OeNB reliably fulfills its core tasks despite COVID-19 pandemic

OeNB achieved good results amid difficult interest rate environment in 2019

“The COVID-19 pandemic is tightening its grip on Austria, Europe and the world. Drastic containment measures have made it necessary to severely restrict our economic and social life, and they will have a long-lasting impact,” said Robert Holzmann, Governor of the Oesterreichische Nationalbank (OeNB), in summing up the dramatic situation during the presentation of the OeNB’s 2019 financial statements and Annual Report.

“At present, all these substantial efforts serve a common goal: to ensure people’s health and to largely absorb the massive, but temporary economic effects of the crisis. I am convinced that by maintaining the discipline we have shown so far and by fully implementing the measures set out by the federal government, we will be able to overcome the COVID-19 crisis. It is therefore a top priority for all of us to join forces now to cope with this difficult situation as best we can. The economic crisis does not stop at national borders. This is why at the European Central Bank (ECB), we have taken immediate action by adopting two packages worth EUR 120 billion and EUR 750 billion, respectively. These measures have already begun to be effective,” explained Governor Holzmann.

“At the current juncture, it is still too early to reliably assess the implications the COVID-19 crisis will have for the economy. First estimates by OeNB forecasters point to a sharp decline in real GDP in Austria by more than 3% in a moderate COVID-19 scenario. This marked contraction of economic output might be followed by a comparably strong rebound in 2021, again in a moderate scenario. This forecast is, of course, subject to a high degree of uncertainty. The underlying assumption was that the federal government will be able to lift most of the containment measures in the course of the second quarter; should this assumption not materialize, the forecast would have to be revised downward significantly. Given the editorial close for the OeNB’s 2019 Annual Report in mid-February 2020, the assessments of the prospects for 2020 and beyond made in the report have meanwhile become obsolete in view of the corona crisis,” Holzmann concluded.

As a central economic policymaking institution, the OeNB is playing its part in helping overcome the crisis. Even though internal measures had to be taken and large numbers of staff are working from home, the OeNB has been able to ensure the critical infrastructures in cash logistics and payment services. Moreover, the OeNB will implement the monetary policy measures and the supervisory measures adopted by the Governing Council of the ECB in March 2020.

OeNB records solid operating profit in 2019
“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,” said OeNB Executive Director Thomas Steiner. The balance sheet total reached a historic high of around EUR 155 billion as at December 31, 2019, up another 3.3% year on year. The gold valuation price alone (EUR 43,500 per kg as at December 31, 2019) drove up total assets by more than EUR 2 billion, while the rise in euro banknotes in circulation accounted for an increase in the balance sheet total of around EUR 3 billion.

As expenses went down significantly, the OeNB was able to report a solid operating profit of EUR 328 million in 2019 – up 15.7% against the comparable figure in 2018. This result is also reflected in the total share of EUR 248 million allocated to the Republic of Austria for 2019; of this total, the central government’s 90% share of profit amounts to EUR 182 million, and corporate income tax equals EUR 65 million. In line with the National Foundation Act, the OeNB will transfer EUR 30.3 million of the central government’s share of profit to the National Foundation for Research, Technology and Development (FTE-Nationalstiftung), in addition to a payment of EUR 36.4 million resulting from investments of the OeNB Anniversary Fund for the Promotion of Scientific Research and Teaching. The total amount transferred thus comes to EUR 66.7 million.

Despite persistently low interest rates, the OeNB’s net interest income remained largely stable, amounting to EUR 681 million in the reporting year (2018: EUR 720 million). 2019 marks the fourth consecutive year in which more than half of this result has been attributable to income stemming from monetary policy instruments.

The decrease in expenses mainly resulted from lower expenses for retirement, which totaled EUR 99 million in 2019 (2018: EUR 139 million). In particular, sound investment income from the pension reserve helped reduce pension expenses year on year.

Great challenges for OeNB business areas
Top priority will now be given to the rapid implementation of the monetary policy measures the Eurosystem adopted in early March and mid-March 2020, namely two additional asset purchase programs worth EUR 120 billion and EUR 750 billion, respectively. These two major packages have contributed directly to restoring a certain degree of calm in the financial markets.

The Eurosystem is currently reviewing its monetary policy strategy. This review process has now somewhat receded to the background as the current problems caused by the corona crisis have taken precedence. The OeNB has been involved in this review process and plans to invite the social partners and other important Austrian institutions, as representatives of Austria as a whole, to present their views on the Eurosystem’s monetary policy at an event to take place in early July 2020 (if possible).

In the area of banking supervision, the reform that had been pursued in 2018 has been discontinued. “The successful cooperation between the OeNB and the Austrian Financial Market Authority (FMA) has been analyzed in detail; as a result, we have gained an even better understanding of our mutual requirements and underlying procedures and processes. The enhancements made underline our commitment to productive and efficient cooperation,” said OeNB Vice Governor Gottfried Haber.

The crisis resilience of Austrian banks is significantly higher today than it was ten years ago. Banks’ capitalization has been doubled, and banks have become more efficient and more effective. “In the current environment, past efforts are paying off and helping combat the crisis. At the same time, supervisors will use the leeway they have in setting measures to temporarily ease regulatory requirements for banks,” Vice Governor Haber explained.

The OeNB continues to ensure cash supply and payment services. “We have taken all necessary measures – regarding both human resources and technical resources – to be able to maintain these services. The OeNB continues to stand ready to provide the population and the economy with cash and to maintain payment services. We keep the economy’s money cycle going,” said OeNB Executive Director Eduard Schock, who is in charge of cash and payment services at the OeNB.

The OeNB has taken comprehensive organizational measures to ensure that it will be able to fully exercise all its tasks also in the future.

At the end of the press conference, OeNB Governor Holzmann thanked – also on behalf of the OeNB’s General Council and Governing Board – the entire OeNB staff for their strong commitment and performance in 2019 and for helping ensure key services for the Austrian population and economy, namely cash supply and payment services, despite the currently difficult conditions.