Annual Report 2001 Statement

≈◊ Oesterreichische Nationalbank

Eurosystem

AnnualAnnual ReportReport 20012001

Report on the Financial Year 2001 with Annual Statement of Accounts 2001

Submitted to the General Meeting on May 23, 2002 Statement

Now that Europes monetary union1) substantial structural progress the has been established for three years, CEECs have already made on the road we have come to take it almost for to EU membership. granted. However, the gloomier inter- Of course, the CEECs participa- national economic situation and the tion in European integration must be uncertainty which spread across the carefully and diligently prepared. For globe in the wake of the terrorist inci- enlargement to work and for the inte- dents in the U.S.A. have impressed on gration of economies at various levels us just how crucial the European inte- of development to be a lasting success, gration project is in a globalized world it is in the interest of the EU and the economy. applicant nations to establish sustain- After the economy had performed able framework conditions. Quite ap- especially well in 2000, the reporting parently, decision-makers on all sides year 2001 was marked by a significant are aware of the challenge that enlarge- cooling. The downturn originated in ment poses. If we succeed in complet- the U.S.A., where a decade-long ing this decisive step of EU enlarge- expansion came to an end, and spread ment, Europes economic and political throughout the world. A hefty and position in the world will be strength- unexpected rise in oil prices triggered ened enormously. a slowdown of economic activity; at In the OeNB as a modern service thesametime,thecorrectionofover- provider, the year 2001 will be remem- investment in the IT sector and tum- bered as the final stage of intense prep- bling stock prices hit the real economy. arations for the project of the century, Europe, and with it Austria, could the introduction of euro banknotes and not fully escape the effect of the U.S. coins. Professional spadework and effi- slowdown. However, stable economic cient structures put in place well in ad- fundamentals and judicious action by vanceenabledtheOeNBtorisetothis economic policymakers prevented the challenge. The OeNBs close coopera- economy from sliding into a full-scale tion with its subsidiaries in the area of recession. Three years of a robust eco- payment instruments and with Austrian nomic expansion were followed by a banks facilitated the smooth transition deceleration to 1% growth in Austria to the euro for businesses and the gen- in 2001, but clues pointing toward a eral public. significant recovery were observed The OeNB fulfills its varied duties again after the beginning of 2002. De- at the European level with the same spite the slackening, Austrian eco- commitment with which it handled nomic policymakers stayed their stabil- the euro project. These responsibilities ity-oriented course in applying the rangefromtheactiveroletheOeNB policy mix. Here, the progress made plays in the ESCB/Eurosystem to the in budget consolidation was particu- manifold duties it carries out at the larly noteworthy. national level. As highlighted by the Developments in Central and East- successful switch to euro cash, serving ern Europe (the CEECs) stood out as the interest of the Austrian public and especially positive in the overall Euro- optimizing results for Austria are pean economic landscape. In the cur- the prime motives of the OeNBs activ- rent economic situation, these coun- ities. 1 Stage Three of Economic and Monetary Union tries represent a stabilizing factor. (EMU) began on Moreover, the regions stability gains Adolf Wala January 1, 1999. of the past years bear witness to the President

4 Annual Report 2001 Statement

Certainly the most oustanding event of of price stability and as a result on the business year 2001 was the unique maintaining the purchasing power of organizational, logistical and public re- the population of the euro area. lations challenge of introducing euro Although inflation temporarily rose banknotes and coins on January 1, well over the 2% reference value, fore- 2002. We may note with pride and de- casts signal that it will soon drop below light that the euro changeover pro- the 2% target again. ceeded smoothly in Austria, as it did Despite the downturn spreading in all 12 euro area countries, and that across the world, the euro area did theAustrianpeoplehavebecomeused not slide into recession last year. The to the new currency very quickly. Since business cycle appears to have bot- March 1, 2002, the euro has been the tomed out, and the long-term cyclical sole legal tender for roughly 300 mil- outlook for the euro area is in fact quite lion Europeans. Using real euro cash upbeat. marks the culmination of a long process As part of the stepped-up coordina- of monetary integration in Europe and tion of national economic policies, the helpsmakeEuropeapalpablecon- most important measures slated for cept for its citizens. the upcoming years are to continue The first three years of Economic public sector consolidation in line with andMonetaryUnionhaveimpressively the provisions of the Stability and shown that the European integration Growth Pact and to redouble efforts process rests soundly on the pillars of on structural reform with the aim of a stability-oriented monetary and fiscal boosting the euro areas international policy and a competitiveness-oriented competitiveness. structural policy. A further challenge Europe faces in The independent Eurosystem the near future is the enlargement of quickly established itself as a stable the European Union over the next anchor, and it demonstrated its ability few years. A thoroughly prepared to act and react flexibly in the face of enlargement oriented on the EUs rapid change in the economic environ- well-established quality standards will ment and the tragedy of September 11, sustainably enhance Europes political 2001. These circumstances manifestly and economic stability and will thus showed that our countrys inclusion in reinforce the foundation for lasting the stability-oriented Economic and welfare and peace. Monetary Union has protected it from The euro will continue to play a negative shocks much more adequately central role as a catalyst for economic than was possible under past regimes. and political integration in Europe, as In fulfilling its numerous and varied re- an international stability anchor and, sponsibilities at the European and at the last but not least, as a token of iden- national level, the OeNB contributed tity for a modern, dynamic, open actively to overcoming these shocks. Europe. The single monetary policy of the Eurosystem has remained steadfastly Klaus Liebscher focusedontheprimaryobjective Governor

Annual Report 2001 5 Conventions used in the tables — = zero x = not applicable 0 = negligible Discrepancies may arise from rounding.

Abbreviations AG Aktiengesellschaft (roughly: HICP Harmonized Index of Consumer Prices stock corporation) IFES Institut fu‹r empirische Sozialforschung ARTIS Austrian Real-Time Interbank Settle- GesmbH (Institute for Empirical Social ment (the Austrian RTGS system) Research) APSS Austrian Payment Systems Services IHS Institute of Advanced Studies A-SIT Zentrum fu‹r sichere Informations- IMF International Monetary Fund technologie Austria — Center for IRB internal ratings-based Secure Information Technology Austria IRC International Relations Committee ATM automated teller machine IT information technology ATX Austrian Traded Index LGD loss given default BCBS Basel Committee on Banking LTRO longer-term refinancing operation Supervision (BIS) M3 broad monetary aggregate M3 BIS Bank for International Settlements MFI monetary financial institution BMF Bundesministerium fu‹r Finanzen — MO‹ AG Mu‹nze O‹ sterreich AG — Austrian Mint Austrian Federal Ministry of Finance MPC Monetary Policy Committee (ECB) BMPE Broad Macroeconomic Projection MRO main refinancing operation Exercise NCBs national central banks BSE bovine spongiform encephalopathy NIPE Narrow Inflation Projection Exercise CDG Christian Doppler Research Society OECD Organisation for Economic CEECs Central and Eastern European Co-operation and Development countries OeNB Oesterreichische Nationalbank CIT cash in transit OeBS Oesterreichische Banknoten- und CMIT Committee on Capital Movements and Sicherheitsdruck GmbH — Austrian Invisible Transactions (OECD) Banknote and Security Printing Works CRM credit risk measurement O‹ BB O‹ sterreichische Bundesbahnen — ECB European Central Bank federal railroad corporation Ecofin Council of Economic and Finance ORF O‹ sterreichischer Rundfunk — Ministers (EU) Austrian Broadcasting Corporation EFC Economic and Financial Committee POS point of sale (EU) RTGS Real-Time Gross Settlement EMAS Eco-Management and Audit Scheme STUZZA Studiengesellschaft fu‹r Zusammenar- EMU Economic and Monetary Union beit im Zahlungsverkehr G.m.b.H. — EONIA Euro OverNight Index Average Austrian Research Association EPC Economic Policy Committee (EU) for Payment Cooperation ERM II Exchange Rate Mechanism II (EU) SDR Special Drawing Right (IMF) ESCB European System of Central Banks TARGET Trans-European Automated Real-time EU European Union Gross settlement Express Transfer EURIBOR Euro Interbank Offered Rate Treaty Treaty establishing the European Eurostat Statistical Office of the European Community Communities UMTS Universal Mobile Telecommunications ECB European Central Bank System Fed Federal Reserve System (the central WIFO O‹ sterreichisches Institut fu‹r Bank of the United States) Wirtschaftsforschung — Austrian FMA Financial Market Authority Institute of Economic Research FOMC Federal Open Market Committee WIIW Wiener Institut fu‹r internationale GDP gross domestic product Wirtschaftsvergleiche — The Vienna GSA GELDSERVICE AUSTRIA Logistik fu‹r Institute for International Economic Wertgestionierung und Transport- Studies koordination G.m.b.H. WKO‹ Wirtschaftskammer O‹ sterreich — (cash services company) Austrian Federal Economic Chamber

6 Annual Report 2001 Contents

General Council (Generalrat), State Commissioner, Governing Board (Direktorium), Personnel Changes, Organizational Structure of the Bank General Council (Generalrat), State Commissioner 10 Governing Board (Direktorium), Personnel Changes 11 Organization Chart 12 Report of the Governing Board (Direktorium) for the Financial Year 2001 Smooth Euro Cash Changeover 17 From Exact Planning to Successful Realization 17 The OeNB — Making the Euro Yours: Intensive and Broadly Based Information Activities 23 Swift Acceptance of Euro Cash and Great Confidence in the OeNB 25 Monetary Policy Secures Stability 27 Eurosystem Monetary Policy: Looking Back on Three Successful Years 27 Difficult Global Economic Conditions in 2001 29 The Forward-Looking Monetary Policy of the Eurosystem Is Effective and Secures Price Stability 30 Monetary Policy Aspects of the Euro Cash Changeover 35 Key Developments in Austria: The Economic Background — the Budget — the Current Account 37 The OeNB Contributes to Financial Stability 42 Stable Financial Markets Are a Prime Objective 42 An Active Role in the Basel II Process 42 Financial Market Supervision: New Developments 45 The OeNB Is Entrusted with Payment Systems Oversight 46 Fundamental Developments of Financial Intermediaries 47 Responsibilities Handled Efficiently 53 The OeNBs Tasks: An Overview 53 An Efficient Organization 56 A New Footing for Communication with Customers and Partners 58 The OeNBs Subsidiaries: Innovative Enterprises 59 A Strategic Position for the Future 61 The OeNB as an International Partner in Cooperation and Dialogue 63 The OeNB as an Active Partner in European Integration 63 Strong International Ties 64 Expertise for Central and Eastern Europe 64 Financial Statements of the Oesterreichische Nationalbank for the Year 2001 Balance Sheet as at December 31, 2001 68 Profit and Loss Account for the Year 2001 70 Notes to the Financial Statements 2001 71 General Notes to the Financial Statements 71 Realized Gains and Losses and Revaluation Differences and their Treatment in the Financial Statements of December 31, 2001 73 Capital Movements 74 Development of the OeNBs Currency Positions in the Business Year 2001 74 Monetary Income in the Eurosystem 75 The Introduction of Euro Banknotes and Coins on January 1, 2002 — Impact on the Financial Statements for 2001 76 Notes to the Balance Sheet 77 Notes to the Profit and Loss Account 95 Governing Board (Direktorium), General Council (Generalrat) 99 Report of the Auditors 100 Profit for the Year and Proposed Profit Appropriation 101 Report of the General Council (Generalrat) on the Annual Report and the Financial Statements for 2001 103 Publications Periodical Publications 106 Selected Publications of the OeNB in 2000 and 2001 107

Editorial close: April 25, 2002 Annual Report 2001 7

General Council (Generalrat),

State Commissioner,

Governing Board (Direktorium)

and Personnel Changes,

Organizational Structure of the Bank General Council (Generalrat), State Commissioner on December 31, 2001

Adolf Wala Herbert Schimetschek President Vice President Chief Executive Director of UNIQA Versicherungen AG

August Astl Rene Alfons Haiden Walter Rothensteiner Secretary General of the Board of Presidents Retired Chief Executive Director Chief Executive Director of the Austrian Chamber of Agriculture of Bank Austria AG of Raiffeisen Zentralbank O‹ sterreich AG

Helmut Elsner Richard Leutner Karl Werner Ru‹sch Chief Executive Director Secretary Former Member of the Government of Bank fu‹rArbeitundWirtschaftAG of the Austrian Trade Union Federation of Vorarlberg Former Second Vice President of the OeNB Helmut Frisch Johann Marihart Chairman of the Supervisory Board Chief Executive Director R. Engelbert Wenckheim of Vienna Technical University of Agrana Beteiligungs-AG Board Member of Getra‹nkeindustrie Holding AG Lorenz R. Fritz Wer ner Muhm Secretary General Deputy Chief Johann Zwettler of the Federation of Austrian Industry of the Chamber of Labor of Vienna Board Member of Bank fu‹r Arbeit und Wirtschaft AG

Representatives delegated by the Staff Council to attend proceedings that deal with personnel matters:

Thomas Reindl Martina Gerharter

State Commissioner Deputy State Commissioner Walter Ruess Heinz Handler Director Director General in the Ministry of Finance in the Federal Ministry for Economic Affairs and Labour

10 Annual Report 2001 Governing Board (Direktorium) on December 31, 2001

Klaus Liebscher Wolfgang Duchatczek Governor Executive Director

Gertrude Tumpel-Gugerell Peter Zo‹llner Vice Governor Executive Director

Personnel Changes between April 19, 2001 and April 25, 2002

General Council member Max Kothbauer resigned his seat on the General Council at the ordinary General Meeting of May 17, 2001. Johann Zwettler, Board Member of Bank fu‹r Arbeit und Wirt- schaft AG, was appointed to the General Council as his successor. Manfred Frey, President of the regional finance authority of Vienna, Lower Austria and Burgenland, was appointed to the office of State Commissioner with effect from April 1, 2002, replacing Walter Ruess in this position. In its session of April 9, 2002, the federal government decided to appoint Bernhard Felderer, director of the Institute for Advanced Studies, and Herbert Kofler, head of the section financial accounting and the tax system of the University of Klagenfurt, to the General Council with effect from April 23, 2002. Moreover, the federal government reappointed Werner Muhm to the General Council with effect from April 23, 2002. The terms of office of Rene Alfons Haiden and Richard Leutner ended on April 22, 2002.

Annual Report 2001 11 Organization Chart

President Vice President Adolf Wala Herbert Schimetschek

Office of the President Richard Mader, Head

Governing Board (Direktorium) Central Bank Policy Department Economics and Financial Markets Department Klaus Liebscher, Governor Gertrude Tumpel-Gugerell, Vice Governor

Office of the Governor Wolfgang Ippisch, Head Section Internal Audit Division Economic Analysis and Research Wolfgang Winter, Head Peter Mooslechner, Director

Secretariat of the Governing Board and Public Relations Economic Analysis Division Wolfdietrich Grau, Head Ernest Gnan, Head

Planning and Controlling Division Economic Studies Division Gerhard Hoha‹user, Head Eduard Hochreiter, Head

Anniversary Fund European Affairs and International Financial Organizations Division Wolfgang Ho‹ritsch, Head Franz Nauschnigg, Head

Foreign Research Division Section N. N. Accounting Brussels Representative Office Michael Wolf, Director Reinhard Petschnigg, Representative

Financial Statements Division Paris Representative Office Friedrich Karrer, Head Andreas Breitenfellner, Representative

Accounts Division Otto Panholzer, Head Section Financial Institutions and Markets Section Andreas Ittner, Director Legal Matters and Management of Equity Interests Financial Markets Analysis and Surveillance Division Bruno Gruber, Director Helga Mramor, Head

Legal Division Banking Analysis and Inspections Division Hubert Mo‹lzer, Head Peter Mayerhofer, Head

Management of Equity Interests Credit Division Franz Richter, Head

Unit Future Unit Peter Achleitner, Director

12 Annual Report 2001 Money, Payment Systems and Information Technology Department Investment Policy and Internal Services Department Wolfgang Duchatczek, Executive Director Peter Zo‹llner, Executive Director

Personnel Division Section Maria Zojer, Head Payment Systems and Information Technology Wolfgang Pernkopf, Director Section Systems Development Division Treasury Reinhard Auer, Head Rudolf Trink, Director

Technical Support Division Treasury — Strategy Division Rudolf Kulda, Head Rudolf Kreuz, Head

Payment Systems Division Treasury — Front Office Andreas Dostal, Head Walter Sevcik, Head

Treasury — Back Office Section Gerhard Bertagnoli, Head Cashiers Division and Branch Offices London Representative Office Alfred Scherz, Director Elisabeth Antensteiner, Representative

Cashiers Division New York Representative Office Stefan Augustin, Head Gerald Fiala, Representative

Printing Office Gerhard Habitzl, Technical Manager Section St. Po‹lten Coordination of Branches Organization and Internal Services Horst Walka, Branch Manager Albert Slavik, Director

Bregenz Organization Division Helmut Ho‹pperger, Branch Manager Norbert Wei§, Head1)

Eisenstadt Administration Division Friedrich Fasching, Branch Manager Roland Kontrus, Head

Graz Security Division Gerhard Schulz, Branch Manager Gerhard Valenta, Head

Innsbruck Documentation Management and Communications Services Gu‹nther Federer, Branch Manager Alfred Tomek, Head

Klagenfurt Gu‹nter Willegger, Branch Manager Section Linz Statistics Axel Aspetsberger, Branch Manager Aurel Schubert, Director

Salzburg Banking Statistics and Minimum Reserve Division Elisabeth Kollarz, Branch Manager Alfred Rosteck, Head

Balance of Payments Division Eva-Maria Nesvadba, Head

1 Environmental Officer.

as of April 25, 2002.

Annual Report 2001 13

Report of the

Governing Board (Direktorium)

for the Financial Year 2001

Smooth Euro Cash Changeover

From Exact Planning to street debut of euro notes and coins Successful Realization was the missing link that completed The euro cash changeover Stage Three of EMU. as a unique historic project After three years of successful With the beginning of Stage Three of participation in EMU, it was the cash Economic and Monetary Union changeover that required the greatest (EMU) on January 1, 1999, the Euro- adjustment effort from the popula- pean Union (EU) reached a milestone tion, as this was the moment when in its integration policy. Three years every single citizen was — maybe for on, the introduction of euro bank- the first time — confronted with the notes and coins on January 1, 2002, direct implications of monetary marked the last step toward EMU. union. However, not only the con- The related costs and efforts should sumers had to adjust to monetary be understood as an investment in union, but also the global monetary the common European monetary in- system as such. A few days into frastructure and thus as a contribu- 2002, several large countries an- tion to promoting the potential for nounced that they would, in the long-term economic growth. The future, strive to balance their foreign launch of euro notes and coins proved reserves between the U.S. dollar and to be one of the greatest and most the euro. Some also considered using demanding challenges the Oesterrei- the euro for trading in commodities chische Nationalbank (OeNB) has such as crude oil. hadtomasterinthe185yearssince The implementation of the cash its foundation. While the overall changeover put the OeNB, its parti- framework for the cash changeover cipating subsidiaries and all other was drawn up in cooperation with stakeholders in this operation, e.g. the national central banks (NCBs) commercial banks and the police participating in the Eurosystem and forces, in the public eye. Given the with the European Central Bank enormous dimension of the project, (ECB), the NCBs were in charge of detailed planning had started at a the actual implementation. very early stage. As a direct conse- This is the first time in history quence, the cash processing functions that 12 sovereign states have intro- at the OeNB and Austrian banks were duced a new, common currency. restructured on a large scale. The realization of this goal was pre- ceded by a vast number of activities, Early organizational restructuring ranging from laying down the politi- at the OeNB cal decision on a common currency The most prominent activity in the in the Maastricht Treaty (1992) to run-up to the cash changeover was naming the new currency euro the production of euro notes and (1995), opting for the banknote coins. The Austrian Mint (MO‹ AG) design proposed by Robert Kalina and the Austrian Banknote and (1996), establishing the ECB (1998), Security Printing Works (OeBS), determining the irrevocable euro two of the OeNBs subsidiaries, were conversion rates to enter into force responsible for producing Austrias on January 1, 1999, and, finally, in- launch stock of euro cash. The troducing the euro as a means of non- MO‹ AG was established in its current cash payment and unit of account form in 1989, when the OeNB pur- with the inception of EMU. The chased the former Austrian State

Annual Report 2001 17 Smooth Euro Cash Changeover

Mint from the Federal Ministry of cession countries, which took a keen Finance (BMF). As of that date, the interest in the Austrian model to pre- Austrian Mint has redoubled its ef- pare for challenging tasks ahead. fortstofulfillmarketandcustomer requirements; a case in point is the Detailed project structure Vienna Philharmonic Gold Coin, A detailed master plan was worked which has become the best-selling out to meet the complex challenges gold coin in Europe. The OeBS was of the cash changeover, aimed, inter established in 1998, when the Secu- alia, at building up the necessary ca- rities Printing Works, a division of pacities in a flexible manner and at the OeNB, became a fully independ- gradually integrating the newly as- ent subsidiary. Part of the motivation sumed tasks into the regular business behind this spinoff was to furnish the operations. OeBS, an internationally renowned The project was divided into competence center, with the struc- 16 subprojects, each with its own ture and flexibility necessary to posi- project structure and one of a range tion itself on the global market. Aside of topics, such as site-specific con- from the OeNB, five other euro area struction planning, simulation, central banks and six national central IT architecture or frontloading. banks from the Central and Eastern European countries (CEECs) rank Logistical fine-tuning among the customers of the OeBS, In Austria, the logistical system used which has already gained a firm for the initial distribution of euro standing on the market. cash and for all subsequent phases of An additional step was the foun- cash management is structured as fol- dation of GELDSERVICE AUSTRIA lows (see chart): Banknotes and coins Logistik fu‹r Wertgestionierung und were delivered directly from the Transportkoordination G.m.b.H. OeBS and the MO‹ AG to the OeNB (GSA), which was entrusted with headquarters in Vienna, the regional providing efficient cash logistics serv- branch offices of the OeNB and the ices in Austria1)andwasthustobe- attached cash centers operated by come the key operating platform the GSA. throughout the cash changeover. In As a next step, cash in transit the run-up to -day, the Austrian Re- (CIT) companies shipped the euro search Association for Payment Co- cash to banks. operation (STUZZA) also underwent major changes. While the STUZZAs OeBS/MÖAG

original mandate had been to simplify OeNB/branch offices/GSA and standardize noncash payments, it now became the leading collaboration Banks platform for Austrian commercial banksandtheOeNB.Thecloseand Retailers/industry constructive cooperation between Consumers the OeNB and banks, both in operational areas (GSA) and in coordination (STUZZA), served as a role Banks decided to coordinate their model for a number of other euro cash shipments during the frontload- 1 See OeNB Annual Report area countries and in particular for ing phase to optimize CIT route plan- 2000, p. 51. the Central and Eastern European ac- ning. They joined ranks within the

18 Annual Report 2001 Smooth Euro Cash Changeover

working group ARGE Geldlogistik sisted of very small amounts for for the time of the cash changeover, training purposes. The great ma- signing joint contracts for banknote jority of enterprises received euro and coin transports. Thanks to this cash at the end of November or in approach, the number of cash ship- December. ments in Austria went up by a mere — As of December 1, 2001, euro 20% even during the busiest front- cash was also distributed to banks loading period. outside the euro area. — On December 15, 2001, consum- Gradual frontloading of euro cash ers received their first euro coins to consumers (mostly starter kits). A number of milestones marked the — January 1, 2002, marked the offi- cash logistics project in the year 2001: cial launch of euro notes and coins — By the end of April 2001, com- and the beginning of the dual cir- mercial banks had placed their culation phase, during which the final orders for euro cash with euro and the schilling were both the OeNB. All further planning legal tender. The dual circulation was based on this order intake. phase ended on February 28, — On September 1, 2001, the first 2002; on March 1, 2002, the euro notes and coins left the eurobecamethesolelegaltender OeNBs cash vaults to be deliv- in the euro area. Any remaining ered to commercial banks. As of schilling stocks of the current ser- this date, banks were theoretically ies may be exchanged for euro entitled to subfrontload euro cash at the OeNB for an unlimited to enterprises; in practice, how- period (see box Return of Schil- ever, cash deliveries mainly con- ling Banknotes for details).

Return of Schilling Banknotes Banknotes that can be returned for an unlimited period of time ATS 5000, 1st motif: Wolfgang A. Mozart ATS 1000, 5th motif: Karl Landsteiner ATS 500, 4th motif: Rosa Mayreder ATS 100, 6th motif: Eugen v. Bawerk ATS 50, 4th motif: Sigmund Freud ATS 20, 5th motif: Moritz M. Daffinger Called-in banknotes and dates at which the exchange period ends1) ATS 1000, 3rd motif: Bertha v. Suttner August 30, 2005 ATS 1000, 4th motif: Erwin Schro‹dinger April 20, 2018 ATS 500, 2nd motif: Josef Ressel August 31, 2007 ATS 500, 3rd motif: Otto Wagner April 20, 2018 ATS 100, 5th motif: Angelika Kauffmann November 28, 2006 ATS 100, 5th motif (2nd print run): Angelika Kauffmann November 28, 2006 ATS 50, 3rd motif: Ferdinand Raimund August 31, 2008 ATS 50, 3rd motif (2nd print run): Ferdinand Raimund August 31, 2008 ATS 20, 4th motif: Carl Ritter v. Ghega September 30, 2009

1) These banknotes can be exchanged for euro at the OeNB until the date at which the exchange period ends.

Annual Report 2001 19 Smooth Euro Cash Changeover

Extensive training 450,000 foreign currency exchange for professional cash handlers transactions It was one of the OeNBs fundamen- While in the past, central banks had tal goals not only to safeguard the exclusively exchanged banknotes they early distribution of the new cash had issued themselves, the NCBs of but also to provide the Austrian the Eurosystem agreed, under Arti- public with timely information. The cle 52 ESCB/ECB Statute, to ex- OeBS and its counterfeit experts at change banknotes (of the most recent the National Analysis Center were series) of other euro area countries key players in the information chain. free of charge during the period from In a first step, five staff members of January 1, 1999, when the euro was the OeNB headquarters and two introduced for noncash payments, staff members of each OeNB branch to March 31, 2002. By end-March office completed intensive training 2002, the exchange facilities set up as banknote experts and were subse- at the OeNB headquarters in Vienna quently responsible for training ex- and at those at the OeNB branch ternal partners, so-called multi- offices had handled more than pliers, specifically recruited from 450,000 foreign exchange trans- commercial banks, the police, labor actions totaling EUR 388 million. and industry representatives, and other organizations. In contrast to Austria reports highest frontloading rate the initial estimate of offering train- Owing to detailed planning and the ing for around 1,000 external multi- OeNBs excellent cooperation with pliers, in fact more than 2,500 per- the commercial banks, Austria re- sons completed this training between corded the highest relative frontload- end-July and early November 2001. ing volume in the euro area. Com- Only genuine euro banknotes pared to the average value of schilling were used in these training sessions. notes and coins in circulation of Aside from learning about the euros around EUR 13.6 billion, the value security features, multipliers ac- of frontloaded euro notes and coins quired basic knowledge about how totaled EUR 10.3 billion, i.e. ap- to identify counterfeits (seized coun- proximately 75% of the value of terfeit banknotes of the legacy cur- schillings in circulation. The high rencies were used for this exercise). frontloading level resulted from the In addition, each participant received fact that economic agents were in- a kit containing training material formed about the changeover at an (leaflets, CD-ROM, a videotape, early stage and that retailers were etc.). Multipliers were encouraged provided with calculators (EuroCal- to pass on their newly acquired culus) to determine their euro cash knowledge to the cash experts at requirements. Also, banks had taken their respective organizations. Banks precautions to deal with possible euro and retail businesses cash handling cash outflows to neighboring coun- staff, police officers and other profes- tries. sionals who regularly handle cash Using an inhouse data base, the were the end users of this infor- OeNB managed the frontloading mation. All in all, this process in- process without incident and in a high volved some 250,000 cash experts, security environment. Only 12.4% of enabling them to act as competent the total frontloaded volume were contacts for the broad public. distributed to businesses which, as a

20 Annual Report 2001 Smooth Euro Cash Changeover

Frontloading of Euro Notes and Coins in the Euro Area

% of currency in circulation

0 AT BE FI FR GE GR IT IR LX NL PT SP

Source: OeNB. precaution, had apparently opted for bottlenecks in Austria caused by the stocking up mainly smaller denomi- outflow of euro cash to neighboring nations to be able to give change. countries, the OeNB arranged for By the beginning of 2002, more than additional euro allocations from the 60% of the overall frontloaded ECB and signed a bilateral coopera- amount of some coin denominations tion agreement with the Deutsche were already safely stored in the cash Bundesbank. To meet the immediate drawers of retailers. cash requirements expected in early 2002, Austria frontloaded more than EUR 500 million frontloaded EUR 500 million to its neighbors. to neighboring countries Such transactions were settled mainly Given Austrias geographical posi- via the existing channels of commer- tion, the question of frontloading cial banks. had not only a national, but also an international dimension. As the Cen- Extensive activities to promote tral and Eastern European accession the return of the schilling countries were holding relatively By launching a joint campaign in large stocks of euro area countries spring 2001, the OeNB, the Austrian national currencies (in particular charity organization Licht ins Dun- DeutschemarkandAustrianschilling kel (A Light in the Dark) and the banknotes), it was to be expected Austrian Youth Red Cross set off a that they would be quick to exchange series of campaigns promoting the these stocks for euro. As for many of early return of schilling coins. The these countries, Austria was the near- campaign Gib dem Schilling eine est place to go in order to exchange Chance — Spende fu‹r Kinder in legacy currencies free of charge, ad- Not (Give the Schilling a Chance — equate measures had to be taken. In GiveforChildreninNeed),forex- the run-up to the cash changeover, ample, was aimed at collecting small therefore, numerous bilateral con- change from Austrian schools. These tacts took place between representa- collection programs and the corre- tives of the OeNB and the respective sponding public relations campaign NCBs. Furthermore, in order to be helped to gradually reduce the num- able to respond quickly to possible ber of coins in circulation. Moreover,

Annual Report 2001 21 Smooth Euro Cash Changeover

the public increasingly realized that it lion 10 groschen coins and 1.5 billion was sensible to return schilling coins schilling coins were in circulation, as early as possible. In the fall of the OeNB pegged the number of 2001, the OeNB started an extensive coins to be returned at around 3 bil- campaign, encouraging consumers to lion. return their schilling coins with the The effective return of the schil- slogan Ich will nachhause (I Want ling began in summer 2001. While to Go Home). This campaign was currency in circulation normally in- scheduled around World Thrift Day creases during the summer months, so as to benefit, in cooperation with it contracted in 2001. At the begin- thecommercialbanks,fromthetime ning of 2002, around 25% of the re- of year when most people tradition- turn volumes calculated for bank- ally take their hoarded coins to banks notes and 35% of coins had already to pay them into savings accounts. been returned to the OeNB. On Another measure to promote schil- January 1, 2002, when the front- ling return was the campaign Be- loaded euro banknotes and coins be- tragsgenaues Zahlen (Give Exact came legal tender, currency in circu- Change), which was organized to- lation soared. During the dual cash gether with the Austrian Federal circulation period, the number of Economic Chamber (WKO‹ ). schilling notes and coins in circula- The volume of banknotes in cir- tion went down drastically, however. culation as at December 31, 2000, was defined as the reference value Old schilling banknotes recycled for the expected return of banknotes. as insulation material, old schilling The OeNB expected that around coins reminted as euro coins 95% of schilling banknotes in circu- In the past, banknotes withdrawn lation — the equivalent of EUR 13.2 from circulation were shredded and billion — would be returned. then burnt. As it was clear that the For coins, by contrast, the piece return of the schilling would drive count served as a reference value. up the volume of shredded banknote On December 31, 2000, around material, the OeNB searched for 6.5 billion coins were in circulation. environmentally friendly ways of re- Given the fact that Austrian coins processing shredded banknotes. Since had remained more or less unchanged experiments in paper recycling and since the 1960s and that around 3 bil- composting had not been successful,

Currency in Circulation in 2001 and in January and February 2002

EUR billion

0 Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. 1.8. 15. 22.29. 5. 12.19. 26. 2001 January 2002 February 2002 Schilling Euro Source: OeNB.

22 Annual Report 2001 Smooth Euro Cash Changeover

experts were looking into methods potential problems and thus contrib- for using shredded banknotes as a re- uted essentially to the smooth transi- source for producing insulation mate- tion to the new cash. The greatest rial. Live operation was taken up challenge for the OeNBs external after extensive testing, and so far communication was to address the the entire volume of shredded schil- entire population, no matter whether ling banknotes has been reused as people were actually interested in the insulation material in construction. euro and to select suitable communi- In addition, organizational processes cation channels to meet a vast range were optimized to ensure that the of information needs. shredded material was transported Thus, the OeNB directly addres- mostly by railway, i.e. in an environ- sed individual target groups with mentally friendly manner. programs designed to help them get Returned coins are decoined (i.e. a feel for the euro and familiarize bent beyond recognition) by the themselves with the new cash and AustrianMintandthensoldonthe its security features. These efforts waste metal market classified by were backed up by the euro area- alloy. Thus, the various raw materials wide campaign the EURO. OUR can be reused to produce new goods. money, which the ECB had devel- Recycled 5 and 10 schilling coins, for oped in collaboration with the NCBs example, are reused for euro coins, of the Eurosystem. In this context, and 10 groschen coins are turned into the ECB and the OeNB cooperated aluminum products. closely with a network of partners including government offices, public The OeNB — Making the authorities, interest groups, busi- Euro Yours: nesses, the Austrian Broadcasting Intensive and Broadly Corporation (ORF), the media, and Based Information credit institutions. The cooperation Activities with the ORF spanned a wide range A challenge to communications policy of information and entertainment The euro cash changeover was both programs, which helped extend the an enormous logistics challenge and reach of the euro campaign and thus an external communication venture. contributedessentiallytomaking Changes of such magnitude — like this campaign a success. By bundling adopting a new currency — are wont these efforts, the OeNB ensured that to evoke skepticism and uncertainty. allAustrianshadaccesstotheexist- The OeNB therefore initiated a coming information in manifold ways. prehensive information campaign ad- dressed to all members of the society. Broad offer of OeNB services As early as in spring 2001, a cam- Aside from large-space advertising, paign was launched to build up a the OeNB directly informed the Aus- positive attitude toward the euro; this trian public in a series of euro-related was the forerunner to the OeNBs events. For this purpose, the OeNB main campaign, which started in fall set up a hotline together with the 2001 under the heading Mit der Na- Federal Economic Chamber and the tionalbank zum Euro (The OeNB — ORF and increased the capacities of Making the Euro Yours). These inten- its own internal call center, which sive preparations and comprehensive handled around 9,000 calls in the information activities helped prevent period from June to December 2001

Annual Report 2001 23 Smooth Euro Cash Changeover

alone. The number of e-mail queries New Cash) was created in coope- processed in 2001 amounted to just ration with the STUZZA, the under 8,000. Federal Economic Chamber, the euro initiative of the Austrian Presentation of euro banknotes federal government and banks. It The media were mainly interested in was published in German and the security precautions for shipping English as well as in eight EU euro notes and coins. It was therefore accession country languages. a special challenge to strike the right — A special emphasis is placed on balance between meeting the neces- the requirements of older per- sary security standards and satisfying sons, youths, and the blind and the publics information require- visually impaired. In this context, ments, or, put differently, to provide the so-called Euro CashTest, a the public with detailed information credit card-sized banknote and while maintaining high security lev- coin gauge, was distributed in co- els. For this reason, the final appear- operation with the Austrian Blind ance of the euro banknotes and coins Union. This device enables blind and their security features were not and visually impaired persons to presented to the public before quickly and determine the exact August 30, 2001 (at the ECB in value of the respective euro bank- Frankfurt) and August 31, 2001 (at note or coin. the OeNB in Vienna). — Special information material for children and youths was provided Broad range of information products in a euro kit for schools; in addi- Moreover, a wide range of information, the competition Be a Euro tion products covered the various as- SuperStar was initiated for eight- pects of the euro cash changeover. to twelve-year-olds in coopera- — Altogether 30.1 million infor- tion with the ECB. mation leaflets were produced, — Moreover, the OeNB website handed out, distributed by mail provided updates on the national or made available at credit institu- changeover process (www.oenb. tions, various public authorities at/geldlogistik). and businesses. — The OeNB also cooperated with — In addition, 4 million miniposters the producers of education mate- were distributed, providing infor- rial to help create multimedia mation on the final appearance of euro information material for the euro banknotes and on the children. security features of the new cur- — The OeNB issued leaflets and rency. organized a traveling exhibition — 620,000 posters depicting euro to inform ten- to fourteen-year- banknotes and coins and their olds about the euro. security features were printed — Together with the federal govern- and distributed to make infor- ments euro initiative, the OeNB mation on the new cash accessible staged Euroinfotage (Euro Info in public and to help raise public Days) in spring 2001, a series of awareness of euro banknotes and events that provided an important coins in general. source of information for many — The brochure Der Euro — unser Austrian citizens. neues Geld (The Euro — Our

24 Annual Report 2001 Smooth Euro Cash Changeover

Euro cockpit served as crisis committee Starter kits containing both euro In the course of the cash changeover, banknotes and coins (equivalent to a special crisis committee, the so- ATS 500) were distributed to the called euro cockpit, was set up at public in the first hours of 2002. In the OeNB from September 2001 to Vienna, these kits were given out by February 2002 to elaborate detailed OeNB Governor Klaus Liebscher, action plans. This units main task was while in the regional capitals the to respond quickly and effectively to heads of the OeNBs branch offices incidents and crisis situations. performed this symbolic gesture at mobile euro cash kiosks installed The publics first contact with the euro cash along the traditional Silvesterpfade From September 17 to December 14, (New Years Trails).1)Thechange- 2001, the Eurotrain crisscrossed over to the euro in the early hours Austria, stopping in around 60 train of 2002 went smoothly; euro cash stations to provide first-hand infor- was available across the nation from mation and consultation services. In 2,660 outdoor ATMs and 3,300 cash cooperation with the federal govern- dispensers in bank lobbies. ments euro initiative, the federal railroad corporation O‹ BB, the Fed- Swift Acceptance eral Economic Chamber and credit of Euro Cash and Great institutions, the OeNB established a Confidence in the OeNB communication platform offering Two weeks after the cash changeover 90% of information and expert consultation transactions were already settled in euro for all age and target groups. On During the first days of January 2002, the occasion of the Eurotrains arrival Austrians chief interest was to famil- at its final destination at Westbahn- iarize themselves with the new hof, Vienna, on the night from De- money. After a relatively short period cember 14 to 15, 2001, Austrians it became clear that the switch to the could acquire their first euro starter euro would be very swift. The great kits for ATS 200. majority of consumers and businesses

Use of the Euro in Cash Transactions in January 2002

0 2. 4. 6. 8. 10. 12. 14. 16. 18. 20. 22. 24. 26. 28. 30. 1 The OeNB donated EUR 5 per starter kit to the charity Source: OeNB. A Light in the Dark.

Annual Report 2001 25 Smooth Euro Cash Changeover

reacted positively to the new cash: compared to the third quarter of Two weeks after the changeover, 2001 — an all-time high that was around 90% of cash transactions were clearly reconfirmed in the first quar- already settled in euro. ter of 2002, when the corresponding figure stood at 88%. Public confidence in the OeNB at record high Public Confidence in the OeNB

With the smooth cash changeover, % the OeNB delivered an impressive performance. A study completed by 88 the Institute for Empirical Social Re- 86 search (IFES) confirms the OeNBs 84

success: in the fourth quarter of 82 2001, 89% of the population cited 80 the OeNB as an institution they had 2001 2002 great confidence in. This corresponds Source: OeNB. to an increase by 9 percentage points

26 Annual Report 2001 Monetary Policy Secures Stability

Eurosystem Monetary policy or the introduction of euro Policy: Looking Back on cash. Three Successful Years The OeNBs active role in the Eurosystem Robust economic growth, stable prices, The independent European System of declining unemployment Central Banks (ESCB) is the organi- Monetary Union and the single cur- zation behind Monetary Union. It is rency have had a favorable impact composed of the ECB and the NCBs on economic developments in the of all 15 EU Member States. The 12 participating Member States. In- 12 NCBs (including the OeNB) of flation is running low. The single the countries which have adopted monetary policy with its primary ob- the euro together with the ECB make jective of price stability makes the up the Eurosystem. The Eurosystem euro a highly stable currency. Gen- and the ESCB are governed by the de- eral government budget balances cision-making bodies of the ECB: the have improved considerably, and Governing Council and the Executive stepped-up structural reforms have Board. As long as the euro has not be- fostered economic convergence come legal tender in all 15 EU Mem- among the Member States. At ber States, it will be necessary to dif- 2.5%, average economic growth was ferentiate between the ESCB and the higher between 1999 and 2001 than Eurosystem; currently, Denmark, in the 1990s. Despite difficult eco- Sweden and the United Kingdom nomic conditions, unemployment have not yet adopted the euro. Dur- dropped to a record low in 2001. ing this transitional period the ESCB The Austrian economy has also has another decision-making body, benefited greatly from EMU mem- the General Council, consisting of bership; low inflation, high produc- the President and the Vice-President tivity gains, wage moderation and of the ECB as well as the governors healthy employment growth helped of the participating and nonpartici- improve its competitiveness in the pating Member States. European context. The Eurosystem has been in charge of the single monetary policy of the euro area since January 1, 1999. The OeNB has been actively taking part in this key area of integration, and the Governor of the OeNB is a voting member of the Governing Council of the ECB (one member, one vote). In this capacity, the Governor is independent and not bound by any instructions. Apart from being an integral part of the Eurosystem, the OeNB is also a link to the decision makers in Aus- trian economic policy. The experience gathered in the three years of EMU membership has played a crucial role in the successful fulfillment of tasks like contributing to monetary

Annual Report 2001 27 Monetary Policy Secures Stability

Key Indicators for the Euro Area and Austria

Real GDP growth Annual change in % Forecast 3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0 1997 1998 1999 2000 2001 2002 2003

Unemployment rate Annual change in % Forecast 10

0 1996 1997 1998 1999 2000 2001 2002 2003

HICP inflation Annual change in % Forecast 2.5

2.0

1.5

1.0

0.5

0.0 1996 1997 1998 1999 2000 2001 2002 2003 Austria Euro area Source: Eurostat, Statistics Austria, European Commissions spring 2002 forecast.

Greece becomes 12th member of EMU so that the drachma easily joined the 2001 saw the enlargement of the euro euro at its central parity rate. By area: Greece became the 12th mem- the end of 2000, differences in ber of EMU on January 1. Accession short-term interest rates between was well prepared: the drachmas Greece and the euro area had also exchange rate had started to converge vanished. The accession of Greece towards its central parity in the increased the population of the ERM in 1999 and continued to do euro area by 3.4% and its GDP by so throughout the following years, 1.9%.

28 Annual Report 2001 Monetary Policy Secures Stability

Euro area tackled the challenges of 2001 attacks of September 11, 2001, came The euro area showed good resilience as a shock which temporarily shook in the difficult year 2001. It largely economic agents confidence. fended off the economic slowdown triggeredbythecoolingoftheU.S. Overinvestment, oil price shock economy and aggravated by the ter- The key driving forces behind the rorist attacks of September 11, nine-year expansion in the U.S.A. 2001. The launch of the single cur- were high productivity gains, a boost rency was key to effective crisis man- in technological development, sub- agement in the participating Member stantial credit-financed consumer de- States.ThankstoEMU,thecrisisof mand and continued overinvestment. 2001 did not spark off divergence The huge amount of capital seeking processes and exchange rate turmoil investment unleashed a boom on the within the EU, which had repeatedly stock markets, especially in the IT been the case in the 1990s in the sector, which witnessed high expect- wake of external upheaval. ations of growth and profit. Buoyed In a period of external uncer- by the bull market, stock prices of tainty, Austrias participation in EMU IT enterprises soared. proved to be extremely valuable. The The vigorous expansion went euro area served as a framework hand in hand with powerful employ- largely shielding its Member States mentgrowth.However,owingto from the negative impact of the the widely deregulated U.S. labor global economy. Furthermore, the market, productivity gains and stiff Austrian economy may have not ex- competition on the product markets, ploited the full profit potential of these two phenomena did not gener- European integration yet: Like in ate wage-induced price pressures. 2000, real GDP growth was slightly U.S. growth was driven chiefly by below the euro area average in 2001 private demand. (+1.0% against 1.5%). In the course of 2001, the up- swing petered out. After growth Difficult Global Economic rates of 4.1% in 1999 and 2000, real Conditions in 2001 GDP increased by a mere 1.2% in U.S. slowdown triggers the U.S.A. in 2001. The realization global economic cooling dawned that profit expectations in After 2000 had seen the highest the IT sector were overstated, and global growth rates since the mid- the oil price hikes of 2000 finally 1980s (4.6%), the world economy had a dampening effect on the econ- faltered in 2001. The global down- omy. Economic agents started to lose turn was sparked in the U.S.A, confidence in 2001, even more so where, after almost a decade of con- after the terrorist attacks; as a conse- tinuous expansion, growth started quence, the expansion on the stock to decelerate in the first quarter of markets and real growth decelerated. 2001. This slowdown marked the When capital spending in the IT end of a historically long period of sector turned out to be overinvest- buoyant growth, which had even trig- ment, it stalled. Surprisingly stable gered discussions on the existence of consumption underpinned U.S. eco- a New Economy. nomic growth in the months after In this environment of ongoing September 11, 2001. In light of the loss of momentum, the terrorist unfavorable economic conditions,

Annual Report 2001 29 Monetary Policy Secures Stability

the Federal Open Market Committee the disposable income of investors (FOMC) of the Federal Reserve in other economic regions. Finally, decided to significantly cut interest crises of confidence may spill over rates. In several moves over the into other economies as investors course of the year, the federal funds mimic the behavior of their counter- rate was slashed by a total of 475 basis parts in other areas. points to an unprecedented low of 1.75% in December 2001. The Forward-Looking Monetary Policy International synchronization of the Eurosystem of the business cycle Is Effective and Secures As the U.S. economy cooled, so did Price Stability economies in all parts of the world. Economic cooling spills over to the euro It was the first time that all major area, oil and food prices push up inflation economies slipped into such a The transmission channels mentioned synchronized slowdown. It is widely above might explain why the euro assumed that the simultaneity can be area was hit by the U.S. downswing traced to the increasing globalization despite solid fundamentals and the of the economy. Yet there is still con- absence of macroeconomic imbalan- siderable uncertainty about the role ces. Household debt in the euro area that the individual transmission chan- had not reached as worrisome a level nels play. Obviously, the global econ- as in the U.S.A.; besides, there had omy was hit by one and the same been no signs of overinvestment in shock — the oil price hikes of 2000. theeuroarea.Thesefactorssuggest Besides, the growing number of mul- that the setback of 2001 — GDP tinational groups and globally dis- growth came to 1.5% — was attribut- persed production sites may be the able to external dynamics. reason why economic ups and downs The euro area recorded a decline are transmitted from one part of the in exports and a slowdown in invest- world to another via the trade chan- ment growth in the course of 2001. nel. The growing diversification of Towards the end of the year, confi- portfolios may also cause develop- dence indicators also trended down- ments in individual countries to affect wards. The downswing of 2001 hit

Real Gross Domestic Product

Quarterly change annualized in % (seasonally adjusted) Forecast 5'0

4'0

3'0

2'0

1'0

0'0

1'0 1995 1996 1997 1998 1999 2000 2001 2002 2003 Austria Euro area U.S.A. Source: OeNB, Austrian Institute of Economic Research (WIFO), Eurostat, IMF forecast of March 2002.

30 Annual Report 2001 Monetary Policy Secures Stability

the entire euro area, but its impact pointed towards mounting inflation- varied from region to region. Posting ary pressures. M3 growth, the key in- negative growth rates in two consec- dicator of the first pillar, which had utive quarters, the German economy been running high throughout 2000, by definition slipped into recession. dropped below the reference value In Austria, real GDP growth leveled of 4% in the first half of 2001. off especially in the second half; With aggregate demand contract- growth came to 1.0% in the entire ing and wages increasing only mo- year 2001 (see section Key Develop- derately, the indicators of the second ments in Austria: The Economy — the pillar pointed towards a cyclical Budget — the Current Account). easing of inflationary pressures. In the first half of 2001, difficult Taking into account these devel- economic conditions worsened fur- opments, the ECB Governing Coun- ther as oil and food prices climbed cilstatedthattheriskstopricestabil- (also as a result of the BSE crisis) ity in the medium term had decreased and exchange rate developments and decided to cut key interest rates pushed up import prices. (minimum bid rate on MROs, marginal lending rate, deposit rate) by ECB Governing Council cuts interest rates 25 basis points on May 10, 2001. De- by a total of 50 basis points velopments in the following months in May and August 2001 confirmed the assessment of waning The minimum bid rate on the main inflationary pressures in the medium refinancing operations (MROs) of term, and the ECB Governing Coun- the Eurosystem was 4.75% (un- cil reduced key interest rates by an- changed since October 5, 2000) in other 25 basis points on August 30, early 2001; at this time, the indica- 2001. tors of the first and the second pillars of the monetary policy strategy

Interest Rate Development in the Euro Area

5.5

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1'0 1999 2000 2001 2002

Marginal refinancing facility Allotment rate (fixed rate tender) or minimum bid rate (variable rate tender) in MROs. Deposit facility Source: ECB.

Annual Report 2001 31 Monetary Policy Secures Stability

HICP Inflation and Contributions to Inflation in the Euro Area

Percentage points

3.0

2.5

2.0

1.5

1.0

0.5

0.0

0.5 1999 2000 2001 2002 Nonenergy industrial goods Energy Services Overall index Food

Source: OeNB, Statistics Austria, ECB.

Effective crisis management at central banks additional liquidity through discount after the events of September 11, 2001 window loans and significantly ex- The terrorist attacks of September tended open market operations. Fol- 11, 2001, had far-reaching implica- lowing its announcement on Septem- tions for the international financial ber 11, the ECB executed one-day system. System breakdowns briefly fine tuning operations on the basis prevented several enterprises and of quick tenders on September 12 organizations from meeting their and 13, allotting EUR 69.3 billion credit obligations, causing recipient and EUR 40.5 billion, respectively. institutions to face temporary pay- In addition, the ECB and the Fed ment defaults. agreed on a swap arrangement to Stock markets slumped; at the facilitate the functioning of financial New York Stock Exchange, trading markets and to provide liquidity in was suspended for a few days. At U.S. dollars. Under the agreement, thesametime,thebondmarkets the ECB was eligible to draw up to turned bullish (flight to quality). The USD50billionandtomakethese gold price rose from some USD 273 dollar deposits available to the natio- prior to the attacks to more than nal central banks of the Eurosystem, USD 290/ounce, and the U.S. dollar which, in turn, would use them to temporarily dropped by 3 cents help banks meet their U.S. dollar against the euro. obligations. Servicing open U.S. Thanks to effective crisis manage- dollar obligations was the acute prob- ment measures and international co- lem of banks in the euro area at this operation, the central banks success- point. It should be noted that the fully tackled these challenges. On events led to a fragmented U.S. dol- the day of the terrorist attacks, the lar money market: Even though the Fed and the Eurosystem already sig- Fed had provided sufficient liquidity naled that they would inject addi- to American banks, they were reluc- tional liquidity into the market if nec- tant to pass on liquidity to European essary. The banks readily accepted banks in the face of uncertain condi- this offer. The Fed made available tions. Default systems worked well

32 Annual Report 2001 Monetary Policy Secures Stability

and effectively, but some telecommu- On November 8, 2001, the ECB nications systems failed. Governing Council reduced key interest rates by another 50 basis Concerted interest rate cuts points, which marked the last of four on September 17, 2001 interest rate cuts in 2001; all in all, The terrorist attacks of September interest rates were slashed by 150 ba- 11, 2001, heightened uncertainty sis points in 2001. about the economic outlook in the M3 growth accelerated con- U.S.A. and the rest of the world. siderably in the second half of 2001 After the Fed had cut the federal (June 2001: +5.6%, November funds rate on September 17, 2001, 2001: +7.8%), chiefly because of the ECB Governing Council — in temporary factors. In particular, un- accordance with the U.S. central certainty in stock markets and the bank — decided to reduce key interest relatively flat yield curve until August rates by 50 basis points. Central caused private investors to shift their banks of other countries (Japan, portfolios from longer-term assets Canada, New Zealand, Switzerland, towards shorter-term assets included the United Kingdom, Sweden and in M3. At the same time, lending Denmark) followed suit. slowed down markedly. On the Slashing key interest rates and in- whole, the ECB Governing Council jecting liquidity helped calm the ner- stated that current monetary devel- vous markets and restore normality opments did not entail risks to price after the terrorist attacks. Therefore, stability. no new fine-tuning operations were Information under the second deemed necessary; two days later, pillar increasingly hinted at declining banks no longer required the U.S. inflation rates on account of weaken- dollar facility provided by the ECB. ing aggregate demand. The inflation- In emergency situations, decisive ary effects of higher energy and food central bank action is key to stabiliz- prices abated notably. ing markets quickly. Efficient and At its meeting on November 8, effective operational structures (e.g. 2001, the ECBs Governing Council default systems) are required to sup- agreed on a change in procedure: port these measures. The events of From this meeting on, monetary pol- September 2001 demonstrated that icy decisions were generally to be the central bank systems of the taken only at the first Governing U.S.A. and of Europe are capable of Council meeting of the month. At managing crises. the second meeting of the month, the Governing Council would focus Eurosystem cuts interest rates for the on questions related to other tasks fourth time by 50 basis points and responsibilities of the ECB and on November 8, 2001 the Eurosystem. Obviously, the Gov- Thanks to the central banks con- erning Council is still free to change certed action to calm international key interest rates regardless of the and European financial markets, previously agreed schedule of meet- monetary policy in the euro area ings. returned to normal relatively quickly. After weeks of crisis management, maintaining macroeconomic stability in the euro area shifted back in focus.

Annual Report 2001 33 Monetary Policy Secures Stability

TheEurosystemandtheFederalReserveSystem(Fed)—AComparison

Decision-Making Bodies Eurosystem The Eurosystem is the monetary policymaking body of the euro area, consisting of the Frankfurt-based ECB and the 12 participating NCBs, including the OeNB. The highest decision-making body within the Eurosystem is the Governing Council of the ECB, which comprises the six members of the Executive Board of the ECB and the twelve NCB governors, including the governor of the OeNB. The Governing Council convenes every two weeks; monetary policy decisions are made usually in the first meeting of the month. The Executive Board of the ECB comprises the President, the Vice President and four other board members. It executes the monetary policy decisions of the Governing Council. Fed The Federal Reserve System (Fed) — the monetary policymaking authority of the United States — consists of the Federal Reserve Board (located in Washington, D.C.) and the12 regional Federal Reserve Banks). Its highest decision-making bodies are the Board of Governors and the Federal Open Market Committee (FOMC). The Board of Governors consists of seven governors, including a chair and a vice chair. The FOMC, the Feds principal monetary policymaking body, is composed of the seven members of the Board of Governors, the President of the Federal Reserve Bank of New York and a rotating roster of four of the presidents of the other eleven regional reserve banks. The FOMC convenes eight times a year. Independence of the Decision-Making Bodies Eurosystem The Treaty stipulates that, when exercising the powers and carrying out the tasks and duties conferred upon them, neither the ECB nor the NCBs, nor any members of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body. The Community institutions and bodies and the governments of the Member States shall not seek to influence the members of the decision-making bodies of the Eurosystem in the performance of their tasks (Article 108). The President of the ECB is required to appear before the European Parliament several times a year; similarly, the NCB governors are required to appear before their national parliaments. Fed The independence of the Fed is stipulated less explicitly. The Chairman of the Fed will appear before the U.S. Congress at least twice a year to report on issues of monetary policy. Monetary Policy Strategy Eurosystem The Treaty stipulates that the primary objective of the Eurosystem is to maintain price stability. Without prejudice to the objective of price stability, the ESCB undertakes to support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community as laid down in Article 2 of the Treaty. It was up to the Eurosystem to determine how to achieve those aims in practice. The Eurosystem defined price stability as a year-on-year increase in the Harmonized Index of Consumer Prices (HICP) of below 2%, which is to be maintained over the medium term. The Eurosystem formulated a two-pillar monetary policy strategy to accomplish this objective. The first pillar refers to the broad monetary aggregate M3. As a benchmark for monitoring M3 annual growth in the medium term, a reference value of 4% was laid down in December 1998 and has since been reconfirmed annually. The second pillar consists of a broadly based assessment of the outlook for price developments on the basis of a wide range of economic indicators (e.g. measures of real activity, bond prices, yield curves, exchange rates, fiscal policy indicators and business and consumer surveys). Deviations from the medium-term objectives do not entail mechanistic responses by the Eurosystem; decisions are based on the General Councils assessment. Fed The Federal Reserve Act requires the Fed to influence the availability and cost of money as a means of helping to promote full employment, price stability and moderate long-term interest rates. There is no explicitly formulated monetary policy strategy; rather, the Fed analyzes a host of current economic data.

34 Annual Report 2001 Monetary Policy Secures Stability

At its meeting on December 6, 2001, — The frontloaded euro banknotes the Governing Council confirmed the and coins that remained with the reference value for annual M3 growth banks had to be sufficiently collat- at 4%. The decision was based on eralized en bloc at the OeNB on the assessment that empirical evi- December 28, 2001. dence continued to support the as- Banks that required more front- sumptions for the medium-term loaded cash had the opportunity to trend in potential output growth deposit collateral on a day-to-day and the velocity of circulation of M3 basis between the prescheduled dates. from which the reference value had The amount of euro banknotes been derived in 1999 and 2000. and coins frontloaded in Austria totaled EUR 10.3 billion, EUR 1.7 bil- Monetary Policy Aspects lion thereof were subfrontloaded to of the Euro Cash businesses, which implied that banks Changeover had to provide an additional EUR Frontloading of euro cash 8.6 billion in collateral at the last and collateralization date of the predefined schedule. The euro cash changeover also had an The banks collateralized the cash impact on the monetary policy frontloaded by securities worth framework. The ECB guideline of EUR 9.2 billion and by EUR 1.1 bil- January 10, 2001, set out the relevant lion in cash. provisions for the changeover. The The issue of collateral had been OeNB and the five Austrian credit in- discussed with bank representatives, stitutions associations entered into an and potential issues of concern — such agreement to safeguard the imple- as the large volume, which signifi- mentation of these provisions. cantly surpassed the usual refinancing One key feature of the change- needs — had already been identified over was the requirement that banks early in the run-up to the changeover. deposit adequate collateral with the These preparations contributed to a OeNB for the euro banknotes and smooth collateralization process. coins frontloaded to them. The col- To make it easier for banks to lateral to be provided had to consist cope with the changeover costs, it either of cash or of securities compli- hadbeenagreedbeforehandthatthe ant with the General Documentation banks current accounts should be on Eurosystem monetary policy in- debited for the frontloaded euro struments and procedures, i.e. essen- banknotes with a third of the amounts tially tier one or tier two assets. The outstanding each at January 2, Janu- following dates marked key steps in ary 23 and January 30 and that the the run-up to the cash changeover collateral would be unfrozen in in 2001: tranches on the same dates. Hence — From September 1, 2001, banks the cost to banks of participating in were entitled to subfrontload the changeover process was offset by euro banknotes and coins to pro- the debiting of frontloaded euro fessional partners. The banks amounts in tranches and by the full were required to deposit collat- crediting to banks OeNB accounts eral for these amounts en bloc of schilling cash returned. with the OeNB at several prede- The fact that Austrian banks did fined dates (between September not resort to the two standing facili- 3 and December 17). ties, i.e. the deposit facility and the

Annual Report 2001 35 Monetary Policy Secures Stability

marginal lending facility, confirms Euro cash changeover that the changeover was orchestrated did not generate price effects meticulously and thoroughly. An analysis of price developments for Since acceptance of the euro had individual goods and services at the been swift and the return of national beginning of 2002 did not reveal sig- banknotes rather sluggish (as de- nificant inflationary effects triggered scribed in the chapter Smooth Euro by the introduction of euro cash. This Cash Changeover), the volume of confirms the expectations voiced in a banknotes in circulation surged euro study drawn up by the OeNB in the area-wide. This situation prompted summer of 20011), according to the ECB to conduct a quick tender which the two potential price drivers to supply the market with additional in the changeover process (the pass- liquidity of EUR 25 billion. Three through of costs and the establish- Austrian banks took part in the ten- ment of new psychological price der, but owing to the low interest points) exerted no or only moderate rate levels, only one of them was in inflationary pressures. In particular, fact allotted liquidity (a very small market forces and a number of insti- amount), which confirms that the tutional factors ensured that no Austrian market did not face any price increases occurred during the liquidity constraints. changeover to the euro; they include:

Inflation Rates in Selected Sectors Austria Annual change in %

4.0

3.0

2.0

1.0

0.0

1.0

2.0 Euro area

5.0

4.0

3.0

2.0

1.0

0.0

1.0 1999 2000 2001 2002 1 Economic Aspects of the Food Nonenergy industrial goods Euro Cash Changeover Services in Austria, Source: ECB. Focus on Austria 2/2001.

36 Annual Report 2001 Monetary Policy Secures Stability

— the high degree of competition in cooled down. Real GDP growth exposed, but increasingly also in came to 1.0% in 2001, after 3.0% protected sectors; in 2000. The year 2001 was charac- — the absorption of changeover terized by a marked slowdown in costs for enterprises by a tempo- economic activity. While the first rary decrease in profit margins; two quarters still showed some — the slowdown of economic activ- growth (0.1% quarter on quarter, ity, higher unemployment and, seasonally adjusted), the Austrian consequently, subdued consumer economy shrank by —0.4% in the demand; third and by —0.2% in the fourth — the Euro-Related Pricing Act, quarter. which mandates the dual display The economic cooling is ascrib- of prices and stipulates that sanc- able to both international and domes- tions may be imposed in the case tic factors. Adverse international of unjustified price hikes during economic conditions and the conse- the changeover; quent uncertainty caused companies — the close monitoring of prices by to noticeably cut back on investment; the Euro Price Commission and real gross capital formation plum- other consumer protection or- meted by 2.6%. Private consumption ganizations, which also monitored growth, generally the backbone of rounding practices; and economic development, decelerated — consumers heightened price sharply as real wages declined and, awareness. at 0.9% in 2001, reached only half In other words, the switch to the theaverageratesmeasuredinthe euro did not entail a wave of price three previous years. The decline in hikes. The acceleration of inflation real income was attributable to a in the euro area and in Austria since surge of consumer prices in 2001 1999 was chiefly attributable to and to budget consolidation meas- higher raw material prices, the lower ures.Thelatteralsobroughtdown exchange rate of the euro, tighter government consumption, which de- supplies on agricultural markets (fol- creased by —0.2%. Despite a sharp lowing the animal disease epidemics) drop in export growth, net exports as well as tax and fee hikes as part of contributed 1.0 percentage points the efforts to balance the general toGDPgrowth,givenaneven government budget. Fears that the weaker import development. Thus, currency conversion might stir infla- foreign trade was the mainstay of tion as companies adapt their psycho- GDP growth, even more so than logical prices (odd-even pricing) did private consumption with its contri- not materialize. bution of 0.7 percentage point. Aus- trian industrial production con- Key Developments tracted by 0.3% in 2001 against in Austria: 2000. A breakdown by sectors shows The Economic Back- that output growth was highest in ground — the Budget — manufacturing (+0.4%). Construc- the Current Account tion was still mired in crisis in Growth slows down to 1.0% in 2001 2001, with output shrinking by Having recorded robust growth rates 2.1%. in 2000, the Austrian economy lost steam in 2001 as the global economy

Annual Report 2001 37 Monetary Policy Secures Stability

Quarterly Contributions to Real GDP in Austria

Percentage points

4 1999 2000 2001

Consumer spending Gross capital formation Errors and omissions Government spending Net exports GDP, real

Source: OeNB, Austrian Institute of Economic Research (WIFO).

HICP inflation at 2.3% months of 2002 (see the section Eco- Inflation accelerated slightly in 2001. nomic Aspects of the Euro Cash The increase in the HICP came to Changeover). 2.3% (2000: +2.0%). Price growth reached its peak in May (2.9%) and Modest employment growth, slowed down subsequently; the De- rising unemployment cember inflation rate was 1.8%. This The economic slowdown also fed trend continued in early 2002. Oil through to the labor market, in par- and food prices as well as fiscal meas- ticular in the second half of 2001. ures had the largest impact on infla- Employment growth lost momentum tion in 2001. At 1.7% year on year, in the course of the year; in Decem- Austria posted the lowest inflation ber, employment slipped below the rate in the euro area in both February previous years figure. The number and March 2002. The euro cash of job vacancies declined dramati- changeover did not generate price cally.Atthesametime,unemploy- effects in 2001 and in the first few ment surged from mid-2001 on.

HICP Inflation and Contributions to Inflation in Austria

Percentage points

2.5

2.0

1.5

1.0

0.5

0.0

0.5

1.0 1999 2000 2001 2002

Nonenergy industrial goods Food Overall index Services Energy Source: OeNB, Statistics Austria, ECB.

38 Annual Report 2001 Monetary Policy Secures Stability

Thanks to the healthy employment advanced by 3.7% to EUR 60.4 bil- growth recorded in the first half, at lion. Both actual revenues and expen- 3.15 million on average payroll diture exceeded the estimate for employment was 0.5% higher in the 2001 (estimate for 2001 compared entire year of 2001 than in the pre- to final budget accounts 2000: reve- vious year. However, the number of nues: +1.8%, expenditure: +0.9%). jobless people increased by 4.9% to Tax receipts were up 11.6% on 204,000, whereas job vacancies de- the year 2000, amounting to creased markedly by 16.4%. EUR 56.2 billion (gross). Receipts At 3.6% on the year, unemploy- in assessed personal income tax ment according to the Eurostat defini- (+41.5%), corporate tax (+61.3%) tion — which is subject to ongoing revi- and transport taxes (+12.9%) in- sion — was lower than in 2000 (3.7%). creased above average. Government By comparison, unemployment accor- expenditure exceeded the budget ding to the national definition climbed estimate because welfare spending from 5.8% (2000) to 6.1% (2001). had risen as a result of worsening economic conditions and other ad- Federal government budget outturn ministrative expenses had also for 2001 outstrips expectations mounted significantly. By contrast, According to the provisional central both interest expenses and staff costs government outturn, the administra- remained below the budget estimate. tive net deficit came to EUR 1.4 billion or 0.7% of GDP in 2001. Com- Austrian stability program envisages pared to the final budget accounts a balanced budget for 2001 to 2003 2000, revenues mounted by 6.5% The update of the EU Member States to EUR 59.0 billion and expenditure stability and convergence programs

Budgetary Notification of February 2002 1998 1999 2000 20011) 20022) EUR billion General government budget balance 4.5 4.3 3.0 0.1 0.0 Central government 5.8 4.9 3.4 1.2 1.7 Regional government 0.8 0.5 0.5 1.2 1.3 Local government 0.3 0.1 0.1 0.3 0.3 Social security funds 0.2 0.0 0.2 0.1 0.0 Debt service costs 7.2 7.0 7.2 7.1 7.1 Primary balance 2.6 2.6 4.2 7.3 7.1 Public debt 121.4 127.5 130.2 130.1 130.1 %ofGDP General government budget balance 2.4 2.2 1.5 0.1 0.0 Central government 3.1 2.5 1.6 0.6 0.8 Regional government 0.4 0.3 0.2 0.6 0.6 Local government 0.1 0.1 0.1 0.1 0.2 Social security funds 0.1 0.0 0.1 0.1 0.0 Debt service costs 3.8 3.5 3.5 3.4 3.3 Primary balance 1.4 1.3 2.0 3.4 3.3 Public debt 63.9 64.9 63.6 61.7 60.2 Source: Statistics Austria, Federal Ministry of Finance. 1) Figures given for central government and regional government are final; figures given for local government and social security institutions are partly based on estimates. 2) Estimates by the Federal Ministry of Finance.

Annual Report 2001 39 Monetary Policy Secures Stability

towards the end of 2001 had to take the transactions with the BIG, the into account the worsening economic government thus more than fulfilled environment. The budget balances in its goal of a balanced budget. Cutting a few EU Member States deteriorated the central government deficit by for the first time in the history of the EUR1.7billiontoEUR1.2billion Stability and Growth Pact. The Euro- or 0.6% of GDP had been key to this pean Commission noted the exis- accomplishment. The budget report tence of an excessive deficit in Ger- to the European Commission of Feb- many, Portugal and Italy and com- ruary 2002 expects the general gov- mended Austria for its budget consol- ernment budget to be balanced in idation efforts. 2002. The Federal Ministry of Finance The Austrian public debt ratio published the updated Austrian stabil- decreased from 63.6% in 2000 to ity program for 2001 to 2005 in 61.7% of GDP in 2001 and is ex- November 2001. According to the pected to continue to decline to projections, the general government 60.2% in 2002. budget will be balanced from 2001 to 2003 and will post a surplus in Future budgetary requirements 2004 and 2005, the temporary eco- According to the preliminary results nomic setback notwithstanding. Aus- for 2001, unscheduled additional rev- tria thus ranks in the upper middle enues (direct taxes, federal funds), of all EU Member States. along with austerity measures, have helped achieve a balanced budget ear- Slight Maastricht surplus in 20011) lier than originally stipulated in the The budget report to the European stability program. To be able to sus- Commission in February 2002 in- tainably fulfill the requirements of volved some retroactive adjustments the Stability and Growth Pact, Aus- for 2000 and 2001: The general gov- tria should continue this policy of ernment deficit-to-GDP ratio for consolidation. The budget estimate 2000 was revised upwards to 1.5% for 2002 and the stability program of GDP (1999: —2.3%). The revision published in November 2001 essen- 1 Not including net interest became necessary after Eurostat had tially reflect this effort. Once the income from swap decided that receipts from the gov- economy has begun to pick up, the agreements, government ernments transactions with the fed- government faces the challenge of net borrowing amounted to eral real estate company Bundesim- cutting taxes as intended and improv- EUR 0.18 billion or —0.1% of GDP in 2001. mobiliengesellschaft (BIG), which ing Austrias position as a business Interest flows exchanged had originally been taken into ac- location while keeping the budget under swap agreements with count in the governments budget cal- sustainably balanced (as required by the government being one of culations, must not be used to offset the Maastricht criteria); priority the counterparts are the Maastricht deficit (the sum in should be given to reducing the tax- included in the calculation of the Maastricht criterion question amounted to some 0.3% of to-GDP ratio, which, at 45.9%, was GDP). Leaving aside one-off effects one of the highest in the EU in for government deficit 2 (Regulation (EC) like the proceeds from the sale of 2001. ) No. 2558/2001 and UMTS licenses, the general govern- Regulation (EC) ment deficit amounted to 1.9% of Lower current account deficit in 2001 No. 351/2002). GDP in 2000. The deficit on the Austrian current 2 Source: Statistics Austria. Taxes (incl. EU In 2001, the general government account was EUR 4.6 billion in contributions), real social posted a budget surplus of 0.1% of 2001. The improved balance of insurance contributions. GDP. Despite Eurostats decision on cross-border goods and services

40 Annual Report 2001 Monetary Policy Secures Stability

Current Account Balance

EUR billion net

7 19921) 19931) 19941) 19951) 19961) 19971) 19981) 19991) 20002) 20013)

Source: OeNB, Statistics Austria. 1) Final data. 2) Revised data. 3) Provisional data. transactions was fundamental for re- on bonds and notes accounted for ducing the deficit by EUR 0.5 million the largest net outflows; banks and compared to 2000. On the whole, the general government contributed the current account reflects the eco- approximately the same amount. nomic slowdown in Austria and in Cross-border capital flows, both main trading partner countries inward and outward, decreased in throughout 2001. The decline of the 2001 against 2000. While the process oil price helped ease the strain on of internationalization and portfolio the current account. rebalancing following the introduc- Tourism, one of the major com- tion of the euro had pushed up ponents of the Austrian current ac- cross-border investment in 1999 count, posted fairly good results in and 2000, these effects seem to have 2001, considering the adverse eco- come to a halt in 2001. nomic conditions. Despite a slower At some EUR 3 billion and EUR 6 summer season, foreign tourist bed- billion, respectively, both outward nights continued to increase, namely and inward foreign direct investment by 1.3%. From a structural point of did not reach the levels of 2000. view, international summer tourism Income on portfolio investment — hasdeclinedtothelevelofthelate the most important subaccount of 1960s, whereas domestic tourism the financial account — also trailed and international winter tourism the results of 2000 (both outward continue to reach new highs. and inward investment). Cross-bor- Owing to the current account der securities transactions accounted deficits recorded in the past few for net capital imports of EUR 4.9 years, the shortfall on the income billion. subaccount — the highest net deficit Reserve assets shrank by EUR 2.1 — widened again in 2001. Interest billion through transactions in 2001.

Annual Report 2001 41 The OeNB Contributes to Financial Stability

Stable Financial Markets their firm determination to keep Are a Prime Objective risks to financial stability at bay. Central banks have a key role Although fears were rife and trading in preventing crises on U.S. and Canadian stock ex- Safeguarding financial stability began changes was in fact briefly halted, to evolve into one of the key central there were no short-term liquidity bank policy objectives in the 1990s shortages. and has become critically important in recent years. The latest turbulen- The OeNB issues a Financial Stability Report ces in some financial centers under- Stable financial markets and a sound line what an important role central banking system are the prerequisites banks play in prudential supervision for an effective monetary policy. andinthedesignoftheframework Hence the two objectives price stabil- conditions for financial markets, ity and financial stability have become above all in times of crisis. increasingly intertwined. Against this In Japan, high volumes of non- background, the OeNB published its performing loans and bearish stock first Financial Stability Report in June prices deepened the persistent prob- 2001.1) This report has since been is- lems of the banking sector even sued semianually in German and in further. Any rapid and sustainable English. The OeNB decided to regu- consolidation of the financial sector larly publish a Financial Stability Re- is not on the horizon yet. In the port to make all players on financial spring of 2001, concerns focused markets and the general public aware chiefly on the financial crisis in of the problems that could arise if de- Turkey. With the recession continu- velopments on financial markets go ing in 2001 and investors exhibiting awry. The well-founded analysis of more risk aversion, Argentina did financial market developments and not succeed in delivering itself from the identification of risks to the its debt crisis. Ongoing sharp set- stability of the Austrian financial sys- backs to high-tech stocks and the tem are designed to contribute to the resulting pressure on equity markets early detection of potential threats in many financial centers in 2001 andtohelpheadoffthesethreatsby along with the slow progress of the enabling a swift response. In practice, IT sector in reducing its debt repre- the OeNB contributes to protecting sented a further risk factor for finan- financial market stability by providing cial markets. In addition, the terrorist its expertise in the supervision of the attacks of September 11, 2001, in the financial system and by working on U.S.A., which severely affected e.g. honing regulatory instruments in tourism (above all airline companies) international forums. and insurance companies, augmented the destabilization potential. An Active Role The resolute, concerted response in the Basel II Process of the worlds major central banks in The Basel Committee publishes the wake of September 11 was mate- its 2nd Consultative Paper rial in containing the most negative The international Basel II process repercussions on international finan- continues. Regulatory and supervi- cial markets. By quickly providing sory authorities, in interaction with 1 See the OeNBs website at liquidity and cutting key interest the industry, have been hammering www.oenb.co.at. rates, the central banks demonstrated out reform proposals for the capital

42 Annual Report 2001 The OeNB Contributes to Financial Stability

Capital Adequacy

old economic capital

assets risk- broadbrush risk weights weighted to cover all risks regulatory assets 8% capital

new market supervisory assets review economic capital

differentiated risk weights for risk- additional credit risk + CRM techniques business weighted x% regulatory market risk assets 8% indicators operational risk capital

Source: OeNB. adequacy standards for banks and in- on the principle of orienting the vestment firms (Basel II) for almost new provisions on economic capital three years now. The second consul- targets. The goals of the new accord tative paper of the Basel Committee — increasing financial stability by on Banking Supervision (BSCE) and emphasizing risk sensitivity, promot- the European Commissions subse- ing advanced risk measurement and quent consultation document, both management techniques and using published in early 2001, have made internal ratings — broadly met with clear that the risk-sensitive weighting a very positive response. Minimum factors this reform introduces and the capital requirements are to be highly refined minimum require- brought more closely in line with ments it proposes are bound to im- economic capital.1) pact banks and thus financial markets However, in the course of the thoroughly. preparatory work, some fundamental The new Basel capital adequacy criticisms emerged, and the second proposals revolve around the inter- consultation phase clearly revealed action between the three pillars: that some of the areas not yet cov- Complementing the considerably ered, e.g. provisions on retail loans, refined minimum capital require- project finance and equity exposures, ments (the first pillar), the second which are to be part of the internal pillar of the new framework envisages ratings-based (IRB) approach, are a supervisory review process. Finally, extremely complex. under the third pillar — market disci- Consequently, the original plan to pline — banks are to disclose their risk complete the new capital accord by management targets and principles the end of 2001 and to implement for every single risk category and to it in 2004 was shelved in June enhance transparency vis-a‘-vis the 2001. Following what is likely to general public. be a very intensive third consulta- The preparatory work completed tion phase and the completion of a so far has revealed that there is a comprehensive Quantitative Impact 1 Basel Committee on Banking Supervision, Consultative broad consensus on the need to over- Study, the new Basel Capital Accord paper on the Basel Capital haul the Basel Capital Accord, on the will be wrapped up and implemented Accord, No. 37, April structure of the new framework and after an appropriate transitional 1998.

Annual Report 2001 43 The OeNB Contributes to Financial Stability

phase. In Europe, the European proposed capital adequacy frame- Commission is also working on a work in depth and then presented draftdirective.Openissuesareto the questions of the BCBS and the be discussed during the third consul- European Commission pertinent to tation procedure in close cooperation the second consultation phase. The with the Basel consultative process. timely dissemination of information about the upcoming risk management Austrian institutions requirements gives banks the oppor- have a common position tunity to review their internal proc- The OeNB has assigned the Basel esses proactively and to work on consultative process a high priority adapting their risk management tech- ever since it was initiated. The Aus- niques to reflect new developments. trian position was closely accorded To ensure a high level of coverage, with the Federal Ministry of Finance the OeNB additionally provided ac- and the Federal Economic Chamber. tive support and expertise for nu- Thanks to the thorough efforts of merous events hosted by the Federal Austrian experts, specifically Aus- Economic Chamber and seminars or- trian conditions have already fed into ganized by private-sector businesses. the negotiations on the Basel pro- The pertinent international docu- posals: ments may be found on the OeNBs — Internal and external ratings are website, as may the joint position of scheduled to have the same stand- the Federal Ministry of Finance and ing and to be accepted coinciden- the OeNB. Beyond providing infor- tally. This provision allows banks mation and serving as a contact for whose clientele is made up mostly banks, the OeNB has started to re- of small and medium-sized busi- flect on the possible effects of the nesses to use IRB advanced ap- Basel II process on its own activities. proaches. Data pooling will be permitted, allowing medium- The challenges Austria faces sized and sectorally grouped The tasks set out for the next few banks to share their internal rat- months will be to identify the amend- ings. mentstobemadetotheBaselIIpro- — Simpler calculation methods and cess in cooperation with Austrias lower risk weights are now being banks and to implement them in con- discussed for personal, small- cert with EU Member States. Basel II business loans and loans for the is intended as a meaningful and self-employed than were pro- fundamental reform targeted at se- posed in the first consultation curing the stability of the interna- paper. tional financial system. The OeNBs representatives to the relevant inter- Information on Basel II national forums will direct their in all Austrian provinces efforts in 2002 at ensuring that the To ensure that banks across Austria new capital adequacy framework were adequately informed about does not put Austrian and other Basel II, the branch offices of the banks and businesses at a competitive OeNB organized information events disadvantage. in all Austrian provinces in March and April 2001. At these workshops, OeNB experts first explained the

44 Annual Report 2001 The OeNB Contributes to Financial Stability

Financial Market One-stop supervision for banks, Supervision: investment firms, insurance companies New Developments and pension funds Prudential supervision reform The Financial Market Authority Act, The need for prudential reform may part of the Financial Market Super- be traced both to the changed regula- vision Act, provides for the constitu- tory framework conditions — above tion of an integrated supervisory alltheBaselCorePrinciplesforEf- body, the Financial Market Authority, fective Banking Supervision and the to perform banking, securities, insur- new capital adequacy standards being ance and pension fund supervision. prepared (Basel II) — and to the glob- The Financial Market Authority is alization of finance, with its stepped- autonomous — it operates independ- up volume of cross-border transac- ently and is free from instructions — tions by Austrian banks, increasingly and is organized as an institution complex financial services and the under public law with a separate legal growing intricacy of internal control personality. In practice, the establish- structures in banks. Prudential ment of the FMA divests the Ministry measures will have to follow suit, of Finance of banking, insurance and resulting e.g. in more bank audits pension fund supervision and the and reinforced international coope- now defunct Austrian Securities Au- ration. thority of securities supervision and endows the FMA with all resulting The ultimate aim: effective banking rights and duties. To improve the en- The reform of Austrias financial forceability of prudential measures, market oversight was aimed at pro- the FMA is also invested with the ducing a high-quality, effective, but power to enforce penalties under ad- nevertheless affordable supervisory ministrative penal law as well as the framework. The Austrian Ministry notices on prudential matters that it of Finance elected to create a new issues. Furthermore, the FMA has single regulator responsible for the right to issue ordinances, which banks, investment firms, insurance it must officially announce in the companies and pension funds. Federal Law Gazette. The FMA management consists of a supervisory The new Financial Market Supervision Act board with six members, three of ThepassageoftheAustrianFinancial whom the OeNB may propose for ap- Market Supervision Act in summer pointment, and an executive board 2001 and the amendment of this with two members, one of whom is law with constitutional status in nominated by the OeNB. March 2002 put prudential super- By analogy to the procedure ap- vision in Austria on a new footing. plied in insurance and securities The central feature of this Act, which supervision so far, the supervised entered into force April 1, 2002, is banks and pension funds will bear the establishment of a Financial the lions share of supervisory costs. Market Authority (FMA). The new The federal government is obliged law focuses on: to provide the FMA with EUR 3.5 — the constitution of the Financial million a year, which reduces the Market Authority and costs incurred by the supervised — the relevant changes in substan- institutions. tive prudential law.

Annual Report 2001 45 The OeNB Contributes to Financial Stability

Moreover, some substantive pru- instructions in this area. Payment dential law details will be altered. systems oversight encompasses The objective is to make prudential the mandate to inspect systemic measures enforceable more quickly stability (see the section The and consequently to boost the effi- OeNB Is Entrusted with Payment ciency of bank audits. As a case in Systems Oversight). point, requirements for bank auditors — Obtaining expert opinions as aretobeformulatedevenmore mandatory under Article 26 ff. strictly in order to eliminate prob- (market risk) remains a duty of lems involved in bank examinations. the OeNB. These requirements include stand- — The well-established reporting ards for the skills of the auditors system for banks and the process- and the introduction of the rotation ing of these data (e.g. for monthly principle to ensure the integrity of returns, quarterly reports) by the examinations. Credit institutions OeNB will be continued, and the supervisory boards will also be exchange of information between strengthened — for example, they will the OeNB and the FMA will be begrantedtheoptiontorequestthe ensured by explicitly standardiz- conduct of examinations to support ing cooperation and information- their own supervisory duties. sharing practices. — The OeNB and the Ministry of Fi- The OeNBs prudential tasks nance have equal rights to nomi- and participation rights are expanded nate members to the FMAs exec- The OeNBs tasks and rights of par- utive and supervisory boards. ticipation in the area of prudential and financial market supervision as Prudential reform safeguards laid down in the Austrian Banking financial stability Act have not only been preserved; The reorganization of financial mar- in fact, they have been augmented ket oversight in Austria and the solid by comparison to what the previously integration of the OeNB into super- applicable law stated: visory operations ensures that the — The provisions under which the OeNB will be able to fulfill its mani- Minister of Finance may commis- fold macroprudential tasks within the sion the OeNB with the examina- Eurosystem and will thus contribute tion of credit institutions (on-site importantly to preserving financial examinations) was changed into a market stability. mandatory duty to entrust the OeNB with on-site examinations The OeNB Is Entrusted of banks market and credit risk. with Payment Systems In the case of other types of on- Oversight site examinations of banks (e.g. Payment systems oversight money laundering audits), rein the Eurosystem performed decentrally questing the OeNBs participation by the NCBs is optional. The Eurosystems objective in exer- — An amendment to the Federal Act cising payment systems oversight is on the Oesterreichische National- to safeguard the stability and effi- bank (Nationalbank Act) entrusts ciency of payment systems and the the OeNB with payment systems enforceability of monetary policy. oversight; the OeNB is free from The organization of payment systems

46 Annual Report 2001 The OeNB Contributes to Financial Stability

oversight in the Eurosystem rests on inform the OeNB about the measures the decentralization and subsidiarity they have taken to ensure systemic se- principles. Accordingly, in an ap- curity at the legal, financial, organiza- proach which is designed to guaran- tional and technical level. tee that oversight is optimally suited to national requirements, the NCBs Payment systems statistics to back enforce the oversight policy stance fulfillment of oversight duties over national payment systems. The The OeNBs payment systems over- NCBs also supervise the national sight responsibilities will be under- components of the TARGET system pinned by a reporting system for pay- (ARTIS in Austria). The main document systems statistics that was de- ments in which the framework for veloped in the reporting year. The oversight is currently set forth are payment systems statistics are to pro- the Core Principles for Systemically vide reliable data about the number Important Payment Systems (BIS, and value of transactions processed 2001) and the minimum require- by payment systems at quarterly ments for electronic money systems intervals. Article 44a paragraph 7 of laid down in the Report on Elec- the Nationalbank Act also specifies tronic Money (ECB, 1998). the reporting obligations for these statistics. Responsibility for payment systems Upon assuming its oversight du- oversight lies with the OeNB ties under Article 44a paragraph 1 from April 1, 2002 of the Nationalbank Act, the OeNB The fundamental prerequisites, such will comply fully with the national as the legal basis, for the oversight mandate and Eurosystem require- of all national payment systems by ments. The OeNB will recognize the OeNB were created in 2001. An both Austrian and European require- amendment to the Nationalbank Act ments in taking the steps required to vested the OeNB with the responsi- implement the provisions of the bility for payment systems oversight Nationalbank Act in Austria and in from April 1, 2002. Article 44a of exercising the oversight functions the Nationalbank Act spells out the incumbent on it. The Austrian Se- legal principles for the OeNBs over- cure Information Technology center sight function. In connection with the (A-SIT) made a vital contribution to mandate to inspect systemic stability, payment systems oversight in 2001 Article 44a specifies the reporting by providing significant support, in obligations of payment systems oper- particular in the development of ators and participants, empowers the oversight principles. OeNB to declare the recommenda- tions on systemic security of the Fundamental ECBandtheBISsCommitteeon Developments of Payment and Settlement Systems Financial Intermediaries binding by issuing ordinances, and Ongoing decline in the number of banking spells out a strict organizational sepa- offices in Austria ration of responsibilities to prevent a The downtrend in the number of conflict of interest within the OeNB. banking offices observed throughout Under Article 44a paragraph 7 of the the past few years continued in Nationalbank Act, especially payment 2001, when the number of banking systems operators will be obligated to offices sank by 26 to 5,453 from the

Annual Report 2001 47 The OeNB Contributes to Financial Stability

beginning of the year. Broken down derivative transactions as a percent- by head and branch offices, the num- age of total assets skyrocketed by ber of head offices diminished by 16 49 percentage points to 189%. to 907, while the number of branch offices was cut by 10. Credit growth decelerates Loan growth weakened in lockstep Total asset growth flags with the economy in 2001, with the After Austrian banks business had expansion halving to EUR 7.9 billion boomed in 2000, they faced far more or 3.5% from 2000. Whereas the difficult conditions, above all in lend- share of foreign currency credit had ing, when among other things inter- still come to some 45% of credit national cyclical activity cooled in growth in 2000, it diminished to 2001. roughly 36% in 2001. Hence, foreign Austrian banks total assets currency lending as a percentage of climbed by EUR 25.0 billion or total lending edged up by only 4.5% in 2001, down from EUR 0.7 percentage point to 18.2% from 38.1 billion or 7.3% in 2000. Though the beginning of 2001. By contrast, the weakening economy was one in 2000 this ratio had risen by 1.8 per- reason for the deceleration, the re- centage points. structuring of Bank Austria AG (BA) in the wake of its merger with Baye- The renaissance of passbook savings rische Hypo- und Vereinsbank AG In the review year deposits made by (HVB) had a more immediate impact. domestic nonbanks advanced at a rate Excluding BA, total asset growth last experienced at the beginning of would have come to 8%, outpacing the 1990s: While deposits had inched the result of 2000. Since the estab- up by only EUR 4.0 billion or 2.3% lishment of EMU, the volume of de- in 2000, they shot up by EUR 13.8 rivatives transactions, particularly in- billion or 7.8% in 2001. Despite terest rate derivatives, has widened the abolition of anonymous passbook noticeably. In 2001 the volume of savings accounts and the drop in such operations mounted by EUR interest rates, the classical savings 323.7 billion or 41.1%. As a result, passbook experienced a revival. After

Credit Institutions Business Activity 2000 2001

at year-end change at year-end change EUR billion % EUR billion % Total assets 562.8 þ 7.3 587.4 þ 4.5

Assets Loans to domestic nonbanks 224.9 þ 6.7 232.8 þ 3.5 thereof: Euro loans 185.4 þ 4.3 190.5 þ 2.7 Foreign currency loans 39.4 þ19.3 42.3 þ 7.2 Foreign assets 157.8 þ20.2 156.3 0.9

Liabilities Domestic nonbank deposits 175.8 þ 2.3 189.6 þ 7.8 thereof: Savings deposits 119.7 2.2 125.4 þ 4.8 Foreign currency deposits 3.3 þ 7.3 2.7 19.1 Foreign liabilities 174.1 þ18.2 173.7 0.6 Source: OeNB.

48 Annual Report 2001 The OeNB Contributes to Financial Stability

an abysmal performance in 2000, well as the surplus on financial trans- when expectations of higher yields actions (+EUR 0.03 billion or prompted investors to shift funds 7.0%). Conversely, fee-based income from savings accounts to mutual contracted (—EUR 0.14 billion or funds, causing savings deposits to —4.4%), mainly because commission shrink by 2.2%, additions to savings income on securities trading plum- deposits ran to EUR 5.7 billion or meted. On the expenditure side, staff 4.8% in 2001, the best result in many costs (+EUR 0.20 billion or +4.5%) years. and other administrative expenses (+EUR 0.22 billion or +7.5%) Austrian banks foreign business subdued surged. The cost/income ratio dete- After Austrian banks foreign busi- riorated by 0.8 percentage point ness temporarily peaked mid-2001, from 2000 to 67.4% in the year external assets closed the year with under review. a decrease by EUR 1.47 billion or 0.9%. However, excluding BA, claims Structure of Operating Income on the rest of the world would have in 2001 % surged by about 16%. By compari- 10.1 son, external assets had jumped by 3.7 more than 20% in 2000.

Expansion on Central and Eastern European 21.8 markets 50.4 Austrias large commercial banks remained very active on CEEC markets, with total assets running to approximately EUR 59 billion or 13.9 roughly 10% of total domestic assets Net interest income Income from securities and equity interests in December 2001. The number of Balance on fee income banking offices rose substantially Balance on financial transactions (December 2001: 2,611), and staff Other operating income augmented to more than 51,000. Source: OeNB. Banks have been steadily boosting their business activity in the area, so that by now Austrian banks have Loan loss provisions are expected gained the largest market share in to have reached EUR 2.2 billion, the Czech Republic, Hungary and representing a pronounced rise over Slovakia. the figure anticipated for 2000. As in the year before, recoveries from Profit up from 2000 risk provisions surpassed new trans- For the year 2001, banks operating in fers to provisions; net recoveries are Austria posted a preliminary operat- expected to be extraordinarily high ing result of EUR 4.6 billion, a at EUR 0.8 billion in 2001. Adjusted 1.3% increase compared to 2000. for risk provisions and value adjust- Banks succeeded in boosting net ments, income from ordinary activi- interest income (+EUR 0.35 billion ties is expected to have climbed by or +5.2%) and income on securi- EUR 0.28 billion or +9.7% to EUR ties transactions and participations 3.15 billion from 2000. After factor- (+EUR 0.14 billion or +7.8%) as ing in lower-than-expected extraor-

Annual Report 2001 49 The OeNB Contributes to Financial Stability

Selected Earnings Ratios of Austrian Banks 1999 2000 2001 % Cost/income ratio 70.7 66.6 67.4 Ratio of net interest income to operating income 52.0 49.8 50.4 Ratio of net fee-based income to operating income 22.6 23.7 21.8 Return on equity 6.9 9.4 9.8 Source: OeNB.

dinary expenses and taxes, Austrian the technology stock euphoria that banks profit for the year comes to had prevailed for years gave way to EUR 2.69 billion, up by EUR 0.36 a more common-sense approach and billion or 15.7% on the result for healthy scepticism. This was one rea- 2000. Return on equity (profit for son the development of electronic the year as a percentage of core cap- money did not live up to the original ital) reached 9.8% in the reporting high expectations. Although card- period, 0.4 percentage point higher based transactions chalked up major than in 2000. gains (debit cards: +30%, Quick electronic purse transactions: +87%), Card payments surge cash remains the instrument of choice After Eurocheques had been in use for payment transactions in Austria. for over 30 years, Eurocheque pay- Banknotes and coins are used for ment services and the Eurocheque 93% of all payments, representing guarantee were terminated at the 81% of the total transaction volume. end of 2001, reflecting the falling popularity of this payment instru- Mutual funds assets grow more slowly ment and the resulting hike in trans- Unfavorable business conditions and action costs. In the course of 2001 the terrorist attacks of September 11,

Number of Investment Funds and Total Assets

EUR billion Number

90 1,600 Domestic investments 80 (left axis) 1,400 Foreign investments 70 (left axis) 1,200 Number of funds 60 (right axis) 1,000 50 800 40 600 30

20 400

10 200

0 0 19961997 1998 1999 2000 2001

Source: OeNB.

50 Annual Report 2001 The OeNB Contributes to Financial Stability

2001, impacted on the development posted a steady rise, which, however, of Austrian mutual funds assets in was interrupted by the decline in 2001. After rising moderately in the prices following the terrorist inci- first half, only to contract more dents in the U.S.A. in September. sharply than ever before in the At the end of the third quarter of third quarter, assets reembarked on 2001, assets fell for the first time a positive trend in the fourth quar- since the introduction of the insur- ter, when markets recovered. In ance statistics. Both investment in do- thefaceoflargelyadversefactors, mestic securities and lending dimin- mutual funds nevertheless managed ished at a faster pace in 2001. Addi- to enlarge assets by EUR 6.7 billion tions to foreign assets, which accoun- or 7.3% in the calendar year 2001. ted for the largest share of investment At the close of December 2001, throughout the year, were very small. the 23 Austrian investment compa- Investment in Austrian banks fluctu- nies managed a total of EUR 98.7 bil- ated wildly in 2001, a likely sign of lion in the 1,720 investment funds shifts to other categories of invest- they operated. Debt securities ac- ment. counted for the largest share in portfolios (59%), followed by equities Austrias stock market is quite stable (19%) and mutual fund shares in an international comparison (17%). The shift from domestic to 2001 was one of the hardest years foreign investment continued at a in decades for the Austrian stock somewhat weakened pace in 2001. market—asitwasforboursesacross The ratio of domestic to foreign in- the world. Under the circumstances, vestment stood at 33.9% to 66.1% the Austrian Traded Index (ATX) in December 2001 (December 2000: held up fairly well; in fact, it even 38% to 62.0%). closed the year with a slight gain of roughly6%.Thisquitestrongper- Slow asset growth at insurance companies formance may be traced, inter alia, as well to the low share of high-tech stocks In the reporting period, mergers in the ATX and the moderate price diminished the number of insurance of most securities listed on Wiener companies operating in Austria by Bo‹rseAG.TheAustrianstockmarket 3 to 65. Insurance companies assets had benefited to a lesser extent (excluding reinsurance transactions) from the worldwide boom of stock

ATX (Austrian Traded Index)

1,250

1,200

1,150

1,100

1,050

1,000 Jan. Feb. March April May June July Aug Sept. Oct. Nov. Dec. 2001

Source: Wiener Börse AG.

Annual Report 2001 51 The OeNB Contributes to Financial Stability

markets of the past years, so when mented at a more moderate pace than markets were hit after the terrorist in the preceding years. While Aus- attacks of September 11, 2001, the trian pension funds profits were pressure to sell affected the Austrian squeezed by tumbling stock prices, stock exchange only temporarily in most funds managed to post profits the weeks following the incident. rather than losses. Developments on the Austrian bond market were stable Positive returns on the Austrian in 2001. The yield gap between Aus- bond market trian bond yields and the German Capital markets in Austria showed benchmark yields remained un- some evidence of higher uncertainty changed, and the Austrian secondary on the part of investors in the review market yield exhibited no irregular year. Derivatives transactions aug- fluctuation.

52 Annual Report 2001 Responsibilities Handled Efficiently

The OeNBs Tasks: monetary policy and contributes to An Overview strengthening Austrias financial mar- The OeNB has twofold responsibilities — ket. The key purpose of the OeNBs in the ESCB and in Austria activities both at the national and at The OeNBs responsibilities result the international level is to benefit from its particular situation as an in- its users and partners. tegral part of the European System of The twofold position the OeNB Central Banks, the ESCB, and from occupies inform the duties presented its function as the central bank of in key words in the box below. The Austria. In this dual role, the OeNB box is followed by a more detailed has an active voice in the ESCBs description of selected tasks.

The OeNBs Tasks: An Overview

— Participation of the OeNBs Governor in the Governing Council and in the General Council of the ECB; — active involvement in various Eurosystem and ESCB bodies; — macro- and microeconomic research and analysis as a basis for the monetary policy decisions of the Governing Council of the ECB; — provision of conclusive and reliable statistics (above all monetary, balance of payments and prudential statistics) designed to serve in particular as a basis for economic policy decisions; — handling of transactions with banks focused on implementing the monetary policy with its prime objective of price stability; — conduct of minimum reserve operations and monitoring of minimum reserve holdings; — participation in foreign exchange market intervention to smooth extraordinary and undesir- able market fluctuations; — management of the OeNBs own reserves and of the OeNBs share of the ECBs foreign exchange reserves; — provision and promotion of reliable cross-border payment systems in Austria (ARTIS, TARGET); — provision of cash to Austrian businesses and consumers; — analysis of financial markets and banks with a view to risks; — participation in the prudential supervision of Austrian banks and payment system oversight to secure financial market stability; — acting as an interface between the Eurosystem, Austrian economic policymakers and the general public; — international monetary policy cooperation and participation in international financial institutions (IMF, BIS).

Economic research and analysis central banks is the backbone of the The participation of the OeNBs Gov- intellectual debate to establish the ernor in the Governing Council of theoretical underpinnings of mone- the ECB intensely involves the OeNB tary policy. The OeNBs economic in the monetary policy decision-mak- research focuses on monetary and ing process of the ESCB. One of the fiscal policy issues, monetary trans- prime functions of economic analysis mission, exchange rate and exchange is to provide valuable, high-quality in- market developments, the implica- puts for decision-making at ECB tions of the use of electronic means Governing Council meetings. Inde- of payment, securing financial stabil- pendent research at the individual ity, various aspects of wage-setting

Annual Report 2001 53 Responsibilities Handled Efficiently

processes in EMU, and competition the functioning and stability of the fi- and location analyses. The semiannual nancial market draw substantially on publication of macroeconomic pro- the OeNBs primary statistics, above jections for the euro area compiled all on the data on financial institu- jointlybyECBandNCBexpertshas tions. moved this area of research even more into the public eye. The OeNB Decentralized implementation provides input via the various work- of Eurosystem monetary policy measures ing groups within the so-called Broad The Eurosystem has a number of Macroeconomic Projection Exercise monetary policy instruments at its (BMPE) and the Narrow Inflation disposal to ensure that the price Projection Exercise (NIPE) and pub- stability objective is achieved. These lishes semiannual economic outlooks instruments serve to influence mar- for Austria. Benefiting from Austrias ket interest rates, to manage the geographic position and the network liquidity of the banking system and of ties to Central and Eastern Europe to signal the general orientation of it has developed over time, the OeNB monetary policy. The Eurosystem is uniquely suited to providing exper- implements monetary policy decen- tise on the CEECs at the national and trally: Within the ESCB, the Govern- at the international level. ing Council of the ECB takes monetary policy decisions, and the NCBs Statistics implement them. The OeNB compiles statistics essen- When it conducts main refinanc- tial for the presentation of the Aus- ing operations (MROs), the OeNB trian financial sector and its develop- supplies Austrian banks with the ment, collecting most of the basic liquidity they need against collateral data required itself. The chief aim is (reverse transactions). MROs are to produce highly reliable statistics conducted through weekly standard which meet a continously high quality tenders (variable rate tenders with a standard. OeNB statistics include: minimum bid rate) and have a matur- monetary and prudential statistics, ity of two weeks. The OeNB takes balance of payments statistics, inter- account of national interests when it national investment position statis- selects eligible assets. In addition to tics, financial accounts and contribu- the MROs, the Eurosystem conducts tions to the national accounts. In longer-term refinancing transactions compiling these statistics, the OeNB (LTROs), which are regular liquid- cooperates with national and interna- ity-providing reverse transactions tional partner organizations such as with a monthly frequency and a ma- Statistics Austria, the ECB, Eurostat, turity of three months. The OeNB the OECD, the IMF and the BIS. The and the other NCBs conduct LTROs OeNBs statistics represent validated as standard tenders as well. The information straight from the source set of monetary policy instruments and provide a reliable and objective also includes fine-tuning operations basis for the monetary policy deci- (quick tenders) which, under excep- sions of the ESCB. Also, they provide tional circumstances, may be exe- support to economic policymakers cuted by the ECB itself within a time- andallowAustriaspositiontobe frame of one day. Two decentral gauged in an international compari- standing facilities at the NCBs are son. Prudential supervision and hence designed either to provide (the mar-

54 Annual Report 2001 Responsibilities Handled Efficiently

ginal lending facility) or absorb (de- banks. Within the permissible frame- posit facility) liquidity overnight and work, the OeNB conducts an active set an upper and a lower limit for gold policy, reinforcing the effective- overnight market interest rates. Use ness of its expertise and making con- of the marginal lending facility is considerable additional profit. tingent on the provision of adequate In addition, the OeNB has an collateral. active interest in financial derivatives, whose expanding role on world Successful reserve management financial markets makes them a focus Despite the generally gloomy eco- of central banks attention. Working nomic picture, the OeNBs invest- groups which deal with the relevant ment policy met with continued suc- issues in these business areas ensure cess in 2001. Like the other NCBs, a permanent flow of information the OeNB is responsible not only between the NCBs and the ECB. for managing its own reserves, it also These structures guarantee the con- manages in a fiduciary capacity the tinuous evolution of the acquired reserves it has transferred to the knowledge along with the develop- ECB for possible interventions. The ment of the appropriate ESCB instru- principles of security, liquidity and ments. profitability govern the management of both portfolios. Whereas the Payment services ECB determines the guidelines for The OeNB operates a real-time gross its reserves, it is up to the NCBs to settlement system called ARTIS (Aus- take the best possible advantage of trian Real-Time Interbank Settle- the remaining room for maneuver. ment) for Austrias financial market However, the NCBs are in charge of to ensure secure payment trans- defining the reserve management actions within the TARGET (Trans- strategy for their own reserves. The European Automated Real-time Gross ECBs thresholds for reporting and settlement Express Transfer) net- authorization requirements ensure work of the ESCB. The chief advant- that the monetary and foreign ex- age of this payment system is the change policy of the ESCB is uni- finality of settlement guaranteed by form. the OeNB and in the immediate avail- The OeNB bases its investment ability of liquidity. The OeNB uses activity on a sophisticated risk man- the ARTIS system to settle money agement system. Different thresholds market transactions and important apply to different types of business; payment transactions, thereby secur- in addition, a limit is fixed for the ing the functioning and the stability permissible total investment. Market of the financial market in Austria. In risk (interest rate and currency risk) a review conducted in the business is defined in the form of thresholds year 2001, the ARTIS system was (duration bands, maximum toleran- deemed to be fully compliant with ces for currency risk); it is also mea- the Core Principles for Systemically sured by applying the value-at-risk Important Payment Systems recog- approach. The OeNBs gold trans- nized by the ECB. The OeNB actions are subject to the Washington achieved a boost in the number of Agreement signed in September transactions processed by the ARTIS 1999, which limits gold investment interbank payment system from and sales by the participating central 1.85 million in 2000 to 2.59 million

Annual Report 2001 55 Responsibilities Handled Efficiently

in 2001. Apart from ARTIS, the An Efficient Organization OeNB supports innovative payment Modern corporate management and systems solutions in Austria and, in organizational development tools in use cooperation with banks, fosters the The OeNB avails itself of modern structural changes required to pro- business management tools, which vide secure and efficient payment were further refined in the review settlement for Austrian consumers period (see the section A Strategic and businesses. Position for the Future). In addition, within the framework of the organi- Cash supply zational development process, pro- Jointly with its subsidiaries, the jects are implemented to analyze OeNB supplies top-quality banknotes organizational and management and coins to all users in Austria. This structures and operational proce- task involves the issue of cash to dures; the aim is to determine and banks and the acceptance of cash optimize their operating efficiency. returned by the banks. The main ob- The standard instruments used are jectives in cash distribution and pro- organizational analyses targeted at cessing are counterfeit protection, a raising the efficiency of selected or- feature important in retaining the ganizational units and process analy- trust of Austrian users in the cur- ses aimed at examining and stream- rency, and the maintenance of the lining particular business and support high quality of the currency in cir- processes. culation in Austria. The euro cash changeover was an enormous suc- Further optimization of processes cess,leadingtoabroadacceptance In 2001 organizational development of the currency by the general public was concentrated on various areas, in a very short period (see the chap- e.g. the restructuring of cash supply ter Smooth Euro Cash Change- services and payment systems. In over). thepaymentsystemsarea,theorgani- zational structure was optimized and Financial market analysis the administration of transactions In line with its obligation to secure, was reorganized and modernized. reinforce and monitor the function- By putting into practice a modern ing and stability of the Austrian e-procurement system, the OeNB financial market, the OeNB performs succeededinstreamliningthepro- banking analysis, payment systems curement processes in the areas or- oversight, on-site inspection of ders and acquisitions, including the banks, reviews of the commercial interfaces with the accounting sys- banks risk management systems, tem. and administers the Major Loans Register. The OeNB has further in- Human resource management developed tensified its focus on financial market further analysis in recent years. These efforts In 2001 the OeNB concentrated its are intended above all to safeguard personnel management capacities on the stability of Austrias banking concepts for flexible working hours, system (see the chapter The OeNB the implementation of a new human Contributes to Financial Stability). resource management concept and the introduction of new human resource development instruments.

56 Annual Report 2001 Responsibilities Handled Efficiently

Above all, recruiting concepts were Reorganization of the IT management optimized. system and of ISO certification In addition to exploiting Internet In 2001, the OeNBs IT operations and intranet placement sites success- introduced a customer-oriented, pro- fully and to developing the required cess-oriented quality management Internet website, the OeNB directly system designed to foster ongoing contacted potential job seekers, IT business process optimization and above all at universities. hence support IT products and ser- As in the past, advanced methods vices. The OeNBs IT quality man- were applied to encourage staff mobi- agement system was reviewed in Sep- lity. These instruments include fur- tember 2001; certification by the ther training and the optimum de- certification institutes O‹ QS (O‹ ster- ployment of human resources. To reichische Vereinigung zur Zertifi- achieve the staff mobility goal, career zierung von Qualita‹ts- und Manage- orientation exchanges with staff were mentsystemen) and DQS (Deutsche introduced. Gesellschaft zur Zertifizierung von Annual goal setting discussions Managementsystemen) according to were introduced as a human resource ISO standard 9001:2000 was success- management tool to complement the fully completed. The motivation for annual performance review. Corpo- this step was the extension of the rate and division objectives are de- group of customers of the OeNBs fined to include every single em- IT operations to the OeNBs subsi- ployee and result in individually diaries, which apply such certified measurable agreements on goals be- quality management systems. More- tween management and staff. over, the quality management system Personnel issues were one of the supports the steady process of im- areas in which intra-ESCB coope- provement and comparability of the ration was further intensified in the OeNBs IT services within the ESCB review year. In this context harmo- and with those of other service pro- nized secondment provisions were viders. elaborated and job rotation within the ESCB was reinforced. In the area EMAS environmental management of personnel training, joint training developed further options for new staff and for manage- The environmental management sys- ment were extended. tem the OeNB and the OeBS, one From January 1, 2002, staff has of its subsidiaries, introduced in been able to benefit from a variety 1999 pursuant to the EMAS Council of part-time concepts that are aimed Regulation1) was refined in 2001 and at creating more flexible working will receive further support through schedules. By using these new part- the creation of an environmental data time schedules, the OeNB is in a base from 2002. position to react flexibly to changes Building ecology considerations in the world of work and to deploy were developed further and used in its human resources in an optimal the conversion and construction of fashion. GSA cash centers in 2001 based on experience gained during the construction of the new OeNB building. 1 Environmental Management and Audit Scheme.

Annual Report 2001 57 Responsibilities Handled Efficiently

A New Footing for mation initiatives in 2001. In Septem- Communication with ber 2001, for instance, a statistics Customers and Partners hotline was established as a central Some 48 million hits on the OeNBs website information service for questions Hits on the OeNBs website about the OeNBs financial statistics. (www.oenb.at) surged to 48.5 mil- Inquiries may be submitted by tele- lion in 2001. A redesign of the phone (+43 01/40420 ext. 5555) OeNBs website was begun. The cen- and e-mail (statistik.hotline@oenb. tral OeNB website already contains co.at). Since mid-2001, answers to the latest information on The frequently asked questions about the OeNB, the EURO. OUR money Austrian financial system have been and Euro — EMU. The relaunch of published in a new quarterly Ger- the OeNBs website is scheduled for man-language brochure entitled Eck- 2002 as part of a more comprehen- daten des o‹sterreichischen Finanz- sive technical project. wesens (The Austrian Financial Sys- tem: Key Figures). The statistical Innovative e-business projects informationthatmaybeaccessedon In the reporting year 2001 the OeNB the OeNBs website was expanded, realized a comprehensive e-business and user-friendliness was improved project, which enabled the OeNB further. Moreover, daily updates of and its subsidiaries to provide user the key figures on the Austrian eco- groups with specifically targeted nomy, which are provided via the information and with additional In- Internet for a world public within ternet applications. The projects span theframeworkoftheIMFsSpecial a wide range from an e-dictionary of Data Dissemination Standards (coor- monetary, banking and financial dinated by the OeNB), were intro- market terminology to background duced in the review year. Finally, knowledge on interest rate risk within the framework of the OeNBs stipulations for loans to information innovative e-business projects, a new about the OeNBs large art collection form of presenting selected timely and its Bank History Archives OeNB statistics was elaborated. The (www.ebusiness.oenb.at). The more aim of this statistical information, intense recourse to the Internet as a which may be viewed under http:// communications medium enabled dieaktuellezahl.oenb.at, is to address the OeNB to provide customers and and inform the broad public using a the general public with targeted and form of communication adapted direct information. In addition, the specifically to the Internet. OeNB enables financial institutions to access useful applications, such as Implementation of the Bank History the ARTIS payment system, via the Archives project Internet. Further projects will ex- In 2001 the OeNB opened its Bank pand the supply of information, History Archives to the general applications and direct communi- public under the provisions of the cation options from 2002. Federal Archives Act. The Archives provide important historical informa- Statistics information initiative tion for persons accessing them for an The OeNB complemented its con- official, research-related or journalis- tacts with partners and customers in tic purpose or on the grounds of the statistics domain with new infor- justified personal interests. More-

58 Annual Report 2001 Responsibilities Handled Efficiently

over, within the framework of the medicine, social sciences and the hu- OeNBs e-business projects, selected manities, with an emphasis on rein- information from the Archives — such forcing the promotion of economic as a historical overview of the OeNB — science projects. Selected project will be made available to interested results are presented to an expert users on the Internet. public via the platform Forum Jubi- la‹umsfonds. Science and Research Promotion With these funding activities, the Since its foundation in 1966, the OeNB has contributed significantly to OeNBs Anniversary Fund for the the promotion of innovation and Promotion of Scientific Research technological development as well and Teaching has supported scientific as to the improvement of Austrias projects in basic and applied research appeal as a business location and the with funds totaling around EUR 493 international competitiveness of the million. The Anniversary Fund has Austrian economy. thus become an indispensable element in securing the future of Aus- Promotion of cultural activities trian science and research. The OeNB puts particular emphasis In 2001 the annual funds dis- on promoting cultural activities. For bursed by the Anniversary Fund this reason, it has acquired a number were raised by EUR 4.85 million to of antique music instruments. Its 29 EUR 70.25 million. Practically all valuable old string instruments are of the new funds were earmarked on loan to rising Austrian violin stars for economics-oriented research. and Austrian chamber music ensem- The amount paid out in the reporting bles and were presented to the public year for economics-oriented research inthecourseoftheStradivari&Co came to EUR 60.9 million. These concert cycle at RadioKulturhaus, funds mainly served to finance 165 organized in cooperation with the economics-oriented research projects Austrian Broadcasting Corporation via the Austrian Industrial Research (ORF). Promotion Fund (Forschungsfo‹rde- rungsfonds fu‹rdiegewerblicheWirt- The OeNBs Subsidiaries: schaft) and the Austrian Science Fund Innovative Enterprises (Fonds zur Fo‹rderung der wirtschaft- The subsidiaries have an important role to lichen Forschung). In addition, the play in the fulfillment of the OeNBs duties OeNBs Anniversary Fund provided The OeNB directly and indirectly funding for four laboratories of the owns subsidiaries, many of whose Christian Doppler Research Society business activities focus on means of (CDG), a research center of the payment (cash, cashless transactions). Austrian Academy of Sciences and The area cash is covered by Mu‹nze three economic research institutes O‹ sterreich AG, the Austrian Mint, (the Austrian Institute of Economic OeBS1), the Austrian Banknote Research, WIFO, the Institute for and Security Printing Works, and 1 Oesterreichische Banknoten- Advanced Studies, IHS, and The GSA2), who are primarily responsible und Sicherheitsdruck Vienna Institute for International for the production of euro coins and GmbH. Economic Studies, WIIW). The euro banknotes and for the cash sup- 2 GELDSERVICE AUSTRIA Logistik fu‹r OeNB directly granted funds to the ply logistics in Austria, respectively. Wertgestionierung und tune of some EUR 11 million for Intheareacashlesspayments(means Transportkoordination 229 research projects in economics, of payment and payment transac- G.m.b.H.

Annual Report 2001 59 Responsibilities Handled Efficiently

tions), the OeNB has equity interests responsibilities. Through its activity, in AUSTRIA CARD1), STUZZA2), each subsidiary has amassed special APSS3) and A-Trust4). AUSTRIA know-how that is sought out by inter- CARD produces technically sophisti- ested parties from all over the world. cated payment cards, among other By providing products and services to things; the remaining companies are a larger customer base, the subsidia- primarily engaged in the field of cash- ries are able to utilize their capacities less payment security and provide the optimally and to make additional infrastructure required to operate profits. The international scope fur- payment systems. ther increases the subsidiaries busi- Changes in the OeNBs equity ness efficiency and contributes to holdings from 2000 occurred when the provision of cost-efficient ser- the OeNB sold a small percentage vices for the Austrian financial of GSA stocks to a number of banks, market. who as a result are now involved in GSAs cash processing services Cash and secure payment systems services throughout Austria. from a single provider The OeNBs subsidiaries are inde- As a first step in providing all Aus- pendent private-sector enterprises. trian users with cash, the OeNB Their main business lines are funda- draws up a strategic plan. Next, the mentally linked to the central banks subsidiaries are entrusted with the

Payment Means Cluster of the OeNB

Cash Cash production Cash processing Münze Österreich AG (MÖAG) GELDSERVICE AUSTRIA minting, distribution and withdrawal Logistik für Wertgestionierung of divisional and negotiable coins und Transportkoordination G.m.b.H. (GSA) production and sale of items cash processing made of noble and other metals supply of banknotes and coins engineering and consulting services logistics

Oesterreichische Banknoten- und Sicherheitsdruck GmbH (OeBS) banknote and security printing print product business research and development services

Cashless payments Production of payment instruments Provision of infrastructure 1 AUSTRIA CARD- AUSTRIA CARD- and reliable services Plastikkarten und Plastikkarten und Ausweissysteme Austrian Payment Systems Services Gesellschaft m. b. H. (APSS) GmbH Ausweissysteme production and sale of forms, credit cards establishment and development of ATM Gesellschaft m.b.H. and card systems as well as of machinery and POS terminal services 2 Studiengesellschaft fu‹r for the production and use of card systems IT services production and sale of ID systems Zusammenarbeit im A-Trust Gesellschaft für Sicherheitssysteme Zahlungsverkehr (STUZZA) im elektronischen Datenverkehr GmbH G.m.b.H. certification services in the area 3 Austrian Payment Systems of electronic signatures Services (APSS) GmbH. Studiengesellschaft für Zusammenarbeit 4 A-Trust Gesellschaft fu‹r im Zahlungsverkehr G.m.b.H. (STUZZA) research association for the development Sicherheitssysteme im of concepts and measures to reduce elektronischen Datenverkehr credit institutions payment transaction costs GmbH.

60 Annual Report 2001 Responsibilities Handled Efficiently

execution of this plan. By strategi- communication strategy secures cally bundling know-how and by public acceptance of the OeNBs coordinating services with its subsi- product portfolio and public con- diaries to provide a full range of pay- fidence in the way it handles its ment systems services, the OeNB responsibilities. contributes to The OeNBs strategic functions — enhancing the security of payment are classified by priority — long-term services (e.g. ensuring that bank- objectives are reflected in the mission notes and coins are counterfeit statement, medium-term aims are proof and that data networks are subsumed under corporate goals and stable); corporate strategy, and annual opera- — improving the quality of payment tional goals are established during an- service products (e.g. compatible nual planning. In 2001 strategic activ- payment media); and ities were geared among other things — lowering overall costs in Austria toward developing a new mission (e.g. by concentrating cash pro- statement for the OeNB, which has cessing operations within GSA). replaced the old statement since the TheroletheOeBS,theAustrian beginning of the year 2002 and which Mint and GSA played during the cash defines the OeNBs main basic tasks changeover and in supplying the pop- and its value system. ulation with cash is described in detail in the chapter Smooth Euro Cash Strategic planning elements Changeover. Moreover, the OeNB began to develop its new corporate strategy in A Strategic Position the second half of 2001. The develop- for the Future ment of the OeNBs corporate stra- The OeNBs strategic concept tegy was based on several pillars: After handling the changeover to the — the analysis of central banking euro successfully, the OeNB has been developments, above all in the able to return to planning its strategic Eurosystem, concept for the next few years. The — expertise on Central and Eastern long-term strategic concept is crucial Europe, to safeguarding the OeNBs ability — the establishment of a position to to provide top-quality products and benefit the Austrian financial services to Austrian businesses and market and individuals. — the further reinforcement of The OeNBs strategic work cen- communication with customers ters on two areas within the broad and partners, signaling the OeNBs range of tasks and responsibilities: increased service orientation. — First, the OeNB is actively involved in developing and refining The overarching principles guid- ESCB/Eurosystem strategy. This ing the OeNBs strategy are the process is aimed at optimizing Treaty establishing the European the interaction of all ESCB/Euro- Community, the Statute of the Euro- system participants. pean System of Central Banks and of — Second, the OeNB pursues the the European Central Bank, and the goal of maximizing the usefulness Federal Act on the Oesterreichische of its products for the Austrian Nationalbank. The OeNBs integra- financial market. A proactive tion into the Austrian and European

Annual Report 2001 61 Responsibilities Handled Efficiently

financial infrastructure represents an providing for a clearer assignment additional key element of strategic of costs and efficient, user-pays ac- planning. These framework condi- counting within the company. De- tions are taken into account at all volving responsibility to the division levels of strategic and operational level further heightens cost-con- planning. By following this proce- sciousness and increasingly bases op- dure, the OeNB has clearly con- erations on business principles. Like firmed its good position within the activity-based cost accounting, the ESCB and the Eurosystem. newly introduced budget monitoring The corporate strategy is imple- enhanced the flexibility of business mented in the form of annual opera- operations. The OeNBs thorough- tional planning. With the aim of going modernization efforts have maintaining its good position among positioned it very favorably within European central banks, the OeNB the ESCB with respect to a number further refined its corporate manage- of business operation parameters, ment instruments in the reporting such as the operating result and year. As a case in point, an activity- organizational processes. based costing system was introduced,

62 Annual Report 2001 The OeNB as an International Partner in Cooperation and Dialogue

The OeNB is an active partner within (see selected areas below), which the ESCB/Eurosystem framework had a decisive impact on the final andinthecommitteesandworking decisions. groups of international organizations — One central area of ESCB discus- and financial institutions. As a repre- sions was the future distribution sentative of Austrias interests, the of monetary income, where in- OeNB introduces the perspective of tense negotiations in 2001 pro- acentralbank,theinterestsofbusi- duced a very satisfactory result ness and industry and of the Austrian for Austria (see Financial State- public, and, finally, the views of Aus- ments 2001 of the Oesterreichi- trian financial market participants in sche Nationalbank). these bodies. Conversely, the OeNB — In refining the statistical basis for acts as a link that transmits to Austria the single monetary policy, the views, plans and decisions taken at new ECB regulation on MFI in- the European level. terest rate statistics was adopted by the Governing Council of the The OeNB as an Active ECB in December 2001, conclud- Partner in European ing a preparation phase of roughly Integration two years. The new regulation Intense participation ensures the provision of harmon- in various working groups ized and complete interest rate Within the EU, the OeNB is part of statistics covering important the ESCB/Eurosystem, and as such banking operations from 2003. its delegates participate in the work As in numerous other cases, the of its committees and working groups OeNB succeeded in providing as well as numerous other economic well-founded suggestions in this policy bodies. These include the area, whose integration in the EUs Economic and Financial Com- regulation is in the interest of mittee (EFC) and Economic Policy the system as well as in the Aus- Committee (EPC), both of whom trian interest. prepare meetings of the Council of — Within the framework of the EUs Economic and Finance Ministers Banking Advisory Committee and (Ecofin). In the past business year, of the ESCBs Banking Supervi- the OeNB played a crucial role sion Committee, the OeNB par- for a number of processes and deci- ticipatedintheregulardialogue sions: with banking supervisors in the — No doubt the outstanding project other EU countries. was the introduction of euro — In the International Relations notes and coins, which was effi- Committee (IRC) of the ESCB ciently planned, executed and andintheEFCWorkingGroup supervised within a framework on IMF and Related Matters, spanning all NCBs. OeNB representatives provided — The expertise of OeNB staff in emphatic support to improving the OeNBs representation on of the representation of common various ESCB committees re- EU interests at international mained a very important input organizations such as the IMF. In in 2001. The OeNBs staff elabo- this context, the declaration of rated crucial contributions to the EU Council meeting in ESCB and Eurosystem provisions Vienna was further specified with

Annual Report 2001 63 The OeNB as an International Partner in Cooperation and Dialogue

regard to EU external relations the IMF Articles of Agreement (Ar- in the area of economic policy ticle IV consultations), which are issues. organized by the OeNB, and under- lined the Austrian approach to the Numerous conferences gradual liberalization of capital move- and events organized ments during the past decades as a As an economic policy agent, the positive example in its annual report. OeNB is intent on promoting the The many years of expertise the dialogue with researchers and politi- OeNB has acquired on capital trans- cians and as such frequently initiates actions were instrumental in the first and hosts national and international appointment of a representative of conferences and events in Vienna the OeNB to the chairmanship of an and outside the nations capital. The OECD committee, the Committee Governing Council of the ECB, the on Capital Movements and Invisible EPC, the IRC, the Monetary Policy Transactions (CMIT). Committee (MPC) and the Legal In order to provide optimal sup- Committee of the ESCB all convened port to the regular country analysis in Vienna. The largest conference the of Austria by the OECD, an OeNB OeNB organizes is the annual Eco- staff member was seconded to the nomics Conference, which took place OECD for two months to work in in June last year and presented the unit in charge of the country anal- important observations on the topic ysis of Austria. of financial stability. In the BIS the OeNB participated Apart from events organized to in the newly established Central Bank support the introduction of euro Governance Network, which draws banknotes and coins (see the chapter up comparative analyses on central Smooth Euro Cash Changeover), banking structures. the OeNB organized a multitude of other events: 227 events attracted Expertise for Central roughly 10,000 participants; more- and Eastern Europe over, 4,000 participants were ad- Advanced analyses and an extensive dressed during 116 school visits. network of close contacts These activities further reinforced Austrias geographic position and the OeNBs reputation as an informa- the network of ties the OeNB has tion platform and dialogue partner at acquired over time have given it a the highest level. great deal of special know-how on Eastern Europe that is tapped both Strong International Ties at the Austrian and at the inter- Cooperation with the BIS, the IMF national level, above all by the Euro- and the OECD system. At the international level (extending Analyzing the integration process beyond the EU level), the OeNB of the Central and Eastern European plays an active role in representing countries into the EU and EMU, pro- Austrias interests at the IMF, the viding technical cooperation, above OECD and the BIS. all with the NCBs of those countries, In 2001 the IMF gave a favorable and offering training support is at the judgment of Austrias economic situ- heart of the OeNBs activities. In ation upon conclusion of its annual addition to highly advanced analysis, consultations under Article IV of the OeNBs competence on Eastern

64 Annual Report 2001 The OeNB as an International Partner in Cooperation and Dialogue

Europe includes an up-to-date net- Both at the bilateral level and work of important contacts, numer- within the framework of the Joint ous events serving among other Vienna Institute, which has become things as a platform for the exchange permanently established in Vienna, of opinions and a wide range of tech- the OeNB has trained officials from nical cooperation and training activ- Central and Eastern European central ities. The semiannual publication banks and has prepared them for the Focus on Transition, which covers coming integration into the institu- the economic challenges and issues tions of the EU. In the past years, of transition countries, is a valuable the emphasis of training has shifted source for experts and decision-mak- from providing knowledge about ba- ers at central banks and international sic economic policy issues and in- organizations as well as for a profes- stitutions to imparting knowledge sional readership. about how to implement instruments Entitled Convergence and Diver- and standards. The OeNB was also gence in Europe, the OeNBs East- involved in the coordination of tech- West Conference in 2001 treated nical assistance at international or- the problem of the different pace ganizations such as the EU and the and level of development among BIS and participated in the assistance European regions and the catching- programs of the EU and the IMF. up strategies of the accession countries from the research expert perspective.1)

1 The contributions to the East-West Conference 2000 were published as a book: Tumpel-Gugerell, G., Wolfe, L., Mooslechner, P. (eds., 2002). Completing Transition: The Main Challenges. Springer.

Annual Report 2001 65

Financial Statements of the Oesterreichische Nationalbank

for the Year 2001 Balance Sheet as at December 31, 2001

Assets

December 31, 2001 December 31, 2000 euro euro

1. Gold and gold receivables 3,519,118,265.13 3,556,162,714.08

2. Claims on non-euro area residents denominated in foreign currency 13,979,832,639.04 15,062,227,984.50 2.1 Receivables from the IMF 1,262,683,249.24 888,393,041.77 2.2 Balances with banks, security investments, external loans and other external assets 12,717,149,389.80 14,173,834,942.73

3. Claims on euro area residents denominated in foreign currency 1,108,565,345.82 1,543,590,501.40

4. Claims on non-euro area residents denominated in euro 1,569,219,994.13 1,860,162,390.22 4.1 Balances with banks, security investments and loans 1,569,219,994.13 1,860,162,390.22 4.2 Claims arising from the credit facility under ERM II

5. Lending to euro area credit institutions related . . to monetary policy operations denominated in euro 1,290,549,780 6,970,764,744 . . 5.1 Main refinancing operations 379,071,760 4,843,970,690 . . 5.2 Longer-term refinancing operations 911,478,020 2,126,794,054 5.3 Fine-tuning reverse operations 5.4 Structural reverse operations 5.5 Marginal lending facility 5.6 Credits related to margin calls

6. Other claims on euro area credit institutions denominated in euro 182,269,783.31 166,356,570.34

7. Securities of euro area residents denominated in euro 1,742,630,781.57 1,381,551,936.48

8. General government debt denominated in euro 287,632,718.05 255,644,384.50 . 9. Intra-Eurosystem claims 3,153,430,658.76 1,297,670,000 . . 9.1 Participating interest in the ECB 117,970,000 117,970,000 . . 9.2 Claims equivalent to the transfer of foreign reserves 1,179,700,000 1,179,700,000 9.3 Claims related to promissory notes backing the issuance of ECB debt certificates1)xx 9.4 Other claims within the Eurosystem (net) 1,855,760,658.76

10. Items in course of settlement 83,404,749.23

11. Other assets 4,384,003,886.29 4,091,433,515.89 11.1 Coins of euro area 151,994,553.97 67,951,433.59 11.2 Tangible and intangible fixed assets 135,622,952.35 109,891,122.93 11.3 Other financial assets 2,548,765,865.44 2,432,098,313.47 11.4 Off-balance-sheet instruments revaluation differences 6,571,481.94 41,598,284.98 11.5 Accruals and deferred expenditure 355,593,036.02 399,075,911.29 11.6 Sundry 1,185,455,996.57 1,040,818,449.63

31,300,658,601.33 36,185,564,741.41

1) Only an ECB balance sheet item.

68 Annual Report 2001 Balance Sheet

Liabilities

December 31, 2001 December 31, 2000 euro euro

1. Banknotes in circulation 10,172,302,497.04 13,933,755,136.11

2. Liabilities to euro area credit institutions related to monetary policy operations denominated in euro 5,497,601,442.69 3,402,808,903.32 2.1 Current accounts (covering the minimum reserve system) 5,497,601,442.69 3,402,808,903.32 2.2 Deposit facility 2.3 Fixed-term deposits 2.4 Fine-tuning reverse operations 2.5 Deposits related to margin calls

3. Other liabilities to euro area credit institutions denominated in euro 1,059,618,205.55

4. Debt certificates issued1) x x

5. Liabilities to other euro area residents denominated in euro 42,101,899.13 18,201,500.45 5.1 General government 21,298,633.20 766,081.04 5.2 Other liabilities 20,803,265.93 17,435,419.41

6. Liabilities to non-euro area residents denominated in euro 63,530,444.37 7,176,741.20

7. Liabilities to euro area residents denominated in foreign currency 308,726,918.84 330,687,652.96

8. Liabilities to non-euro area residents denominated in foreign currency 985,659,161.39 900,889,207.44 8.1 Deposits, balances and other liabilities 985,659,161.39 900,889,207.44 8.2 Liabilities arising from the credit facility under ERM II

9. Counterpart of Special Drawing Rights allocated by the IMF 255,051,392.95 250,678,218.83

10. Intra-Eurosystem liabilities 5,024,023,947.10 10.1 Liabilities equivalent to the transfer of foreign reserves1)xx 10.2 Liabilities related to promissory notes backing the issuance of ECB debt certificates 10.3 Other liabilities within the Eurosystem (net) 5,024,023,947.10

11. Items in course of settlement 507,385,260.28

12. Other liabilities 1,516,790,955.97 1,101,311,694.59 . 12.1 Off-balance-sheet instruments revaluation differences 207,999,252.71 3,975,845 12.2 Accruals and deferred income 109,867,776.42 79,671,367.74 12.3 Sundry 1,198,923,926.84 1,017,664,481.85

13. Provisions 1,856,057,752.80 1,937,247,894.71

14. Revaluation accounts 4,680,053,372.83 4,908,714,957.34

15. Capital and reserves 4,247,440,269.22 4,260,243,425.62 . . 15.1 Capital 12,000,000 12,000,000 15.2 Reserves 4,235,440,269.22 4,248,243,425.62

16. Profit for the year 108,339,028.27 109,825,461.74 (thereof EUR 4,656.82 profit brought forward from 2000) 31,300,658,601.33 36,185,564,741.41

1) Only an ECB balance sheet item.

Annual Report 2001 69 Profit and Loss Account for the Year 2001

Business year 2001 Business year 2000 euro euro

1.1 Interest income 1,287,006,069.51 1,584,887,939.87

1.2 Interest expense 413,905,931.65 570,441,348.81

1. Net interest income 873,100,137.86 1,014,446,591.06

2.1 Realised gains/losses arising from financial operations 995,744,801.23 700,374,710.16

2.2 Writedowns on financial assets and positions 88,353,343.41 97,846,732.39

2.3 Transfer to/from provisions for foreign exchange and price risks 87,320,307.38 293,986,735.09

2. Net result of financial operations, writedowns and risk provisions 994,711,765.20 896,514,712.86

3.1 Fees and commissions income 1,381,355.03 2,086,141.87

3.2 Fees and commissions expense 1,701,254.24 1,703,371.45

3. Net income from fees and commissions 319,899.21 382,770.42

4. Income from equity shares and participating interests 54,095,046.59 6,268,546.99

5. Net result of pooling of monetary income 606,563.30 652,250.40

6. Other income 7,322,868.26 7,036,340.02

Total net income 1,928,303,355.40 1,923,996,710.95

7. Staff cost 92,971,491.46 88,191,757.12

8. Administrative expenses 110,604,056.83 89,265,008.06

9. Depreciation of tangible and intangible fixed assets 19,945,786.71 12,298,656.21

10. Banknote production services 62,232,247.83 37,837,721.57

11. Other expenses 1,119,902.18 10,355,410.30

1,641,429,870.39 1,686,048,157.69

12. Corporate income tax 558,086,155.93 573,256,373.61

1,083,343,714.46 1,112,791,784.08

13. Central governments share of profit and transfer to the pension reserve (the latter refers only to 2000) 975,009,343.01 1,002,966,322.34

14.1 Net income 108,334,371.45 109,825,461.74

14.2 Profit brought forward 4,656.82

14. Profit for the year 108,339,028.27 109,825,461.74

70 Annual Report 2001 Notes to the Financial Statements 2001

General Notes to the Financial Statements

Accounting Pursuant to Council Regulation Fundamentals and Legal (EC) No. 1478/2000 of 19 June Framework 2000 amending Regulation (EC) No. The OeNB is committed (pursuant to 2866/98 on the conversion rates be- Article 67 paragraph 2 of the Federal tweentheeuroandthecurrenciesof Act on the Oesterreichische Natio- the Member States adopting the euro, nalbank of 1984 as amended — Natio- the conversion rate between the euro nalbank Act) to prepare its balance and the Greek drachma was irrevoca- sheet and its profit and loss account bly fixed at 340,750 Greek drachma in conformity with the policies estab- to the euro. This Regulation entered lished by the Governing Council of into force on January 1, 2001. the ECB under Article 26.4 of the The financial statements for 2001 ESCB/ECB Statute. These policies were prepared in the formats laid are laid down in the Guideline of down by the Governing Council of the ECB of 1 December 1998 on the ECB. This format has remained the legal framework for accounting unchanged from that of the financial and reporting in the European Sys- statements for 2000. tem of Central Banks as amended on 15 December 1999 and 14 De- Accounting Policies cember 2000 (ECB/2000/18).1)The The financial statements were pre- OeNBs financial statements for the pared in conformity with the ac- year 2001 were prepared fully in line counting policies adopted by the with the provisions set forth in this Governing Council of the ECB2). guideline. In cases not covered by Said accounting policies, which gov- the guideline, the generally accepted ern the accounting and reporting op- accounting principles referred to in erations of the Eurosystem, follow Article 67 paragraph 2 second sen- accounting principles harmonized by tence of the Nationalbank Act were Community law and generally ac- applied. cepted international standards. The The other Nationalbank Act pro- key policy provisions are summarized visions that govern the OeNBs finan- below. cial statements (Articles 67 through The following accounting princi- 69 and Article 72 paragraph 1 of ples have been applied: the Nationalbank Act, as amended — economic reality and transpar- and as promulgated in Federal Law ency, Gazette I No. 60/1998) as well as — prudence, the relevant provisions of the Com- — recognition of post-balance-sheet mercial Code as amended remained events, unchanged from the previous year. — materiality, In accordance with Article 67 para- — a going-concern basis, graph 3 of the Nationalbank Act, the — the accruals principle, 1 Decision of the Governing OeNB continued to be exempt in — consistency and comparability. Council of the ECB 2001 from preparing consolidated fi- Transactions in financial assets of December 14, 2000. 2 Decision of the Governing nancial statements as required under and liabilities are reflected in the ac- Council of the ECB Article 244 et seq. of the Commer- counts on the basis of the date on of December 14, 2000 cial Code. which they were settled. (ECB/2000/18).

Annual Report 2001 71 Financial Statements

Foreign currency transactions in the runup to 1999.1)Unrealized whose exchange rate is not fixed losses in any one security, currency against the accounting currency were or in gold holdings were not netted recorded at the respective euro ex- with unrealized gains in other secur- change rate. ities, currencies or gold, since net- At year-end both financial assets ting is prohibited under the Account- and liabilities were revalued at curing Guideline. rent market prices/rates. This applies The average acquisition cost and equally to on- and off-balance-sheet the value of each currency position transactions. The revaluation took were calculated on the basis of the place on a currency-by-currency sum total of the holdings in any one basis for foreign exchange positions currency or gold, including both and on a code-by-code basis for asset and liability positions and securities. both on-balance-sheet and off-bal- Gainsandlossesrealizedinthe ance-sheet positions. course of transactions were taken to In compliance with Article 69 the profit and loss account. For gold, paragraph 4 of the Nationalbank foreign currency instruments and se- Act, which stipulates that the reserve curities, the average cost method was fund for exchange risks be set up or used in accordance with the daily net- released on the basis of the risk as- ting procedure for purchases and sessment of nondomestic assets, the sales. As a rule, the realized gain or value-at-risk (VaR) method was used loss was calculated by juxtaposing to calculate the currency risk. VaR the sales price of each transaction is defined as the maximum loss of a with the average acquisition cost of gold or foreign currency portfolio all purchases made during the day. with a given currency diversification In the case of net sales, the calcula- at a certain level of confidence tion of the realized gain or loss was (97.5%) and for a given holding peri- based on the average cost of the re- od (one year). The potential loss cal- spective holding for the preceding culated under this approach is to be day. offset against the reserve fund for Unrealized revaluation gains were exchange risks and the revaluation not taken to the profit and loss ac- accounts. Provided that such losses count, but transferred to a revalua- cannot be offset in this way, any re- tion account on the liabilities side of maining loss shall be offset against the balance sheet. Unrealized losses net income by allocating the neces- were recognized in the profit and loss sary funds to provisions for ex- account when they exceeded pre- change rate risks. In case just part vious revaluation gains registered in of the reserve fund for exchange the corresponding revaluation ac- risks is needed to cover the loss, count; they may not be reversed thedifferencewillbereleasedand against new unrealized gains in sub- will increase net income. sequent years. Furthermore, the Future market developments, es- OeNBs management determined pecially interest and exchange rate that unrealized foreign currency movements, may entail considerable 1 Decision of the Governing losses that must be expensed were fluctuations of the income of the Board of November 10, 1999, and of the General to be covered by the release of an off- OeNB and the other NCBs participat- Council of November 25, setting amount from the reserve ing in Stage Three of Economic and 1999. fund for exchange risks accumulated Monetary Union (EMU) as well as

72 Annual Report 2001 Financial Statements

the ECB as a result of the harmonized ation. Depreciation was calculated on accounting rules with they must com- a straight-line basis, beginning with ply since January 1, 1999. the quarter after acquisition and con- Premiums or discounts arising on tinuing over the expected economic securities issued or purchased were lifetime of the assets, namely: calculated and presented as part of in- — computers, related hardware and terest income and amortized over the software, and motor vehicles remaining life of the securities. (4 years), Participating interests were val- — equipment, furniture and plant in ued on the basis of the net asset value building (10 years),1) of the respective companies (equity — buildings (25 years). method). Fixed assets costing less than Tangible and intangible fixed as- EUR 10,000 were written off in the sets were valued at cost less depreci- year of purchase.

Realized Gains and Losses and Revaluation Differences and their Treatment in the Financial Statements of December 31, 2001

Realized gains Realized losses Unrealized Change in (posted to the (posted to the losses unrealized gains profit and loss profit and loss (posted to the (posted account) account) profit and loss to revaluation account) accounts) EUR million

Gold 204.888 0.000 — +134.392 Foreign currency 519.087 6.992 60.5191) —205.373 Securities 221.994 7.753 26.8012) — 9.414 Initial valuation of securities 26.750 x x x IMF euro holdings 35.300 — — — Participating interests — — 0.428 +113.356 Off-balance-sheet operations 3.311 0.840 0.605 — 1.562

Total 1,011.330 15.585 88.353 + 31.399

1) This sum did not have an impact on profit because the loss was offset against the reserve fund for exchange risks. 2) This sum did not have an impact on profit because the loss was offset against the reserve for nondomestic and price risks.

1 By way of derogation from this principle, the useful life of banknote and coin processing equipment was halved to five years in 2001.

Annual Report 2001 73 Financial Statements

Capital Movements

Movements in Capital Accounts in 2001

Dec. 31, Increase Decrease Dec. 31, 2000 2001 EUR million

Revaluation accounts Reserve fund for exchange risks 2,075.237 — 232.489 1,842.748 Initial valuation reserve 309.825 — 27.572 282.253 Eurosystem revaluation accounts 2,523.653 31.399 — 2,555.052

Total 4,908.715 31.399 260.061 4,680.053 Capital 12.000 — — 12.000 Reserves General reserve fund 1,611.952 — — 1,611.952 Freely disposable reserve fund 1,036.219 — 118.500 917.719 Reserve for nondomestic and price risks 1,077.606 152.890 66.072 1,164.424 Earmarked capital funded with net interest income from ERP loans 515.199 18.879 — 534.078 Fund for the Promotion of Scientific Research and Teaching 7.267 — — 7.267

Total 4,248.243 171.769 184.572 4,235.440 Profit for the year 109.825 — 1.486 108.339

For details of the various changes, please refer to the notes to the respective balance sheet items.

Development of the OeNBs Currency Positions in the Business Year 2001

Net Currency Position (including gold)

Dec. 31, Dec. 31, Change 2000 2001 EUR million %

Gold and gold receivables 3,556.162 3,519.118 — 37.044 — 1.0 Claims on non-euro area residents denominated in foreign currency1) 17,009.068 15,705.247 —1,303.821 — 7.7 Claims on euro area residents denominated in foreign currency 1,543.591 1,108.566 — 435.025 — 28.2 Other assets 37.968 23.092 — 14.876 — 39.2 less: Liabilities to euro area residents denominated in foreign currency 330.688 308.727 — 21.961 — 6.6 Liabilities to non-euro area residents denominated in foreign currency 900.889 985.659 + 84.770 + 9.4 Counterpart of Special Drawing Rights allocated by the IMF 250.678 255.051 + 4.373 + 1.7 Revaluation accounts 109.874 91.132 — 18.742 — 17.1

Total 20,554.660 18,715.454 —1,839.206 — 8.9 Off-balance-sheet assets/liabilities (net) — 659.071 — 1,434.061 — 774.990 —117.6

Total 19,895.589 17,281.393 —2,614.196 — 13.1

1) Excluding the share of the IMF quota which was not drawn expressed in euro.

74 Annual Report 2001 Financial Statements

Monetary Income in the Eurosystem

Article32oftheStatuteofthe NCBs paid-up shares in the capital ESCB/ECB defines monetary income of the ECB. as the income accruing to the NCBs in the performance of the Eurosys- Procedure tems monetary policy function. for the Business Years Under the ESCB/ECB Statute, the 1999 to 2001 amount of each NCBs monetary Since the balance sheet structures of income shall be equal to its annual the participating NCBs diverged income derived from its assets held widely at the time at which they en- against notes in circulation and tered Stage Three of EMU, the Gov- deposit liabilities to credit insti- erning Council of the ECB agreed on tutions (which together form the November 3, 1998, that for the first liability base). Such assets shall be three years monetary income should earmarked and the income derived be measured according to an alterna- from these assets shall be redi- tive, indirect method provided for stributed among the euro area under Article 32.3 of the ESCB/ NCBs in accordance with guide- ECB Statute. The Governing Council lines to be established by the Govern- determined that the indirect method ing Council of the ECB (Article 32.2 was to be applied until the end of of the ESCB/ECB Statute; direct 2001. Under this method, a refer- method of calculating monetary in- ence rate, namely the marginal bid come). rate for two-week repos, is applied The amount of income the NCBs to the liability base to calculate the actually pay into the pool for redis- amount of monetary income earned. tribution is influenced by the costs Since banknotes in circulation did that they incur in connection with not include euro banknotes from the liquidity-absorbing monetary pol- 1999 to 2001 and national banknotes icy operations, and moreover by the in circulation were excluded from remuneration of reserves under the the liability base under the interim Eurosystems minimum reserve sys- solution, the liability base consisted tem, because any interest that the only of deposit liabilities to credit NCBs pay on banks minimum re- institutions during this period. As serve deposits reduces the amounts interest paid on those liabilities could they contribute to the pool of mone- be offset against the monetary in- tary income. come to be pooled,1)theEurosys- The rationale for this policy is to tems overall monetary income was equitably redistribute the income in fact not very high. Under this resulting from the use of the mone- method, the OeNB paid very small tary policy instruments in conducting net amounts into the pool of mone- the single monetary policy. Any such tary income during the first three 1 The interest rate for the income earned in the euro area is years because the income accruing remuneration of minimum pooled and reallocated to the partici- to the OeNB from the components reserve balances and the rate pating NCBs according to a desig- mentioned above was roughly equal applied to calculating monetary income have been nated key. More precisely, the pooled to the offsettable remuneration of identical since the monetary income is divided up minimum reserve holdings. establishment of the in proportion to the participating Eurosystem.

Annual Report 2001 75 Financial Statements

Outlook: The Procedure Under the transitional regime ap- Applicable from 2002 to plicable until 2007, the amount of 2007 monetary income to be pooled is ad- The inclusion of euro banknotes in justed on the basis of compensating circulation from 2002 in the liability factors, which will be progressively base called for a viable longer-term reduced to zero. This solution is de- solution. As a result of the accounting signed to compensate changes in the regime for euro banknotes in circula- relative income positions of the NCBs tion (for more information, see The after the introduction of the euro. Introduction of Euro Banknotes and For 2002 the measurement of mone- Coins below), new provisions for tary income will be based on both the allocation of monetary income national banknotes in circulation and for the years 2002 to 20071)were euro banknotes in circulation, using adopted on the basis of the Decision the alternative method provided for of the European Central Bank of 6 under Article 32.3 of the ESCB/ December 2001 on the allocation of ECB Statute and applied since 1999. monetary income of the national cen- From 2003 a direct method as pro- tral banks of participating Member vided for under Article 32.2 will be States from the financial year 2002. applied.

The Introduction of Euro Banknotes and Coins

1 Decision of the European on January 1, 2002 — Central Bank of 6 December Impact on the Financial Statements for 2001 2001 on the allocation of monetary income of the The introduction of euro notes and banknotes in circulation are allo- national central banks of coins on January 1, 2002, begins cated3)). The amount of euro bank- participating member states the second-to-last phase (3b) of the notes in circulation allocated to each from the financial year three-stage process of Economic and of the 12 participating NCBs is deter- 2002 (ECB/2001/16). 2 Federal Law Gazette Part I Monetary Union described in the mined in accordance with their share No. 2000/72, Article I, Treaty. Pursuant to Article 10 of in the paid-up capital of the ECB. On paragraphs 1 and 2 Federal Council Regulation (EC) No. 974/ December 20, 2001, the Governing Act adopting measures in the 98 of 3 May 19982) on the introduc- Council of the ECB authorized the is- field of currency in tion of the euro banknotes and coins sue of euro coins by the Member connection with the issuance of euro banknotes and coins denominated in euro have the status States pursuant to Article 106 of are to be adopted (Euro Act) of legal tender in all participating the Treaty. and amending the Austrian Member States (in the euro area) Coinage Act of 1988 and from January 1, 2002. While the Frontloading the Central Bank Act of schilling was legal tender for pay- In order to ensure that a sufficient 1984. This law is based on Council Regulation (EC) ments next to the euro during a dual quantity of euro notes and coins were No. 974/98 of 3 May phase lasting until February 28, distributed to businesses and the 1998 on the introduction of 2002, the single currency became general population in time for the the euro, Official Journal the sole legal tender from March 1, changeover and to facilitate a rapid L 139, 11 May 1998. 2002. The euro banknotes are issued exchange during the dual circulation 3 Decision of the European by the ECB (to which 8% of the total period, the OeNB frontloaded exten- Central Bank of 6 December 2001 on the issue of euro value of banknotes in circulation are sively to selected banks. The total of banknotes allocated) and by the NCBs (among frontloaded euro banknotes came to (ECB/2001/15). whom the remaining 92% of the some EUR 9.8 billion, and EUR 0.5

76 Annual Report 2001 Financial Statements

billion of euro coins were front- the changeover. From December 15, loaded. In a second step, these banks 2001 euro starter kits and euro and subfrontloaded notes and coins to cent coins were sold or distributed businesses and other banks. The to Austrians for the most part by OeNB frontloaded euro banknotes, banks, but also by the OeNB directly. euro and cent coins and euro starter In line with the guidelines of the kits for businesses and households de- ECB, the frontloaded euro banknotes signed to help ensure that enough and coins were not posted to the small change would be available for balance sheet, as they were not yet transactions in the first days following legal tender.

Notes to the Balance Sheet

Assets An additional 30 tons were sold in 1. Gold the form of forward transactions in and gold receivables 2001.

EUR million 2. Claims on non-euro Closing balance Dec. 31, 2001 3,519.118 area residents Closing balance Dec. 31, 2000 3,556.162 denominated in foreign Change — 37.044 currency —1.0%

This item comprises the OeNBs EUR million holdings of physical and nonphysical Closing balance Dec. 31, 2001 13,979.833 gold, which amounted to approxi- Closing balance Dec. 31, 2000 15,062.228 mately 347 tons on December 31, Change — 1,082.395 2001. At a market value of EUR —7.2% 314.990 per fine ounce (i.e. EUR 10,127.16 per kg of fine gold), the These claims consist of receiv- OeNBs gold holdings were worth ables from the International Mone- EUR 3,519.118 million at the bal- tary Fund — including the receivables ance sheet date. from the IMF, holdings of Special The year-on-year change results Drawing Rights (SDR) and other from revaluation gains on the order claims against the IMF — and claims of EUR 200.578 million, as offset by denominated in foreign currency sales (30 tons worth EUR 273.599 against non-euro area countries, i.e. million). On balance realized revalu- counterparties resident outside the ation gains and book value reconcilia- euro area. tions increased gold and gold holdings by EUR 35.976 million. The gold sales complied with the Central Bank Gold Agreement con- cluded by 14 NCBs — among them theOeNB—andtheECBinSeptem- ber 1999; this agreement limits total gold stock sales to 2,000 tons over a five-year period.

Annual Report 2001 77 Financial Statements

The receivables from the IMF No purchases arising from desig- comprise the following items: nations by the IMF were effected in 2001. Principally the OeNB con- Dec. 31, Dec. 31, Change tinues to be obliged under the 2000 2001 IMFs statutes to provide currency EUR million % on demand to participants using SDRs Receivables from the IMF 674.539 941.696 +267.157 +39.6 up to the point at which its holdings Holdings of SDRs 143.850 264.007 +120.157 +83.5 Other claims against the IMF 70.004 56.981 — 13.023 —18.6 of SDRs are three times as high as its net cumulative allocation. The Total 888.393 1,262.684 +374.291 +42.1 OeNBs current net cumulative allocation is SDR 179.045 million. Other claims against the IMF Drawings on behalf of member comprise the OeNBs other contribu- states and the revaluation of euro tions to loans under special borrow- holdings by the IMF as well as allo- ing arrangements. In the financial cations by the IMF to its account statements for 2001 this item relates boosted the receivables from the mainly to claims (over SDR 40 mil- IMF1) by a total of EUR 329.817 lion) arising from contributions to million. Revaluation gains (+EUR the Poverty Reduction and Growth 19.831 million) and realized ex- Facility (PRGF). The PRGF is a spe- change rate gains and book value rec- cial initiative designed to support onciliation (+EUR 25.900 million) the IMFs aims by granting the poor- further increased these claims. Con- est countries credits at highly conces- versely, drawings by member states sional terms in order to finance eco- reduced the receivables from the nomic programs targeted at fostering IMF by a total of EUR 108.391 mil- economic growth and ensuring a lion. strong, sustainable recovery of the The national IMF quota remained balance of payments. unchanged at SDR 1,872.3 million in 2001. The IMF remunerates participations in the Fund at a rate of remu- 1 Pursuant to federal law as neration that is updated weekly. In promulgated in Federal Law 2001 this rate hovered between Gazette No. 309/1971, 2.2% and 4.6% p.a., mirroring the the OeNB assumed the entire Austrian quota at the IMF prevailing SDR rate. on its own account on behalf The holdings of Special Draw- 2 of the Republic of Austria. ing Rights ) were recognized in 2 Pursuant to federal law as the balance sheet at EUR 264.007 promulgated in Federal Law million on December 31, 2001, Gazette No. 440/1969, the OeNB is entitled to which is equivalent to SDR 185 mil- participate in the SDR lion. The net rise by EUR 120.157 system on its own account on million in 2001 resulted from SDR behalf of the Republic of purchases and interest credited Austria and to enter the (+EUR 194.054 million), above all SDRs purchased or allocated remunerations of the participation gratuitously on the assets side of the balance sheet as in the IMF. SDR sales diminished cover for the total holdings of Special Drawing Rights circulation. by EUR 76.546 million.

78 Annual Report 2001 Financial Statements

Balances with banks, security investments, external loans and other external assets cover the following:

Dec. 31, Dec. 31, Change 2000 2001 EUR million %

Balances with banks 3,794.481 3,416.102 — 378.379 — 10.0 Securities 10,371.623 9,293.899 —1,077.724 — 10.4 Loans 537 — — 537 —100.0 Other assets 7.194 7.148 — 46 — 0.6

Total 14,173.835 12,717.149 —1,456.686 — 10.3

Balances with banks outside the 3. Claims on euro area euro area include foreign currency residents denominated deposits on correspondent accounts, in foreign currency deposits with agreed maturity and overnight funds. Securities relate to Foreign currency-denominated claims instruments issued by non-euro area on euro area residents are as follows: residents. As a rule, operations are carried out only with financially Dec. 31, Dec. 31, Change sound counterparties. 2000 2001 EUR million % Loans extended to non-euro area residents include a standby credit to Balances with banks 947.617 494.146 —453.471 —47.9 the Turkish central bank, which was Securities 595.973 614.419 + 18.446 + 3.1 recorded in the financial statements Total 1,543.590 1,108.565 —435.025 —28.2 of December 31, 2000, with a remaining value of EUR 537 million (USD 0.5 million). This loan, ex- 4. Claims on non-euro tendedinFebruary1981foraninitial area residents amount of USD 15 million, was fully denominated in euro redeemed on schedule in February This item includes all euro-denomi- 2001, with the last of 30 semiannual nated investments and accounts with installments of USD 0.5 million each counterparties who are not euro area payable from August 1986. residents. The other external assets com- On December 31, 2000, and De- prise only non-euro area banknotes. cember 31, 2001, the subitems of this balance sheet item closed as follows:

Dec. 31, Dec. 31, Change 2000 2001 EUR million %

Security investments 1,652.296 1,368.803 —283.493 —17.2 Other investments 207.866 200.417 — 7.449 — 3.6

Total 1,860.162 1,569.220 —290.942 —15.6

Annual Report 2001 79 Financial Statements

5. Lending to euro area the highest interest rates are accepted credit institutions first and bids with successively lower relatedtomonetary rates are then accepted until the total policy operations liquidity to be allotted is exhausted. denominated in euro The main refinancing operations This balance sheet item represents are the most important open market the liquidity-providing transactions operations conducted by the Eurosys- executed by the OeNB. tem, playing a pivotal role in signal- The principal components of this ing the stance of monetary policy. item are: They provide the bulk of liquidity to the financial sector. Dec. 31, Dec. 31, Change The longer-term refinancing 2000 2001 operations are regular liquidity- EUR million % providing reverse transactions with a 5.1 Main refinancing monthly frequency and a maturity operations 4,843.971 379.072 —4,464.899 —92.2 5.2 Longer-term of three months. They are aimed at refinancing operations 2,126.794 911.478 —1,215.316 —57.1 providing longer-term refinancing to 5.3 Fine-tuning the financial sector and are executed reverse operations — — — — 5.4 Structural reverse through standard tenders by the operations — — — — NCBs. All longer-term refinancing 5.5 Marginal lending operations conducted in 2001 were facility — — — — 5.6 Credits carried out in the form of variable related to margin calls — — — — rate tenders. Fine-tuning reverse opera- Total 6,970.765 1,290.550 —5,680.215 —81.5 tions areexecutedonanad-hocbasis with a view to managing the liquidity situationinthemarketandsteering The main refinancing opera- interest rates, in particular to smooth tions are regular liquidity-providing the effects on interest rates caused by reverse transactions, executed by unexpected liquidity fluctuations in the NCBs with a weekly frequency themarket.Thechoiceofinstru- and a maturity of two weeks in the ments and procedures depends on form of standard (fixed or variable the type of transaction and the under- rate) tender operations. Bids may be lying motives. Fine-tuning operations submited, within one day, by all are normally executed by the NCBs counterparties who fulfill the general through quick tenders or through bi- eligibility criteria. In 2001 all main lateral operations. It is up to the Gov- refinancing operations were carried erning Council of the ECB to em- out in the form of variable rate ten- power the ECB to conduct fine-tun- ders. The main feature of the variable ing operations itself under excep- rate tender procedure is that eligible tional circumstances. counterparties may submit bids at up The Eurosystem conducted li- to ten different interest rates. In each quidity-providing fine tuning opera- bid they state the amount they are tions totaling EUR 2.9 billion mid- willing to transact with the national September 2001. Each of these quick central banks and the respective in- tenders had a one-day maturity and terest rate. Bids at a rate below the was settled the same day. The fine minimum bid rate announced by the tuning operations were executed in ECB will be discarded. The bids with the wake of the terrorist attacks in

80 Annual Report 2001 Financial Statements

the U.S.A. on September 11, 2001, claim on the counterparty is recorded which had created a technical liquid- in this subitem. No claims were re- ity shortage on the money markets. corded under this item in 2001. The transactions were conducted as quick tenders at a fixed rate of 6. Other claims on euro 4.25%. The money market through- area credit institutions out the Eurosystem received a total denominated in euro of EUR 110 billion though these operations, which reestablished suffi- EUR million cient liquidity. Closing balance Dec. 31, 2001 182.270 The ECB may use structural re- Closing balance Dec. 31, 2000 166.357 Change + 15.913 verse operations to adjust the struc- +9.6% tural position of the Eurosystem vis- ‘-visa the financial sector. This item includes EUR 179.685 Structural operations in the millionofclaimsoncreditinstitu- form of reverse transactions totaling tions resulting from the delivery of EUR 702.238 million (rate: 4.77% frontloaded euro starter kits for con- to 4.80% p.a.) were conducted from sumers (with a value of EUR 14.54) April 30 to May 6, 2001; operations and companies (with a value of EUR totaling EUR 208.739 million (rate: 145.50). The claim on the credit in- 3.28% to 3.30% p.a.) were con- stitutions resulting from the front- ductedfromNovember30toDe- loaded starter kits was debited in cember 4, 2001. Both additional their respective accounts with the one-week operations were used to OeNB (on January 2, January 23 address structural liquidity require- and January 30, 2002) according to ments in April and November 2001. the linear debiting model. Counterparties may use the marginal lending facility to obtain 7. Securities overnight liquidity from NCBs at a of euro area residents prespecified interest rate against eli- denominated in euro gible assets. The facility is intended to satisfy counterparties temporary EUR million liquidity needs. Under normal cir- Closing balance Dec. 31, 2001 1,742.631 cumstances, the interest rate on the Closing balance Dec. 31, 2000 1,381.552 Change + 361.079 facility provides a ceiling for the +26.1% overnight interest rate. The marginal lending facility was accessed numerous times in 2001. This item covers all marketable Credits related to margin securities (including government calls arise when the value of under- securities stemming from before lying assets regarding credit extended EMU) denominated in constituent to credit institutions increases be- currencies of the euro that are not yond collateral requirements, obli- used in monetary policy operations gating the central bank to provide and that are not part of investment counterparties with additional credit portfolios that have been earmarked to offset the value in excess of re- for specific purposes. quirements. If such credit is provided The annual change is mainly due not by the return of securities but to additions resulting from net sales. rather by an entry on an account, a

Annual Report 2001 81 Financial Statements

8. General government in the course of 2001 had a total face debt denominated value of EUR 42.332 million. The rein euro demptions made out of the central governments share in the OeNBs EUR million profit for the year 2000 plus the pro- Closing balance Dec. 31, 2001 287.633 ceeds from metal recovery totaled Closing balance Dec. 31, 2000 255.645 EUR 10.344 million. Change + 31.988 +12.5% 9. Intra-Eurosystem claims This balance sheet item subsumes This balance sheet item consists of the claim on the Austrian Federal the claims arising from the OeNBs Treasury from silver commemorative share of the ECBs capital and the coins issued before 1989, based on claims equivalent to the transfer of the 1988 Coinage Act as promulgated foreign reserves to the ECB. Further, in Federal Law Gazette No. 425/ this item shows TARGET balances 1996. and other (net) claims within the In theory, the maximum federal Eurosystem, provided that these liability of EUR 1,295.630 million items closed the reporting year with is the sum total of all silver commem- net claims. Since November 30, orative coins issued before 1989, 2000, the TARGET balances with minus any coins returned to and paid the central banks of nonparticipating for by the central government, minus countries have also been recognized any coins no longer fit for circulation in this item. and hence directly withdrawn by the Other claims within the Austrian Mint. The figure actually Eurosystem (net) consisted of the showninthebooksislowerbecause following subitems on December it has been adjusted for coins in circu- 31, 2001: lation (EUR 905.800 million) and cash in hand (EUR 102.197 Dec. 31, Dec. 31, Change million), both of which 2000 2001 EUR million are not yet redeemable. Repayment is effected 9.1 Participating interest in the ECB 117.970 117.970 — 9.2 Claims equivalent to the transfer by annual installments of foreign reserves 1,179.700 1,179.700 — of EUR 5.814 million 9.4 Other claims within (equivalent to ATS the Eurosystem (net) — 1,855.761 +1,855.761 80 million) out of the Total 1,297.670 3,153.431 +1,855.761 central governments share of the OeNBs profit. The proceeds from metal re- The share that the OeNB holds in covery are also designated for repay- the capital of the ECB —EUR5bil- ment. Any amount outstanding on lion in total — corresponded to December 31, 2040, will have to be 2.3594% at the balance sheet date, repaid in the five following years unchanged from December 31, 2000. (2041 to 2045) in five equal install- The following table contains a ments. breakdown of the various NCBs The silver commemorative coins shares in the capital of the ECB: returned to the central government

82 Annual Report 2001 Financial Statements

The 15 EU central banks shares in the capital of the ECB absolut share thereof paid up relative share %EUR %

Deutsche Bundesbank 24.4935 1,224,675,000 1,224,675,000 30.2410 Banque de France 16.8337 841,685,000 841,685,000 20.7838 Banca dItalia 14.8950 744,750,000 744,750,000 18.3902 Banco de Espana 8.8935 444,675,000 444,675,000 10.9804 De Nederlandsche Bank 4.2780 213,900,000 213,900,000 5.2819 Banque Nationale de Belgique 2.8658 143,290,000 143,290,000 3.5383 Oesterreichische Nationalbank 2.3594 117,970,000 117,970,000 2.9130 Bank of Greece 2.0564 102,820,000 102,820,0001) 2.5389 Banco de Portugal 1.9232 96,160,000 96,160,000 2.3745 Suomen Pankki 1.3970 69,850,000 69,850,000 1.7248 Central Bank of Ireland 0.8496 42,480,000 42,480,000 1.0490 Banque Central de Luxembourg 0.1492 7,460,000 7,460,000 0.1842

80.9943 4,049,715,000 4,049,715,000 100.0000

Bank of England 14.6811 734,055,000 36,702,750 Sveriges Riksbank 2.6537 132,685,000 6,634,250 Danmarks Nationalbank 1.6709 83,545,000 4,177,250

19.0057 950,285,000 47,514,250

Total 100.0000 5,000,000,000 4,097,229,250

1) Fully paid up from January 1, 2001, with the participation of the Bank of Greece in the Eurosystem.

The transfer of foreign re- item covers net claims arising at serves from the Eurosystem NCBs year-end from the difference be- to the ECB is based on the provisions tween monetary income to be pooled of Article 30 of the ESCB/ECB Stat- and distributed as well as net claims ute. The euro-denominated claims on arising from the correspondent ac- the ECB in respect of those transfers counts1) of individual NCBs. are shown under this item. The individual bilateral end-of- ThereservesthattheOeNBhas day balances of the OeNB with the transferred are managed on behalf other NCBs are netted by novating and for the account of the ECB sepa- them to the ECB. In 2000 this item rately from the OeNBs own holdings was shown as a net liability under and therefore do not show up in its item 10.3 Other liabilities within balance sheet. the Eurosystem (net). The ECB remunerates the nonre- The ECB remunerates the net bal- deemable euro-denominated claims ance on a daily basis, settling payment with which it has credited the NCBs at the end of the month. The ECB in return for the transfer at 85% of calculates this remuneration cen- the current interest rate on the main trally, using the prevailing interest refinancing operations on a daily rate for main refinancing operations. basis. The corresponding payments are set- The other claims within the tled ex post monthly via the TARGET Eurosystem (net) largely represent system. 1 These correspondent net claims arising from balances of accounts may be used for a limited amount of TARGET accounts with the other 14 transactions e.g. when a NCBs (i.e. including nonparticipating temporary disruption of the NCBs) and the ECB. Moreover, this TARGET system occurs.

Annual Report 2001 83 Financial Statements

10. Items in course Coins of euro area represent of settlement the OeNBs stock of fit coins of euro This claim results from the prefinanc- area. At the balance sheet date, this ing of the pension costs for 2001. The item consisted of Austrian schilling transfer of the funds from the pension coins only. The rise in coins and the reserve to a designated OeNB ac- simultaneous decline in coin in circu- count was effected at the beginning lation is the result of increased re- of January 2002. turns of coins in the runup to the introduction of euro cash. 11. Other assets Coin in circulation is a statistical Other assets comprise the following figure not apparent from the OeNBs items: balance sheet. By provision of the 1988 Coinage Act, the face value of Dec. 31, Dec. 31, Change all coins struck by the Austrian Mint 2000 2001 and put into circulation by the EUR million % OeNB, plus the special quality coins 11.1 Coins of the euro area 67.952 151.995 + 84.043 +123.7 and gold bullion coins issued directly 11.2 Tangible and intangible fixed assets 109.891 135.623 + 25.732 + 23.4 by the Austrian Mint, minus any coins 11.3 Other financial assets 2,432.098 2,548.766 +116.668 + 4.8 that have been withdrawn, add up to 11.4 Off-balance-sheet the coin in circulation figure. This is instruments revaluation in line with the harmonized proce- differences 41.598 6.571 — 35.027 — 84.2 dure for recording coin circulation 11.5 Accruals and deferred on which the Eurosystem central expenditure 399.076 355.593 — 43.483 — 10.9 11.6 Sundry 1,040.819 1,185.456 +144.637 + 13.9 banks have agreed. Tangible and intangible Total 4,091.434 4,384.004 +292.570 + 7.2 fixed assets comprise Bank premises and equipment (including machinery, computer hardware and software, motor vehicles) and intangible fixed assets. Premises developed as follows:

Cost Purchases Sales Re- Accu- Book Book Annual incurred in 2001 in 2001 assign- mulated value on value on depre- until ment depre- Dec. 31, Dec. 31, ciation Dec. 31, (—) ciation 2001 2000 in 2001 2000 EUR million

57.0981) 25.845 — 0.065 14.572 68.306 43.098 0.572

1) Land and buildings acquired prior to December 31, 1956, were booked at the cost recorded in the schilling opening balance sheet (Federal Law Gazette No. 190/1954).

84 Annual Report 2001 Financial Statements

Equipment developed as fol- sented investments of the pension lows: reserve and another EUR 13.923 investments of Cost Purchases Sales Re- Accu- Book Book Annual the OeNBs Fund incurred in 2001 in 2001 assign- mulated value on value on depre- until ment depre- Dec. 31, Dec. 31, ciation for the Promo- Dec. 31, (+) ciation 2001 2000 in 2001 tion of Scientific 2000 Research and EUR million Teaching. Unre- 77.900 17.197 10.1171) 0.065 51.335 33.710 36.062 19.274 alized valuation

1) The balance between the book value of the sales and the underlying historical costs is EUR 9.777 million. gains of EUR 77.318 million compare with Movable real assets worth unrealized valuation losses of EUR EUR 32.918 million represent the 39.271 million. OeNBs collection of antique string Participating interests — instruments1). This collection was booked at their net asset value — de- enlarged in 2001 with the purchase veloped as follows: of 2 violins. On December 31, 2001, the OeNBs collection of Net asset Purchases Sales Book Book Annual Revalua- value on in 2001 in 2001 value on value on depre- tion valuable instruments encompassed Dec. 31, Dec. 31, Dec. 31, ciation in 2001 23 violins, 4 violoncellos and 2 vio- 2000 2001 2000 in 2001 las. These instruments are on loan EUR million to musicians deemed worthy of 695.851 7.046 0.1141) 815.825 695.851 0.428 113.356 special support. 1 Intangible fixed assets (the ) The balance between the book value of the sales and the underlying historical costs is EUR 114 million. right to use an apartment) developed as follows: The partici- Cost Purchases Sales Accu- Book Book Annual pating interests incurred until in 2001 in 2001 mulated value on value on depre- Dec. 31, depre- Dec. 31, Dec. 31, ciation were valued at 2000 ciation 2001 2000 in 2001 their net asset EUR million value in the an-

0.720 — — 0.031 0.689 0.704 0.015 nual accounts for 2001. The OeNBs Other financial assets com- printing works, prise the following subitems: Oesterreichische Banknoten- und Dec. 31, Dec. 31, Change Sicherheitsdruck 2000 2001 GmbH (OeBS), EUR million % increased its Securities 1,716.261 1,497.705 —218.556 —12.7 nominal capital Participating interests 695.851 815.825 +119.974 +17.2 Sundry assets 19.986 235.236 +215.250 x from its corporate resources in Total 2,432.098 2,548.766 +116.668 + 4.8 2001. The capital of ATS 100 million was con- 1 The OeNB began acquiring Of the OeNBs securities port- verted into EUR 7.267 million antique string instruments folio, EUR 1,483.782 million repre- and, after an increase by EUR 2.733 in 1989.

Annual Report 2001 85 Financial Statements

million, totals EUR 10.000 million. rency exchange and quality assurance The OeBS is wholly owned by the services. The companys nominal OeNB. The stockholders equity capital amounts to EUR 0.036 mil- came to EUR 83.842 million on De- lion. In 2001 cash centers went into cember 31, 2000, and the profit for operation in four provincial capitals: the year amounted to EUR 6.660 Bregenz, Innsbruck, Klagenfurt and million. Salzburg; all seven cash centers are In 1999 the OeBS began to print now in operation. The Vienna and the euro banknotes to be put into cir- Graz centers were relocated to new culation from January 1, 2002. The premises in 2001. OeBS invoiced the OeNB for deliv- Article241oftheCommercial eries of euro banknotes of EUR Code applies to the other equity in- 62.232 million in 2001; these are terests. shown under banknote production Sundry assets include assets services, item 10 of the Profit and earmarked for investment for the Loss Account. pension reserve and the Fund for Moreover, the item participating the Promotion of Scientific Research interests shows the OeNBs 100% and Teaching. stake in the Austrian Mint (Mu‹nze Asset item 11.6, sundry, consists O‹ sterreich AG). of the following subitems: The Austrian Mint increased its Dec. 31, Dec. 31, Change share capital from 2000 2001 EUR million corporate resources in 2001. The capital Claims arising from ERP loans to companies 732.226 748.807 + 16.581 of ATS 75 million OeKB overnight account for ERP lending 124.928 127.226 + 2.298 was converted to ERP loan portfolio managed by the OeNB 857.154 876.033 + 18.879 EUR 5,450,462.56 Advances to prefinance the production of euro coins 145.346 145.346 — and boosted by Advances on salaries 7.083 6.332 — 751 EUR 549,537.44 to Stock of euro starter kits — 8.093 + 8.093 EUR 6.000 million. Other claims 31.236 149.652 +118.416 As at December 31, Total 1,040.819 1,185.456 +144.637 2000, the stockholders equity ran to EUR 223.858 million, and the profit According to Article 3.2 of the for the year amounted to EUR 4.899 ERP Fund Act, the ceiling of the million. In 2001 the Austrian Mint OeNBs financing commitment cor- released dividend earnings of EUR responds to the sum by which the 3.634 million to the OeNB for the federaldebtwaswrittendownini- business year 2000, the same amount tially (ATS 4,705,404,000; EUR as in 2000 for the business year 1999. 341.955 million) plus interest ac- In 2001 the OeNBs participating crued (EUR 534.078 million on interest in the cash services company December 31, 2001). The ERP loan GELDSERVICE AUSTRIA Logistik portfolio managed by the OeNB fu‹r Wertgestionierung und Trans- totaled EUR 876.033 million on portkoordination G.m.b.H. (GSA) December 31, 2001. The provisions came to 93.4% of the companys governing the extension of loans capital stock. GSA primarily offers from this portfolio are laid down in currency processing, foreign cur- Article 83 of the Nationalbank Act.

86 Annual Report 2001 Financial Statements

The residual terms of advances on kits (EUR 2.924 million) were sold salaries are generally more than one at the OeNBs counters, with pay- year. Security on all advance payment effected directly in schilling ments is in the form of life insurance cash. The amount of EUR 8.093 mil- plans. lion shown on the balance sheet date Euro starter kits were front- of December 31, 2001, represents loaded to businesses and households the total of undistributed euro starter before the launch of euro cash on Jan- kits. uary 1, 2002, so that enough euro Other claims contain minor items coins would be broadly available. arising from day-to-day business. Starter kits delivered by the Mint to Moreover, this item contains the the OeNB were frontloaded to credit claimonAustrianMintinrespectof institutions from September 1, 2001 still unsettled schilling coin returns (6,518,768 starter kits with a value of EUR 104.376 million. This claim of EUR 179.685 million), with an and the claim resulting from the pre- equivalent claim entered into the financing of the production of euro balance sheet for settlement under coins (EUR 145.346 million) was off- the linear debiting model (see assets set by the OeNBs liability from as- item 6. Other claims on euro area suming delivery of the euro starter credit institutions denominated in kits and settled between the parties euro). In addition, 177,567 starter on January 2, 2002.

Annual Report 2001 87 Financial Statements

Liabilities Statute — record those banknotes as 1. Banknotes an intra-ESCB claim against the in circulation OeNB as the issuing NCB. Upon notification, the OeNB will adjust its EUR million banknotes in circulation figure ac- Closing balance Dec. 31, 2001 10,172.302 cordingly. Over time, depending on Closing balance Dec. 31, 2000 13,933.755 the repatriation volumes agreed bilat- Change — 3,761.453 —27.0% erally, the schilling banknotes received by other NCBs will be returned to the OeNB. This figure is derived from the The sharp contraction of the amount of schilling banknotes in cir- banknotes in circulation figure by culation adjusted for the banknotes more than a quarter is the conse- received and held by other NCBs par- quence of stepped-up returns of ticipating in the Eurosystem. schilling banknotes by businesses The qualification regarding bank- and households in the runup to the notes held by other NCBs is based introduction of euro banknotes. on Article 9.1 of the Guideline The table below shows the annual ECB/2000/18 and follows from the average banknotes in circulation fig- implementation of Article 52 of the ures of the past five years: ESCB/ECB Statute.1)Thoseprovi- sions ensure the proper representation of the aggregate banknotes in Banknotes Annual change in circulation, circulation figure of the Eurosystem annual average in the consolidated Eurosystem bal- EUR million % ance sheet, both during the transition 1997 11,913 +370 +3.2 period and after the introduction of 1998 11,688 —225 —1.9 euro banknotes. An NCB receiving 1999 12,095 +407 +3.5 schilling banknotes will — in compli- 2000 12,851 +756 +6.3 ance with its commitments arising 2001 12,519 —332 —2.6 under Article 52 of the ESCB/ECB

Banknotes in Circulation

Calendar-day volumes, EUR billion

14.0 1 Article 52 obliges the NCBs 2000 to ensure that the exchange 13.5 of — household amounts of — 1999 13.0 banknotes denominated in currencies with irrevocably 12.5 1997 fixed exchange rates is 12.0 1998 offered at the respective par values free of charge at one 11.5 location per country at least. 11.0 The OeNB has arranged for authorized agents to offer 10.5 this service at the OeNBs 10.0 2001 branch offices (except at the Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. St. Po‹lten branch office) and in the OeNBs name for the Source: OeNB. agents account.

88 Annual Report 2001 Financial Statements

Banknotes in circulation posted 3. Other liabilities an annual high of EUR 13,934 million to euro area credit on January 1, 2001, and an annual institutions denominated low of EUR 10,172 million on De- in euro cember 31, 2001. EUR million

2. Liabilities to euro area Closing balance Dec. 31, 2001 1,059.618 credit institutions Closing balance Dec. 31, 2000 — relatedtomonetary Change + 1,059.618 policy operations denominated in euro This item showed the liabilities On December 31, 2000, and Decem- arising from deposits pledged ber 31, 2001, the subitems of this by credit institutions as collateral balance sheet item closed as follows: for frontloaded euro banknotes from September Dec. 31, Dec. 31, Change 3, 2001. The de- 2000 2001 posits are remun- EUR million % erated at the rate 2.1 Current accounts applicable to mini- (covering the minimum mum reserves. reserve system) 3,402.808 5,497.601 +2,094.793 + 61.6 The Guideline of 2.2 Deposit facility ———— 2.3 Fixed-term deposits ————the European 2.4 Fine-tuning Central Bank of reverse operations ———— 2.5 Deposits 10 January 2001 related to margin calls ————adopting certain provisions on the Total 3,402.808 5,497.601 +2,094.793 + 61.6 2002 cash changeover (ECB/2001/1) The current accounts (cover- represents the legal basis for this ing the minimum reserve procedure. system) primarily comprise credit institutions accounts for minimum 5. Liabilities reserves. to other euro area Banks minimum reserve balances residents have been remunerated on a daily ba- denominated in euro sis since January 1, 1999, at the prevailing interest rate for the ESCBs EUR million main refinancing operations. Closing balance Dec. 31, 2001 42.102 The deposit facility item refers Closing balance Dec. 31, 2000 18.202 Change +23.900 to overnight deposits placed with the +131.3% OeNB by Austrian banks that access the Eurosystems liquidity-absorbing This item comprises general gov- standing facility at the prespecified ernment deposits of EUR 21.299 rate. In 2001 the volume of such million and the current accounts of transactions averaged EUR 3.940 other nonbanks. million. Moreover, it contains the deposits of the International Fund for the ClearanceoftheFairwayoftheDan- ube, an international organization

Annual Report 2001 89 Financial Statements

under the patronage of the European This item mainly comprises swap Commission. This Fund (also known transactions with the financial sector. as the Danube Fund) was established in Vienna by the Danube Com- 8. Liabilities mission and is entrusted with han- to non-euro area dling the funding of the project to re- residents denominated store free navigation on the Danube in foreign currency in the Novi Sad region. Under the provisions of the Federal Act on the EUR million International Fund for the Clearance Closing balance Dec. 31, 2001 985.659 of the Fairway of the Danube (Federal Closing balance Dec. 31, 2000 900.889 Change + 84.770 Law Gazette I No. 70/2000), the +9.4% OeNB places the funds for the Dan- ube Commission, 85% of which are Foreign currency liabilities arising provided by the European Commis- from swap operations and from re- sion and 15% of which are provided purchase agreements with financial by neighboring countries and other sector counterparties are shown donors, on an interest-bearing ac- under this heading. The increase re- count. sultedfromthehighervolumeofre- purchase agreements. 6. Liabilities to non-euro area 9. Counterpart residents denominated of Special Drawing Rights in euro allocated by the IMF

EUR million EUR million

Closing balance Dec. 31, 2001 63.530 Closing balance Dec. 31, 2001 255.051 Closing balance Dec. 31, 2000 7.177 Closing balance Dec. 31, 2000 250.678 Change +56.353 Change + 4.373 +785.2% +1.7% This item contains euro-denomi- This item represents the counter- nated liabilities to non-Eurosystem part of the Special Drawing Rights al- central banks and monetary institu- located gratuitously to the OeNB. tions. In 2001 this item also captured Measured at current market values liabilities of EUR 60.270 million re- on the balance sheet date, the coun- sulting from euro frontloading to terpart was worth SDR 179 million. central banks and commercial banks The OeNB was allocated SDRs in outside the euro area. six installments from 1970 to 1972 and from 1979 to 1981, always on 7. Liabilities January 1. to euro area residents denominated in foreign 10. Intra-Eurosystem currency liabilities

EUR million EUR million

Closing balance Dec. 31, 2001 308.727 Closing balance Dec. 31, 2001 — Closing balance Dec. 31, 2000 330.688 Closing balance Dec. 31, 2000 5,024.024 Change — 21.961 Change —5,024.024 —6.6% —100.0%

90 Annual Report 2001 Financial Statements

This item shows TARGET balan- 12. Other liabilities ces and other (net) liabilities within Other liabilities are broken down as the Eurosystem, provided that these follows: items closed the reporting year with netliabilities.AstheTARGETbalan- Dec. 31, Dec. 31, Change cesandotherclaimsorliabilities 2000 2001 EUR million % within the Eurosystem showed net claims on the balance sheet date 12.1 Off-balance-sheet instruments December 31, 2001, they are repre- revaluation differences 3.976 207.999 +204.023 x sented under assets item 9.4 Other 12.2 Accruals claims within the Eurosystem (net). and deferred income 79.671 109.868 + 30.197 +37.9 12.3 Sundry 1,017.665 1,198.924 +181.259 +17.8

11. Items in course Total 1,101.312 1,516.791 +415.479 +37.7 of settlement

EUR million The off-balance-sheet instru- Closing balance Dec. 31, 2001 507.385 ments revaluation differences Closing balance Dec. 31, 2000 — subsume the revaluation losses arising Change +507.385 on off-balance-sheet positions, which are posted to the profit and loss This item comprises EUR account (EUR 0.605 million). The 443.982 million resulting from the rise from December 31, 2000, delivery of schilling cash by credit resulted from book value reconcilia- institutions which could not be tions and realized losses. settledontheTARGETclosingday Item 12.3 (sundry) is composed December 31, 2001, and were of the following subitems: settled at the beginning of January 2002 by credits to the banks current Dec. 31, Dec. 31, Change accounts. Moreover, it includes EUR 2000 2001 EUR million % 24.126 million of frontloaded euro banknotes and euro coin rolls handed Central governments share of profit (without dividends) 988.429 975.009 — 13.420 — 1.4 out at OeNB counters, as they were Liquid funds of the Fund not legal tender on December 31, for the Promotion of Scientific 2001. From the beginning of January Research and Teaching 17.033 22.643 + 5.610 +32.9 Liability to the Austrian Mint — 2002 the euro banknotes became euro starter kits — 190.702 +190.702 x banknotes in circulation and the euro Other 12.203 10.570 — 1.633 —13.4 coins were debited to assets item 11.1 Coins of euro area. Total 1,017.665 1,198.924 +181.259 +17.8

Pursuant to Article 69 paragraph 3 of the Nationalbank Act, the central governments share of profit corresponds to 90% of the profit for the year after tax. The amount of EUR 22.643 million shown as earmarked funds of the Fund for the Promotion of Scientific Research and Teaching consisted of pledged funds

Annual Report 2001 91 Financial Statements

not used up by December 31, 2001. the state pension system. To secure According to the General Meetings this liability the OeNB is obligated decision, EUR 70.250 million of the by law to establish a pension reserve profit for the year for 2000 were ap- corresponding to the actuarial pre- propriated to the OeNBs Fund for sent value of its pension liabilities. the Promotion of Scientific Research Following a change in the retire- and Teaching to support research ment plan, staff recruited after projects, with EUR 61.529 million May 1, 1998, stands to receive a state apportioned to projects with a highly pension supplemented by an occupa- practical thrust. In the year 2001, the tional pension from an externally General Council decided to appor- managed pension fund. For this sup- tion an additional EUR 69.530 mil- plementary pension the OeNB took lion for 398 projects and EUR out a contract effective May 1, 1999, 3.366 million to promote four insti- which also applies retroactively to tutes; EUR 67.767 of this amount employees taken on in the 12 months on balance were paid out on balance. from May 1, 1998. With the OeNBs This means that a total EUR 490.966 direct liability to pay retirement ben- million of the funds pledged as finan- efits now limited to staff recruited cial assistance since 1966 have been before May 1, 1998, the pension repaid out. serve set up to secure this liability The liability to the Austrian Mint has become a closed system. There- reflects the assumption of a total of fore starting with the year 2000, the 6,820,520 euro starter kits and was OeNB has used its pension reserve settled between the parties on to pay out retirement benefits. January 2, 2002. Pension benefits as covered by the pension reserve augmented by 13. Provisions EUR 2.524 million to EUR 83.405 million. This in- Dec. 31, Transfer Transfer Dec. 31, cludes the remu- 2000 from to 2001 neration of 15 re- EUR million tired board mem- Pension reserve 1,780.867 83.405 83.405 1,780.867 bers or their Personnel provisions Severance payments 42.649 — 1.462 44.111 dependents (to- Anniversary bonuses 10.689 450 — 10.239 taling EUR 3.778 Residual leave entitlements 8.279 — 1.008 9.287 million; 2000: Other provisions EUR 3.969 mil- Corporate income tax 76.216 76.216 — — lion). Supplies of goods and services 5.310 4.713 5.253 5.850 The EUR Repatriation of banknotes 1.331 1.331 1.182 1.182 Administration of premises 1.289 27 374 1.636 83.405 million of Supplies from subsidiaries 9.337 9.337 389 389 income on invest- Other 1.281 1.048 2.264 2.497 ment relating to Total 1,937.248 176.527 95.337 1,856.058 the pension reserve was transferred to the pen- Under the OeNBs initial retire- sion reserve when the financial statement plan it is solely the liability of ments for 2001 were prepared, so the Bank to provide retirement bene- that the pension reserve remained fits to employees. The members of unchanged from the level of Decem- this scheme are contracted out of ber 31, 2000.

92 Annual Report 2001 Financial Statements

The pension reserve on Decem- The amounts recorded in the re- ber 31, 2001, was calculated accord- valuation accounts on a currency- ing to actuarial principles; a discount by-currency and code-by-code basis rate of 3.50% p.a. was applied are in their entirety gains that arose (December 31, 2000: 3.40% p.a.). on the valuation of assets as at De- Provisions for severance pay- cember 31, 2001. Those gains are ments (EUR 44.111 million) are cal- realizable only in the context of fu- culated according to actuarial princi- ture transactions in the respective ples, applying a discount rate of category; otherwise they can be used 3.50% p.a. (December 31, 2000: to reverse revaluation losses that may 3.40% p.a.). Requirements to top arise in future years. The revaluation up the account led to an increase. gains in each currency, moreover, Actuarial calculations put the cover the risks that the nondomestic need for anniversary bonuses at EUR assets carry (as established with the 10.239 million as at the balance sheet VaR method). date. Consequently, EUR 0.450 mil- In line with requirements, the in- lion were allocated to provisions for itial valuation gains recorded in the anniversary bonuses when the finan- opening balance sheet of January 1, cial accounts for 2001 were closed. 1999, were partly realized during Provisions for residual leave enti- 2001 in the course of sales of under- tlements amounted to EUR 9.287 lying assets. million (+EUR 1.008 million). Article 69 paragraph 1 of the Na- No provisions for pending law- tionalbank Act obliges the OeNB to suits were made, as they are not ex- maintain a reserve covering exchange pected to have a material impact. risks which may arise on nondomestic assets. The reserve fund for ex- 14. Revaluation accounts change risks posted in the finan- This item consists of the following cial statements 2001 contains ex- accounts: change gains accrued in the runup to 1999 totaling Dec. 31, Dec. 31, Change EUR 1,842.748 mil- 2000 2001 lion. On the one hand EUR million the annual change re- Eurosystem revaluation accounts flects the realization Gold 566.078 700.470 +134.392 Foreign currency 1,664.603 1,459.230 —205.373 of exchange rate Securities 213.323 203.909 — 9.414 gains resulting from Participating interests 71.515 184.872 +113.357 the sale of underlying Off-balance-sheet operations 8.134 6.571 — 1.563 assets. On the other Subtotal 2,523.653 2,555.052 + 31.399 hand the fund is used to cover unrealized Unrealized valuation gains from January 1, 1999 (initial valuation) exchange losses that Securities 29.892 2.320 — 27.572 must be expensed, as Participating interests 279.933 279.933 — well as any exchange Subtotal 309.825 282.253 — 27.572 risks (as calculated with the VaR ap- Reserve fund for exchange risks (funded up to the end of 1998) 2,075.237 1,842.748 —232.489 proach) that are not offset by the balances Total 4,908.715 4,680.053 —228.662 on the revaluation accounts. As from

Annual Report 2001 93 Financial Statements

January 1, 1999, no further allocations may be made to this fund.

15. Capital and reserves A summary of the OeNBs reserves shows the following developments:

Dec. 31, Dec. 31, Change 2000 2001 EUR million %

General reserve fund 1,611.952 1,611.952 — — Freely disposable reserve fund 1,036.219 917.719 —118.500 —11.4 Reserve for nondomestic and price risks 1,077.606 1,164.424 + 86.818 + 8.1 Earmarked capital funded with net interest income from ERP loans 515.199 534.078 + 18.879 + 3.7 Fund for the Promotion of Scientific Research and Teaching 7.267 7.267 — —

Total 4,248.243 4,235.440 — 12.803 — 0.3

The reserve for nondomestic and Other financial liabilities price risks serves to offset any ECB (off-balance-sheet losses which the OeNB may have to positions) cover according to its share in the Apart from the items recognized in ECBs capital as well as any unrealized the balance sheet, the following fi- losses resulting from a fall in the price nancial liabilities and financial deri- of securities. The total risk to be vatives are stated off the balance sheet covered is calculated by applying on December 31, 2001: recognized risk assessment models. — Foreign currency forward trans- According to the General Meetings actions and swap transactions of decision, on May 17, 2001, EUR a total of EUR 1,629.416 million. 34.390 million were allocated to the These forward transactions also reserve for nondomestic and price include forward sales of 30 tons risks out of the profit for the year of gold. 2000. When the financial statements — Contingent liabilities arising from for 2001 were drawn up, EUR the statutory direct charge on the 118.500 million from the freely dis- OeNB of EUR 193.164 million posable reserve fund were reallocated resulting from the allocation of and EUR 66.072 million were used the ECBs loss according to the to cover a fall in the price of secur- NCBs shares in the ECBs capital. ities invested by the OeNB. — Contingent liabilities on the order In April 1966, EUR 7.267 million of EUR 235.940 million to fund were allocated out of the net income unrealized losses which arose on for the year 1965 to the Fund for the ECBs foreign currency posi- the Promotion of Scientific Re- tions and gold; these liabilities research and Teaching for the pur- sult from the fact that the OeNB pose of profitable investment. may waive a maximum of 20% of its claims arising under the transfer of foreign reserves.

94 Annual Report 2001 Financial Statements

— Liabilities resulting from designa- — Liabilities of EUR 26.154 million tions under Special Drawing from foreign currency invest- Rights within the IMF of EUR ments effected in the OeNBs 501.147 million. name for third account. — Contingent liabilities to the IMF — Repayment obligations to the under the New Arrangements amount of EUR 10.505 million to Borrow totaling EUR arising from pension contribu- 586.898 million. tions paid by OeNB staff mem- — The obligation to make a supple- bers payable on termination of mentary contribution of EUR employment contracts. 33.045 million (equivalent to Moreover, the OeNB reports 15 million gold francs) to the liabilities outstanding on unmatured OeNBs stake in the capital of gold/interest rate swaps involving the Bank for International Settle- 27.9 tons of gold. ments (BIS) in Basel, consisting of 8,000 shares of 2,500 gold francs each.

Notes to the Profit and Loss Account

2000 2001 Change1) EUR million %

1. Net interest income 1,014.446 873.100 —141.346 — 13.9 2. Net result of financial operations, writedowns and risk provisions 896.515 994.712 + 98.197 + 11.0 3. Net income from fees and commissions 383 — 320 — 703 —183.6 4. Income from equity shares and participating interests 6.268 54.095 + 47.827 +763.0 5. Net result of pooling of monetary income — 653 — 607 — 46 — 7.0 6. Other income 7.036 7.322 + 286 + 4.1

Total net income 1,923.995 1,928.302 + 4.307 + 0.2

7. Staff costs — 88.191 — 92.971 + 4.780 + 5.4 8. Administrative expenses — 89.265 — 110.604 + 21.339 + 23.9 9. Depreciation of tangible and intangible fixed assets — 12.299 — 19.946 + 7.647 + 62.2 10. Banknote production services — 37.837 — 62.232 + 24.395 + 64.5 11. Other expenses — 10.356 — 1.120 — 9.236 — 89.2

Operating profit 1,686.047 1,641.429 — 44.618 — 2.6

12. Corporate income tax — 573.256 — 558.086 — 15.170 — 2.6

1,112.791 1,083.343 — 29.448 — 2.6 13. Central governments share of profit and transfer to the pension reserve —1,002.9662) — 975.0092) — 27.957 — 2.8 14.1 Net income 109.825 108.334 — 1.491 — 1.4 14.2 Profit brought forward — 5 +5 x

14. Profit for the year 109.825 108.339 — 1.486 — 1.4

1) Absolute increase (+) or decrease (—) in the respective income or expense item. 2) 2000: thereof: EUR 14.537 million transfer to the pension reserve. 2001: Central governments share of profit only.

Annual Report 2001 95 Financial Statements

Operating Profit eign currency, securities or other transactions. Among other EUR million 15 things, these gains include price gains 1,500 110 108 91 from the sale of 30 tons of gold. 102 1,250 83 Net gains augmented by EUR 92 86 295.370 million (+42.2%) to EUR 1,000 988 975 823 746 995.745 million. EUR 752.283 mil- 750 773 lion (+EUR 87.884 million) thereof 500 stem from gold and foreign currency

250 operations, EUR 240.990 million 524 573 558 474 443 (+EUR 205.015 million) from secur- 0 ities transactions. 1997 19981999 2000 2001 The writedowns on financial Transfer to the pension reserve pursuant assets and positions were trig- to Article 69 paragraph 2 NBA Profit for the year gered by the downtrend in market Transfer to the general reserve fund Central governments share of profit prices observed in 2001, amid which Corporate income the market value dropped below the

Source: OeNB. average acquisition cost of the respective currencies or securities on the balance sheet date. 1. Net interest income The item transfer to/from With interest rates for foreign cur- provisions for foreign exchange rency investment having declined rate and price risks resulted from sharply from 2001, interest income, transfers from the reserve fund for net of interest expense, contracted exchange risks that the OeNB funded by EUR 141.346 million (—13.9%) up to the end of 1998 with a view to to EUR 873.100 million. covering unrealized foreign currency Net interest income from assets losses. Thus, in compliance with Ar- and liabilities denominated in foreign ticle 69 paragraph 1 of the National- currency and euro totaled EUR bank Act, these losses did not have 841.188 million. Refinancing opera- an impact on profit. Moreover, this tions yielded EUR 213.075 million, item reflects the offsetting of unreal- and the ECB remunerated the trans- ized losses on security price losses fer of foreign reserves with EUR against the reserve for nondomestic 43.970 million. Conversely, interest and price risks. expenses of EUR 171.436 million The breakdown of this profit and resulted from TARGET liabilities, loss account item is described under and the remuneration of minimum Realized Gains and Losses and Re- reserves came to EUR 171.436 mil- valuation Differences and their Treat- lion. ment in the Financial Statements of December 31, 2001. 2.Netresultoffinancial operations, writedowns 4. Income from equity and risk provisions shares and participating Realizedgainsorlossesfromday-to- interests day financial operations resulted Income from equity shares and par- from — receivable or payable — differ- ticipating interests stems from the ences between the acquisition cost first distribution of profit by the and the market value of gold, for- ECB for 2000 and from dividend pay-

96 Annual Report 2001 Financial Statements

ments by the Austrian Mint, the BIS, contribution pension plan. The AUSTRIA CARD-Plastikkarten und OeNB opted for this approach in or- Ausweissysteme Gesellschaft m.b.H., der to bring its retirement plan in and Austrian Payment Systems Ser- line with the retirement provision vices (APSS) GmbH. systems prevailing in Austria, where the statutory state pension is the first 5.Netresultofpoolingof pillar and occupational and private monetary income pension funds are the second and Article 32 of the ESCB/ECB Statute third pillars. provides for the redistribution of Salaries net of pension contribu- the income accruing to the NCBs tions collected from staff members from their monetary policy opera- expanded by EUR 5.092 million or tions at the end of each fiscal year. 6.9% to EUR 79.418 million. This ThenetchargeontheOeNBmirrors increase may be traced primarily to the redistribution effect within the the wage increase negotiated for the system, which results from the differ- banking sector and activities con- ence between what the OeNB enters nected to the introduction of euro into the pool (which is determined by cash (such as more overtime and ad- its liability base) and the proportion ditional personnel). The OeNBs out- from the pooled income that is allo- lays were reduced by recoveries of catedtotheOeNBaccordingtothe salaries totaling EUR 9.028 million redistribution key laid down in the for staff members on secondment to ESCB/ECB Statute. the subsidiaries and foreign institu- For a detailed portrayal, see the tions. chapter entitled Monetary Income In a comparison of staff levels on in the Eurosystem. December 31, 2000, and December 31, 2001, the number of persons em- 7. Staff costs ployed by the OeNB (including mem- Salaries, severance payments and the bers of the Governing Board, ad- employers social security contribu- justed for staff on secondment and tions and other statutory or contrac- in subsidiaries) declined by 12 per- tual social charges fall under this sons from 955 to 943 persons. heading. Staff costs were reduced by The average number of staff em- recoveries of salaries and employees ployed by the OeNB (excluding the pension contributions. members of the Governing Board) As of January 1, 1997, the pen- widened from 1,121 employees in sion contributions of employees who 2000 to 1,153 in 2001, a rise by joined the OeNB after March 31, 2.9% or 32 persons. Adjusted for 1993, and who qualify for a Bank employees on leave (such as mater- pension, were raised from 5% of nity leave and parental leave), 921 their total basic pay to 10.25% of that persons were employed on average part of their basic salaries which is (2000: 938 persons). The number belowtheearningscaponsocialse- of blue-collar workers declined by curity. A rate of 2% applies to income one person to ten workers. above the earnings cap. The emoluments of the four With effect from May 1, 1998, members of the Governing Board (in- new entrants are enrolled into the cluding remuneration in kind, such as national social security system and private use of company cars, subsi- in addition are covered by a defined dies to health and accident insurance)

Annual Report 2001 97 Financial Statements

pursuant to Article 33 paragraph 1 of 13. Central governments the Nationalbank Act totaled EUR share of profit 0.988 million (2000: EUR 1.013 andtransfertothe million). The emoluments of the pension reserve President and Vice President of the This item developed as follows in Oesterreichische Nationalbank 2001: amounted to EUR 0.046 million (2000: 2000 2001 Change EUR 0.045 million). EUR million % Outlays for sever- Transfer to the pension ance payments de- reserve under the provisions of the Nationalbank Act 14.537 — —14.537 —100.0 creased by EUR Central governments 0.282 million or share of profit 6.5% to EUR 4.051 under the provisions million in 2000. of the Nationalbank Act 988.429 975.009 —13.420 — 1.4 Statutory or Total 1,002.966 975.009 —27.957 — 2.8 contractual social charges totaling EUR 11.349 million (+EUR 1.156 Under Article 69 paragraph 3 of million) contain municipal tax pay- the Nationalbank Act, the central ments of EUR 2.443 million, social governments share of profit is 90% security contributions of EUR 5.145 of the net income for the year after million and contributions of EUR tax, as in the previous years. 3.669 million to the family burden equalization fund. 10. Banknote production services Expenses for banknote production services resulted from the purchase of euro banknotes from the OeBS. In 2000 this item had shown the cost of the last batch of schilling banknotes produced by the OeBS. 12. Corporate income tax A corporate income tax rate of 34% was applied to the taxable income according to Article 72 of the National- bank Act and in line with Article 22 paragraph 1 of the Corporation Tax Act 1988.

98 Annual Report 2001 Financial Statements

Governing Board (Direktorium)

Governor Klaus Liebscher Vice Governor Gertrude Tumpel-Gugerell Executive Director Wolfgang Duchatczek Executive Director Peter Zo‹llner

General Council (Generalrat)

President Adolf Wala Vice President Herbert Schimetschek August Astl Helmut Elsner Helmut Frisch Lorenz Fritz Rene Alfons Haiden Max Kothbauer (until May 17, 2001) Richard Leutner Johann Marihart Wer ner Muhm Walter Rothensteiner Karl Werner Ru‹sch Engelbert Wenckheim Johann Zwettler (from May 17, 2001)

In accordance with Article 22 paragraph 5 of the Nationalbank Act, the following representatives of the Staff Council participated in discussions on personnel, social and welfare matters: Thomas Reindl and Martina Gerharter.

Vienna, March 25, 2002

Annual Report 2001 99 Financial Statements

Report of the Auditors

We have audited the accounting records and the financial statements of the Oesterreichische Nationalbank for the year ending December 31, 2001, and have found that they are presented in accordance with the provisions of the Federal Act on the Oesterreichische Nationalbank of 1984 as amended and as promulgated in Federal Law Gazette I No. 60/1998. The financial statements were prepared in conformity with the accounting policies defined by the Governing Council of the European Central Bank, as set forth in the Guideline of the European Central Bank of 1 December 1998 on the legal framework for accounting and reporting in the European System of Central Banks as amended on 15 December 1999 and 14 December 2000 (ECB/2000/18), in conformity with Article 26.4 of the Protocol on the Stat- ute of the European System of Central Banks and the European Central Bank. In our opinion the accounts provide a true and fair view of the OeNBs financial position and the results of its operations. The annual report complies with the provisions of Article 68 paragraph 1 and paragraph 3 of the Nationalbank Act as amended and as promulgated in Federal Law Gazette I No. 60/1998 and corresponds with the financial statements.

Vienna, March 25, 2002

Pipin Henzl Peter Wolf Certified Certified Public Accountant Public Accountant

100 Annual Report 2001 Financial Statements

Profit for the Year and Proposed Profit Appropriation

With the statutory allocations of the OeNBs profit having been made in conformity with Article 69 paragraph 3 of the Nationalbank Act (item 13 of the profit and loss account), including the central governments share of EUR 975.009 million (2000: EUR 988.429 million), the balance sheet and the profit and loss account show a

Profit for the year 2001 of EUR 108,339,028.27. On April 3, 2002, the Governing Board endorsed the following proposal to the General Council for the appropriation of profit: to pay a 10% dividend on the OeNBs capital stock of EUR 12 million EUR 1,200,000. to allocate to the Leopold Collection EUR 4,194,888.91 to allocate to the reserve for nondomestic and price risks EUR 32,575,750.79 to allocate to the Fund for the Promotion of Scientific Research and Teaching EUR 70,250,000. to carry forward a retained profit of EUR 118,388.57 EUR 108,339,028.27

Annual Report 2001 101

Report of the General Council (Generalrat)

on the Annual Report

and the Financial Statements for 2001

The General Council (Generalrat) the certified public accounts Pipin fulfilled the duties incumbent on it Henzl and Peter Wolf, on the basis pursuant to the Nationalbank Act of the books and records of the 1984 by holding its regular meetings, Oesterreichische Nationalbank as by convening its subcommittees and well as the information and evidence by obtaining the information re- provided by the Governing Board. quired. In its meeting of April 25, 2002, The Governing Board (Direkto- the General Council approved the rium) periodically reported to the Annual Report of the Governing General Council on the Banks oper- Board and the Financial Statements ations and their current state, on for the business year 2001. The Gen- the conditions on the money, capital eral Council submits the Annual Re- and foreign exchange markets, on port and moves that the General important matters which arose in Meeting approve the Financial the course of business, on all devel- Statements of the Oesterreichische opments of importance for an ap- Nationalbank for the year 2001 and praisal of the monetary situation, on discharge the General Council and the arrangements made for supervis- the Governing Board from responsi- ing the OeNBs financial conduct and bility for management during the on any other significant dispositions preceding business year. Moreover, and events affecting its operations. the General Council requests that The Financial Statements for the the General Meeting approve the year 2001 were given an unqualified allocation of the profit for the year auditors opinion after examination in accordance with the proposal made by the auditors elected by the in the notes to the Financial State- General Meeting of May 17, 2001, ments 2001 (page 101).

Publications,

Imprint Periodical Publications

Published

Statistisches Monatsheft monthly

Focus on Statistics monthly English translation of Statistisches Monatsheft http://www.oenb.at Leistungsbilanz O‹ sterreichs, revidierte Jahresdaten annually gegliedert nach Regionen und Wa‹hrungen Berichte und Studien quarterly

Focus on Austria quarterly Selected chapters from Berichte und Studien Finanzmarktstabilita‹tsbericht semiannually

Financial Stability Report semiannually English translation of Finanzmarktstabilita‹tsbericht Focus on Transition semiannually

Gescha‹ftsbericht annually

Annual Report annually English translation of Gescha‹ftsbericht Volkswirtschaftliche Tagung annually

The Austrian Financial Markets — annually A Survey of Austrias Capital Markets — Facts and Figures

106 Annual Report 2001 Selected Publications of the OeNB in 2000 and 2001

For a comprehensive overview of the OeNBs publications, please refer to the December issue of the monthly statistical bulletin Statistisches Monatsheft, or the last issue of Berichte und Studien, or the first issue of Focus on Aus- tria of each year. This list is designed to inform readers about selected documents published by the OeNB. The publications are available to interested parties free of charge from the Secretariat of the Governing Board and Public Relations. Please submit orders in writing to the postal address given on the back of the title page. You may also order copies of publications by phone. For a complete list of the documents published by the OeNB, please visit the OeNBs website (http://www.oenb.at).

Focus on Austria (published quarterly) Economic and Monetary Union Recent Developments on the Meat Markets and Their Impact on Inflation in Austria and the Euro Area 1/2001 Economic Aspects of the Euro Cash Changeover in Austria 2/2001

Oesterreichische Nationalbank and Selected Monetary Aggregates The New Millennium — Time for a New Economic Paradigm? Results of the 28th OeNBs Economics Conference 3/2000 The Single Financial Market: Two Years into EMU — Results of the OeNBs 29th Economics Conference 2/2001 Official Announcements Regarding the Foreign Exchange Law and Minimum Reserve Requirements periodically Calendar of Monetary and Economic Highlights quarterly

Austrian Financial Institutions The Austrian Supervisory Risk Assessment System 1/2000 Risk Analysis of a Representative Portfolio of International Assets 2/2000 Calculating the Thresholds for the Notification of Mergers of Banks — The New Legal Situation 2/2000 Money and Credit quarterly

Austrian Capital Market Venture Capital in Austria 2/2000 Austrian Stock Market Survey and Outlook 4/2000

Austrian Bond Market Austrian Bond Market Developments 1/2001

Austrian Real Economy Financial Accounts in Accordance with ESA 95 — Financial Assets and Liabilities of the Sectors of the Austrian Economy; Results for 1998 1/2000

Annual Report 2001 107 Selected Publications

Economic Outlook for Austria from 2000 to 2002 (Spring 2000) 2/2000 Financial Accounts in Accordance with ESA 95 — Financial Assets and Liabilities of the Sectors of the Austrian Economy; Results for 1999 3/2000 Economic Outlook for Austria from 2000 to 2002 (Fall 2000) 4/2000 Economic Outlook for Austria from 2001 to 2003 (Spring 2001) 2/2001 Updating the Calculation of the Indicator for the Competitiveness of Austrias Economy 2/2001 Economic Outlook for Austria from 2001 to 2003 (Fall 2001) 3—4/2001 Financial Accounts in Accordance with ESA 95 — Financial Assets and Liabilities of the Sectors of the Austrian Economy; Results for 2000 3—4/2001 Economic Background quarterly

External Sector New Statistical Framework for the Portfolio Investment Position 4/2000 Austrias International Investment Position annually Austrian Outward and Inward Direct Investment annually Balance of Payments quarterly

Overview of Studies Published in Focus Issues Focus on Austria (issue 2/2000) The Monetary Policy of the Eurosystem Monetary Policy and Monetary Policy Strategy in EMU: New Framework — New Challenges The Credibility of the Eurosystem Monetary Growth during the Changeover to Economic and Monetary Union Indicators for Assessing Price Changes Estimate and Interpretation of the Taylor Rule for the Euro Area Modifications to the Monetary Policy Framework and Structural Changes in the Austrian Money Market in Stage Three of EMU

108 Annual Report 2001 Selected Publications

Focus on Austria (issue 3/2000) A New Capital Adequacy Framework as Proposed by Basel and Brussels Regulatory Capital Requirements for Austrian Banks — A Supervisory Tool Subject to Change Supervisory Review Credit Risk — Proposal on a Capital Charge for Credit Risk Put forward by the Basel Committee on Banking Supervision and the European Commission — Current Debate and Possible Implications for the Austrian Banking Industry Critical Evaluation of the Basel Committees and the European Commissions Proposals on the Treatment of Other Risks in the New Capital Adequacy Framework Interest Rate Risk in the Banking Book Focus on Austria (issue 2/2001) The New Framework for Fiscal Policy Fiscal Policy Design in the EU Measures and Strategies for Budget Consolidation in EU Member States Distributive Aspects of Economic Policy in EMU — An Analysis from an Employee Perspective Problems Relating to the Taxation of Cross-Border Capital Income Austrias Sovereign Debt Management Against the Background of Euro Area Financial Markets Cyclically Adjusted Budgetary Balances for Austria Focus on Austria (issue 3-4/2001) Aspects of the Transmission of Monetary Policy The Transmission Mechanism and the Role of Asset Prices in Monetary Policy Asymmetric Transmission of Monetary Policy throughBankLending— Evidence from Austrian Bank Balance Sheet Data Balance Sheet and Bank Lending Channels: Some Evidence from Austrian Firms Financial Innovation and the Monetary Transmission Mechanism Transmission Mechanism and the Labor Market: A Cross-Country Analysis Monetary Transmission and Fiscal Policy Principles for Building Models of the Monetary Policy Transmission Mechanism

Annual Report 2001 109 Selected Publications

Focus on Transition (published semiannually) Monetary Transmission and Asset-Liability Management by Financial Institutions in Transitional Economies — Implications for Czech Monetary Policy 1/2000 The Development of the Banking Sectors in Russia, Ukraine, Belarus and Kazakhstan since Independence 1/2000 The Effects of the EUs Eastern European Enlargement on Austria — Austrias Specific Position 1/2000 More Pre-Ins Ante Portas? Euro Area Enlargement, Optimum Currency Area, and Nominal Convergence 2/2000 A Critical Review of Unilateral Euroization Proposals: The Case of Poland 2/2000 Measuring Central Bank Independence in Selected Transition Countries 2/2000 The Development of the Croatian Banking Sector since Independence 2/2000 The Financial Sector in Five Central and Eastern European Countries: An Overview 1/2001 Intraindustry Trade between the EU and the CEECs The Evidence of the First Decade of Transition 1/2001 The Development of the Romanian and Bulgarian Banking Sectors since 1990 1/2001 Similarity of Supply and Demand Shocks Between the Euro Area and the Accession Countries 2/2001 Determinants of Real Exchange Rates in Transition Economies 2/2001 Old-Age Pension Systems in the Czech Republic, Hungary and Poland 2/2001 Transcarpathia — Ukraines Westernmost Region and a Gateway to Central And Western Europe 2/2001

110 Annual Report 2001 Selected Publications

Working Papers No. 40 Central Banks in European Emerging Market Economies in the 1990s 2000 No. 41 Is there a Credit Channel in Austria? The Impact of Monetary Policy on Firms Investment Decisions 2000 No. 42 Integration, Disintegration and Trade in Europe: Evolution of Trade Relations During the 1990s 2000 No.43TheBank,theStates,andtheMarket: An Austro-Hungarian Tale for Euroland, 1867—1914 2001 No. 44 The Euro Area and the Single Monetary Policy 2001 No. 45 Is There an Asymmetric Effect of Monetary Policy over Time? A Bayesian Analysis Using Austrian Data 2001 No. 46 Exchange Rates, Prices and Money. A Long Run Perspective 2001 No. 47 The ECB Monetary Policy Strategy and the Money Market 2001 No. 48 A Regulatory Regime for Financial Stability 2001 No. 49 Arbitrage and Optimal Portfolio Choice with Financial Constraints 2001 No. 50 Macroeconomic Fundamentals and the DM/$ Exchange Rate: Temporal Instability and the Monetary Model 2001 No. 51 Assessing Inflation Targeting after a Decade of World Experience 2001 No. 52 Beyond Bipolar: A Three-Dimensional Assessment of Monetary Frameworks 2001 No. 53 Why Is the Business-Cycle Behavior of Fundamentals Alike Across Exchange-Rate Regimes? 2001 No. 54 New International Monetary Arrangements and the Exchange Rate 2001 No. 55 The Effectiveness of Central Bank Intervention in the EMS: The Post 1993 Experience 2001

Annual Report 2001 111 Selected Publications

Other Publications Architektur des Geldes — Vom klassizistischen Palais zum zeitgeno‹ssischen Geldzentrum The Architecture of Money — From the Classicistic Bank Palace to the Modern Money Center The Austrian Financial Markets — A Survey of Austrias Capital Markets — Facts and Figures Guidelines on Market Risk (six volumes) The New Millennium — Time for a New Economic Paradigm? Results of the 28th OeNBs Economics Conference The Single Financial Market: Two Years into EMU — Results of the 29th OeNBs Economics Conference

112 Annual Report 2001 Publisher and editor: Oesterreichische Nationalbank Otto-Wagner-Platz 3, A-1090 Vienna Editor in chief: Wolfdietrich Grau, Secretariat of the Governing Board and Public Relations Edited by: Karin Fischer, Christiana Weinzetel, Economic Analysis Division Otto-Wagner-Platz 3, A-1090 Vienna Translated by: Dagmar Dichtl, Ingrid Haussteiner, Irene Mu‹hldorf, Ingeborg Schuch and Susanne Steinacher, Foreign Research Division Technical editors: Manfred Fluch, Economic Analysis Division Helmut Gruber, Treasury — Strategy Division Gerhard Havelka, Organization Division Oliver Huber, Secretariat of the Governing Board and Public Relations Georg Hubmer, Financial Markets Analysis and Surveillance Division Martin Taborsky, Section Cashiers Division Branch Offices Beat Weber, European Affairs and International Financial Organizations Division Manfred Zipko, Financial Statements Division Viktor Zorn, Planning and Controlling Division Layout and design: Peter Buchegger, Secretariat of the Governing Board and Public Relations Walter Grosser, Printing Office Photographs: Herbert Fidler, Foto Simonis, Ulrich Schnarr Oesterreichische Nationalbank, GELDSERVICE AUSTRIA Logistik fu‹r Wertgestionierung und Transportkoordination G.m.b.H. European Central Bank, Claudio Hills Mu‹nze O‹sterreich AG Paper: Salzer Demeter, 100% woodpulp paper, bleached without chlorine, acid-free, without optical whiteners Typesetting, printing and production: Oesterreichische Nationalbank, Printing Office Published and produced at: Otto-Wagner-Platz 3, A-1090 Vienna Inquiries: Oesterreichische Nationalbank, Secretariat of the Governing Board and Public Relations Otto-Wagner-Platz 3, A-1090 Vienna Postal address: P. O. Box 61, A-1011 Vienna Telephone: (+43-1) 404 20, ext. 6666 Fax: (+43-1) 404 20, ext. 6696 Orders: Oesterreichische Nationalbank, Documentation Management and Communications Services Otto-Wagner-Platz 3, A-1090 Vienna Postal address: P. O. Box 61, A-1011 Vienna Telephone: (+43-1) 404 20, ext. 2345 Fax: (+43-1) 404 20, ext. 2398 Internet: http://www.oenb.at DVR 0031577

Vienna 2002