes in the Harmonised Index of Consumer Prices in Austria from the first quarter of 2019 to the fourth quarter of 2024. The timeline reflects 12 forecasts prepared in March, June, September and December of 2020, 2021 and 2022. The lines show annual percentage changes as forecast. Increasingly higher upward revisions indicate that HICP inflation in Austria rose sharply from 2021 onward. In the period under review, actual HICP inflation measures in Austria ranged from 1.1% in the second quarter of 2020 to some 9.9% in the third quarter of 2022. The December 2022 forecast yielded the highest HICP inflation forecast in the period under review, namely around 11% for the fourth quarter of 2022. Over the current forecast horizon, HICP inflation is forecast to drop to 3.4% in the fourth quarter of 2024. Source: Oesterreichische Nationalbank, Statistics Austria.

The OeNB’s September 2022 outlook was built on the assumption of declining commodity prices, reflecting the first downward revision of such prices in 2½ years. This assumption was subsequently confirmed in December, so that the HICP outlook published in December remained broadly unchanged compared with September.

Chart 6, Sharp rise in HICP inflation in Austria in late 2022, is a column chart with line chart overlays, showing changes in inflation according to the Harmonized Index of Consumer Prices for Austria and the euro area between January 2020 and December 2022. The line chart overlays indicate annual HICP inflation on a monthly basis for Austria and the euro area, plus the core inflation rate for Austria. The columns show the monthly contributions to Austrian HICP inflation from food and energy (with a weight of 25%) and nonenergy industrial goods and services (with a weight of 75%). From January 2020 to April 2021, HICP inflation in Austria ranged between 2.2% and 1.9%. After that, it continued to rise, peaking at just under 11.6% in October 2022. Food and energy had contributed about 6.7 percentage points to this rise, and services and industrial goods about 5 percentage points. In 2022, HICP inflation was mainly driven by energy and food prices. Source: Eurostat and Statistics Austria.

By now, all major HICP subcategories have become affected by high inflation rates. Energy and food were, however, the main price drivers in 2022 (chart 6). Based on year-on-year changes, the share of energy price increases in the overall rise in HICP inflation in 2022 comes to 41%. Food accounted for another 24% of the increase, nonenergy industrial goods for 21% and services, for the time being, for just 14% (chart 7).

Chart 7, Inflation growth in Austria in 2022 mainly driven by energy prices, is a pie chart reflecting the contributions to the rise in inflation observed in Austria in 2022. For further details, please refer to the main text. Source: Statistics Austria.

Both crude oil and gas prices have been ­declining from their inflation highs, and forward prices point toward further declines. As a result, energy prices are going to contribute less to ­inflation in 2023 than they did in 2022, while services prices will rise somewhat more strongly in line with higher wage settlements. Overall, the OeNB expects HICP inflation in Austria to decline from 8.6% in 2022 to 6.5% in 2023 and 3.9% in 2024. In 2025, HICP inflation is expected to return to just below 3% but to remain above its long-term average. Core ­inflation (excluding energy and food) reached 5.0% in 2022 and, in contrast to HICP inflation, is expected to rise further to 5.6% in 2023, reflecting strong wage cost increases and indirect effects from energy prices. Core inflation will not fall until 2024 (to 3.5%) and 2025 (to 3.1%), which means that it will also remain well above its long-term average.

Labor market robust despite economic slowdown

In an increasingly tight economy, labor market conditions were very stable in Austria in 2022. Employment growth, although moderating over time, remained at long-term averages in the second half of the year. In 2022 as a whole, employment is expected to have risen by 2.9%, i.e. to a level well above the long-term average of just over 1%. The number of unemployed continued to decline in the first two quarters of 2022 and remained at first-quarter levels in the second half of 2022. Reported vacancies ­declined from their historical peaks in the first half of the year, but continued to visibly exceed the long-term averages in the second half of the year. The seasonally adjusted unemployment rate published by the Public Employment ­Service Austria (AMS) was stable throughout the year at less than 6.5%. Unemployment as defined by Eurostat averaged 4.6% and will ­remain below 5% in the years ahead. 8 According to the OeNB’s December 2022 outlook for the Austrian economy, collectively agreed wages are expected to rise by 7.2% in 2023 and 5.9% in 2024. This notwithstanding, we do not see any risk of a wage-price spiral for the time being (see box 3).

Wage-price spiral

High inflation can lead to high wage settlements to compensate for consumers’ loss of purchasing power. The wage-price spiral is defined as a multiyear episode of several rounds of price increases driven by wage increases and vice versa.

Wages are an important macroeconomic variable. They represent the main source of income for households and generally the highest cost component for firms. Annual wage negotiations therefore play a crucial role in the economy. These negotiation rounds serve to find a balance between the demands of employers and employees: Employees are looking for compensation for inflation-induced losses of purchasing power and seek to capture a fair share of aggregate productivity growth. Yet, their interests also need to be offset against the interests of employers.

For the benefit of the overall economy, wage-setting policies in Austria have for decades been guided by the so-called Benya rule according to which wage settlements must give equal consideration to two aspects: 9 (1) the increase in aggregate labor productivity (real GDP per employee) over the medium term, and (2) the amount of consumer price inflation over the preceding 12 months. If the consumer price index (CPI) tracking the price level of a broad basket of consumer products is closely aligned with the GDP deflator, which is a broad index of ­inflation in the economy, 10 all other things being equal, we arrive at a constant wage share (compensation of ­employees divided by nominal GDP). Striking such a balance is an implicit objective of the wage bargaining ­process and implies a distribution-neutral outcome of wage negotiations.

This approach usually leads to rapid settlements in times of low inflation and productivity gains. Balancing the interests of employers and employees has, however, been somewhat of a challenge more recently, given high and rapidly rising inflation driven by energy prices and the economic upheaval caused by the coronavirus ­pandemic. Against this background, the various wage-setting indicators have been sending divergent signals: The consumer price index, which also includes imported energy goods, has seen significantly stronger growth rates than the GDP deflator. Thus, the challenge for negotiators has been to work out which parts of the energy price shock are to be borne by employees, and which by employers. Another difficulty is the fact that the pandemic distorted labor productivity for a while: Labor productivity dropped in 2020 when we witnessed a sharp decline in GDP while a corresponding drop in employment was broadly cushioned by short-time work. Subsequently, labor productivity recovered in 2021 and 2022. All this explains the increased challenge of balancing interests in the 2023 wage settlement rounds and the reemergence of strikes as a wage negotiation tactic (as used by e.g. railroad workers) after many years without any strikes.

Chart 8, Wage forecast for Austria for 2023 aligned with GDP deflator, is a line chart plotting the development of collectively agreed wages in Austria as well as wages per employee in Austria, including forecasts. The chart indicates aggregate percentage changes for the period from 2000 to 2009 and for the period from 2010 to 2019 as well as annual percentage changes for the years from 2019 to 2024. In addition, it shows data points for different benchmarks used as guidance in wage settlement negotiations. These benchmarks are calculated for two horizons from labor productivity, the consumer price index and the deflator for the gross domestic product. Specifically, these benchmarks are rolling 3-year and 5-year averages for the GDP deflator plus average labor productivity and rolling 3-year and 5-year averages for the CPI plus average labor productivity. For further details, please refer to the main text. Source: Oesterreichische Nationalbank and Statistics Austria.

For ease of understanding, chart 8 plots the determinants of wage setting and wage paths (collectively agreed wages and compensation per employee). As outlined above, we use two indices, the CPI and the GDP deflator, to chart the underlying price dynamics in previous years, and the labor productivity averages for the previous three and five years to reflect the medium-term productivity momentum. The left-hand side of the chart shows the averages for the past two decades. During this period, the price indices and medium-term productivity broadly mirrored the collectively agreed wage increases. This is also the case for 2020, when wages were negotiated on the basis of pre-pandemic figures. In 2021, we see the emergence of a substantial gap, with collectively agreed wages lying in the upper range of the indicators assessed. In addition, the wage drift turned positive. 11 The wage settlements for 2022 were somewhat above the indicator range.

At the same time, employees suffered a historically high real wage loss of 3.7% in 2022, given the inherent lag in wage compensation for inflation and the sharp rise in inflation. When we consider the ­respective increases in aggregate labor productivity and consumer price inflation as outlined above, the 7.2% wage increase agreed for 2023 12 is somewhat above the range calculated based on the GDP deflator (6.7% to 6.9%) but well below the corresponding CPI-based range (8.6% to 8.8%). For 2024, we also expect wage settlements to be closer to the lower end of the range. The lower wage settlements will, however, be offset by real wage gains of 0.7% in 2023 and 2.2% in 2024 given the projected decline in inflation.

Chart 9, Austrian wage share of GDP on the rise from 2023, is a column chart that shows percentage changes in wages divided by the nominal gross domestic product for Austria. The more recent data, which also include projections up to 2024, are compared with aggregates for the period from 2000 to 2009 (46.7%) and for the period from 2010 to 2019 (47.6%). The chart shows the following wage shares: 48.5% for 2019, 50.6% for 2020, 49.5% for 2021, 47.5% for 2022, 48.1% for 2023 and 48.5% for 2024. Source: Statistics Austria.

When we move on to analyze the wage share (chart 9), we see pandemic-related outliers in 2020 and 2021, an inflation-driven decline in 2022 and a broad realignment with pre-2019 levels in 2023 and 2024. In other words: This outcome reflects distribution-neutral wage settlements, as driven by the backward-looking approach of the “Benya rule.” OeNB ­simulations have, moreover, yielded a relationship of 1:0.3 for the pass-through of wage increases to inflation after about three years. That is to say, for any 10% that nominal wages rise, inflation increases by (just) 3%. Yet, on balance, Austria’s wage settlement processes have continued to deliver even in today’s challenging times and have thus, for the time being, prevented a wage-price spiral from emerging.

Budget deficit drops below 3% of GDP despite numerous fiscal support ­measures

In 2022, the budget balance is expected to have improved by around 3 percentage points to –2.9% of GDP, dropping back below the 3% benchmark (Maastricht definition) after two years. This outcome has been mainly driven by the cyclical recovery and unexpectedly high tax revenues (especially from personal and corporate income taxes). The size of discretionary fiscal measures adopted in 2022 is even somewhat higher than the size of the measures implemented in the two preceding pandemic years, 2020 and 2021. While the eco-social tax reform, which entails a gradual reduction of personal income tax rates, had a relatively small impact on Austria’s budget balance in 2022, the impact of expenditure on the energy relief packages is clearly visible. The single biggest offsetting factors for (energy) inflation in 2022 were higher one-off payments (climate and anti-inflation bonus) and the costs of building up the strategic gas reserve. At the same time, the government spent significantly less on pandemic-related ­fiscal support measures (in particular on income support such as short-time work, fixed cost subsidy, default bonus and hardship funding).

The strong decline in the debt ratio by more than 5 percentage points, to 77.2% of GDP, in 2022 is attributable to high nominal GDP growth. When seen in isolation, the government debt ratio was actually pushed up by the relatively high primary deficit and the positive stock flow adjustments.

On November 9, 2022, the European Commission published a communication on orientations for a reform of the EU economic governance framework . Overall, the communication confirmed the existing fiscal reference values (a budget deficit of 3% of GDP and a debt ratio of 60% of GDP). What is new is that compliance with these values is to be achieved through credible country-specific budget paths to ensure sustainable economic growth. The European Commission plans to present corresponding legislative proposals once the discussion process has been completed. It will also re-issue fiscal policy guidance in the first quarter of 2023.

CESEE: war in Ukraine and generally heightened uncertainty depress economic activity and continue to fuel inflation

The war in Ukraine was definitely the key determinant of economic activity in Central, Eastern and Southeastern Europe (CESEE) 13 in 2022. Average economic growth in the CESEE EU member states is expected to have declined from 6.2% in 2021 to 4.1% in 2022 (chart 10). Even so, economic activity proved to be surprisingly robust to the initial effects of the war in the first half of the year. In this period, GDP growth was mainly supported by consumer demand. Solid consumer demand can be attributed to the boost savings received earlier as people were spending less during the lockdowns, and to favorable labor market conditions. At 3.9% in October 2022, the average unemployment rate in the CESEE area was only marginally above its trough at the end of 2019. In the middle of the year, both employment and labor participation rates rose to historic highs or even beyond, which translated into dynamic nominal wage increases. Investment also provided a stable contribution to growth, reflecting high capacity utilization, high corporate financial surpluses and, in some cases, increased inventory accumulation following the restoration of key supply chains.

Chart 10, Economic growth in CESEE affected by the war in Ukraine, is a column chart that compares the real growth in gross domestic product in percent in 2021 and 2022. The chart presents data for 11 Central, Eastern and Southeastern European countries, ranked in ascending order of 2021 GDP growth, namely Slovakia, Czechia, Latvia, Romania, Lithuania, Poland, Hungary, Bulgaria, Estonia, Slovenia and Croatia. Moreover, the chart compares the aggregate GDP growth of these 11 countries with the euro area aggregate. In 2021, growth in the CESEE region ranged from 3% in Slovakia to 13.1% in Croatia. The aggregate value for CESEE was 6.2%. By comparison, growth in the euro area stood at 5.3%. In 2022, growth in the CESEE region was between minus 0.1% in Estonia and 6.2% in Slovenia, compared with aggregate growth of 4.1% in CESEE and of 3.2% in the euro area. Source: Eurostat and the European Commission’s autumn forecast of November 2022.

Over the course of the year, however, the economy became a lot less resilient to the effects of the war in Ukraine. Confidence indicators were deteriorating significantly from early summer 2022 onward, with the consumer confidence indicator falling to a deeper level than at the peak of the COVID-19 pandemic. From fall 2022 onward, activity indicators were weakening as well. In the industrial sector, almost all sectors were affected by the downturn, in particular export-oriented industries, which are dependent on raw materials and imported components. In the retail sector, sales of daily necessities increased, while sales of durable goods and also fuels weakened. The loss of purchasing power in the wake of strong inflation became increasingly apparent as well. As a result, quarter-on-quarter GDP growth turned negative in more than half of CESEE countries in the third quarter of 2022, with the Baltic countries already meeting the criteria for a technical recession.

The war in Ukraine exacerbated supply-­demand imbalances in some areas, pushed up energy and food prices and significantly weakened, at least temporarily, the external value of some CESEE currencies. This drove up the pandemic-related price pressures at the earlier stages of the pricing chain even further, thus pushing up inflation to as much as 16.4% on average in November 2022 – a level last seen in the mid-1990s. In contrast to 2021, almost all areas of the basket of goods were affected by inflationary pressures in 2022, causing core ­inflation to go up heavily as well. At the end of the year, however, inflation rates stabilized somewhat after lower world market prices for crude oil and country-specific household energy relief packages had caused energy inflation to slow down.

Rising inflation and the associated risks of second-round effects, as well as the risk of a deanchoring of inflation expectations, had led central banks in the CESEE region to tighten monetary policy from mid-2021 onward. These interest rate measures not only continued in 2022, but even picked up speed in most countries, also in response to pressures emanating from foreign exchange markets. Ultimately, key interest rates were at a multiyear high at the end of 2022. However, the underlying conditions for monetary policy became increasingly challenging as the year progressed, as any further interest rate moves had to be weighed against the expected economic slowdown in the coming quarters. The Polish and Czech central banks have therefore refrained from any further interest rate hikes in recent months.

On December 15, 2022, the ECB announced that the existing temporary euro liquidity lines (swap and repo lines) with non-euro area central banks would be extended for another year, until January 15, 2024. Repo lines are in place with Albania, Andorra, North Macedonia, ­Romania, San Marino and Hungary, and there is a swap line with Poland. The size and operational parameters of the individual agreements remain unchanged. Against the backdrop of continued uncertainty, the repo lines are designed to prevent spillovers to euro area financial markets and economies and to safeguard the smooth transmission of the ECB’s monetary policy.

European integration deepens and ­widens: Croatia becomes the 20th member of the euro area in 2023, three countries are recognized as candidates for EU membership

On June 1, 2022, the ECB and the European Commission published their respective 2022 Convergence Reports, recording the progress made by non-euro area EU countries toward adopting the euro. Seven member states were covered: Bulgaria, Croatia, Czechia, Hungary, Poland, Romania and Sweden. The European Commission and the ECB both concluded that Croatia fulfills the economic and legal convergence criteria. The final decision on Croatia’s accession to the euro area was taken by the Economic and Financial Affairs Council (Ecofin) on July 12, 2022. The conversion rate of the Croatian kuna (HRK) was fixed at HRK 7.53450 per euro.

On January 1, 2023, the Governor of Croatia’s central bank became a voting member of the Governing Council of the ECB. Thus, the Governing Council now comprises the six members of the Executive Board of the ECB and the 20 governors of the national central banks of the euro area countries. The rotation system of voting rights introduced in 2015 for Governing Council meetings remains broadly unchanged following the accession of Croatia. Under the rotation regime, the euro area countries are divided into two groups according to the size of their economies and their financial sectors. The governors from the five largest countries (Germany, France, Italy, Spain and the Netherlands) share four voting rights. All others (15 since Croatia joined on January 1, 2023, ­including Austria and thus the OeNB’s governor) share 11 voting rights. In both groups, the governors take turns using their voting rights based on a monthly rotation scheme. 14 In 2023, for instance, the OeNB’s governor will not ­exercise his right to vote in May and June.

In 2022, the European Council decided
to grant EU candidate status to Ukraine and ­Moldova (as agreed on June 23) and to Bosnia and Herzegovina (as agreed on December 15). It thus followed the recommendations of the ­European Commission, which had already positively assessed the three countries in light of the so-called Copenhagen ­criteria. These criteria ­reflect political and economic considerations as well as the countries’ ability to assume the obligations of EU membership.

IMF and EU financing for Ukraine

Since Russia’s invasion of Ukraine, Ukraine has been receiving financial support from both the EU and the IMF. The total amount of EU macro­financial assistance (MFA) disbursed to Ukraine by the EU reached EUR 7.2 billion in 2022. The money has been extended in the form of loans subject to highly beneficial conditions with ­longer maturities than for regular MFA loans. In addition, any interest payable on these exceptional MFA loans is covered from the EU budget, at least for the current multi-annual ­financial framework.

On November 9, 2022, the European Commission adopted a proposal to provide up to EUR 18 billion of support in the form of loans to Ukraine for 2023 through a new MFA+ ­instrument. The package provides for a highly concessional loan to help support reforms, primarily with regard to anchoring the rule of law and combating corruption. The EU thus seeks to provide regular financial support to Ukraine, helping the country to cover a significant part of its short-term financing needs in 2023. The first installment of EUR 3 billion was disbursed on January 17, 2023. From March onward, Ukraine stands to receive EUR 1.5 billion per month, provided it fulfills the attached conditionality.

Special Drawing Rights (SDRs)

Special Drawing Rights are the accounting unit created in 1969 by the IMF for its reserve asset transactions. The value of the SDR is calculated from a weighted basket of five currencies, namely the US dollar, the euro, the Chinese renminbi-yuan, the Japanese yen and the pound sterling. The SDR is an international reserve asset. SDR balances represent potential claims on the freely usable currencies of other IMF member countries.

SDRs may be used for payment transactions among IMF member countries and with the IMF itself. However, SDRs are not legal tender, as they are not accepted for payment outside the IMF’s SDR system.

In spring 2022, the IMF Executive Board approved emergency funding to Ukraine under the Rapid Financing Instrument (RFI) of SDR 1.0059 billion, which corresponds to around EUR 1.26 billion (at the exchange rate of December 31, 2022). In addition, the IMF established an administered account for bilateral financing agreements with donor countries. Under the Food Shock Window, the IMF approved on October 7, 2022, a disbursement of another SDR 1.0059 billion to Ukraine, as an IMF member country facing increased costs of food imports and food insecurity. On ­December 19, 2022, the IMF Executive Board approved the launch of Program Monitoring with Board Involvement (PMB) – which has been made available under a recent policy change – for Ukraine. The four-month PMB is designed to help Ukraine maintain stability and catalyze donor financing. Moreover, it might pave the way for a more comprehensive IMF program.

New IMF constituency agreement

On October 31, 2022, the IMF constituency agreement which had governed representation at the IMF for the group of countries (“constituency”) including Austria expired after ten years. A new constituency agreement entered into force on November 1, 2022, again for a ten-year period. The constituency comprises the following IMF members: Turkey, Austria, Czechia, Hungary, Slovakia, Slovenia and Kosovo (countries listed according to IMF quota). The agreement also governs the rotation system agreed. Accordingly, Austria will appoint an Executive Director and an Advisor to the IMF for the period from 2026 to 2028, and a First Alternate Executive Director for the entire ten years, except for the period from 2026 to 2028.

8 The unemployment rate as defined by the AMS is higher than the unemployment rate as defined by Eurostat because the latter is based on a different definition of economic activity and different job-seeking avenues.

9 Mesch, M. 2015. Benya-Formel gleich produktivitätsorientierte Lohnpolitik . In: Wirtschaft und Gesellschaft 41(4). 593–599. Note: Anton Benya was a long-time head of the Austrian Trade Union Federation and as such actively involved in wage negotiations.

10 The GDP deflator is the price index of value added generated by firms.

11 The wage drift is defined as the difference between actual wages per employee and growth in negotiated wages.

12 Figures from the fourth quarter of 2022 as forecast in the OeNB’s December 2022 outlook for the Austrian economy.

13 CESEE: Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia.

14 For more information, see the rotation calendar on the ECB’s website.

Reserve management in times of multiple crises

OeNB reserve management focuses on core markets

Our medium- to long-term investment strategy boils down to investing in the major and stable global reserve currencies which together compose the basket of currencies from which the value of the IMF’s Special Drawing Rights is calculated. Subject to our risk framework, we also seek to generate adequate income with our investments to cover operating costs. By fine-tuning our strategic asset allocation with short-term tactical asset allocation, we were able to respond to financial market conditions in 2022. This included risk-reducing measures, such as shifting government bond portfolios ­toward shorter maturities and diversifying non-euro assets more strongly.

Strategic asset allocation

Strategic asset allocation is a portfolio strategy where investors set long-term targets for asset classes and currencies. The target allocations hinge on predefined investment objectives, time horizon, risk-bearing capacity as well as risk tolerance.

When it comes to investing the OeNB’s ­reserve assets, pursuing a balanced allocation strategy is key, as has been highlighted most ­recently by the enormous pandemic-related challenges, escalating energy prices and ­surging inflation. In 2022, major diversification ­benefits continued to come above all from non-euro ­assets. Weighed down by tight monetary ­policy, both our sovereign bond and equity portfolios recorded a negative performance, but our US dollar-denominated holdings benefited from the dollar’s strong appreciation.

The OeNB’s investment portfolio is well diversified

The investment of OeNB assets is subject to comprehensive risk management procedures and controls. Our primary investment goal is to maintain a high degree of liquidity and security to ensure the ready availability of funds for coordinated intervention in financial markets whenever action should be required. Another key criterion guiding investment decisions is a broad range of diversification (chart 11). Apart from gold, which accounts for about 40% of the OeNB’s reserves, the OeNB invests above all in bonds (more than 50%) and in stocks (close to 8%). The predominant currencies are convertible currencies of countries with excellent credit ratings. The predominant bonds are bonds issued by governments, agencies and supranational institutions, as well as covered bonds. Other assets such as corporate bonds and stocks have been included with a view to improving the risk-return ratio. This strategy has been a cornerstone of the OeNB’s stability and continues to underpin its activities within the European System of Central Banks (ESCB).

Chart 11, The OeNB’s reserve assets are well diversified, consists of two pie charts. The first pie chart shows the OeNB’s reserve asset allocation at the end of 2022, and the second the currency allocation of investment in government and agency bonds. The two biggest asset classes were gold (around 39%) and government and agency bonds (around 49%), followed by stocks (around 8%) and corporate bonds (around 4 %). Among government and agency bonds, euro-denominated assets account for the biggest share (51%), followed by assets denominated in US dollars (31%) and a few minor segments, including assets denominated in Japanese yen (7%), pound sterling (6%), Chinese renminbi (4%) and other currencies (2%). At the end of 2022, the OeNB’s reserve assets added up to about EUR 39 billion. Source: Oesterreichische Nationalbank.

Financial markets are weighed down by inflation and monetary policy tightening

In 2022, financial markets suffered disruptions from a series of crises. Not only was financial market sentiment clouded by Russia’s war on Ukraine and the ensuing significant economic disturbances, but it was also overshadowed by the ongoing coronavirus pandemic, which led to repeated lockdowns in China in particular.

The combination of continued supply chain bottlenecks and the sharp rise in energy prices given the war situation eventually caused inflation to take off and central banks to significantly tighten monetary policies. Ultimately, the US Federal Reserve (Fed) increased its key policy rates by 4.25 percentage points in the course of 2022, whereas the ECB raised its rates by 2.50 percentage points over the same period. Major central banks around the globe also started to unwind asset purchases made to provide additional stimulus to the economy during the ­pandemic. The Fed and the Bank of England were the first ones to reduce their bond holdings. The ECB likewise reduced its balance sheet by adopting measures that prompted banks to repay outstanding targeted longer-­term refinancing operations (TLTROs) ahead of time.

The scale and pace of monetary policy normalization led to sharply rising bond yields, as a result of which the prices of government bonds, which are generally regarded as safe, ­declined significantly (chart 12). As a case in point, the yield on ten-year German government bonds rose by 275 basis points to 2.57% and the yield on ten-year US Treasury notes rose by 236 basis points to 3.87%.

In addition to the fixed income securities markets, which experienced the most severe losses in decades, equity markets also came ­under considerable pressure. The combination of falling bond and equity prices is an anomaly of the typically negative correlation between the two asset classes, which has not been observed for several decades.

Chart 12, Money tightening weighs on bond and equity markets in 2022, is a column chart providing a performance overview for selected asset classes for 2022. These asset classes are bonds, stocks, commodities and foreign currencies. Among government bonds issued in developed markets, US treasuries were the best-performing asset class with a performance loss of 12.5, compared with performance losses of 17.2% for Italian government bonds, 17.8% for German government bonds and 21.3% for Austrian government bonds. Emerging market bonds showed a performance loss of 12.4% as expressed in local currencies. Among stocks, stocks listed in the Japanese Nikkei index recorded the best performance with a loss of 9.4%, followed by EU stocks with a loss of 11.7%, Austrian stocks with a loss of 19% and US stocks with a loss 19.4%. Emerging market stocks exhibited the weakest performance measures with a loss of 22.4%. Among commodities, gold prices contracted by 0.3% in US dollars, while West Texas Intermediate crude oil prices jumped by 16.7%. With regard to foreign currency-denominated assets, the US dollar appreciated by 6.2% against the euro while the Japanese yen and the British pound depreciated against the euro by 6.7% and 5%, respectively. Emerging market currencies depreciated by 5.1 % against the US dollar. Source: Bloomberg.

The convergence of all these crises caused consumer confidence to take a plunge and ­confronted firms with considerably tightening financing conditions. Even though corporate performance rates were very good, the main stock price indices fell significantly in 2022. The US S&P 500 index declined by 19.4% and the euro area stock price index EURO STOXX 50 declined by 7.8%. The ­Japanese Nikkei225, which lost 9.4%, was somewhat better off. This was due, in particular, to the fact that the Bank of Japan was the only major central bank to ­retain its ultra-­expansionary monetary policy. By contrast, the equity markets of emerging market economies came under particularly strong pressure as ­investors were generally risk averse, recording a negative performance of –22.4% (in USD).

The financial market turmoil also spilled over to foreign exchange markets, which developed very heterogeneously. While the US dollar benefited from its role as a global reserve ­currency and from the sharp interest rate hikes by the Federal Reserve, the Japanese yen, in particular, came under severe pressure. The US dollar appreciated by 6.2% against the euro, while the yen depreciated by 6.7%. The pound sterling also weakened by 5.0% against the euro. Accordingly, J.P. Morgan’s Emerging Market Currency index dropped by 5.1% against the US dollar.

The geopolitical escalation caused energy prices to rise rapidly. For example, the price of crude oil rose by 16.7% over the course of 2022. By contrast, the price of gold (–0.3% in USD) responded less to the rise in risk aversion and inflation than would have been expected. After all, the substantial increase in bond yields across the globe following monetary tightening raised the opportunity cost of holding gold markedly given that, unlike government bonds, gold investments do not pay interest.

Gold proves an anchor of stability in ­reserve management

Chart 13, Market value of OeNB gold holdings reaches another record high in 2022, is a combined column and line chart showing volume and value changes in the OeNB’s gold holdings from 2000 to 2022. In 2000, the OeNB held 377 tons of gold; the volume then dropped to 280 tons in 2007. Since then, the volume has remained unchanged. The value of the OeNB’s gold holdings decreased from some 3.6 billion euro in 2000 to around 3.2 billion euro in 2004. Thereafter, it increased gradually, reaching just under 11.4 billion euro in 2012. Then the value dropped sharply to 7.8 billion euro in 2013. Prices started to reverse thereafter and by the end of 2022, the value of the OeNB’s gold holdings had climbed to 15.4 billion euro. Source: Oesterreichische Nationalbank.

The unusually sharp fall in prices in both bond and equity markets also impacted the OeNB’s reserve assets, which generated a negative yield of –8.9% in 2022. This result excludes the contribution from gold holdings, which account for just under 40% of the OeNB’s reserves. In the course of the year, the value of the OeNB’s gold reserves rose to more than EUR 15 billion, continuing to top previous record results (+6.0% against 2021, chart 13). Thus, gold continued to provide an anchor of stability in a rough economic sea and validated the OeNB’s strategy to rely on gold for crisis prevention and management.

Beyond profit: in pursuit of sustainability in investing

For many years, explicit sustainability criteria have informed the OeNB’s risk management decisions. Since 2011, external asset managers making investments for the OeNB must have signed the UN-supported Principles for ­Responsible Investment. These principles address environmental, social and governance (ESG) issues and provide for responsible disclosure practices and proactive ownership policies, for instance through the exercise of voting rights.

Environmental, social and ­governance (ESG)

More and more financial and nonfinancial firms around the world believe that management decisions and company analyses should give due consideration to environmental, social and governance (ESG) issues. Rating agencies and many investors have come to include such criteria, for instance compliance with the UN-supported Principles for Responsible Investment, into their securities analysis framework.

Beyond that, the OeNB has implemented requirements regarding greenhouse gas emissions for selected asset classes in its externally managed portfolios. The underlying idea is to encourage external asset managers to systematically integrate ESG criteria into their investment processes by applying sustainable and ­responsible investment (SRI) strategies. The OeNB’s internal portfolio managers have likewise been giving increasing preference to assets that meet these quality standards. The application of the SRI criteria for internally and externally managed portfolios will be developed further in the light of experience and in accordance with accepted procedures. In 2023 and beyond, we intend to take sustainable investment to the next level in three major respects:

  • building sustainability criteria more firmly into the investment process;
  • integrating SRI/ESG criteria more widely into IT systems and reporting;
  • investing more heavily in green, sustainable bonds.

Last but not least, the Eurosystem has agreed to rely more heavily on harmonized sustainability criteria in handling nonmonetary policy portfolios from 2023 onward.

This includes the commitment to start ­publishing climate-related aspects regarding the nonmonetary policy portfolios in 2023. The OeNB published the relevant data in a ­dedicated report (see Climate-related financial disclosures by the Oesterreichische Nationalbank 2022 ).

The OeNB plays an active part in ensuring financial stability

Austrian banking system resilient in challenging environment

Banks need to maintain and further strengthen resilience

Driven by Russia’s invasion of Ukraine, risks to financial stability increased significantly in the course of 2022. Austria’s financial vulnerability was being heightened by the exposures domestic banks have in Central, Eastern and Southeastern Europe (CESEE). 15 Yet, all the efforts made by Austrian banks in the past and the ­forward-looking microprudential and macroprudential measures adopted by supervisors have paid off: From a longer-term perspective, Austrian banks have significantly improved their capital ratios and funding structures, thus strengthening financial stability in Austria (see sections Macroprudential supervision contributes to higher capital levels for banks to keep up with international peers; and National and ­European banking supervisors have been cooperating effectively for years). This is also ­reflected in S&P’s Banking Industry Country Risk Assessment (BICRA) reports, which have been finding the Austrian banking system to be among the ten most stable banking systems in the world. To keep ensuring the resilience of the Austrian banking sector, two key macroprudential measures were taken in 2022: (1) Sustainable lending standards for residential real estate financing were implemented; and (2) the macroprudential capital buffers were ­redefined (see section Macroprudential supervision contributes to higher capital levels for banks to keep up with international peers).

Chart 14, Net interest margin of Austrian banks exceeds SSM peer average, is a line chart comparing the margins earned by the Austrian banking sector on a consolidated basis and Austrian significant institutions with the margins earned by all European institutions supervised under the Single Supervisory Mechanism. The chart covers the period from the fourth quarter of 2014 to the third quarter of 2022. The data on Austrian significant institutions include data for UniCredit Bank Austria AG. Up until recently, bank interest income and margins were driven by the low interest rates. Starting from a rate of 1.2% in the fourth quarter of 2014, the average interest rate margin of SSM-supervised banks continuously declined to 1% in the third quarter of 2022 – the lowest level measured in the period under review. The margin of the significant Austrian institutions and of the consolidated Austrian banking sector was consistently higher than that of SSM-supervised banks. In the period under review, the interest margin of the significant Austrian institutions dropped from 2.1% in the fourth quarter of 2014 to 1.4 % in the fourth quarter of 2021. In the first three quarters of 2022, the significant Austrian institutions managed to increase their interest rate margin by about 20 basis points. Source: Oesterreichische Nationalbank and European Central Bank.

In the first three quarters of 2022, the consolidated net profit of the Austrian banking ­sector fell from EUR 5.9 billion to EUR 5.5 billion year on year, mainly due to higher risk costs and impaired investments. To some ­extent, the fall in profit was cushioned by several one-off effects, including higher extraordinary ­income and profits from discontinued operations. The cost-to-income ratio reached 68%. From a short-term perspective, monetary tightening after years of monetary easing had a positive impact on profit by pushing up net ­interest income and interest margins. In part, this is attributable to the fact that Austrian banks have a higher share of variable rate loans on their books than their international peers on average. Given rising interest rates, the net ­interest margins of Austrian banks and significant institutions 16 improved to around 1.5% and 1.6% year on year, respectively, in the third quarter of 2022 (chart 14) – an effect that also reflects earlier and stronger interest rate increases in CESEE, among other things. Across the Single Supervisory Mechanism (SSM), net interest margins have not yet been improving on average so far. Over the medium term, credit growth and credit quality might be adversely affected by higher monetary interest rates.

Net interest margin

The net interest margin is defined as the ratio of net interest income to total assets or, alternatively, to interest-bearing assets. It is, thus, considered an important indicator of banks’ profitability.

In Austria, high loan growth rates have been observed in the residential real estate sector and, more recently, in the corporate sector in particular. Since the fourth quarter of 2021, loan growth has been mainly driven by businesses’ short-term financing needs to cover inventory and working capital costs. Prompted by supply chain problems, businesses have been building up their inventories as a precautionary ­measure. The annual rate of corporate loan growth amounted to 9.2% at the end of ­December 2022. Annual growth in real estate loans has ­remained high in recent years and declined somewhat in 2022 (+5.0% at year-end).

The support measures taken in Austria in the wake of the pandemic (including loan ­moratoria) helped avoid major credit defaults. As a result and given elevated credit growth, the nonperforming loan (NPL) ratio of ­Austrian banks remained historically low at 1.6% on a consolidated level. This compares with an NPL ratio of 1.7% for Austrian significant institutions and 1.8% for all SSM-supervised institutions on average. In addition, the share of potential loan defaults declined further in the first three quarters of 2022. Still, the outlook for credit risk is clouded by underlying economic conditions.

CESEE-based operations continue to be a major profit driver for Austrian banks. Their CESEE subsidiaries generated an aggregate net profit (after tax) of EUR 3.6 billion for the first three quarters of 2022 (compared with EUR 2.3 billion a year earlier). 17 Credit quality also remained at a high level. Most of Austrian banks’ CESEE exposures are intra-EU exposures: The subsidiaries in Czechia, Croatia, Hungary, Romania and Slovakia account for close to 80% of Austrian banks’ aggregate ­assets in CESEE. However, the risks for ­Austrian banks’ CESEE subsidiaries have increased ­significantly in light of the war in Ukraine.

In the first three quarters of 2022, banks’ consolidated common equity tier 1 (CET1) ­ratio declined somewhat, to 15.8%. This reduction is primarily attributable to credit growth and the renewed increase in profit ­distributions. Given bleak macroeconomic ­conditions, the OeNB advised banks in its ­ November 2022 Financial Stability Report to keep strengthening their capital base in a ­sustainable and forward-looking manner, especially by exercising restraint with regard to profit distributions. After all, Austrian significant institutions are not as well capitalized as their SSM peers on average. A high degree of resilience, building on sustainable lending and business policies and a strengthened capital base, is key in ensuring the intermediation function of the Austrian banking sector, especially the provision of loans and other financial services to the real economy.

Macroprudential supervision contributes to higher capital levels for banks to keep up with international peers

OeNB analyses have shown that systemic risks from residential real estate financing have been rising continually in recent years, even more so since 2020. The OeNB started to step up its communication on the associated risks already in 2016. In 2018, Austria’s Financial Market ­Stability Board (FMSB) first issued concrete recommendations on sustainable housing financing, but recommendation uptake ­remained limited. While systemic risks in this ­segment have increased in many euro area countries, developments in Austria do stand out. Variable rate housing loans, while having declined since 2015, still play a significant role in new lending in Austria (49%, December 2022, chart 15, left-hand panel); for details on credit growth, see section Banks need to maintain and further strengthen resilience). In an environment of rising interest rates, particular attention has to be paid to the associated risks.

Chart 15, Share of variable rate loans in Austria above euro area average (new lending per month), consists of two line chart panels depicting changes over time in the shares of variable rate loans in corporate loans, loans to households and residential real estate financing. The chart runs from 2004 to 2022 and is based on monthly data for new lending. The left-hand panel shows developments in Austria and the right-hand panel those in the euro area. The share of variable rate loans was higher in Austria than in the euro area in all three loan segments throughout the observation period. A comparison of data for December 2022 shows the following differences: The share of variable rate loans in loans to households amounted to 61% in Austria and to 29% in the euro area. The share of variable rate loans in residential real estate loans came to 49% in Austria and to 25% in the euro area. In Austria, the share of variable rate loans in loans to households had even exceeded 90% in 2014. In the segment of corporate loans, finally, the difference is a lot smaller, with a share of 86% for Austria and a share of 82% for the euro area. Still, even the smaller difference matters because the share of variable rate loans in corporate loans is considerably higher than the share of variable rate loans in household loans. Source: European Central Bank.

Hence, a number of international institutions (ESRB, IMF, OECD) have advised Austria to adopt borrower-based measures to prevent the buildup of systemic risk from residential real estate financing. The guidance provided to banks by the FMSB was that they should apply upper limits, as indicated, for loan-to-value ­ratios (90%), debt service-to-income ratios (40%) and loan maturities (35 years) (under Article 23 Austrian Banking Act). 18 A corresponding regulation for sustainable lending standards for residential real estate financing (known by its German acronym KIM-V) issued by Austria’s Financial Market Authority (FMA), entered into force on August 1, 2022. In the second half of 2022, interest rate and inflation hikes visibly dampened the demand for real ­estate and thus also for real estate loans – not just in Austria alone but in the euro area as a whole, and also in countries with similar economic structures, like Germany. In its meeting on February 13, 2023, 19 the FMSB concluded that the KIM-V regulation had been adopted in a timely manner, since the need for sustainable lending has even increased with rising interest and inflation rates. At the same time, based on the experience gained so far with the application of the new regulation, the FMSB advised the FMA to develop the KIM-V further and ­exclude two types of loans from the scope of application: short-term bridge loans to be ­redeemed by selling properties owned by ­borrowers and nonrepayable subsidies granted by ­regional governments. Moreover, the FMSB recommended adjusting the exemption buckets for smaller credit institutions with low levels of new lending and the exemption amounts for loans to couples. These adjustments provide for additional flexibility in applying the KIM-V regulation in a number of ways and yet ­continue to ensure sustained real estate loan growth.

The main objective of these measures is to prevent the further buildup of systemic risks. Moreover, the measures protect borrowers from overindebtedness and its consequences. The sustainable lending standards reduce ­aspects of excess in mortgage lending, such as ­excessive credit growth rates, inadequate provision of collateral, too high debt servicing ­burdens and overly long maturities. International experience has shown that financial ­crises ­related to real estate crises come with high welfare losses. Austria has not suffered a real estate crisis for decades. The measures taken in 2022 were necessary to mitigate emerging systemic risks to financial stability. The effectiveness of borrower-based measures in lowering systemic risks has been confirmed by empirical studies. Out of the 30 countries that form the European Economic Area, 24 have, in fact, already ­adopted such measures.

In 2022, the OeNB also continued to deepen its analysis of systemic risks arising from commercial real estate financing. Corporate loans secured by commercial or residential property account for 16% of Austrian banks’ exposures, and the segment continued to grow in 2022, following sustained dynamic growth in recent years. Furthermore, more than one-third of these loans serve to finance residential property, thereby exacerbating systemic risks stemming from the financing of private residential property. A large proportion of commercial real estate loans also have high loan-to-value ratios. The OeNB has therefore advised banks to critically review their collateral valuations, risk weights and risk provisions and adapt them to an environment of prolonged elevated inflation, rising interest rates, more supply chain bottlenecks, mounting commodity prices and, as a result, weaker growth prospects.

Shortly after macroprudential supervision was put in place in Austria in 2014, a systemic risk analysis conducted by the OeNB led to the definition of two structural macroprudential capital buffers: a systemic risk buffer (SyRB) and a buffer for banks identified as other systemically important institutions (O-SII). Since then, the capitalization level of the Austrian banking sector has gone up, becoming more closely aligned with international levels, and lending has accelerated. The improved capitalization of the Austrian banking sector and its enhanced perception contribute to a funding cost advantage that has been benefiting not only the banking sector as such but the real economy as well. The aim of these measures is to ensure that the Austrian banking system remains among the most stable banking systems in the world. The measures have helped the Austrian banking sector catch up with comparable peer systems, with regard to more stringent macroprudential measures and with regard to higher capitalization.

In 2022, the OeNB reassessed the existing regime for macroprudential capital buffers. The outcome was that structural systemic risks continue to be heightened and that Austrian banks have fallen somewhat behind their European peers when it comes to capitalization. In addition, the two structural macroprudential capital buffers became additive in 2022.

Additive capital buffers

In addition to the microprudential minimum own funds requirements, banks are required to maintain certain macroprudential capital buffers. As these buffers ­complement each other in covering specific risks, they are considered to be additive. The buffers in question are the capital conservation buffer plus, where appropriate, a countercyclical buffer add-on, the systemic risk buffer and the buffer for (global or) other systemically important institutions. This mix of buffers is also referred to as combined buffer requirement.

Banks that play a systemic role in the ­Austrian banking market or that are particularly exposed to systemic risk in the event of a crisis have therefore had to maintain increasingly higher capital buffers as of January 1, 2023.

While the SyRB addresses the heightened vulnerability of Austria’s banking system to ­imbalances in the financial system or parts thereof as arising from financial interlinkages, the O-SII buffer addresses risks emerging for the financial system and the real economy from the failure of a systemically important institution. This means that the two buffers need not be fully additive to achieve the objective of improving financial stability. This warranted the quantification of a certain overlap between these two complementary buffers. In addition, due account was given to the emergence of new uncertainties, mainly related to the war in Ukraine, higher energy prices and high inflation. Therefore, in a step-by-step approach, the additive requirements from the two buffers were defined as an add-on of no more than 0.5 percentage points for the time being. In the case of banks whose buffer requirements have increased, the FMSB recommended phasing in the new regime, in 0.25 percentage point steps per year until the full size of the buffer is reached. This was subsequently laid down by the FMA in a regulation amending the Capital ­Buffer Regulation adopted in 2021. Accordingly, the impact of the adjusted buffer requirements will be limited even under conservative assumptions.

Cyclical and structural ­systemic risks

Systemic risk in general is the risk that a disruption in the financial system, or parts thereof, can have serious adverse effects on the financial system and the real economy. Cyclical systemic risks increase and decrease markedly over time by definition. Structural systemic risks relate to risks that are inherent in the financial system or that are intrinsically linked to individual financial market participants.

The countercyclical capital buffer (CCyB) was retained at 0 percentage points in 2022. The relevant indicator for measuring the ­credit-to-GDP gap was below the critical threshold of 2 percentage points until the ­second quarter of 2022, reflecting still high nominal GDP growth. However, additional ­indicators on the mispricing of risks, the soundness of banks’ balance sheets and developments in corporate loans showed heightened cyclical risks. While high inflation, rising interest rates and high construction costs as well as very high house prices reduced demand for mortgage loans, demand for corporate loans even ­increased in the course of 2022. Owing to the high volatility of GDP growth in 2022 and ­substantial data revisions, the meaningfulness of the traditional CCyB indicator has become more limited than in previous years. In addition, the downside risks to the economic outlook for 2023 were increasing at the end of 2022. In light of this and with a view to strengthening banks’ capital base in a forward-looking manner, the FMSB urged banks to exercise caution in distributing profits in 2023.

Q&As on two macroprudential supervisory measures adopted in 2022: lending standards and macroprudential capital buffers

What developments have increased systemic risks in residential real estate financing?

When real estate prices rise considerably more than incomes, households have to take on more and more debt to buy property. While the prevailing environment placed further pressure on lending standards, ­recommendations made by the Financial Market Stability Board (FMSB) have not worked as intended. Over the past ten years, real estate prices and the average amount of mortgage loans in Austria have doubled, while incomes have risen by only one-third. These developments have increased systemic risks. In the past, the materialization of systemic risks has led to real estate crises in many countries, entailing very high social and financial costs.

How have lending standards in retail real estate financing evolved in recent years?

Real estate lending standards had become increasingly relaxed over time. For example, in 2011, for around 80% of real estate loans, the outstanding volume was below six times the annual net income of the households ­concerned. By 2022, this share had dropped from 80% to 50%. In other words, households that have to borrow more than six times their annual net household income to be able to buy a property now account for half of the outstanding loan amounts. And there is a fair share of borrowers who need to take out even more than ten times their annual household net income to be able to buy their own home. Higher household indebtedness is not the recipe for affordable housing, though.

Why were borrower-based measures called for?

Borrower-based measures were necessary to prevent the buildup of systemic risks and thus mitigate losses from lending. Moreover, the measures protect borrowers from overindebtedness and its ­consequences. ­Standards for sustainable lending reduce aspects of excess in mortgage lending, such as inadequate provision of collateral, too high debt servicing burdens and overly long maturities.

Why are the SyRB and O-SII capital buffers crucial for financial stability?

The systemic risk buffer (SyRB) is a macroprudential measure designed to address the existing long-term, noncyclical systemic risks in the Austrian banking system and to ensure that market exits of individual banks can be absorbed without the use of taxpayer money. It is also intended to prevent systemic risks from being “imported” into the Austrian banking system through exposures abroad. The buffer for other systemically important institutions (O-SII) addresses the systemic risk associated with the failure of a larger bank, making sure that banks need not be bailed out with public funds and thus ­preventing domino effects.

Why do the structural buffers also apply at the unconsolidated level?

As structural systemic risks can manifest themselves at both the consolidated and unconsolidated level of a banking group, the SyRB and O-SII buffers have been designed to apply at both levels. Going ­forward, the four regional and mortgage banks required to maintain SyRB buffers at the consolidated level will therefore also have to hold such buffers at the unconsolidated level.

National and European banking super­visors have been cooperating effectively for years

The Single Supervisory Mechanism (SSM), the system of European banking supervision ­created in 2014, has been instrumental in enhancing the stability and resilience of the European banking system. In November 2022, the list of significant institutions established in the euro area plus Croatia and Bulgaria that are directly supervised by the ECB included 113 ­institutions, 7 of which were banks established in Austria 20 (Sberbank Europe AG returned its license on December 15, 2022).

Close cooperation within the SSM

While the euro area countries participate in the SSM as a rule, other EU countries may seek to participate in the SSM under close cooperation agreements between the ECB and their national supervisors. Once close cooperation has been established, the national competent authorities of these countries are full-fledged SSM members and may also join the Single Resolution Mechanism (SRM).

Close cooperation within the SSM has been in place with the Croatian and Bulgarian ­central banks since October 2020. In their Convergence Reports published in early June 2022, the ECB and the European Commission concluded that Croatia fulfilled the economic and legal convergence criteria for joining the euro area. The formal decision ­approving Croatia’s accession to the euro area from January 2023 was taken in July 2022. Close cooperation ­between Bulgaria and the ECB within the SSM remains in place.

Q&As on the OeNB’s contribution to effective banking supervision

How does the SSM work?

Banking supervision on a pan-European scale – the Single Supervisory Mechanism (SSM) – became operational in the euro area in 2014 as laid down the SSM Regulation. Since then, the ECB has been directly responsible for supervising significant institutions, whereas the national supervisory authorities continue to be responsible for less significant institutions. However, to ensure consistent and high-quality supervisory practices, the ECB ­indirectly oversees the supervision of less significant institutions.

How does the OeNB participate in the supervision of significant institutions?

Significant institutions are supervised by joint supervisory teams, composed of staff from the ECB and the ­national supervisory institutions, i.e. FMA and OeNB staff members in the case of Austria.

What is the OeNB’s role in banking supervision?

In banking supervision, the OeNB is responsible for fact finding. We conduct on-site inspections of significant institutions on behalf of the ECB and of less significant institutions on behalf of the FMA, and produce analyses and expert opinions.

What tools does the OeNB use in supervising credit institutions?

The ongoing supervision of banks (off-site analysis) is essentially about monitoring the risk situation of the supervised credit institutions. The OeNB above all gathers information from data and reports submitted by banks under regulatory reporting, conducts regular meetings with banks, produces on-site inspection reports, carries out regulatory stress test calculations and establishes recovery plans. On top of this, we have put in place a supervisory review and evaluation process (SREP), which serves to assess the adequacy of the supervised institutions’ business model, risk management and capital and liquidity situation once a year.

What measures have been adopted to strengthen banking sector resilience?

In line with the risk-oriented supervisory approach, analyzing the risks in the banking sector is a joint effort by the ECB, the European Banking Authority (EBA) and the national supervisory authorities. Annual assessments are translated into strategic priorities for the coming year. For 2023, the OeNB and the FMA defined the following joint focus areas for banking supervision in Austria: (1) enhance banking sector resilience and financial stability, (2) improve lending standards, (3) urge banks to visibly step up the coverage of climate-related and environmental risks in their risk management, strategy and governance efforts, (4) keep adjusting regulations to continuously adapt supervisory methodologies, processes and tools to new rules and findings, (5) promote digital transformation and address risks arising from information and communications technology and (6) guide the supervised institutions in strengthening their governance structures. These objectives are aligned with the supervisory priorities defined at the SSM level and by the EBA for 2023.

On-site inspections focus on commercial real estate and corporate financing

While in previous years on-site inspections of significant institutions had mainly been driven by pandemic-related considerations, in 2022 the focus shifted to the impact of geopolitical changes, the weakening of the economy and rising interest rates on the risks involved in credit exposures. In Austria, the focus of ­banking supervision was also very much on commercial real estate and corporate and SME financing. In this respect, it has been noted ­repeatedly that the recent changes in the ­economic environment have not been leading to significantly more credit defaults at the ­supervised banks. Risk provisioning requirements are, however, expected to rise in the years ahead. From a supervisory perspective, the early identification of problematic credit exposures is of particular importance in this context.

Bank resolution and crisis management: the case of Sberbank Europe AG

Sberbank Europe AG (SBEU), operating from Vienna, reported a dramatic deterioration of its liquidity situation immediately upon Russia’s invasion of Ukraine on February 24, 2022. Consequently, on February 27, 2022, the Supervisory Board of the ECB assessed SBEU as failing or likely to fail. Based on this assessment, the competent resolution authority, the Single Resolution Board (SRB), stepped in to take the necessary decisions on how to proceed. The SRB concluded that public interest did not call for taking resolution action because the statutory resolution objectives (in particular the objective of avoiding adverse effects on financial stability in Austria) were ensured even without the application of these resolution measures. Therefore, the SRB stepped back and the national supervisory authorities took over to oversee the process of winding down the bank’s operations outside the resolution regime. On March 1, 2022, acting upon instructions from the ECB, the FMA requested SBEU to discontinue its operations on the grounds of imminent insolvency, which triggered a payout event under the ­Austrian deposit guarantee scheme.

This made it possible to prevent the insolvency of SBEU and kick off the orderly wind-down of SBEU’s ­operations, supervised by the Austrian authorities in consultation with the ECB. During this orderly wind-down, all the financial resources provided temporarily out of the Austrian deposit guarantee scheme (EUR 941 million) were returned in full by SBEU. This means that no financial burden was imposed on the deposit guarantee scheme and that negative financial repercussions on Austrian banks could be prevented. SBEU also managed to service all its other creditors on time under the applicable sanction regime and the resolution plan.

Banking operations were wound up as planned and SBEU returned its banking license on December 15, 2022. SBEU’s subsidiaries have already been sold under separate resolution procedures or are currently in ­liquidation.

Despite the high complexity of the case and the many different actors involved, the SSM, the SRB and the national supervisory and resolution authorities (in Austria: the OeNB and the FMA, with some involvement from the Federal Ministry of Finance) managed to respond quickly and effectively to the SBEU crisis on just one weekend. This made it possible to safeguard financial stability even in this challenging situation and to avert potential damage from SBEU depositors and Austrian taxpayers.

Owing to the structural complexity of the banking group, with several subsidiaries in EU and non-EU ­countries as well as a significant branch in Germany, and the sanctions against Russia, the orderly resolution of SBEU was quite a challenge for all players. The various national supervisory and resolution authorities worked hand in hand effectively and lessons learned can serve as a roadmap for further improving this cooperation.

Recent developments in banking ­regulation

Following proposals by the European Commission on the Banking Package 2021, i.e. amendments to the Capital Requirements Regulation (CRR III) and the Capital Requirements Directive (CRD VI), and following intense negotiations, the European Council reached a political agreement in November 2022 on a general approach on how to implement the globally agreed Basel III reforms in the EU. One of the key measures agreed upon is to apply an output floor to limit the risk weights banks determine by using internal models to 72.5% of the capital requirements that would apply if they used the standardized approach.

Output floor

Capital requirement floor set by the Basel Committee on Banking ­Supervision at 72.5% of capital requirements calculated with the standardized approach for credit risk. The underlying idea is that the capital requirements calculated using internal models should not deviate excessively from the level that would result from applying the standardized approach. Conversely, capital requirements must be no more than 27.5% below those calculated with the standardized approach.

The general approach agreed upon also includes the enhanced integration of environmental, social and governance (ESG) risks in banks’ reporting and ­disclosure frameworks, stress testing, SREP processes and transition planning with regard to addressing sustainability issues, including ESG risks. The corresponding regulatory activities should be seen in conjunction with other provisions ­resulting from the European Commission’s Sustainable Finance Action Plan. To help achieve the objectives ­defined in the action plan (reorienting capital flows toward sustainable investment, addressing financial sustainability risks, increasing transparency), European legislators have ­adopted an EU regulation introducing a ­sustainable investment taxonomy and ­sustainability-related disclosure requirements for ­financial service providers and as well as an EU directive on corporate sustainability reporting. As larger and increasingly standardized datasets are being built given the new ­reporting ­requirements, these provisions will ensure that the compatibility of firm and bank activities with sustainability objectives and ­associated risks will become easier to assess.

Trilogue negotiations between the European Council, the European Commission and the European Parliament to finalize the Banking Package 2021 are expected to start during the first half of 2023.

In 2022, the EBA conducted the first mandatory quantitative impact study (QIS) on the Basel III reforms with December 31, 2021, as the reporting date. The Austrian sample consisted of ten credit institutions, which between them cover around 70% of the risk-weighted assets of the Austrian banking sector. While capital requirements for EU-domiciled banks will increase by around 11.5% based on the ­European Commission’s legislative proposal to finalize the implementation of Basel III in the EU, the increase remains significantly lower for Austrian banks (less than 1%).

In addition, the EU’s crisis management and deposit insurance (CMDI) framework is being revised. Based on the experience of the past eight years, individual areas for improvement of the existing framework were identified in 2022. Key issues relate, for example, to the use of deposit insurance funds in the event of a crisis, government assistance to banks and the exit of medium-sized banks with high deposits. The European Commission is expected to ­publish its revision proposal in 2023.

The proposal for a regulation on crypto-­assets (MiCA) has been the subject of intense debate since September 2021. MiCA is ­expected to enter into force in 2023 and will be ­applicable from 2024 or later. Rules on various crypto ­tokens and on the licensing of crypto-asset ­service providers are to be introduced in stages up to 2026.

The Digital Operational Resilience Act (DORA), finally, will make an important contribution to enhancing operational resilience and the resilience of digital systems in the ­financial sector. It includes, inter alia, arrangements for managing IT risks, conducting cyber threat testing, responding to cyber incidents and supervising critical IT service providers. The DORA regulation entered into force at the beginning of 2023 and will apply from the ­beginning of 2025. The OeNB and the FMA are closely involved in the European ­preparatory work for its implemention.

OeNB stress tests find Austrian banks to be resilient even in the current ­environment

Chart 16, CET1 ratio of Austrian banking sector shrinks by 5.8 percentage points in adverse scenario, is a line chart that shows percentage changes in the aggregate common equity tier 1 (CET1) ratio calculated for Austria’s banking sector for the period between the fourth quarter of 2018 and the fourth quarter of 2024. From 2018 to 2021, the CET1 ratio increased from 15.5% to 16.0%, which is the reference value against which the OeNB stress-tested Austrian banks in 2022. In the baseline scenario, the CET1 ratio was found to rise further to 16.8% until 2024, whereas the adverse scenario yielded a decline by 5.8 percentage points to 10.2% over the same period.

Different stress test scenarios generate a range of “what if” assessments, serving as an alert mechanism that helps identify potential adverse developments in good time. Stress tests are one among several tools used to arrive at an overall risk assessment for individual banks or the banking sector as a whole. The OeNB conducts annual stress tests for all Austrian banks and continued to do so in 2022, examining the ­entire Austrian banking system from various perspectives and analyzing capital, liquidity and contagion risks. The OeNB’s stress test ­assumed a macroeconomic scenario involving a further escalation of the war in Ukraine, ­energy supply disruptions and a sharp global recession amid rising inflation and interest rates.

Domestic banks were found to be resilient even under the adverse scenario. While the stress test knocked 5.8 percentage points off banks’ CET1 capital, they still had an aggregate CET1 ratio of 10.2% (chart 16). This rate ­exceeds the levels observed prior to the ­financial crisis of 2008 and 2009, despite the rigorous assumptions applied. Given growing uncertainty and an increasingly difficult economic environment, Austrian banks should, however, act with particular care when it comes to ­distributing profits.

In 2022, the ECB conducted a climate risk stress test involving national supervisors. The calculations were carried out by the participating banks themselves in a bottom-up approach, using the methodology centrally specified by the ECB. The climate stress test consists of three separate modules: (1) a qualitative questionnaire on banks’ internal stress testing ­procedures; (2) the calculation of predefined climate risk metrics; and (3) the computation of several short- and long-term scenarios for a subset of directly supervised significant ­institutions. The stress test, which is basically a learning exercise, feeds into the annual supervisory assessment of participating banks on a qualitative basis. The results across participating banks are heterogeneous, with stress-­testing capacities and data availability for climate-­related risks not yet in line with the ECB’s ­expectations. The ECB therefore recommends that banks improve their data and ­methodologies for internal stress testing. In ­addition, the ECB will monitor related progress in the super­visory process. The OeNB conducted its first ­climate risk stress test in 2021, examining the introduction of a greenhouse gas tax in different scenarios. This stress test was calculated in a top-down ­approach by the OeNB and yielded results at the sectoral level.

15 This section is based on a broad definition of CESEE that also includes Russia, Ukraine and Belarus.

16 Austrian significant institutions including UniCredit Bank Austria AG.

17 After Russia invaded Ukraine, sanctions were imposed on Russia. Russia reciprocated with sanctions of its own and introduced restrictions on the movement of capital. These resulted in restrictions on the transferability of liquidity and capital (including dividends). The results of banks operating in Russia have been affected, in particular, by exchange rate developments and measures taken by the Bank of Russia.

18 Subject to an overall exemption bucket of 20% that gives credit institutions adequate operational flexibility. To take into account the higher risk potential of variable rate housing loans, the FMSB recommended to apply an upper limit of 30% for the debt service-to-­income ratio for loans with a term of more than five years if the corresponding lock-in period is less than half of the loan term.

19 See the corresponding FMSB press release on the outcome of the 35th meeting of Austria’s Financial Market Stability Board .

20 As on November 1, 2022: Addiko Bank AG, BAWAG Group AG, Erste Group Bank AG, Raiffeisen Bank International AG, Raiffeisenbankengruppe OÖ Verbund eGen, Sberbank Europe AG (under resolution) and Volksbank Wien AG. For updates, see the ECB’s list of supervised entities .

Enhanced OeNB statistics meet high demand for top-quality data

Our statistical products and services continue to evolve

It takes reliable statistical data to make informed decisions and to develop innovative applications for virtually all areas of life. As a leading provider of financial and economic statistics in Austria, we seek to offer our statistical products and services in a timely manner, in state-of-the-art fashion and tailored to the needs of our target audiences. In 2022, we made a particular effort to improve data visualization by using dashboards, such as for data on foreign direct investment (FDI) . In addition, we worked on enabling advanced user-defined queries (in German), for instance, to ensure better access to the growing range of data we provide (more than 400 tables at present). We use complex systems to support the collection, processing, release and dissemination of statistics, working closely with numerous domestic and foreign reporting entities as well as target and interest groups. To be able to meet high organizational, legal, economic and technical standards and to keep improving the benefit of our statistics for society, we steadily enhance our data strategy and the framework for systematic data governance.

Our new data strategy supports data opening and strengthens client ­orientation

Under our new OeNB-wide data strategy, which was adopted in the summer of 2022 for the period from 2022 to 2025, we seek to make the shift from a data-savvy institution to a data-­driven institution. In a rapidly changing environment that is characterized by strong growth in data volumes and data complexity, ever-­evolving legal requirements and swift technological advances, this shift will help us continue to fulfill our tasks in the best possible way. Our data strategy focuses on the following four ­fields: (1) data opening and data efficiency, (2) customer orientation and compliance, (3) data competence and data culture, and (4) innovation and infrastructure. Implementing this structured approach calls for an integrated data design and governance framework that is applied across the OeNB.

Data governance

A framework for managing the availability, usability, integrity and security of data in business systems with a dedicated set of processes, roles, institutions, policies and standards. Data governance aims to increase data use.

Data opening implies making data readily accessible through self-service portals. The idea is to enable data users to work with the available data unassisted, i.e. without requiring input from data producers, and in a decentralized fashion. Data governance processes are intended to address potential redundancies and forestall the generation of conflicting or interchangeable data products.

To meet client needs, data must be managed adequately. The challenge is to produce meaningful descriptions and simplify data and product searches. To this effect, we are working on a data dictionary and other ways to provide relevant information.

Progress made with ESCB-wide efforts to steadily enhance the reporting framework

The ESCB-wide initiative to harmonize statistical reporting in line with the Eurosystem ­Integrated Reporting Framework (IReF) aims to reduce the reporting burden for commercial banks while enhancing data quality and analytical flexibility. This initiative thus contributes essentially to reaching the objective, defined by the European Parliament and the EU Council, of an overall integrated reporting system for banks combining reporting for supervision, resolution and monetary policy purposes. In 2022, the ECB set up the IReF framework and launched the nontechnical design phase, with active support from staff seconded from the ESCB national central banks. This phase, scheduled until April 2023, is to be followed by a nontechnical exploratory phase, for which the ECB intends to seek the approval of the Governing Council in April 2023. Harmonized IReF ­reporting is due to start in 2027.

In parallel, a newly established ESCB Working Group on Integrated Reporting and Data Dictionary, chaired by the OeNB, has been working closely with IReF program managers. The working group has been active since early 2022 and has two main tasks: (1) support the ESCB Statistics Committee in all matters relating to IReF, including the development of the integrated reporting framework and a corresponding regulation; (2) establish, in cooperation with relevant joint working groups of the ECB and the European Banking Authority (EBA), a common set of data for the overall integrated reporting system for statistical, supervisory and resolution purposes.

At the OeNB, an integrated reporting system has been in place for years. Early in 2021, we started a two-year subproject, aimed at technically upgrading the integrated reporting data model to improve access to related documentation for reporting agents, technical partners and data users, and to facilitate further ­upgrades and maintenance. All project objectives were achieved by the end of 2022, including the transfer of the complete documentation to a tailor-made application which allows for interactive data processing (e.g. establishing how reported data points relate to each other).

Supervisory data reporting to be made easier for reporting agents

Furthermore, 2022 saw the implementation of initial recommendations to reduce the reporting burden at the European level, based on a cost-benefit analysis carried out in 2021 to find out how to make reporting under current EBA reporting requirements more efficient, especially for small, noncomplex banks. From mid-2023 onward, the reporting burden will therefore be considerably eased, especially with regard to liquidity reporting requirements.

In 2022, the ESCB Working Group on AnaCredit focused on data quality assurance in the context of AnaCredit, the database set up to compile and make available granular credit and credit risk data in a harmonized manner across the euro area. Another priority was to provide optimum support to data users from fellow central banks and supervisory authorities, in particular in the context of the Single Supervisory Mechanism (SSM).

Harnessing technology to detect unusual developments in the banking sector

In 2022, the OeNB continued its multiyear ­research project on how to better identify patterns that point to gross irregularities at individual banks. In this exercise, we aim at developing adequate procedures, models and algorithms for evaluating all available data, including newly available data sources. In addition, the OeNB and the FMA together successfully applied for technical support in tapping additional data sources under the European Commission’s Technical Support Instrument (TSI). The issue at question here was which newly available public data might be used to unveil implausible and unusual developments at banks with the help of innovative statistical procedures, including ­machine learning.

Technical Support Instrument (TSI)

EU program providing EU member states with tailor-made technical expertise to design and implement reforms.

In our multiyear research project on harnessing technology to identify banking irregularities, we made notable progress in 2022 in several machine learning subdisciplines, in particular with regard to unsupervised and supervised learning techniques. We currently work on developing an application based on unsupervised ­machine learning. The benefit of such applications is that they can handle the vast amount of supervisory data that are being reported to the OeNB. Supervised learning tools, by contrast, apply supervisory expert knowledge as benchmarks (“labels”), enabling us to train innovative automated models to come up with potentially better answers to specific questions (“How likely is Bank X to turn into a problem bank?”). In addition, we also continued to work on a prototype for natural language processing, which might be used to translate texts into­ machine-­readable computer code, thus significantly broadening the range of input data.

Another milestone in improving our ­external statistics and payment statistics

2022 saw the successful completion of a three-year project aimed at integrating new data processing systems rolled out for external statistics and ­financial accounts into the OeNB’s IT system architecture. In parallel, we created a new ­reporting structure for external statistics and implemented new ECB legal requirements. In addition, we started to use a new online reporting application (“MeldeWeb”). All statistical information to be handled by the OeNB is now being processed and evaluated in an integrated state-of-the-art system infrastructure. With our harmonized framework for compiling the balance of payments and the financial accounts we have raised the bar for collecting statistics in Europe.

2022 marked the first year in which the OeNB received more extensive data reports (in terms of data quantity and granularity) on all cashless payment transactions from Austrian payment service providers. Importantly, reporting has been enhanced to include detailed information on fraudulent payments, in line with the ECB regulation on reporting requirements on payments statistics (as amended) and the EBA Guidelines on fraud reporting. To limit the burden on reporting institutions, the range of data to be reported to the ECB and the EBA has been harmonized within the ESCB. Further events of note include the amendment of the Payment Services Act, at the national level, and the conclusion of a Memorandum of Understanding between the EBA and the ECB, at the international level. At the OeNB, we also use these data to calculate travel and tourism revenue and expenditure, for the purpose of payment system oversight and to monitor compliance with sanctions regulations.

Advances in credit assessment and ­models

To support central banks using an in-house credit assessment system (ICAS) to assess nonfinancial corporations, the Deutsche Bundesbank and the OeNB have developed and put in place a common rating platform called CoCAS (Common Credit Assessment System). Preparations to fully bring on board the Bank of Greece as a new user of both the CoCAS platform and the International Financial Reporting Standards (IFRS) model were completed in 2022. The ICAS Expert Group, chaired by the OeNB, worked on drafting minimum standards for incorporating climate-related risks into the in-house credit assessment systems used by the Eurosystem and to prepare the respective decision to be taken by the Governing Council of the ECB. Moreover, models used in banking supervision were enhanced to use granular data to assess credit spread risks and credit concentration risks. Last but not least, in the European Committee of Central Balance Sheet Data Offices (ECCBSO), an advisory body for questions ­relating to corporate balance sheet data set up at the initiative of the European Commission in 1987, the OeNB handed over the chair to the Deutsche Bundesbank at the end of its three-year term. Under the auspices of the Bundesbank, the ECCBSO will continue to focus on data ­integration, sustainability issues and climate-­related risks.

Common Credit Assessment System (CoCAS)

System developed by the Deutsche Bundesbank and the OeNB to assess the credit quality of amounts outstanding to nonfinancial corporations (credit claims). The OeNB uses CoCAS as its in-house credit assessment system (ICAS) in line with Eurosystem standards.

Secure and efficient payments as a cornerstone of economic activity

The OeNB ensures smooth cash ­management

Euro banknotes in circulation saw a boost in 2022 as a result of the war in Ukraine. As people tend to use cash more heavily as a store of value in times of great uncertainty, cash in circulation typically grows strongly in times of crisis. Recent cases in point include the outbreak of the COVID-19 pandemic in 2020, Russia’s latest currency crisis following the marked depreciation of the Russian ruble in 2015, and the financial crisis in 2008 and 2009. Thus, the value of euro banknotes in circulation jumped by 9.1%, in ­annual terms, at the end of April 2022.

Chart 17, Value of euro banknotes in circulation up 1.8% at end-2022, is a combined line and column chart showing changes in the value of euro banknotes in circulation between 2008 and 2022 in euro billion and in terms of annual percentage growth, broken down by individual months. The value of euro banknotes in circulation went up from around EUR 650 billion in January 2008 to around EUR 1,572 billion in December 2022. Annual percentage growth is particularly striking in times of uncertainty, as was the case during the financial crisis in 2008 and 2009, when it peaked above 13% between October 2008 and May 2009. Other examples are an annual growth of 9% in July 2015 because of the currency crisis following the depreciation of the Russian ruble in that year, or of just over 12% in January and February 2021 during the COVID-19 pandemic, or of more than 9% in April 2022 reflecting the war in Ukraine. As of July 2022, when the European Central Bank was beginning to gradually raise its key interest rates, the annual growth rates of euro banknotes in circulation declined, reaching a low of 1.8% in December 2022. Source: European Central Bank.

Banknote circulation typically shows significant seasonal peaks, e.g. in the Christmas shopping period. In the second half of 2022, euro banknotes in circulation followed an uncharacteristic downward trend for a number of months as the ECB raised its deposit facility rates in several steps. As a result, Austrian banks reduced their holdings of euro cash
from around EUR 12 billion at end-2021 to EUR 3.8 billion at end-2022. With banks across the euro area cutting their euro cash holdings by around EUR 39 billion in total, the volume of euro banknotes in circulation went down significantly.

Ultimately, at the end of 2022, a total of 29.45 billion euro banknotes with a value of EUR 1,571.99 billion were in circulation (chart 17). This corresponds to an annual rise of 4.5% in terms of volume and 1.8% in terms of value. Regarding the share of EUR 200 banknotes in circulation, the annual growth rate declined from around 34% at end-2021 to 2.3% at end-2022.

The volume of euro coins in circulation continued to grow steadily. Unlike banknotes, coins are, after all, mainly used for payment transactions rather than as a store of value. On December 31, 2022, 8.5 billion euro coins worth EUR 1.9 billion were in circulation in Austria – a year-on-year rise by 197 million coins or EUR 73.9 million in value. This increase can be observed across all denominations.

Our new web application shows ATM accessibility across Austria

For three years, the OeNB has been analyzing the accessibility of automated teller machines (ATMs) in Austria. The results show that people living in Austria tend to have good access to ATMs. At end-2021, the closest ATM was within a distance of 1.1 km (2020: 1.1 km; 2019: 1.2 km) for the population at large – a three-minute drive on average. Two-thirds of the Austrian population live less than 1 km from the nearest ATM, and for 97%, the nearest ATM is less than 5 km away. These figures have remained unchanged since 2019.

At the municipality level, the number of inhabitants strongly correlates with the average distance to the nearest cash access point. In smaller municipalities with less than 2,000 inhabitants, the average distance to the nearest ATM is 2 km, compared with 380 m for Vienna. Only from a relatively small number of villages all over Austria do people have to travel more than 5 km, on average, to reach the nearest ATM. On average, those are places with some 800 inhabitants.

Around 15% of Austrian municipalities did not have any ATM at the end of 2021. From these places, the average distance to the nearest ATM is 3.8 km on average. People living in municipalities that have ATMs, by contrast, can reach the nearest ATM within 1.7 km on average.

The OeNB’s research into ATM accessibility led to the development of an interactive web application (in German) that offers a detailed regional breakdown for Austria. Users can consult a map (figure 2) that shows the average distance to the nearest ATM for each of the 2,096 Austrian municipalities and also for each district in Vienna. In addition, a series of tables show average distances and travel times as well as the share of the population living within a distance of more than 5 km from the nearest ATM. Thus, results can be compared across municipalities, districts and provinces.

Figure 2, Short distance to nearest ATM for most Austrians, shows a map of Austria in which the areas of all municipalities are colored according to the average distance people have to cover to get to the nearest ATM. The following color codes are used: blue for a distance of below 1 kilometer; green for a distance of 1 to 3 kilometers; yellow for a distance of 3 to 5 kilometers; orange for a distance of 5 to 7 kilometers and dark orange for a distance of more than 7 kilometers. The average distances per municipality were calculated on the basis of the results for 100 meter grid cells, which were aggregated at the municipal level based on the corresponding number of inhabitants. The dominant color on this map is green. This means that for most of the 2,096 Austrian municipalities, the average distance to the nearest ATM is between 1 and 3 kilometers. There are also many municipality areas that are colored in blue, indicating an average distance of below 1 kilometer to the nearest ATM. These municipalities are mostly located in the eastern- and westernmost parts of Austria: for instance, the districts of Vienna or the municipalities located north and south of Vienna or in northern Burgenland to the east and Vorarlberg and Tyrol to the west. For a few municipalities here and there, colors indicate average distances of 5 kilometers or more (orange and dark orange). Such outliers can be found in all Austrian provinces with the exception of Vienna; they are slightly more frequent in remoter northern areas or the mountainous south of Lower Austria and in the mountainous regions of Styria. Source: Oesterreichische Nationalbank, Statistics Austria.

In line with its mandate to ensure cash supply in Austria, in 2022 the OeNB carried out extensive analyses and evaluations on how to guarantee the provision of cash in the event of a blackout (see section Our blackout contingency plan is in place). After all, cash is the only means of payment that also works when there is no electricity. For this reason, the OeNB advises households to stow away around EUR 100 worth of cash in small denominations for each household member, or the equivalent of two weeks’ shopping. In a series of outreach activities planned for 2023, we will strive to raise public awareness for the importance of keeping cash reserves.

In the reporting year, the Eurosystem began preparations for redesigning the euro banknotes and drafting a potential new series. A multidisciplinary theme advisory group consisting of one member from each euro area country compiled a list of potential themes for the new series, from which one theme will be chosen in 2023. The Eurosystem plans to present the new bank­note design to the public in 2024 following a ­design competition. The redesign initiative aims to ­ensure that euro cash remains a secure means of payment and a symbol of European cohesion.

Croatia’s initial supply of euro cash comes from Austria

Within the Eurosystem, the OeNB has established itself as a cash supply and logistics hub. Given Austria’s geographical location, our expertise in cash logistics and our excellent cooperation with the Croatian central bank, we were able to make a major contribution to the euro cash changeover in Croatia on January 1, 2023. On behalf of the Eurosystem, the OeNB delivered the initial supply of euro banknotes to Croatia, providing the central bank with a total of 346.4 million banknotes in all denominations, worth around EUR 9 billion.

Euro counterfeits in Austria continue to decline sharply

In line with their legal mandate, the OeNB and its subsidiaries provide people living in Austria and the Austrian economy with secure euro banknotes and coins and monitor the volumes and quality of euro cash in circulation. In 2022, the OeNB brought a total of around 1.4 billion euro banknotes into the cash cycle, while around 1.6 billion banknotes were returned to the OeNB. Returned banknotes are processed, checked for authenticity and fitness, and then recirculated. The OeNB is not solely responsible for cash processing but shares this task with credit institutions, bureaux de change and cash-in-transit companies.

Chart 18, Number of counterfeits recovered in Austria continues to decline, is a column chart showing the number of counterfeit euro banknotes recovered from circulation in Austria from 2002 to 2021. The following quantities of counterfeit euro banknotes were seized from circulation in Austria: in 2002: 3,409; in 2003: 7,467; in 2004: 13,386; in 2005: 7,127; in 2006: 5,919; in 2007: 7,768; in 2008: 8,082; in 2009: 9,780; in 2010: 8,812; in 2011: 5,583; in 2012: 6,327; in 2013: 8,193; in 2014: 8,461; in 2015: 14,502; in 2016: 12,234; in 2017: 9,893; in 2018: 11,698; in 2019: 7,977; in 2020: 6,321; in 2021: 4,456; in 2022: 3971. Source: Oesterreichische Nationalbank.

The number of counterfeit euro banknotes recovered from circulation continued to decrease rapidly in 2022. In total, 3,971 counterfeits were seized in Austria in the reporting year (2021: 4,456 counterfeits; chart 18). Forged EUR 50 banknotes topped the list in 2022 (1,780 counterfeits recovered), followed by counterfeit EUR 20 banknotes (781) and EUR 100 banknotes (759). Together, these three denominations accounted for 83.6% of the total number of counterfeits seized in Austria in 2022. The situation across Europe was very similar, with counterfeits of the EUR 50, EUR 20 and EUR 10 banknotes together accounting for around 79% of all counterfeits recovered in the reporting year.

As in previous years, most incidences of counterfeit banknotes in Austria continued to be recorded in Vienna (46.1%), followed by Lower Austria (12.6%) and Upper Austria (11.7%). In 2022, the overall damage caused by euro counterfeits in Austria came to EUR 244,405 (2021: EUR 272,515). At 1.0%, Austria’s share in the total volume of counterfeits recovered from circulation in the euro area remained relatively low. This means that most people have only a minimal chance of coming across counterfeit banknotes in Austria.

Providing unrestricted cash payments remains important

Results of the latest OeNB survey on ­payment behavior in Austria

In 2022, the Institute for Empirical Social Studies (IFES) again conducted
a country-wide survey on behalf of the OeNB, ­covering the payment behavior of households (women and men from the age of 15). This survey feeds into the OeNB Barometer survey. Data were collected from the end of May to mid-August 2022 and are representative for Austria in terms of respondents’ age, gender and province of residence. The results provide interesting insights into people’s most recent payment behavior compared to their payment behavior in the first year of the pandemic (i.e. in the second half of 2020). Recalling their payment habits in the first half of 2022, just over two-thirds (67%) of respondents said that they had paid in cash more often (8%) than in the reference period, or just as often (59%). Only 31% said that they had used cash less frequently than back then. The share of respondents who said they had used cash even more frequently than in the second half of 2020 went up markedly, namely by 5 percentage points to 8% (chart 19).

Point of sale (POS)

Place where goods or services are sold and paid for. A typical POS is a cash register in a store. POS terminals can also be found in restaurants, hotels, service stations and other facilities.

Chart 19, Austrians still prefer cash, is a bar chart comparing payment behavior in Austria in the first half of 2022 with the payment behavior observed in the second half of 2020 during the early stages of the COVID-19 pandemic. More detailed information is available in the main text. Source: Oesterreichische Nationalbank.

A demographic analysis of 2022 survey ­results shows that people’s preference for cash payments increases with age: 7% of respondents aged 45 to 59 years said they preferred paying in cash, while for the 60+ age group, the comparable share is just under one-fifth (18%). Of those below the age of 30, 6% shared their intention to start using cash more often, while the share of those who answered “Don’t know” was rather high at 13%. In other words, while the youngest age group strongly leans ­toward cashless payments, their share of cashless payments may still be subject to further changes. Overall, cash remains the number one means of payment that almost all respondents (99%) reported to be using at the point of sale (POS).

Card payments with PIN or signature continue to be the preferred option for 60% of ­respondents – a figure that has not changed since the first months of the pandemic. In the first half of 2022, the share of respondents who said they had been using card payments more frequently increased to 22%. The largest relative increase, by 9 percentage points compared to the second half of 2020, was recorded in contactless payments with NFC-enabled cards, which were named by 38%, i.e. more than one-third, of respondents. Only around one-quarter (26%) of respondents claimed they used NFC-­enabled mobile phones with corresponding mobile payment apps, which makes mobile payments the least frequently used means of payment in Austria (chart 19).

Near field communication (NFC)

A radio standard for wireless data transmission over short distances that is also used for making payments. Bank cards and mobile phones equipped with NFC chips serve to make contactless payments at POS terminals.

The trend toward using cashless payments more frequently is attributable to the COVID-19 pandemic, and in particular to the misconception that using cash increased the risk of contagion, as had been communicated to the public at the outset of the pandemic. This is not the case, however, as an ECB study 21 has shown. In reaction to these findings, 9% of those respondents who indicated that they had been using cash less frequently said that they would go back to using cash more often; 13% said that they were still undecided.

The majority of respondents clearly opposed the introduction of upper limits for cash payments. 62% agreed that it should remain possible to make payments in excess of EUR 10,000 in cash. Having the possibility to make cash payments was considered even more important for smaller amounts. For instance, 94% of ­respondents said that making payments of EUR 500 in cash should continue to be possible. These results clearly demonstrate that people living in Austria attach great importance to having the option of paying in cash. Survey ­results also confirmed that cash payments are widely used and accepted all across Austria: Nine out of ten respondents stated that, within the last 12 months, they had been able to pay in cash anywhere they had intended to.

An international comparison confirms the importance of cash

Between October 2021 and June 2022, data on the payment behavior of euro area households were collected for an ECB study 22 . Published at end-2022, the results at the aggregate level show a high degree of consistency with OeNB Barometer data.

Chart 20, Cash remains popular in the euro area and Austria, consists of two panels. The left-hand panel, Cash payments at the POS decline but remain dominant in the euro area, is a column chart showing changes in the share of cash in payment transactions at the point of sale across the euro area for 2016, 2019 and 2022. In 2022, cash was used for 59% of payments at the POS – more often than any other means of payment. This compares to a share of 72% in 2019 and 79% in 2016. In 2022, 34% of POS transactions were card payments, compared with 25% in 2019 and 19% in 2016. The share of payments via mobile apps increased from less than 1% in 2019 to 3% in 2022. Other payment instruments were used for 3% of POS transactions throughout the years under review. The right-hand panel, Share of cash payments at the POS in Austria and other euro-area countries, shows a map of Europe, with the euro area countries colored in different shades of blue, indicating the share of cash payments at the POS per country. Darker shades show higher shares. Exact figures for 2022 percentage shares are indicated per country as well. The highest shares of cash payments at the POS were recorded in Malta at 77%, Slovenia at 73% and Austria at 70%. The lowest shares were recorded in Finland at 19% and the Netherlands at 21%. Source: Oesterreichische Nationalbank and European Central Bank (SPACE, 2022).

The ECB study confirms the clearly positive trend in cash perception that was observed in Austria: 60% of respondents to the ECB’s survey considered it important to be able to pay in cash. This figure is 5 percentage points higher than in 2019. Most frequently, respondents named the protection of privacy and the ease of keeping track of their expenses as the key advantages of cash. Cash remains the most commonly used means of payment at POS terminals in the euro area as a whole, accounting for a share of 59% in overall POS payments (chart 20, left-hand panel). Following a pandemic-related decline in 2021, the share of cash transactions at POS terminals in Austria rose from 66% to 70% in 2022 (chart 20, right-hand panel).

Accounting for 46% of the overall value of POS payments in the euro area, however, card payments surpassed cash payments (42%) for the first time in 2022. Still, cash payments outnumber card payments (59% vs. 34%; chart 20, left-hand panel).

The share of online payments almost tripled from 6% in 2019 to 17% in 2022. The highest shares of online payments were reported in Belgium (24%), Austria and Ireland (both 21%). Online payments were mainly used to buy food and daily necessities from supermarkets and restaurants.

In contrast with the global trend toward card payments or other forms of cashless payments, people’s preference for cash payments has increased by 3 percentage points in Austria since 2019. In terms of cash affinity, Austria thus continues to hold a top position in the euro area. 45% of Austrian consumers prefer to pay in cash, 36% prefer card payments or other cashless payments, and 19% said they had no clear preference (chart 21).

Austrian consumers attach great value to having the option of paying in cash. Compared with the other euro area countries, Austria takes the lead here, too: 43% of Austrian respondents said being able to pay in cash is very important for them, and 23% said it was rather important. So in this ranking, Austria is 6 percentage points above the euro area average.

Overall, the present ECB study shows that by international standards people in Austria give exceptionally high priority to cash payments.

Chart 21, Euro area comparison 2022: cash remains preferred means of payment in Austria, is a column chart showing what payment instruments people in the 19 euro area countries preferred in 2022. Figures are given in percent of respondents. From left to right, the horizontal axis shows the 19 euro area countries (one bar per country), including the average over all 19 euro area countries. Ranked in descending order as regards their cash affinity, these are: Austria, Germany, Ireland, Slovenia, Malta, Lithuania, Greece, Spain, Cyprus, the euro area as a whole, Slovakia, Estonia, Belgium, Latvia, Italy, Portugal, France, the Netherlands, Luxembourg and Finland. 45% of Austrian consumers preferred paying in cash, 36% preferred cards or other cashless payment instruments, and 19% said they had no clear preference. In the euro area as a whole, an average of 22% respondents preferred cash payments, 55% preferred card or other cashless payments, and 23% did not have a clear preference. Source: Oesterreichische Nationalbank and European Central Bank (SPACE, 2022).

Cash remains forward-looking and ­future-proof

The OeNB supports the notion that cash is a smart payment option and that this option needs to be retained. This will ensure that people in Austria can continue to freely choose their preferred means of payment and benefit from the advantages that result from the competition between cash payments and cashless payment. Currently, we have excellent framework conditions in Austria as ATM accessibility is good and cash withdrawals from most ATMs are not subject to transaction fees. We must therefore strive to maintain these conditions.

When bearing in mind economies of scale, however, it is only possible to guarantee the comprehensive and efficient supply of cash if cash continues to be widely used and accepted. In view of the current global crises, issues like resilience and cash supply have come more and more into focus. To be able to identify future cash-related challenges in good time and to take the necessary action, the OeNB engages in an active dialogue with all stakeholders in the cash cycle.

The OeNB establishes a euro cash ­platform

As a central bank, the OeNB advocates the continued availability of euro cash of the highest quality. In doing so, we fulfill our legal mandate to ensure cash supply. By establishing the euro cash platform in September 2022, we took further steps along this path. Together with representatives of the general public and the business community, we seek to actively address upcoming changes in the field of payment instruments in Austria in the interest of all stakeholders. Moreover, we seek to strengthen and ensure the position of euro cash as a public means of payment, and thus as the only means of payment that is not intended to generate a profit, in an increasingly digital society and to further strengthen public awareness of these ­issues.

In a related effort, the OeNB supports Münze Österreich AG’s information campaign “Bares ist Wahres” that demonstrates the multiple advantages and unique features of euro cash and shows why euro cash is indispensable. Paying with euro banknotes and coins does not require people’s personal data to be shared and thus ensures privacy; moreover, cash payments are direct payments, requiring no intermediary, and they do not involve transaction fees; and last but not least, euro cash is also available in crisis situations. All of these benefits make cash popular with consumers. The popularity of cash in Austria is also confirmed by the results of the above OeNB Barometer survey and the high number of signatures – around half a million – of a petition for a referendum on unrestricted cash payments in September 2022.

The Eurosystem progresses toward a digital euro

Digital euro

Anyone who pays in cash actually pays with central bank money. With a digital euro, the Eurosystem would provide households with a form of central bank money that can be used quickly, easily and safely in addition to euro cash.

Given the increasing demand for secure and ­reliable electronic means of payment, the Eurosystem is considering issuing central bank money also in digital form. A digital euro would be issued, protected and regulated by the ECB, just like euro cash, and would thus be equally trustworthy. It would be an alternative, future-­proof way of making person-to-person (P2P) payments and consumer-to-business (C2B) payments, both at the point of sale and online, and of making transfers to public institutions. Moreover, a digital euro would strengthen the euro area’s monetary sovereignty and foster competition and ­efficiency in the European payments market.

The current two-year investigation phase regarding the roll-out of a digital euro, which is scheduled to end in October 2023, serves to establish what it would take to implement a digital euro. Specifically, there is a need to develop the design specifications, select functions that meet user requirements and agree on the division of responsibilities between the Eurosystem and the supervised financial intermediaries. Together with the ECB and other Eurosystem central banks, the OeNB actively contributes to developing a corresponding payment scheme and distribution model as well as prototypes and to collecting information on customer ­requirements.

Solutions for both online and offline payments will be developed. Offline payments will be settled directly via the payers’ and the payees’ devices, i.e. without any third-party intermediaries that verify the payment and settle it in the background. As offline payments do not necessarily require network connectivity, they make overall payments more resilient to external factors such as blackouts or natural disasters.

Ensuring the highest possible level of privacy for both online and offline payments is a key requirement. Central banks would only ­receive the information required to fulfill their tasks and should not be able to trace end users’ payment patterns. Tiered remuneration combined with quantitative restrictions would ensure that the digital euro would primarily be used as a means of payment and not as a form of investment.

Private payment service providers would, in line with the Austrian Payment Services Act, perform the tasks required at the customer interface level, such as opening and closing accounts, transferring digital euro amounts from bank accounts to users’ devices or vice versa, adding cash to digital accounts or cashing out digital amounts, and executing or reversing payments. The Eurosystem would verify and record payments. As amounts held in digital euro would be Eurosystem liabilities, the Eurosystem should be able to monitor digital euro issuance, holdings and redemptions.

To ensure i.a. that the digital euro would be widely available and broadly accepted already on the potential date of its introduction, the European Commission would have to initiate amendments to some legal frameworks. Classifying the digital euro as legal tender would be essential, for instance.

EU-wide electronic identification is just around the corner

Everyday life is swiftly going digital, making electronic identification (eID) a must-have. This, in turn, calls for an appropriate platform technology so that eIDs can be used for a wide range of services, from e-government to electronic health records and e-wallets with payment functions. Consequently, electronic identification is a key element in the European Union’s and the Eurosystem’s strategies for ­European retail payments.

So far, only some member states have implemented the EU-wide recognition of national eIDs, which means that only 14% of public services are currently covered. For this reason, the European Commission has initiated a revision of the relevant regulation (eIDAS 2.0) to update and improve the corresponding framework. The revised regulation is scheduled to be adopted in the course of 2023. The European digital identity wallet, a mobile application that ensures electronic identification in line with ­eIDAS 2.0, is expected to be available from 2024. Meanwhile, the European Commission has invited tenders from public and private enterprises for pilot projects testing the eID wallet.

Together with a consortium of participants from 19 EU member states and Ukraine and in collaboration with the Austrian Federal Ministry of Finance, the OeNB and the OeNPAY Financial Innovation HUB GmbH will contribute to one of the pilot projects that were approved in December 2022. In addition to dealing with the typical case of opening a bank account, the consortium will i.a. examine issues like the electronic driving license, the retrieval of social security data and digital signatures. The project is scheduled to run for up to two years; content work is expected to start during the second quarter of 2023.

We help small change donations go digital

In the age of digital payments, it should also be possible to make and receive digital donations quickly, safely and easily. With this in mind, and as part of the OeNB’s competition “Social Digital Challenge,” the OeNB and the OeNPAY organized a hackathon on November 16 and 17, 2022, in cooperation with Caritas Austria, Blue Code International AG and World-­Direct eBusiness solutions GmbH. Working in interdisciplinary teams, 16 students from different fields of study at upper secondary technical schools and universities had two days to develop a prototype enabling the receipt of digital donations.

The winning team was awarded EUR 1,000 and one OeNB internship per team member; they impressed the jury with a proposal to design personalized donation badges, basically a smart card using NFC technology or a QR code. Charitable organizations could hand out such donation badges to people in need. Donators would scan the QR code (or activate the NFC chip) to access a donations app to choose the amount they wished to donate and their bank and would then be redirected automatically to their internet banking app. Alternatively, the chip could be linked to other payment methods, e.g. payment by card or bluecode. Donees would be registered so that each NFC chip or QR code would be clearly assigned to an individual. This would ensure that donations remained available to the donee even if they lost their NFC chip or QR code. Potential partners such as post offices, pharmacies, social cafés, tobacconists, sausage stands or service stations were considered to act as payment agencies.

The OeNB’s subsidiaries always keep pace with the times

In performing its core tasks in cash production, cash supply and cash logistics, the OeNB is supported by three subsidiaries and their staff: Münze Österreich AG, the Oesterreichische Banknoten- und Sicherheitsdruck GmbH (OeBS) and GELDSERVICE AUSTRIA (GSA). The subsidiaries carry out their tasks as separate business entities, guided by the principles of quality, ­security, sustainability and cost effectiveness.

For the OeNB and its subsidiaries, a strong focus on protecting the environment and ensuring sustainable business development is indispensable for future-oriented and successful corporate governance. With this in mind, related measures are combined in the environmental management system under ISO 14001:2015, and quality certifications are carried out according to the ISO 9001:2015 standard. In addition, processes and procedures in place at the individual subsidiaries and across the group are ­optimized continuously to improve eco-efficiency.

Within European monetary union, Münze Österreich AG is the official mint of the Republic of Austria. Its exclusive right to mint and issue coins in Austria is laid down in the Coinage Act. In 2022, Münze Österreich AG supplied the OeNB with 146.9 million euro coins with a face value of EUR 39.3 million. Moreover, Münze Österreich AG continually develops new and innovative product lines, e.g. various coin series and gold investment products, to meet customers’ rising demand for precious metals. Münze Österreich AG has successfully maintained its global position as a reliable producer also in times of crisis.

The OeBS conducts research and development activities and produces banknotes for the Eurosystem and for international customers. On behalf of the OeNB, the OeBS produces the share of the annual euro banknote production volume allocated to Austria on the basis of the ECB’s capital key. In 2022, the OeBS produced roughly 98 million EUR 10 banknotes. As a cooperation partner, the OeBS continues to produce euro banknotes for the Belgian ­central bank to increase efficiency within the Eurosystem. Banknote production at the OeBS also helps the OeNB meet the logistical requirements resulting from Austria’s strategic position as a cash supply hub in Central Europe. The OeBS continues to develop and expand its role as a competence center for securities printing and detectors by relying on innovation, sustainability and in-house technical developments.

The GSA provides cash logistics and cash processing services to the OeNB, banks, payment service providers and trading companies. The GSA’s regional cash centers in Vienna, Graz, Linz, Salzburg, Innsbruck, Klagenfurt and Bregenz support the OeNB in its task of supplying euro cash all over Austria; in doing so, they contribute to ensuring the high quality of cash in circulation.

Another OeNB subsidiary, the OeNPAY Financial Innovation HUB GmbH, has been in business since 2021. It runs a competency network that supports efforts to implement digital payments across Austria and promotes financial innovations in cooperation with all stakeholders in payment services. Its objective is to ensure easy, stable and safe payments for all. To this end, the OeNPAY aims to identify, prepare and use relevant new developments, taking into ­account mega and technology trends by means of trend scouting. Being a wholly-owned subsidiary of the OeNB, the OeNPAY has taken care to adopt a neutral market position.

The real estate investment group IG-Immobilien Gruppe is tasked with optimally managing the OeNB’s real estate investments. It is, inter alia, responsible for preserving and sustainably improving the value of OeNB real estate holdings and for optimizing current earnings on our individual properties. The premises management group BLM Betriebs-Liegenschafts-Management GmbH is in charge, in particular, of providing the premises the OeNB or its subsidiaries require to carry out their business activities.

On their websites, the OeNB’s subsidiaries publish annual reports in accordance with the Public Corporate Governance Code initially adopted by the Austrian federal government on October 30, 2012. Table 12 provides a comprehensive list of the OeNB’s direct and indirect equity interests.

21 Tamele, B., A. Zamora-Pérez, C. Litardi, J. Howes, E. Steinmann and D. Todt. 2021. Catch me (if you can): assessing the risk of SARS-CoV-2 transmission via euro cash . ECB Occasional Paper Series No 259.

Sustainability as a corporate strategy

Brightening the spotlight on sustainability

What sustainability means for the OeNB

At the OeNB, we keep an eye on how our ­activities impact on society and the environment – with a view to promoting sustainable development in Austria and beyond. According to the United Nations’ 1987 Brundtland Report , “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

In the financial sector, and when it comes to sustainability reporting more generally, ­sustainability tends to be broken down into ­environmental, social and governance (ESG) factors.

  • Environmental factors cover, for instance, ­climate protection, resource efficiency and the use of renewable energy sources. In this respect, the OeNB intends to reduce air and wastewater emissions as well as its ecological footprint (see the OeNB’s Environmental Statement 2022).
  • Social factors include creating fair working conditions, respecting human rights and ­investing in employees’ training, job security and health (see the section on human resources management).
  • Corporate governance measures are designed to prevent corruption or market distortion, e.g. through independent oversight bodies, and to incentivize sustainable behavior (see the sections on governance and risk management).

In the sustainability section of this year’s Annual Report, we cover strategy, risk management, governance as well as metrics and ­targets. This way, we take due account of the recommendations set forth in the “Guide on climate-­related disclosure for central banks” of the Network for Greening the Financial System (NGFS). These recommendations are broadly in line with the guidance provided by the ­Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). As part of a Eurosystem-wide initiative, the OeNB disclosed climate-related aspects of its nonmonetary policy portfolios in a dedicated report (see Climate-related financial disclosures by the Oesterreichische Nationalbank 2022 ).

Network for Greening the ­Financial System (NGFS)

A global network of central banks and supervisory ­authorities that advocates a more sustainable financial system. Its aims are to ­analyze the impact of climate change on the financial ­system and to redirect global financial flows to enable low-carbon economic growth. The OeNB has been a member of the NGFS since 2018.

Our sustainability strategy

The OeNB’s 2020–2025 strategy already ­reflects many elements of the Sustainable Development Goals (SDGs) issued by the United Nations. In 2023, we will continue (1) mapping the OeNB’s strategic objectives to selected SDGs and (2) improving quantification and ­reporting. The OeNB committed itself in 2021 to making its activities fully carbon ­neutral by 2040. At present, we cooperate closely with ­international bodies to develop metrics and instruments to achieve the respective targets.

How we deal with sustainability risks

To identify, assess and control all significant risks, the OeNB has established a comprehensive risk management system. As a logical consequence, we have now also integrated ESG risks into our risk processes, i.e. risks related to environmental, social and governance factors. ESG risks could affect the OeNB’s risk profile and turn into financial risks in the longer term. Their careful integration into our risk processes will also support us in achieving the strategic objectives of the OeNB (see the section on risk management).

Ensuring good governance

The OeNB’s governance is largely determined by the Federal Act on the Oesterreichische ­Nationalbank (Nationalbank Act), the Treaty on the Functioning of the European Union (TFEU) and the Statute of the ESCB and of the ECB. Within this framework and based on Austria’s Federal Public Corporate Governance Code, the OeNB has ­developed its own corporate governance code to reinforce its statutory independence. This code was last revised in 2018. Moreover, we publish annual corporate governance reports on our website. These ­reports and our governance code are in German only.

To ensure and strengthen good governance, the OeNB has set up a compliance management system (CMS) and a risk management system. The CMS reflects to a large extent ECB guidelines that lay down the principles of the ethics framework for the Euro­system and for the ­Single Supervisory Mechanism. Currently, our CMS is being adapted to changes stipulated by the ECB. Among other things, the CMS includes a preventive system with ­anti-corruption measures and an electronic whistleblowing ­system.

The OeNB moreover relies on an enterprise risk management system to capture and assess compliance and legal as well as financial and operational risks. In this respect, we put great emphasis on limiting risks. ESG risks, added explicitly to the risk catalogue in 2022 (see the section on risk management), are treated as a horizontal issue.

Hence, various functions are accountable for ESG topics and contribute to the work of both OeNB and international bodies. At the OeNB, we have organized sustainability management in three workstreams. First, a dedicated competence unit is in charge of coordinating OeNB-wide efforts toward achieving corporate sustainability objectives. Second, an environmental officer (together with an environmental coordinator and environmental controllers of the various divisions) is responsible for implementing the requirements of the EMAS Regulation as well as the measures outlined in the environmental program. Their remit also includes the compilation of environmental data (see the OeNB’s Environmental Statement 2022). Third, a green finance platform facilitates an in-depth, evidence-based exchange of ideas across all OeNB departments and with external stakeholders. Under its supervisory mandate, the OeNB has, moreover, set up an expert group on sustainable finance, whose members foster cross-pollination by combining policy work in international bodies with day-to-day banking supervision activities.

The OeNB plays an active role in several ­national and international fora:

  • We contribute to the Focal Group Green ­Finance, which the Ministry for Climate ­Action and the Ministry of Finance started to coorganize in 2019. This forum, which liaises with many representatives of the Austrian ­financial sector, discusses progress made and further action required to promote a sustainable financial market.
  • We are also involved in the advisory board of the Green Finance Alliance . The members of this national forum – banks and other financial sector companies – pursue the self-­imposed goal of making their portfolios ­climate neutral in a gradual and transparent fashion.
  • Apart from the ongoing cooperation in technical working groups of the ESCB, the OeNB has joined the Eurosystem Climate Change ­Forum, which was established in 2022. This forum serves as a vehicle for fostering information exchange and knowledge-sharing and for jointly advancing the Eurosystem’s climate agenda. We specifically contribute know-how from the OeNB’s longstanding environmental management, green finance platform and climate-related competence unit that was established in 2021.
  • Since 2018, the OeNB has been a member of the Network of Central Banks and Supervisors for Greening the Financial System , which was founded in 2017. Today, the network’s ­membership comprises 121 central banks and supervisory authorities. Representatives from all OeNB departments contribute to the work on climate-related and environmental risks in four workstreams dedicated to supervision, scenario design and analysis, monetary policy and net zero for central banks. A subgroup of the latter workstream, which focuses on greening central banks’ corporate operations, is cochaired by an OeNB representative. The numerous publications released by the NGFS provide valuable guidance.
  • In the field of supervision, the OeNB is represented in the EBA’s working group on sustainable finance and the SSM contact group for ­climate-related and environmental risks. Concrete supervisory measures have already been taken by SSM supervisors reviewing banks’ approaches to managing climate-related and environmental risks.
  • The OeNB also participates in the Vienna ­Initiative Working Group on Climate Change, which in 2022 organized several workshops on topics such as data provision or banking supervision and regulation for central, development and commercial banks that are active in the CESEE region.

Our organization is adapting to an ­ever-changing environment

The first half of 2022 continued to be dominated by the COVID-19 pandemic. Consequently, most of our staff continued to work remotely until the end of April 2022, with high-priority external events and business trips being resumed step by step and under strict safety precautions. As of May, when we invited our employees to return to the office, hybrid working became the new normal (see table 1). Looking back in a staff survey on the time that had passed since the beginning of the ­pandemic, we found that together we had successfully met the technical, organizational and communication challenges that had arisen when the OeNB had switched to working mostly from home in March 2020.

Table 1: Trends in Webex, Skype and MS Teams meetings at the OeNB  
Unit Q4 21 Q1 22 Q2 22 Q3 22 Q4 22
Webex meetings number 1,228 122 128 87 151
Participants number 5,645 4,996 4,294 1,795 3,900
Overall duration minutes 63,264 10,068 8,468 6,543 12,400
Skype meetings number 21,292 23,135 15,552 11,614 12,447
Participants number 83,005 87,557 56,820 39,864 43,597
Overall duration minutes 728,265 827,708 501,644 349,519 323,151
MS Teams meetings number 2,790 6,761 5,621 6,817 8,090
Particpants number 3,580 8,340 22,992 18,968 23,844
Source: OeNB.

One of the milestones in the year under ­review was completing the reorganization of our Economic Analysis and Research Department. The existing structures were replaced with flatter and more flexible hierarchies, with a view to creating agile teams and making the workplace more collaborative. Moreover, the Office of the Fiscal Advisory Council was ­expanded to comprise the Office of the Austrian Productivity Board, an expert body newly established in 2022 (see box 8).

The Austrian Productivity Board takes up its functions

The OeNB’s tasks go beyond implementing monetary policy and safeguarding financial stability. For example, it provides the secretariat for the Austrian Fiscal Advisory Council and the Austrian Productivity Board , two institutions that fulfill economic governance and coordination functions in the context of Economic and Monetary Union. Austria’s legislative authorities thereby benefit from the OeNB’s independent status within the economic policy framework, which ensures that the two bodies can carry out their tasks free from instructions and without direct political interference.

The Productivity Board took up its work in the second half of 2022. It consists of five members in an ­honorary capacity who are experts on productivity and competitiveness and for whom the Office of the Austrian Productivity Board provides scientific and operational support. The new office with its staff of four is part of the Office of the Fiscal Advisory Council and Productivity Board, an organizational unit in the OeNB’s Economic Analysis and Research Department. The Productivity Board is chaired by the President of the Fiscal Advisory Council.

The tasks of the Productivity Board include monitoring and analyzing, in an independent manner, developments with an impact on Austria’s productivity growth and competitiveness. The results of its analyses will be presented in annual reports. In line with the objectives of the European Green Deal, the Board’s work focuses on issues relating to Austria’s economic, environmental and social performance and on macroeconomic stability. In these areas, the Productivity Board may make recommendations to the federal government and is expected to contribute to the public debate. Other tasks comprise the active participation in scientific exchange and in subject-matter coordination with other European productivity boards and the European Commission. The Board’s 2022/23 annual report will be submitted to the Austrian Parliament by the Federal Minister of Labour and Economy at the end of the second quarter of 2023.

The OeNB monitors compliance with ­financial sanctions

In the wake of Russia’s war of aggression against Ukraine, the international sanctions against Russia have become the focus of attention. Pursuant to Article 8 paragraph 1 Sanctions Act 2010, the OeNB is responsible for the related supervision of credit, financial and payment institutions licensed in Austria. In line with this provision and according to Regulation (EU) No 269/2014 as amended, the supervised institutions reported to the OeNB that 249 bank accounts or custody accounts of sanctioned ­individuals (total funds: EUR 1.997 billion) were frozen as of December 31, 2022. In the year under review, the OeNB also expanded the range of related information on its website (in German). As in the past, the OeNB will continue to monitor compliance with the applicable sanctions provisions by credit, financial and payment institutions in the coming years. To best exploit synergies in supervising these institutions, we continue to advocate centralizing the supervision of compliance with anti-­money laundering and financial sanctions provisions. This would mean that the responsibility for supervising compliance with financial sanctions would pass from the OeNB to the Austrian Financial Market Authority. For the time being, we hired temporary staff to cope with the extra workload.

Our blackout contingency plan is in place

In the current situation, the risk of a prolonged, large-scale power failure is one of a number of realistic threat scenarios. As a provider of critical infrastructure, the OeNB takes great care to identify risks related to such scenarios early on and to take adequate precautions. Thus, ­following an assessment of the impact of a power blackout on the OeNB in early 2022, we put in place appropriate business continuity measures. In addition to helping maintain the ­necessary infrastructure, these measures apply specifically to the OeNB’s three core responsibilities of cash, payments and treasury management. In early 2023, we presented a blackout contingency plan and informed key staff on the required emergency procedures. Both the contingency plan and the related arrangements will be subject to regular tests.

We count on innovation as a driver of digital transformation

In 2022, our IT staff and experts from other business areas continued to collaborate in the OeNB’s Innovation Lab, exploring new areas such as digital currencies and digital solutions in regulation (RegTech) and supervision (Sup­Tech). The underlying goal of these endeavors is to build up know-how and make business processes more efficient (table 2).

In the area of digital central bank money, the OeNB, together with the other Eurosystem central banks, is actively involved in developing and designing the technical prototype of a ­digital euro (see section Eurosystem progresses toward a digital euro). In addition, we work with external partners to examine the various aspects of digital central bank money in wholesale transactions.

Moreover, a number of innovative projects explore the potential of automated text analysis, which is of relevance in particular for business areas analyzing large amounts of documents from external sources. By applying state-of-the-art machine learning methods, existing processes are to be semi-automated, which would alleviate the overall workload of the business areas concerned. Typical applications would be the automatic classification or keywording of documents or the merging of similar texts from several documents.

Table 2: Indicators of knowledge-based processes at the OeNB  
Unit 2019 2020 2021 2022
Process efficiency
Certified areas number 10 10 10 10
Entries in the OeNB’s terminology database number 23,308 23,748 24,178 24,329
Error-free payment transactions % 99.88 99.91 99.87 99.87
Staff suggestions for improvements number 41 19 581 842
Technical infrastructure
IT services for the ESCB/Eurosystem number 3 3 3 3
Major IT projects number 5 5 7 9
Source: OeNB.
1 22 suggestions for improvement + 36 ideas submitted in an in-house “climate challenge” competition.
2 55 suggestions for improvement + 29 ideas submitted in an in-house “climate challenge” competition.

Our human resources management ­reflects the new normal

As the central bank of the Republic of Austria, we are aware of our responsibility for Austria and Europe and of the key role our staff play in the fulfillment of our tasks. We therefore strive to create the best possible framework for our staff and the valuable work they do.

In 2022, as the pandemic began to ease, our organization returned to a new, and more ­modern, normal. The OeNB has learned from the swift changes in working conditions the pandemic brought about especially in the fields of IT infrastructure and virtual cooperation (table 1).

Taking into account recent trends in workplace flexibility, we established a new remote work framework, enabling our staff to choose a healthy mix of on-site and remote work. With the implementation of the new arrangement, the previous longer-term teleworking arrangements, which had been used by just under 13% (2019) of staff before the pandemic, were ­discontinued at end-2022.

Our staff also welcomed the opportunity to again participate in in-person training and team-building events and to catch up on training events missed during the pandemic, as ­evidenced by the corresponding knowledge ­acquisition indicators for 2022. The average number of training days per employee was significantly higher (4.7) than in the previous years and even exceeded the comparable pre-pandemic figure (2019: 3.9). Another positive trend is evident in human resources development: 2022 marked the first year in which we achieved an education and training participation rate of 100% (i.e. at least one training event per employee per year; table 5) following the roll-out of mandatory e-learning modules. Since the beginning of the pandemic, our Human Resources Division has gradually expanded the e-learning program – an initiative that has been very well received by our staff.

In the fall of 2022, our “workandfamily” ­audit team organized the first OeNB family fest after having had to postpone this initiative a number of times during the pandemic. At the event, children and family members of our staff had the opportunity to get to know the OeNB as a workplace and learn more about it in playful activities. The family fest stands out as a prominent example of our endeavors to reconcile work and family life – one of the OeNB’s top priorities.

Another focus in 2022 was preventive health care in general and cancer prevention in particular: Since 2022, the OeNB has been an official Pink Ribbon partner. Moreover, in cooperation with the “discovering hands” initiative, in 2022 we were able to offer our female staff the first-time opportunity to undergo ­tactile breast examinations as a complement to regular breast cancer screening. In addition, we organized melanoma screenings, prostate examinations and an information campaign aimed to increase participation in available health screenings in general. Moreover, we carried out a survey on psychosocial stress factors among our staff to identify any relevant stress factors at an early stage and be able to take countermeasures in good time. Last but not least, our company health center continued to offer COVID-19 vaccination throughout 2022.

discovering hands

A breast cancer screening initiative relying on the ­increased tactile perception of blind and visually impaired women.

All these measures and efforts are designed to make the OeNB more attractive as an ­employer and to offer our staff the best possible working environment.

So far, our strategy has been a success, as is evident from the relevant key indicators (­table 5): a continually low staff fluctuation rate (3.1%), the take-up of our enhanced flexible work arrangements (share of staff in part-time work arrangements: 21.8%; average days of remote work per employee: 100.6) and the opportunities for greater job mobility (29 ­in-house job rotations and 60 job rotations with national and international organizations).

Nevertheless, the indicators also show that there is still room for improvement in gender management, in particular as far as the share of women in expert career and management ­positions is concerned (table 3, table 5 and box 9).

Table 3: Share of women in OeNB expert career track and management positions by career levels  
2017 2018 2019 2020 2021 2022
Share of women in %
Management positions 29 28 28 26 28 29
Head of unit 32 28 26 23 27 28
Deputy head of division 30 33 33 32 29 29
Head of division 24 25 29 26 28 29
Director of department 22 22 22 22 30 30
Expert career track 33 38 36 35 37 35
Level 1 34 39 37 31 37 35
Level 2 31 36 39 40 42 38
Level 3 22 27 21 31 30 28
Level 4 75 78 60 70 43 43
Source: OeNB.
Note: As at December 31.

Our aim is to increase the share of women in both career tracks. With this in mind, the Governing Board adopted the OeNB’s second action plan for the advancement of women in March 2022. Containing 20 different measures to promote women and foster diversity, the ­action plan will be in force for the next six years pursuant to the Austrian Federal Equal Treatment Act.

In addition to continuing our related information campaigns, we took new initiatives, for instance by recommending the use of inclusive language, introducing an e-learning module for bias awareness training and establishing the OeNB Women’s Forum, a networking platform supporting knowledge and information sharing among our female staff.

Other new measures in 2022 included a workshop for managers on inclusive leadership and women’s promotion and an in-house management shadowing program called Women in Leadership that specifically targeted women. During this program, ten female staff members had the opportunity to job-shadow a manager for some time, thus gaining insights into everyday management tasks. Moreover, additional expert career positions were created specifically for staff members being on, or having ­returned from, parental leave. This specific measure is intended to compensate for any ­career disadvantages that might be caused by prolonged absences or part-time work. In the coming years, the OeNB will continue to ­implement the existing measures, evaluate them at regular intervals and adjust or expand them where necessary.

Equal pay for equal work amid structural income gaps

Increasing income transparency is one of many objectives of the OeNB’s current action plan for the advancement of women . A thorough analysis of the gender pay gap identified at the OeNB mainly reveals that the gap can be attributed to significant structural differences (table 5). It will take proactive measures to achieve a well-­balanced gender composition and income structure. This includes measures to align the take-up of part-time work arrangements by women and men and measures to increase the share of women in the workforce (at all management and professional levels).

The OeNB used to report highly aggregated gender pay gap figures for the central government’s annual income report (pursuant to Article 6a Federal Equal Treatment Act). These data have not been published, ­however. On the basis of disaggregated data for 2021, an in-house project now analyzed what forms of income inequality exist at the OeNB and how they can be explained. To this end, we considered the unadjusted gender pay gap, which is defined as the difference between women’s and men’s average annual salaries and is calculated on a full-time equivalent basis. 23 , 24 Broadly speaking, it is the percentage by which women earn less than men. Measured in terms of paid-out total salaries in 2021, the average gender pay gap at the OeNB was 17.4% (table 4). Looking only at paid-out basic salaries (meaning salaries excluding allowances, bonus payments, etc.), we see that the gap narrows to 12.5%. Both calculations do not take into account differences in the extent of employment, though. Factoring in part-time employees converted into full-time equivalents (FTEs), the OeNB’s unadjusted gender pay gap in 2021 was 8.2%. 25

Table 4: Gender pay gap at the OeNB has structural reasons  
Difference between women’s
and men’s salaries in % of
men’s salaries
Paid-out total salary –17.4
Paid-out basic salary –12.5
Annual salary, FTEs =
unadjusted gender pay gap
–8.2
Source: OeNB.
Note: In principle, the gender pay gap observed at the OeNB can be fully explained
by employees’ education levels, functions, seniority, applicable Conditions of
­Service, age, and the number of dependent children. Figures refer to 2021.
FTEs = full-time equivalents.

Structural imbalances thus explain a significant part of the gender pay gap recorded at the OeNB, with differences in the take-up of part-time work ­arrangements playing a major role. In our calculations, basic salaries and allowances were extrapolated to FTEs. This method neglects any possible ­financial ­disadvantage of part-time employees that exceeds the extent of employment reduction. Still, our analysis ­indicates that such a disadvantage does exist also at the OeNB, and for men and women alike. ­Interestingly, with regard to the average extent of part-time work (measured as a percentage of full-time ­employment), we find no big difference between women and men at the OeNB, with men under part-time contracts working 73% of full-time hours, on ­average, and women 69%. Obvious differences do exist, however, in the share of men and women that opt for part-time work in general. While only 11% of male OeNB employees work part time, 38% of female staff do. Part-time arrangements therefore have a particularly strong impact on the OeNB’s gender pay gap.

Employing regression analyses, the unadjusted gender pay gap can be broken down into a number of key explanatory factors that fully explain this gap in case of the OeNB: 26 education level, in-house function (management or expert career position), seniority or applicable Conditions of Service, age, number of dependent children. Another major factor appears to be the consideration of academic qualifications. All factors have the expected signs and are statistically significant. Income rises with age and seniority and is comparatively higher for staff with higher academic qualifications, higher management or expert career positions and for those that receive child allowances. Thus, the lower share of women in expert career positions (26% of women vs. 34% of men) is another structural factor that explains the current gender pay gap at the OeNB.

We strive for an inclusive corporate ­culture

In addition to supporting equal opportunities for women and men, we are committed to ­actively promoting diversity and inclusion as a key element of our corporate culture. In the ­reporting year, the OeNB continued to participate in the myAbility Talent program, which connects enterprises and highly qualified ­students with disabilities or chronic conditions. Under this program, students have a chance to experience everyday work life while enterprises can meet talented young people with a wide variety of potentials. So far, the OeNB has offered five myAbility Talent internships to ­university students (2022: one). We keep striving to promote the inclusion of people with ­disabilities by directly addressing this target group in specific job advertisements, for instance. Moreover, we seek to make the OeNB’s premises, workplace equipment and digital ­information services more easily accessible.

We take our social responsibility ­seriously

The OeNB’s development aid group, a registered association, has been run by dedicated ­active and retired employees since 1982. ­According to its bylaws, the group only accepts submissions for supporting humanitarian projects that are consonant with the UN Sustainable Development Goals. The group helps ­finance such projects by collecting membership fees and donations from the OeNB’s staff and Governing Board. In 2022, ten submitted projects for Africa and Asia were supported by ­generous donations collected either at charity events (e.g. “Swimming together” in cooperation with the OeNB’s sports and social club or a Christmas bazaar in cooperation with the OeNB’s cafeteria), through a fundraising initiative on International Literacy Day and new memberships.

Moreover, the OeNB staff council organized a donation campaign for Ukraine, to which our staff made generous contributions. The funds donated were made available to ­Caritas Austria, Volkshilfe Austria (Volkshilfe Solidarity) and Doctors Without Borders, ­charity organizations providing on-site assistance in Ukraine.

Table 5: Indicators of investment in knowledge-based capital at the OeNB  
Unit 2018 2019 2020 2021 2022
Staff structure
Full-time equivalent staff (year-end)1 number 1,079.3 1,069.6 1,097.5 1,133.2 1,129.3
aged up to 30 years % 9.2 7.1 7.3 8.7 8.9
aged 31 to 40 years % 28.6 29.4 28.9 28.1 26.6
aged 41 years or older % 62.2 63.5 63.8 63.2 64.6
Fluctuation rate % 2.8 2.6 2.1 1.7 3.1
Share of staff with academic qualification in total staff % 64.9 65.8 67.4 69.9 71.6
Staff-to-manager ratio number 7.0 7.1 7.6 7.7 8.0
Flexible working arrangements
Part-time arrangements % 16.0 18.3 18.6 20.8 21.8
Remote work (annual average per employee)2 days x x 131.9 157.4 100.6
Sabbaticals number 6 5 3 7 7
Gender management
Share of women in total staff % 38.8 39.3 39.6 39.7 40.3
Share of women in management positions % 27.9 28.8 26.3 27.9 28.7
Share of women in expert career positions % 37.9 36.2 35.2 36.9 34.7
Share of women in part-time jobs % x 72.9 72.7 70.9 71.2
Share of women in education and training participation rate % x x 41.0 39.2 39.5
Mobility
Participants in in-house job rotation program number 40 30 23 43 29
Working visits to national and international organizations
(external job rotation)
number 56 57 43 45 60
Working visits to the OeNB (incoming) number 32 31 5 2 12
Internships number 75 77 70 79 87
Knowledge acquisition
Education and training days (annual average per employee) days 4.1 3.9 1.7 3.2 4.7
Education and training participation rate (share of employees
who attended at least one training event per year)
% 82.2 82.2 61.9 63.4 86.3
Source: OeNB.
1 Figures include part-time employees on a pro rata basis.
2 Including long-term teleworking arrangements, which were discontinued at the end of 2022.
3 If mandatory e-learning modules are included, this rate is 100%.

23 Eurostat defines the unadjusted gender pay gap as the difference between the average gross hourly earnings of men and women expressed as a percentage of the average gross hourly earnings of men. According to Eurostat, the unadjusted gender pay gap in 2020, the year to which the latest available data refer, was 13% in the EU and 18.9% in Austria, with the widest gap (27.2%) of all having been ­recorded in Austria’s financial services sector.

24 This analysis is based on 2021 data for all OeNB employees (excluding staff on leave and staff seconded to other institutions or OeNB subsidiaries) and includes bonus payments for 2021 that were actually paid out in 2022.

25 As our calculations are performed on an FTE basis, this figure is comparable to the gender pay gap of 18.9% for Austria identified by Eurostat.

26 The estimation results of our ordinary least squares (OLS) regressions were confirmed by Blinder-Oaxaca decompositions.

Fostering knowledge transfer and dialogue with the public

OeNB events reflect COVID-19 ­pandemic and war in Ukraine

What the COVID-19 pandemic and the war in Ukraine meant for inflation, economic development and global value chains was among the key topics discussed at the OeNB’s recent economic events. Under the heading “ The return of inflation ,” the OeNB’s 49th Economics Conference in May 2022 examined the effects the pandemic and geopolitical tensions had on inflation as well as the resulting monetary policy challenges. We hosted the conference jointly with SUERF – The European Money and Finance Forum. In November 2022, our annual Conference on European Economic Integration (CEEI) on “ Economic and monetary policy ­under wartime conditions – implications for CESEE ” dealt with the impact of the war in Ukraine and in particular with its effects on Central, Eastern and Southeastern Europe (CESEE). As part of a series of annual lectures we organize in cooperation with The Vienna Institute for International Economic Studies ( wiiw ), the 27th Global Economy Lecture in early January 2023 focused on current trends in world trade and the global economy. Our speaker Sergei Guriev, professor of economics at Sciences Po in Paris, discussed “ The political economy of Putin’s war in Ukraine .” Our monthly Friday Seminars and the East Jour Fixe series addressed other topical issues such as climate change, digital means of payment and e-motion trends. As our events generally take place in a hybrid format now, speakers and audience alike can participate on site or online. This format has helped us meet changing pandemic-related safety requirements, reduce the carbon footprint of our events and make them accessible to remote audiences.

In addition to our conferences and other live events, our regular publications also serve to disseminate our analytical work and findings. Many articles in the OeNB’s semiannual Financial Stability Report and the quarterly ­ Focus on European Economic Integration , which concentrates on CESEE, dealt with topics ­related to the pandemic and the war in Ukraine. Moreover, special issues of our quarterly Monetary Policy & the Economy covered various ­aspects of 20 years of euro cash in Austria and provided in-depth inflation analyses.

The OeNB is making headway in the ­social media

One of the priorities in our communication with the general public in 2022 was the 20th anniversary of the introduction of euro banknotes and coins, which featured prominently on all our communication channels (#EUROat20). To reach as many people as possible, we took great care to present information in a short, concise format. We also used our social media channels to explain the tasks the OeNB fulfills as a central bank. In parallel to our #EUROat20 campaign, we launched the OeNB’s Facebook account in May 2022. Thanks to our social media presence, we manage to reach an ever-growing audience. On Instagram, the number of our followers has doubled to almost 9,000. Recording growth rates of around 40%, the OeNB’s LinkedIn channel now has more than 10,300 followers. On LinkedIn, we mainly provide information on issues related to financial markets, euro cash and financial education, while we mostly use Twitter to promote upcoming OeNB events and studies. Last but not least, the OeNB podcast series has been a real success: Launched some two years ago, it now has twice as many listeners as in the beginning.

The OeNB celebrates 20 years of euro cash with a series of #EUROat20 activities

Logo Euro at 20

The ECB and the other Eurosystem central banks launched a wide range of ­initiatives in 2022 to mark the 20th anniversary of the euro cash changeover. The OeNB played a very active role, celebrating the anniversary with:

  • a kickoff event on January 19, 2022: Our #EUROat20 campaign was kicked off with a joint press meeting of the OeNB’s Governing Board and Austrian Federal Minister of Finance Magnus Brunner. On this occasion, we provided press releases, a press kit and a dedicated Flickr account as well as historical images and footage.
  • a euro-themed illumination: From January to April 2022, a special LED light installation illuminated the facade of the OeNB’s main building in Vienna with images of euro banknotes and coins.
  • the web portal www.euroat20.at : By the end of December 2022, our dedicated web portal for all ­#EUROat20 activities had registered almost 10,000 visits. The portal provided data, facts and figures on the euro and also featured an interactive #EUROat20 quiz for visitors to test their knowledge of the common currency. Moreover, a raffle was held among quiz participants for a visit to the OeNB, including a tour of the gold vault.
  • the “Let’s talk about the euro” town hall forum: One of the OeNB’s outreach activities during the #EUROat20 campaign was a series of discussions called “Let’s talk about the euro” (Red ma übern Euro) that took members of the OeNB’s Governing Board to several of Austria’s provincial capitals to talk about the euro with local residents. The series benefited from support by major Austrian dailies.
  • a mass media campaign: To raise public awareness of the euro and euro cash, we launched specific radio, print and online media advertisement and information campaigns.
  • social media activities: On our social media channels, we posted facts about the euro and shared memories of the cash changeover in personal posts and throwback posts. Moreover, we promoted our anniversary ­activities by using the hashtags #EUROat20, #EUROmeinBargeld (my cash), #EUROmeineWährung (my currency) and #EUROmeineZukunft (my future).
  • publications, videos and podcasts: In addition, we issued a short documentary on the history of euro cash (“ Die Geschichte des Euro-Bargelds ,” in German), special podcast episodes, contributions on current issues in the “Thema im Fokus” section on our German website, an anniversary edition of our German folder “ Fakten zum Euro ” (Facts on the euro) and a special edition of our quarterly publication Monetary Policy & the Economy on “20 years of euro cash in Austria.”
  • the special exhibition “€URO CASH – 20 years of euro banknotes and coins”: Highlighting the story behind the introduction of euro cash, this special exhibition at the OeNB’s Money Museum will be open until June 30, 2023.
  • EUgen and ROsi: Touring almost all Austrian provinces, our two life-sized euro mascots were handing out giveaways as part of our #EUROat20 campaign. The mascots’ names “EUgen” and “ROsi” – alternative spellings of a male and a female German first name, respectively – had been selected from more than 200 entries in a public naming competition.
  • in-house activities: To mark the special occasion, we set up a “euro corner” at the OeNB’s main building and dedicated a section on the intranet to interviews and special features. Moreover, we organized in-house competitions and special activities, and all members of staff were presented with a “euro starter kit 2.0” containing a set of proof-quality euro coins minted in 2022.

The chapter dividers in this report show #EUROat20 highlights from the euro’s anniversary year.

Confidence in the OeNB is on the rise again

The challenging economic and political environment is mirrored in the indicators showing the amount of trust people place in Austrian institutions, and in the OeNB in particular. In the second half of 2022, 74% of respondents said they trusted the OeNB – a year-on-year rise by 9 percentage points that brought this figure almost back to pre-pandemic levels ­(table 6). General confidence levels had declined temporarily, which was partly attributable to method effects caused by social distancing during the pandemic. People’s confidence in domestic banks (73%) and in the ECB (45%) improved as well, by 12 percentage points and 3 percentage points, respectively. Confidence in the OeNB’s fulfilling its core tasks also went up. 77% of respondents are confident that the OeNB ensures the provision of cash (up 13 percentage points), 62% trust the OeNB to effectively oversee payment systems (up 10 percentage points) and 53% are confident that the OeNB delivers on its mandate of monitoring and supervising banks (up 13 percentage points). Between May and November 2022, the “Let’s talk about the euro” town halls (box 10) brought top OeNB managers to several provincial capitals for talks with local residents in an effort to further support confidence building.

All in all, our #EUROat20 activities have been a success. To reach out to different target groups, we employed a mix of communication strategies to disseminate information, offering, for instance, both in-person dialogue and virtual interactive content. In a number of Euro­system working groups, the OeNB’s comprehensive #EUROat20 activities served as a benchmark. We found that seeking direct contact with the population and having conversations with people throughout Austria really helped build confidence in the OeNB as an ­institution. With the newly established euro cash platform (see section Secure and efficient payments as a cornerstone of economic activity), the OeNB aims to strengthen its confidence-­building efforts by taking continuous measures to raise people’s awareness of the importance of euro cash.

Financial education benefits from broad-based cooperation

For many years, the OeNB has been particularly concerned with strengthening financial literacy in Austria, providing financial education and helping people understand how the economy works. In these efforts, cooperation is a must-have. This is why, in 2022, we sought to strengthen existing cooperations, find new partners and make progress in other areas as well. For instance, the OeNB contributes to implementing Austria’s National Financial Literacy Strategy, serving on both the Executive Board and the Steering Board of the Financial Literacy Stakeholder Council and co-chairing the Scientific Committee. In addition, we help establish a central online financial education portal in Austria, and we specifically target women.

The OeNB cooperates with universities and promotes financial education at schools and kindergartens

In 2022, the OeNB concluded cooperation agreements with the University of Vienna and the University College of Teacher Education Burgenland (PPH Burgenland). Under these agreements, students from the two universities have the opportunity to acquire teaching practice while earning full credits for their master’s courses. Also, in the year under review, we contributed to teachers’ initial training and professional development by offering more seminars across Austria, for instance by providing advanced training sessions for teachers in cooperation with Stiftung Wirtschaftsbildung, a national foundation for economic education.

Moreover, the OeNB cooperates with the province of Lower Austria and the Austrian Federal Ministry of Social Affairs, Health, Care and Consumer Protection to promote financial and consumer education also at the kindergarten level. With a view to launching a pilot project with kindergartens in Lower Austria in September 2023, we are currently developing teaching materials on “saving, buying and selling” together with the Ministry. In addition, the OeNB will give scientific support at the ­pilot stage and evaluate how the newly created teaching materials are put to use at the participating kindergartens.

Another priority in 2022 was the evaluation of a school pilot project involving 30 schools that tested how, and to what effect, economic education could be more firmly anchored in lower secondary education. In a scientific cooperation with the Institute for Advanced Studies, we finalized the corresponding survey design and carried out qualitative and quantitative surveys. Also, we offered regular training courses for teachers participating in the pilot project.

The OeNB hosted an OECD/INFE ­conference in October 2022

In the reporting year, we hosted the semiannual working group meeting of the OECD’s International Network on Financial Education (INFE) and a hybrid symposium on “Financial literacy and financial resilience in challenging times.” More than 200 international experts from just under 50 countries attended and shared their views on recent developments in areas such as inflation, green finance and digital transformation in financial education.

News from the OeNB’s Money Museum and Bank History Archives

After two years of pandemic-related restrictions, the OeNB’s Money Museum saw a marked rise in visitor numbers from March 2022 onward. At 1,582 visitors, figures peaked during the Austrian Broadcasting Corporation’s Museum Night. In July, we opened the special exhibition “€URO CASH – 20 years of euro banknotes and coins,” which, among other attractions, offered a selfie station where visitors could have their portrait depicted on a virtual EUR 2 coin. Moreover, the Money Museum went digital in 2022, presenting around 240 items from its collection and 16 virtual tours of specific areas of the permanent exhibition (see the digital Money Museum , in German). In mid-October 2022, the OeNB made its Bank History Archives accessible online. The online archives can be searched for source material ­relating to monetary policy, the history of money, architecture and former work environments and may also be used for genealogical research.

Technical central bank cooperation in the aftermath of the pandemic

Joint Vienna Institute resumes face-to-face teaching

While in the first half of 2022, the Joint Vienna Institute (JVI) continued to hold its courses ­online in view of the pandemic, face-to-face teaching was resumed from June and was very well received by the target audience. Participants said they particularly appreciated the ­opportunity to learn from one another, build networks and share their expertise and best practice. The war in Ukraine, however, created major challenges for the JVI. Participants from Russia and Belarus have been temporarily ­excluded from participating in JVI courses; participants from Ukraine, on the other hand, have found it next to impossible to travel to Austria under the circumstances. In addition, it has become increasingly difficult for course participants from Central Asia to obtain the necessary visas.

Joint Vienna Institute (JVI)

The JVI offers training to central bank experts and public sector officials on a broad range of topics with a focus on economic, fiscal, monetary and financial market policy. Most course participants come from the CESEE and Caucasus regions and from Central Asia. The Austrian Federal Ministry of Finance, the IMF and the OeNB are jointly responsible for financing and managing the JVI. Since its foundation in 1992, the JVI has trained a total of 50,294 course participants.

During the period under review, a total of 103 weeks of training courses were held for 1,552 course participants, with a fairly balanced presence of women and men. Attendance is still below pre-pandemic levels (table 6) as group sizes are now smaller and the war in Ukraine and/or pandemic-related requirements render participation difficult for some candidates. In 2022, the OeNB offered seven weeks of training in the following subject areas: supervision and financial stability, statistics, European integration, human resources, financial education, climate change and green finance, and financial translation and terminology skills.

During the pandemic, the JVI developed a successful webinar series, not least with input from OeNB experts. The 16 webinars held in 2022 reached a total of 1,451 participants.

Launch of a new regional program for EU candidates and potential candidates in the Western Balkans

The OeNB is a member of the ESCB Working Group on Central Bank Cooperation, which, among other things, coordinates large-scale EU-funded programs that support non-EU ­central banks in bringing their practices in line with EU standards. In 2022, a new regional program for the EU candidates and potential candidates in the Western Balkans was launched. Coordinated by the Deutsche Bundes­bank, the program, which is scheduled to run for 36 months, involves the ECB and 20 ESCB national central banks, including the OeNB. The European Commission has allocated EUR 3 million from its Instrument for Pre-Accession Assistance (IPA III) to support the implementation of the program.

Table 6: Indicators of the OeNB’s knowledge-based output  
Unit 2019 2020 2021 2022
Cooperation and networks
National bodies with OeNB representatives number 85 79 75 78
International and European bodies with OeNB representatives (ESCB, etc.) number 323 331 345 332
Technical assistance activities with central banks in CESEE,
the Caucasus and Central Asia
days 4941 345 376 467
Joint Vienna Institute (JVI) course participants number 2,410 756 1,578 1,552
OeNB-hosted national and international events days 200 43 120 177
Lectures delivered by OeNB staff to external audiences number 879 474 659 803
of which: related to ESG (sustainability) number x x x 57
Communication and information
Queries to OeNB hotlines number 11,432 9,756 7,337 9,171
Research cooperation projects with external partners number 150 126 106 97
of which: related to ESG (sustainability) number x x x 24
Money Museum visitors number 11,019 2,790 2,995 9,372
Cash training course participants (including Euro Shop Tour) number 16,939 3,354 1,562 5,355
Children and teachers reached through school outreach activities number 27,914 12,172 9,850 20,239
Seminars for teachers number 25 27 51 58
Press conferences number 20 9 8 12
Press releases number 114 114 101 111
Publications
Articles published by OeNB staff number 79 72 98 69
of which: related to ESG (sustainability) number x x x 5
refereed articles number 36 27 32 31
of which: related to ESG (sustainability) number x x x 1
Confidence and image
Confidence ratio in the second half of the year % 76 76 652 74
Image index in the second half of the year
(values between 5.5 and 10.0 signal a positive image)
index value 7.2 6.9 6.52 6.7
Source: OeNB.
1 Corrected figure.
2 Break in the time series owing to a pandemic-induced change in survey methodology to a CATI/CAWI mixed mode.

The OeNB promotes science, business development, the arts and culture in Austria

Granting funds earmarked for scientific economic research

The strategic focus of the OeNB Anniversary Fund for the Promotion of Scientific Research and Teaching is to ensure a level playing field for basic research projects on central bank topics. Through our funding, we help make economic research in Austria more competitive and more attractive.

Guided by these strategic considerations, the OeNB’s Governing Board in 2022 approved funding for 32 research projects totaling around EUR 6.5 million. With five awarded projects, the University of Graz was the primary institutional beneficiary (EUR 998,000), followed by Johannes Kepler University Linz with four awarded projects (EUR 901,000).

Supporting independent economic ­research in Austria

Independent, high-quality empirical economic research generates valuable input for public policymaking and keeps the public informed by analyzing economic policy measures. In fact, the wide range of economic challenges we face today underscores the relevance of economic research as a major public good. At the OeNB, we acknowledge this notion and, by providing financial support, make an essential contribution to keeping economic research independent of politics and industry.

Accordingly, in the fall of 2021, we thoroughly redesigned our core funding program for Austrian economic research institutions. From January 2022, we invited funding applications under the OeNB’s new funding program for the period from 2022 to 2024.

The awarding process featured a multi-stage selection procedure that benefited from major inputs from two international external experts. Funding applications were assessed against a set of clear-cut criteria.

For the first funding period under the new program, the OeNB awarded four institutions with the following subsidy amounts (to be paid in three installments from 2022 to 2024): (1) the Austrian Institute of Economic Research (EUR 5,925,000 in total), (2) the Institute for Advanced Studies (EUR 4,100,000 in total), (3) The Vienna Institute for International Economic Studies (EUR 1,995,000 in total), and (4) the Complexity Science Hub Vienna (EUR 795,000 in total).

Supporting business development in Austria

Today, the funds allocated to Austria under the European Recovery Program (ERP), commonly known as the Marshall Plan, serve to finance low-interest rate loans with a view to strengthening Austria as a business location. The OeNB has been instrumental in implementing the Marshall Plan from the very beginning and to this day continues to administer the ERP central bank assets. Most recently, the OeNB was managing 564 ERP loans granted in the industrial, trade and services sectors, with outstanding volumes totaling EUR 764 million.

Promoting the arts and culture

The OeNB is proud of its commitment to promoting the arts and culture. By purchasing ­major artworks – including, in 2022, two paintings from the 1920s by Werner Berg and Herbert Ploberger – we contribute to keeping Austrian cultural assets in the country. Moreover, we particularly focus on supporting young Austrian artists by acquiring their works for our art collection. In 2022, important works from our collection were on loan to a number of Austrian museums, such as the Albertina Museum, the Leopold Museum, mumok and Schönbrunn Palace in Vienna, the State Gallery of Lower Austria in Krems, the Neue Galerie Graz, the Nordico City Museum in Linz and Bruck Castle in Lienz. Apart from that, works from the OeNB’s collection were also on loan to exhibitions in Paris and Berlin.

With our collection of historical string ­instruments, we aim at contributing to Austria’s international reputation as a land of music. The OeNB’s collection currently numbers 45 instruments, all of which were crafted by the most renowned violinmakers of the Italian and French schools. We traditionally loan the instruments to selected musicians free of charge. This partnership makes it possible to preserve this unique cultural heritage and the precious ­instruments’ distinct sound for future generations. As part of our long-standing cooperation with the Austrian radio station Ö1, instruments from the OeNB’s collection again featured in concerts held in Vienna, Graz, Linz and Innsbruck in 2022. During the concert in Vienna, the winner of a composition contest jointly organized by Ö1 and the OeNB, Tanja Elisa Glinsner, premiered her work entitled “Die Geburt des Chrysomeles” (The Birth of Chrysomallos).

You may learn more about the OeNB’s collection of historical string instruments on the OeNB’s website .

Enterprise risk management adapts to dynamic ­environment

In the OeNB’s strategy for 2020 to 2025, the implementation of an enterprise risk management (ERM) framework was defined as one of the OeNB’s strategic objectives. The OeNB ­already has a number of different risk management systems in place that serve to reduce risks associated e.g. with investment, equity holdings, IT systems or compliance as well as risks arising from specific projects. These systems are now gradually being harmonized. Further progress was made in 2022 following the launch of the project in 2020 and the adoption of ­specific ERM business area regulations defining harmonized minimum requirements for risk management in 2021. In 2022, we managed to combine the existing reports dedicated to the individual risk management systems into a ­single integrated risk report. Moreover, we put a brighter spotlight on ESG risks, i.e. environmental, social and governance risks (see section Integrating ESG risks into our risk management). Rather than identifying ESG risks as yet another type of risk, we have agreed to analyze ESG risks as a driver of the range of risk categories we monitor already, in line with a newly developed internal definition of ESG risks that we consider to best reflect the OeNB’s circumstances. It remains up to the individual business areas to address any action points that may be identified in this process.

Financial risk

The financial risk categories relevant to the OeNB are market, credit and market liquidity risk. Adding a layer of observation, we now pay greater attention to ESG risks, since we are aware of the fact that such risks – especially ­climate-related ESG risks – can lead to ­increased financial risks over a longer period of time (see section Integrating ESG risks into our risk management). In managing financial risks, we follow a top-down approach. The OeNB’s Governing Board sets out risk management principles and adopts an annual Risk Appetite Statement for the OeNB’s investment portfolio. At the next level, Asset Liability Coordination meetings and Risk Committee meetings serve to manage and monitor financial risks based on the framework requirements thus defined. At the next lower level, the OeNB’s Treasury ­Department operates subject to the ­risk-limiting rules and regulations that the Governing Board adopts acting on proposals from the Risk Committee. The Risk Committee monitors continuous compliance with these rules and ­requirements based on specific risk measurement systems and methods. The Risk Committee likewise defines the methods to be used to quantify risks. Investment in new currencies and financial instruments must be authorized by the Governing Board upon in-depth analysis.

Risk Appetite Statement

The articulation in written form of the aggregate level and types of risk the OeNB is willing to accept in order to achieve its business objectives.

Market risk

Market risk is the risk of exposure arising from changes in financial market prices, as driven in particular by exchange rate, stock price and ­interest rate changes. To limit market risk for OeNB investments, the OeNB’s Governing Board lays down rules that must be observed in market risk management. Market risk is primarily measured in terms of the expected shortfall. Calculations are consistently based on a one-year horizon and a confidence interval of 99%. The actual risk exposure depends on the amount of assets invested, including gold, and holdings of Special Drawing Rights (SDRs) as well as on the amount of own funds and ­earmarked funds invested. The OeNB also ­calculates the risk involved in real estate holdings, using a real estate index based on value at risk (VaR) calculations with a one-year horizon and a confidence interval of 99%.

Credit risk

Credit risk is the risk that a counterparty will fail to meet some or all of its obligations. For the OeNB, credit risk arises from the implementation of the single monetary policy in the euro area, on the one hand, and from any ­investment activities related to the OeNB’s own funds portfolio and own account holdings, on the other. Credit risk arising from Euro­system monetary policy operations is calculated by the ECB and accounted for on a pro rata ­basis in OeNB risk reporting. Credit risk ­arising from holdings for own account and ­investments of own funds is calculated by the OeNB and taken into account when monitoring risk utilization. In all instances, credit risk is calculated with a one-year horizon and a ­confidence level of 99%. In principle, the OeNB manages the credit risk arising from its own funds portfolio and related investment ­activities with a limit system which provides up-to-date information on all risk limits and exposures.

Market liquidity risk

Market liquidity risk is the risk that a market may be too thin or may not be able to accommodate all trades, so that the trading volume is lower than desired and assets cannot be traded quickly enough or perhaps only at a discount. To prevent incurring market liquidity risk, the OeNB analyzes the market liquidity of financial products, adjusts holdings to issuing volumes and limits the maximum residual maturities of transactions. Security and liquidity considerations take precedence over yield in managing the OeNB’s assets.

Operational risk

Operational risk categories comprise all risks arising from deficiencies or inadequacies in ­internal processes or systems, human errors or disruptions from external events. They may damage corporate reputation, impair the achievement of corporate objectives or cause ­financial damage for the OeNB. In cooperation with the responsible business areas, operational risk management aims to assess, control and continually monitor the current risk situation and to reduce identified risks by taking ­adequate risk-mitigating measures. The management of operational risk at the OeNB is governed by the ERM business area regulations and, more specifically, by staff rules on operational risk management. The OeNB is aware of its responsibility as an operator of critical infrastructure and therefore considers the potential impact of ­operational risk more closely also in the context of business continuity and crisis management. Specific contingency measures have been defined to help maintain the OeNB’s business ­operations. Recent events – such as the coronavirus pandemic, the war in Ukraine but also the uncertain energy situation in Europe – have required a host of analyses and contingency planning for potential crisis situations. In 2022, in particular, we adopted a range of measures to address blackout risks (see section Our organization is adapting to an ever-changing environment) and to make sure that the OeNB stands ready to handle potential energy shortages.

Information security risk

Our IT Department operates an information security management system certified according to ISO 27001, with a view to examining and dealing with information security risk on a systematic basis. Technical and organizational vulnerabilities are identified in line with protection requirements defined by the OeNB to ascertain whether they present confidentiality, integrity or availability risks. In this context, the need to protect information and to manage the security of IT systems must be balanced with cost and usability considerations.

To meet the cyber resilience oversight ­expectations (CROE) for financial market ­infrastructures adopted by the Governing Council of the ECB, the OeNB’s Governing Board added cyber resilience to the areas covered by the OeNB’s corporate strategy. Gaps identified in a preliminary examination will be closed ­under a targeted information security program covering the years up to 2025.

Integrating ESG risks into our risk ­management

ESG risks

Potential negative impact of environmental, social and governance (ESG) factors on the OeNB’s financial position and performance, reputation and ability to achieve its objectives.

In 2022, we continued integrating ESG risks into the OeNB’s risk management processes. We developed a common definition of ESG risks that we will be using within the OeNB. This allows us to systematically capture ESG risks as drivers of existing financial risk categories such as market, credit and ­operational risks. We pay particular attention to climate-­related risks, which include chronic and acute physical and transition risks. Physical risks ­result from climate-related changes and natural disasters, while transition risks arise from the transition to a carbon-neutral economy.

A concept that plays an important role in the treatment of ESG risks and in sustainability reporting is “double materiality.” Double materiality means that a company should not only consider how sustainability aspects affect the company itself (outside-in perspective) but also assess the risks the company’s activities pose to society and the environment (inside-out perspective). The outside-in perspective takes precedence when it comes to preventing or limiting any OeNB losses. ESG factors might have a negative impact on the financial position and performance and impede our ability to achieve the OeNB’s objectives. Vice versa, when it comes to the public’s perception of the OeNB and the OeNB’s legal compliance, reputational, legal and liability risks (i.e. the inside-out perspective) take center stage.

While the management of monetary policy operations and portfolios is governed by common Eurosystem guidelines, the nonmonetary policy portfolio is managed under the OeNB’s own responsibility. To capture any financial risks and potential triggers of reputational, ­legal and/or liability risks that may arise from an ESG perspective with regard to this port­folio, we started out by conducting a self-­assessment. In the course of our self-assessment, we analyzed both various scenarios that could negatively affect the OeNB’s risk profile and the respective transmission channels. In the scenario analyses, we considered, among other things, technological advances and tightening regulatory require­ments in terms of energy efficiency and carbon emissions, as well as increases in natural disasters and biodiversity loss. Traditional transmission channels include, for example, profitability, asset valuations and the cost of compliance.

Furthermore, we paid particular attention to the share of sovereign debtors in the OeNB’s nonmonetary policy portfolio, as sovereign debtors might also face ESG risks at some point. Several factors may lead to higher sovereign spending and thus put a strain on public ­finances. They may include recurrent natural disasters, efforts to ensure a socially just transition to a carbon-neutral economy as well as structural measures and incentive schemes to decarbonize the national economy.

We based this qualitative assessment on a longer-term, forward-looking horizon that ­exceeds that of traditional risk models. The ­frequency and scale of climate-related risks will only become clearer as time progresses. At this point, historical data series do not sufficiently reflect climate-related risks.

We expect data availability to improve ­significantly in the coming years, which will ­allow for a more accurate quantitative assessment of climate-related risks. At any rate, ­scenario analyses and longer-term simulations are set to play a key role in evaluating ESG risks as drivers of traditional risk categories.

To complement the qualitative analysis, we calculated the sensitivity of the OeNB’s nonmonetary policy portfolio to climate-related risks as on December 31, 2022. To this end, we drew on metrics such as the carbon footprint of the assets denominated in euro (see Climate-­related financial disclosures of the Oester­reichische Nationalbank 2022 ).

In 2022, the ESCB agreed that ESG reporting will be based on harmonized data. At the OeNB, we started using data from two ESG data providers in 2022 for drawing up analyses and calculating metrics and targets as well as for reporting purposes. In terms of data ­reliability, both providers comply with high methodological requirements that also cover quality control and validation routines. Missing data are estimated via models.

We actively integrate ESG data into the risk management processes applicable to the OeNB’s nonmonetary policy portfolio, and we are committed to capturing such risks in a transparent and consistent manner. The OeNB therefore engages in frequent dialogue with the ESG data providers with a view to improving both data availability and quality.

To ensure an independent assessment of ESG risks, the OeNB’s risk-monitoring unit is functionally and hierarchically separate from the risk-taking units, including the highest ­decision-making level. Incorporating ESG risks as drivers of traditional financial risk types, such as credit and market risks, ultimately ­allows for an integrated risk analysis that best reflects complex interactions.

The OeNB’s Environmental Statement 2022

Updated Environmental Statement in line with EMAS Regulation (EC) ­No 1221/2009

EMAS

The OeNB practices environmental management under the EU’s Eco-Management and Audit Scheme (EMAS). Under this voluntary commitment, we continually improve environmental protection within our organization, not least by encouraging employee support. Organizations audited under EMAS effectively contribute to environmental protection, save costs and show social responsibility.

In the summer of 2022, Europe experienced an unprecedented heatwave and droughts with a number of serious consequences; in the context of global warming, this is a further indication of the looming climate crisis. With fossil fuel prices soaring especially since the war in Ukraine began, even areas not immediately ­affected by that war have begun to feel considerable uncertainty. Now, there is a risk that ­investments in swift technological transition and low-carbon solutions for mobility, production and heating might be postponed. However, if we do not throw all our weight behind green transition as long as there is still time, we will have to face extensive follow-up costs and economic instability. Extreme climate events such as droughts or floods not only cause enormous human suffering, but also entail infrastructural damage, destroy harvests and disrupt supply chains. Moreover, they affect product prices, thereby making inflation more volatile. All these effects will be even more serious if we fail to meet the goals set forth in the Paris Agreement, namely to keep global warming well ­below 2°C and, if possible, even below 1.5°C. It is therefore high time to step up our joint ­efforts and accelerate decarbonization.

Under the ECB climate agenda 2022 , the European Central Bank supports green transition in line with its mandate, not least with the aim of mitigating associated risks to the Eurosystem balance sheet as well as to price and financial stability. In practice, the ECB is taking additional steps to better integrate climate-related aspects into its monetary policy operations (in particular with regard to corporate bond purchases and the collateral framework for Euro­system credit operations), to introduce climate-­related financial disclosures and to enhance risk management.

Climate neutrality

In 2022, natural disasters and extreme weather events continued to indicate that climate change is progressing. Counteractive measures are meant to help reduce greenhouse gas emissions to quantities that can, ideally, be neutralized, i.e. fully absorbed by carbon sinks such as soils, forests and oceans. The 2022 United Nations Climate Change Conference (COP27) in Egypt focused on climate financing and efforts to limit global warming to 1.5°C, if possible. Europe aims to become the first climate-neutral continent in the world by the year 2050. The OeNB seeks to achieve effective climate neutrality in all its activities even sooner, by 2040.

All these efforts and environmental measures are also aligned with the European Green Deal , which aims to make Europe climate neutral by 2050. This climate target is legally binding under the European Climate Law, which was adopted by the European Parliament and the Council in 2021. The European Climate Law also laid down the target of reducing net greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels (Regulation (EU) 2021/1119).

Numerous OeNB events and outreach activities raise green awareness

The OeNB strives to contribute to examining, planning and implementing low-carbon transition in cooperation with the relevant stakeholders in Austria and Europe. Green finance plays an important role in this context. A recent economic study found that carbon pricing at the European and the national level drives up inflation in Austria only marginally. 27 The rising prices of EU emission allowances have had little impact in Austria, as more than 80% of Austria’s electricity are already produced from renewable energy sources. Domestic carbon pricing in other sectors of the Austrian economy might cause headline inflation to rise by between 0.1 percentage point and 0.2 percentage points annually, at the most, between 2022 and 2025. Additional factors are second-­round effects from higher wage settlements and indirect inflation effects arising as production costs are being passed on to consumers, which are difficult to assess.

In 2022, the OeNB continued to be involved in numerous events on sustainability, environmental and climate action issues. On March 24, 2022, for instance, we held a joint workshop with the European Investment Bank on financing green transition in Austria. In addition, a series of in-house presentations discussed a wide range of topics like carbon prices, “green” quantitative easing, the impact of carbon prices on stock prices, an international comparison of e-fuel production efficiency, the technological preconditions of energy transition, climate policy and stranded assets (i.e. assets that suffered from unanticipated or premature write-downs or devaluations) and the causes of the EU electricity price crisis. Some of these presentations arose from specific research collaborations. Both OeNB Executive Director Thomas Steiner and Austrian Federal President Alexander Van der Bellen spoke at a Club of Rome (Austrian Chapter) event held at the OeNB in May 2022 to mark the 50th anniversary of the Club of Rome’s report “The Limits to Growth.” In September 2022, the OeNB’s Brussels Representative Office and the Austrian Chamber of Labour organized a panel discussion on how to finance green transition, and in October, OeNB Executive Director Thomas Steiner gave an opening speech on the future of green finance at the Hungarian central bank. Also in the fall, we hosted three rounds of dialogues on transparency in environmental, social and corporate governance (ESG) under the OeNB’s Presidential ­Innovation Fellowship, welcoming representatives from the real economy, the financial sector and the investor community to discuss strategies against greenwashing, among other things. Rounding off our many dedicated activities and events, the OeNB’s annual Conference on Euro­pean Economic Integration (CEEI) devoted one of its sessions to green transition in Central, Eastern and Southeastern Europe (CESEE).

The OeNB has practiced certified ­environmental management for ­around two decades

Green transition at the OeNB began more than 20 years ago, not least through the use of district heating and, later, district cooling, the operation of facade-integrated photovoltaics and a ­series of EMAS certifications. In addition, the OeNB began to disclose its CO2 emissions and initiated measures to limit emission volumes: Our energy management has been certified ­under ISO 50001 since 2014. In 2022, we analyzed the urban area surrounding our premises in Vienna and the buildings themselves in cooperation with climate experts, architects and ­urban greening experts (table 11). The aim of this project was to identify urban heating issues and enhance the OeNB’s climate fitness as well as to contribute to curbing the climate-related acceleration of urban heating in the years to come. As climate change progresses and its ­effects become more obvious, our demands on office buildings change as well. To meet these demands, our facilities management focuses on continuous modernization and revitalization, also with a view to saving resources by using existing buildings for as long as possible. (After all, the OeNB’s main building is more than 100 years old.) Land is a limited resource, which means that the use and development of building stock is gaining importance in environmental protection. With this in mind, our climate fitness project aims to promote greening and shading measures as a healthy future alternative to air conditioning. This is even more important as the annual number of extreme heat days with temperatures above 30°C keeps rising. At the same time, in a project coordinating climate action, we are working with ­external experts to enhance our environmental performance ­report in line with Greenhouse Gas Protocol standards and to step up the ­involvement of all OeNB business areas concerned.

Eco management under EMAS supports continuous improvement

The objective of environmental management under EMAS is to continually improve corporate environmental protection by integrating ecological criteria into operational procedures. Related monitoring relies on an environmental database documenting all relevant measured values, the applicable legal provisions, and ­internal and external audits. Compliance with the relevant environmental provisions is well on target, as evidenced i.a. by the OeNB’s regular EMAS management reviews.

Certified energy management under ISO 50001 ensures energy savings

In response to sharply rising energy prices, the Austrian federal government has called on households and public institutions to minimize the use of energy and resources. To support these efforts, we designed a set of measures to be implemented on our premises with the aim of

  • reducing room temperatures to a range of 19°C to 21°C in winter,
  • reducing the operating times of ventilation systems outside office hours,
  • reducing lighting duration (LED lighting in corridors has been reduced to a minimum; emergency lighting signs and intensifiers continue to be illuminated at all times in line with legal requirements),
  • turning off the facade lighting of the OeNB’s main building as a signal to the public,
  • saving energy by reducing office cooling in summer (trading higher office temperatures for lower energy consumption).

According to current energy management data, the OeNB’s annual electricity consumption per employee (FTE) totaled 5.2 MWh in 2022. Some areas show higher consumption than in previous years, but this can be explained by higher demand for cooling in the summer and stricter requirements for banknote storage and production, which drove up measured values in the OeNB’s Money Center in particular. At the same time, improvements in building technology and yet another winter with mild outside temperatures made it possible to keep district heating consumption at very low levels.

For many years, the OeNB has exclusively been purchasing electricity from certified renewable sources. To reduce greenhouse gas emissions and save energy, we also rely on heat recovery, facade-­integrated photovoltaics, the sustainable use of buildings, optimized lighting concepts comprising motion detectors and LED lamps as well as improved technical facilities. Measures range from precision controls for elevators, sunshades, pumps and ventilators to a free-cooling system that cools our main building by directing cooler outside air flows into the building’s interior at night without requiring much operating energy itself. Other related activities include measures to raise awareness of environmental issues among our staff (e.g. supporting public transport use in commuting and business travel), ideas competitions (e.g. on climate protection and energy saving) and the provision of multiyear funding to renaturation and research programs from the OeNB’s Anniversary Fund. In an almost 15-year cooperation with the World Wide Fund for Nature (WWF), for instance, we have sponsored flood control and river renaturation projects and thus helped reestablish wildlife in previously lost habitats and create entirely new habitats.

In addition, the OeNB’s vehicle fleet also comprises plug-in hybrid cars and electric service bicycles (“OeNBikes”). To encourage staff to use these service bicycles rather than taxis for errands around town, we will plant a tree for every 250 km covered by e-bike. The first tree was already planted in the fall of 2022. In addition, we make charging stations for private electric bicycles and scooters available to our staff as an incentive to use these climate-friendly alternatives alongside public transport. All OeNB charging stations are supplied with certified green electricity. Our commitment to energy efficiency is also reflected in the fact that the OeNB has been certified under energy management standard ISO 50001 since 2014.

The OeNB’s environmental indicators ­improved in the wake of the pandemic

In general, the OeNB’s environmental indicators for 2022 show that measured values in ­facilities and business travel management went down visibly as a result of the pandemic. Although windows were kept open longer in an effort to improve ventilation, the need for heating ­remained below the pre-pandemic average in the reporting year. At the same time, office work has changed fundamentally – a lasting success from an environmental point of view. Working from home has been very well accepted by our staff, and many OeNB or ECB working meetings have been changed to a virtual or ­hybrid format for good. Incentives to promote trains over planes also show in the OeNB’s transport mileage (table 9). Minimizing greenhouse gas emissions by reducing business travel (table 8) is another way to contribute to climate protection.

In addition to being EMAS-certified, the multimedia, internet and print service unit at the OeNB’s Information Management and ­Services Division has been awarded ISO 9001 and ISO 14001 accreditations. This means that priority is given to environmentally friendly production processes, resource conservation and waste prevention, combined with high quality standards. Higher paper consumption in 2022 (table 7) is due to an increase in stocks, which were replenished in a forward-looking manner in response to market developments.

Table 7: The OeNB’s ecological indicators (2020–2022)  
Unit 2020 2021 2022
Energy
Electricity consumption per FTE1, 2 MWh 5.6 5.1 5.2
Heat consumption kWh per m2 38 46 45
District cooling kWh per m2 39 53 60
Total energy consumption (buildings)3 MWh 13,143 12,813 12,518
of which: renewable energy4 MWh 9,427 8,959 8,842
Total energy consumption including business travel MWh 13,842 13,171 13,275
Water
Drinking water consumption per FTE liters per day x 16 23
Industrial water consumption per FTE liters per day x 15 30
Total water consumption per FTE5 liters per day 59 31 53
Consumption of materials and products
Total paper consumption per FTE6 kg 24 15 24
Consumption of printing/copying paper per FTE sheets 4,072 2,307 4,266
Share of recycled copying paper % 53 46 49
Consumption of cleaning agents7 g per m2 7 5 8
Total CO2 emissions per FTE8 tons 1.9 1.8 1.7
Source: OeNB.
1 Number of employees (full-time equivalents – FTEs): 2020 = 1,087.5; 2021 = 1,133; 2022 = 1,129.3. The OeNB’s environmental management
system according to EMAS covers the following locations: Vienna (main building, Otto-Wagner-Platz 3; northern office building, Rotenhausgasse 4;
and the areas in the Money Center that are assigned to the OeNB, Garnisongasse 15; all 1090 Vienna) and
OeNB – Western Austria (Adamgasse 2, 6020 Innsbruck).
2 All energy data on buildings include the Money Center but exclude the location OeNB – Western Austria and
the Brussels Representative Office (around 20 FTEs).
3 Partly lower energy consumption due to the COVID-19 pandemic.
4 Since 2010, the OeNB has procured green electricity from certified providers.
5 Excluding the location OeNB – Western Austria and the Brussels Representative Office; lower water consumption in 2021 due to
the COVID-19 pandemic; more detailed breakdown (drinking water and industrial water) from 2021.
6 Total consumption in 2022: 27,160 kg, based on paper purchased (i.e. including stocks).
7 Total consumption in 2022: 557 liters.
8 Operation of facilities (including emergency generators) and business travel and transport; total in 2022: 1,940 tons, conversion factors according
to the Environment Agency Austria, including indirect greenhouse gas emissions (previous years’ figures were recalculated).
Note: Land used: 20,758 m2; sealed surface; 17,860 m2, green area: 4,520 m2 (including green roof areas). The following indicators required by EMAS
are not provided in this ­table because of negligible values: emissions of greenhouse gases and air pollutants such as CH4 , N2O, HFC, PFC, SF6 or
SO2 , NOx and fine dust.
Table 8: Sources of greenhouse gas emissions at the OeNB (2020–2022)  
2020 2021 2022
Tons of CO21
Scope 1 emissions
Vehicle fleet 60.6 60.7 71.8
Cooling agents 0.0 5.0 6.7
Emergency generator tests 11.7 12.0 13.1
Subtotal 72.3 77.7 91.6
Scope 2 emissions
District heating2 868.7 699.3 638.3
District cooling2 687.4 666.4 664.4
Subtotal 1,556.1 1,365.7 1,302.7
Scope 3 emissions
Electricity3 107.9 79.3 79.8
Business travel by airplane4 282.7 61.0 441.3
Business travel by car 29.2 9.1 20.9
Business travel by train5 0.7 0.3 3.9
Subtotal 312.6 70.4 545.9
Total 1,941.0 1,513.8 1,940.2
Source: OeNB.
1 Greenhouse gas emissions including indirect effects; updated conversion factors
­according to the Environment Agency Austria.
2 Conversion factor for district heating according to the Environment Agency Austria.
Previous environmental statements used the conversion factor provided by the
energy provider.
3 Unlike in previous environmental statements, this item is now listed under scope 3
emissions in line with the Greenhouse Gas Protocol. The OeNB procures green
electricity from certified providers.
4 Fluctuations i.a. due to the COVID-19 pandemic. By end-2022, figures had more or
less returned to pre-pandemic levels.
5 The OeNB encourages rail travel as an environmentally friendly business travel
­alternative, which is reflected in an increase by the factor of ten in rail travel over
the previous year.
Table 9: OeNB transport mileage (2020–2022)  
Unit 2020 2021 2022
Business travel by airplane1 km 676,192 154,907 642,631
Business travel by car km 117,300 39,933 96,145
Business travel by train2 km 83,400 20,400 201,000
Fuels for transport liter 20,123 19,768 23,604
Source: OeNB.
1 Fluctuations i.a. due to the COVID-19 pandemic.
2 The OeNB encourages rail travel as an environmentally friendly business travel alternative,
which is reflected in an increase by the factor of ten in rail travel over the previous year.
Table 10: Waste generation by the OeNB (2020–2022)  
2020 2021 2022
kg
Nonhazardous materials 44,390 39,190 35,979
Nonhazardous materials per FTE1 40 35 32
Hazardous materials 9,322 10,639 10,855
Hazardous materials per FTE2 8 9 10
Recyclables 90,990 87,965 105,590
Recyclables per FTE3 83 78 94
Total waste 144,702 137,794 152,424
Source: OeNB.
1 Reduction in this category is attributable to rigorous waste separation and reuse of
­recyclable materials in general and, from 2020, also to the COVID-19 pandemic.
2 Slight increase in 2020 due to more frequent and varied use of mobile devices
(digital working environment).
3 Fluctuations in waste paper due to office moves and archive clearances.
Table 11: The OeNB’s environmental performance up to 2022 and environmental program for 2023  
Year Status Action
Further greening of procurement
Hiring an EMAS-certified cleaning contractor 2023 to be continued business area
Procuring office material according to ecological criteria (e-procurement) 2023 to be continued business area
Responsible resource use, further reduction of greenhouse gas emissions and ­electricity consumption
Climate targets coordination project (involving all business areas in reducing
­greenhouse gas emissions)
2023 to be continued business area
Urban heating project on future OeNB climate fitness 2022 implemented business area
Replacing lighting in northern office building (mail room) 2022 implemented energy specialists
Switching to LED lighting on service floors (main building, northern office building) 2023 to be continued energy specialists
Modernizing plumbing, cooling and heating installations 2023 to be continued energy specialists
Planning project for energy improvement of northern office building facade,
windows and sun shading
2023 planned energy specialists
Planning project for renewal of ventilation station (eastern top floor, main building) 2023 planned energy specialists
Continuing project on exchanging ceiling panels and installing new LED lighting 2023 planned energy specialists
Renewing convector fans in the cash counter area 2023 planned energy specialists
Installing more efficient heat recovery units in the ventilation system (northern
office building)
2023 planned energy specialists
Promoting environmental awareness, training
Promoting green mobility (offering training for OeNBikes) 2023 to be continued business area
Training new staff 2022 implemented EPT
Urban gardening (providing information on plants in the city) 2022 implemented EPT
Networking and communication
Membership in the Central Banks and Supervisors Network for Greening the
Financial ­System (NGFS)
2023 to be continued EPT
Lecturing on green finance 2023 planned EPT
Cooperating with partners such as the Club of Rome, the WWF
(World Wide Fund for Nature) and OEGUT (Austrian Society for
Environment and Technology)
2023 to be continued EPT
Auditing the waste disposal contractor 2022 implemented waste management officer
Auditing OeNB – Western Austria (on site) 2023 planned environmental officer
Greening the food offered at the OeNB further, reducing plastic material 2022 implemented EPT
Source: OeNB.
Note: EPT = environmental protection team.

EMAS validation

This updated Environmental Statement published by the Oesterreichische Nationalbank, Otto-­Wagner-Platz 3, 1090 Vienna, Austria, has been validated in accordance with the EMAS Regulation by TÜV SÜD, Franz-Grill-Straße 1, Arsenal Objekt 207, 1030 Vienna, Austria, AT-V-0003.

The Lead Verifier of TÜV SÜD herewith confirms that the OeNB’s environmental policy, its environmental program and environmental management system, its environmental review and its environmental audit ­procedures conform to Regulation (EC) No 1221/2009 of the European Parliament and of the Council of 25 November 2009 (EMAS Regulation), as amended by Commission Regulation (EU) 2018/2026 of 19 December 2018, and validates the relevant information for the Environmental Statement in accordance with Annex IV ­section B points (a) to (h).

Vienna, January 2023

Signature Kurt Kefer, Lead Environmental Verifier

Kurt Kefer, Lead Environmental Verifier

The next update of the OeNB’s Environmental Statement will be published in spring 2024.

27 Breitenfellner, A., F. Fritzer, D. Prammer, F. Rumler and M. Salish. 2022. What is the impact of carbon pricing on inflation in Austria? In: Monetary Policy & the Economy Q3/22. OeNB. 23–41.

Direct and indirect equity interests

Table 12 shows the OeNB’s direct and indirect equity interests in line with Article 68 paragraph 4 Nationalbank Act.

Table 12: Direct and indirect equity interests of the OeNB as on December 31, 2022  
Share in % Company Capital issued
100 Münze Österreich Aktiengesellschaft, Vienna (Austria) EUR 6,000,000.00
100 Schoeller Münzhandel GmbH, Vienna (Austria) EUR 1,017,420.00
(100) 100 Schoeller Münzhandel Deutschland GmbH, Hamburg (Germany) EUR 6,000,000.00
50 PRINT and MINT SERVICES GmbH, Vienna (Austria) EUR 35,000.00
22.25 proionic GmbH, Raaba-Grambach (Austria) EUR 52,877.00
16.67 World Money Fair Holding GmbH, Berlin (Germany) EUR 30,000.00
(16.67) 100 World Money Fair Berlin GmbH, Berlin (Germany) EUR 25,000.00
(16.67) 100 World Money Fair AG, Basel (Switzerland) CHF 300,000.00
12.28 Stirtec GmbH, Premstätten (Austria) EUR 95,050.00
100 Oesterreichische Banknoten- und Sicherheitsdruck GmbH, Vienna (Austria) EUR 10,000,000.00
50 PRINT and MINT SERVICES GmbH, Vienna (Austria) EUR 35,000.00
0.25 Europafi S.A.S., Vic-le-Comte (France) EUR 133,000,000.00
100 GELDSERVICE AUSTRIA Logistik für Wertgestionierung und Transportkoordination G.m.b.H., Vienna (Austria) EUR 3,336,336.14
100 OeNPAY Financial Innovation HUB GmbH, Vienna (Austria) EUR 35,000.00
100 IG Immobilien Invest GmbH, Vienna (Austria) EUR 40,000.00
100 Austrian House S.A., Brussels (Belgium) EUR 5,841,610.91
100 City Center Amstetten GmbH, Vienna (Austria) EUR 72,000.00
100 EKZ Tulln Errichtungs GmbH, Vienna (Austria) EUR 36,000.00
100 HW Hohe Warte Projektentwicklungs- und ErrichtungsgmbH, Vienna (Austria) EUR 35,000.00
100 IG Belgium S.A., Brussels (Belgium) EUR 19,360,309.87
100 IG Hungary Irodaközpont Kft., Budapest (Hungary) EUR 11,852.00
100 IG Immobilien Beteiligungs GmbH, Vienna (Austria) EUR 40,000.00
100 IG Immobilien M97 GmbH, Vienna (Austria) EUR 120,000.00
100 IG Immobilien Management GmbH, Vienna (Austria) EUR 40,000.00
100 IG Immobilien Mariahilfer Straße 99 GmbH, Vienna (Austria) EUR 72,000.00
100 IG Immobilien O20-H22 GmbH, Vienna (Austria) EUR 110,000.00
100 IG Netherlands N1 and N2 B.V., Hoofddorp (Netherlands) EUR 91,000.00
100 BLM Betriebs-Liegenschafts-Management GmbH, Vienna (Austria) EUR 40,000.00
100 BLM-IG Bauträger GmbH, Vienna (Austria) EUR 35,000.00
(100) 100 OWP5 Betriebs-Liegenschafts-Management GmbH, Vienna (Austria) EUR 35,000.00
100 BLM New York 43 West 61st Street LLC, New York (USA) USD 10.00
Source: OeNB, subsidiaries.
Note: The OeNB’s share of the subscribed capital of the European Central Bank (ECB), Frankfurt (Germany), which totals EUR 10,825,007,069.61,
amounted to 2.3804% as on December 31, 2022. The OeNB also holds 8,000 shares (at SDR 5,000 each) and 564 nonvoting shares in
the Bank for International Settlements (BIS), Basel (Switzerland), as well as 56 shares (at EUR 125.00 each) in Swift (Society for
Worldwide Interbank Financial Telecommunication), La Hulpe (Belgium).

The OeNB contributes to safeguarding price stability and financial stability

Two years into the pandemic, Eurosystem monetary policy remains ­accommodative

Nonstandard measures remain in place in 2021, but step-by-step reduction ­announced for 2022

The novel coronavirus (COVID-19) pandemic that emerged in late 2019 kept driving global economic developments also in 2021. Overall, the situation was mixed. The rollout of COVID-19 vaccines, above all in advanced economies, provided respite and paved the way for a strong economic recovery after the recession year 2020. As estimated by the IMF , the world economy expanded by 5.9% in 2021. At the same time, bottlenecks in global supply chains persisted, making it impossible for production to keep pace with rapidly growing demand in many instances. Around the globe, the mismatch between supply and demand contributed to a rise in inflation.

Crude oil prices, for instance, jumped from around EUR 40 per barrel in early 2021 1 to more than EUR 70 per barrel in October 2021, or by 75%, due to the surprisingly strong economic rebound. This development was exacerbated by the fact that the 13 member countries of the Organization of the Petroleum Exporting Countries (OPEC) and their 10 allies including Russia (OPEC+) were slow to unwind the output caps imposed in 2020. Restarting oil rigs that were idled in 2020 took its time, and investing in new rigs has been controversial given climate-driven policies to reduce the ­carbon footprint. Prices were also sharply on the rise for many other raw materials and intermediate goods, which ultimately added to consumer price inflation pressures.

Expanded asset purchase ­programme (APP)

Under its expanded asset purchase programme, the Eurosystem has been buying different types of securities based on four underlying programmes: (1) the covered bond purchase programme (CBPP3), (2) the asset-backed securities purchase programme (ABSPP), (3) the public sector purchase programme (PSPP) as well as (4) the corporate sector purchase programme (CSPP). The PSPP accounts for the lion’s share (close to 80%) of the entire APP portfolio.

The OeNB implements the measures ­adopted by the Governing Council of the ECB

The further easing of euro area monetary policy agreed in the first pandemic year was maintained in 2021 and implemented through the Eurosystem’s asset purchase programmes and liquidity-providing operations.

The existing expanded asset purchase programme (APP) was kept up in 2021 with a monthly ­purchase volume of EUR 20 billion. All in all, the Eurosystem bought securities ­issued in the euro area worth EUR 214.4 billion. These operations were carried out both centrally by the European Central Bank (ECB) and in a decentralized fashion by all 19 national central banks of the Eurosystem. In this context, the OeNB mobilized close to EUR 4.4 billion to buy ­Austrian public sector bonds and covered bonds issued by Austrian banks. Together with the ­assets purchased since 2015, the assets bought in 2021 enlarged the APP-related ­segment of the OeNB’s balance sheet to EUR 71.3 billion at the end of 2021 (chart 1).

Pandemic emergency ­purchase programme (PEPP)

The PEPP is the crisis tool with which the Eurosystem helps the euro area economy absorb the impact of the COVID-19 pandemic. The underlying goal is to ­systematically buy assets, between March 2020 and March 2022, with a view to maintaining favorable financing conditions and supporting the smooth transmission of monetary policy.

In addition, the Euro­system bought securities worth EUR 827 billion under its pandemic emergency purchase programme (PEPP) in 2021, to which the OeNB contributed EUR 19 billion. As a result, the OeNB’s PEPP portfolio totaled EUR 36.1 billion at the end of 2021. While PEPP purchases are essentially subject to the same ­requirements as APP purchases, the PEPP ­programme is also open for purchases of public sector bonds with a remaining maturity of less than one year (but more than 70 days). The national central banks continue to buy only their respective public sector bonds and not those of other jurisdictions. In other words, the OeNB buys only Austrian government bonds and bonds issued by Austrian agencies, such as the two agencies operating the domestic rail ­infrastructures (ÖBB-Infra­struktur) and highways ­(ASFINAG). Moreover, purchases of ­public sector bonds across euro area countries are guided by the Eurosystem capital key, which spells out the contributions of the ­national central banks to the ECB’s capital. Compared with APP purchases, PEPP purchases are subject to a higher degree of flexibility over time, across asset classes and among ­jurisdictions. Also, under the PEPP, the ECB and the Greek central bank buy Greek government bonds, which are not ­eligible for APP purchases for reasons of credit­worthiness.

Chart 1, Securities holdings by asset purchase programmes in the OeNB’s balance sheet, is a column chart showing the net volume of securities the Oesterreichische Nationalbank bought under the Eurosystem’s expanded asset purchase programme, since March 2015, and pandemic emergency purchase programme, since March 2020. Volumes are given in euro billion. Under the expanded asset purchase programme, the Oesterreichische Nationalbank acquired securities worth EUR 57 billion between March 2015 and December 2018, buying Austrian public sector bonds worth about EUR 50 billion and covered bonds issued by Austrian banks worth close to EUR 7 billion. From January 2019, no new purchases were made under this program, but maturing assets were reinvested. In November 2019, asset purchases were resumed. Further purchases made until December 2021 brought the corresponding asset portfolio to slightly more than EUR 71 billion. Thereof, public sector bonds accounted for some EUR 60 billion, and covered bonds accounted for close to EUR 11 billion. The pandemic emergency purchase programme was launched in March 2020. In this segment, the Oesterreichische Nationalbank bought additional assets worth EUR 36 billion until the end of 2021. All in all, the Oesterreichische Nationalbank thus carried securities purchased for monetary policy purposes in the amount of some EUR 107 billion its balance sheet as at December 31, 2021. Source: Oesterreichische Nationalbank.

The other key pillar of the Eurosystem’s ­policy of monetary accommodation in 2021 was the provision of liquidity through the, by now, third series of targeted longer-term refinancing operations (TLTROs III). Under the TLTROs, commercial banks eligible for refinancing with the Eurosystem gained access to central bank credit with a maturity of up to three years. These loans are subject to variable “discrete” or “blended” interest rates lying somewhere ­between the average rate applied to the Eurosystem’s main refinancing operations over the life of the respective operation and the ­average interest rate on the deposit facility. The rates applied depend on the extent to which the lending ­patterns of the individual banks fulfill specific requirements stipulated by the ECB. In response to the COVID-19 pandemic, the applicable ­interest rates were lowered by another 50 basis points for the period between June 2020 and June 2022, making an interest rate of –1% ­possible. The underlying goal was to stimulate bank lending to the real economy amid the ­crisis, above all loans to small and medium-­sized enterprises and to households for consumption purposes (excluding mortgage loans).

Targeted longer-term ­refinancing operations (TLTROs III)

Loans against collateral with a maturity of three years that banks can take out from Eurosystem central banks. The applicable interest rate depends on the amount of onward lending by banks.

In 2021, four new TLTRO III lending rounds were offered. The bids received from banks across the euro area in these four additional operations totaled EUR 589.9 billion. Like asset purchases, these refinancing operations are handled by the national central banks of the Eurosystem. Austrian banks took out new TLTRO III funding worth EUR 20.6 billion from the OeNB in 2021, which corresponds to some 3.5% of all funds provided in this period. Compared with their European peers, Austrian banks thus exhibited above-average demand (relative to total assets). Since September 2021, banks have had an early repayment option starting 12 months after the settlement of the individual TLTRO III operations. Repayment may be made at quarterly intervals in full or in part. In 2021, banks made only limited use of this option; in the euro area as a whole, early repayment balances totaled EUR 139.4 billion; in Austria EUR 0.2 billion were paid back early to the OeNB. The cumulative volume of TLTRO III funding provided by the OeNB totaled EUR 87.2 billion at the end of 2021. All in all, ten TLTRO III operations were conducted; ­starting in 2019 and 2020 and most recently in December 2021, with the maturity period of the final operation running to December 2024 (chart 2).

Chart 2, Central bank liquidity provided through OeNB tender operations, is a column chart showing the amounts of liquidity the Oesterreichische Nationalbank provided to Austrian banks through credit operations from the fourth quarter of 2019 to the fourth quarter of 2021. Data are presented as end-of-quarter figures in euro billion. In late 2019 – before the onset of the COVID-19 pandemic – the amount of funding the OeNB provided to Austrian banks totaled about EUR 17 billion, EUR 14 billion of which had been provided under the Eurosystem’s second series of targeted longer-term refinancing operations (TLTROs II) and close to EUR 3 billion under the third series (TLTROs III). In response to the pandemic, the Eurosystem made the conditions for TLTRO III operations a lot more attractive. As a result, banks used the option of shifting funds from TLTRO II to TLTRO III operations and, in addition, demand for new funding soared to EUR 58 billion in the second quarter of 2020. By the end of 2021, this figure  had climbed to EUR 87 billion. Since the second quarter of 2020, liquidity provision has been heavily dominated by TLTRO III operations. Other tender operations, such as the pandemic emergency longer-term refinancing operations, the main refinancing operations and the regular three-month liquidity-providing operations, created only limited demand among Austrian banks after June 2020 and are therefore not evident from the chart.  Source: Oesterreichische Nationalbank.

In 2021, the ECB also continued to offer pandemic emergency longer-term refinancing operations (PELTROs), which were introduced in 2020 to provide an effective backstop against liquidity shortages. 2021 saw the unwinding of the first seven PELTROs and the implementation of four new PELTROs. While Austrian banks paid back EUR 242 million to the OeNB in ­operations maturing in 2021, the OeNB provided new liquidity totaling EUR 245 million with a maturity of between 12 and 13 months. Like all other operations, the PELTROs were conducted as fixed rate tender procedures with full allotment. The interest rate applied to PELTROs was 25 basis points below the interest rate on the main refinancing operations prevailing over the life of the respective PELTRO, i.e. –0.25% in 2021. These conditions were not subject to any constraints. The final PELTRO was offered in December 2021 and will run to January 2023.

In view of the comparatively cheaper refinancing available through TLTRO III and ­PELTRO operations, demand for the regular refinancing operations with a maturity of one week or three months was very limited both in the euro area as a whole and in Austria. The ­interest rate for the weekly main refinancing operations remained unchanged in 2021 at 0%. Likewise, the interest rate for the marginal lending ­facility was left unchanged at 0.25%, and the interest rate for the deposit facility ­remained at –0.50%.

Outcome of the Eurosystem’s monetary policy strategy review

Until fairly recently, the Eurosystem operated on the basis of a monetary policy strategy defined in 1998, subject to clarification of some of the key elements in 2003. To realign the strategy with best practices and to respond to changing economic conditions (see box 2), the Eurosystem launched a broad-based review of the strategy in 2020. The review also included public events to involve interest groups and civil society organizations. Like many other national central banks and the ECB, the OeNB reached out to stakeholders in Austria to hear their take – and will keep listening beyond the review.

As announced by the president of the ECB, Christine Lagarde, the idea of the overhaul was to address all key issues from different perspectives and to leave no stone unturned. The review, which was organized in ­several work streams, was built on close cooperation between the national central banks and the ECB. ­Economists working at the ECB and at the national central banks volunteered to join the respective working groups, in line with their expertise and interests. The core issues were the definition of price stability, inflation measures, ­monetary policy communication and the interaction between fiscal policy and monetary policy. Other issues ­included the impact of globalization and digital transformation on monetary policy, and the relevance of climate change for monetary policy. Upon the OeNB’s initiative, the review also comprised an assessment of the drivers of productivity and of the implications declining productivity growth may have for monetary policymaking. OeNB economists participated in almost all working groups. The working group on productivity was co-chaired by the ECB and the OeNB.

Every single issue was looked at from various angles, including theoretical and empirical perspectives. ­Working group members compared a range of models and methods with a view to deriving robust concepts for the euro area. One guiding principle was to always keep in mind the unique setup of the euro area, which after all blends a common monetary area with a range of heterogeneous countries with national responsibility for economic policy. Working group members regularly met online to discuss progress made and to coordinate the reports to be drafted.

The work was carried through over a period of about 16 months and thus longer than initially intended, to make up for ground lost in the initial months, when Eurosystem staff resources were needed more urgently ­elsewhere in the early days of the COVID-19 pandemic. The final reports submitted by all working groups served as decision-making input for the overhaul of the monetary policy strategy by the Governing Council of the ECB. All 13 final reports are available for download from the ECB’s website ( ECB occasional papers ). Based on all this groundwork, the Governing Council embarked on developing the new strategy. Following a debate spanning ­several weeks, the new monetary policy strategy was published in mid-2021, with the following new features:

The primary objective of the ECB was and is to maintain price stability in the euro area, but the concept of price stability has been redefined slightly. The ECB now considers that price stability is best maintained by ­aiming for 2% inflation over the medium term. The commitment to this target is symmetric, which means that negative and positive deviations are considered equally undesirable. The Harmonised Index of Consumer Prices (HICP) remains the appropriate price measure for assessing the achievement of the price stability objective. Yet, the Governing Council recognizes that the inclusion of the costs related to owner-occupied housing in the HICP would better represent the inflation rate that is relevant for households. It will, however, take a few years until reliable estimates of such costs become available.

Like a compass pointing north, this strategy provides clarity for the monetary policy decision-making bodies about which way to go for price stability. To arrive at reliable decisions about emerging risks to the stability of euro-denominated prices, policymakers continue to rely on two interdependent analyses – the economic analysis and the monetary and financial analysis. The economic analysis focuses on real and nominal economic developments, such as economic growth and the components of growth as well as employment, wages and prices, ­including relevant projections. The monetary and financial analysis examines monetary and financial indicators, as it focuses on the functioning of the monetary transmission mechanism and any risks to medium-term price stability that might arise from financial imbalances and monetary factors, such as loan growth. In light of the pervasive role of macrofinancial linkages in economic, monetary and financial developments, the ­interdependencies across the two analyses needed to be more fully incorporated. Moreover, the new strategy assigns a larger role to the assessment of the proportionality of monetary policy decisions and their potential side effects. This is an aspect that was very dear to the heart of the Austrian stakeholders contributing to the review.

As another outcome of the strategy review, the Governing Council of the ECB recognized the importance of taking into account the implications of the effective lower bound; periods when the policy rates are close to the lower bound call for a differentiated approach. This may involve the adoption of nonstandard measures, but this may also require especially forceful or persistent monetary policy measures to avoid negative deviations from the inflation target becoming entrenched. This may also imply a transitory period in which inflation is moderately above 2%.

The strategy review also led to the formal recognition of the implications that climate change has for price stability. Climate change, the ensuing global warming and higher incidence of extreme weather events as well as the transition to a more sustainable economy impact price stability by feeding through to macroeconomic ­indicators such as prices, output, interest rates, financial stability and monetary transmission. Hence, the Euro­system is going to step up its climate-related monetary policy assessments and adjust the design of its ­macroeconomic models, reporting frameworks and monetary policy operational framework accordingly.

Looking ahead, the Governing Council intends to periodically assess the appropriateness of its monetary policy strategy, with the next assessment expected in 2025.

Monetary policy decision-making reflects strategy overhaul

The review of the ECB’s monetary policy ­strategy launched in 2020 was completed in mid-2021 (box 1). On July 22, 2021, the ­Governing Council of the ECB held its first regular monetary policy meeting guided by the new strategy. As the key ECB interest rates had been close to their lower bound for some time and the medium-­term outlook for inflation was still well below 2%, the Governing Council’s forward guidance on interest rates was revised as follows. The Governing Council ­expected the key ECB interest rates to remain at their present or lower levels until it saw inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of the ­projection horizon, and it judged that realized progress in underlying inflation was sufficiently advanced to be consistent with inflation stabilizing at 2% over the medium term. This might also imply a transitory period in which ­inflation is moderately above target.

Economic conditions improved much faster across the euro area in 2021 than had been ­anticipated. Following the rollout of COVID-19 vaccines and the ensuing gradual unwinding of lockdown measures, the economy revived ­visibly. Moreover, robust export demand and fiscal support provided under the NextGenerationEU initiative helped overcome the recession in the euro area fast. Based on preliminary Eurostat data, the euro area’s real gross domestic ­product (GDP) increased by 5.2% in 2021. Eurosystem staff projections of December 2021 expect GDP growth to remain elevated also in 2022 (+4.2%) and 2023 (+2.9%).

HICP inflation also rose much more strongly than expected. Close to 1% in early 2021, inflation climbed to 5.0% until ­year-end, which translated into an annual average of 2.6%. The increase was largely driven by the surge in commodity prices (above all energy prices). Other factors that added to the rise in inflation were the freeing of pent-up demand following the unwinding of lockdown ­measures, mounting producer prices fueled by global supply shortages and increased transport costs. Base effects related to the discontinuation of value-­added tax cuts in Germany also played a role. Last but not least, measurement issues – above all in the first year of the pandemic, when many shops were closed and when prices were difficult to collect – may have led to a bias in inflation measurement in 2021. All inflation forecasts for the euro area anticipate that the elevated ­inflation rates are going to be a largely temporary phenomenon, and that inflation rates will go down steadily in 2022. The Eurosystem’s December 2021 projections for 2022 point to the gradual resolution of supply bottlenecks and a modest easing of many commodity prices, given the downward-sloping profile of futures prices. Specifically, inflation is expected to ­total 3.2% in 2022 and decline to 1.8% in 2023 and 2024.

Governing Council of the ECB announces step-by-step reduction in the pace of asset purchases

Based on this outlook, the Governing Council of the ECB agreed at its December 2021 meeting that progress on economic recovery and ­toward its medium-term inflation target permitted a step-by-step reduction in the pace of asset purchases. Specifically, the ECB announced that net asset purchases under the pandemic emergency purchase programme (PEPP) would be conducted at a slower pace in the first quarter of 2022 than in the final quarter of 2021, and that the net purchases would be discontinued at the end of March. At the same time, the ECB extended the reinvestment horizon for maturing PEPP assets to the end of 2024 or beyond. In the event of renewed market fragmentation related to the pandemic, PEPP reinvestments could be adjusted flexibly across time, asset classes and jurisdictions at any time. Net purchases under the PEPP could also be resumed, if necessary, to counter negative shocks related to the pandemic.

To cushion the withdrawal of market presence because of the end of PEPP purchases, the pace of monthly net asset purchases under the APP will be increased temporarily in 2022 – to EUR 40 billion in the second quarter and to EUR 30 billion in the third quarter – before being brought back to EUR 20 billion per month from October 2022 onward. At this level, net asset purchases under the APP would be maintained for as long as necessary to reinforce the accommodative impact of the policy rates. The ECB also continued to anticipate that net asset purchases would end shortly before key ECB interest rates started to be raised. The reinvestment policy would be retained for an extended period past the date when the ECB starts raising its policy interest rates.

Two-tier system for reserve remuneration

Most commercial banks in the euro area are required to hold minimum reserves with the Eurosystem. In times of negative interest rates for the deposit facility, the ­remuneration of reserve holdings in excess of minimum reserve requirements turns into a cost factor for banks. To alleviate costs, the Eurosystem introduced an exempt tier in 2019, which means that part of the excess reserves are not subject to negative remuneration.

The last of the pandemic-related longer-­term refinancing operations (TLTROs III and PELTROs; see above) were conducted as planned in December 2021. The special conditions ­applicable under TLTRO III operations are ­expected to end in June 2022, as announced. There are no plans to extend these operations. At the same time, the Governing Council of the ECB will continue to monitor bank funding conditions and ensure that the maturing of funds does not hamper the smooth ­transmission of monetary policy. This applies to TLTRO III funds in particular, as maturing TLTRO III funding would withdraw large amounts of ­liquidity from the banking sector. In addition, there is a need to assess the appropriate calibration of the two-tier system for ­reserve remuneration so that the negative interest rate policy does not limit the intermediation capacity of the banking system in an environment of ample excess liquidity.

Structural reasons for the protracted period of low interest rates – discussing the equilibrium real interest rate for the euro area

To assess the adequacy of monetary policy interest rates, economists use the concept of the equilibrium real interest rate. This is the rate, as adjusted for inflation, at which the economy is in a state of balance, as ­expressed by a rate of inflation that is neither going down nor going up but aligned with the target level. As it cannot be measured or observed directly, the equilibrium interest rate must be estimated by using quantitative finance, statistical and econometric methods. Central banks rely on equilibrium real interest rate estimates as a benchmark for nudging inflation toward the level of the inflation objective.

Rather than staying put at a given level, the equilibrium real interest rate fluctuates in line with structural economic changes. In recent decades, economies worldwide, including the euro area economies, have undergone numerous structural changes. The assumption is that the equilibrium real interest rate has gone down as a result of such changes, including weakening productivity growth rates, the aging of populations, excess saving (or ­investment gaps) as well as heightened risk aversion. In the case of the euro area, the equilibrium real interest rate is currently estimated at zero or slightly below zero. This provides an explanation for the very low level at which monetary policy interest rates have been hovering all over the world.

Chart 3, Range of point estimates for the euro area’s equilibrium real interest rate, summarizes the outcomes of eight papers that were reviewed in a study published in the European Central Bank’s Occasional Paper Series (number 217). The chart covers the period from 1999 to the end of 2019 and shows the point estimates obtained from the reviewed models. The resulting range is depicted by a shaded area which reflects model uncertainty, but no other source of estimation uncertainty. Estimates have been smoothed so as to reduce the statistical effect of the business cycle.

For the early days of monetary union, estimates ranged between 2% and 3%. In the years that followed, the range shifted to between 0% and 2% and then continued to decrease further amid the global financial crisis of 2008 and 2009 and the ensuing sovereign bond crisis. The estimates for 2019 ranged from 0% to minus 2%. Source: European Central Bank (2018). The natural rate of interest: estimates, drivers, and challenges to monetary policy. ECB Occasional Working Paper Series 217; Ajevskis (2018); Brand, Goy and Lemke (2020); Brand and Mazelis (2019); Fiorentini, Galesi, Pérez-Quirós and Sentana (2018); Geiger and Schupp (2018); Holston, Laubach and Williams (2017); Jarocinski (2017); Johannsen and Mertens (2021).

Given the trend decline in equilibrium real interest rates (chart 3), central banks become increasingly ­constrained in the conduct of monetary policy, i.e. in the room for lowering the policy rates below the equilibrium real interest rate, if called for. This is why central banks have been taking increasing recourse to tools not or seldom used in the past, such as asset purchase programmes. Such nonstandard measures help fuel demand and bring inflation rates back to target in crisis situations; but they may, over time, nourish risks to financial stability and constrain economic growth as a result of the misallocation of resources.

Abandoning today’s policy of ultralow interest rates without jeopardizing output growth, employment and the achievement of the price stability goal presupposes, among other things, that the equilibrium real interest rate is on the rise. However, for this to happen, the impact of the influencing factors that caused the equilibrium real interest rate to decline in the first place would need to become reversed. Such a reversal may be brought on by a stronger growth of productivity, which may in turn be the result of stepped-up R&D efforts, or higher innovation and investment subsidies. Other supporting factors include an increase in the retirement eligibility age and in the female labor participation rate, as such developments would drive up labor supply. Moreover, a broad-based global investment program for protecting the climate would raise demand for capital and absorb excess savings. The resulting higher long-term productivity and output growth would contribute to a rise of the ­equilibrium real interest rate, thus broadening the room for maneuver that monetary policymakers might need to respond to the next cyclical downturn or the next crisis. As a result, asset purchases would be a minor option for central banks, which would in turn limit potential negative spillovers on financial stability (for instance through stock market or real estate bubbles) or on longer-term economic growth.

Higher productivity growth rates can only be achieved through joint efforts in numerous policy areas. Above all, there is a need for action on the part of euro area governments. The role of monetary policy in raising the equilibrium real interest rate is limited but key: tightening monetary policy without delay once the price stability target has been achieved, rather than adding to the prolongation of low interest rate periods.

1 In spring 2020, oil prices had dropped to levels as low as EUR 20 per barrel.

How the pandemic changed the Austrian economy in 2021

Lockdown impact weakens but remains significant

Since the COVID-19 pandemic took hold in Europe in spring 2020, the Austrian economy has been largely driven by the spreading of coronavirus infections and the related containment measures. The stricter the government’s lockdown-style policies (as assessed with the Oxford Stringency Index ), the lower public mobility (as measured with the Google Mobility Index) and the larger the negative repercussions for real economic growth have been. In Austria, mobility figures hit bottom during the first lockdown in spring 2020, translating into a weekly loss of GDP of close to EUR 2 billion (chart 4). During the second and third lockdowns in fall and winter 2020/21, production was not shut down in the construction sector and the manufacturing industry, which has high export ratios. In addition, retailers and restaurants were able to reduce their losses by using alternative distribution channels (online shopping, take-away or in-store pickup). Compared with the first lockdown, the weekly loss of value added thus halved to close to EUR 1 billion. The fourth general lockdown, brought on in late fall 2021 by the Delta variant, was lifted after three weeks. During those three weeks, the decline in GDP was close to EUR 0.7 billion, i.e. again somewhat lower than during the previous lockdowns.

Chart 4, Comparing the decline in mobility and GDP with the intensity of containment measures, maps the percentage changes in output as reflected by the weekly gross national product indicator calculated by the Oesterreichische Nationalbank (compared with the corresponding pre-crisis weeks) against the percentage fluctuations reflected in the Google Mobility Index (compared with a reference period in January 2020) and the inverted Oxford Stringency Index (plotted as points). All measures are shown as lines in the period from mid-February 2020 until end-December 2021. The colored areas of the chart indicate different periods in which different types of lockdowns were in place: full or partial lockdowns; or lockdowns in parts of Austria and/or lockdowns for the unvaccinated. Source: Google, Oesterreichische Nationalbank, University of Oxford.

Austrian economy grows by 4.7% in 2021

Pandemic-related containment measures continued to weigh on Austria’s economy also in 2021, as is evident from supply- and demand-­side GDP data. On the supply side, the service sector felt the full weight of the containment measures both at the start and at the end of the year. The summer months, in contrast, saw strong catching-up effects once the third lockdown was lifted. For instance, in August and September 2021, Austria’s tourism industry ­recorded even more overnight stays than in the record summer of 2019. The manufacturing ­industry and the construction sector barely felt the lockdowns but could not work at full ­capacity because of global supply delays and bottlenecks, which increasingly slowed down growth dynamics in these sectors as the year progressed. In sum, Austrian GDP expanded by 4.7% in 2021, after having contracted by 6.8% in 2020.

These developments are broadly mirrored by demand-side indicators of GDP (chart 5). Private consumption, which accounts for ­almost half of GDP in Austria, had been ­characterized by very strong growth rates in ­mid-2020. This compares with strong setbacks in the first and fourth quarters of 2021, when shops, restaurants and hotels were shut down for several weeks.

Chart 5, GDP growth driven by the pandemic since 2020, is a column chart with line chart overlays showing quarter-on-quarter rates of gross domestic product growth in Austria and in the euro area. The chart covers the period from the first quarter of 2019 to the fourth quarter of 2021. The data for Austria reflect the import-adjusted contributions to GDP from domestic demand, exports and changes in inventories (including statistical discrepancies). Source: Eurostat, Statistics Austria.

Unlike household consumption, business investment continued to increase at a fairly ­robust pace in early 2021. Investment growth was driven by government support in the form of investment premiums and by hopes that the pandemic would soon be brought under control following the rising rollout of COVID-19 ­vaccines. However, as the year progressed, the momentum of investment slowed down, largely on the back of disruptions in the supply chains of intermediate goods. Added to that, the ­uncertain outlook for early 2022 had a weakening effect toward the end of the year.

Unlike in 2020, Austrian exporters were not affected by border closures in 2021. ­Exports of goods continued to recover strongly and ­exceeded pre-crisis levels already in early 2021. Exports of services, by contrast, felt the marked decline of tourism demand. In sum, exports of goods and services rose by more than 10%, however, in 2021.

Looking ahead, the outlook is clouded by high levels of uncertainty in view of the rapid spreading of Omicron, the latest coronavirus variant at the time of writing.

Loss of tourist travel income sends the current account into deficit

Following a drop in overnight stays by about one-third in 2020, Austria’s tourism ­industry suffered further losses in 2021, namely a ­decline by roughly another quarter. This adds up to a loss of about 50% compared with pre-crisis ­levels of 2019. Since the months of January and February, which make or break the winter tourist season, were lockdown months in 2021, the tourism industry failed to generate the revenues that used to prop up the current account. On the back of weak tourism and travel ­receipts, the current account balance was negative in the first half of 2021 (–EUR 2,693 million), compared with a surplus of more than EUR 4 ­billion in 2019 and 2020. The balance will also be negative for 2021 as a whole, marking Austria’s first current account deficit since 2001.

HICP inflation rises strongly in late 2021

Energy prices had dropped visibly in 2020, thus keeping inflation as measured by the Harmonised Index of Consumer Prices (HICP) from rising beyond 1.4% on average. Amid the rapid cyclical upswing in the first half of 2021, ­energy prices rebounded sharply, reaching pre-crisis levels. Strong growth of demand for durable consumer goods fueled manufacturing globally, as a result of which raw materials and intermediate goods became in short supply. Heightened consumer demand, in turn, sparked even more demand for energy, which ultimately drove energy and raw material prices beyond pre-crisis levels. In this context, Austria’s HICP rate rose from 1.5% in the first quarter to 3.9% in the fourth quarter of 2021 and even moved up to 4.1% in November 2021, a level not seen in almost ten years. Energy prices were the main driver of inflation, accounting for more than two-thirds of price increases (chart 6). In 2021 as a whole, HICP inflation ran to 2.8%. Looking ahead, the price pressures on energy ought to recede again once the supply shortages have been resolved and pent-up demand has been met. Based on this assumption, we expect energy prices to stabilize in mid-2022 and again play a lesser role for headline inflation. In this process, the currently high inflation rates should go down again.

Chart 6, HICP inflation at elevated levels in late 2021, is a column chart with line chart overlays, covering the period from January 2019 to December 2021. The line chart overlays indicate annual inflation on a monthly basis according to the Harmonized Index of Consumer Prices (HICP) for Austria and the euro area as well as the resulting core inflation rate for Austria. The columns show the monthly contributions to HICP inflation from food and energy (with a weight of 25%) and nonenergy industrial goods and services (with a weight of 75%). Source: Eurostat, Statistics Austria.

Given the pandemic-related economic contraction amid low inflation rates, the wage ­increases for 2021 negotiated by the social ­partners in the fall of 2020 had remained rather moderate at 1.7%. In the fall of 2021, robust economic growth and the comparatively high inflation rates supported higher wage settlements for 2022 (+3.2%). At the same time, these wage settlements are broadly in line with distribution-neutral wage increases, defined as the sum total of productivity gains and inflation. Hence, we assume that wage developments will not be adding to price pressures ahead.

Labor market conditions improve in 2021

With the onset of a second wave of new COVID-19 infections in the winter of 2020/21 and in line with the seasonality of unemployment rates, the number of unemployed people rose markedly between October 2020 and ­January 2021. At the same time, the increase was cushioned by learning effects and the ­government’s short-time working program, thus remaining below the rise in the spring of 2020. Unemployment figures actually started to go down already in January 2021 and even dropped below pre-crisis levels following steady improvements in September. In terms of unemployment, the impact of the fourth lockdown in November/December 2021 was fairly limited. Following methodological changes in the way Eurostat measures unemployment, the unemployment rate for 2021 (6.3%) nonetheless slightly exceeded the rate measured for 2020 (6.1%). Mirroring cyclical developments, employment growth contracted in the first and fourth quarters of 2021, whereas it spiked in the middle of the year. On balance, employment figures grew strongly in 2021, ­rebounding to pre-crisis levels toward year-end. The high ­employment growth rates and the strong decline in the number of unemployed people was, however, accompanied by a marked rise in the number of job vacancies. This implies a growing supply/demand mismatch in the Austrian labor market (box 3).

Labor shortage and mismatch in the Austrian labor market

Following record unemployment numbers in 2020, the Austrian labor market recovered significantly in the course of 2021. At the end of November 2021, the number of unemployed people was within close reach of pre-crisis levels (seasonally adjusted; 2,800 unemployed individuals more than at the end of February 2020). At the same time, the number of job vacancies has been at record highs since spring 2021, reaching 112,000 unfilled ­vacancies at the end of November (seasonally adjusted; left-hand panel of chart 7). In parallel, the number of unemployed persons per job opening dropped to unprecedented lows; at the end of November the unemployed-­to-vacancy ratio stood at 2.6.

In many occupations, the labor shortages boil down to skills shortages. According to data on unemployed job seekers and job vacancies published by Public Employment Service Austria (AMS) for more than 500 ­occupations, the number of job vacancies in so-called shortage occupations has risen very fast in recent months, reaching about 70,000 at the end of October 2021 (middle panel of chart 7). This is more than half of all job vacancies and about one-quarter of the number of people registered as unemployed. Austria’s list of shortage occupations for 2022 comprises 66 occupations, based on the labor ministry’s definition according to which shortage ­occupations are occupations where the ratio of registered unemployed people to job openings is less than 1.5. The detailed AMS data also provide insights into the likelihood with which vacancies in shortage occupations in one or more provinces might be filled with people registered as unemployed in other provinces. This regional mismatch was growing visibly in late 2021, reaching close to 41,000 unfilled vacancies or 15.2% of all unemployed people in individual provinces (right panel of chart 7).

Chart 7, Vacancies, shortage occupations and regional skills mismatch, consists of three panels. The left-hand panel is a line chart that maps the number of vacancies (left-hand scale) against the number of unemployed job seekers per unfilled job (right-hand scale) starting in 2017. Based on seasonally adjusted data, the number of vacancies had risen from some 50,000 in early 2017 to some 80,000 in February 2020. When the coronavirus crisis emerged in spring 2020, the number of vacancies dropped back to some 50,000. Since then, the number of vacancies has been rising again, except for a short interruption in late 2020/early 2021. In November 2021, the number of vacancies had climbed to close to 120,000, which is a new record high. The number of unemployed job seekers per unfilled job developed broadly inversely in line with the number of vacancies. From early 2017 until February 2020, this ratio dropped from more than 6 to below 4. When the coronavirus crisis emerged in spring 2020, the number of jobless people per unfilled job jumped to a ratio of close to 10. Since then, this ratio has been going down again, except for a short interruption in late 2020/early 2021. The ratio calculated for November 2021 was 2.6.

 

The middle panel is a line chart that shows how vacancies in shortage occupations have developed since early 2017. The data exhibit a pronounced seasonal pattern, with regular mid-year peaks. The seasonal pattern apart, the number of vacancies trended upward from early 2017 to early 2020, peaking at around 40,000 in mid-2020. During 2020, the number of vacancies in shortage occupations dropped sharply amid the pandemic conditions. Since early 2021, the figures have been growing sharply, reaching close to 70,000 in November 2021.

 

The right-hand panel is another line chart for the period from 2017 to 2021, depicting the skills mismatch between regional demand (unfilled jobs) and supply (job seekers) in percent of the unemployed. Here, too, the regional mismatch mirrors the seasonal pattern with mid-year peaks. Again, a steady increase up to some 10% from early 2017 to early 2020 was followed by an abrupt decline during the first pandemic-related shutdown to some 2% in March 2020. Since then, the regional mismatch measure has been trending upward, approaching 15% in November 2021. Source: Oesterreichische Nationalbank, Public Employment Service Austria. Left-hand panel: Seasonally adjusted data until November 30, 2021. Middle panel and right-hand panel: Not seasonally adjusted data until October 31, 2021.

Measures supporting regional mobility – such as relocation subsidies, tax relief for home purchases or ­measures to lower transaction costs – as well as efforts to increase the attractiveness of some occupations may be part of the solution. Above all, this is the case for some jobs in the tourism, retail and transport business, which do not require high skills and which are in the lower income brackets. In other occupations, however, we see a ­genuine mismatch of skills required for unfilled vacancies and jobseekers’ skills. This includes some jobs in the tourism industry (such as cooks) and many skilled crafts or trades (such as electricians) as well as the skills ­required from health care workers and nurses, public security officials and IT specialists. Meeting this demand will take a mix of measures, including an overhaul of vocational training, adequate reskilling programs for the unemployed and proactive migration policies.

COVID-19 measures continue to burden the budget in 2021

Following the adoption of comprehensive ­measures by the Austrian government to ­cushion the impact of the COVID-19 pandemic and ­related containment measures, Austria’s fiscal balance deteriorated by around 9 percentage points to a deficit of 8.3% of GDP in 2020. The budget deficit measured in 2021 remained very high by historical standards. Given the economic revival and the decreasing volume of subsidies for short-time work, lost turnover and fixed costs, the deficit appears to have narrowed to 5.9% of GDP ( OeNB December 2021 outlook ). Likewise, in line with cyclical conditions, we project the debt ratio to have declined somewhat to 82.7% of GDP already in 2021, following an unprecedented 83.2% of GDP in 2020. An ecological and socially balanced (“eco-­social”) tax reform adopted in 2021, which will start to take effect in 2022, is unlikely to significantly impair the positive fiscal path implied by the OeNB’s projections.

Real estate prices heavily on the rise in 2021

Following almost 10% year-on-year growth in the second half of 2020, real estate prices ­continued to accelerate at even slightly higher rates in 2021, exceeding 10% in the first three quarters. Over the year, the OeNB’s fundamentals indicator for residential property prices accordingly pointed to increasing signs of ­overheating in the domestic property market. Meanwhile, residential construction has been expanding significantly, despite supply chain problems. Strong construction activity in ­combination with decelerating population growth has had the effect of realigning housing demand with supply. This should have had a cooling impact on prices. The continued strong uptick in prices may, therefore, have been driven above all by high demand for homes as investment properties.

Receding COVID-19 pandemic fuels growth and inflation in Central, Eastern and Southeastern Europe

For the EU member states in Central, Eastern and Southeastern Europe (CESEE), 2020 went down in history as one of the deepest recession years since the transition period of the early 1990s. One year on, in spring 2021, a significant decline in new COVID-19 infections paved the way for an easing of the pandemic-­related containment measures, as a result of which economic activity revived on a broad ­basis. The ­revival was driven by dynamic exports and, as the year progressed, by business investments and later by private consumption as well. As a result, annual real GDP growth averaged nearly 5.5%, a level last seen almost 15 years ago.

The economic momentum also fed through to labor market conditions in CESEE, causing ­unemployment rates in late 2021 to revert to the historically low levels of 2019.

Yet, new COVID-19 infection waves, the emergence of the Omicron variant and persistent bottlenecks in global value and supply chains eventually increased the risks to growth again toward the end of the reporting year. At the same time, inflation rates went higher and higher, culminating in the highest average rate measured in CESEE since 2008 in December 2021 (7.2%). These developments were driven by both international factors, including rising energy and commodity prices, and domestic factors. The latter included pent-up consumer demand, the normalization of prices in sectors hit hard by the lockdowns, adjustments of ­regulated prices and ­post-lockdown frictional losses, e.g. on account of short-term staff or supply shortages.

The inflation-targeting central banks in the CESEE area responded to the rising prices with minor or major interest rate hikes, thus abandoning the monetary policy easing that was called for during the pandemic in 2020. At the end of 2021, policy rates had been raised to the following levels: 1.75% in Romania (+25 basis points); 1.75% in Poland (a cumulative +165 basis points), 2.4% in Hungary (+180 basis points in total) and 3.75% in Czechia (­ultimately +350 basis points).

Chart 8, Strong recovery of real GDP growth in CESEE following 2020 recession, is a column chart that compares the real growth in gross domestic product (GDP) in percent in 2020 and 2021. The chart presents data for eleven Central, Eastern and Southeastern European countries, ranked in ascending order of 2021 GDP growth, namely Czechia, Slovakia, Bulgaria, Latvia, Poland, Lithuania, Slovenia, Romania, Hungary and Croatia. Moreover, the chart compares the aggregate GDP growth of these 11 countries with euro area aggregate GDP growth for 2020 and 2021. In 2020, the individual economies contracted by between minus 8.1% (Croatia) and minus 0.1% (Lithuania), compared with regional aggregate growth of minus 3.8% and euro area growth of minus 6.4%. In 2021, by contrast, the individual economies by grew between 3% (Croatia) and 9% (Estonia), compared with regional aggregate GDP growth of 5.4% and euro area aggregate GDP growth of 5%. Source: Eurostat, European Commission autumn forecast of November 2021.

European and international monetary and financial policy developments

IMF contributes to overcoming the ­economic consequences of the pandemic

On August 2, 2021, the International Monetary Fund (IMF) endorsed the largest general allocation of Special Drawing Rights (SDRs) in ­history, equivalent to about USD 650 billion (or about SDR 456 billion). The allocation, which caused the amount of SDRs allocated worldwide to more than triple, addresses the long-term global need for reserves and supports countries with liquidity shortages in dealing with the financial impact of the COVID-19 pandemic. In line with the international community and the EU member states, the OeNB voted for the general SDR allocation and hence Austria’s participation.

When the SDR allocation came into effect on August 23, 2021, the OeNB received SDR 3.77 billion (or EUR 4.56 billion with the exchange rate of August 23, 2021), in proportion to Austria’s quota share in the IMF. This raised the OeNB’s cumulative SDR allocation from SDR 1.74 billion to SDR 5.51 billion (or EUR 6.80 billion using the exchange rate for December 31, 2021).

Special Drawing Rights (SDRs)

Special Drawing Rights are the accounting unit created in 1969 by the IMF for its reserve asset transactions. The value of the SDR is calculated from a weighted basket of five currencies, namely the US dollar, the euro, the Chinese yuan, the Japanese yen and the British pound. SDR balances represent potential claims on the freely usable currencies of other IMF member countries. Other than for such exchanges, SDRs may be used for payments among IMF member countries and the IMF itself. However, SDRs are not legal tender, as they are not accepted for payment outside the IMF’s dedicated system.

The IMF’s annual Article IV consultations with Austria were held from May 26 to June 15, 2021. In its report published on September 9, 2021, the IMF acknowledged the fast and ­effective response of Austria to the COVID-19 pandemic, underlining that fiscal policymakers had struck an adequate balance between supporting sectors hit particularly hard and getting the economy going again. While attesting to the resilience of the Austrian banking sector amid the COVID-19 pandemic, the IMF did recommend the use of borrower-based instruments for residential mortgages (see section Forward-­looking macroprudential measures contribute to strengthening financial stability in Austria).

In a decision adopted by written procedure in October 2021, OeNB Governor Robert Holzmann, who serves as the IMF Governor for Austria, and the IMF Governor for Bhutan, were elected as Vice Chairs of the IMF’s Board of Governors until the close of the IMF’s ­Annual Meetings in October 2022. The chairmanship, which also rotates annually among the IMF Governors, will be held by the IMF Governor for Egypt until that date.

International role of the euro confirmed in turbulent times

The ECB’s annual review of the international role of the euro , published on June 2, 2021, again contained insights about the use of the euro in Central, Eastern and Southeastern ­Europe, derived from the data compiled with the OeNB’s Euro Survey . As confirmed by the report, the euro continued to be the second most important currency in the international monetary system. Even under exceptionally turbulent economic conditions, the ­international role of the euro remained broadly stable. In other words, the euro has fared much better ­recently than during the financial and economic crisis of 2008 and 2009, which had ­adversely affected the role of the euro. Ultimately, the global attractiveness of the euro is primarily supported by strengthening economic and monetary union, including advancing both the banking union and the capital markets union.

Recent research by the ECB suggests that between 30% and 50% of the value of euro banknotes is held outside the euro area. The decline in shipments of euro area banknotes was found to be mainly attributable to the ­pandemic-related setback of tourism. Among other things, the report shows that the euro ­remained a key currency in international green bond markets. Over half of the green bonds ­issued globally over the review period were ­denominated in euro. A special feature of the report on the international role of the euro ­examined the potential impact of a central bank-issued digital euro. Finally, the report ­underlined the role of Eurosystem swap and repo facilities for non-euro area countries.

Access to euro liquidity also became an ­issue during the COVID-19 pandemic. The ­policy of the Eurosystem has been to also provide smaller non-euro area central banks with euro liquidity. The geographical focus of the swap and repo lines has been on EU countries ­outside the euro area and on the Western Balkans. The central banks of ­Albania, Croatia, Hungary, North Macedonia, ­Romania, San Marino and Serbia took up the ECB’s offer of February 2021 to prolong the existing transactions for nine months until March 2022.

The Eurosystem launches a digital euro project

In mid-2021, the Governing Council of the ECB launched a two-year investigation phase to establish what it would take to roll out a digital euro. The possibility of issuing digital currencies for everyday use is being ­investigated by central banks all across the world.

Unlike electronic euro balances handled by commercial banks and private sector payment service providers, digital euro balances would be issued and backed by the Eurosystem; in other words, by the ECB, the OeNB and other euro area central banks – just like euro cash. People would withdraw digital euro amounts from their bank accounts, just like they withdraw cash, or receive digital euro credits to their accounts in the payment cycle. Euro area credit institutions would obtain digital euro balances from their respective central bank against the pledge or sale of assets used as collateral, much like they obtain cash or electronic liquidity today.

A digital euro would not replace but complement cash and existing retail payment solutions provided by private sector payment service providers. By issuing a digital euro, the Eurosystem would be able to ensure that – even in an increasingly digital world – consumers continue to have a choice between payment instruments guaranteed by the central bank and payment instruments provided by the private sector.

Since the euro must meet the very highest requirements whatever its form and since any undesirable impact needs to be avoided, it will take several years of investigation before any decision can be made on introducing a digital euro. The key issues to be addressed include the available technical options, changes to the legislative framework that may be needed, the possible economic impact and the digital design options that would best meet user needs. Only once these fundamental issues have been clarified will the ECB be in a position to decide whether to launch a digital euro.

With a view to determining how to best ensure the distribution and use of a digital euro, the ECB is ­interacting, inter alia, with the financial institutions it supervises. The ECB has also launched a review, on various levels, of the related payment system needs and requirements and is engaging with European policymakers. Within the Eurosystem, the OeNB actively contributes to the various work streams under the digital euro ­project.

Management of reserve assets amid mixed economic recovery

The OeNB’s investment portfolio is well diversified

The investment of OeNB assets is subject to comprehensive risk management procedures and controls. The primary goal of investment is to maintain a high degree of liquidity and security to ensure the ready availability of funds for coordinated intervention in financial markets whenever action should be required. Another key criterion guiding investment decisions is a broad range of diversification (chart 9). Gold reserves account for about 40% of the OeNB’s reserves. In addition, the OeNB invests above all in bonds (about 50%) and in stocks (about 10%), across a number of regions and ­currencies. The predominant currencies are convertible currencies of countries with excellent credit ratings. The predominant bonds are bonds issued by governments, agencies and supranational ­institutions as well as covered bonds. Other assets, such as corporate bonds and stocks, are included with a view to improving the risk-return ratio. This strategy has been a cornerstone of the OeNB’s stability and continues to underpin our activities within the European System of Central Banks (ESCB).

Chart 9, The OeNB’s reserve portfolio is well diversified, is a pie chart showing the OeNB’s reserve asset allocation at the end of 2021. The two biggest asset classes were gold (around 41%) and government and agency bonds (around 42%), followed by three minor categories: stocks (around 10%), corporate bonds (around 5%) and covered bonds (around 1%). Source: Oesterreichische Nationalbank.

Financial markets benefit from economic recovery

In 2021, financial markets revived as ­economies recovered from the economic setback in 2021. Yet, the recovery remained highly uneven across regions, reflecting above all divergent strategies to contain the COVID-19 pandemic and the different speeds at which the rollout of COVID-19 vaccines progressed.

This situation was mirrored, in particular, by stock markets and by the sharp rally of the leading stock market indices of the western world. The corporate sector – US companies in particular – continued to benefit from the highly supportive fiscal policies, which enabled excellent corporate results despite the many challenges, including the pandemic, supply-chain problems or surging input prices. In this environment, the US stock exchange index Standard & Poor’s (S&P) 500 jumped by 26.9% in 2021. The euro area index EURO STOXX 50 also climbed by 21.0%, while the Japanese Nikkei Stock Average (Nikkei 225) added 4.9% (expressed in local currencies). The stock ­markets of emerging economies, in contrast, suffered from the sluggish rollout of COVID-19 vaccines and monetary tightening in view of mounting inflation, which led to a 4.6% decline in stock prices (expressed in US dollar terms).

Progress made in containing the pandemic in combination with rising economic growth and climbing inflation rates translated into a burden for government bond markets, which are generally seen as safe havens. Thus, most government bond markets experienced losses in 2021. Yields were rising for many government bonds, not least because markets anticipated that, inter alia, the world’s two leading central banks, the US Federal Reserve (Fed) and the ECB, would begin to wind down their massive monetary stimulus measures. For instance, the yield of German ten-year government bonds increased by 39 basis points to –0.18% in 2021, while the yield of US ten-year treasuries mounted by 60 basis points to 1.51%.

The resulting widening of the interest rate differential between the USA and the euro area was also mirrored by exchange rate ­movements. The US dollar appreciated by 7.5% against the euro, benefiting from the strength of the US economy and the Fed’s faster pace of monetary policy tightening. In a similar vein, the British pound appreciated 6.5% against the euro. The Japanese yen, in contrast, depreciated by 3.5% against the euro in 2021, reflecting rather ­moderate economic growth and below-average inflation rates in Japan. The depreciation against the euro was even more pronounced for many emerging economy currencies, including the Turkish lira and the Argentine peso. Accordingly, J.P. Morgan’s Emerging Market Currency index dropped more than 9% against the US dollar.

The main winner of the cyclical upturn were crude oil prices, soaring by close to 59% in the reporting year. The key driver for this price hike was the release of pent-up demand as economies reopened after lockdowns, contrasting with an only moderate increase of supply volumes amid the restrictive crude oil production regime of the OPEC+ countries. Last but not least, the price of gold stopped going higher in 2021, given increased risk-taking among ­investors, and actually dropped by 3.4% against the US dollar.

Chart 10, Financial market performance reflects mixed economic recovery, is a column chart providing a performance overview for selected asset classes for 2021. These asset classes are bonds, stocks, commodities and foreign currencies. Among sovereign bonds, US treasuries were the best-performing asset class, with a performance loss of 2.3%, compared with performance losses of 2.7% for German government bonds, 3.1% for Italian government bonds and 5.8% for Austrian government bonds. Emerging market bonds in local currencies showed an even weaker performance with a loss of 11.3%. Among stocks, Austrian stocks listed in the Austrian Traded Index achieved the highest performance gain (38.9%), followed by US stocks (26.9%) EU stocks (21.0%) and Japanese stocks (4.9%). Here, too, emerging market stocks exhibited the weakest performance measures (minus 4.6%). Among commodities, gold prices contracted by 3.4%, while West Texas Intermediate crude oil prices soared by 58.9%. With regard to foreign currency-denominated assets, the US dollar appreciated by 7.5% against the euro, and the pound sterling by 6.5%. In contrast, the Japanese yen depreciated by 3.5% against the euro, and emerging market currencies depreciated by 9.2% against the US dollar. Source: Bloomberg.

OeNB reserve management subject to risk reduction measures

In response to financial market developments in 2021, the OeNB adjusted its asset allocation strategy by redefining the strategy for foreign currency investments and shifting larger amounts into stocks. Throughout 2021, the OeNB’s foreign currency reserves were ­invested almost exclusively in the major stable inter­national reserve currencies which define the ­international reserve asset created by the IMF (Special Drawing Rights – SDRs). The proportion of stocks was raised within the OeNB’s ­externally managed higher-risk portfolios. The contracts for externally managed portfolios are tendered in a multi-tier bidding process. The decision to go for a higher share of stocks was motivated by efforts to ­address the challenges for euro-denominated investments arising from the protracted period of low interest rates. This realignment aimed to increase the robustness of investments and to further enhance the prospective risk-return profile in times of heightened financial market volatility.

The challenges created by the pandemic and the protracted period of low interest rates have, yet again, highlighted the relevance of a balanced allocation of the OeNB’s reserve assets. In 2021, major diversification benefits came above all from non-euro assets. While euro-denominated government bonds generated a negative performance on account of rising yields, the foreign currency portfolios benefited from the euro’s weakness. As the OeNB’s own reserve assets are invested in a mix of euro- and foreign currency-denominated bonds, this portfolio generated a clear performance gain (around 1.3%).

The OeNB’s externally managed portfolios showed a solid positive performance with a performance gain of more than 11% in 2021, thus significantly driving up valuation gains.

Finally, the value of the OeNB’s gold ­reserves rose to more than EUR 14 billion due to the strong performance of gold compared with the euro, topping last year’s record result by some 4% (chart 11).

Chart 11, Market value of OeNB gold holdings remains at record high, is a combined column and line chart showing volume and value changes in the OeNB’s gold holdings since 2000. The volume of the OeNB’s gold holdings dropped from 377 tons in 2000 to 280 tons in 2007 and has remained constant since then. The value of the OeNB’s gold holdings decreased from EUR 3.5 billion in 2000 to EUR 3.2 billion in 2004. Thereafter, we observe a gradual increase to EUR 11.4 billion until 2012 and a sharp drop to EUR 7.8 billion in 2013. By the end of 2021, the value of the OeNB’s gold holdings climbed to EUR 14.5 billion. Source: Oesterreichische Nationalbank.

Beyond profit: in pursuit of sustainability in investing

For many years, explicit sustainability criteria have informed the OeNB’s risk management decisions. Since 2011, external asset managers making investments for the OeNB must have signed the UN-supported Principles for Reponsible Investment . These principles address environmental, social and governance (ESG) issues and provide for responsible disclosure practices and ownership policies. Beyond that, the OeNB has implemented requirements ­regarding greenhouse gas emissions for selected asset classes in its externally managed ­portfolios. The underlying idea is to encourage external asset managers to systematically apply both ESG criteria and sustainable and responsible ­investment (SRI) criteria. The OeNB’s internal portfolio managers have likewise been giving increasing preference to assets that meet these quality standards. The application of the SRI criteria for internally and externally managed portfolios will be developed further in the light of experience and in accordance with accepted procedures. In 2022 and beyond, we intend to take sustainable investment to the next level in three major respects:

  • building sustainability criteria more firmly into the investment process;
  • integrating SRI/ESG criteria more widely into IT systems and reporting;
  • investing more heavily in green, sustainable bonds.

Last but not least, the Eurosystem also agreed on a common stance for climate change-related sustainable and responsible investment principles for euro-denominated nonmonetary policy portfolios. The Euro­system, including the OeNB, aims to start climate-related disclosures for these types of port­folios within two years. The ECB issued a press release to this effect in early February 2021.

Environmental, social and ­governance (ESG)

More and more financial and nonfinancial firms around the world believe that management decisions and company analyses should give due consideration to environmental, social and governance issues. Rating agencies and many investors have come to include such criteria, for instance compliance with the UN-supported Principles for Responsible Investment, into their securities analysis framework.

Climate change also affects the OeNB’s core tasks

Natural disasters in neighboring countries and extreme weather events in Austria drove home the message in 2021 that climate change has arrived (chart 12). In November 2021, the UN Climate Change Conference in Glasgow (COP26) ended with the commitment of participants to pursue efforts to limit global warming to 1.5°C. A couple of months earlier, the European Commission had unveiled new measures aimed at lowering greenhouse gas emissions by at least 55% until 2030, compared with 1990 levels, across the European Union. The final goal is to make Europe the first climate-neutral continent by 2050. Already, we have started to feel the ­macroeconomic impact of both climate change and climate protection. As a case in point, the rapid rise of emissions trading prices in 2021 appears to be correlated with the latest spike in energy prices and currently elevated inflation.

Chart 12, Projected rise in global mean temperature, is a line chart that shows by how much global mean temperature might rise in this century from pre-industrial levels. The vertical axis plots the temperature rise from 0 degree Celsius to 5 degree Celsius. The horizontal axis shows the observation period from 2020 to 2100, divided in 20-year intervals. Three lines emerge from the bottom left corner, starting at slightly more than 1 degree Celsius in 2020. All three lines go upward over time and diverge in slightly downward sloping curves. 

The line with the highest trajectory reaches a level slightly above 3 degree Celsius in 2100. It symbolizes the likely average temperature rise in a scenario that does not go beyond current climate protection measures. The expanding shading around the line is a measure of the uncertainty surrounding this measure. In other words, in this scenario, the mean temperature may range between above 2 degree Celsius and below 5 degree Celsius at the end of this century, albeit with decreasing probability. The line with the highest trajectory reaches a level slightly above 3 degree Celsius in 2100. It symbolizes the likely average temperature rise in a scenario that does not go beyond current climate protection measures. The expanding shading around the line is a measure of the uncertainty surrounding this measure. In other words, in this scenario, the mean temperature may range between above 2 degree Celsius and below 5 degree Celsius at the end of this century, albeit with decreasing probability toward these extreme numbers. 

A second line matches the first line until 2040 but then flattens visibly, to somewhat above 1.5 degree Celsius by 2100. This trajectory represents the likely outcome of a delayed transition scenario in which it takes the economy and society longer to achieve climate neutrality. Here, too, shading around the line implies a rising level of uncertainty, which reaches a range of slightly above 1 degree Celsius to 2.5 degree Celsius in 2100. 

Finally, a third line tracks the other two lines until 2030 and then slightly undercuts the second line, reaching close to 1.5% in 2100. This line represents a scenario compatible with net zero CO2 emissions by 2050. This line, too, comes with a shaded area that represents the degree of uncertainty of the baseline estimates. Under this scenario, we arrive at an increase of between 1 degree Celsius to below 2.5 degree Celsius. 

Source: The information provided stems from a database run by the International Institute for Applied Systems Analysis and the Network for Greening the Financial System and is based on the REMIND model developed by the Potsdam Institute for Climate Impact Research. REMIND is an acronym for Regional Model of Investment and Development.

Climate change is, ultimately, also a challenge for monetary policymaking, as evidenced by an OeNB study . 2 Key issues in this context include the multi­faceted risks to price and financial stability arising from global warming and measures taken to address these risks. Central banks are called upon to consider such implications in their policies. Climate change might drive up economic uncertainty, restrict central banks’ leeway for policymaking and affect their sheets. Without prejudice to the objective of price ­stability and in line with its statutory mandate, the Eurosystem supports the general economic policies in the EU, including those on environmental protection.

Primarily, however, climate policymaking is the task of governments and parliaments. By adopting carbon pricing measures, they can promote the ­transition to a climate-neutral economy in a more ­effective and efficient manner than monetary policymakers might do. True cost-pricing and a smooth decarbonization process would also lower the risks to financial stability, thus creating fewer challenges for central banks’ activities in banking supervision. Monetary policy ­operations may contribute to reducing climate-related risk. The tools of choice would be the revaluation of assets and collateral as well as adjustments of liquidity-providing transactions and asset-buying programs. Last but not least, heightened transparency and standards will send out a powerful signal for higher sustainability in financial markets.

Starting from these premises, the ECB adopted an action plan in mid-2021 to include climate change ­considerations in its monetary policy strategy (see box 1). Related measures will be implemented in line with EU initiatives in the field of environmental sustainability disclosure and reporting.

Research conducted at the OeNB adds to expertise on the relationship between the climate and the ­economy. A short study published by the OeNB in 2021, for instance, highlights that Austria is no longer at the vanguard of EU countries when it comes to climate policymaking. 3 In Austria, the cumulative amount of greenhouse gas emissions increased by 1% from 1990 to 2018, whereas it dropped by 18% among Western European EU member states. Austria’s comparatively higher GDP growth rates may serve as an explanation for this gap only to a small extent. Much rather, the study identified the transport sector as the main driver, given that fuel prices are lower in Austria than in neighboring countries. While Austria’s carbon pricing program, which is to be implemented in 2022, will offset this price advantage only to a degree, it is a first step toward meeting the ­government’s climate neutrality goal by 2040.

The OeNB supports the financial sector in dealing with the risks and opportunities arising from climate change, i.a. in monitoring physical risks and transition risks. The physical risks of climate change relate to ­natural disasters, which may have a negative impact on productivity and asset prices. Transition risks could arise from sharp changes in climate policies, technological innovations or consumer behavior as a result of which fossil fuels assets may diminish in value. All of these risks affect the credit ratings of individual banks and might destabilize the financial system as a whole. This is why current law already requires that climate-related financial risks be taken into account in risk management.

At the same time, climate protection activities also create new opportunities for the financial sector, given the need for major investments to help implement the transition to alternative sources of fuel and energy. In Austria alone, we will have to mobilize three-digit billion amounts from public and private sector investors until 2030 to make substantial progress. As yet, sustainable finance products that comply with environmental, social and governance (ESG) criteria are a small, if growing market niche. At the same time, the widespread greenwashing of unsustainable finance products might deal a blow to investor confidence. To prevent this, we need more transparency, e.g. by requiring financial institutions and business corporations to disclose sustainability measures, as envisaged by the (enhanced) European Commission’s action plan on financing sustainable growth.

As a member of the Central Banks and Supervisors Network for Greening the Financial System (NGFS), the OeNB contributes to analytical work supporting microfinancial supervision, the identification of macrofinancial risks, the development of market incentive strategies and data provision. Among other things, the OeNB has created climate stress tests for banks, contributed to the Guide for Managing Sustainability Risks published by Austria’s Financial Market Authority (FMA) and supported the Austrian government in launching its Green ­Finance Agenda (see box 7 and section Enhanced regulatory framework for the financial sector). Within the Eurosystem, the OeNB is also working on climate change-related sustainable and responsible investment ­principles for the euro-denominated nonmonetary policy portfolios of euro area central banks (see section ­Beyond profit: in pursuit of sustainability in investing). Last but not least, the OeNB as an organization has been applying environmental management solutions for decades and remains committed to keep reducing its ­operational carbon footprint with a view to achieving effective climate neutrality by 2040 (see section The OeNB’s Environmental Statement 2021). On the occasion of the UN Climate Change Conference in Glasgow, the OeNB and the FMA published a joint pledge , to encourage climate-friendly financial markets by walking the talk in their remits (monetary policy, financial supervision, own investment and operational ecology).

Looking ahead, the OeNB intends to reinforce its efforts in all sustainability-related work streams (including green finance; environmental, social and governance issues; sustainable and responsible investment; and ­ecological management) to be able to disclose climate-relevant information by 2023 and keep enhancing its carbon management practices in view of the carbon neutrality goal for 2040. As a first step, the Governing Board of the OeNB has launched a climate targets coordination project to synchronize OeNB-wide efforts ­toward achieving this goal.

2 Breitenfellner, A. and W. Pointner. 2021. The impact of climate change on monetary policy. In: Monetary Policy & the Economy Q3/21. OeNB. 59–80.

3 Breitenfellner, A., M. Lahnsteiner and T. Reininger. 2021. Österreichs Klimapolitik: Vom Vorbild zum Nachzügler in der EU. In: ­Konjunktur aktuell – December 2021. OeNB. 53–58.

The OeNB actively seeks to ensure financial stability

Banking sector resilience is the focal point of supervision

Austrian banks benefit from economic ­upturn

Austrian banking sector profits improved ­visibly in the first three quarters of 2021, more than doubling to EUR 5.9 billion year on year. As the economy recovered, broad-based support cushioned the impact of pandemic-related effects and credit growth did not let up, banks were able to cut their provisioning. In fact, after having increased sharply in 2020, risk provisioning decreased by slightly more than three-quarters to EUR 0.5 billion in 2021. Austrian banks thus even outperformed the profits they had earned in the period from 2017 to 2019, under benign macrofinancial conditions.

Chart 13, Net profit of Austrian banks, is a combined column and line chart showing how the consolidated results of Austrian banks evolved from 2011 to 2020 and in the third quarter of 2021. The columns indicate low profitability in the years after the economic and financial crisis of 2008 and 2009, when banks mostly recorded profits of below EUR 1 billion or, in 2013, even a EUR 1 billion loss. Thereafter, we observe significant profitability gains from 2015, well above EUR 5 billion in some years (amid cyclical highs), a sharp decrease of net profits in 2020 to somewhat above EUR 3 billion amid the COVID-19 pandemic due to a sharp rise in risk provisioning, and a strong rebound of net profit in 2021 to close to EUR 6 billion after the first three quarters of the year. 

These figures are put into perspective with the corresponding cost of risk provisioning, as evidenced by the line chart. The cost of risk fluctuated heavily, between 88% in 2013 and 5% in 2018, before rebounding to 45% in 2020.  Source: Oesterreichische Nationalbank.

However, the improvement in operating profits (excluding risk costs) was strongly driven by valuation adjustments and one-off ­effects. Given the persistently low interest rates, banks’ interest income rose by just 1.1% year on year in November 2021, even though the growth rate of lending to nonbanks remained strong (+4.5%).

Loan asset quality continued to be stable at high levels. Nonperforming loans accounted for a historically low share of 1.8% of the loan portfolio in September 2021. At the same time, credit risk measures with leading indicator properties imply emerging challenges ahead. Cases in point are the level of forbearance ­activities and the share of assets classified as IFRS 9 Stage 2 under the International ­Financial Reporting Standards (see chart 15). The outlook is also clouded by the growing number of firms that became insolvent in the second half of 2021 (see section National and European ­banking supervisors join forces in safeguarding banking sector resilience).

Forbearance

Forbearance measures are any concessions lenders make to borrowers that face or are about to face financial difficulties. ­Forbearance measures are sound as long as the agreed postponement remains temporary. The underlying risk is that banks may end up avoiding loss recognition methodically, thus underestimating credit risk and overestimating their own loss-absorption capacity.

A similar picture emerges for Austrian banks’ subsidiaries in Central, Eastern and South­eastern Europe (CESEE). 4 They achieved an ­aggregate period ­result (after taxes) of EUR 2.3 billion for the first three quarters of 2021 (+44% year on year), largely thanks to the ­decline in risk costs.

The lending activity of Austrian banks continued to be driven by mortgage lending to ­domestic households. In November 2021, the mortgage lending pace increased to 6.8% year on year (with outstanding loans climbing to EUR 128.8 billion), thus exceeding the growth rate of corporate loans, which had started to accelerate of late (+5.5% year on year; outstanding loans of EUR 180.6 billion).

Microprudential and ­macroprudential supervision

Microprudential supervision refers to the ongoing monitoring of individual banks, with supervisors focusing on assessing banks’ compliance with regulatory criteria and the resilience of their business models. The OeNB is a national supervisory authority in the system of banking supervision in Europe, the Single Supervisory Mechanism (SSM). As such, it is involved in supervising both significant and less significant Austrian credit institutions. The key supervisory tool is the supervisory review and evaluation process (SREP), which serves to bundle all supervisory findings recorded for a given year and to communicate all requirements for improvement to the respective banks.

Macroprudential supervision is aimed at analyzing and reducing any risks emerging in the financial system that are of a systemic nature. Systemic risks may jeopardize the financial system or parts thereof, which could have severe negative repercussions not only for the financial system but also for the real economy. Macroprudential supervision is a national responsibility, and the OeNB plays a key role in the macroprudential supervision of Austrian banks.

As a result of banks’ efforts and microprudential and macroprudential measures adopted in the past, capital ratios in the banking sector have gone up and Austria’s financial system has become more resilient. Thus, the banking sector has been an anchor of stability during the COVID-19 pandemic, ensuring the provision of liquidity to the Austrian corporate sector. In the first nine months of 2021, Banks’ consolidated common equity tier 1 ratio (CET1) climbed to 15.8% (+0.18 percentage points compared with September 2020), reflecting among other things supervisory guidance to refrain from or limit ­dividend payouts (see section Measures to mitigate the impact of ­COVID-19 on the banking sector are lifted). The combined leverage ratio of Austrian banks reached 7.6% in September 2021 (+46 basis points). Furthermore, their liquidity situation is solid, supported by the favorable terms for Eurosystem credit operations, which also benefited profitability. Austrian banks’ subsidiaries in CESEE continue to increasingly rely on local stable funding, in line with supervisory guidance ( Sustainability Package ). Having declined further, foreign currency loans in both Austria and CESEE do not constitute any systemic risks.

These positive developments did not go ­unnoticed by international financial institutions and rating agencies. As a case in point, the ­International Monetary Fund (IMF) concluded in its 2021 Article IV consultations that the Austrian financial sector had remained resilient throughout the pandemic.

Uncertainty and structural challenges ­continue to call for prudent behavior

The positive developments in the first three quarters of 2021 notwithstanding, pandemic-­related uncertainty factors and structural ­challenges with regard to the efficiency of the Austrian banking sector continue to apply. The same holds true for the heightened credit risk that comes with these conditions as well as the risks arising from the persistently low interest rates.

Thus, banks will need to continue to exercise restraint on dividend payouts to keep strengthening and sustaining their capital ratios. Such prudent behavior will help ensure that the banking sector remains resilient and is able to fulfill its core task of providing the real economy with loans and financial services even in an environment of crisis. Applying sustainable lending standards, especially in housing mortgage lending, is crucial in this respect. 5

Forward-looking macroprudential ­measures help strengthen financial stability in Austria

As OeNB analyses have shown, market momentum remained high in Austria’s residential property market in 2021. The real estate market continues to be characterized by high price and loan growth, lending rates at unprecedented lows, intense competition and low margins amid high debt service-to-income and loan-to-value ratios. The share of variable rate loans has declined substantially in recent years, but many borrowers are still vulnerable to an increase in short-term interest rates. Based on a comprehensive review of systemic risk by the OeNB, the Austrian Financial Market Stability Board (FMSB) concluded in its 30th meeting on ­December 13, 2021 , that banks had failed to adequately comply with its guidance on sustainable mortgage lending so far.

If a real estate crisis were to emerge, the financial system might face disruptions that could trigger negative repercussions for the real economy. The adequate way forward, from the OeNB’s perspective, would be legally-binding borrower-based measures for preventing the further buildup of systemic risks arising from housing mortgages. The use of such measures in Austria has been evaluated and advised also by European and international organizations such as the European Systemic Risk Board ­(ESRB), 6 the Organisation for Economic Co-operation and Development (OECD) and the IMF (see also box 6).

Borrower-based ­macroprudential measures

Borrower-based measures are macroprudential measures that target borrowers with a view to preventing the buildup of systemic risks from real estate exposures. The underlying idea is to prevent borrowers from becoming overindebted, loans from defaulting and defaulted loans from resulting in credit losses. In other words, borrower-based measures are intended to prevent adverse real estate market developments from having a negative impact on borrowers, banks and ultimately the financial system as a whole. Key indicators in this respect are the loan-to-value ratio, the debt service-to-income ratio and the debt-to-income ratio.

Furthermore, the OeNB has stepped up its monitoring activities with regard to banks’ commercial real estate exposures. As a starting point, a new OeNB reporting regulation known by its German acronym “GIMPI” is set to ­improve data availability. The data to be collected will, in particular, enable the OeNB to calculate commercial property price indicators. It will, however, take a few years until meaningful time series for compiling the indicators become available.

Acting on the OeNB’s annual review of banks identified as other systemically important institutions (O-SIIs), the FMSB also renewed its recommendation on the O-SII buffer for Austrian banks. Compared with 2020, the list of institutions identified as O-SIIs and the ­buffer levels remained broadly unchanged. The O-SII buffer addresses risks arising for the ­financial system and the real economy from the malfunctioning of a systemically important ­institution. Specifically, the FMSB advised the Austrian Financial Market Authority (FMA) to require O-SII buffers for seven Austrian banks both on a consolidated and on an unconsolidated level.

The systemic risk buffer (SyRB) addressing the vulnerability of the Austrian banking system to imbalances in the ­financial system, last reviewed in 2020, was not subject to adjustments in 2021. Following the implementation, as of May 29, 2021, of the EU’s revised Capital Requirements Directive (CRD V), the O-SII buffer and the SyRB have become additive, while until then the higher of the two had applied. 7

Chart 14, Credit and GDP growth in Austria, is a line chart that compares the volume of lending extended by Austrian banks with Austria’s gross domestic product in the period from 2008 to mid-2021. The key message of the chart is that bank lending continued virtually unabated during the COVID-19 pandemic, while GDP declined, not least because of containment measures. The changes in these two indicators are relevant  for the assessment of excessive credit growth (a positive gap implies that the credit-to-GDP ratio is above trend). Source: Oesterreichische Nationalbank.

Last but not least, supervisors also need to keep an eye on cyclical risks that may arise for the Austrian banking system. The countercyclical capital buffer (CCyB) developed for this purpose was left at 0% of risk-weighted assets in 2021 as advised by the FMSB. While the gap between the credit-to-GDP ratio and its trend remained positive, it narrowed in the second quarter of 2021 as the economy recovered (chart 14). Other indicators likewise imply risk mispricings, though. Any future decision on whether the FMSB should advise a higher CCyB requirement will depend on whether the CCyB-relevant indicators continue to see a ­sustained improvement as the economy ­recovers, and whether borrower-based measures are ­effective in reducing the risks from the credit cycle.

Q&As on macroprudential measures regarding housing mortgages

How might housing mortgages contribute to emerging systemic risks?

In the past, rising house prices and mortgage lending have been early warning indicators for an ­emerging real estate crisis in a number of countries. Typical crisis factors include ultralow lending ­interest rates and intense competition among banks as drivers of markedly declining yield margins and rising risk tolerance in the real estate lending segment. The momentum created by rising prices, easing lending standards and robust loan growth may cause the residential property market to become overheated. In the event of property price corrections, banks may be confronted with credit defaults and suffer losses, which in turn leads to a sharp increase in collateral realization amid dwindling demand. As these developments then amplify the downward pressure on prices, the real estate crisis deepens in a vicious cycle.

What is the OeNB’s assessment of systemic risk arising from housing mortgages in Austria?

The mounting systemic risks identified in the OeNB’s broad-based analysis of systemic risks may ­disrupt Austria’s financial system, or parts thereof; and these disruptions may trigger serious negative effects on the financial system or the real economy. If a real estate crisis were to emerge, the financial system might be affected – notwithstanding a number of mitigating factors that the OeNB identified as well. Austria has a well-developed rental market with a high share of nonprofit providers; renting out debt-financed private property plays but a minor role; Austrian borrowers tend to have high ­incomes and wealth by international standards; and Austrian households’ indebtedness is ­comparatively low.

European and international organizations have assessed the situation in a similar fashion. For this ­reason, also the European Systemic Risk Board (ESRB), the Organisation for Economic Co-operation and ­Development (OECD) and the International Monetary Fund (IMF) have advised the Austrian ­authorities to adopt borrower-based measures.

What has been done so far in Austria to address these risks, and how effective have such initiatives been?

For some time now, the OeNB has been urging banks to apply sustainable lending standards, alerting them to potential repercussions for financial stability. Supporting this assessment, Austria’s Financial Market Stability Board (FMSB) provided guidance on sustainable lending standards already in 2018. As a rule, banks should require mortgage borrowers to contribute at least 20% own funds; debt service payments should not exceed 30% to 40% of net household income; and loan terms should be limited to 35 years and aligned with borrowers’ life cycle to reflect, for instance, lower income levels after retirement.

However, a considerable share of new mortgages continues to be offered at elevated debt service-to-income and loan-to-value ratios. In other words, banks have failed to comply to a sufficient degree with the FMSB’s guidance on sustainable mortgage lending.

Which instruments does the macroprudential toolkit in Austria include?

The OeNB considers legally binding borrower-based measures in line with sustainable lending ­standards to be necessary and adequate. The legal basis for such instruments has been established in Article 23h Austrian Banking Act. In line with its legal mandate, the OeNB will prepare an FMSB ­recommendation to the Financial Market Authority (FMA), aiming at measures to become legally ­binding preferably by mid-2022. Such measures may include upper limits for a number of ­macroprudential indicators such as maximum loan-to-value, debt service-to-income and debt-to-income ratios as well as maximum loan maturities. Other options include amortization requirements and different rules for different geographic areas or lending instruments as well as exemption buckets.

What does the macroprudential toolkit look like in other EU countries?

A great number of EU countries have already responded to the mounting systemic risks that arise from housing mortgages. Most countries have opted for legally binding measures (e.g. Estonia, Ireland, Lithuania, the Netherlands, Poland, Slovakia and Sweden), others for guidance measures (e.g. Belgium, France and Portugal). As a rule, they have implemented a package of measures (e.g. debt service-to-income ratios and limitations on loan maturities) including upper limits for the respective ratios and exemption buckets. Among the first to adopt borrower-based measures were those EU member states whose economy suffered big losses from the bursting of real estate bubbles during the financial crisis of 2008 and 2009 (e.g. Latvia). In January 2022, Germany announced a set of macroprudential measures, including the activation of the countercyclical capital buffer and the introduction of a ­sectoral systemic risk buffer for housing mortgages. Only few EU members have not yet adopted any measures (e.g. Greece, Italy and Spain).

National and European banking ­supervisors join forces in safeguarding the stability of the banking sector

The Single Supervisory Mechanism (SSM), the system of banking supervision on the European level established in 2014, was instrumental in enhancing the capital and liquidity situation of the European banking sector after the financial crisis of 2008 and 2009. In Austria, the OeNB and the FMA have continued to play a major role in supervising significant institutions ­supervised directly by the ECB. They have ­remained directly responsible for supervising less significant institutions within the overall SSM context. In late 2021, the list of significant entities directly supervised by the ECB across Europe contained 115 institutions, 7 of which were banks established in Austria. 8 The list of significant Austrian banks grew from 6 to 7 in October 2020, when Addiko Bank AG was added to reflect its significant cross-border ­activities in Croatia.

Under the prevailing pandemic conditions, significant Austrian and European banks alike continued to enhance their capital ratios as their balance sheets likewise increased (see ­section Austrian banks benefit from economic ­upturn). Given the measures adopted to ­support the real economy, the traditional indicators (such as nonperforming loans) have not been signaling a pandemic-related heightening of credit risk at Austria’s significant institutions. At the same time, one of the leading indicators of loan quality – the three-stage IFRS 9 impairment model – shows that credit exposures ­categorized into Stage 2 under IFRS 9 account for a significantly larger share among Austria’s significant institutions than among their peers in other EU countries (chart 15; data for the third quarter of 2021). Stage 2 loans are ­defined as loans that are not credit impaired but have seen a significant increase in credit risk since initial recognition; accordingly, banks have to recognize expected credit losses for such exposures. The comparatively high share of Stage 2 loans among Austrian significant institutions may reflect above all conservative risk assessments, as the cost of credit risk and the ratio of nonperforming loans are low at the Austrian institutions whereas risk provisions are higher than average.

On-site inspections focus on credit risk

The on-site inspections carried out at a number of Austrian banks in 2021 were partly carried out remotely on account of the pandemic. At significant institutions, the inspections focused on commercial real estate exposures and on corporate funding, including funding provided to small and medium-sized enterprises (SMEs). The inspections were carried out with harmonized procedures and common methods developed at the SSM level. For instance, individual exposures were reviewed in a standardized manner and banks’ IFRS 9 calculations were examined with common models. This ensures that bank-specific results are comparable. While these exercises are ongoing in 2022, ­initial ­results show that banks have been pursuing quite heterogeneous approaches in the ­relevant segments, such as credit risk management ­processes and methods or IFRS 9 impairment modeling, in particular when accounting for COVID-19-­related aspects.

OeNB and FMA jointly define ­supervisory priorities

Looking ahead to 2022, the OeNB and the FMA again defined joint priorities for banking supervision in Austria. As agreed, the key objectives will be to (1) undertake adequate early warning monitoring and practice transparent communication with a view to further enhancing the ­stability and resilience of Austria’s banking market under COVID-19 conditions, (2) identify risks related to the growing use of digital technologies, (3) enhance analysis in order to ­better reflect environmental, social and governance (ESG) risks and in particular climate risk aspects, (4) keep adjusting supervisory methods, processes and tools to new regulations and findings, (5) identify and address gaps in the sustainability of banks’ business models, and (6) reduce risks arising from real estate exposures. These objectives are connected with the supervisory priorities defined at the SSM level and by the European Banking ­Authority (EBA) for 2022.

Enhanced regulatory framework for the financial sector

In October 2021, the European Commission adopted legislative proposals to amend the ­Capital Requirements Regulation (CRR III) and the Capital Requirements Directive (CRD VI) ( EU banking package 2021 ). This package essentially served to complete the implementation of the globally agreed final Basel III reform package in the EU, which is aimed above all at strengthening the risk-based approach of ­banking regulation. The new rules improve the risk-sensitivity calibration under the standardized approach for measuring credit risk and constrain the use of internal ratings-based (IRB) models, above all by imposing an output floor, i.e. requiring IRB-derived risk-weighted assets to be no less than 72.5% of the risk-weighted assets required under the standardized approach. EU-specific rules geared at structural features of the EU economy (e.g. SME-supporting factor and infrastructure ­supporting factor) have been retained. Finally, the banking package is also aimed at reducing compliance costs for noncomplex, small banks.

Basel III

Basel III refers to the current version of the internationally agreed legal framework for banking supervision developed by the Basel Committee on Banking Supervision (BCBS). The initial Basel III reforms were adopted in 2010 in response to the financial crisis of 2008 and 2009, providing above all for new rules regarding own funds, liquidity and the leverage ratio. The final Basel III reform package, which was not endorsed until 2017, focused above all on the calculation of risk-weighted assets and their lower bounds (output floor). The final parts of the Basel III standards are due to take effect on January 1, 2023.

As envisaged in the European Commission’s legislative proposals, the CRR III framework will start to apply from January 1, 2025. However, numerous exemptions and transitional provisions will postpone the full rollout in the EU until 2030 and 2033, respectively. The ­European Commission expects its legislative proposals for implementing the latest Basel III rules, which also reflect a number of EU-­specific rules, to lead to an increase in EU banks’ minimum levels of capital requirements of between 0.7% and 2.7% by 2025 and of ­between 6.4% and 8.4% by 2030. OeNB calculations suggest that Austrian banks are likely to be somewhat less strongly affected by these ­Basel III-induced effects than their EU peers.

Moreover, the legislative proposals provide for an enhanced monitoring of ESG risks, as a result of which reporting requirements, stress testing procedures and the supervisory review and evaluation process (SREP) will have to be adjusted accordingly. In early July 2021, the European Commission published its new ­strategy for financing the transition to a ­sustainable economy, which has high regulatory relevance and will guide future EU initiatives. Furthermore, the Central Banks and Super­visors Network for Greening the Financial ­System (NGFS) issued a declaration on the ­occasion of the UN Climate Change Conference in Glasgow (COP26) in November 2021. As NGFS members, the OeNB and the FMA pledged to support this cause in a separate joint declaration, outlining their approach to climate risk supervision (see box 5).

The need to enhance regulation also relates to the ongoing digital transformation of the ­financial sector. The European Commission ­responded to this need by presenting a digital finance package in September 2020, aimed at providing a regulatory framework for innovative financial services while safeguarding the EU’s global competitiveness in this area. This package includes a number of legislative proposals: (1) a proposal for a regulation on ­markets in crypto-assets (MiCA), which was motivated by the intention to harmonize the regulation of crypto markets and the respective service providers across the EU; (2) a proposal for a distributed ledger technology pilot ­regime, which is a first attempt at regulating decentralized digital market infrastructures, including blockchain-type transactions and settlements; and (3) a proposal for a financial services digital operational resilience act (DORA), which is aimed at contributing to the operational ­stability and resilience of digital systems in the financial system. Having been agreed on by the Council of the European Union in November 2021, these legislative proposals are already ­being discussed in interinstitutional ­negotiations at the EU level, so-called trilogues, between the Council of the EU, the European Parliament and the European Commission. The new rules are expected to take effect in 2023.

Given the rapid pace of technological ­progress in payments, the Eurosystem has also been enhancing the supervisory framework for payments. In November 2021, the Governing Council of the ECB adopted a new oversight framework for electronic payment ­instruments, schemes and arrangements (PISA). This framework follows up on initial guidance on managing and overseeing the operational resilience of financial market infrastructures that had been applicable since 2019: the ECB’s cyber resilience oversight expectations (CROE) for financial market infrastructures. The new framework extends the oversight principles that have already existed for card-based payment systems (e.g. VISA, MasterCard) and credit transfer schemes (e.g. SEPA) to innovative instruments (e.g. electronic wallets or crypto asset-related payment services).

Austria’s deposit guarantee scheme continued to prove its reliability and stability in 2021 given the third payout event 9 since spring 2020, when economic uncertainty started to increase amid the COVID-19 pandemic. These three payout events, which were unconnected and driven by idiosyncratic factors, created neither uncertainty among savers nor negative spillovers onto other banks. Beyond Austria’s ­central ­deposit insurance scheme (Einlagensicherung AUSTRIA – ESA), two institutional deposit ­insurance and investor protection schemes are in place in Austria, covering the savings bank (Sparkassen) sector (S-Haftung) and – since December 2021 – all Raiffeisen cooperative banks (Österreichische Raiffeisen Sicherungseinrichtung – ÖRS).

Measures to mitigate the impact of COVID-19 on the banking sector are lifted

The banking sector continued to be confronted with pandemic-related challenges in 2021. The relief measures adopted by the regulatory and supervisory authorities in 2020 were primarily aimed at supporting banks in continuing to provide funding to the real economy. In particular, the ECB and the SSM, the EBA and the Single Resolution Board (SRB) decided to ­adjust their supervisory processes, and the FMA and the OeNB followed suit in Austria. Some of these relief measures were lifted again in 2021, including the greater operational ­flexibility provided to banks and EBA guidelines on legislative and nonlegislative ­moratoria.

The recommendations made by the ESRB and the ECB for SSM-supervised banks to ­refrain from or limit dividend payouts applied until September 30, 2021. The reduced scope of recovery plan reporting in the SSM ­continued to apply throughout 2021. The leverage ratio relief provided by the ECB and the FMA, under which banks were allowed to temporarily ­exclude certain central bank exposures from the leverage ratio, is set to expire at the end of March 2022. The temporary framework ­adopted by the European Commission to enable EU countries to use the full flexibility of state aid rules was prolonged ­until June 30, 2022.

Leverage ratio

A 3% minimum leverage ratio became binding for EU-based banks on June 28, 2021. The leverage ratio shows the relationship between a bank’s tier 1 capital (numerator) and its total exposures (denominator). A low leverage ratio means that a bank’s level of exposures is rather high compared with its level of tier 1 capital. Because the leverage ratio is not dependent on risk, it serves as a backstop to risk-weighted capital requirements.

Confirmed by EU-wide and OeNB stress tests: the risk-bearing capacity of ­Austrian banks remains solid

Different stress test scenarios serve to generate a range of “what if” assessments. Based on these scenarios, stress tests simulate the performance of a range of banking industry indicators over a couple of years, thus serving as an alert mechanism that helps identify potential adverse developments in good time. Stress tests are one among several analytical tools used to arrive at an overall risk assessment of individual banks or the banking sector as a whole.

Under the auspices of the EBA, EU-wide stress tests are carried out every other year for significant institutions. Following the postponement of the 2020 exercise due to the COVID-19 pandemic, another EU-wide stress test was performed in 2021. The underlying macroeconomic scenarios reflected different pandemic-related narratives. While the assumption of the baseline scenario was a rapid economic recovery, the adverse scenario ­expected the pandemic to continue in 2021 and until 2023, accompanied by sweeping public containment measures and a deepening of the economic contraction compared with 2020. The results show that the European banking sector would withstand the adverse scenario, subject to a decline of the aggregated CET1 ­ratio by 4.9 percentage points to 10.2%. Compared with their European peers, the Austrian banks that were tested in this exercise ranked neither high nor low.

In addition, the OeNB conducted a national stress test of its own, as it does every year. The OeNB’s stress test covered the Austrian banks that have been classified as significant and the Austrian banking system as a whole, focusing on risk to capital as well as on liquidity and spillover risks. The results likewise confirmed the strong resilience of Austrian banks.

In sum, the exercise identified an aggregate stress test impact of 5.1 percentage points for the Austrian banking sector (chart 16), which was mostly driven by heightened loan defaults. With a CET1 ratio of 11%, the capitalization ratio for the end of the forecasting horizon still exceeds the ratio that had been measured ­before the financial crisis of 2008 and 2009, as banks have been strengthening capitalization in recent years. Beyond that, banks have been benefiting indirectly from public action taken to support the economy, because measures to mitigate loan defaults have lowered the need for risk provisions.

Chart 16, CET1 ratio of the Austrian banking system, is a line chart that shows the changes in the aggregate common equity tier 1 (CET1) ratio calculated for Austria’s banking sector. The CET1 ratio increased from 15.3% to 16.1% in the period from 2017 until 2020. 16.1% is the value against which the OeNB stress-tested Austrian banks in 2021. In the baseline scenario, the CET1 ratio was found to rise further to 18.2% until 2023, whereas the adverse scenario yielded a decline to 11%. Source: Oesterreichische Nationalbank.

Insights from OeNB pilot study on climate risks: carbon pricing does not constitute a threat to Austria’s banking sector

The OeNB conducted a pilot study on climate risks in 2021, namely an OeNB climate stress test that looked into the impact that carbon pricing may have on Austria’s banking system over a fiveyear horizon. The stress test modeled two transition scenarios, comparing an orderly increase with a disorderly, disruptive increase in carbon costs across the entire European Union. Specifically, the authors assumed that the price per carbo-equivalent ton would rise from EUR 30 to EUR 130, or from EUR 130 to EUR 260, and would thus well exceed current measures as planned even in the orderly scenario.

In the disruptive scenario, the price put on carbon may have major effects on individual sectors, above all in the area of agriculture and transport. Here, loan default ratios would rise sharply, hitting primarily banks with above-average exposures to these sectors. Moreover, corresponding portfolios related to Eastern Europe would be affected to a higher degree, given the higher emissions intensity of these economies. The outcomes need to be seen in the context of static underlying assumptions, which reinforce the negative impact of carbon pricing. Specifically, the model does not reflect structural supply-side and demand-side adjustments, and it does not provide for the use of tax revenues from carbon pricing to alleviate negative effects.

Projecting the development of the aggregated common equity tier 1 (CET1) ratio of the Austrian banking system over a period of five years, the authors found that the CET1 ratio would drop 0.7 percentage points ­below the result for the baseline scenario in the orderly transition scenario, and 2.7 percentage points in the disorderly transition scenario. In other words, even under the disruptive scenario, the reduction of the CET1 ratio is only half as big as in the regular stress test, thus constituting no threat to the stability of the banking sector.

First bottom-up climate risk stress test to be conducted among SSM-supervised banks in 2022

In early 2022, the ECB launched a supervisory climate risk stress test among significant institutions supervised under the European Single Supervisory Mechanism (SSM), to be conducted on the basis of harmonized scenarios and common underlying assumptions developed at the SSM level. Unlike in the OeNB’s own climate stress test, the participating credit institutions will perform the exercise themselves, based on the requirements communicated. The stress test consists of three distinct modules: (1) a questionnaire on banks’ climate stress test ­capabilities, (2) the calculation of climate risk-sensitive indicators, and (3) the modeling of several short and long-term scenarios reflecting both physical risks and risks stemming from the transition to a greener economy. The aim is to identify and analyze vulnerabilities banks may face when managing increasing climate-related risks. The stress test is to be a learning exercise to assess banks’ climate-risk preparedness, based on the ­application of new methods, and will not have direct implications for banks’ capital levels.

4 This section is based on a broad definition of Central, Eastern and Southeastern Europe that also includes Russia, Ukraine and Belarus.

7 In view of the high degree of uncertainty, the FMSB had advised in mid-2020 adjusting the size of the buffers in a way that prevents effective buffer requirements from increasing until end-2022 simply because of legal changes (24th meeting on June 15, 2020).

8 Addiko Bank AG, BAWAG Group AG, Erste Group Bank AG, Raiffeisen Bank International AG, Raiffeisenbankengruppe OÖ Verbund eGen, Sberbank Europe AG and Volksbank Wien AG, as evident from the ECB‘s list of supervised entities (as of 1 November 2021) .

9 AutoBank AG. The two other payout events concerned Anglo Austrian AAB Bank AG and Commerzialbank Mattersburg im Burgenland AG.

Improved services with enhanced financial statistics

The OeNB supplies solid statistical data

Policymakers, businesses and the general public count on scientifically sound and reliable statistics for guidance and evidence-based decisions – ­especially in exceptional economic circumstances. During the second year of the COVID-19 ­pandemic, when distinguishing between factual and opinion statements in public discourse proved a frequent challenge, credibility became an invaluable asset. In these challenging times, the OeNB continued to support economic ­policy decisions by providing high-quality data, in particular on loan moratoria. In addition, we introduced a framework for systematic data governance that sets new strategic and organizational standards for improving our statistical products and services. Moreover, we launched new products such as “Statistik im Fokus” (in German), which makes complex relationships hidden in economic data more easily accessible to the public by means of interactive charts.

New data governance framework ­improves access to data and data ­usability

For the period from 2020 to 2025, the OeNB’s strategic priority in statistics is to increase data availability and transparency and to optimize data usability for both in-house and external ­users. With this objective in view, we ­developed a data governance framework in 2021 that will be rolled out from 2022 onward. To make it easier for users to access and use our statistical data, we are working to realign data ­management with the statistical products we provide for ­various target groups, ranging from inter­national organizations to the general public. Under our ongoing myData project, we are ­expanding our current data infrastructure over the next few years by building a modern data analytics platform and creating a data dictionary. The data dictionary will make it easier for users to access statistical data within a self-service framework, which in turn fuels the advancement of projects in data science and advanced analytics.

Further progress in integrating the ­European reporting framework

To make reporting easier for euro area banks, the Governing Council of the ECB launched the Eurosystem Integrated Reporting Framework (IReF) project. Under the IReF, ­statistical data reporting is to be harmonized and integrated across the euro area in order to reduce the reporting burden on commercial banks; moreover, data quality is to be enhanced and analyses will become more flexible. This makes the IReF a key component in fully integrating the reporting requirements banks must fulfill and fully harmonizing the collection and usage of data required for banking supervision, bank resolution and the conduct of monetary policy. In the first half of 2021, input was gathered from the agents involved in data reporting, processing and usage about the costs and benefits of the integrated reporting framework, and in the second half of the year, the ECB began to review and analyze the survey data. With these integration efforts, the ECB pursues a strategy for the euro area that the OeNB had already adopted for Austria a number of years ago. Meanwhile, we have implemented this strategy successfully at the national level.

Early in 2021, the OeNB started a two-year myData subproject, aimed specifically at technically upgrading the integrated reporting data model to improve access to related documentation and make further upgrades and maintenance easier to handle. All reporting items are to be migrated to a new, tailor-made application that enables both interactive data evaluation and high-quality analyses.

Innovations in supervisory statistics

To determine how the reporting burden under current requirements of the European Banking Authority (EBA) can be reduced in particular for small, noncomplex banks, a cost-benefit analysis was conducted at the European level in 2021. The outcome were 25 recommendations geared toward rendering reporting requirements and processes more proportionate and efficient. The gradual implementation of these recommendations was included in the EBA’s current working program and is scheduled for the ­coming months or years.

Also in 2021, great efforts were made to ­finalize the EBA’s feasibility study on how to establish an integrated reporting system combining statistical, resolution and supervisory reporting, which currently are separate reporting areas. This study evaluated the creation of a common standard data dictionary, the establish­ment of a joint committee on developing and coordinating an integrated reporting system and the feasibility and potential design of a ­central data warehouse with the aim of making multi-agency data sharing more efficient.

In the reporting year, the ESCB’s Working Group on AnaCredit, which is chaired by the OeNB, concentrated in particular on data ­quality assurance, on making available harmonized granular euro area credit and credit risk data to users from all areas of central banking and ­supervision and on providing optimum support to authorized parties.

AnaCredit

AnaCredit serves to set up a granular European credit register, the purpose of which is to enhance banks’ credit risk management and improve the monitoring of financial stability risks.

As part of a multi-year project dealing with the technology-assisted detection of atypical developments in the banking sector, in 2021 the OeNB examined how, in going beyond the identification of banks at risk and the major sources of risk, patterns indicating major mismatches at banks in general could be ­detected more easily. In this exercise, we aim at developing adequate procedures, models and ­algorithms for evaluating all – including the most recent – available data. Complementing this approach, the OeNB and FMA together successfully ­applied for technical support in tapping additional data sources under the European Commission’s Technical Support Instrument (TSI). The issue at question here was which new, publicly available data might be used to unveil ­implausible and atypical developments at banks with innovative statistical procedures (i.a. machine learning).

Machine learning

Machine learning is an application of artificial intelligence. It is used to train IT systems to automatically recognize data patterns or contexts without having to program them to do so.

Recent developments in external statistics

2021 was the second year of a three-year ­project aimed at integrating data processing systems used in external statistics (in particular in ­balance of payments statistics) and financial ­accounts into the OeNB’s IT system architecture. Apart from promoting technical system integration, efforts in the reporting year comprised the introduction of a new online reporting application called “MeldeWeb,” which ­replaced the previously used “ZABIL online” format. “MeldeWeb” has been well received by reporting agents since its launch in November 2021. To inform reporting agents on the new reporting structure and reporting platform, the OeNB hosted three webinars for a total of around 2,000 participants; in addition, information letters were sent out to stakeholders and further information was published on the OeNB’s website.

In the field of external statistics ­compilation, we were able to secure a five-year contract (2022 to 2026) with Statistics Austria concerning current account data. The contract focuses on data covering current developments such as digital advancement and globalization. The OeNB also explores integrating big data (such as mobile positioning data) or employing ­enhanced data collection in payments statistics, in particular in the calculation of travel and tourism revenues and expenditures as these are of key interest for Austria.

To support central banks’ in-house credit ­assessment of nonfinancial corporations, the Deutsche Bundesbank and the OeNB jointly developed a common rating platform called CoCAS (Common Credit Assessment System). Following a review of the statistical methodology for CoCAS model estimations, the revised methodology was applied for the first time in the past year. In addition, the platform’s IT ­interfaces were enhanced and preparations for connecting the Greek central bank to CoCAS, which had begun in 2020, were continued. Headed by the OeNB, the ICAS Expert Group defined minimum standards for considering climate risks in in-house credit assessments in 2021. Last but not least, the OeNB presently chairs the European Committee of Central ­Balance Sheet Data Offices (ECCBSO), which was established in 1987 as a consultative body for issues regarding nonfinancial corporations’ balance sheet data. Current ECCBSO activities focus on aligning credit register and bond data with both corporate balance sheet data and ­sustainability and climate risk data.

Secure and efficient payments are the cornerstone of economic activity

Demand for cash is on the rise

One of the OeNB’s core functions is to ensure the supply of cash to people living in Austria and to the Austrian economy. This involves cash logistics planning as well as the ­production, provision and secure storage of cash, ­adequate stockholding and cash cycle management and maintenance. We fulfill these key tasks in close cooperation with our subsidiaries Oester­reichische Banknoten- und Sicherheitsdruck GmbH (OeBS), Münze Österreich AG (MÜNZE) and GELDSERVICE AUSTRIA (GSA). In cooperation with Austrian banks and cash-in-transit companies, we ensure cost-­effective cash supply across Austria. But the OeNB also acts as a hub of cross-border cash supply and, as such, has become an important partner for other euro area countries, in particular for Slovenia and Slovakia. Data on the wholesale banknotes business conducted via the OeNB confirm both our strategic importance within the Eurosystem and the euro’s key role as an international trading currency.

Chart 17, Rising value of euro banknotes in circulation, is a combined column and line chart indicating changes in the value of euro banknotes in circulation over time. The right-hand scale relates to the line, which starts in January 2008 at an overall value of around EUR 650 billion and ends in December 2021 at around EUR 1,544 billion. The left-hand scale relates to the columns and shows the annual rate at which the value of banknotes in circulation grew in percent per month from January 2008 to December 2021. The chart highlights that the growth rates were particularly high in uncertain times, such as when the COVID-19 pandemic broke out in 2020, driving up growth rates to peaks of more than 12% in January and February 2021; or during the currency crisis following the depreciation of the Russian ruble in 2015, when growth rates peaked at 9% in July 2015; or during the financial crisis of 2008 and 2009, with more than 13% growth recorded in the period from October 2008 to May 2009. Source: European Central Bank.

Demand for euro cash has been increasing steadily. A total of 28.19 billion euro banknotes were in circulation at end-2021, worth EUR 1,544.37 billion. This corresponds to an annual rise of 6.5% in terms of numbers and 7.7% in terms of value (chart 17). Once again, the EUR 200 banknote recorded the highest annual growth rate (+34% in 2021), followed by the EUR 100 banknote (+9%). The rise in cash ­demand has not been linear; significant ­seasonal peaks toward year-end indicate Christmas sales. Times of high uncertainty have had a ­considerable and lasting impact on the use of banknotes and coins, which is mirrored by strong annual growth of cash in circulation during crisis events. Cases in point are the outbreak of the coronavirus pandemic in 2020, the marked depreciation of the Russian ruble in 2015 and the financial crisis of 2008 and 2009. What determines the demand for cash most nowadays is therefore its use as a store of value.

Transaction-related cash demand only ­accounts for part of the overall demand for bank­notes and coins. As options for consumption were restricted during coronavirus lockdowns in 2021, the share of cash used for ­payment transactions in total cash in circulation ­decreased throughout the year. Private and banking sector cash holdings continued to ­increase in Austria, by contrast, totaling around EUR 23 billion in 2021. What is particularly remarkable is that the euro cash holdings of Austrian banks went up sharply from EUR 3.0 billion at end-2016 to EUR 12.2 billion on ­December 31, 2021. This corresponds to an annual growth rate of 32.5%.

The number and value of euro coins in ­circulation also continue to trend upward. The issuance of euro coins is the responsibility of the individual euro area countries. In Austria, this responsibility rests with MÜNZE, a wholly owned subsidiary of the OeNB. As on December 31, 2021, 8.3 billion Austrian euro coins worth EUR 1.8 billion were in circulation – a year-on-year rise by 219.9 million coins or EUR 48.2 million in value (chart 18). Circulation figures in 2021 went up for coins of all ­denominations. As coins are mainly used for payment transactions, their higher circulation signals continually rising cash demand.

Chart 18, Rising number of Austrian euro coins in circulation, is a line chart showing how the number of Austrian euro coins in circulation increased between 2006 and 2021. There is a line for each of the denominations, ranging from the 2 euro coin to the 1 cent coin. The vertical axis shows the respective quantity. All denominations have recorded a continuous rise in circulation numbers since 2006. On December 31, 2021, the numbers of Austrian euro coins in circulation per denomination, in billion, were as follows: 2 euro coins: 0.44; 1 euro coins: 0.42; 50 cent coins: 0.28; 20 cent coins: 0.67; 10 cent coins 0.95; 5 cent coins: 0.05: 1.0; 2 cent coins: 2.03; one cent coins: 2.57. Source: European Central Bank, Oesterreichische Nationalbank.

The OeNB ensures cash security

In line with their legal mandate, the OeNB and its subsidiaries provide the Austrian general public and economy with secure euro banknotes and coins and analyze euro cash circulation and quality. In 2021, the OeNB introduced a total of around 1.2 billion euro banknotes into the cash cycle, while 1.4 billion euro banknotes were returned to the OeNB. Returned bank­notes are processed, checked for authenticity and fitness, and then reintroduced into the cash cycle. In addition, cash is also processed outside the OeNB by professional cash handlers. To be able to guarantee cash security and the high quality of cash in circulation, the OeNB ­monitors compliance with the applicable provisions. Apart from being required to report all cash recycling machines in use on a semiannual basis, cash handlers have been subject to stepped-up on-site inspections. These include equipment tests, reviews of banknote processing procedures and checks for compliance with the provision to employ only trained staff at the point of sale. Despite the pandemic, the OeNB carried out 40 on-site inspections in 2021 that involved 74 equipment tests.

Professional cash handlers

Professional cash handlers in a legal sense are primarily credit institutions, bureaux de change and cash-in-transit companies, as well as traders and casinos if they are involved in sorting and issuing cash by operating cash dispensers.

Like in 2020, the number of counterfeit euro banknotes recovered from circulation in Austria went down in the reporting year. During cash processing in Austria, a total of 4,456 counterfeit euro banknotes were ­recovered from circulation in 2021 (2020: 6,321) (chart 19).

Counterfeits of the EUR 50 banknote topped the list in the year under review (1,914 counterfeit banknotes recovered), followed by counterfeits of the EUR 20 banknote (1,140) and of the EUR 100 banknote (632). Together, these three denominations accounted for 82.7% of all counterfeit euro banknotes recovered in Austria in 2021. The situation across Europe was rather similar, with counterfeits of the EUR 50, EUR 20 and EUR 10 banknotes together accounting for 81.6% of all counterfeits recovered.

Most incidences of counterfeit banknotes in Austria continued to be recorded in Vienna (40.9%), followed by Upper Austria (13.2%) and Lower Austria (12.5%). In 2021, the overall damage caused by euro counterfeits in Austria came to EUR 272,515 (2020: EUR 320,190). At 1.3%, Austria’s share in the total volume of counterfeits recovered from circulation in the euro area remained relatively low. This means that most people still have only a minimal chance of coming across counterfeit banknotes in Austria.

Chart 19, Continuous decline of counterfeit euro banknotes recovered in Austria, is a column chart showing the number of counterfeit euro banknotes recovered from circulation in Austria from 2002 to 2021. The vertical axis shows the number of counterfeit euro banknotes recovered. The horizontal axis shows the years since 2002. The following numbers of counterfeit euro banknotes were recovered from circulation in Austria per year: in 2002: 3,409; in 2003: 7,467; in 2004: 13,386; in 2005: 7,127; in 2006: 5,919; in 2007: 7,768; in 2008: 8,082; in 2009: 9,780; in 2010: 8,812; in 2011: 5,583; in 2012: 6,327; in 2013: 8,193; in 2014: 8,461; in 2015: 14,502; in 2016: 12,234; in 2017: 9,893; in 2018: 11,698; in 2019: 7,977; in 2020: 6,321; in 2021: 4,456. Source: Oesterreichische Nationalbank.

Celebrating our common currency: 20 years of euro banknotes and coins

The goal of introducing a common European currency was set in 1986 when the Single European Act was signed. For the euro to come into existence, however, it took until January 1, 1999, when it was first introduced as an electronic currency. This means that from this date, all accounts with banks in the designated euro area ­countries were converted to euro. As to cash, the various national currencies remained legal tender. Finally, ­January 1, 2002, marked the beginning of the euro cash changeover. Austrian schilling banknotes and coins were thus being replaced by euro cash. Between January 1, 2002, and February 28, 2002, cash payments could be made in either currency, but as of March 1, 2002, the Austrian schilling ceased to be legal tender. Banknotes of the last Austrian schilling series that were legal tender in Austria when the euro was introduced can be ­exchanged for euro at the OeNB for an unlimited period of time.

The design of the first series of euro banknotes was by graphic designer Robert Kalina from the ­Oesterreichische Banknoten- und Sicherheitsdruck GmbH (OeBS) in Vienna. The euro banknotes show structures symbolizing different ­architectural styles. The second series of euro banknotes, the Europa series, was launched between 2013 and 2019. It is equipped with new and innovative security features. Today, the euro is the official currency of 19 EU member states. More than 340 million people across Europe use the euro to make their payments.

In preparation for the cash changeover in 2002, 550 million euro banknotes worth EUR 30.65 billion and 1.8 billion euro coins worth EUR 672.7 million were produced in Austria. These volumes met the initial demand for euro cash and guaranteed constant cash supply during the changeover. Moreover, they served as an ­emergency cash reserve.

One week into 2002, more than 291 million euro banknotes were already circulating in Austria (i.e. 86% of the volume of Austrian schilling banknotes circulating at the time). Two weeks into the cash changeover, 90% of all payment transactions in Austria were carried out in euro already.

User behavior

Money broadly fulfills three functions: It serves as a medium of exchange, a unit of account and a store of value. As a currency of global importance, the euro is not only in high demand in the euro area but also beyond its borders. The ECB estimates that between 30% and 50% of total euro cash in circulation circulate outside the euro area. 10 The euro is widely used above all in regions neighboring the euro area (by border workers and in cross-border tourism) or in EU countries hoping to introduce the euro in the near future. In Southeastern Europe in particular, many people use the euro as a store of value (chart 20). 11 Not least because of its geographical location, Austria has become a key cash supply hub for Central European countries.

Chart 20, Holdings of euro cash in CESEE (2017–2021), is a column chart showing how many percent of respondents of the Euro Survey conducted by the Oesterreichische Nationalbank said they held euro cash. Percentage results are shown for ten Central, Eastern and Southeastern European countries for the period from 2017 to 2021. Values remained high also during the pandemic in 2020 and 2021; in 2021 (as in previous years) they were lowest at around 7% in Bosnia and Herzegovina and highest at around 36% in Serbia. Source: Euro Survey of the Oesterreichische Nationalbank.

Payment behavior

Since 1996, the OeNB has surveyed people aged 15 or older to learn about the payment behavior of households. In 2016 and 2019, these representative surveys were conducted as part of a related ECB survey. 12 According to these surveys, cash is the most popular means of payment in the euro area. Yet, the COVID-19 pandemic has impacted payment behavior, as shown by the results for Austria from 2020 and 2021. During the pandemic, the use of cash went down by 13 percentage points against 2019. Although 97% of respondents living in Austria said that they had a payment card, cash continued to be the most frequently used means of payment at the point of sale 13 , accounting for 66% of transactions. Cash continues to be popular also because it is readily available. In Austria, cardholders may withdraw cash from automated teller machines (ATMs) mostly without being charged withdrawal fees. 14 Moreover, people in Austria live within a distance of 1.2 km on average of an ATM, with travel time by car to the closest ATM averaging some 3 minutes – which is very fast by European comparison.

OeNB cash strategy safeguards the future of euro cash in payments

Cash is a means of payment that is widely known and generally accepted. Therefore, cash plays an important role in society and is the only type of central bank money everyone has direct access to. Yet, with modern ­technologies advancing in many areas of everyday life, people’s payment behavior has changed, too. Payment cards are widely popular today so that people now use them more often to make everyday payments.

The OeNB actively supports the use of cash, and we do so particularly in view of the quick pace of digital transformation. Our new cash strategy aims to ensure that cash remains widely available and accepted as both a means of payment and a store of value. At the same time, we promote innovations and developments in ­electronic payments. Over the next ten years starting from 2022, we will work to ensure the smooth supply of secure cash in Austria and will make sure that cash is accepted everywhere.

To this end, we continue cooperating closely with our subsidiaries Münze Österreich AG (MÜNZE), the ­Oesterreichische Banknoten- und Sicherheitsdruck GmbH (OeBS) and GELDSERVICE AUSTRIA (GSA), with all other cash logistics stakeholders in Austria and with the Eurosystem.

Throughout 2022, we are going to celebrate the 20th anniversary of the euro with our Eurosystem partners by organizing a series of events. For further information on our activities (in German), see www.euroat20.at/ .

Access to and acceptance of cash

In February 2021, the ECB and the Euro Retail Payments Board (ERPB) launched a working group on access to and acceptance of cash to address issues driven by developments during the COVID-19 pandemic. What had caused particular concern was that ATM networks were diminishing in some euro area countries, which posed a challenge to ensuring general availability of euro cash. Having examined ­access to cash and cash acceptance, the working group presented its final report in November 2021. Apart from taking stock of the current state of cash supply, the report contains suggestions for future initiatives on how to avoid cash supply deficits.

Although access to cash was found to be good, in general, in most countries covered, there are concerns that cash supply by banks has been increasingly deteriorating at least in certain areas of some countries. At the same time, a wide range of initiatives in individual countries aims at ensuring access to cash. In the euro area, access to cash continues to be provided mostly via ATMs and the branch ­network of commercial banks. The distance people have to travel to reach these cash access points as well as the capacities of these facilities have become topics of major interest in many member states. Some countries have started to issue nonbinding national action plans with a view to maintaining or improving access to cash. Sustained access to cash services requires that all participants in the cash cycle cooperate closely.

Should such initiatives fail to yield the ­desired results, additional measures may be taken. If necessary, this may even mean imposing a legal requirement to establish and maintain a minimum network of cash access points. With regard to the acceptance of cash, the ­report found that cash is widely accepted as a reliable payment instrument in retail trade as long as the corresponding infrastructure that ensures cash lodgment and withdrawal is available within a reasonable distance and at adequate cost. The ERPB working group considers it advisable to regularly evaluate the access to and acceptance of cash to ensure that cash, alongside digital retail payment means, will ­remain an inclusive, efficient and sustainable means of pay­ment for consumers in line with the Eurosystem’s cash strategy .

Euro Retail Payments Board (ERPB)

The ERPB is a high-level strategic body that promotes the integration, innovation and competitiveness of euro retail payments in the EU. The ECB established the ERPB in 2013 and has acted as its chair ever since. Members on the board are representatives of payment service providers and users of payment services (industry groups, user representatives, retailers and businesses as well as public administration).

In 2020 and 2021, the Institute for Empirical Social Studies (IFES) conducted the fifth Austria-wide survey on the payment behavior of households on behalf of the OeNB. The ­results of this survey covering people aged 15 or older are representative for Austria with ­regard to respondents’ age, gender and place of residence. Because of pandemic-related lockdowns and other social distancing provisions, the field phase lasted from September 2020 to April 2021.

Chart 21, How people pay at the point of sale (POS) in Austria and the euro area, consists of two panels. The left-hand panel is a column chart and shows the shares of payment transactions made by cash, cards or other means of payment in Austria in 2019 and 2020 to 2021. The right-hand panel is a map of Europe and shows cash usage at the point of sale across the euro area in 2019. Values are given in percent of total payment transactions. For Austria, the share of cash payments was 79% in 2019 and went down to 66% in 2020 to 2021. The share of card payments at the POS went up from 19% in 2019 to 29% in 2020 to 2021. Cash transaction shares in the euro area range from 3 percent in the Netherlands to 88 percent in Malta.  Source of left-hand panel: Oesterreichische Nationalbank, European Central Bank. Source of right-hand panel: European Central Bank, Deutsche Bundesbank, De Nederlandsche Bank, Study on the payment attitudes of consumers in the euro area (SPACE) 2019.

According to the survey results, cash transactions at the point of sale (POS), which made up some 66% of all POS transactions, went down by 13 percentage points in the 2020 to 2021 observation period when compared with 2019. This notwithstanding, cash remains the most popular means of payment in Austria. Yet, people use cash less frequently in everyday payments because of the general trend toward electronic payments and, most prominently, because of changes triggered by the COVID-19 pandemic. Such changes appear to have amplified consumers’ tendency to pay by card. Moreover, pandemic-related restrictions affected cash-intensive activities such as travel, recreation and cultural activities. Also, in supermarkets, consumers were specifically asked to use cards and contactless payment options. In this context, respondents said they chose cashless payments because they felt that using banknotes and coins carried the risk of contracting the coronavirus. Almost one-fourth of respondents of the recent survey said that they had changed their payment behavior since the beginning of the pandemic in March 2020. An OeNB study 15 examining the relation between the decrease in cash payments and the contagion risk arising from cash use as subjectively perceived by ­survey ­respondents shows that respondents tended to pay less frequently in cash the higher they thought the related contagion risk would be. According to the study, perceived contagion risk often tended to be strongly overrated. In fact, many scientific studies have shown that the risk of contracting the coronavirus from ­using cash is very low.

Compared with 2019 figures, debit card transactions went up by 10 percentage points to 29% of POS payments while credit cards were used for no more than 2% of POS payments. At 44% in the observation period, the share of contactless debit card payments without PIN verification rose by a marked 16 percentage points compared with ECB data from 2019 (28%). During the pandemic the transaction limit for contactless payments was raised from EUR 25 to EUR 50, and this is more likely to have caused the surge in such payments than the perceived contagion risk arising from cash.

What likewise rose significantly during the pandemic is the share of online sales in total consumption. Around 30% of survey respondents said that they had shopped more on the internet during the observation period than ­before. Unlike in over-the-counter trade, the most popular means of payment on the internet is payment by credit transfer (31%).

It will remain to be seen whether the changes in people’s payment behavior observed during the pandemic both at the POS and on the internet will have a lasting influence on payments in the long term once pandemic-­related restrictions (e.g. temporary closure of certain industries, tightening of opening and closing hours, registration obligation as well as obligation to provide proof of vaccination, ­negative test or recovery, hygiene measures and travel restrictions) have been fully lifted and both economic and social life will gradually ­return to normal. Another factor will be to what extent retailers actually provide digital payment options such as PayPal or Apple Pay.

Chart 22, People’s attitude to future cash use in Austria (2018–2021), is a bar chart showing the extent to which respondents agreed with three different statements regarding future cash use they were asked to consider. Results are shown as percentages of the population for the second half of 2018, 2019 and 2020, respectively, and for the first half of 2021. The first statement is: Cash should remain as important as it is now. Agreement is shown to be highest at 75% in the second half of 2018, declining from there and stagnating at 65% in the second half of 2020 and the first half of 2021. The second statement is: I don’t mind if cash becomes less important, but I don’t want to do without cash altogether. Agreement with this statement rises from 21% in the second half of 2018 to 32% in the second half of 2020 before declining to 28% in the first half of 2021. The third statement is: I don’t mind if cash disappears altogether. Agreement with this statement is lowest in all periods under observation, ranging between 3% and 5%. Source: Oesterreichische Nationalbank.

In the first half of 2021, the vast majority of respondents (93%) wanted cash to remain available also in the future; most of them (65%) would prefer if cash kept its current form. Only 5% of all respondents said they would not mind if cash disappeared altogether. 16 It is the OeNB’s ­declared aim to ensure that people in Austria have a free choice of payment instruments also in the future. Essential prerequisites for meeting this objective are both the nationwide supply with cash and its unlimited acceptance in retail trade.

The OeNB acts as cofounder of the ­Austrian Payments Board

With Austria’s retail payment infrastructure undergoing major changes, the Austrian Payments Board (APB) was established as a new platform to promote the dialogue between Austrian banks that offer key retail payment services in Austria and the OeNB. The APB convenes two to three times a year. In the ­reporting year, the APB’s work focused on the European Payments Initiative (EPI) and on the digital euro. Launched by major European banks and payment services network operators, the EPI project aims at establishing a Europe-­wide payment solution that leverages both ­instant and card payments. As to the digital euro, the APB established a specific subgroup, the digital euro forum (Forum zum digitalen Euro – FDE), after the ECB had launched the investigation phase of its digital euro project. The FDE will deal exclusively with issues ­concerning the digital euro. In a coordinating capacity, the FDE is to support the flow of ­information between the ECB project and the Austrian financial market.

T2-T2S consolidation soon to be ­completed

In 2017, the Governing Council of the ECB ­decided to consolidate the Eurosystem’s real-­time gross settlement system TARGET2 (T2) and the securities settlement platform TARGET2-­Securities (T2S). The technical and functional improvements will now be implemented in 2022. The entire Eurosystem infrastructure as well as the infrastructures of banks connected to TARGET2 will be migrated to a new, consolidated platform over the same weekend. This “big bang” scenario has proved challenging during tests and preparations and cannot be compared with previous system migrations, which took place in waves. Apart from fully migrating the consolidated platform to the XML format according to ISO 20022, separating traditional high-value payments from ­central bank operations to manage liquidity, which so far have both been settled in T2, is the most important innovation.

From November 2022, a dedicated Central Liquidity Management (CLM) module will be in place for central bank and liquidity management operations. The CLM module will hold main cash accounts (MCAs) as a central source of ­liquidity for subordinate services – large-value payments (T2), instant payments (TIPS) and securities settlement (T2S) (figure 1).

Figure 1, Eurosystem market infrastructures from November 2022, shows the three systems that form the backbone of the Eurosystem’s infrastructure for central bank operations and central liquidity management: TARGET2 for large-value payments, TIPS for instant payments and TARGET2-Securities (T2S) for securities settlement. Source: Oesterreichische Nationalbank.

The Eurosystem Collateral ­Management System – a joint service for Europe

In the future, Eurosystem collateral will be managed under TARGET services within the Eurosystem Collateral Management System (ECMS). The ECMS will combine into one ­system the 19 national collateral management systems currently in operation at the Euro­system central banks; its launch is planned for November 2023. The ECMS will keep track of the collateral and credit positions of all Euro­system counterparties, including Austrian banks. Through joint access to TARGET ­services (including ECMS), counterparties will benefit from harmonized, highly efficient procedures enabling the cross-border mobilization of ­collateral that is required to participate in the monetary policy operations of the Eurosystem.

OeNB subsidiaries respond to current challenges with innovation

In performing its core tasks in cash production, cash supply and cash logistics, the OeNB is ­supported by three subsidiaries with a ­combined staff of more than 600 employees: Münze Öster­reich AG (MÜNZE), the Oesterreichische Banknoten- und Sicherheitsdruck GmbH (OeBS) and GELDSERVICE AUSTRIA (GSA). The subsidiaries carry out their tasks as ­separate business entities, guided by the principles of quality, security, sustainability and cost effectiveness.

Within European monetary union, MÜNZE is the official mint of the Republic of Austria. Its exclusive right to mint and issue coins in Austria is laid down in the provisions of the Coinage Act. In 2021, MÜNZE supplied the OeNB with a total of 122.5 million euro coins with a face value of EUR 30.6 million. Moreover, MÜNZE continually develops new and innovative product lines, e.g. various coin ­series and gold investment products, to meet ­customers’ rising demand for precious metals. MÜNZE has successfully maintained its global position as a reliable producer also in times of crisis.

The OeBS conducts R&D activities and produces banknotes for the Eurosystem and for international customers. On behalf of the OeNB, the OeBS produces the share of annual euro banknote production volumes allocated to Austria on the basis of the OeNB’s share in the ECB’s capital key. In 2021, the OeBS produced roughly 190 million EUR 5 banknotes. Cooperation at the central bank level continued with the OeBS producing euro banknotes for the Belgian central bank. Banknote production at the OeBS also helps the OeNB meet the ­logistical requirements resulting from Austria’s strategic position as a cash supply hub in ­Central Europe. Despite the challenging conditions created by the COVID-19 pandemic, the OeBS has continued to develop and expand its role as a competence center for securities printing and detectors by relying on innovation, sustainability and in-house technical developments.

The GSA provides services in the fields of cash logistics and processing for the OeNB, banks, payment service providers and trading companies. The GSA’s regional cash centers in Vienna, Graz, Linz, Salzburg, Innsbruck, ­Klagenfurt and Bregenz support the OeNB in its task of supplying euro cash all over Austria; in doing so, they contribute to ensuring the high quality of cash in circulation. The GSA uses state-of-the-art counting and sorting ­machines for banknotes and coins. In supplying cash across Austria, the GSA has proved a ­reliable and flexible partner also during the COVID-19 pandemic.

The OeNPAY Financial Innovation HUB GmbH (OeNPAY) began operations in 2021. It runs a competency network that supports ­efforts to implement digital payments across Austria and promotes financial innovations in cooperation with all stakeholders in payment services. Its objective is to ensure easy, stable and safe payments for all. To this end, the OeNPAY relies on trend scouting, among other techniques, giving consideration to both mega and technological trends when identifying and preparing relevant new developments to make them accessible to all stakeholders. Being a wholly-­owned subsidiary of the OeNB, the OeNPAY has taken care to adopt a neutral ­market position.

The real estate investment group IG-Immobilien Gruppe serves to optimally manage the OeNB’s real estate investments. It is, inter alia, responsible for preserving and sustainably ­improving the value of OeNB real estate holdings and for optimizing current earnings on the ­individual properties.

The premises management group BLM ­Betriebs-Liegenschafts-Management GmbH is in charge, in particular, of providing premises the OeNB or its subsidiaries require to carry out their business activities.

On their websites, the OeNB’s subsidiaries publish annual reports pursuant to the Federal Public Corporate Governance Code adopted by the Austrian federal government on October 30, 2012. Table 12 provides a comprehensive list of the OeNB’s direct and indirect equity ­interests.

10 ECB. 2021. Foreign demand for euro banknotes . Occasional Paper Series 253. January.

11 For further indicators and studies on the use of euro cash in Central, Eastern and Southeastern Europe, please refer to OeNB Euro ­Survey on the OeNB website.

13 Unlike payment transactions for purchases made on the internet or by telephone, payment transactions at the point of sale take place directly on site, e.g. at a retail location.

14 Cash withdrawals are free of charge within the ATM network provided by PSA Payment Services Austria GmbH (PSA), which operates the majority of ATMs in Austria. Owned by Austria’s major banks, PSA supports these banks in its capacity as a transaction service ­provider.

15 Höpperger, D. and C. Rusu. 2022. Payment behavior in Austria during the COVID-19 pandemic . In: Monetary Policy & the Economy Q4/21. OeNB. 85–104.

16 In chart 22, the category “Don’t know”/no answer accounts for the remaining 2% in the survey figures for 2019 and 2021.

Sustainability as a corporate strategy

Green light for new OeNB projects

The OeNB initiates a change in ­corporate culture

The OeNB is widely recognized as an attractive employer but to keep this status, it must keep changing. This is all the more true as the pace of changes in the working world, such as the strong tendency toward working from home, has picked up over the last few years. In addition, as our staff is becoming more diverse from one year to the next, so are their needs, which are the needs of different generations at ­different stages of their lives.

The guiding principle of human resources development at the OeNB is to make the OeNB a leading central bank within the ESCB, not least with regard to innovation. This is only possible, however, if we can continue to rely on the expertise of our staff, keep attracting new talent and strictly focus on this guiding principle in our incentive and consequence management and our recruiting policies.

To this end, the OeNB’s Governing Board in cooperation with the OeNB’s General Council initiated a project in 2021 to bring about a change in corporate culture that will help the OeNB remain attractive for new talents and that will further improve performance orientation. A set of specific measures was developed and began to be implemented in 2022.

The following target areas were identified:

  • transparency and commitment;
  • further development and feedback;
  • leadership and career;
  • incentive and consequence management.

The key assumption feeding into the OeNB’s change in corporate culture is that critical and active leadership is a major success factor. This also implies improvements in our culture of discussion and communication across all company levels. As a first step, managers at all ­levels have been invited to contribute to developing the sets of measures needed to facilitate the ­intended change. One of the objectives of this endeavor is that managers accept more responsibility for staff performance. As part of their staff leadership duties, they are called upon to give constructive feedback when they see room for improvement and take adequate measures to correct and prevent underperformance.

Another focus apart from strengthening the culture of discussion and communication has been on examining and adjusting present arrange­ments and fringe benefits.

Preserving and promoting the health of our staff – both at the individual and the organizational level – is one of the OeNB’s priorities. This is why we regularly evaluate and adjust ­existing measures supporting sports and health activities. In this spirit, we plan to offer our employees enhanced access to full medical checkups as our contribution to promoting ­preventive health care.

During the COVID-19 crisis, most of our staff switched to working from home, at least temporarily; with this measure, the OeNB was able to keep up the operation of its critical ­infrastructure and functions while ­contributing to social distancing and thus to preventing new infections. Both our staff and the OeNB as an organization have gained sound experience with remote work during this exceptional ­situation that has now lasted for close to two years. Based on this experience, arrangements have been made to allow staff to continue to work remotely for up to 40% of their normal working hours once the pandemic is over.

The OeNB’s COVID-19 crisis ­management has stood the test

Coronavirus task force continues to provide valuable expertise

In 2020, the OeNB had established a corona­virus task force, the Corona Working Group, to coordinate and handle all issues related to the COVID-19 pandemic. The task force ­continued to meet regularly in 2021. Its members from the areas of risk monitoring, human resources, facilities and security management, the press office, the staff council and the company health center continually supported the OeNB’s Governing Board in its pandemic-related decisions and provided valuable input to drafting the OeNB’s COVID-19 strategy and to establishing the best possible conditions for maintaining the OeNB’s business operations in a safe and responsible manner during the pandemic.

Number of virtual meetings goes up as ­people increasingly work from home

As the COVID-19 pandemic continued throughout 2021, OeNB staff mostly kept working from home to ensure maximum protection. Remote working days averaged 157.4 per staff member in the reporting year. Under these ­circumstances, the OeNB’s intranet and virtual newsroom became increasingly important as a social hub beyond the facilitation of office ­communication, building on the Team OeNB campaign launched in 2020. While well-­received Team OeNB activities were continued in 2021 (e.g. staff interviews about work during the pandemic, coffee roulette meetings, Skype lectures explaining complex OeNB issues, ­Friday art tours presenting items from the OeNB’s collection), staff were also invited to join in at new virtual events. There were campaigns ­covering monthly themes (e.g. advancement of women, cybersecurity), photo competitions, betting games for the European Football Champion­ship and a hiking tip exchange. Staff members shared short video messages about how it felt to be working on site with ­almost nobody else present (“Inside OeNB”) or what it was like to be working from their homes (“OeNB@home”). In the summer of 2021, a photo booth was installed on site so staff ­returning to work on the OeNB’s premises ­after months of remote work could take pictures with their colleagues to share in the virtual news­room. Moreover, the Bank History Archives started the monthly “Nahaufnahme” (Close-up) intranet series that presents pictures from the archives and provides interesting background information, related stories and historical ­context.

Table 1: Trends in Webex, Skype and MS Teams meetings  
Q4 20 Q1 21 Q2 21 Q3 21 Q4 21
Webex meetings, number 3,824 3,154 2,646 1,500 1,228
Participants, number 16,314 13,002 12,645 7,480 5,645
Overall duration, minutes 178,298 154,678 136,389 78,341 63,264
Skype meetings, number 25,426 28,295 27,916 16,001 21,292
Participants, number 98,052 106,248 107,377 59,811 83,005
Overall duration, minutes 883,121 1,060,514 1,058,495 565,584 728,265
MS Teams meetings, number x x x 871 2,790
Participants, number x x x 1,019 3,580
Source: OeNB.

Business continuity planning in the spotlight

The OeNB is aware of its responsibility as an operator of critical infrastructure and has been able to maintain its particularly critical functions also during the pandemic. The relocation of one of the OeNB’s data centers and a backup site to locations further away from the OeNB’s premises, which was completed in 2020, stood the test in 2021 even though the pandemic ­created additional challenges. To minimize the effect of various system failure scenarios to the OeNB’s business operations and to further ­improve the organization’s resilience, the OeNB takes great care to identify potential threats on a continuous basis and to have mitigating measures in place. For 2022, related ­efforts will focus on taking further safeguarding measures against a possible blackout ­scenario.

A new platform for suggesting ­improvements

In the reporting year, the existing system for collecting staff suggestions for improvements was enhanced by implementing a web-based IT system that enables the participatory and cooperative development and evaluation of new ideas in a digital framework. The new platform supports idea development by applying a design thinking approach and thus ideally complements the OeNB’s Innovation Lab, which may come into play when ideas are taken one step further to building prototypes for demonstration purposes. Our hopes for more submissions of new ideas for improvement were fulfilled shortly after the new platform went live.

Continuous optimization of ­infrastructure for hybrid meetings and video production

Experience from 2021 has shown that, as ­virtual and hybrid events are here to stay, it is essential that we ensure top-quality information transmission and make expert use of different media channels. All in all, demand for high-grade ­digital content has kept rising. Professional ­internet and TV appearances have become the norm. They rely on an adequate technical environ­ment, however. Bearing this in mind, the OeNB made continuous improvements during the year and also evaluated two related projects in parallel. One of these projects concerns the OeNB’s main hall, the Kassensaal, which currently serves to hold press conferences and all types of events. Additional video cameras have been installed in the Kassensaal and the ­business continuity management for events has been ­improved. Apart from these short-term ­measures, long-term improvements have been made to the lighting and sound equipment, paving the way for diversified use. All these changes will be incorporated in an ­architectural redevelopment of the main hall in the coming year.

The second project comprises setting up a modern video and recording studio with state-of-the-art lighting, video and sound equipment and a choice of background designs, much like a TV studio. This will allow for greater flexibility in meeting a wide range of requirements for professional presentations and appearances in a cost-effective manner. The new studio can be used e.g. for press conferences, trainings and webinars as well as for conferences that take place as webcasts or webinars only. Moreover, the studio will also serve to produce digital content for in-house and external audiences and provide an adequate setting for participating in meetings, press conferences and interviews organized by third parties.

Table 2: Indicators of knowledge-based processes  
Unit 2018 2019 2020 2021
Process efficiency
Certified areas number 10 10 10 10
Entries in the OeNB’s terminology database number 22,901 23,308 23,748 24,178
Error-free payment transactions % 99.95 99.88 99.91 99.87
Staff suggestions for improvements number 48 41 19 581
Technical infrastructure
IT services for the ESCB/Eurosystem number 3 3 3 3
Major IT projects number 6 5 5 7
Source: OeNB.
1 22 suggestions for improvements + 36 ideas submitted in an in-house competition for climate change projects.

Human resources management in year two of the pandemic

As the central bank of the Republic of Austria, the OeNB operates in an environment of ­increasingly complex challenges; to remain an attractive employer and ensure its high level of performance and competitiveness, the OeNB continuously strives to optimize the working conditions for its employees.

Going digital and working from home

Digital transformation remained a key priority in human resources development also in the ­reporting year, in particular as OeNB staff ­continued to work mostly from home. Taking this situation into account, we sought to offer additional opportunities for training and education to complement virtual trainings by establishing an e-learning platform to provide a modern, state-of-the-art framework enabling our staff to develop new skills and competences. Thanks to these new training formats, the number of staff participating in further ­education and training events was on the rise again in 2021: The education and training ­participation rate increased slightly to 63.4%; the average number of training days per employee came to 3.2, which almost compares to pre-­pandemic levels.

The OeNB introduces a new talent ­management scheme and successfully passes ­“workandfamily” recertification audit

The OeNB has always made great efforts to ­become more attractive as an employer and to provide the best possible opportunities for our staff. In keeping with this tradition, we ­developed a comprehensive talent management framework in 2021. The new framework will ensure, ideally, that the talents and potentials of all members of staff are identified and ­promoted, expectations remain ­realistic and processes become transparent.

An additional factor contributing to the OeNB’s position as an attractive employer is the fact that we regularly participate in the “ workandfamily ” audit to be certified as a ­family-friendly employer. In 2021, another three-year audit period was concluded. Over this period, we successfully implemented a number of measures such as improving our meeting practices with a focus on convening at family-friendly hours, expanding our offer of holiday camps for children of staff, adapting working arrangements to enable care for family members, and organizing a seminar for working parents on how to balance work and family life. At the end of 2021, the OeNB was successfully recertified for the next three years under “workandfamily” standards. During the present audit period, the OeNB will focus on strengthening health promotion, fostering paternity leave, supporting hybrid working and virtual leadership and implementing a mentoring program.

The OeNB is an equal opportunity and ­diversity supporter

The OeNB is aware of the sociopolitical role it plays as an enterprise and employer and is therefore proactive in taking measures to ­promote equality and inclusion in society. The OeNB pursues an equal opportunities strategy with a view to promoting gender equality at work. In particular, we are committed to fostering ­modern, gender-neutral career opportunities and roles. With its second action plan for the advancement of women, which reflects current legislation and covers the period from 2022 to 2027, the OeNB actively promotes diversity as a key value of its corporate culture and also strives to increase the share of women in ­expert and management positions. At the moment, the share of women in expert career track (36.9%) or management (27.9%) positions at the OeNB is clearly below the 50% required by law (table 3). By implementing the new action plan, the OeNB aims at sustainably raising the share of women in these positions.

Table 3: Share of women in expert career track and management positions by career levels  
Share of women
%
Expert career track
Level 1 36.8
Level 2 41.5
Level 3 29.7
Level 4 42.9
Total 36.9
Management positions
Head of unit 26.8
Deputy head of division 28.6
Head of division 28.2
Director of department 30.0
Total 27.9
Source: OeNB.
Note: As at December 31, 2021.

Apart from fostering gender equality, the OeNB also takes action to promote diversity and inclusion. In the reporting year, we continued to participate in the myAbility Talent program , which connects enterprises and highly qualified students with disabilities or chronic conditions. Under this program, students have a chance to experience everyday working life while enterprises can meet talented young people with a wide variety of potentials. As a result, the OeNB was happy to offer two internships to program participants in 2021. For its successful five-year cooperation with myAbility, the OeNB was awarded “gold partner” status.

On the International Day of Persons with Disabilities in 2021, the OeNB again participated in the #PurpleLightUp movement by lighting up its main building purple as a sign of solidarity with the concerns of persons with disabilities.

Our efforts to create optimal conditions for our staff and to prove a reliable employer have been effective. The staff fluctuation rate, which had already been at low levels, declined further in the reporting year, to 1.7%, and the various flexible working arrangements and opportunities for job mobility continue to be well received (table 4).

Table 4: Indicators of investment in knowledge-based capital  
Unit 2018 2019 2020 2021
Staff structure
Full-time equivalent staff (year-end)1 number 1,079.3 1,069.6 1,097.5 1,133.2
aged up to 30 years % 9 7 7 9
aged 31 to 40 years % 29 29 29 28
aged 41 years or older % 62 64 64 63
Fluctuation rate % 2.8 2.6 2.1 1.7
Share of university graduates in total staff % 64.9 65.8 67.4 69.9
Staff-to-manager ratio number 7.0 7.1 7.6 7.7
Flexible working arrangements
Part-time arrangements % 16.0 18.3 18.6 20.8
Teleworking arrangements % 11.2 12.8 12.9 7.1
Remote work (annual average per employee)2 days x x 131.9 157.4
Sabbaticals number 6 5 3 7
Gender management
Share of women in total staff % 38.8 39.3 39.6 39.7
Share of women in management positions % 27.9 28.8 26.3 27.9
Share of women in expert career track % 37.9 36.2 35.2 36.9
Share of women in part-time jobs % x 72.9 72.7 62.5
Share of women in teleworking jobs % x 47.6 47.3 45.3
Share of women in education and training participation rate % x x 41.0 39.2
Mobility
Participants in in-house job rotation program number 40 30 23 43
Working visits to national and international organizations
(external job rotation)
number 56 57 43 45
Working visits to the OeNB (incoming) number 32 31 5 2
Internships number 75 77 70 79
Knowledge acquisition
Education and training days (annual average per employee) days 4.1 3.9 1.7 3.2
Education and training participation rate
(share of employees who attended at least one training event per year)
% 82.2 82.2 61.9 63.4
Source: OeNB.
1 Figures include part-time employees on a pro rata basis.
2 Unlike long-term teleworking arrangements, remote work arrangements are possible at short notice as the need arises.

Digital communication is advancing steadily

OeNB communication rises to meet new challenges

The economic impact of the COVID-19 pandemic has become a key issue in the OeNB’s communication of its core topics – monetary and financial stability, cash, payments and ­statistics. Thus, we examine and discuss the ­effects of the COVID-19 crisis in a wide range of OeNB studies, analyses, comments and postings. The media have shown great interest in particular in our contributions on cyclical and property price developments, inflation, ­financial stability as well as on the digital euro and on trends in Austria’s external sector. As was to be expected, the number of followers has increased across all the OeNB’s social media channels. The most popular channel at the moment is the OeNB’s LinkedIn channel (more than 7,000 followers). The new online video series Ein.Blick Wissenschaft (Science insights) presents winners of OeNB scholarships, sharing their success stories and detailing some of their projects. This format is particularly popular on Twitter, where it helped attract more than 1,200 new followers this year. A popular feature on the OeNB’s Instagram channel are reels (30-second video clips). In November 2020, the OeNB started a podcast series and has meanwhile produced 23 episodes, which continue to be available for download; the podcast has around 2,300 subscribers and has recorded more than 3,550 viewings so far. To ensure effective reporting of the OeNB’s social media activities to the individual business areas, we implemented an automated social media content analysis tool.

In 2021, the OeNB organized a series of events to promote the exchange of opinions on monetary and economic policy issues, which met with strong interest from national and ­international experts. Because of the pandemic, most of these conferences, jours fixes, press conferences, workshops and seminars were held as hybrid or purely virtual events, much like in 2020. The events that attracted the ­largest audiences of several hundreds of participants each were the OeNB’s Economics Conference on “Gender, money and finance,” the conference on “Climate protection: state of play, division of labor, steps forward” and the OeNB’s Conference on European Economic ­Integration (CEEI) on “Recalibrating ­tomorrow’s global value chains – prospects for CESEE.” A total of more than 1,500 participants joined the events organized to inform external sector ­reporting agents on the new reporting ­structure and reporting application for balance of payments data.

Enhanced cooperation in financial ­education activities

Financial education is one of the OeNB’s ­strategic focus areas for the period from 2020 to 2025. Apart from offering a wide range of teaching and information material in German ( www.eurologisch.at ), the OeNB also promotes financial education through a series of cooperations. Following several months of close collaboration between the OeNB and the Federal Ministry of Finance, for instance, Austria’s strategy for financial education was presented in September 2021. The agreed national action plan aims to raise financial literacy levels in Austria and to raise awareness, in general, for issues like finance, capital markets, the accumulation of wealth and sustainable financial planning. The OeNB contributed to drafting the financial education strategy and will also be involved in implementing the action plan in ­cooperation with the Federal Ministry for ­Education, Science and Research and the ­Federal Ministry for Social Affairs, Health, Care and Consumer Protection.

Toward the end of 2021 the round table ­series on financial education in Austria came to an end. After five years of successful exchange and interesting discussions with noncommercial providers of financial education, this working group will now continue its activities within the framework of Austria’s financial education strategy. The initiatives presented at the round table discussions repeatedly sparked new ­projects and fruitful cooperations.

2021 also saw the fifth anniversary of our cooperation with the Institute for Business ­Education at Vienna University of Economics and Business. The respective cooperation agree­ment to promote financial education in Austria was signed in 2016. It focuses on joint research, teaching and events. Under this agreement, OeNB representatives have been holding ­various seminars at the Institute for Business Education. Moreover, the OeNB has expanded its ­activities to a number of other universities in Austria, supporting them in the fields of teacher training and continuing education.

The OeNB is a founding member of Stiftung Wirtschaftsbildung, a national foundation for economic education that started operations in early 2021, and in its cooperation with the foundation has also relied on its expertise in impact analysis and assessment. Currently, we cooperate in implementing a school pilot ­project testing how to enhance economic ­education in lower secondary education at 30 ­Austrian schools. There are also plans to ­develop a toolkit based on scientific standards and ­requirements for evaluating the quality of financial education measures, which we will share with other institutions to support them in evidence-based ­decision-making and ­evaluation.

Even though the OeNB’s Money Museum had to remain closed for 14 weeks in 2021 in line with pandemic-related restrictions, it ­welcomed 2,995 visitors in the reporting year. The special exhibition “FUNNY MONEY. Money in caricature” was extended for one year until the summer of 2022 and opened, as a smaller ­version, at OeNB – Western Austria in Innsbruck on October 1, 2021. A special highlight in the reporting year was the Museum Night on October 1, 2021, that was organized by the Austrian Broadcasting Corporation ORF and took place under strict conditions in response to the pandemic. 800 persons visited the Money Museum during the Museum Night.

A major contribution to the Money Museum’s collection was made by incorporating thousands of historical banknote counterfeits that had been submitted to the OeNB’s ­Cashier’s Division. Last but not least, the Money Museum supported the Austrian State Archives by providing visual materials to their exhibition presenting historically relevant ­Austrian documents at the Federal Chancellery under the heading “Österreich in Europa. ­Dokumente aus dem Staatsarchiv, die Ge­schichte schrieben.”

The Joint Vienna Institute continues its online courses

The Joint Vienna Institute (JVI) offers training to central bank experts and public sector ­officials from many different countries on a broad range of topics with a focus on economic, fiscal, monetary and financial market policy. The course participants mostly come from ­CESEE countries and the Commonwealth of Independent States (CIS). The JVI is co-sponsored by the Austrian Federal Ministry of ­Finance, the IMF and the OeNB. From its foundation in 1992 up to 2021, the JVI has trained a total of 48,742 course participants.

The pandemic continues to pose great challenges to the JVI, however. Resuming face-to-face teaching was not possible in the reporting year, but unlike in 2020, when the number of courses held had dropped dramatically, 94% of planned JVI courses (115 weeks of training courses) did take place in a virtual setting in 2021. The OeNB offered seven weeks of training in the following subject areas: supervision and financial stability, European integration, ­financial education, climate change and green finance as well as diversity and inclusion. Three courses were rescheduled for 2022 for reasons of didactics. The number of course participants has gone down by about one-third since before the pandemic as group sizes have been reduced. The number of registrations for JVI courses has halved. Still, feedback from course participants shows that satisfaction with courses offered at the JVI and related learning effects continue to be high. Many participants state, however, that they had to perform other tasks while participating in online courses and that the virtual setting created concentration challenges and technical issues. What they miss most are peer learning and networking opportunities. The advantages of virtual courses, on the other hand, are greater flexibility and lower costs.

The JVI also developed a successful webinar series during the pandemic: Its 34 webinars in 2021 reached 3,043 participants. The OeNB contributed its expertise to this series as well.

Regional program for EU candidates and potential candidates concluded amid challenging conditions

The OeNB is a member of the ESCB Working Group on Central Bank Cooperation, which i.a. coordinates large-scale EU-funded programs supporting non-EU central banks in bringing their practices in line with EU standards. A ­regional program for EU candidates and potential candidates in the Western Balkans that had been under way since 2019 was successfully concluded in the reporting year. Preparations for a follow-up program have begun.

Table 5: Indicators of knowledge-based output  
Unit 2018 2019 2020 2021
Cooperation and networks
National bodies with OeNB representatives number 84 85 79 75
International and European bodies with OeNB
representatives (ESCB, etc.)
number 356 323 331 345
Technical assistance activities with CESEE and CIS central banks days 451 4941 345 376
Joint Vienna Institute (JVI) course participants number 2,282 2,410 756 1,578
OeNB-hosted national and international events days 209 200 43 120
Lectures delivered by OeNB staff to external audiences number 870 879 474 659
Communication and information
Queries to OeNB hotlines number 12,449 11,432 9,756 7,337
Research cooperation projects with external partners number 100 150 126 106
Money Museum visitors number 11,482 11,019 2,790 2,995
Cash training course participants (including Euro Shop Tour) number 5,979 16,939 3,354 1,562
Children and teachers reached through school outreach activities number 29,252 27,914 12,172 9,850
Seminars for teachers number 21 25 27 51
Contacts during the Euro Info Tour number 30,208 19,189 x2 x
Press conferences number 13 20 9 8
Press releases number 187 114 114 101
Publications
Articles published by OeNB staff number 119 79 72 98
of which: refereed papers number 30 36 27 32
Source: OeNB.
1 Corrected figure.
2 The Euro Info Tour was discontinued in 2020.

The OeNB is committed to its social responsibility

The OeNB is active as a reliable partner and promoter in six different areas

Business development

The European Recovery Program (ERP), more widely known as the Marshall Plan, was established by the United States to help rebuild ­Europe after World War II. Today, ERP funds serve to finance low-interest rate loans aimed to strengthen Austria as a business location. The OeNB was instrumental in implementing the Marshall Plan and to this day continues to administer the ERP central bank assets. Most recently, the OeNB was managing 564 ERP loans granted in the industry, trade and ­services sectors, with an outstanding volume totaling EUR 764 million.

Research funding

It is the declared aim of the OeNB Anniversary Fund for the Promotion of Scientific Research and Teaching to ensure fair conditions in the competition for funding for highly focused ­basic research projects on central bank-related issues and, in doing so, to contribute to making economic research in Austria more attractive overall.

Guided by these strategic considerations, the Governing Board of the OeNB approved funding totaling around EUR 6.5 million for 34 Anniversary Fund research projects in 2021. Most of these funds (EUR 1.45 million) went to Vienna University of Economics and ­Business for seven approved projects; the University of Vienna received EUR 1.04 million for six approved projects.

Independent economic research in Austria

Independent high-quality empirical economic research produces important input for policymaking and keeps the public informed by ­analyzing economic policy measures. Overall, independent economic research is thus a major public good. The OeNB acknowledges and ­supports this notion and considers designing a new funding program key to making a valuable financial contribution to economic research in Austria that will ensure the latter’s independence from politics and industry. The formal criteria for the retargeted funding program of 2021 are designed in a way to make funding available to all Austrian research institutions that fulfill specific legal, technical and infrastructural conditions. In this way, the group of potential beneficiaries has been enlarged when compared with those institutions that ­previously received basic financing.

In the first quarter of 2022, our new funding program for Austrian economic research institutions will invite tenders for a slightly higher budget of EUR 12 million in total for a three-year funding period from 2022 to 2024. In ­September 2022, the OeNB’s Governing Board and General Council will allocate the funding budget to the eligible institutions in a transparent manner according to clearly defined criteria (eligible projects must be scientific, analytical, application oriented, informative and/or ­instructive). In their decision-making, the OeNB’s Governing Board and General Council will be supported by independent assessments from ­international experts.

Arts and culture

With its collection of historical string instruments, the OeNB aims at contributing to Austria’s excellent reputation as a musical ­nation. Currently, the OeNB’s collection numbers 45 instruments, all crafted by the most ­renowned violinmakers of the Italian and French schools and lent to selected musicians free of charge. This partnership makes it ­possible to preserve this unique cultural heritage of sound bodies for future generations. Even though the pandemic continued in 2021, ­concerts with instruments from the OeNB’s collection could be held in the reporting year in Linz, Innsbruck and, during the Carinthian Summer Music Festival, at Ossiach Abbey, thanks to our long-standing cooperation with the Austrian broadcasting station Ö1.

The OeNB is proud of its commitment to promoting the arts and culture. By purchasing major artworks – like the painting “Himmel und Wolken” (Sky and clouds) by Max Weiler in 2021 – we contribute to keeping Austria’s cultural assets in the country. Moreover, we particularly focus on supporting young ­Austrian artists by purchasing their works for our art collection. In this segment, our activities ­concentrate on abstract art. To make part of our collection accessible to the public, we loaned selected works to exhibitions in Graz, Innsbruck and Krems in the reporting year. Moreover, a number of paintings from the OeNB’s collection are on permanent loan to the Albertina Museum, the Leopold Museum and Schönbrunn Palace in Vienna and Bruck Castle in Lienz, East Tyrol.

The Shoah Wall of Names Memorial

With the Memorial to the Jewish children, women and men of Austria who were ­murdered in the Shoah, a place of reverence has been ­created for the victims of Nazism that came from Austria’s Jewish community.

The memorial was built in Ostarrichi Park in front of the OeNB’s main building. Covering a total of around 2,500 square meters, it is partly located on OeNB property. A corresponding easement contract has been concluded between the OeNB, the City of Vienna and the Association for the Building of a Wall of Names Memorial dedicated to the Jewish Children, Women and Men of Austria who were murdered in the Shoah.

The OeNB supported the construction of the memorial by carrying out preparatory ­measures in a project led by our Facilities and Security Management Division and was also ­involved in organizing the opening ceremony on November 9, 2021.

A closer look at the Shoah Wall of Names Memorial

Built at a central location in Vienna, the Shoah Wall of Names Memorial offers a quiet environment for ­remembering the fate of the more than 65,000 Jewish children, women and men from Austria that were ­murdered in the Shoah and for honoring their lives.

The new memorial is located in Ostarrichi Park, in front of the OeNB’s main building. It consists of a series of stone walls forming an ellipse and bearing the names of the Jewish holocaust victims from Austria. At its ­center, nine trees – one for each Austrian province – form a green island among the walls. This architectural design creates a contemplative space for commemoration. 64,425 names have been engraved on the memorial’s walls so far, and new names are being added continually.

The memorial was funded by contributions from all stakeholders (Republic of Austria, all nine regional ­governments) and private donations. The major part of funding was provided by the federal government.

Development aid

The development aid group within the OeNB has been run for more than 35 years by dedicated volunteers from among active and retired OeNB staff. The group helps finance humanitarian projects by collecting membership fees and donations from the OeNB’s staff and ­Governing Board. In line with the UN Sustainable Development Goals, the group provides funding for selected humanitarian projects that aim to eradicate extreme poverty and hunger, achieve universal primary education, improve the health of mothers and children, promote the economic participation of women and ­ensure the sustainable use of natural resources.

Apart from eight projects in Africa and Asia that were suggested by OeNB staff in 2021, the group’s general meeting also chose to support a development aid club in Guatemala in its ­project helping indigenous people defend their ­ancestral lands against land theft by international corporations.

Enterprise risk management

In the OeNB’s strategy for 2020 to 2025, the implementation of an enterprise risk management (ERM) framework was defined as one of the OeNB’s strategic objectives. The OeNB ­already has a number of different risk management systems in place that serve to reduce risks associated e.g. with investment, equity holdings, IT systems or compliance as well as risks arising from specific projects. These systems are now gradually being harmonized. The first milestone in this harmonization process was reached in 2021 when the OeNB’s management adopted specific ERM business area regulations defining harmonized minimum requirements for risk management and a joint risk policy, thereby enabling a common understanding of risk management processes at the OeNB. In ­addition, an enterprise risk forum was established at the OeNB in 2021 as a platform where representatives of the various risk management systems can exchange their expertise on risk-specific issues at quarterly meetings.

Operational risk

Operational risk categories comprise all risks arising from deficiencies or inadequacies in ­internal processes or systems, human errors or disruptions from external events. They may damage corporate reputation, impair the achievement of corporate objectives or cause ­financial damage for the OeNB. In cooperation with the responsible business areas, operational risk management aims to assess, control and continually monitor the current risk situation and to reduce identified risks by taking ­adequate risk-mitigating measures. The management of operational risk at the OeNB is governed by the ERM business area regulations and, more ­specifically, by staff rules on operational risk management. The OeNB is aware of its responsibility as an operator of critical infrastructure and therefore considers the potential impact of operational risk more closely also in the ­context of business continuity and crisis management. Specific contingency requirements – such as the establishment of a second data center and a backup data site at more distant locations – have been met to help maintain the OeNB’s business operations.

Information security risk

The OeNB’s IT department operates an information security management system certified to ISO 27001, examining and dealing with ­information security risk on a systematic basis. Technical and organizational vulnerabilities are identified in line with protection requirements defined by the OeNB to ascertain whether they present a confidentiality, an integrity or availability risk. In this context, protection and ­security of information need to be balanced with costs and usability.

To meet the cyber resilience oversight ­expectations (CROE) for financial market ­infrastructures adopted by the Governing Council of the ECB, the OeNB’s Governing Board included the issue of cyber resilience in the OeNB’s corporate strategy. Gaps identified in a preliminary examination will be closed ­under a targeted information security program covering the years up to 2025.

Financial risk

The financial risk categories relevant to the OeNB are market, credit and market liquidity risk. Climate risk has received increased attention as an additional driver of financial risk. ­Reserve asset and risk management principles are laid down in specific rules of procedure ­adopted by the OeNB’s Governing Board. In line with these rules of procedure, the OeNB’s Treasury Department is subject to rules and ­requirements that reflect the risk limits designated by the Governing Board, as adopted by the latter on proposal of the OeNB’s Risk Committee. The Risk Committee monitors continuous compliance with these rules and requirements based on specific risk measurement ­systems and methods. The systematic consideration of climate risk and environmental, social and corporate governance (ESG) criteria is ­regarded as essential for the future. The Risk Committee receives regular reports on risk management and in turn reports to the Governing Board. Moreover, the Risk Committee decides which methods are to be used for risk measurement. Investment in new currencies and asset classes as well as applicable risk limits must be authorized by the Governing Board upon in-depth analysis.

Market risk

Market risk is the risk of exposure arising from changes in financial market prices, as driven in particular by exchange rate, stock price and ­interest rate changes. To limit market risk for OeNB investments, the OeNB’s Governing Board lays down rules that must be observed in market risk management. Market risk is primarily measured in terms of the expected shortfall. Calculations are consistently based on a one-year horizon and a confidence interval of 99%. The actual risk exposure depends on the amount of assets invested, including gold, on holdings of unhedged ­Special Drawing Rights (SDRs) as well as on the amount of own funds and earmarked funds ­invested. In addition, the OeNB makes provision commensurate to its relative share in the ECB’s paid-up capital for ECB investment risk and for risks arising for the ECB from conducting Euro­system monetary policy operations. The OeNB calculates the risk involved in real estate holdings using various real estate indices based on value-at-risk calculations with a one-year horizon and a confidence interval of 99%.

Credit risk

Credit risk is the risk that a counterparty will fail to meet some or all of its obligations. In principle, the OeNB manages the credit risk arising from its own funds portfolio and related investment activities with a limit system which provides up-to-date information on all risk ­limits and exposures. Credit risk arising from Eurosystem monetary policy operations is calculated by the ECB and accounted for on a pro rata basis in OeNB risk reporting. Credit risk arising from holdings for own account and ­investments of own funds is calculated by the OeNB and taken into account when monitoring utilization of the risk framework. The credit risk calculations of the Eurosystem, the ECB and the OeNB are consistently based on a one-year horizon and a confidence interval of 99%.

Market liquidity risk

Market liquidity risk is the risk that a market may be too thin and may not be able to fully accommodate all trades, so that the securities trading volume is lower than desired and securities cannot be traded quickly enough or perhaps only at a discount. To prevent incurring market liquidity risk, the OeNB analyzes the market liquidity of financial products, adjusts holdings to issuing volumes and limits the ­maximum residual maturities of transactions. Security and liquidity considerations take precedence over yield in managing the OeNB’s ­assets.

The OeNB’s Environmental Statement 2021

Comprehensive Environmental ­Statement in line with EMAS Regulation (EC) No 1221/2009

Sustainability is a top priority for the OeNB, which is why we started to operate to the ­environmental reporting standards of the EU’s Eco-Management and Audit Scheme (EMAS) around 20 years ago. And even before then, we had taken care to minimize our environmental impact, inter alia, by implementing energy-­saving measures and using environmentally compatible cleaning agents and eco-friendly printing paper.

Meanwhile, environmental action must be seen, in particular, in the context of the European Green Deal, which the European Commission adopted in 2019. Its goal is to reduce the EU’s net greenhouse gas emissions to zero by 2050 and thus make Europe the first ­continent to become climate neutral. 17 To the extent that this is in line with its mandate, the OeNB is firmly committed to contributing its share to fighting climate change. To this end, we stepped up efforts in 2021 to become a ­climate-neutral enterprise that achieves net zero emissions, i.e. a balance between the amount of greenhouse gas emissions produced and those removed from the atmosphere. Achieving climate neutrality is a major milestone in reaching our sustainability target of continuously reducing our ecological footprint as an enterprise. The OeNB plans to reach net zero emissions by 2040 (box 10). In November 2021, the OeNB and the FMA acknowledged the objectives of the UN Climate Change ­Conference (COP26) in Glasgow, emphasizing their commitment to pursue ambitious ­operational ecology goals to comply with their high credibility standards. Going beyond in-house optimization, the OeNB also contributes, at both the national and European level, to generating expertise on the impact of ­climate change. To reach our climate goals, we first need to know how to effectively mitigate this impact on society, the economy and the ­financial system and what adjustments to make (box 5).

For the OeNB, the key to becoming ­climate neutral lies in combining continuous monitoring with reducing or offsetting emissions where these cannot be fully avoided.

  • Monitoring emissions

Changes will only be possible if we are aware of our ecological footprint. Therefore, we need to consistently record all emissions we generate through our business activities, ranging from office operation to business trips and investments, taking care to continually enhance and fine-tune our monitoring procedures.

  • Reducing emissions

Reducing emissions is essential in the fight against global warming. Since we adopted eco management under EMAS and, in particular, since we implemented energy management according to ISO 50001 in 2014, we have consistently strived to identify potential ways to save energy. According to our environmental policy, avoiding and ­reducing emissions has priority over offsetting them.

  • Offsetting emissions

Under its compensation strategy and as an immediate step toward greater sustainability, the OeNB participates in climate projects promoting e.g. the regeneration of fauna and flora along dedicated sections of Austrian ­rivers such as the Traun, Inn and March and the implementation of corresponding flood control measures. In addition, our financial literacy activities have recently focused more closely on green finance.

The OeNB’s corporate environmental policy

Stability, security and trust guide us in fulfilling our responsibility toward society. These principles are reflected in the OeNB’s corporate governance, which is geared toward sustainability, and apply equally to its core business and to its commitment to people and the environment. The OeNB is a top environmental performer among Austrian enterprises – nevertheless we seek to continuously improve our environmental track record. Apart from meeting the environmental standards required by law, we comply with the principles of the EMAS Regulation.

Responsible resource consumption

We endeavor to minimize negative impacts on the environment while observing business management ­principles. It is our aim to avoid unnecessary resource and energy consumption with the help of a comprehensive energy management system.

Ecologically sound procurement

We observe ecological criteria for purchases of products and services, especially in tenders. Specifically, we give preference to products that are made of environmentally friendly materials and whose energy efficiency and life cycles are ecologically sustainable.

Ecological awareness among staff

We promote environmental thinking and action throughout the OeNB. To achieve and maintain a high level of eco-consciousness, we offer a range of related information and training events for staff.

Research and cooperation with partners

We cooperate with partner organizations and representatives of civil society to implement environmental ­protection measures. Beyond the scope of the OeNB’s mandate, we work toward a livable environment e.g. by supporting related research projects.

Information policy

We pursue an open, responsible policy in providing the public with information.

Climate change

We acknowledge the risks involved in climate change as a key challenge of our times. We therefore strive to make the OeNB’s activities fully carbon neutral and we implement dedicated projects aimed at becoming a ­climate neutral enterprise by 2040. In doing so, minimizing our greenhouse gas emissions takes priority over carbon offsets.

Robert Holzmann Gottfried Haber

Governor Vice Governor

Eduard Schock Thomas Steiner

Executive Director Executive Director

Martin Much

Environmental Officer

Vienna, March 2020

Efficient environmental management according to EMAS

The OeNB’s corporate environmental policy (box 10) is defined by its EMAS management representative, who is responsible for ensuring that the OeNB complies with the obligations laid down in the EMAS Regulation, such as compliance with environmental laws (in particular with waste and energy legislation), establishment and pursuit of environmental objectives, voluntary activities and binding commitments. To achieve the continued improvement required under EMAS, the OeNB has defined projects and activities in its environmental ­program that serve to realize its environmental objectives.

Developing the OeNB’s ecological strategy and practical guidelines based on its environmental management system is the job of the OeNB’s Environmental Officer. The OeNB’s environmental protection team (EPT) is ­responsible for implementing our ­environmental program, steadily improving our ­environmental performance and communicating ­environmental issues within the organization. The EPT ­consists of the Environmental Coordinator, experts for energy, waste, water and security matters as well as environmental controllers from ­individual business areas. Internal environmental ­audits are conducted by specially trained environmental auditors from among our staff who meet as a group to undergo ­further specialization and ­coordinate their ­approach. EPT members meet up monthly to keep each other informed and coordinate OeNB-wide green initiatives. These initiatives also include lectures and documentary film screenings that raise ecological awareness, ­provide specific training and spread green know-how.

The OeNB’s environmental management system relies on an environmental database which contains the documentation of environmental audits as required under EMAS and gives evidence of the OeNB’s compliance with legal provisions in this field. Corresponding task monitoring and all relevant activities are on schedule.

Promoting ecological awareness in ­publications and at events

The OeNB regularly organizes or participates in conferences and events dealing with green issues, and it supports publications discussing the environment and climate change. In 2021, for instance, we commissioned a study on investments in digital transformation and decarbonization in Austria, which was completed by the Austrian Institute of Economic Research (WIFO) in June. Moreover, we ­provided EUR 650,000 of funding from our Anniversary Fund (around 10% of the subsidies paid out in 2021 and thus more than in recent years) to three climate- and environment-­related study projects. In ­addition, OeNB ­authors also presented a number of studies on climate issues (box 5) in the reporting year.

A number of OeNB events in 2021 dealt with climate protection and related issues. An East Jour Fixe on June 3, 2021, discussed the second transition of the countries in Central, Eastern and Southeastern Europe (CESEE), namely the transition toward carbon neutrality. At an online conference on October 7, 2021, which the OeNB organized in cooperation with SUERF – The European Finance and Money Forum, Lord Nicholas Stern discussed effective climate protection strategies for monetary and fiscal policymakers and financial markets. Co-organized with The Vienna Institute for ­International Economic Studies (wiiw), the Global Economy Lecture 2021 took place on November 3, 2021. Keynote speaker Professor Sir Partha Dasgupta elaborated on the economic link between population, consumption and biodiversity. And finally, on November 22 and 23, 2021, the OeNB’s Conference on ­European Economic Integration (CEEI), which we organized together with the European ­Investment Bank (EIB), examined, inter alia, the ecological aspects of global value chains from a CESEE perspective.

Certified ISO 50001 energy ­management

Since most of our staff continued to work ­primarily from home also in the second year of the pandemic, office energy consumption ­remained limited in 2021: Electricity consumption amounted to just 5.1 MWh per full-time equivalent (FTE) staff, and district heating consumption stayed at very low levels.

For many years, we have exclusively procured electricity from renewable sources certified with the Austrian Ecolabel. Further measures to reduce greenhouse gas emissions ­include continued heat recovery, a photovoltaic system that was integrated into the building facade in 1998, the sustainable use of buildings, an optimized lighting concept (LED lighting), improved technical facilities (pump, sunblind and ventilation controls, district heating, district cooling, “free cooling” rooftop systems). Moreover, the OeNB strives to raise ecological awareness among employees, e.g. by encouraging the use of public transport both for getting to work and for business travel. The newly ­established environmental communication task force prepared contributions for the OeNB ­intranet and newspaper articles on questions of energy and environmental management. Moreover, plug-in ­hybrid vehicles with electric ­motors have been added to the OeNB’s company vehicle fleet and five electric bicycles have been made available to staff for errands around Vienna, which ­improved our green mobility score not least ­because we exclusively procure certified electricity from renewable sources. The fact that the OeNB has been certified ­under energy management standard ISO 50001 since 2014 underlines our commitment to ­energy efficiency.

The OeNB’s ecological indicators

With staff working mostly from home during the pandemic, the OeNB’s energy ­consumption, CO2 emissions and waste generation have ­declined (table 6). In total, the OeNB ­generated 447.1 tons of CO2 equivalents in 2021. Moreover, total paper consumption remained low as the pandemic and a number of optimization measures drove up the use of electronic media. In fact, we reduced paper consumption for good as the OeNB’s Business and Economics Library went digital. In line with the digital strategy for the library, both daily papers and expert journals can now be accessed via online subscriptions, and subscriptions for print copies have been canceled. The corresponding CO2 equivalents were calculated on the basis of ­conversion factors according to the Environment Agency Austria, taking into account indirect greenhouse gas emissions.

Promoting environmental awareness among our staff

To promote green mobility, the OeNB subsidizes yearly passes for public transport and has revised its staff agreement for business trips with a view to creating incentives for staff to use eco-friendly transportation on their way to and from work and when traveling on business. Moreover, an electronic workflow has been implemented to handle all business travel ­management procedures, which not only ­resulted in economic ­advantages but also in ecological benefits (lower paper consumption). Dedicated newsletters and articles on the ­intranet advocate traveling by train instead of by airplane or car and using the electric ­bicycles (“OeNBikes”) which we provide for errands around town (complete with specific training units). As mentioned above, the high share of OeNB staff working more frequently from home over the past two years in response to the pandemic also helped reduce the OeNB’s ­emissions.

Some environmental impact scores and ecological indicators need to be ­improved

In line with the EMAS Regulation, we ­regularly review the direct and indirect environmental aspects of measures that might have a ­significant impact on the environment. In doing so, we must consider issues such as an aspect’s ­potential to cause environmental harm, the degree of environ­mental vulnerability, the scale or ­severity of the impact, concerns of interested parties and legal requirements. Table 11 gives an overview of ­environmental impact assessments for different areas and of the potential for organizational ­improvement.

Table 6: The OeNB’s ecological indicators (2019–2021)  
Unit 2019 2020 2021
Energy
Electricity consumption per FTE 1, 2 MWh 6.50 5.57 5.10
Heat consumption kWh per m2 37 38 46
District cooling kWh per m2 43 39 53
Total energy consumption (buildlings)3 MWh 14,249 13,143 12,813
of which: renewable energy 4 MWh 7,837 9,427 8,959
Total energy consumption including business travel MWh 16,411 13,842 13,171
Water
Drinking water consumption per FTE liters per day x x 16
Industrial water consumption per FTE liters per day x x 15
Total water consumption per FTE5 liters per day 87 59 31
Consumption of materials and products
Total paper consumption per FTE6 kg 44 24 15
Consumption of printing/copying paper per FTE sheets 4,967 4,072 2,307
Share of recycled copying paper % 38 53 46
Consumption of cleaning agents 7 g per m2 16 7 5
Total CO2 emissions per FTE8 tons 1.5 0.7 0.4
Source: OeNB.
1 Number of employees (full-time equivalents – FTEs): 2019 = 1,069.6; 2020 = 1,087.5; 2021 = 1,133. The OeNB’s environmental management system according to EMAS
covers the following locations: Vienna (main building, Otto-Wagner-Platz 3; northern office building, Rotenhausgasse 4; and the areas in the Money Center that are assigned
to the OeNB, Garnisongasse 15; all 1090 Vienna) and OeNB – Western Austria (Adamgasse 2, 6020 Innsbruck).

2 All energy data on buildings include the Money Center but exclude the location OeNB – Western Austria and the Brussels Representative Office (around 20 FTEs).

3 Since 2020, lower energy consumption due to COVID-19 containment measures.

4 Since 2010, the OeNB has purchased green electricity from certified providers.

5 Excluding the location OeNB – Western Austria and the Brussels Representative Office; lower water consumption in 2021 due to COVID-19 containment measures.

6 Total consumption in 2021: 17,018 kg, based on paper purchased (i.e. including stocks).

7 Total consumption in 2021: 484 liters; lower consumption in 2021 due to COVID-19 containment measures.

8 Operation of facilities (including emergency generators) and business travel and transport; total in 2021: 405 tons, lower emissions due to COVID-19 containment measures;
conversion factors according to the Environment Agency Austria, including indirect greenhouse gas emissions.

Note: Land used: 20,758 m2, sealed surface: 17,860 m2, green area: 4,520 m2 (including green roof areas). The following indicators required by EMAS are not provided in this table
because of negligible values: emissions of greenhouse gases and air pollutants such as CH4, N2O, HFC, PFC, SF6 or SO2, NOx and fine dust.
Table 7  
Sources of greenhouse gas emissions at the
2019 2020 2021
Tons of CO21
Scope 1 emissions
Vehicle fleet 108.4 60.6 60.7
Cooling agents 3.6 0.0 5.0
Emergency generator tests 18.9 11.7 12.0
Subtotal 130.9 72.3 77.7
Scope 2 emissions
Electricity 95.4 107.9 79.3
District heating 69.2 91.0 73.2
District cooling 167.1 151.2 146.5
Subtotal 331.7 350.1 299.0
Scope 3 emissions
Business travel by airplane 1,032.7 282.7 61.0
Business travel by car 80.9 29.2 9.1
Business travel by train 3.2 0.7 0.3
Subtotal 1,116.8 312.6 70.4
Total 1,579.4 734.9 447.1
Source: OeNB.
1 Greenhouse gas emissions including indirect effects.
Note: Figures for 2019 were calculated ex post using current conversion factors.
Table 8: Transport mileage (2019–2021)  
2019 2020 2021
Business travel by airplane, km 2,609,057 676,192 154,907
Business travel by car, km 356,642 117,300 39,933
Business travel by train, km 250,200 83,400 20,400
Fuels for transport, liters 34,879 20,123 19,768
Source: OeNB.
Table 9: Waste generation by the OeNB (2019–2021)  
2019 2020 2021 Waste code number
kg
Nonhazardous materials 72,396 44,390 39,190
Commercial waste1 60,410 34,976 26,600 91101
Electronic scrap2 3,167 3,394 1,080 35202
Electrical applicances, large and small 165 344 2,356 35221, 53231
Bulky waste3 0 0 0 91401
Wood waste, treated and untreated3 7,380 5,676 8,800 17201, 17202
Fire extinguishers, with or without residual content 1,274 0 354 35105, 59802
Sand filter contents 0 0 0 94704
Nonhazardous waste per FTE 68 40 35
Hazardous materials 28,611 9,322 10,639
Waste paint, waste varnish, solvents, cleaning agents 0 14 0 55502, 59405
Refrigeration equipment 100 181 81 35205
Refrigerants containing CFCs 71 0 0 55205
Refrigeration and air-conditioning equipment 0 0 0 35206
Unsorted batteries, lithium and nickel-cadmium batteries 366 506 268 35338, 35337, 35323
Lead storage cells4 23,736 330 990 35322
Heating oil and fuels 0 0 0 54108
Oil separator contents5 2,980 4,280 8,600 54702
Visual display units, PCB-free capacitors 345 282 0 35210, 35339, 35209
Laboratory waste 0 0 0 59305
Large visual display units and electronic devices 837 609 700 35212, 35201, 35220
Solvent-water mixtures, other oil-water mixtures 0 0 0 55374, 54408
Filter materials and absorbents with harmful additives 3 0 31435
Cleaning agent and solvent waste6 0 0 0 59405, 55377
Gases in pressure containers, aerosol cans 173 2,160 0 59801, 59803
Plastic packaging material with hazardous residual content 0 0 0 57127
Asbestos cement 0 960 0 31412
Hazardous waste per FTE 27 8 9
Recyclables 102,210 90,990 87,965
Colored glas 2,790 4,290 5,500 31469
Clear glas 3,020 4,000 6,000 31468
Metal/cans 2,280 0 0 35315
Biodegradable waste7 11,290 11,300 11,300 91701
Plastic packaging material including PET waste, cans 6,160 9,800 9,800 57118, 57130 or 91207
Iron and steel waste8 19,330 10,570 13,160 35103, 35105
Waste paper9 57,190 35,250 28,970 18718
Styrofoam/polysterene 150 110 210 57108
Data carriers 0 0 50 57119
Waste paper and cardboard, coated9 0 15,670 12,975 18702
Recyclables per FTE 96 83 78
Total waste 203,217 144,702 137,794
Source: OeNB.
1 Reduction in this category is attributable to rigorous waste separation and reuse of recyclable materials in general and, from 2020, also to pandemic-related containment measures
in particular.
2 Increase in 2020 due to more frequent and varied use (e.g. mobile devices, digital working environment).
3 Furniture is disassembled and disposed of with wood and metal waste, which keeps bulky waste volumes low most of the time.
4 Lead storage cells are required to ensure uninterrupted power supply; overhaul of the telephone system in 2021.
5 Oil separators in the parking garage.
6 Tank cleaning where required.
7 Including green waste (garden/park waste).
8 Metal containers had to be disposed of in 2019.
9 Fluctuations due to office moves and archive clearances.
Table 10: The OeNB’s environmental performance up to 2021 and environmental program for 2022  
Year S Action
Further greening of procurement
Hiring a new cleaning contractor with EMAS certification 2022 to be continued business area
Procuring office material according to ecological criteria 2022 to be continued business area
Responsible resource use, reduction of emissions, further reduction of
electricity consumption by 2% against 2014
Climate targets coordination project 2022 planned business area
Implementing occupancy-based lighting at the workplace 2021 implemented business area
Developing the mobility strategy further (e-bikes) 2021 implemented EPT
Evaluating district heat connection of OeNB – Western Austria 2022 planned IG Immobilien ­Management GmbH
Electricity saving projects
Switching to LED lighting on service floors (main building, northern office building) 2022 to be continued business area
Modernizing plumbing, cooling and heating installations 2022 to be continued business area
Planning project for energy-improvement of northern office building facade 2023 planned business area
Replacing lighting in northern office building (mail room) 2022 planned business area
Planning project for renewal of ventilation station (eastern top floor) 2022 planned business area
Promoting environmental awareness, training
Promoting green mobility (bicycle use, including training for OeNBikes) 2022 to be continued business area
Training new staff (including remote training) 2022 planned EPT
Urban gardening, information: plants in the city 2022 to be continued business area
Networking and communication
Membership in the Central Banks and Supervisors Network for Greening the
Financial System (NGFS)
2022 to be continued EPT
Information campaign, including lectures, more information on the intranet 2021 implemented EPT
Cooperating with partners such as the Club of Rome, the WWF (World Wide Fund
for Nature) and OEGUT (Austrian Society for Environment and Technology)
2022 to be continued EPT
Auditing the waste disposal contractor 2022 planned waste management officer
Greening the food offered at the OeNB further, reducing plastic material 2022 implemented EPT
Source: OeNB.
Note: EPT = environmental protection team.
Table 11: Evaluation of environmental aspects at the OeNB (direct and indirect impact according to EMAS)  
Electricity consump
1
Heat consumpti
1
District ­coolin
1
Water
2
Waste
3
Procurement1 Consumption of ­materials, e.g. paper4 Waste
accumulation5
Mobilit
s travel, transport
Environmental relevance High High High Medium Low High Medium High High
Potential for improvement Medium Low Low Low Low Medium Low Medium Medium
Source: OeNB.
1 Fundamental impact on resources and greenhouse gas emissions.

2 Fundamental impact on resources and ecosystems.

3 Fundamental impact on biodiversity and ecosystems.

4 Fundamental impact on resources, ecosystems and greenhouse gas emissions.

5 Fundamental impact on ecosystems, greenhouse gas emissions and land surfaces.

6 Fundamental impact on soil and air quality, resources, ecosystems and greenhouse gas emissions.

EMAS validation

This comprehensive Environmental Statement published by the Oesterreichische Nationalbank, Otto-­Wagner-Platz 3, 1090 Vienna, Austria, has been validated in accordance with the EMAS Regulation by TÜV SÜD, Franz-Grill-Straße 1, Arsenal Objekt 207, 1030 Vienna, Austria, AT-V-0003.

The Lead Verifier of TÜV SÜD herewith confirms that the OeNB’s environmental policy, its environmental program and environmental management system, its environmental review and its environmental audit ­procedures conform to Regulation (EC) No 1221/2009 of the European Parliament and of the Council of 25 November 2009 (EMAS Regulation), as amended by Commission Regulation (EU) 2018/2026 of 19 December 2018, and validates the relevant information for the Environmental Statement in accordance with Annex IV ­section B points (a) to (h).

Vienna, January 2022

Unterschrift Dipl.-Ing. Dr. Kurt Kefer, Leitender Umweltgutachter

Kurt Kefer, Lead Environmental Verifier

The next update of the OeNB’s Environmental Statement will be published as part of the OeNB’s sustainability report in spring 2023.

17 Austria’s government program contains the commitment for Austria to become climate neutral by 2040, but corresponding climate ­legislation is still pending.

Direct and indirect equity interests

Table 12 shows the OeNB’s direct and indirect equity interests in line with Article 68 paragraph 4 Nationalbank Act.

Table 12: Direct and indirect equity interests of the OeNB as on December 31, 2021  
Share in % Company Capital issued
100 Münze Österreich Aktiengesellschaft, Vienna (Austria) EUR 6,000,000.00
100 Schoeller Münzhandel GmbH, Vienna (Austria) EUR 1,017,420.00
(100) 100 Schoeller Münzhandel Deutschland GmbH, Hamburg (Germany) EUR 6,000,000.00
50 PRINT and MINT SERVICES GmbH, Vienna (Austria) EUR 35,000.00
22.25 proionic GmbH, Raaba-Grambach (Austria) EUR 52,877.00
16.67 World Money Fair Holding GmbH, Berlin (Germany) EUR 30,000.00
(16.67) 100 World Money Fair Berlin GmbH, Berlin (Germany) EUR 25,000.00
(16.67) 100 World Money Fair AG, Basel (Switzerland) CHF 300,000.00
12.28 Stirtec GmbH, Premstätten (Austria) EUR 95,050.00
100 Oesterreichische Banknoten- und Sicherheitsdruck GmbH, Vienna (Austria) EUR 10,000,000.00
50 PRINT and MINT SERVICES GmbH, Vienna (Austria) EUR 35,000.00
0.25 Europafi S.A.S., Vic-le-Comte (France) EUR 133,000,000.00
100 GELDSERVICE AUSTRIA Logistik für Wertgestionierung und Transportkoordination G.m.b.H., Vienna (Austria) EUR 3,336,336.14
100 OeNPAY Financial Innovation HUB GmbH, Vienna (Austria) EUR 35,000.00
100 IG Immobilien Invest GmbH, Vienna (Austria) EUR 40,000.00
100 Austrian House S.A., Brussels (Belgium) EUR 5,841,610.91
100 City Center Amstetten GmbH, Vienna (Austria) EUR 72,000.00
100 EKZ Tulln Errichtungs GmbH, Vienna (Austria) EUR 36,000.00
100 HW Hohe Warte Projektentwicklungs- und ErrichtungsgmbH, Vienna (Austria) EUR 35,000.00
100 IG Belgium S.A., Brussels (Belgium) EUR 19,360,309.87
100 IG Hungary Irodaközpont Kft., Budapest (Hungary) EUR 11,852.00
100 IG Immobilien Beteiligungs GmbH, Vienna (Austria) EUR 40,000.00
100 IG Immobilien M97 GmbH, Vienna (Austria) EUR 120,000.00
100 IG Immobilien Management GmbH, Vienna (Austria) EUR 40,000.00
100 IG Immobilien Mariahilfer Straße 99 GmbH, Vienna (Austria) EUR 72,000.00
100 IG Immobilien O20-H22 GmbH, Vienna (Austria) EUR 110,000.00
100 IG Netherlands N1 and N2 B.V., Uithoorn (Netherlands) EUR 91,000.00
100 BLM Betriebs-Liegenschafts-Management GmbH, Vienna (Austria) EUR 40,000.00
100 BLM-IG Bauträger GmbH, Vienna (Austria) EUR 35,000.00
(100) 100 OWP5 Betriebs-Liegenschafts-Management GmbH, Vienna (Austria) EUR 35,000.00
100 BLM New York 43 West 61st Street LLC, New York (USA) USD 10.00
Source: OeNB, subsidiaries.
Note: The OeNB’s share of the subscribed capital of the European Central Bank (ECB), Frankfurt (Germany), which totals EUR 10,825,007,069.61, amounted to 2.3804% as at December 31, 2021. The OeNB also holds 8,000 shares (at SDR 5,000 each) and 564 nonvoting shares in the Bank for International Settlements (BIS), Basel (Switzerland), as well as 56 shares
(at EUR 125.00 each) in S.W.I.F.T. (Society for Worldwide Interbank Financial Telecommunication), La Hulpe (Belgium).
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