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ANNUAL REPORT 2019 Including the Intellectual Capital Report and the Environmental Statement SUSTAINABILITY REPORT 2019

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ANNUAL REPORT 2019 Including the Intellectual Capital Report and the Environmental Statement SUSTAINABILITY REPORT 2019 M OSYSTE R EU OESTERREICHISCHE NATIONALBANK EUR OSY STEM ANNUAL REPORT 2019 including the Intellectual Capital Report and the Environmental Statement SUSTAINABILITY REPORT 2019 Stability and Security. 2019 The OeNB’s legal mandate Federal Act on the Oesterreichische Nationalbank – selected provisions (1984 Nationalbank Act) Federal Law Gazette No. 50/1984, as amended by Federal Law Gazette Part I No. 37/2018 Article 2 (1) The Oesterreichische Nationalbank is a stock corporation; it is the central bank of the Republic of Austria and, as such, an integral part of the European System of Central Banks (ESCB). (2) The Oesterreichische Nationalbank shall, in accordance with the provisions of the TFEU [i.e. the Treaty on the Functioning of the European Union], the ESCB/ECB Statute [i.e. the Statute of the European System of Central Banks and of the European Central Bank], the directly applicable European Union (EU) legislation adopted thereunder, and this federal act, be obliged to work towards the achievement of the objectives and fulfillment of the tasks of the ESCB. Within the framework of EU law [...], the Oesterreichische Nationalbank shall use all the means at its disposal to maintain the objective of price stability. To the extent that this does not interfere with the objective of price stability, the needs of the national economy with regard to economic growth and employment trends shall be taken into account and the general economic policies in the European Union shall be supported. (5) In pursuing the objectives and performing the tasks set out [...], the Oesterreichische Nationalbank shall act in accordance with the guidelines and instructions of the ECB [...]; in doing so, neither the Oesterreichische Nationalbank nor any member of its decision-making bodies shall seek or take instructions from EU institutions or bodies, from any government of a Member State of the European Union, or from any other body. Article 44a (1) The Oesterreichische Nationalbank shall be in charge of performing payment systems over- sight. Payment systems oversight involves monitoring the systemic safety of payment systems. Article 44b (1) In the public interest, the Oesterreichische Nationalbank shall monitor all circumstances that may have an impact on safeguarding financial stability in Austria. Article 44c (1) Without prejudice to Article 44b, the Oesterreichische Nationalbank contributes to maintaining financial stability and reducing systemic and procyclical risk in Austria [...]. Apart from the Nationalbank Act and a number of EU legal acts (EU regulations, Statute of the ESCB and of the ECB), further tasks of the OeNB are based on the following pieces of national legislation: • Banking Act (BWG) • Financial Market Authority Act (FMABG) • Bank Recovery and Resolution Act (BaSAG) • Deposit Guarantee Schemes and Investor Compensation Act (ESAEG) • Alternative Investment Fund Managers Act (AIFMG) • Sanctions Act (SanktG) • E-Money Act (E-GeldG 2010) • Payment Services Act 2018 (ZaDiG 2018) • Settlement Finality Act (FinalitätsG) • Insurance Supervision Act (VAG 2016) • Exchange Control Act 2004 • European Recovery Program (ERP) Fund Act 2 OESTERREICHISCHE NATIONALBANK The OeNB’s Mission Statement The Oesterreichische Nationalbank (OeNB) contributes essentially to securing price stability and financial stability. MISSION • The OeNB is the independent central bank of the Republic of Austria. • Together with the European Central Bank (ECB) and the other euro area central banks, we safeguard the stability of the euro and thus support sound economic development. • In cooperation with the ECB and the Austrian Financial Market Authority, we ensure the stability of banks and financial markets. • We and our subsidiaries provide secure cash and smoothly functioning payment services. • We invest and manage the national monetary and gold reserves professionally in accordance with our stability mandate and furnish banks with central bank liquidity as needed. • As a central economic policy-making institution, we seek to provide economic and financial expertise and guide policymakers with high-quality, reliable statistics. • We support financial literacy by offering a broad range of information and education services. VALUES • We are committed to the European project and actively support the European integration process. • To maintain price and financial stability in Austria and in Europe, we pursue effectiveness and efficiency in our work. • Our endeavors are founded on technical expertise and social competence, transparency and responsible corporate governance. • We welcome change and embrace forward thinking. • Our staff and their skills and commitment are our biggest asset. • We are an equal opportunity employer, value diversity, and assist our employees in combining a career with family life. • Our social responsibility is also reflected in our support for science and research, humanitarian concerns, art, culture and environmental protection. ANNUAL REPORT 2019 3 29 OESTERREICHISCHE NATIONALBANK Contents Foreword by the President 6 Foreword by the Governor 8 The OeNB’s General Council 10 The OeNB’s ownership structure and decision-making bodies 11 The OeNB’s organization 14 The OeNB at a glance 16 Austria as a business and financial location 17 How Austrians bank and pay in an increasingly digital world 19 The OeNB contributes to safeguarding price stability and financial stability Headwinds for growth and inflation in the euro area 27 Hello €STR, good-bye EONIA! 31 Austria moves to a slower growth path in 2019 33 Stagnant German economy weighs on output growth in Austria 36 External effects on the Austrian economy in 2019 39 Looking back on 30 years of transition in CESEE: remarkable economic achievements 41 Diversified reserve management in times of weakening economic growth and ample monetary accommodation 45 The OeNB is walking the talk on green finance 48 Austrian banks face rising risks amid favorable economic conditions 51 Macroprudential measures strengthen Austria’s financial stability 53 Austria’s Financial Market Stability Board and its contribution to mitigating systemic risk in the past five years 55 Risk resilience of Austria’s banking sector confirmed by the IMF’s FSAP and by stress tests 55 European banking supervision has been very effective 57 OeNB statistics trace economic and financial activities in Austria 61 Secure and efficient payment services in Austria 65 The OeNB – a sustainable enterprise The OeNB – an expert organization 75 Risik management 79 Keeping Austrians informed – the OeNB reaches out to the general public and target groups 81 The OeNB promotes research, the economy, science, art and culture 85 Environmental Statement 2019 – the OeNB as an ecological organization 87 Direct and indirect equity interests 93 Financial statements of the OeNB for 2019 95 Notes Abbreviations, legend 142 Periodical publications 143 Addresses 145 Editorial close: February 13, 2020 29 OESTERREICHISCHE NATIONALBANK ANNUAL REPORT 2019 5 Foreword by the President Harald Mahrer Ladies and gentlemen, In 2019, the difficult global macroeconomic environment resulting from mounting trade tensions between the U.S.A. and China and several Brexit extensions weighed on economic activity in the euro area. In addition, the faltering German economy had an impact on neighboring countries, including Austria. The reporting year also saw climate change take center stage in the policy debate and new leaders take over at the European Com- mission, the ECB and the IMF. In this challenging overall environment, Austria’s economy proved competitive and robust, with Austria’s GDP growth mildly outperforming the euro area average. Amid dwindling global demand, growth will weaken slightly in 2020, but, according to recent forecasts, it will pick up speed again in the coming years. For the Oesterreichische Nationalbank (OeNB), the year 2019 was all about change. In September 2019, the Eurosystem adopted another package of expansionary monetary policy measures to be implemented by the national central banks. A review of the Eurosystem’s monetary policy strategy was first discussed in 2019 and will intensify in 2020 under the auspices of the new President of the ECB. Discussions will also focus on central bank digital currency (CBDC) and on how to consider “green finance” in monetary policy while main- taining both price and financial stability. In banking supervision, emphasis was put on strengthening banks’ long-lasting resilience, ensuring sustai- nable lending, tackling digitalization and IT risks as well as implementing the finalized Basel III reform package. Some ten years after the financial crisis, the banking system is robust and healthy. Austria’s present banking supervisory setup and financial market received an outstanding rating under the Financial Sector Assessment Program (FSAP) conducted by the IMF in 2019. Concluding a joint Memorandum of Understanding, the OeNB and the Austrian Financial Market Authority (FMA) optimized their cooperation and laid down the supervisory objectives for 2020. Financial intermediaries will need to adopt methods to effectively manage climate change- related financial risks. The OeNB will also continue monitoring the fintech ecosystem, i.e. technology-driven innovations in financial services. In 2019, the OeNB achieved another solid operating profit thanks to its investment strategy, which relied on stepped-up diversification and risk reduction measures given the difficult market conditions. The new EUR 100 and EUR 200 banknotes
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