Annual Report 2001 - oenb.at

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O e s t e r r e i c h i s c h e Nat i ona l b a n k

E u r o s y s t e m

A n n u a l R e p o r t 2 0 0 1A n n u a l R e p o r t 2 0 0 1

ˆ

Report on the Financial Year 2001

with Annual Statement of Accounts 2001

Submitted to the General Meeting on May 23, 2002

Now that Europe�s monetary union1)has been established for three years,we have come to take it almost forgranted. However, the gloomier inter-national economic situation and theuncertainty which spread across theglobe in the wake of the terrorist inci-dents in the U.S.A. have impressed onus just how crucial the European inte-gration project is in a globalized worldeconomy.

After the economy had performedespecially well in 2000, the reportingyear 2001 was marked by a significantcooling. The downturn originated inthe U.S.A., where a decade-longexpansion came to an end, and spreadthroughout the world. A hefty andunexpected rise in oil prices triggereda slowdown of economic activity; atthe same time, the correction of over-investment in the IT sector and tum-bling stock prices hit the real economy.

Europe, and with it Austria, couldnot fully escape the effect of the U.S.slowdown. However, stable economicfundamentals and judicious action byeconomic policymakers prevented theeconomy from sliding into a full-scalerecession. Three years of a robust eco-nomic expansion were followed by adeceleration to 1% growth in Austriain 2001, but clues pointing toward asignificant recovery were observedagain after the beginning of 2002. De-spite the slackening, Austrian eco-nomic policymakers stayed their stabil-ity-oriented course in applying thepolicy mix. Here, the progress madein budget consolidation was particu-larly noteworthy.

Developments in Central and East-ern Europe (the CEECs) stood out asespecially positive in the overall Euro-pean economic landscape. In the cur-rent economic situation, these coun-tries represent a stabilizing factor.Moreover, the region�s stability gainsof the past years bear witness to the

substantial structural progress theCEECs have already made on the roadto EU membership.

Of course, the CEECs� participa-tion in European integration must becarefully and diligently prepared. Forenlargement to work and for the inte-gration of economies at various levelsof development to be a lasting success,it is in the interest of the EU and theapplicant nations to establish sustain-able framework conditions. Quite ap-parently, decision-makers on all sidesare aware of the challenge that enlarge-ment poses. If we succeed in complet-ing this decisive step of EU enlarge-ment, Europe�s economic and politicalposition in the world will be strength-ened enormously.

In the OeNB as a modern serviceprovider, the year 2001 will be remem-bered as the final stage of intense prep-arations for the project of the century,the introduction of euro banknotes andcoins. Professional spadework and effi-cient structures put in place well in ad-vance enabled the OeNB to rise to thischallenge. The OeNB�s close coopera-tion with its subsidiaries in the area ofpayment instruments and with Austrianbanks facilitated the smooth transitionto the euro for businesses and the gen-eral public.

The OeNB fulfills its varied dutiesat the European level with the samecommitment with which it handledthe euro project. These responsibilitiesrange from the active role the OeNBplays in the ESCB/Eurosystem to themanifold duties it carries out at thenational level. As highlighted by thesuccessful switch to euro cash, servingthe interest of the Austrian public andoptimizing results for Austria arethe prime motives of the OeNB�s activ-ities.

Adolf WalaPresident

Statement

1 Stage Three of Economicand Monetary Union(EMU) began onJanuary 1, 1999.

4 Annual Report 2001�

Certainly the most oustanding event ofthe business year 2001 was the uniqueorganizational, logistical and public re-lations challenge of introducing eurobanknotes and coins on January 1,2002. We may note with pride and de-light that the euro changeover pro-ceeded smoothly in Austria, as it didin all 12 euro area countries, and thatthe Austrian people have become usedto the new currency very quickly. SinceMarch 1, 2002, the euro has been thesole legal tender for roughly 300 mil-lion Europeans. Using real euro cashmarks the culmination of a long processof monetary integration in Europe andhelps make �Europe� a palpable con-cept for its citizens.

The first three years of Economicand Monetary Union have impressivelyshown that the European integrationprocess rests soundly on the pillars ofa stability-oriented monetary and fiscalpolicy and a competitiveness-orientedstructural policy.

The independent Eurosystemquickly established itself as a stableanchor, and it demonstrated its abilityto act and react flexibly in the face ofrapid change in the economic environ-ment and the tragedy of September 11,2001. These circumstances manifestlyshowed that our country�s inclusion inthe stability-oriented Economic andMonetary Union has protected it fromnegative shocks much more adequatelythan was possible under past regimes.In fulfilling its numerous and varied re-sponsibilities at the European and at thenational level, the OeNB contributedactively to overcoming these shocks.

The single monetary policy of theEurosystem has remained steadfastlyfocused on the primary objective

of price stability and as a result onmaintaining the purchasing power ofthe population of the euro area.Although inflation temporarily rosewell over the 2% reference value, fore-casts signal that it will soon drop belowthe 2% target again.

Despite the downturn spreadingacross the world, the euro area didnot slide into recession last year. Thebusiness cycle appears to have bot-tomed out, and the long-term cyclicaloutlook for the euro area is in fact quiteupbeat.

As part of the stepped-up coordina-tion of national economic policies, themost important measures slated forthe upcoming years are to continuepublic sector consolidation in line withthe provisions of the Stability andGrowth Pact and to redouble effortson structural reform with the aim ofboosting the euro area�s internationalcompetitiveness.

A further challenge Europe faces inthe near future is the enlargement ofthe European Union over the nextfew years. A thoroughly preparedenlargement oriented on the EU�swell-established quality standards willsustainably enhance Europe�s politicaland economic stability and will thusreinforce the foundation for lastingwelfare and peace.

The euro will continue to play acentral role as a catalyst for economicand political integration in Europe, asan international stability anchor and,last but not least, as a token of iden-tity for a modern, dynamic, openEurope.

Klaus LiebscherGovernor

Statement

Annual Report 2001 5�

Conventions used in the tables— = zerox = not applicable0 = negligibleDiscrepancies may arise from rounding.

Abbreviations

AG Aktiengesellschaft (roughly:stock corporation)

ARTIS Austrian Real-Time Interbank Settle-ment (the Austrian RTGS system)

APSS Austrian Payment Systems ServicesA-SIT Zentrum fu‹r sichere Informations-

technologie Austria — Center forSecure Information Technology Austria

ATM automated teller machineATX Austrian Traded IndexBCBS Basel Committee on Banking

Supervision (BIS)BIS Bank for International SettlementsBMF Bundesministerium fu‹r Finanzen —

Austrian Federal Ministry of FinanceBMPE Broad Macroeconomic Projection

ExerciseBSE bovine spongiform encephalopathyCDG Christian Doppler Research SocietyCEECs Central and Eastern European

countriesCIT cash in transitCMIT Committee on Capital Movements and

Invisible Transactions (OECD)CRM credit risk measurementECB European Central BankEcofin Council of Economic and Finance

Ministers (EU)EFC Economic and Financial Committee

(EU)EMAS Eco-Management and Audit SchemeEMU Economic and Monetary UnionEONIA Euro OverNight Index AverageEPC Economic Policy Committee (EU)ERM II Exchange Rate Mechanism II (EU)ESCB European System of Central BanksEU European UnionEURIBOR Euro Interbank Offered RateEurostat Statistical Office of the European

CommunitiesECB European Central BankFed Federal Reserve System (the central

Bank of the United States)FMA Financial Market AuthorityFOMC Federal Open Market CommitteeGDP gross domestic productGSA GELDSERVICE AUSTRIA Logistik fu‹r

Wertgestionierung und Transport-koordination G.m.b.H.(cash services company)

HICP Harmonized Index of Consumer PricesIFES Institut fu‹r empirische Sozialforschung

GesmbH (Institute for Empirical SocialResearch)

IHS Institute of Advanced StudiesIMF International Monetary FundIRB internal ratings-basedIRC International Relations CommitteeIT information technologyLGD loss given defaultLTRO longer-term refinancing operationM3 broad monetary aggregate M3MFI monetary financial institutionMO‹ AG Mu‹nze O‹ sterreich AG — Austrian MintMPC Monetary Policy Committee (ECB)MRO main refinancing operationNCBs national central banksNIPE Narrow Inflation Projection ExerciseOECD Organisation for Economic

Co-operation and DevelopmentOeNB Oesterreichische NationalbankOeBS Oesterreichische Banknoten- und

Sicherheitsdruck GmbH — AustrianBanknote and Security Printing Works

O‹ BB O‹ sterreichische Bundesbahnen —federal railroad corporation

ORF O‹ sterreichischer Rundfunk —Austrian Broadcasting Corporation

POS point of saleRTGS Real-Time Gross SettlementSTUZZA Studiengesellschaft fu‹r Zusammenar-

beit im Zahlungsverkehr G.m.b.H. —Austrian Research Associationfor Payment Cooperation

SDR Special Drawing Right (IMF)TARGET Trans-European Automated Real-time

Gross settlement Express TransferTreaty Treaty establishing the European

CommunityUMTS Universal Mobile Telecommunications

SystemWIFO O‹ sterreichisches Institut fu‹r

Wirtschaftsforschung — AustrianInstitute of Economic Research

WIIW Wiener Institut fu‹r internationaleWirtschaftsvergleiche — The ViennaInstitute for International EconomicStudies

WKO‹ Wirtschaftskammer O‹ sterreich —Austrian Federal Economic Chamber


General Council (Generalrat), State Commissioner,

Governing Board (Direktorium), Personnel Changes,

Organizational Structure of the Bank

General Council (Generalrat), State Commissioner 10Governing Board (Direktorium), Personnel Changes 11Organization Chart 12

Report of the Governing Board (Direktorium)

for the Financial Year 2001

Smooth Euro Cash Changeover 17From Exact Planning to Successful Realization 17The OeNB — Making the Euro Yours: Intensive and Broadly Based Information Activities 23Swift Acceptance of Euro Cash and Great Confidence in the OeNB 25

Monetary Policy Secures Stability 27Eurosystem Monetary Policy: Looking Back on Three Successful Years 27Difficult Global Economic Conditions in 2001 29The Forward-Looking Monetary Policy of the EurosystemIs Effective and Secures Price Stability 30Monetary Policy Aspects of the Euro Cash Changeover 35Key Developments in Austria:The Economic Background — the Budget — the Current Account 37

The OeNB Contributes to Financial Stability 42Stable Financial Markets Are a Prime Objective 42An Active Role in the Basel II Process 42Financial Market Supervision: New Developments 45The OeNB Is Entrusted with Payment Systems Oversight 46Fundamental Developments of Financial Intermediaries 47

Responsibilities Handled Efficiently 53The OeNB�s Tasks: An Overview 53An Efficient Organization 56A New Footing for Communication with Customers and Partners 58The OeNB�s Subsidiaries: Innovative Enterprises 59A Strategic Position for the Future 61

The OeNB as an International Partner in Cooperation and Dialogue 63The OeNB as an Active Partner in European Integration 63Strong International Ties 64Expertise for Central and Eastern Europe 64

Financial Statements of the Oesterreichische Nationalbank

for the Year 2001

Balance Sheet as at December 31, 2001 68Profit and Loss Account for the Year 2001 70Notes to the Financial Statements 2001 71

General Notes to the Financial Statements 71Realized Gains and Losses and Revaluation Differences and their Treatmentin the Financial Statements of December 31, 2001 73Capital Movements 74Development of the OeNB�s Currency Positions in the Business Year 2001 74Monetary Income in the Eurosystem 75The Introduction of Euro Banknotes and Coins on January 1, 2002 —Impact on the Financial Statements for 2001 76Notes to the Balance Sheet 77Notes to the Profit and Loss Account 95Governing Board (Direktorium), General Council (Generalrat) 99Report of the Auditors 100Profit for the Year and Proposed Profit Appropriation 101

Report of the General Council (Generalrat)

on the Annual Report and the Financial Statements for 2001

103Publications

Periodical Publications 106Selected Publications of the OeNB in 2000 and 2001 107

Contents

Editorial close: April 25, 2002


ˆ

General Council (Generalrat),

State Commissioner,

Governing Board (Direktorium)

and Personnel Changes,

Organizational Structure of the Bank

General Council (Generalrat), State Commissioneron December 31, 2001

Adolf WalaPresident

Herbert SchimetschekVice President

Chief Executive Director

of UNIQA Versicherungen AG

August AstlSecretary General of the Board of Presidents

of the Austrian Chamber of Agriculture

Helmut ElsnerChief Executive Director

of Bank fu‹r Arbeit und Wirtschaft AG

Helmut FrischChairman of the Supervisory Board

of Vienna Technical University

Lorenz R. FritzSecretary General

of the Federation of Austrian Industry

Rene Alfons HaidenRetired Chief Executive Director

of Bank Austria AG

Richard LeutnerSecretary

of the Austrian Trade Union Federation

Johann MarihartChief Executive Director

of Agrana Beteiligungs-AG

Werner MuhmDeputy Chief

of the Chamber of Labor of Vienna

Walter RothensteinerChief Executive Director

of Raiffeisen Zentralbank O‹ sterreich AG

Karl Werner Ru‹schFormer Member of the Government

of Vorarlberg

Former Second Vice President of the OeNB

R. Engelbert WenckheimBoard Member

of Getra‹nkeindustrie Holding AG

Johann ZwettlerBoard 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 CommissionerWalter RuessDirector

in the Ministry of Finance

Deputy State CommissionerHeinz HandlerDirector General

in the Federal Ministry for Economic Affairs

and Labour



on December 31, 2001

Klaus Liebscher Wolfgang DuchatczekGovernor Executive Director

Gertrude Tumpel-Gugerell Peter Zo‹llnerVice Governor Executive Director

Personnel Changesbetween April 19, 2001 and April 25, 2002

General Council member Max Kothbauer resigned his seat on theGeneral 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 ofVienna, Lower Austria and Burgenland, was appointed to the officeof State Commissioner with effect from April 1, 2002, replacingWalter Ruess in this position.

In its session of April 9, 2002, the federal government decidedto appoint Bernhard Felderer, director of the Institute for AdvancedStudies, and Herbert Kofler, head of the section financial accountingand the tax system of the University of Klagenfurt, to the GeneralCouncil with effect from April 23, 2002. Moreover, the federalgovernment reappointed Werner Muhm to the General Council witheffect from April 23, 2002. The terms of office of Rene AlfonsHaiden and Richard Leutner ended on April 22, 2002.


PresidentAdolf Wala

Office of the PresidentRichard Mader, Head

Vice PresidentHerbert Schimetschek

Governing Board (Direktorium)Central Bank Policy DepartmentKlaus Liebscher, Governor

Office of the GovernorWolfgang Ippisch, Head

Internal Audit DivisionWolfgang Winter, Head

Secretariat of the Governing Board and Public RelationsWolfdietrich Grau, Head

Planning and Controlling DivisionGerhard Hoha‹user, Head

Anniversary FundWolfgang Ho‹ritsch, Head

SectionAccountingMichael Wolf, Director

Financial Statements DivisionFriedrich Karrer, Head

Accounts DivisionOtto Panholzer, Head

SectionLegal Matters and Management of Equity InterestsBruno Gruber, Director

Legal DivisionHubert Mo‹ lzer, Head

Management of Equity Interests

Economics and Financial Markets DepartmentGertrude Tumpel-Gugerell, Vice Governor

SectionEconomic Analysis and ResearchPeter Mooslechner, Director

Economic Analysis DivisionErnest Gnan, Head

Economic Studies DivisionEduard Hochreiter, Head

European Affairs and International Financial Organizations DivisionFranz Nauschnigg, Head

Foreign Research DivisionN. N.

Brussels Representative OfficeReinhard Petschnigg, Representative

Paris Representative OfficeAndreas Breitenfellner, Representative

SectionFinancial Institutions and MarketsAndreas Ittner, Director

Financial Markets Analysis and Surveillance DivisionHelga Mramor, Head

Banking Analysis and Inspections DivisionPeter Mayerhofer, Head

Credit DivisionFranz Richter, Head

UnitFuture UnitPeter Achleitner, Director

Organization Chart


Money, Payment Systems and Information Technology DepartmentWolfgang Duchatczek, Executive Director

SectionPayment Systems and Information TechnologyWolfgang Pernkopf, Director

Systems Development DivisionReinhard Auer, Head

Technical Support DivisionRudolf Kulda, Head

Payment Systems DivisionAndreas Dostal, Head

SectionCashier�s Division and Branch OfficesAlfred Scherz, Director

Cashier�s DivisionStefan Augustin, Head

Printing OfficeGerhard Habitzl, Technical Manager

St. Po‹ lten Coordination of BranchesHorst Walka, Branch Manager

BregenzHelmut Ho‹pperger, Branch Manager

EisenstadtFriedrich Fasching, Branch Manager

GrazGerhard Schulz, Branch Manager

InnsbruckGu‹nther Federer, Branch Manager

KlagenfurtGu‹nter Willegger, Branch Manager

LinzAxel Aspetsberger, Branch Manager

SalzburgElisabeth Kollarz, Branch Manager

Investment Policy and Internal Services DepartmentPeter Zo‹ llner, Executive Director

Personnel DivisionMaria Zojer, Head

SectionTreasuryRudolf Trink, Director

Treasury — Strategy DivisionRudolf Kreuz, Head

Treasury — Front OfficeWalter Sevcik, Head

Treasury — Back OfficeGerhard Bertagnoli, Head

London Representative OfficeElisabeth Antensteiner, Representative

New York Representative OfficeGerald Fiala, Representative

SectionOrganization and Internal ServicesAlbert Slavik, Director

Organization DivisionNorbert Wei§, Head1)

Administration DivisionRoland Kontrus, Head

Security DivisionGerhard Valenta, Head

Documentation Management and Communications ServicesAlfred Tomek, Head

SectionStatisticsAurel Schubert, Director

Banking Statistics and Minimum Reserve DivisionAlfred Rosteck, Head

Balance of Payments DivisionEva-Maria Nesvadba, Head

1 Environmental Officer.

as of April 25, 2002.


ˆ

Report of the


for the Financial Year 2001

From Exact Planning toSuccessful RealizationThe euro cash changeoveras a unique historic projectWith the beginning of Stage Three ofEconomic and Monetary Union(EMU) on January 1, 1999, the Euro-pean Union (EU) reached a milestonein its integration policy. Three yearson, the introduction of euro bank-notes and coins on January 1, 2002,marked the last step toward EMU.The related costs and efforts shouldbe understood as an investment inthe common European monetary in-frastructure and thus as a contribu-tion to promoting the potential forlong-term economic growth. Thelaunch of euro notes and coins provedto be one of the greatest and mostdemanding challenges the Oesterrei-chische Nationalbank (OeNB) hashad to master in the 185 years sinceits foundation. While the overallframework for the cash changeoverwas drawn up in cooperation withthe national central banks (NCBs)participating in the Eurosystem andwith the European Central Bank(ECB), the NCBs were in charge ofthe actual implementation.

This is the first time in historythat 12 sovereign states have intro-duced a new, common currency.The realization of this goal was pre-ceded by a vast number of activities,ranging from laying down the politi-cal decision on a common currencyin the Maastricht Treaty (1992) tonaming the new currency �euro�(1995), opting for the banknotedesign proposed by Robert Kalina(1996), establishing the ECB (1998),determining the irrevocable euroconversion rates to enter into forceon January 1, 1999, and, finally, in-troducing the euro as a means of non-cash payment and unit of accountwith the inception of EMU. The

street debut of euro notes and coinswas the missing link that completedStage Three of EMU.

After three years of successfulparticipation in EMU, it was the cashchangeover that required the greatestadjustment effort from the popula-tion, as this was the moment whenevery single citizen was — maybe forthe first time — confronted with thedirect implications of monetaryunion. However, not only the con-sumers had to adjust to monetaryunion, but also the global monetarysystem as such. A few days into2002, several large countries an-nounced that they would, in thefuture, strive to balance their foreignreserves between the U.S. dollar andthe euro. Some also considered usingthe euro for trading in commoditiessuch as crude oil.

The implementation of the cashchangeover put the OeNB, its parti-cipating subsidiaries and all otherstakeholders in this operation, e.g.commercial banks and the policeforces, in the public eye. Given theenormous dimension of the project,detailed planning had started at avery early stage. As a direct conse-quence, the cash processing functionsat the OeNB and Austrian banks wererestructured on a large scale.

Early organizational restructuringat the OeNBThe most prominent activity in therun-up to the cash changeover wasthe production of euro notes andcoins. The Austrian Mint (MO‹ AG)and the Austrian Banknote andSecurity Printing Works (OeBS),two of the OeNB�s subsidiaries, wereresponsible for producing Austria�slaunch stock of euro cash. TheMO‹ AG was established in its currentform in 1989, when the OeNB pur-chased the former Austrian State


Smooth Euro Cash Changeover

Mint from the Federal Ministry ofFinance (BMF). As of that date, theAustrian Mint has redoubled its ef-forts to fulfill market and customerrequirements; a case in point is theVienna Philharmonic Gold Coin,which has become the best-sellinggold coin in Europe. The OeBS wasestablished in 1998, when the Secu-rities Printing Works, a division ofthe OeNB, became a fully independ-ent subsidiary. Part of the motivationbehind this spinoff was to furnish theOeBS, an internationally renownedcompetence center, with the struc-ture and flexibility necessary to posi-tion itself on the global market. Asidefrom the OeNB, five other euro areacentral banks and six national centralbanks from the Central and EasternEuropean countries (CEECs) rankamong the customers of the OeBS,which has already gained a firmstanding on the market.

An additional step was the foun-dation of GELDSERVICE AUSTRIALogistik fu‹r Wertgestionierung undTransportkoordination G.m.b.H.(GSA), which was entrusted withproviding efficient cash logistics serv-ices in Austria1) and was thus to be-come the key operating platformthroughout the cash changeover. Inthe run-up to �-day, the Austrian Re-search Association for Payment Co-operation (STUZZA) also underwentmajor changes. While the STUZZA�soriginal mandate had been to simplifyand standardize noncash payments, itnow became the leading collaborationplatform for Austrian commercialbanks and the OeNB. The close andconstructive cooperation betweenthe OeNB and banks, both in opera-tional areas (GSA) and in coordina-tion (STUZZA), served as a rolemodel for a number of other euroarea countries and in particular forthe Central and Eastern European ac-

cession countries, which took a keeninterest in the Austrian model to pre-pare for challenging tasks ahead.

Detailed project structureA detailed master plan was workedout to meet the complex challengesof the cash changeover, aimed, interalia, at building up the necessary ca-pacities in a flexible manner and atgradually integrating the newly as-sumed tasks into the regular businessoperations.

The project was divided into16 subprojects, each with its ownproject structure and one of a rangeof topics, such as site-specific con-struction planning, simulation,IT architecture or frontloading.

Logistical fine-tuningIn Austria, the logistical system usedfor the initial distribution of eurocash and for all subsequent phases ofcash management is structured as fol-lows (see chart): Banknotes and coinswere delivered directly from theOeBS and the MO‹ AG to the OeNBheadquarters in Vienna, the regionalbranch offices of the OeNB and theattached cash centers operated bythe GSA.

As a next step, cash in transit(CIT) companies shipped the eurocash to banks.

Banks decided to coordinate theircash shipments during the frontload-ing phase to optimize CIT route plan-ning. They joined ranks within the

1 See OeNB Annual Report2000, p. 51.

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working group ARGE Geldlogistikfor the time of the cash changeover,signing joint contracts for banknoteand coin transports. Thanks to thisapproach, the number of cash ship-ments in Austria went up by a mere20% even during the busiest front-loading period.

Gradual frontloading of euro cashto consumersA number of milestones marked thecash logistics project in the year 2001:— By the end of April 2001, com-

mercial banks had placed theirfinal orders for euro cash withthe OeNB. All further planningwas based on this order intake.

— On September 1, 2001, the firsteuro notes and coins left theOeNB�s cash vaults to be deliv-ered to commercial banks. As ofthis date, banks were theoreticallyentitled to subfrontload euro cashto enterprises; in practice, how-ever, cash deliveries mainly con-

sisted of very small amounts fortraining purposes. The great ma-jority of enterprises received eurocash at the end of November or inDecember.

— As of December 1, 2001, eurocash was also distributed to banksoutside the euro area.

— On December 15, 2001, consum-ers received their first euro coins(mostly starter kits).

— January 1, 2002, marked the offi-cial launch of euro notes and coinsand the beginning of the dual cir-culation phase, during which theeuro and the schilling were bothlegal tender. The dual circulationphase ended on February 28,2002; on March 1, 2002, theeuro became the sole legal tenderin the euro area. Any remainingschilling stocks of the current ser-ies may be exchanged for euroat the OeNB for an unlimitedperiod (see box �Return of Schil-ling Banknotes� for details).

Return of Schilling Banknotes

Banknotes that can be returned for an unlimited period of timeATS 5000, 1st motif: Wolfgang A. MozartATS 1000, 5th motif: Karl LandsteinerATS 500, 4th motif: Rosa MayrederATS 100, 6th motif: Eugen v. BawerkATS 50, 4th motif: Sigmund FreudATS 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, 2005ATS 1000, 4th motif: Erwin Schro‹dinger April 20, 2018ATS 500, 2nd motif: Josef Ressel August 31, 2007ATS 500, 3rd motif: Otto Wagner April 20, 2018ATS 100, 5th motif: Angelika Kauffmann November 28, 2006ATS 100, 5th motif(2nd print run): Angelika Kauffmann November 28, 2006ATS 50, 3rd motif: Ferdinand Raimund August 31, 2008ATS 50, 3rd motif(2nd print run): Ferdinand Raimund August 31, 2008ATS 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.



Extensive trainingfor professional cash handlersIt was one of the OeNB�s fundamen-tal goals not only to safeguard theearly distribution of the new cashbut also to provide the Austrianpublic with timely information. TheOeBS and its counterfeit experts atthe National Analysis Center werekey players in the information chain.In a first step, five staff members ofthe OeNB headquarters and twostaff members of each OeNB branchoffice completed intensive trainingas banknote experts and were subse-quently responsible for training ex-ternal partners, so-called multi-pliers, specifically recruited fromcommercial banks, the police, laborand industry representatives, andother organizations. In contrast tothe initial estimate of offering train-ing for around 1,000 external multi-pliers, in fact more than 2,500 per-sons completed this training betweenend-July and early November 2001.

Only genuine euro banknoteswere used in these training sessions.Aside from learning about the euro�ssecurity features, multipliers ac-quired basic knowledge about howto identify counterfeits (seized coun-terfeit banknotes of the legacy cur-rencies were used for this exercise).In addition, each participant receiveda kit containing training material(leaflets, CD-ROM, a videotape,etc.). Multipliers were encouragedto pass on their newly acquiredknowledge to the cash experts attheir respective organizations. Banks�and retail businesses� cash handlingstaff, police officers and other profes-sionals who regularly handle cashwere the end users of this infor-mation. All in all, this process in-volved some 250,000 cash experts,enabling them to act as competentcontacts for the broad public.

450,000 foreign currency exchangetransactionsWhile in the past, central banks hadexclusively exchanged banknotes theyhad issued themselves, the NCBs ofthe Eurosystem agreed, under Arti-cle 52 ESCB/ECB Statute, to ex-change banknotes (of the most recentseries) of other euro area countriesfree of charge during the period fromJanuary 1, 1999, when the euro wasintroduced for noncash payments,to March 31, 2002. By end-March2002, the exchange facilities set upat the OeNB headquarters in Viennaand at those at the OeNB branchoffices had handled more than450,000 foreign exchange trans-actions totaling EUR 388 million.

Austria reports highest frontloading rateOwing to detailed planning and theOeNB�s excellent cooperation withthe commercial banks, Austria re-corded the highest relative frontload-ing volume in the euro area. Com-pared to the average value of schillingnotes and coins in circulation ofaround EUR 13.6 billion, the valueof frontloaded euro notes and coinstotaled EUR 10.3 billion, i.e. ap-proximately 75% of the value ofschillings in circulation. The highfrontloading level resulted from thefact that economic agents were in-formed about the changeover at anearly stage and that retailers wereprovided with calculators (EuroCal-culus) to determine their euro cashrequirements. Also, banks had takenprecautions to deal with possible eurocash outflows to neighboring coun-tries.

Using an inhouse data base, theOeNB managed the frontloadingprocess without incident and in a highsecurity environment. Only 12.4% ofthe total frontloaded volume weredistributed to businesses which, as a



precaution, had apparently opted forstocking up mainly smaller denomi-nations to be able to give change.By the beginning of 2002, more than60% of the overall frontloadedamount of some coin denominationswere already safely stored in the cashdrawers of retailers.

EUR 500 million frontloadedto neighboring countriesGiven Austria�s geographical posi-tion, the question of frontloadinghad not only a national, but also aninternational dimension. As the Cen-tral and Eastern European accessioncountries were holding relativelylarge stocks of euro area countries�national currencies (in particularDeutsche mark and Austrian schillingbanknotes), it was to be expectedthat they would be quick to exchangethese stocks for euro. As for many ofthese countries, Austria was the near-est place to go in order to exchangelegacy currencies free of charge, ad-equate measures had to be taken. Inthe run-up to the cash changeover,therefore, numerous bilateral con-tacts took place between representa-tives of the OeNB and the respectiveNCBs. Furthermore, in order to beable to respond quickly to possible

bottlenecks in Austria caused by theoutflow of euro cash to neighboringcountries, the OeNB arranged foradditional euro allocations from theECB and signed a bilateral coopera-tion agreement with the DeutscheBundesbank. To meet the immediatecash requirements expected in early2002, Austria frontloaded more thanEUR 500 million to its neighbors.Such transactions were settled mainlyvia the existing channels of commer-cial banks.

Extensive activities to promotethe return of the schillingBy launching a joint campaign inspring 2001, the OeNB, the Austriancharity organization �Licht ins Dun-kel� (A Light in the Dark) and theAustrian Youth Red Cross set off aseries of campaigns promoting theearly return of schilling coins. Thecampaign �Gib dem Schilling eineChance — Spende fu‹r Kinder inNot� (Give the Schilling a Chance —Give for Children in Need), for ex-ample, was aimed at collecting smallchange from Austrian schools. Thesecollection programs and the corre-sponding public relations campaignhelped to gradually reduce the num-ber of coins in circulation. Moreover,

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the public increasingly realized that itwas sensible to return schilling coinsas early as possible. In the fall of2001, the OeNB started an extensivecampaign, encouraging consumers toreturn their schilling coins with theslogan �Ich will nachhause� (I Wantto Go Home). This campaign wasscheduled around World Thrift Dayso as to benefit, in cooperation withthe commercial banks, from the timeof year when most people tradition-ally take their hoarded coins to banksto pay them into savings accounts.Another measure to promote schil-ling return was the campaign �Be-tragsgenaues Zahlen� (Give ExactChange), which was organized to-gether with the Austrian FederalEconomic Chamber (WKO‹ ).

The volume of banknotes in cir-culation as at December 31, 2000,was defined as the reference valuefor the expected return of banknotes.The OeNB expected that around95% of schilling banknotes in circu-lation — the equivalent of EUR 13.2billion — would be returned.

For coins, by contrast, the piececount served as a reference value.On December 31, 2000, around6.5 billion coins were in circulation.

Given the fact that Austrian coinshad remained more or less unchangedsince the 1960s and that around 3 bil-

lion 10 groschen coins and 1.5 billionschilling coins were in circulation,the OeNB pegged the number ofcoins to be returned at around 3 bil-lion.

The effective return of the schil-ling began in summer 2001. Whilecurrency in circulation normally in-creases during the summer months,it contracted in 2001. At the begin-ning of 2002, around 25% of the re-turn volumes calculated for bank-notes and 35% of coins had alreadybeen returned to the OeNB. OnJanuary 1, 2002, when the front-loaded euro banknotes and coins be-came legal tender, currency in circu-lation soared. During the dual cashcirculation period, the number ofschilling notes and coins in circula-tion went down drastically, however.

Old schilling banknotes recycledas insulation material, old schillingcoins reminted as euro coinsIn the past, banknotes withdrawnfrom circulation were shredded andthen burnt. As it was clear that thereturn of the schilling would driveup the volume of shredded banknotematerial, the OeNB searched forenvironmentally friendly ways of re-processing shredded banknotes. Sinceexperiments in paper recycling andcomposting had not been successful,

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experts were looking into methodsfor using shredded banknotes as a re-source for producing insulation mate-rial. Live operation was taken upafter extensive testing, and so farthe entire volume of shredded schil-ling banknotes has been reused asinsulation material in construction.In addition, organizational processeswere optimized to ensure that theshredded material was transportedmostly by railway, i.e. in an environ-mentally friendly manner.

Returned coins are decoined (i.e.bent beyond recognition) by theAustrian Mint and then sold on thewaste metal market classified byalloy. Thus, the various raw materialscan be reused to produce new goods.Recycled 5 and 10 schilling coins, forexample, are reused for euro coins,and 10 groschen coins are turned intoaluminum products.

The OeNB — Making theEuro Yours:Intensive and BroadlyBased InformationActivitiesA challenge to communications policyThe euro cash changeover was bothan enormous logistics challenge andan external communication venture.Changes of such magnitude — likeadopting a new currency — are wontto evoke skepticism and uncertainty.The OeNB therefore initiated a com-prehensive information campaign ad-dressed to all members of the society.As early as in spring 2001, a cam-paign was launched to build up apositive attitude toward the euro; thiswas the forerunner to the OeNB�smain campaign, which started in fall2001 under the heading �Mit der Na-tionalbank zum Euro� (The OeNB —Making the Euro Yours). These inten-sive preparations and comprehensiveinformation activities helped prevent

potential problems and thus contrib-uted essentially to the smooth transi-tion to the new cash. The greatestchallenge for the OeNB�s externalcommunication was to address theentire population, no matter whetherpeople were actually interested in theeuro and to select suitable communi-cation channels to meet a vast rangeof information needs.

Thus, the OeNB directly addres-sed individual target groups withprograms designed to help them geta feel for the euro and familiarizethemselves with the new cash andits security features. These effortswere backed up by the euro area-wide campaign �the EURO. �OURmoney,� which the ECB had devel-oped in collaboration with the NCBsof the Eurosystem. In this context,the ECB and the OeNB cooperatedclosely with a network of partnersincluding government offices, publicauthorities, interest groups, busi-nesses, the Austrian BroadcastingCorporation (ORF), the media, andcredit institutions. The cooperationwith the ORF spanned a wide rangeof information and entertainmentprograms, which helped extend thereach of the euro campaign and thuscontributed essentially to makingthis campaign a success. By bundlingthese efforts, the OeNB ensured thatall Austrians had access to the exist-ing information in manifold ways.

Broad offer of OeNB servicesAside from large-space advertising,the OeNB directly informed the Aus-trian public in a series of euro-relatedevents. For this purpose, the OeNBset up a hotline together with theFederal Economic Chamber and theORF and increased the capacities ofits own internal call center, whichhandled around 9,000 calls in theperiod from June to December 2001



alone. The number of e-mail queriesprocessed in 2001 amounted to justunder 8,000.

Presentation of euro banknotesThe media were mainly interested inthe security precautions for shippingeuro notes and coins. It was thereforea special challenge to strike the rightbalance between meeting the neces-sary security standards and satisfyingthe public�s information require-ments, or, put differently, to providethe public with detailed informationwhile maintaining high security lev-els. For this reason, the final appear-ance of the euro banknotes and coinsand their security features were notpresented to the public beforeAugust 30, 2001 (at the ECB inFrankfurt) and August 31, 2001 (atthe OeNB in Vienna).

Broad range of information productsMoreover, a wide range of informa-tion products covered the various as-pects of the euro cash changeover.— Altogether 30.1 million infor-

mation leaflets were produced,handed out, distributed by mailor made available at credit institu-tions, various public authoritiesand businesses.

— In addition, 4 million miniposterswere distributed, providing infor-mation on the final appearance ofthe euro banknotes and on thesecurity features of the new cur-rency.

— 620,000 posters depicting eurobanknotes and coins and theirsecurity features were printedand distributed to make infor-mation on the new cash accessiblein public and to help raise publicawareness of euro banknotes andcoins in general.

— The brochure �Der Euro — unserneues Geld� (The Euro — Our

New Cash) was created in coope-ration with the STUZZA, theFederal Economic Chamber, theeuro initiative of the Austrianfederal government and banks. Itwas published in German andEnglish as well as in eight EUaccession country languages.

— A special emphasis is placed onthe requirements of older per-sons, youths, and the blind andvisually impaired. In this context,the so-called Euro CashTest, acredit card-sized banknote andcoin gauge, was distributed in co-operation with the Austrian BlindUnion. This device enables blindand visually impaired persons toquickly and determine the exactvalue of the respective euro bank-note or coin.

— Special information material forchildren and youths was providedin a euro kit for schools; in addi-tion, the competition �Be a EuroSuperStar� was initiated for eight-to twelve-year-olds in coopera-tion with the ECB.

— Moreover, the OeNB websiteprovided updates on the nationalchangeover process (www.oenb.at/geldlogistik).

— The OeNB also cooperated withthe producers of education mate-rial to help create multimediaeuro information material forchildren.

— The OeNB issued leaflets andorganized a traveling exhibitionto inform ten- to fourteen-year-olds about the euro.

— Together with the federal govern-ment�s euro initiative, the OeNBstaged �Euroinfotage� (Euro InfoDays) in spring 2001, a series ofevents that provided an importantsource of information for manyAustrian citizens.



Euro cockpit served as crisis committeeIn the course of the cash changeover,a special crisis committee, the so-called euro cockpit, was set up atthe OeNB from September 2001 toFebruary 2002 to elaborate detailedaction plans. This unit�s main task wasto respond quickly and effectively toincidents and crisis situations.

The public�s first contact with the euro cashFrom September 17 to December 14,2001, the �Eurotrain� crisscrossedAustria, stopping in around 60 trainstations to provide first-hand infor-mation and consultation services. Incooperation with the federal govern-ment�s euro initiative, the federalrailroad corporation O‹ BB, the Fed-eral Economic Chamber and creditinstitutions, the OeNB established acommunication platform offeringinformation and expert consultationfor all age and target groups. Onthe occasion of the Eurotrain�s arrivalat its final destination at Westbahn-hof, Vienna, on the night from De-cember 14 to 15, 2001, Austrianscould acquire their first euro starterkits for ATS 200.

Starter kits containing both eurobanknotes and coins (equivalent toATS 500) were distributed to thepublic in the first hours of 2002. InVienna, these kits were given out byOeNB Governor Klaus Liebscher,while in the regional capitals theheads of the OeNB�s branch officesperformed this symbolic gesture atmobile euro cash kiosks installedalong the traditional �Silvesterpfade�(New Year�s Trails).1) The change-over to the euro in the early hoursof 2002 went smoothly; euro cashwas available across the nation from2,660 outdoor ATMs and 3,300 cashdispensers in bank lobbies.

Swift Acceptanceof Euro Cash and GreatConfidence in the OeNBTwoweeks after the cash changeover 90% oftransactions were already settled in euroDuring the first days of January 2002,Austrians� chief interest was to famil-iarize themselves with the newmoney. After a relatively short periodit became clear that the switch to theeuro would be very swift. The greatmajority of consumers and businesses

1 The OeNB donated EUR 5per starter kit to the charityA Light in the Dark.

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reacted positively to the new cash:Two weeks after the changeover,around 90% of cash transactions werealready settled in euro.

Public confidence in the OeNBat record highWith the smooth cash changeover,the OeNB delivered an impressiveperformance. A study completed bythe Institute for Empirical Social Re-search (IFES) confirms the OeNB�ssuccess: in the fourth quarter of2001, 89% of the population citedthe OeNB as an institution they hadgreat confidence in. This correspondsto an increase by 9 percentage points

compared to the third quarter of2001 — an all-time high that wasclearly reconfirmed in the first quar-ter of 2002, when the correspondingfigure stood at 88%.

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Eurosystem MonetaryPolicy: Looking Back onThree Successful YearsThe OeNB�s active role in the EurosystemThe independent European System ofCentral Banks (ESCB) is the organi-zation behind Monetary Union. It iscomposed of the ECB and the NCBsof all 15 EU Member States. The12 NCBs (including the OeNB) ofthe countries which have adoptedthe euro together with the ECB makeup the Eurosystem. The Eurosystemand the ESCB are governed by the de-cision-making bodies of the ECB: theGoverning Council and the ExecutiveBoard. As long as the euro has not be-come legal tender in all 15 EU Mem-ber States, it will be necessary to dif-ferentiate between the ESCB and theEurosystem; currently, Denmark,Sweden and the United Kingdomhave not yet adopted the euro. Dur-ing this transitional period the ESCBhas another decision-making body,the General Council, consisting ofthe President and the Vice-Presidentof the ECB as well as the governorsof the participating and nonpartici-pating Member States.

The Eurosystem has been incharge of the single monetary policyof the euro area since January 1,1999. The OeNB has been activelytaking part in this key area of inte-gration, and the Governor of theOeNB is a voting member of theGoverning Council of the ECB(�one member, one vote�). In this ca-pacity, the Governor is independentand not bound by any instructions.Apart from being an integral part ofthe Eurosystem, the OeNB is also alink to the decision makers in Aus-trian economic policy. The experi-ence gathered in the three years ofEMU membership has played a cru-cial role in the successful fulfillmentof tasks like contributing to monetary

policy or the introduction of eurocash.

Robust economic growth, stable prices,declining unemploymentMonetary Union and the single cur-rency have had a favorable impacton economic developments in the12 participating Member States. In-flation is running low. The singlemonetary policy with its primary ob-jective of price stability makes theeuro a highly stable currency. Gen-eral government budget balanceshave improved considerably, andstepped-up structural reforms havefostered economic convergenceamong the Member States. At2.5%, average economic growth washigher between 1999 and 2001 thanin the 1990s. Despite difficult eco-nomic conditions, unemploymentdropped to a record low in 2001.

The Austrian economy has alsobenefited greatly from EMU mem-bership; low inflation, high produc-tivity gains, wage moderation andhealthy employment growth helpedimprove its competitiveness in theEuropean context.


Monetary Policy Secures Stability

Greece becomes 12th member of EMU2001 saw the enlargement of the euroarea: Greece became the 12th mem-ber of EMU on January 1. Accessionwas well prepared: the drachma�sexchange rate had started to convergetowards its central parity in theERM in 1999 and continued to doso throughout the following years,

so that the drachma easily joined theeuro at its central parity rate. Bythe end of 2000, differences inshort-term interest rates betweenGreece and the euro area had alsovanished. The accession of Greeceincreased the population of theeuro area by 3.4% and its GDP by1.9%.

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Euro area tackled the challenges of 2001The euro area showed good resiliencein the difficult year 2001. It largelyfended off the economic slowdowntriggered by the cooling of the U.S.economy and aggravated by the ter-rorist attacks of September 11,2001. The launch of the single cur-rency was key to effective crisis man-agement in the participating MemberStates. Thanks to EMU, the crisis of2001 did not spark off divergenceprocesses and exchange rate turmoilwithin the EU, which had repeatedlybeen the case in the 1990s in thewake of external upheaval.

In a period of external uncer-tainty, Austria�s participation in EMUproved to be extremely valuable. Theeuro area served as a frameworklargely shielding its Member Statesfrom the negative impact of theglobal economy. Furthermore, theAustrian economy may have not ex-ploited the full profit potential ofEuropean integration yet: Like in2000, real GDP growth was slightlybelow the euro area average in 2001(+1.0% against 1.5%).

Difficult Global EconomicConditions in 2001U.S. slowdown triggersglobal economic coolingAfter 2000 had seen the highestglobal growth rates since the mid-1980s (4.6%), the world economyfaltered in 2001. The global down-turn was sparked in the U.S.A,where, after almost a decade of con-tinuous expansion, growth startedto decelerate in the first quarter of2001. This slowdown marked theend of a historically long period ofbuoyant growth, which had even trig-gered discussions on the existence ofa New Economy.

In this environment of ongoingloss of momentum, the terrorist

attacks of September 11, 2001, cameas a shock which temporarily shookeconomic agents� confidence.

Overinvestment, oil price shockThe key driving forces behind thenine-year expansion in the U.S.A.were high productivity gains, a boostin technological development, sub-stantial credit-financed consumer de-mand and continued overinvestment.The huge amount of capital seekinginvestment unleashed a boom on thestock markets, especially in the ITsector, which witnessed high expect-ations of growth and profit. Buoyedby the bull market, stock prices ofIT enterprises soared.

The vigorous expansion wenthand in hand with powerful employ-ment growth. However, owing tothe widely deregulated U.S. labormarket, productivity gains and stiffcompetition on the product markets,these two phenomena did not gener-ate wage-induced price pressures.U.S. growth was driven chiefly byprivate demand.

In the course of 2001, the up-swing petered out. After growthrates of 4.1% in 1999 and 2000, realGDP increased by a mere 1.2% inthe U.S.A. in 2001. The realizationdawned that profit expectations inthe IT sector were overstated, andthe oil price hikes of 2000 finallyhad a dampening effect on the econ-omy. Economic agents started to loseconfidence in 2001, even more soafter the terrorist attacks; as a conse-quence, the expansion on the stockmarkets and real growth decelerated.When capital spending in the ITsector turned out to be overinvest-ment, it stalled. Surprisingly stableconsumption underpinned U.S. eco-nomic growth in the months afterSeptember 11, 2001. In light of theunfavorable economic conditions,



the Federal Open Market Committee(FOMC) of the Federal Reservedecided to significantly cut interestrates. In several moves over thecourse of the year, the federal fundsrate was slashed by a total of 475 basispoints to an unprecedented low of1.75% in December 2001.

International synchronizationof the business cycleAs the U.S. economy cooled, so dideconomies in all parts of the world.It was the first time that all majoreconomies slipped into such asynchronized slowdown. It is widelyassumed that the simultaneity can betraced to the increasing globalizationof the economy. Yet there is still con-siderable uncertainty about the rolethat the individual transmission chan-nels play. Obviously, the global econ-omy was hit by one and the sameshock — the oil price hikes of 2000.Besides, the growing number of mul-tinational groups and globally dis-persed production sites may be thereason why economic ups and downsare transmitted from one part of theworld to another via the trade chan-nel. The growing diversification ofportfolios may also cause develop-ments in individual countries to affect

the disposable income of investorsin other economic regions. Finally,crises of confidence may spill overinto other economies as investorsmimic the behavior of their counter-parts in other areas.

The Forward-LookingMonetary Policyof the EurosystemIs Effective and SecuresPrice StabilityEconomic cooling spills over to the euroarea, oil and food prices push up inflationThe transmission channels mentionedabove might explain why the euroarea was hit by the U.S. downswingdespite solid fundamentals and theabsence of macroeconomic imbalan-ces. Household debt in the euro areahad not reached as worrisome a levelas in the U.S.A.; besides, there hadbeen no signs of overinvestment inthe euro area. These factors suggestthat the setback of 2001 — GDPgrowth came to 1.5% — was attribut-able to external dynamics.

The euro area recorded a declinein exports and a slowdown in invest-ment growth in the course of 2001.Towards the end of the year, confi-dence indicators also trended down-wards. The downswing of 2001 hit

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the entire euro area, but its impactvaried from region to region. Postingnegative growth rates in two consec-utive quarters, the German economyby definition slipped into recession.In Austria, real GDP growth leveledoff especially in the second half;growth came to 1.0% in the entireyear 2001 (see section �Key Develop-ments in Austria: The Economy — theBudget — the Current Account�).

In the first half of 2001, difficulteconomic conditions worsened fur-ther as oil and food prices climbed(also as a result of the BSE crisis)and exchange rate developmentspushed up import prices.

ECB Governing Council cuts interest ratesby a total of 50 basis pointsin May and August 2001The minimum bid rate on the mainrefinancing operations (MROs) ofthe Eurosystem was 4.75% (un-changed since October 5, 2000) inearly 2001; at this time, the indica-tors of the first and the second pillarsof the monetary policy strategy

pointed towards mounting inflation-ary pressures. M3 growth, the key in-dicator of the first pillar, which hadbeen running high throughout 2000,dropped below the reference valueof 4�% in the first half of 2001.

With aggregate demand contract-ing and wages increasing only mo-derately, the indicators of the secondpillar pointed towards a cyclicaleasing of inflationary pressures.

Taking into account these devel-opments, the ECB Governing Coun-cil stated that the risks to price stabil-ity in the medium term had decreasedand decided to cut key interest rates(minimum bid rate on MROs, mar-ginal lending rate, deposit rate) by25 basis points on May 10, 2001. De-velopments in the following monthsconfirmed the assessment of waninginflationary pressures in the mediumterm, and the ECB Governing Coun-cil reduced key interest rates by an-other 25 basis points on August 30,2001.

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Effective crisis management at central banksafter the events of September 11, 2001The terrorist attacks of September11, 2001, had far-reaching implica-tions for the international financialsystem. System breakdowns brieflyprevented several enterprises andorganizations from meeting theircredit obligations, causing recipientinstitutions to face temporary pay-ment defaults.

Stock markets slumped; at theNew York Stock Exchange, tradingwas suspended for a few days. Atthe same time, the bond marketsturned bullish (flight to quality). Thegold price rose from some USD 273prior to the attacks to more thanUSD 290/ounce, and the U.S. dollartemporarily dropped by 3 centsagainst the euro.

Thanks to effective crisis manage-ment measures and international co-operation, the central banks success-fully tackled these challenges. Onthe day of the terrorist attacks, theFed and the Eurosystem already sig-naled that they would inject addi-tional liquidity into the market if nec-essary. The banks readily acceptedthis offer. The Fed made available

additional liquidity through discountwindow loans and significantly ex-tended open market operations. Fol-lowing its announcement on Septem-ber 11, the ECB executed one-dayfine tuning operations on the basisof quick tenders on September 12and 13, allotting EUR 69.3 billionand EUR 40.5 billion, respectively.

In addition, the ECB and the Fedagreed on a swap arrangement tofacilitate the functioning of financialmarkets and to provide liquidity inU.S. dollars. Under the agreement,the ECB was eligible to draw up toUSD 50 billion and to make thesedollar deposits available to the natio-nal central banks of the Eurosystem,which, in turn, would use them tohelp banks meet their U.S. dollarobligations. Servicing open U.S.dollar obligations was the acute prob-lem of banks in the euro area at thispoint. It should be noted that theevents led to a fragmented U.S. dol-lar money market: Even though theFed had provided sufficient liquidityto American banks, they were reluc-tant to pass on liquidity to Europeanbanks in the face of uncertain condi-tions. Default systems worked well

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and effectively, but some telecommu-nications systems failed.

Concerted interest rate cutson September 17, 2001The terrorist attacks of September11, 2001, heightened uncertaintyabout the economic outlook in theU.S.A. and the rest of the world.After the Fed had cut the federalfunds rate on September 17, 2001,the ECB Governing Council — inaccordance with the U.S. centralbank — decided to reduce key interestrates by 50 basis points. Centralbanks of other countries (Japan,Canada, New Zealand, Switzerland,the United Kingdom, Sweden andDenmark) followed suit.

Slashing key interest rates and in-jecting liquidity helped calm the ner-vous markets and restore normalityafter the terrorist attacks. Therefore,no new fine-tuning operations weredeemed necessary; two days later,banks no longer required the U.S.dollar facility provided by the ECB.

In emergency situations, decisivecentral bank action is key to stabiliz-ing markets quickly. Efficient andeffective operational structures (e.g.default systems) are required to sup-port these measures. The events ofSeptember 2001 demonstrated thatthe central bank systems of theU.S.A. and of Europe are capable ofmanaging crises.

Eurosystem cuts interest rates for thefourth time by 50 basis pointson November 8, 2001Thanks to the central banks� con-certed action to calm internationaland European financial markets,monetary policy in the euro areareturned to normal relatively quickly.After weeks of crisis management,maintaining macroeconomic stabilityin the euro area shifted back in focus.

On November 8, 2001, the ECBGoverning Council reduced keyinterest rates by another 50 basispoints, which marked the last of fourinterest rate cuts in 2001; all in all,interest rates were slashed by 150 ba-sis points in 2001.

M3 growth accelerated con-siderably in the second half of 2001(June 2001 : +5.6%, November2001: +7.8%), chiefly because oftemporary factors. In particular, un-certainty in stock markets and therelatively flat yield curve until Augustcaused private investors to shift theirportfolios from longer-term assetstowards shorter-term assets includedin M3. At the same time, lendingslowed down markedly. On thewhole, the ECB Governing Councilstated that current monetary devel-opments did not entail risks to pricestability.

Information under the secondpillar increasingly hinted at declininginflation rates on account of weaken-ing aggregate demand. The inflation-ary effects of higher energy and foodprices abated notably.

At its meeting on November 8,2001, the ECB�s Governing Councilagreed on a change in procedure:From this meeting on, monetary pol-icy decisions were generally to betaken only at the first GoverningCouncil meeting of the month. Atthe second meeting of the month,the Governing Council would focuson questions related to other tasksand responsibilities of the ECB andthe Eurosystem. Obviously, the Gov-erning Council is still free to changekey interest rates regardless of thepreviously agreed schedule of meet-ings.



The Eurosystem and the Federal Reserve System (Fed) — A Comparison

Decision-Making BodiesEurosystemThe Eurosystem is the monetary policymaking body of the euro area, consisting of the Frankfurt-based ECB and the 12 participat-ing NCBs, including the OeNB. The highest decision-making body within the Eurosystem is the Governing Council of the ECB, whichcomprises 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 themonetary policy decisions of the Governing Council.

FedThe Federal Reserve System (Fed) — the monetary policymaking authority of the United States — consists of the Federal ReserveBoard (located in Washington, D.C.) and the12 regional Federal Reserve Banks). Its highest decision-making bodies are the Boardof 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 Fed�s 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 regionalreserve banks. The FOMC convenes eight times a year.

Independence of the Decision-Making BodiesEurosystemThe Treaty stipulates that, when exercising the powers and carrying out the tasks and duties conferred upon them, neither the ECBnor the NCBs, nor any members of their decision-making bodies shall seek or take instructions from Community institutions orbodies, from any government of a Member State or from any other body. The Community institutions and bodies and thegovernments of the Member States shall not seek to influence the members of the decision-making bodies of the Eurosystemin the performance of their tasks (Article 108). The President of the ECB is required to appear before the European Parliamentseveral times a year; similarly, the NCB governors are required to appear before their national parliaments.

FedThe independence of the Fed is stipulated less explicitly. The Chairman of the Fed will appear before the U.S. Congress at leasttwice a year to report on issues of monetary policy.

Monetary Policy StrategyEurosystemThe Treaty stipulates that the primary objective of the Eurosystem is to maintain price stability. Without prejudice to the objectiveof price stability, the ESCB undertakes to support the general economic policies in the Community with a view to contributing to theachievement of the objectives of the Community as laid down in Article 2 of the Treaty. It was up to the Eurosystem to determinehow to achieve those aims in practice. The Eurosystem defined price stability as a year-on-year increase in the Harmonized Index ofConsumer Prices (HICP) of below 2%, which is to be maintained over the medium term. The Eurosystem formulated a two-pillarmonetary policy strategy to accomplish this objective. The first pillar refers to the broad monetary aggregate M3. As a benchmarkfor monitoring M3 annual growth in the medium term, a reference value of 4�% was laid down in December 1998 and has sincebeen reconfirmed annually. The second pillar consists of a broadly based assessment of the outlook for price developments on thebasis of a wide range of economic indicators (e.g. measures of real activity, bond prices, yield curves, exchange rates, fiscal policyindicators and business and consumer surveys). Deviations from the medium-term objectives do not entail �mechanistic� responsesby the Eurosystem; decisions are based on the General Council�s assessment.

FedThe Federal Reserve Act requires the Fed to influence the availability and cost of money as a means of helping to promote fullemployment, 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.



At its meeting on December 6, 2001,the Governing Council confirmed thereference value for annual M3 growthat 4�%. The decision was based onthe assessment that empirical evi-dence continued to support the as-sumptions for the medium-termtrend in potential output growthand the velocity of circulation of M3from which the reference value hadbeen derived in 1999 and 2000.

Monetary Policy Aspectsof the Euro CashChangeoverFrontloading of euro cashand collateralizationThe euro cash changeover also had animpact on the monetary policyframework. The ECB guideline ofJanuary 10, 2001, set out the relevantprovisions for the changeover. TheOeNB and the five Austrian credit in-stitutions associations entered into anagreement to safeguard the imple-mentation of these provisions.

One key feature of the change-over was the requirement that banksdeposit adequate collateral with theOeNB for the euro banknotes andcoins frontloaded to them. The col-lateral to be provided had to consisteither of cash or of securities compli-ant with the General Documentationon Eurosystem monetary policy in-struments and procedures, i.e. essen-tially tier one or tier two assets. Thefollowing dates marked key steps inthe run-up to the cash changeoverin 2001:— From September 1, 2001, banks

were entitled to subfrontloadeuro banknotes and coins to pro-fessional partners. The bankswere required to deposit collat-eral for these amounts en blocwith the OeNB at several prede-fined dates (between September3 and December 17).

— The frontloaded euro banknotesand coins that remained with thebanks had to be sufficiently collat-eralized en bloc at the OeNB onDecember 28, 2001.Banks that required more front-

loaded cash had the opportunity todeposit collateral on a day-to-daybasis between the prescheduled dates.

The amount of euro banknotesand coins frontloaded in Austria to-taled EUR 10.3 billion, EUR 1.7 bil-lion thereof were subfrontloaded tobusinesses, which implied that bankshad to provide an additional EUR8.6 billion in collateral at the lastdate of the predefined schedule.The banks collateralized the cashfrontloaded by securities worthEUR 9.2 billion and by EUR 1.1 bil-lion in cash.

The issue of collateral had beendiscussed with bank representatives,and potential issues of concern — suchas the large volume, which signifi-cantly surpassed the usual refinancingneeds — had already been identifiedearly in the run-up to the changeover.These preparations contributed to asmooth collateralization process.

To make it easier for banks tocope with the changeover costs, ithad been agreed beforehand that thebanks� current accounts should bedebited for the frontloaded eurobanknotes with a third of the amountsoutstanding each at January 2, Janu-ary 23 and January 30 and that thecollateral would be unfrozen intranches on the same dates. Hencethe cost to banks of participating inthe changeover process was offset bythe debiting of frontloaded euroamounts in tranches and by the fullcrediting to banks� OeNB accountsof schilling cash returned.

The fact that Austrian banks didnot resort to the two standing facili-ties, i.e. the deposit facility and the



marginal lending facility, confirmsthat the changeover was orchestratedmeticulously and thoroughly.

Since acceptance of the euro hadbeen swift and the return of nationalbanknotes rather sluggish (as de-scribed in the chapter �Smooth EuroCash Changeover�), the volume ofbanknotes in circulation surged euroarea-wide. This situation promptedthe ECB to conduct a quick tenderto supply the market with additionalliquidity of EUR 25 billion. ThreeAustrian banks took part in the ten-der, but owing to the low interestrate levels, only one of them was infact allotted liquidity (a very smallamount), which confirms that theAustrian market did not face anyliquidity constraints.

Euro cash changeoverdid not generate price effectsAn analysis of price developments forindividual goods and services at thebeginning of 2002 did not reveal sig-nificant inflationary effects triggeredby the introduction of euro cash. Thisconfirms the expectations voiced in astudy drawn up by the OeNB in thesummer of 20011), according towhich the two potential price driversin the changeover process (the pass-through of costs and the establish-ment of new psychological pricepoints) exerted no or only moderateinflationary pressures. In particular,market forces and a number of insti-tutional factors ensured that noprice increases occurred during thechangeover to the euro; they include:

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— the high degree of competition inexposed, but increasingly also inprotected sectors;

— the absorption of changeovercosts for enterprises by a tempo-rary decrease in profit margins;

— the slowdown of economic activ-ity, higher unemployment and,consequently, subdued consumerdemand;

— the Euro-Related Pricing Act,which mandates the dual displayof prices and stipulates that sanc-tions may be imposed in the caseof unjustified price hikes duringthe changeover;

— the close monitoring of prices bythe Euro Price Commission andother consumer protection or-ganizations, which also monitoredrounding practices; and

— consumers� heightened priceawareness.In other words, the switch to the

euro did not entail a wave of pricehikes. The acceleration of inflationin the euro area and in Austria since1999 was chiefly attributable tohigher raw material prices, the lowerexchange rate of the euro, tightersupplies on agricultural markets (fol-lowing the animal disease epidemics)as well as tax and fee hikes as part ofthe efforts to balance the generalgovernment budget. Fears that thecurrency conversion might stir infla-tion as companies adapt their psycho-logical prices (odd-even pricing) didnot materialize.

Key Developmentsin Austria:The Economic Back-ground — the Budget —the Current AccountGrowth slows down to 1.0% in 2001Having recorded robust growth ratesin 2000, the Austrian economy loststeam in 2001 as the global economy

cooled down. Real GDP growthcame to 1.0% in 2001, after 3.0%in 2000. The year 2001 was charac-terized by a marked slowdown ineconomic activity. While the firsttwo quarters still showed somegrowth (0.1% quarter on quarter,seasonally adjusted), the Austrianeconomy shrank by —0.4% in thethird and by —0.2% in the fourthquarter.

The economic cooling is ascrib-able to both international and domes-tic factors. Adverse internationaleconomic conditions and the conse-quent uncertainty caused companiesto noticeably cut back on investment;real gross capital formation plum-meted by 2.6%. Private consumptiongrowth, generally the backbone ofeconomic development, deceleratedsharply as real wages declined and,at 0.9% in 2001, reached only halfthe average rates measured in thethree previous years. The decline inreal income was attributable to asurge of consumer prices in 2001and to budget consolidation meas-ures. The latter also brought downgovernment consumption, which de-creased by —0.2%. Despite a sharpdrop in export growth, net exportscontributed 1.0 percentage pointsto GDP growth, given an evenweaker import development. Thus,foreign trade was the mainstay ofGDP growth, even more so thanprivate consumption with its contri-bution of 0.7 percentage point. Aus-trian industrial production con-tracted by 0.3% in 2001 against2000. A breakdown by sectors showsthat output growth was highest inmanufacturing (+0.4%). Construc-tion was still mired in crisis in2001, with output shrinking by2.1%.



HICP inflation at 2.3%Inflation accelerated slightly in 2001.The increase in the HICP came to2.3% (2000: +2.0%). Price growthreached its peak in May (2.9%) andslowed down subsequently; the De-cember inflation rate was 1.8%. Thistrend continued in early 2002. Oiland food prices as well as fiscal meas-ures had the largest impact on infla-tion in 2001. At 1.7% year on year,Austria posted the lowest inflationrate in the euro area in both Februaryand March 2002. The euro cashchangeover did not generate priceeffects in 2001 and in the first few

months of 2002 (see the section �Eco-nomic Aspects of the Euro CashChangeover�).

Modest employment growth,rising unemploymentThe economic slowdown also fedthrough to the labor market, in par-ticular in the second half of 2001.Employment growth lost momentumin the course of the year; in Decem-ber, employment slipped below theprevious year�s figure. The numberof job vacancies declined dramati-cally. At the same time, unemploy-ment surged from mid-2001 on.

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Thanks to the healthy employmentgrowth recorded in the first half, at3.15 million on average payrollemployment was 0.5% higher in theentire year of 2001 than in the pre-vious year. However, the number ofjobless people increased by 4.9% to204,000, whereas job vacancies de-creased markedly by 16.4%.

At 3.6% on the year, unemploy-ment according to the Eurostat defini-tion — which is subject to ongoing revi-sion — was lower than in 2000 (3.7%).By comparison, unemployment accor-ding to the national definition climbedfrom 5.8% (2000) to 6.1% (2001).

Federal government budget outturnfor 2001 outstrips expectationsAccording to the provisional centralgovernment outturn, the administra-tive net deficit came to EUR 1.4 bil-lion or 0.7% of GDP in 2001. Com-pared to the final budget accounts2000, revenues mounted by 6.5%to EUR 59.0 billion and expenditure

advanced by 3.7% to EUR 60.4 bil-lion. Both actual revenues and expen-diture exceeded the estimate for2001 (estimate for 2001 comparedto final budget accounts 2000: reve-nues: +1.8%, expenditure: +0.9%).

Tax receipts were up 11.6% onthe year 2000, amounting toEUR 56.2 billion (gross). Receiptsin assessed personal income tax(+41.5%), corporate tax (+61.3%)and transport taxes (+12.9%) in-creased above average. Governmentexpenditure exceeded the budgetestimate because welfare spendinghad risen as a result of worseningeconomic conditions and other ad-ministrative expenses had alsomounted significantly. By contrast,both interest expenses and staff costsremained below the budget estimate.

Austrian stability program envisagesa balanced budget for 2001 to 2003The update of the EU Member States�stability and convergence programs

Budgetary Notification of February 20021998 1999 2000 20011) 20022)

EUR billion

General governmentbudget balance � 4.5 � 4.3 � 3.0 0.1 0.0Central government � 5.8 � 4.9 � 3.4 � 1.2 � 1.7Regional government 0.8 0.5 0.5 1.2 1.3Local government 0.3 0.1 0.1 0.3 0.3Social security funds 0.2 0.0 � 0.2 � 0.1 0.0Debt service costs 7.2 7.0 7.2 7.1 7.1Primary balance 2.6 2.6 4.2 7.3 7.1Public debt 121.4 127.5 130.2 130.1 130.1

% of GDP

General governmentbudget balance � 2.4 � 2.2 � 1.5 0.1 0.0Central government � 3.1 � 2.5 � 1.6 � 0.6 � 0.8Regional government 0.4 0.3 0.2 0.6 0.6Local government 0.1 0.1 0.1 0.1 0.2Social security funds 0.1 � 0.0 � 0.1 � 0.1 0.0Debt service costs 3.8 3.5 3.5 3.4 3.3Primary balance 1.4 1.3 2.0 3.4 3.3Public 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.



towards the end of 2001 had to takeinto account the worsening economicenvironment. The budget balances ina few EU Member States deterioratedfor the first time in the history of theStability and Growth Pact. The Euro-pean Commission noted the exis-tence of an excessive deficit in Ger-many, Portugal and Italy and com-mended Austria for its budget consol-idation efforts.

The Federal Ministry of Financepublished the updated Austrian stabil-ity program for 2001 to 2005 inNovember 2001. According to theprojections, the general governmentbudget will be balanced from 2001to 2003 and will post a surplus in2004 and 2005, the temporary eco-nomic setback notwithstanding. Aus-tria thus ranks in the upper middleof all EU Member States.

Slight Maastricht surplus in 20011)The budget report to the EuropeanCommission in February 2002 in-volved some retroactive adjustmentsfor 2000 and 2001: The general gov-ernment deficit-to-GDP ratio for2000 was revised upwards to 1.5%of GDP (1999: —2.3%). The revisionbecame necessary after Eurostat haddecided that receipts from the gov-ernment�s transactions with the fed-eral real estate company Bundesim-mobiliengesellschaft (BIG), whichhad originally been taken into ac-count in the government�s budget cal-culations, must not be used to offsetthe Maastricht deficit (the sum inquestion amounted to some 0.3% ofGDP). Leaving aside one-off effectslike the proceeds from the sale ofUMTS licenses, the general govern-ment deficit amounted to 1.9% ofGDP in 2000.

In 2001, the general governmentposted a budget surplus of 0.1% ofGDP. Despite Eurostat�s decision on

the transactions with the BIG, thegovernment thus more than fulfilledits goal of a balanced budget. Cuttingthe central government deficit byEUR 1.7 billion to EUR 1.2 billionor 0.6% of GDP had been key to thisaccomplishment. The budget reportto the European Commission of Feb-ruary 2002 expects the general gov-ernment budget to be balanced in2002.

The Austrian public debt ratiodecreased from 63.6% in 2000 to61.7% of GDP in 2001 and is ex-pected to continue to decline to60.2% in 2002.

Future budgetary requirementsAccording to the preliminary resultsfor 2001, unscheduled additional rev-enues (direct taxes, federal funds),along with austerity measures, havehelped achieve a balanced budget ear-lier than originally stipulated in thestability program. To be able to sus-tainably fulfill the requirements ofthe Stability and Growth Pact, Aus-tria should continue this policy ofconsolidation. The budget estimatefor 2002 and the stability programpublished in November 2001 essen-tially reflect this effort. Once theeconomy has begun to pick up, thegovernment faces the challenge ofcutting taxes as intended and improv-ing Austria�s position as a businesslocation while keeping the budgetsustainably balanced (as required bythe Maastricht criteria); priorityshould be given to reducing the tax-to-GDP ratio, which, at 45.9%, wasone of the highest in the EU in2001.2)

Lower current account deficit in 2001The deficit on the Austrian currentaccount was EUR 4.6 billion in2001. The improved balance ofcross-border goods and services

1 Not including net interestincome from swapagreements, governmentnet borrowing amounted toEUR 0.18 billion or—0.1% of GDP in 2001.Interest flows exchangedunder swap agreements withthe government being one ofthe counterparts areincluded in the calculationof the Maastricht criterionfor government deficit(Regulation (EC)No. 2558/2001 andRegulation (EC)No. 351/2002).

2 Source: Statistics Austria.Taxes (incl. EUcontributions), real socialinsurance contributions.



transactions was fundamental for re-ducing the deficit by EUR 0.5 millioncompared to 2000. On the whole,the current account reflects the eco-nomic slowdown in Austria and inmain trading partner countriesthroughout 2001. The decline of theoil price helped ease the strain onthe current account.

Tourism, one of the major com-ponents of the Austrian current ac-count, posted fairly good results in2001, considering the adverse eco-nomic conditions. Despite a slowersummer season, foreign tourist bed-nights continued to increase, namelyby 1.3%. From a structural point ofview, international summer tourismhas declined to the level of the late1960s, whereas domestic tourismand international winter tourismcontinue to reach new highs.

Owing to the current accountdeficits recorded in the past fewyears, the shortfall on the incomesubaccount — the highest net deficit— widened again in 2001. Interest

on bonds and notes accounted forthe largest net outflows; banks andthe general government contributedapproximately the same amount.

Cross-border capital flows, bothinward and outward, decreased in2001 against 2000. While the processof internationalization and portfoliorebalancing following the introduc-tion of the euro had pushed upcross-border investment in 1999and 2000, these effects seem to havecome to a halt in 2001.

At some EUR 3 billion and EUR 6billion, respectively, both outwardand inward foreign direct investmentdid not reach the levels of 2000.Income on portfolio investment —the most important subaccount ofthe financial account — also trailedthe results of 2000 (both outwardand inward investment). Cross-bor-der securities transactions accountedfor net capital imports of EUR 4.9billion.

Reserve assets shrank by EUR 2.1billion through transactions in 2001.

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Stable Financial MarketsAre a Prime ObjectiveCentral banks have a key rolein preventing crisesSafeguarding financial stability beganto evolve into one of the key centralbank policy objectives in the 1990sand has become critically importantin recent years. The latest turbulen-ces in some financial centers under-line what an important role centralbanks play in prudential supervisionand in the design of the frameworkconditions for financial markets,above all in times of crisis.

In Japan, high volumes of non-performing loans and bearish stockprices deepened the persistent prob-lems of the banking sector evenfurther. Any rapid and sustainableconsolidation of the financial sectoris not on the horizon yet. In thespring of 2001, concerns focusedchiefly on the financial crisis inTurkey. With the recession continu-ing in 2001 and investors exhibitingmore risk aversion, Argentina didnot succeed in delivering itself fromits debt crisis. Ongoing sharp set-backs to high-tech stocks and theresulting pressure on equity marketsin many financial centers in 2001along with the slow progress of theIT sector in reducing its debt repre-sented a further risk factor for finan-cial markets. In addition, the terroristattacks of September 11, 2001, in theU.S.A., which severely affected e.g.tourism (above all airline companies)and insurance companies, augmentedthe destabilization potential.

The resolute, concerted responseof the world�s major central banks inthe wake of September 11 was mate-rial in containing the most negativerepercussions on international finan-cial markets. By quickly providingliquidity and cutting key interestrates, the central banks demonstrated

their firm determination to keeprisks to financial stability at bay.Although fears were rife and tradingon U.S. and Canadian stock ex-changes was in fact briefly halted,there were no short-term liquidityshortages.

The OeNB issues a Financial Stability ReportStable financial markets and a soundbanking system are the prerequisitesfor an effective monetary policy.Hence the two objectives price stabil-ity and financial stability have becomeincreasingly intertwined. Against thisbackground, the OeNB published itsfirst Financial Stability Report in June2001.1) This report has since been is-sued semianually in German and inEnglish. The OeNB decided to regu-larly publish a Financial Stability Re-port to make all players on financialmarkets and the general public awareof the problems that could arise if de-velopments on financial markets goawry. The well-founded analysis offinancial market developments andthe identification of risks to thestability of the Austrian financial sys-tem are designed to contribute to theearly detection of potential threatsand to help head off these threats byenabling a swift response. In practice,the OeNB contributes to protectingfinancial market stability by providingits expertise in the supervision of thefinancial system and by working onhoning regulatory instruments ininternational forums.

An Active Rolein the Basel II ProcessThe Basel Committee publishesits 2nd Consultative PaperThe international Basel II processcontinues. Regulatory and supervi-sory authorities, in interaction withthe industry, have been hammeringout reform proposals for the capital

1 See the OeNB�s website atwww.oenb.co.at.


The OeNB Contributesto Financial Stability

adequacy standards for banks and in-vestment firms (Basel II) for almostthree years now. The second consul-tative paper of the Basel Committeeon Banking Supervision (BSCE) andthe European Commission�s subse-quent consultation document, bothpublished in early 2001, have madeclear that the risk-sensitive weightingfactors this reform introduces and thehighly refined minimum require-ments it proposes are bound to im-pact banks and thus financial marketsthoroughly.

The new Basel capital adequacyproposals revolve around the inter-action between the three pillars:Complementing the considerablyrefined minimum capital require-ments (the first pillar), the secondpillar of the new framework envisagesa supervisory review process. Finally,under the third pillar — market disci-pline — banks are to disclose their riskmanagement targets and principlesfor every single risk category and toenhance transparency vis-a‘-vis thegeneral public.

The preparatory work completedso far has revealed that there is abroad consensus on the need to over-haul the Basel Capital Accord, on thestructure of the new framework and

on the principle of orienting thenew provisions on economic capitaltargets. The goals of the new accord— increasing financial stability byemphasizing risk sensitivity, promot-ing advanced risk measurement andmanagement techniques and usinginternal ratings — broadly met witha very positive response. Minimumcapital requirements are to bebrought more closely in line witheconomic capital.1)

However, in the course of thepreparatory work, some fundamentalcriticisms emerged, and the secondconsultation phase clearly revealedthat some of the areas not yet cov-ered, e.g. provisions on retail loans,project finance and equity exposures,which are to be part of the internalratings-based (IRB) approach, areextremely complex.

Consequently, the original plan tocomplete the new capital accord bythe end of 2001 and to implementit in 2004 was shelved in June2001. Following what is likely tobe a very intensive third consulta-tion phase and the completion of acomprehensive Quantitative ImpactStudy, the new Basel Capital Accordwill be wrapped up and implementedafter an appropriate transitional

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1 Basel Committee on BankingSupervision, Consultativepaper on the Basel CapitalAccord, No. 37, April1998.


The OeNB Contributes

to Financial Stability

phase. In Europe, the EuropeanCommission is also working on adraft directive. Open issues are tobe discussed during the third consul-tation procedure in close cooperationwith the Basel consultative process.

Austrian institutionshave a common positionThe OeNB has assigned the Baselconsultative process a high priorityever since it was initiated. The Aus-trian position was closely accordedwith the Federal Ministry of Financeand the Federal Economic Chamber.Thanks to the thorough efforts ofAustrian experts, specifically Aus-trian conditions have already fed intothe negotiations on the Basel pro-posals:— Internal and external ratings are

scheduled to have the same stand-ing and to be accepted coinciden-tally. This provision allows bankswhose clientele is made up mostlyof small and medium-sized busi-nesses to use IRB advanced ap-proaches. Data pooling will bepermitted, allowing medium-sized and sectorally groupedbanks to share their internal rat-ings.

— Simpler calculation methods andlower risk weights are now beingdiscussed for personal, small-business loans and loans for theself-employed than were pro-posed in the first consultationpaper.

Information on Basel IIin all Austrian provincesTo ensure that banks across Austriawere adequately informed aboutBasel II, the branch offices of theOeNB organized information eventsin all Austrian provinces in Marchand April 2001. At these workshops,OeNB experts first explained the

proposed capital adequacy frame-work in depth and then presentedthe questions of the BCBS and theEuropean Commission pertinent tothe second consultation phase. Thetimely dissemination of informationabout the upcoming risk managementrequirements gives banks the oppor-tunity to review their internal proc-esses proactively and to work onadapting their risk management tech-niques to reflect new developments.

To ensure a high level of coverage,the OeNB additionally provided ac-tive support and expertise for nu-merous events hosted by the FederalEconomic Chamber and seminars or-ganized by private-sector businesses.The pertinent international docu-ments may be found on the OeNB�swebsite, as may the joint position ofthe Federal Ministry of Finance andthe OeNB. Beyond providing infor-mation and serving as a contact forbanks, the OeNB has started to re-flect on the possible effects of theBasel II process on its own activities.

The challenges Austria facesThe tasks set out for the next fewmonths will be to identify the amend-ments to be made to the Basel II pro-cess in cooperation with Austria�sbanks and to implement them in con-cert with EU Member States. Basel IIis intended as a meaningful andfundamental reform targeted at se-curing the stability of the interna-tional financial system. The OeNB�srepresentatives to the relevant inter-national forums will direct theirefforts in 2002 at ensuring that thenew capital adequacy frameworkdoes not put Austrian and otherbanks and businesses at a competitivedisadvantage.




Financial MarketSupervision:New DevelopmentsPrudential supervision reformThe need for prudential reform maybe traced both to the changed regula-tory framework conditions — aboveall the Basel Core Principles for Ef-fective Banking Supervision and thenew capital adequacy standards beingprepared (Basel II) — and to the glob-alization of finance, with its stepped-up volume of cross-border transac-tions by Austrian banks, increasinglycomplex financial services and thegrowing intricacy of internal controlstructures in banks. Prudentialmeasures will have to follow suit,resulting e.g. in more bank auditsand reinforced international coope-ration.

The ultimate aim: effective bankingThe reform of Austria�s financialmarket oversight was aimed at pro-ducing a high-quality, effective, butnevertheless affordable supervisoryframework. The Austrian Ministryof Finance elected to create a newsingle regulator responsible forbanks, investment firms, insurancecompanies and pension funds.

The new Financial Market Supervision ActThe passage of the Austrian FinancialMarket Supervision Act in summer2001 and the amendment of thislaw with constitutional status inMarch 2002 put prudential super-vision in Austria on a new footing.The central feature of this Act, whichentered into force April 1, 2002, isthe establishment of a FinancialMarket Authority (FMA). The newlaw focuses on:— the constitution of the Financial

Market Authority and— the relevant changes in substan-

tive prudential law.

One-stop supervision for banks,investment firms, insurance companiesand pension fundsThe Financial Market Authority Act,part of the Financial Market Super-vision Act, provides for the constitu-tion of an integrated supervisorybody, the Financial Market Authority,to perform banking, securities, insur-ance and pension fund supervision.The Financial Market Authority isautonomous — it operates independ-ently and is free from instructions —and is organized as an institutionunder public law with a separate legalpersonality. In practice, the establish-ment of the FMA divests the Ministryof Finance of banking, insurance andpension fund supervision and thenow defunct Austrian Securities Au-thority of securities supervision andendows the FMA with all resultingrights and duties. To improve the en-forceability of prudential measures,the FMA is also invested with thepower to enforce penalties under ad-ministrative penal law as well as thenotices on prudential matters that itissues. Furthermore, the FMA hasthe right to issue ordinances, whichit must officially announce in theFederal Law Gazette. The FMA man-agement consists of a supervisoryboard with six members, three ofwhom the OeNB may propose for ap-pointment, and an executive boardwith two members, one of whom isnominated by the OeNB.

By analogy to the procedure ap-plied in insurance and securitiessupervision so far, the supervisedbanks and pension funds will bearthe lion�s share of supervisory costs.The federal government is obligedto provide the FMA with EUR 3.5million a year, which reduces thecosts incurred by the supervisedinstitutions.




Moreover, some substantive pru-dential law details will be altered.The objective is to make prudentialmeasures enforceable more quicklyand consequently to boost the effi-ciency of bank audits. As a case inpoint, requirements for bank auditorsare to be formulated even morestrictly in order to eliminate prob-lems involved in bank examinations.These requirements include stand-ards for the skills of the auditorsand the introduction of the rotationprinciple to ensure the integrity ofexaminations. Credit institutions�supervisory boards will also bestrengthened — for example, they willbe granted the option to request theconduct of examinations to supporttheir own supervisory duties.

The OeNB�s prudential tasksand participation rights are expandedThe OeNB�s tasks and rights of par-ticipation in the area of prudentialand financial market supervision aslaid down in the Austrian BankingAct have not only been preserved;in fact, they have been augmentedby comparison to what the previouslyapplicable law stated:— The provisions under which the

Minister of Finance may commis-sion the OeNB with the examina-tion of credit institutions (on-siteexaminations) was changed into amandatory duty to entrust theOeNB with on-site examinationsof banks� market and credit risk.In the case of other types of on-site examinations of banks (e.g.money laundering audits), re-questing the OeNB�s participationis optional.

— An amendment to the Federal Acton the Oesterreichische National-bank (Nationalbank Act) entruststhe OeNB with payment systemsoversight; the OeNB is free from

instructions in this area. Paymentsystems oversight encompassesthe mandate to inspect systemicstability (see the section �TheOeNB Is Entrusted with PaymentSystems Oversight�).

— Obtaining expert opinions asmandatory under Article 26 ff.(market risk) remains a duty ofthe OeNB.

— The well-established reportingsystem for banks and the process-ing of these data (e.g. for monthlyreturns, quarterly reports) by theOeNB will be continued, and theexchange of information betweenthe OeNB and the FMA will beensured by explicitly standardiz-ing cooperation and information-sharing practices.

— The OeNB and the Ministry of Fi-nance have equal rights to nomi-nate members to the FMA�s exec-utive and supervisory boards.

Prudential reform safeguardsfinancial stabilityThe reorganization of financial mar-ket oversight in Austria and the solidintegration of the OeNB into super-visory operations ensures that theOeNB will be able to fulfill its mani-fold macroprudential tasks within theEurosystem and will thus contributeimportantly to preserving financialmarket stability.

The OeNB Is Entrustedwith Payment SystemsOversightPayment systems oversightin the Eurosystem performed decentrallyby the NCBsThe Eurosystem�s objective in exer-cising payment systems oversight isto safeguard the stability and effi-ciency of payment systems and theenforceability of monetary policy.The organization of payment systems




oversight in the Eurosystem rests onthe decentralization and subsidiarityprinciples. Accordingly, in an ap-proach which is designed to guaran-tee that oversight is optimally suitedto national requirements, the NCBsenforce the oversight policy stanceover national payment systems. TheNCBs also supervise the nationalcomponents of the TARGET system(ARTIS in Austria). The main docu-ments in which the framework foroversight is currently set forth arethe �Core Principles for SystemicallyImportant Payment Systems� (BIS,2001) and the minimum require-ments for electronic money systemslaid down in the �Report on Elec-tronic Money� (ECB, 1998).

Responsibility for payment systemsoversight lies with the OeNBfrom April 1, 2002The fundamental prerequisites, suchas the legal basis, for the oversightof all national payment systems bythe OeNB were created in 2001. Anamendment to the Nationalbank Actvested the OeNB with the responsi-bility for payment systems oversightfrom April 1, 2002. Article 44a ofthe Nationalbank Act spells out thelegal principles for the OeNB�s over-sight function. In connection with themandate to inspect systemic stability,Article 44a specifies the reportingobligations of payment systems oper-ators and participants, empowers theOeNB to declare the recommenda-tions on systemic security of theECB and the BIS�s Committee onPayment and Settlement Systemsbinding by issuing ordinances, andspells out a strict organizational sepa-ration of responsibilities to prevent aconflict of interest within the OeNB.Under Article 44a paragraph 7 of theNationalbank Act, especially paymentsystems operators will be obligated to

inform the OeNB about the measuresthey have taken to ensure systemic se-curity at the legal, financial, organiza-tional and technical level.

Payment systems statistics to backfulfillment of oversight dutiesThe OeNB�s payment systems over-sight responsibilities will be under-pinned by a reporting system for pay-ment systems statistics that was de-veloped in the reporting year. Thepayment systems statistics are to pro-vide reliable data about the numberand value of transactions processedby payment systems at quarterlyintervals. Article 44a paragraph 7 ofthe Nationalbank Act also specifiesthe reporting obligations for thesestatistics.

Upon assuming its oversight du-ties under Article 44a paragraph 1of the Nationalbank Act, the OeNBwill comply fully with the nationalmandate and Eurosystem require-ments. The OeNB will recognizeboth Austrian and European require-ments in taking the steps required toimplement the provisions of theNationalbank Act in Austria and inexercising the oversight functionsincumbent on it. The Austrian Se-cure Information Technology center(A-SIT) made a vital contribution topayment systems oversight in 2001by providing significant support, inparticular in the development ofoversight principles.

FundamentalDevelopments ofFinancial IntermediariesOngoing decline in the number of bankingoffices in AustriaThe downtrend in the number ofbanking offices observed throughoutthe past few years continued in2001, when the number of bankingoffices sank by 26 to 5,453 from the




beginning of the year. Broken downby head and branch offices, the num-ber of head offices diminished by 16to 907, while the number of branchoffices was cut by 10.

Total asset growth flagsAfter Austrian banks� business hadboomed in 2000, they faced far moredifficult conditions, above all in lend-ing, when among other things inter-national cyclical activity cooled in2001.

Austr ian banks� tota l assetsclimbed by EUR 25.0 billion or4.5% in 2001, down from EUR38.1 billion or 7.3% in 2000. Thoughthe weakening economy was onereason for the deceleration, the re-structuring of Bank Austria AG (BA)in the wake of its merger with Baye-rische Hypo- und Vereinsbank AG(HVB) had a more immediate impact.Excluding BA, total asset growthwould have come to 8%, outpacingthe result of 2000. Since the estab-lishment of EMU, the volume of de-rivatives transactions, particularly in-terest rate derivatives, has widenednoticeably. In 2001 the volume ofsuch operations mounted by EUR323.7 billion or 41.1%. As a result,

derivative transactions as a percent-age of total assets skyrocketed by49 percentage points to 189%.

Credit growth deceleratesLoan growth weakened in lockstepwith the economy in 2001, with theexpansion halving to EUR 7.9 billionor 3.5% from 2000. Whereas theshare of foreign currency credit hadstill come to some 45% of creditgrowth in 2000, it diminished toroughly 36% in 2001. Hence, foreigncurrency lending as a percentage oftotal lending edged up by only0.7 percentage point to 18.2% fromthe beginning of 2001. By contrast,in 2000 this ratio had risen by 1.8 per-centage points.

The renaissance of passbook savingsIn the review year deposits made bydomestic nonbanks advanced at a ratelast experienced at the beginning ofthe 1990s: While deposits had inchedup by only EUR 4.0 billion or 2.3%in 2000, they shot up by EUR 13.8billion or 7.8% in 2001. Despitethe abolition of anonymous passbooksavings accounts and the drop ininterest rates, the classical savingspassbook experienced a revival. After

Credit Institutions� Business Activity2000 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

AssetsLoans to domestic nonbanks 224.9 þ 6.7 232.8 þ 3.5thereof: Euro loans 185.4 þ 4.3 190.5 þ 2.7

Foreign currency loans 39.4 þ19.3 42.3 þ 7.2Foreign assets 157.8 þ20.2 156.3 � 0.9

LiabilitiesDomestic nonbank deposits 175.8 þ 2.3 189.6 þ 7.8thereof: Savings deposits 119.7 � 2.2 125.4 þ 4.8

Foreign currency deposits 3.3 þ 7.3 2.7 �19.1Foreign liabilities 174.1 þ18.2 173.7 � 0.6

Source: OeNB.




an abysmal performance in 2000,when expectations of higher yieldsprompted investors to shift fundsfrom savings accounts to mutualfunds, causing savings deposits toshrink by 2.2%, additions to savingsdeposits ran to EUR 5.7 billion or4.8% in 2001, the best result in manyyears.

Austrian banks� foreign business subduedAfter Austrian banks� foreign busi-ness temporarily peaked mid-2001,external assets closed the year witha decrease by EUR 1.47 billion or0.9%. However, excluding BA, claimson the rest of the world would havesurged by about 16%. By compari-son, external assets had jumped bymore than 20% in 2000.

Expansion on Central and Eastern EuropeanmarketsAustria�s large commercial banksremained very active on CEEC mar-kets, with total assets running toapproximately EUR 59 billion orroughly 10% of total domestic assetsin December 2001. The number ofbanking offices rose substantially(December 2001: 2,611), and staffaugmented to more than 51,000.Banks have been steadily boostingtheir business activity in the area, sothat by now Austrian banks havegained the largest market share inthe Czech Republic, Hungary andSlovakia.

Profit up from 2000For the year 2001, banks operating inAustria posted a preliminary operat-ing result of EUR 4.6 billion, a1.3% increase compared to 2000.Banks succeeded in boosting netinterest income (+EUR 0.35 billionor +5.2%) and income on securi-ties transactions and participations(+EUR 0.14 billion or +7.8%) as

well as the surplus on financial trans-actions (+EUR 0.03 billion or7.0%). Conversely, fee-based incomecontracted (—EUR 0.14 billion or—4.4%), mainly because commissionincome on securities trading plum-meted. On the expenditure side, staffcosts (+EUR 0.20 billion or +4.5%)and other administrative expenses(+EUR 0.22 billion or +7.5%)surged. The cost/income ratio dete-riorated by 0.8 percentage pointfrom 2000 to 67.4% in the yearunder review.

Loan loss provisions are expectedto have reached EUR 2.2 billion,representing a pronounced rise overthe figure anticipated for 2000. Asin the year before, recoveries fromrisk provisions surpassed new trans-fers to provisions; net recoveries areexpected to be extraordinarily highat EUR 0.8 billion in 2001. Adjustedfor risk provisions and value adjust-ments, income from ordinary activi-ties is expected to have climbed byEUR 0.28 billion or +9.7% to EUR3.15 billion from 2000. After factor-ing in lower-than-expected extraor-

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dinary expenses and taxes, Austrianbanks� profit for the year comes toEUR 2.69 billion, up by EUR 0.36billion or 15.7% on the result for2000. Return on equity (profit forthe year as a percentage of core cap-ital) reached 9.8% in the reportingperiod, 0.4 percentage point higherthan in 2000.

Card payments surgeAfter Eurocheques had been in usefor over 30 years, Eurocheque pay-ment services and the Eurochequeguarantee were terminated at theend of 2001, reflecting the fallingpopularity of this payment instru-ment and the resulting hike in trans-action costs. In the course of 2001

the technology stock euphoria thathad prevailed for years gave way toa more common-sense approach andhealthy scepticism. This was one rea-son the development of electronicmoney did not live up to the originalhigh expectations. Although card-based transactions chalked up majorgains (debit cards: +30%, Quick elec-tronic purse transactions: +87%),cash remains the instrument of choicefor payment transactions in Austria.Banknotes and coins are used for93% of all payments, representing81% of the total transaction volume.

Mutual funds� assets grow more slowlyUnfavorable business conditions andthe terrorist attacks of September 11,

Selected Earnings Ratios of Austrian Banks1999 2000 2001

%

Cost/income ratio 70.7 66.6 67.4Ratio of net interest income to operating income 52.0 49.8 50.4Ratio of net fee-based income to operating income 22.6 23.7 21.8Return on equity 6.9 9.4 9.8

Source: OeNB.

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2001, impacted on the developmentof Austrian mutual funds� assets in2001. After rising moderately in thefirst half, only to contract moresharply than ever before in thethird quarter, assets reembarked ona positive trend in the fourth quar-ter, when markets recovered. Inthe face of largely adverse factors,mutual funds nevertheless managedto enlarge assets by EUR 6.7 billionor 7.3% in the calendar year 2001.

At the close of December 2001,the 23 Austrian investment compa-nies managed a total of EUR 98.7 bil-lion in the 1,720 investment fundsthey operated. Debt securities ac-counted for the largest share in port-folios (59%), followed by equities(19%) and mutual fund shares(17%). The shift from domestic toforeign investment continued at asomewhat weakened pace in 2001.The ratio of domestic to foreign in-vestment stood at 33.9% to 66.1%in December 2001 (December 2000:38% to 62.0%).

Slow asset growth at insurance companiesas wellIn the reporting period, mergersdiminished the number of insurancecompanies operating in Austria by3 to 65. Insurance companies� assets(excluding reinsurance transactions)

posted a steady rise, which, however,was interrupted by the decline inprices following the terrorist inci-dents in the U.S.A. in September.At the end of the third quarter of2001, assets fell for the first timesince the introduction of the insur-ance statistics. Both investment in do-mestic securities and lending dimin-ished at a faster pace in 2001. Addi-tions to foreign assets, which accoun-ted for the largest share of investmentthroughout the year, were very small.Investment in Austrian banks fluctu-ated wildly in 2001, a likely sign ofshifts to other categories of invest-ment.

Austria�s stock market is quite stablein an international comparison2001 was one of the hardest yearsin decades for the Austrian stockmarket — as it was for bourses acrossthe world. Under the circumstances,the Austrian Traded Index (ATX)held up fairly well; in fact, it evenclosed the year with a slight gain ofroughly 6%. This quite strong per-formance may be traced, inter alia,to the low share of high-tech stocksin the ATX and the moderate priceof most securities listed on WienerBo‹rse AG. The Austrian stock markethad benefited to a lesser extentfrom the worldwide boom of stock

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markets of the past years, so whenmarkets were hit after the terroristattacks of September 11, 2001, thepressure to sell affected the Austrianstock exchange only temporarily inthe weeks following the incident.

Positive returns on the Austrianbond marketCapital markets in Austria showedsome evidence of higher uncertaintyon the part of investors in the reviewyear. Derivatives transactions aug-

mented at a more moderate pace thanin the preceding years. While Aus-trian pension funds� profits weresqueezed by tumbling stock prices,most funds managed to post profitsrather than losses. Developments onthe Austrian bond market were stablein 2001. The yield gap between Aus-trian bond yields and the Germanbenchmark yields remained un-changed, and the Austrian secondarymarket yield exhibited no irregularfluctuation.




The OeNB�s Tasks:An OverviewThe OeNB has twofold responsibilities —in the ESCB and in AustriaThe OeNB�s responsibilities resultfrom its particular situation as an in-tegral part of the European System ofCentral Banks, the ESCB, and fromits function as the central bank ofAustria. In this dual role, the OeNBhas an active voice in the ESCB�s

monetary policy and contributes tostrengthening Austria�s financial mar-ket. The key purpose of the OeNB�sactivities both at the national and atthe international level is to benefitits users and partners.

The twofold position the OeNBoccupies inform the duties presentedin key words in the box below. Thebox is followed by a more detaileddescription of selected tasks.

The OeNB�s Tasks: An Overview

— Participation of the OeNB�s Governor in the Governing Council and in the General Council ofthe 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 OeNB�s own reserves and of the OeNB�s share of the ECB�s 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 analysisThe participation of the OeNB�s Gov-ernor in the Governing Council ofthe ECB intensely involves the OeNBin the monetary policy decision-mak-ing process of the ESCB. One of theprime functions of economic analysisis to provide valuable, high-quality in-puts for decision-making at ECBGoverning Council meetings. Inde-pendent research at the individual

central banks is the backbone of theintellectual debate to establish thetheoretical underpinnings of mone-tary policy. The OeNB�s economicresearch focuses on monetary andfiscal policy issues, monetary trans-mission, exchange rate and exchangemarket developments, the implica-tions of the use of electronic meansof payment, securing financial stabil-ity, various aspects of wage-setting


Responsibilities Handled Efficiently

processes in EMU, and competitionand location analyses. The semiannualpublication of macroeconomic pro-jections for the euro area compiledjointly by ECB and NCB experts hasmoved this area of research evenmore into the public eye. The OeNBprovides input via the various work-ing groups within the so-called BroadMacroeconomic Projection Exercise(BMPE) and the Narrow InflationProjection Exercise (NIPE) and pub-lishes semiannual economic outlooksfor Austria. Benefiting from Austria�sgeographic position and the networkof ties to Central and Eastern Europeit has developed over time, the OeNBis uniquely suited to providing exper-tise on the CEECs at the national andat the international level.

StatisticsThe OeNB compiles statistics essen-tial for the presentation of the Aus-trian financial sector and its develop-ment, collecting most of the basicdata required itself. The chief aim isto produce highly reliable statisticswhich meet a continously high qualitystandard. OeNB statistics include:monetary and prudential statistics,balance of payments statistics, inter-national investment position statis-tics, financial accounts and contribu-tions to the national accounts. Incompiling these statistics, the OeNBcooperates with national and interna-tional partner organizations such asStatistics Austria, the ECB, Eurostat,the OECD, the IMF and the BIS. TheOeNB�s statistics represent validatedinformation straight from the sourceand provide a reliable and objectivebasis for the monetary policy deci-sions of the ESCB. Also, they providesupport to economic policymakersand allow Austria�s position to begauged in an international compari-son. Prudential supervision and hence

the functioning and stability of the fi-nancial market draw substantially onthe OeNB�s primary statistics, aboveall on the data on financial institu-tions.

Decentralized implementationof Eurosystem monetary policy measuresThe Eurosystem has a number ofmonetary policy instruments at itsdisposal to ensure that the pricestability objective is achieved. Theseinstruments serve to influence mar-ket interest rates, to manage theliquidity of the banking system andto signal the general orientation ofmonetary policy. The Eurosystemimplements monetary policy decen-trally: Within the ESCB, the Govern-ing Council of the ECB takes mone-tary policy decisions, and the NCBsimplement them.

When it conducts main refinanc-ing operations (MROs), the OeNBsupplies Austrian banks with theliquidity they need against collateral(�reverse transactions�). MROs areconducted through weekly standardtenders (variable rate tenders with aminimum bid rate) and have a matur-ity of two weeks. The OeNB takesaccount of national interests when itselects eligible assets. In addition tothe MROs, the Eurosystem conductslonger-term refinancing transactions(LTROs), which are regular liquid-ity-providing reverse transactionswith a monthly frequency and a ma-turity of three months. The OeNBand the other NCBs conduct LTROsas standard tenders as well. Theset of monetary policy instrumentsalso includes fine-tuning operations(quick tenders) which, under excep-tional circumstances, may be exe-cuted by the ECB itself within a time-frame of one day. Two decentralstanding facilities at the NCBs aredesigned either to provide (the mar-



ginal lending facility) or absorb (de-posit facility) liquidity overnight andset an upper and a lower limit forovernight market interest rates. Useof the marginal lending facility is con-tingent on the provision of adequatecollateral.

Successful reserve managementDespite the generally gloomy eco-nomic picture, the OeNB�s invest-ment policy met with continued suc-cess in 2001. Like the other NCBs,the OeNB is responsible not onlyfor managing its own reserves, it alsomanages in a fiduciary capacity thereserves it has transferred to theECB for possible interventions. Theprinciples of security, liquidity andprofitability govern the managementof both portfolios. Whereas theECB determines the guidelines forits reserves, it is up to the NCBs totake the best possible advantage ofthe remaining room for maneuver.However, the NCBs are in charge ofdefining the reserve managementstrategy for their own reserves. TheECB�s thresholds for reporting andauthorization requirements ensurethat the monetary and foreign ex-change policy of the ESCB is uni-form.

The OeNB bases its investmentactivity on a sophisticated risk man-agement system. Different thresholdsapply to different types of business;in addition, a limit is fixed for thepermissible total investment. Marketrisk (interest rate and currency risk)is defined in the form of thresholds(duration bands, maximum toleran-ces for currency risk); it is also mea-sured by applying the value-at-riskapproach. The OeNB�s gold trans-actions are subject to the WashingtonAgreement signed in September1999, which limits gold investmentand sales by the participating central

banks. Within the permissible frame-work, the OeNB conducts an activegold policy, reinforcing the effective-ness of its expertise and making con-siderable additional profit.

In addition, the OeNB has anactive interest in financial derivatives,whose expanding role on worldfinancial markets makes them a focusof central banks� attention. Workinggroups which deal with the relevantissues in these business areas ensurea permanent flow of informationbetween the NCBs and the ECB.These structures guarantee the con-tinuous evolution of the acquiredknowledge along with the develop-ment of the appropriate ESCB instru-ments.

Payment servicesThe OeNB operates a real-time grosssettlement system called ARTIS (Aus-trian Real-Time Interbank Settle-ment) for Austria�s financial marketto ensure secure payment trans-actions within the TARGET (Trans-European Automated Real-time Grosssettlement Express Transfer) net-work of the ESCB. The chief advant-age of this payment system is thefinality of settlement guaranteed bythe OeNB and in the immediate avail-ability of liquidity. The OeNB usesthe ARTIS system to settle moneymarket transactions and importantpayment transactions, thereby secur-ing the functioning and the stabilityof the financial market in Austria. Ina review conducted in the businessyear 2001, the ARTIS system wasdeemed to be fully compliant withthe Core Principles for SystemicallyImportant Payment Systems recog-n i zed by the ECB. The OeNBachieved a boost in the number oftransactions processed by the ARTISinterbank payment system from1.85 million in 2000 to 2.59 million



in 2001. Apart from ARTIS, theOeNB supports innovative paymentsystems solutions in Austria and, incooperation with banks, fosters thestructural changes required to pro-vide secure and efficient paymentsettlement for Austrian consumersand businesses.

Cash supplyJointly with its subsidiaries, theOeNB supplies top-quality banknotesand coins to all users in Austria. Thistask involves the issue of cash tobanks and the acceptance of cashreturned by the banks. The main ob-jectives in cash distribution and pro-cessing are counterfeit protection, afeature important in retaining thetrust of Austrian users in the cur-rency, and the maintenance of thehigh quality of the currency in cir-culation in Austria. The euro cashchangeover was an enormous suc-cess, leading to a broad acceptanceof the currency by the general publicin a very short period (see the chap-ter �Smooth Euro Cash Change-over�).

Financial market analysisIn line with its obligation to secure,reinforce and monitor the function-ing and stability of the Austrianfinancial market, the OeNB performsbanking analysis, payment systemsoversight, on-site inspection ofbanks, reviews of the commercialbanks� risk management systems,and administers the Major LoansRegister. The OeNB has further in-tensified its focus on financial marketanalysis in recent years. These effortsare intended above all to safeguardthe stability of Austria�s bankingsystem (see the chapter �The OeNBContributes to Financial Stability�).

An Efficient OrganizationModern corporate management andorganizational development tools in useThe OeNB avails itself of modernbusiness management tools, whichwere further refined in the reviewperiod (see the section �A StrategicPosition for the Future�). In addition,within the framework of the organi-zational development process, pro-jects are implemented to analyzeorganizational and managementstructures and operational proce-dures; the aim is to determine andoptimize their operating efficiency.The standard instruments used areorganizational analyses targeted atraising the efficiency of selected or-ganizational units and process analy-ses aimed at examining and stream-lining particular business and supportprocesses.

Further optimization of processesIn 2001 organizational developmentwas concentrated on various areas,e.g. the restructuring of cash supplyservices and payment systems. Inthe payment systems area, the organi-zational structure was optimized andthe administration of transactionswas reorganized and modernized.By putting into practice a moderne-procurement system, the OeNBsucceeded in streamlining the pro-curement processes in the areas or-ders and acquisitions, including theinterfaces with the accounting sys-tem.

Human resource management developedfurtherIn 2001 the OeNB concentrated itspersonnel management capacities onconcepts for flexible working hours,the implementation of a new humanresource management concept andthe introduction of new humanresource development instruments.



Above all, recruiting concepts wereoptimized.

In addition to exploiting Internetand intranet placement sites success-fully and to developing the requiredInternet website, the OeNB directlycontacted potential job seekers,above all at universities.

As in the past, advanced methodswere applied to encourage staff mobi-lity. These instruments include fur-ther training and the optimum de-ployment of human resources. Toachieve the staff mobility goal, careerorientation exchanges with staff wereintroduced.

Annual goal setting discussionswere introduced as a human resourcemanagement tool to complement theannual performance review. Corpo-rate and division objectives are de-fined to include every single em-ployee and result in individuallymeasurable agreements on goals be-tween management and staff.

Personnel issues were one of theareas in which intra-ESCB coope-ration was further intensified in thereview year. In this context harmo-nized secondment provisions wereelaborated and job rotation withinthe ESCB was reinforced. In the areaof personnel training, joint trainingoptions for new staff and for manage-ment were extended.

From January 1, 2002, staff hasbeen able to benefit from a varietyof part-time concepts that are aimedat creating more flexible workingschedules. By using these new part-time schedules, the OeNB is in aposition to react flexibly to changesin the world of work and to deployits human resources in an optimalfashion.

Reorganization of the IT managementsystem and of ISO certificationIn 2001, the OeNB�s IT operationsintroduced a customer-oriented, pro-cess-oriented quality managementsystem designed to foster ongoingIT business process optimization andhence support IT products and ser-vices. The OeNB�s IT quality man-agement system was reviewed in Sep-tember 2001; certification by thecertification institutes O‹ QS (O‹ ster-reichische Vereinigung zur Zertifi-zierung von Qualita‹ts- und Manage-mentsystemen) and DQS (DeutscheGesellschaft zur Zertifizierung vonManagementsystemen) according toISO standard 9001:2000 was success-fully completed. The motivation forthis step was the extension of thegroup of customers of the OeNB�sIT operations to the OeNB�s subsi-diaries, which apply such certifiedquality management systems. More-over, the quality management systemsupports the steady process of im-provement and comparability of theOeNB�s IT services within the ESCBand with those of other service pro-viders.

EMAS environmental managementdeveloped furtherThe environmental management sys-tem the OeNB and the OeBS, oneof its subsidiaries, introduced in1999 pursuant to the EMAS CouncilRegulation1) was refined in 2001 andwill receive further support throughthe creation of an environmental database from 2002.

Building ecology considerationswere developed further and used inthe conversion and construction ofGSA cash centers in 2001 based onexperience gained during the con-struction of the new OeNB building.

1 Environmental Managementand Audit Scheme.



A New Footing forCommunication withCustomers and PartnersSome 48 million hits on the OeNB�s websiteHi t s on the OeNB�s webs i t e(www.oenb.at) surged to 48.5 mil-lion in 2001. A redesign of theOeNB�s website was begun. The cen-tral OeNB website already containsthe latest information on �TheOeNB,� �the EURO. OUR money�and �Euro — EMU.� The relaunch ofthe OeNB�s website is scheduled for2002 as part of a more comprehen-sive technical project.

Innovative e-business projectsIn the reporting year 2001 the OeNBrealized a comprehensive e-businessproject, which enabled the OeNBand its subsidiaries to provide usergroups with specifically targetedinformation and with additional In-ternet applications. The projects spana wide range from an e-dictionary ofmonetary, banking and financialmarket terminology to backgroundknowledge on interest rate riskstipulations for loans to informationabout the OeNB�s large art collectionand its Bank History Archives(www.ebusiness.oenb.at). The moreintense recourse to the Internet as acommunications medium enabledthe OeNB to provide customers andthe general public with targeted anddirect information. In addition, theOeNB enables financial institutionsto access useful applications, such asthe ARTIS payment system, via theInternet. Further projects will ex-pand the supply of information,applications and direct communi-cation options from 2002.

Statistics information initiativeThe OeNB complemented its con-tacts with partners and customers inthe statistics domain with new infor-

mation initiatives in 2001. In Septem-ber 2001, for instance, a statisticshotline was established as a centralinformation service for questionsabout the OeNB�s financial statistics.Inquiries may be submitted by tele-phone (+43 01/40420 ext. 5555)and e-mail ([email protected]). Since mid-2001, answers tofrequently asked questions about theAustrian financial system have beenpublished in a new quarterly Ger-man-language brochure entitled �Eck-daten des o‹sterreichischen Finanz-wesens� (The Austrian Financial Sys-tem: Key Figures). The statisticalinformation that may be accessed onthe OeNB�s website was expanded,and user-friendliness was improvedfurther. Moreover, daily updates ofthe key figures on the Austrian eco-nomy, which are provided via theInternet for a world public withinthe framework of the IMF�s SpecialData Dissemination Standards (coor-dinated by the OeNB), were intro-duced in the review year. Finally,within the framework of the OeNB�sinnovative e-business projects, a newform of presenting selected timelyOeNB statistics was elaborated. Theaim of this statistical information,which may be viewed under http://dieaktuellezahl.oenb.at, is to addressand inform the broad public using aform of communication adaptedspecifically to the Internet.

Implementation of the Bank HistoryArchives projectIn 2001 the OeNB opened its BankHistory Archives to the generalpublic under the provisions of theFederal Archives Act. The Archivesprovide important historical informa-tion for persons accessing them for anofficial, research-related or journalis-tic purpose or on the grounds ofjustified personal interests. More-



over, within the framework of theOeNB�s e-business projects, selectedinformation from the Archives — suchas a historical overview of the OeNB —will be made available to interestedusers on the Internet.

Science and Research PromotionSince its foundation in 1966, theOeNB�s Anniversary Fund for thePromotion of Scientific Researchand Teaching has supported scientificprojects in basic and applied researchwith funds totaling around EUR 493million. The Anniversary Fund hasthus become an indispensable ele-ment in securing the future of Aus-trian science and research.

In 2001 the annual funds dis-bursed by the Anniversary Fundwere raised by EUR 4.85 million toEUR 70.25 million. Practically allof the new funds were earmarkedfor economics-oriented research.The amount paid out in the reportingyear for economics-oriented researchcame to EUR 60.9 million. Thesefunds mainly served to finance 165economics-oriented research projectsvia the Austrian Industrial ResearchPromotion Fund (Forschungsfo‹rde-rungsfonds fu‹r die gewerbliche Wirt-schaft) and the Austrian Science Fund(Fonds zur Fo‹rderung der wirtschaft-lichen Forschung). In addition, theOeNB�s Anniversary Fund providedfunding for four laboratories of theChristian Doppler Research Society(CDG), a research center of theAustrian Academy of Sciences andthree economic research institutes(the Austrian Institute of EconomicResearch, WIFO, the Institute forAdvanced Studies, IHS, and TheVienna Institute for InternationalEconomic Studies, WIIW). TheOeNB directly granted funds to thetune of some EUR 11 million for229 research projects in economics,

medicine, social sciences and the hu-manities, with an emphasis on rein-forcing the promotion of economicscience projects. Selected projectresults are presented to an expertpublic via the platform �Forum Jubi-la‹umsfonds.�

With these funding activities, theOeNB has contributed significantly tothe promotion of innovation andtechnological development as wellas to the improvement of Austria�sappeal as a business location and theinternational competitiveness of theAustrian economy.

Promotion of cultural activitiesThe OeNB puts particular emphasison promoting cultural activities. Forthis reason, it has acquired a numberof antique music instruments. Its 29valuable old string instruments areon loan to rising Austrian violin starsand Austrian chamber music ensem-bles and were presented to the publicin the course of the �Stradivari & Co�concert cycle at RadioKulturhaus,organized in cooperation with theAustrian Broadcasting Corporation(ORF).

The OeNB�s Subsidiaries:Innovative EnterprisesThe subsidiaries have an important role toplay in the fulfillment of the OeNB�s dutiesThe OeNB directly and indirectlyowns subsidiaries, many of whosebusiness activities focus on means ofpayment (cash, cashless transactions).

The area cash is covered by Mu‹nzeO‹ sterreich AG, the Austrian Mint,OeBS1), the Austr ian Banknoteand Security Printing Works, andGSA2), who are primarily responsiblefor the production of euro coins andeuro banknotes and for the cash sup-ply logistics in Austria, respectively.In the area cashless payments (meansof payment and payment transac-

1 Oesterreichische Banknoten-und SicherheitsdruckGmbH.

2 GELDSERVICE AUSTRIALogistik fu‹rWertgestionierung undTransportkoordinationG.m.b.H.



tions), the OeNB has equity interestsin AUSTRIA CARD1), STUZZA2),APSS3) and A-Trust4). AUSTRIACARD produces technically sophisti-cated payment cards, among otherthings; the remaining companies areprimarily engaged in the field of cash-less payment security and provide theinfrastructure required to operatepayment systems.

Changes in the OeNB�s equityholdings from 2000 occurred whenthe OeNB sold a small percentageof GSA stocks to a number of banks,who as a result are now involvedin GSA�s cash processing servicesthroughout Austria.

The OeNB�s subsidiaries are inde-pendent private-sector enterprises.Their main business lines are funda-mentally linked to the central bank�s

responsibilities. Through its activity,each subsidiary has amassed specialknow-how that is sought out by inter-ested parties from all over the world.By providing products and services toa larger customer base, the subsidia-ries are able to utilize their capacitiesoptimally and to make additionalprofits. The international scope fur-ther increases the subsidiaries� busi-ness efficiency and contributes tothe provision of cost-efficient ser-vices for the Austr ian financialmarket.

Cash and secure payment systems servicesfrom a single providerAs a first step in providing all Aus-trian users with cash, the OeNBdraws up a strategic plan. Next, thesubsidiaries are entrusted with the

1 AUSTRIA CARD-Plastikkarten undAusweissystemeGesellschaft m.b.H.

2 Studiengesellschaft fu‹rZusammenarbeit imZahlungsverkehr (STUZZA)G.m.b.H.

3 Austrian Payment SystemsServices (APSS) GmbH.

4 A-Trust Gesellschaft fu‹rSicherheitssysteme imelektronischen DatenverkehrGmbH.

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execution of this plan. By strategi-cally bundling know-how and bycoordinating services with its subsi-diaries to provide a full range of pay-ment systems services, the OeNBcontributes to— enhancing the security of payment

services (e.g. ensuring that bank-notes and coins are counterfeitproof and that data networks arestable);

— improving the quality of paymentservice products (e.g. compatiblepayment media); and

— lowering overall costs in Austria(e.g. by concentrating cash pro-cessing operations within GSA).The role the OeBS, the Austrian

Mint and GSA played during the cashchangeover and in supplying the pop-ulation with cash is described in detailin the chapter �Smooth Euro CashChangeover.�

A Strategic Positionfor the FutureThe OeNB�s strategic conceptAfter handling the changeover to theeuro successfully, the OeNB has beenable to return to planning its strategicconcept for the next few years. Thelong-term strategic concept is crucialto safeguarding the OeNB�s abilityto provide top-quality products andservices to Austrian businesses andindividuals.

The OeNB�s strategic work cen-ters on two areas within the broadrange of tasks and responsibilities:— First, the OeNB is actively in-

volved in developing and refiningESCB/Eurosystem strategy. Thisprocess is aimed at optimizingthe interaction of all ESCB/Euro-system participants.

— Second, the OeNB pursues thegoal of maximizing the usefulnessof its products for the Austrianfinancial market. A proactive

communication strategy securespublic acceptance of the OeNB�sproduct portfolio and public con-fidence in the way it handles itsresponsibilities.The OeNB�s strategic functions

are classified by priority — long-termobjectives are reflected in the missionstatement, medium-term aims aresubsumed under corporate goals andcorporate strategy, and annual opera-tional goals are established during an-nual planning. In 2001 strategic activ-ities were geared among other thingstoward developing a new missionstatement for the OeNB, which hasreplaced the old statement since thebeginning of the year 2002 and whichdefines the OeNB�s main basic tasksand its value system.

Strategic planning elementsMoreover, the OeNB began to de-velop its new corporate strategy inthe second half of 2001. The develop-ment of the OeNB�s corporate stra-tegy was based on several pillars:— the analysis of central banking

developments, above all in theEurosystem,

— expertise on Central and EasternEurope,

— the establishment of a position tobenefit the Austrian financialmarket and

— the further reinforcement ofcommunication with customersand partners, signaling the OeNB�sincreased service orientation.

The overarching principles guid-ing the OeNB�s strategy are theTreaty establishing the EuropeanCommunity, the Statute of the Euro-pean System of Central Banks and ofthe European Central Bank, and theFederal Act on the OesterreichischeNationalbank. The OeNB�s integra-tion into the Austrian and European



financial infrastructure represents anadditional key element of strategicplanning. These framework condi-tions are taken into account at alllevels of strategic and operationalplanning. By following this proce-dure, the OeNB has clearly con-firmed its good position within theESCB and the Eurosystem.

The corporate strategy is imple-mented in the form of annual opera-tional planning. With the aim ofmaintaining its good position amongEuropean central banks, the OeNBfurther refined its corporate manage-ment instruments in the reportingyear. As a case in point, an activity-based costing system was introduced,

providing for a clearer assignmentof costs and efficient, user-pays ac-counting within the company. De-volving responsibility to the divisionlevel further heightens cost-con-sciousness and increasingly bases op-erations on business principles. Likeactivity-based cost accounting, thenewly introduced budget monitoringenhanced the flexibility of businessoperations. The OeNB�s thorough-going modernization efforts havepositioned it very favorably withinthe ESCB with respect to a numberof business operation parameters,such as the operating result andorganizational processes.



The OeNB is an active partner withinthe ESCB/Eurosystem frameworkand in the committees and workinggroups of international organizationsand financial institutions. As a repre-sentative of Austria�s interests, theOeNB introduces the perspective ofa central bank, the interests of busi-ness and industry and of the Austrianpublic, and, finally, the views of Aus-trian financial market participants inthese bodies. Conversely, the OeNBacts as a link that transmits to Austriaviews, plans and decisions taken atthe European level.

The OeNB as an ActivePartner in EuropeanIntegrationIntense participationin various working groupsWithin the EU, the OeNB is part ofthe ESCB/Eurosystem, and as suchits delegates participate in the workof its committees and working groupsas well as numerous other economicpolicy bodies. These include theEU�s Economic and Financial Com-mittee (EFC) and Economic PolicyCommittee (EPC), both of whomprepare meetings of the Council ofEconomic and Finance Ministers(Ecofin). In the past business year,the OeNB played a crucial rolefor a number of processes and deci-sions:— No doubt the outstanding project

was the introduction of euronotes and coins, which was effi-ciently planned, executed andsupervised within a frameworkspanning all NCBs.

— The expertise of OeNB staff inthe OeNB�s representation onvarious ESCB committees re-mained a very important inputin 2001. The OeNB�s staff elabo-rated crucial contributions toESCB and Eurosystem provisions

(see selected areas below), whichhad a decisive impact on the finaldecisions.

— One central area of ESCB discus-sions was the future distributionof monetary income, where in-tense negotiations in 2001 pro-duced a very satisfactory resultfor Austria (see �Financial State-ments 2001 of the Oesterreichi-sche Nationalbank�).

— In refining the statistical basis forthe single monetary policy, thenew ECB regulation on MFI in-terest rate statistics was adoptedby the Governing Council of theECB in December 2001, conclud-ing a preparation phase of roughlytwo years. The new regulationensures the provision of harmon-ized and complete interest ratestatistics covering importantbanking operations from 2003.As in numerous other cases, theOeNB succeeded in providingwell-founded suggestions in thisarea, whose integration in theregulation is in the interest ofthe system as well as in the Aus-trian interest.

— Within the framework of the EU�sBanking Advisory Committee andof the ESCB�s Banking Supervi-sion Committee, the OeNB par-ticipated in the regular dialoguewith banking supervisors in theother EU countries.

— In the International RelationsCommittee (IRC) of the ESCBand in the EFC Working Groupon IMF and Related Matters,OeNB representatives providedemphatic support to improvingof the representation of commonEU interests at internationalorganizations such as the IMF. Inthis context, the declaration ofthe EU Council meeting inVienna was further specified with


The OeNB as an International Partnerin Cooperation and Dialogue

regard to EU external relationsin the area of economic policyissues.

Numerous conferencesand events organizedAs an economic policy agent, theOeNB is intent on promoting thedialogue with researchers and politi-cians and as such frequently initiatesand hosts national and internationalconferences and events in Viennaand outside the nation�s capital. TheGoverning Council of the ECB, theEPC, the IRC, the Monetary PolicyCommittee (MPC) and the LegalCommittee of the ESCB all convenedin Vienna. The largest conference theOeNB organizes is the annual Eco-nomics Conference, which took placein June last year and presentedimportant observations on the topicof financial stability.

Apart from events organized tosupport the introduction of eurobanknotes and coins (see the chapter�Smooth Euro Cash Changeover�),the OeNB organized a multitude ofother events: 227 events attractedroughly 10,000 participants; more-over, 4,000 participants were ad-dressed during 116 school visits.These activities further reinforcedthe OeNB�s reputation as an informa-tion platform and dialogue partner atthe highest level.

Strong International TiesCooperation with the BIS, the IMFand the OECDAt the international level (extendingbeyond the EU level), the OeNBplays an active role in representingAustria�s interests at the IMF, theOECD and the BIS.

In 2001 the IMF gave a favorablejudgment of Austria�s economic situ-ation upon conclusion of its annualconsultations under Article IV of

the IMF Articles of Agreement (Ar-ticle IV consultations), which areorganized by the OeNB, and under-lined the Austrian approach to thegradual liberalization of capital move-ments during the past decades as apositive example in its annual report.

The many years of expertise theOeNB has acquired on capital trans-actions were instrumental in the firstappointment of a representative ofthe OeNB to the chairmanship of anOECD committee, the Committeeon Capital Movements and InvisibleTransactions (CMIT).

In order to provide optimal sup-port to the regular country analysisof Austria by the OECD, an OeNBstaff member was seconded to theOECD for two months to work inthe unit in charge of the country anal-ysis of Austria.

In the BIS the OeNB participatedin the newly established Central BankGovernance Network, which drawsup comparative analyses on centralbanking structures.

Expertise for Centraland Eastern EuropeAdvanced analyses and an extensivenetwork of close contactsAustria�s geographic position andthe network of ties the OeNB hasacquired over time have given it agreat deal of special know-how onEastern Europe that is tapped bothat the Austrian and at the inter-national level, above all by the Euro-system.

Analyzing the integration processof the Central and Eastern Europeancountries into the EU and EMU, pro-viding technical cooperation, aboveall with the NCBs of those countries,and offering training support is at theheart of the OeNB�s activities. Inaddition to highly advanced analysis,the OeNB�s competence on Eastern


The OeNB as an International Partner

in Cooperation and Dialogue

Europe includes an up-to-date net-work of important contacts, numer-ous events serving among otherthings as a platform for the exchangeof opinions and a wide range of tech-nical cooperation and training activ-ities. The semiannual publication�Focus on Transition�, which coversthe economic challenges and issuesof transition countries, is a valuablesource for experts and decision-mak-ers at central banks and internationalorganizations as well as for a profes-sional readership.

Entitled �Convergence and Diver-gence in Europe,� the OeNB�s East-West Conference in 2001 treatedthe problem of the different paceand level of development amongEuropean regions and the catching-up strategies of the accession coun-tries from the research expert per-spective.1)

Both at the bilateral level andwithin the framework of the JointVienna Institute, which has becomepermanently established in Vienna,the OeNB has trained officials fromCentral and Eastern European centralbanks and has prepared them for thecoming integration into the institu-tions of the EU. In the past years,the emphasis of training has shiftedfrom providing knowledge about ba-sic economic policy issues and in-stitutions to imparting knowledgeabout how to implement instrumentsand standards. The OeNB was alsoinvolved in the coordination of tech-nical assistance at international or-ganizations such as the EU and theBIS and participated in the assistanceprograms of the EU and the IMF.

1 The contributions to theEast-West Conference 2000were published as a book:Tumpel-Gugerell, G.,Wolfe, L., Mooslechner, P.(eds., 2002). CompletingTransition: The MainChallenges. Springer.


The OeNB as an International Partner

in Cooperation and Dialogue

ˆ

Financial Statements

of the Oesterreichische Nationalbank

for the Year 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 residentsdenominated in foreign currency 13,979,832,639.04 15,062,227,984.502.1 Receivables from the IMF 1,262,683,249.24 888,393,041.772.2 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 residentsdenominated in foreign currency 1,108,565,345.82 1,543,590,501.40

4. Claims on non-euro area residentsdenominated in euro 1,569,219,994.13 1,860,162,390.224.1 Balances with banks, security investments and loans 1,569,219,994.13 1,860,162,390.224.2 Claims arising from the credit facility under ERM II � �

5. Lending to euro area credit institutions relatedto 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 institutionsdenominated in euro 182,269,783.31 166,356,570.34

7. Securities of euro area residentsdenominated 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 issuanceof ECB debt certificates1) x x

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 4,091,433,515.8911.1 Coins of euro area 151,994,553.97 67,951,433.5911.2 Tangible and intangible fixed assets 135,622,952.35 109,891,122.9311.3 Other financial assets 2,548,765,865.44 2,432,098,313.4711.4 Off-balance-sheet instruments� revaluation differences 6,571,481.94 41,598,284.9811.5 Accruals and deferred expenditure 355,593,036.02 399,075,911.2911.6 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.


Balance Sheetas at December 31, 2001

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 institutionsrelated to monetary policy operationsdenominated in euro 5,497,601,442.69 3,402,808,903.322.1 Current accounts

(covering the minimum reserve system) 5,497,601,442.69 3,402,808,903.322.2 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 institutionsdenominated in euro 1,059,618,205.55 �

4. Debt certificates issued1) x x

5. Liabilities to other euro area residentsdenominated in euro 42,101,899.13 18,201,500.455.1 General government 21,298,633.20 766,081.045.2 Other liabilities 20,803,265.93 17,435,419.41

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

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

8. Liabilities to non-euro area residentsdenominated in foreign currency 985,659,161.39 900,889,207.448.1 Deposits, balances and other liabilities 985,659,161.39 900,889,207.448.2 Liabilities arising from the credit facility

under ERM II � �

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

10. Intra-Eurosystem liabilities � 5,024,023,947.1010.1 Liabilities equivalent to the transfer

of foreign reserves1) x x10.2 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 1,101,311,694.5912.1 Off-balance-sheet instruments� revaluation differences 207,999,252.71 3,975,845

.�

12.2 Accruals and deferred income 109,867,776.42 79,671,367.7412.3 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 4,260,243,425.6215.1 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.


Balance Sheet

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 forforeign 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 andintangible 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 government�s share of profit and transferto 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


Profit and Loss Accountfor the Year 2001

General Notes to the Financial Statements

AccountingFundamentals and LegalFrameworkThe OeNB is committed (pursuant toArticle 67 paragraph 2 of the FederalAct on the Oesterreichische Natio-nalbank of 1984 as amended — Natio-nalbank Act) to prepare its balancesheet and its profit and loss accountin conformity with the policies estab-lished by the Governing Council ofthe ECB under Article 26.4 of theESCB/ECB Statute. These policiesare laid down in the Guideline ofthe ECB of 1 December 1998 onthe legal framework for accountingand reporting in the European Sys-tem of Central Banks as amendedon 15 December 1999 and 14 De-cember 2000 (ECB/2000/18).1) TheOeNB�s financial statements for theyear 2001 were prepared fully in linewith the provisions set forth in thisguideline. In cases not covered bythe guideline, the generally acceptedaccounting principles referred to inArticle 67 paragraph 2 second sen-tence of the Nationalbank Act wereapplied.

The other Nationalbank Act pro-visions that govern the OeNB�s finan-cial statements (Articles 67 through69 and Article 72 paragraph 1 ofthe Nationalbank Act, as amendedand as promulgated in Federal LawGazette I No. 60/1998) as well asthe relevant provisions of the Com-mercial Code as amended remainedunchanged from the previous year.In accordance with Article 67 para-graph 3 of the Nationalbank Act, theOeNB continued to be exempt in2001 from preparing consolidated fi-nancial statements as required underArticle 244 et seq. of the Commer-cial Code.

Pursuant to Council Regulation(EC) No. 1478/2000 of 19 June2000 amending Regulation (EC) No.2866/98 on the conversion rates be-tween the euro and the currencies ofthe Member States adopting the euro,the conversion rate between the euroand the Greek drachma was irrevoca-bly fixed at 340,750 Greek drachmato the euro. This Regulation enteredinto force on January 1, 2001.

The financial statements for 2001were prepared in the formats laiddown by the Governing Council ofthe ECB. This format has remainedunchanged from that of the financialstatements for 2000.

Accounting PoliciesThe financial statements were pre-pared in conformity with the ac-counting policies adopted by theGoverning Council of the ECB2).Said accounting policies, which gov-ern the accounting and reporting op-erations of the Eurosystem, followaccounting principles harmonized byCommunity law and generally ac-cepted international standards. Thekey policy provisions are summarizedbelow.

The following accounting princi-ples have been applied:— economic reality and transpar-

ency,— prudence,— recognition of post-balance-sheet

events,— materiality,— a going-concern basis,— the accruals principle,— consistency and comparability.

Transactions in financial assetsand liabilities are reflected in the ac-counts on the basis of the date onwhich they were settled.

1 Decision of the GoverningCouncil of the ECBof December 14, 2000.

2 Decision of the GoverningCouncil of the ECBof December 14, 2000(ECB/2000/18).


Notesto the Financial Statements 2001

Foreign currency transactionswhose exchange rate is not fixedagainst the accounting currency wererecorded at the respective euro ex-change rate.

At year-end both financial assetsand liabilities were revalued at cur-rent market prices/rates. This appliesequally to on- and off-balance-sheettransactions. The revaluation tookplace on a currency-by-currencybasis for foreign exchange positionsand on a code-by-code basis forsecurities.

Gains and losses realized in thecourse of transactions were taken tothe profit and loss account. For gold,foreign currency instruments and se-curities, the average cost method wasused in accordance with the daily net-ting procedure for purchases andsales. As a rule, the realized gain orloss was calculated by juxtaposingthe sales price of each transactionwith the average acquisition cost ofall purchases made during the day.In the case of net sales, the calcula-tion of the realized gain or loss wasbased on the average cost of the re-spective holding for the precedingday.

Unrealized revaluation gains werenot taken to the profit and loss ac-count, but transferred to a revalua-tion account on the liabilities side ofthe balance sheet. Unrealized losseswere recognized in the profit and lossaccount when they exceeded pre-vious revaluation gains registered inthe corresponding revaluation ac-count; they may not be reversedagainst new unrealized gains in sub-sequent years. Furthermore, theOeNB�s management determinedthat unrealized foreign currencylosses that must be expensed wereto be covered by the release of an off-setting amount from the �reservefund for exchange risks� accumulated

in the runup to 1999.1) Unrealizedlosses in any one security, currencyor in gold holdings were not nettedwith unrealized gains in other secur-ities, currencies or gold, since net-ting is prohibited under the Account-ing Guideline.

The average acquisition cost andthe value of each currency positionwere calculated on the basis of thesum total of the holdings in any onecurrency or gold, including bothasset and liability positions andboth on-balance-sheet and off-bal-ance-sheet positions.

In compliance with Article 69paragraph 4 of the NationalbankAct, which stipulates that the reservefund for exchange risks be set up orreleased on the basis of the risk as-sessment of nondomestic assets, thevalue-at-risk (VaR) method was usedto calculate the currency risk. VaRis defined as the maximum loss of agold or foreign currency portfoliowith a given currency diversificationat a certain level of confidence(97.5%) and for a given holding peri-od (one year). The potential loss cal-culated under this approach is to beoffset against the �reserve fund forexchange risks� and the �revaluationaccounts.� Provided that such lossescannot be offset in this way, any re-maining loss shall be offset againstnet income by allocating the neces-sary funds to �provisions for ex-change rate risks.� In case just partof the �reserve fund for exchangerisks� is needed to cover the loss,the difference will be released andwill increase net income.

Future market developments, es-pecially interest and exchange ratemovements, may entail considerablefluctuations of the income of theOeNB and the other NCBs participat-ing in Stage Three of Economic andMonetary Union (EMU) as well as

1 Decision of the GoverningBoard of November 10,1999, and of the GeneralCouncil of November 25,1999.



the ECB as a result of the harmonizedaccounting rules with they must com-ply since January 1, 1999.

Premiums or discounts arising onsecurities issued or purchased werecalculated and presented as part of in-terest income and amortized over theremaining life of the securities.

Participating interests were val-ued on the basis of the net asset valueof the respective companies (equitymethod).

Tangible and intangible fixed as-sets were valued at cost less depreci-

ation. Depreciation was calculated ona straight-line basis, beginning withthe quarter after acquisition and con-tinuing over the expected economiclifetime of the assets, namely:— computers, related hardware and

software, and motor vehicles(4 years),

— equipment, furniture and plant inbuilding (10 years),1)

— buildings (25 years).Fixed assets costing less than

EUR 10,000 were written off in theyear of purchase.

Realized Gains and Losses

and Revaluation Differences and their Treatmentin the Financial Statements of December 31, 2001

1 By way of derogation fromthis principle, the useful lifeof banknote and coinprocessing equipment washalved to five years in2001.

Realized gains(posted to theprofit and lossaccount)

Realized losses(posted to theprofit and lossaccount)

Unrealizedlosses(posted to theprofit and lossaccount)

Change inunrealized gains(postedto revaluationaccounts)

EUR million

Gold 204.888 0.000 — +134.392Foreign currency 519.087 6.992 60.5191) —205.373Securities 221.994 7.753 26.8012) — 9.414Initial valuation of securities 26.750 x x xIMF euro holdings 35.300 — — —Participating interests — — 0.428 +113.356Off-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.�



Capital Movements

For details of the various changes, please refer to the notes to the respec-tive balance sheet items.

Development of the OeNB�s Currency Positions

in the Business Year 2001

Movements in Capital Accounts in 2001

Dec. 31,2000

Increase Decrease Dec. 31,2001

EUR million

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

Total 4,908.715 31.399 260.061 4,680.053Capital 12.000 — — 12.000ReservesGeneral reserve fund 1,611.952 — — 1,611.952Freely disposable reserve fund 1,036.219 — 118.500 917.719Reserve for nondomestic and price risks 1,077.606 152.890 66.072 1,164.424Earmarked capitalfunded with net interest incomefrom ERP loans 515.199 18.879 — 534.078Fund for the Promotionof Scientific Research and Teaching 7.267 — — 7.267

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

Net Currency Position (including gold)

Dec. 31,2000

Dec. 31,2001

Change

EUR million %

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

Total 20,554.660 18,715.454 —1,839.206 — 8.9Off-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.



Monetary Income in the Eurosystem

Article 32 of the Statute of theESCB/ECB defines monetary incomeas the income accruing to the NCBsin the performance of the Eurosys-tem�s monetary policy function.Under the ESCB/ECB Statute, theamount of each NCB�s monetaryincome shall be equal to its annualincome derived from its assets heldagainst notes in circulation anddeposit liabilities to credit insti-tutions (which together form theliability base). Such assets shall beearmarked and the income derivedfrom these assets shall be redi-stributed among the euro areaNCBs in accordance with guide-lines to be established by the Govern-ing Council of the ECB (Article 32.2of the ESCB/ECB Statute; directmethod of calculating monetary in-come).

The amount of income the NCBsactually pay into the pool for redis-tribution is influenced by the coststhat they incur in connection withthe liquidity-absorbing monetary pol-icy operations, and moreover by theremuneration of reserves under theEurosystem�s minimum reserve sys-tem, because any interest that theNCBs pay on banks� minimum re-serve deposits reduces the amountsthey contribute to the pool of mone-tary income.

The rationale for this policy is toequitably redistribute the incomeresulting from the use of the mone-tary policy instruments in conductingthe single monetary policy. Any suchincome earned in the euro area ispooled and reallocated to the partici-pating NCBs according to a desig-nated key. More precisely, the pooledmonetary income is divided upin proportion to the participating

NCBs� paid-up shares in the capitalof the ECB.

Procedurefor the Business Years1999 to 2001Since the balance sheet structures ofthe participating NCBs divergedwidely at the time at which they en-tered Stage Three of EMU, the Gov-erning Council of the ECB agreed onNovember 3, 1998, that for the firstthree years monetary income shouldbe measured according to an alterna-tive, �indirect� method provided forunder Article 32.3 of the ESCB/ECB Statute. The Governing Councildetermined that the indirect methodwas to be applied until the end of2001. Under this method, a refer-ence rate, namely the marginal bidrate for two-week repos, is appliedto the liability base to calculate theamount of monetary income earned.

Since banknotes in circulation didnot include euro banknotes from1999 to 2001 and national banknotesin circulation were excluded fromthe liability base under the interimsolution, the liability base consistedonly of deposit liabilities to creditinstitutions during this period. Asinterest paid on those liabilities couldbe offset against the monetary in-come to be pooled,1) the Eurosys-tem�s overall monetary income wasin fact not very high. Under thismethod, the OeNB paid very smallnet amounts into the pool of mone-tary income during the first threeyears because the income accruingto the OeNB from the componentsmentioned above was roughly equalto the offsettable remuneration ofminimum reserve holdings.

1 The interest rate for theremuneration of minimumreserve balances and the rateapplied to calculatingmonetary income have beenidentical since theestablishment of theEurosystem.



Outlook: The ProcedureApplicable from 2002 to2007The inclusion of euro banknotes incirculation from 2002 in the liabilitybase called for a viable longer-termsolution. As a result of the accountingregime for euro banknotes in circula-tion (for more information, see �TheIntroduction of Euro Banknotes andCoins� below), new provisions forthe allocation of monetary incomefor the years 2002 to 20071) wereadopted on the basis of the Decisionof the European Central Bank of 6December 2001 on the allocation ofmonetary income of the national cen-tral banks of participating MemberStates from the financial year 2002.

Under the transitional regime ap-plicable until 2007, the amount ofmonetary income to be pooled is ad-justed on the basis of compensatingfactors, which will be progressivelyreduced to zero. This solution is de-signed to compensate changes in therelative income positions of the NCBsafter the introduction of the euro.For 2002 the measurement of mone-tary income will be based on bothnational banknotes in circulation andeuro banknotes in circulation, usingthe alternative method provided forunder Article 32.3 of the ESCB/ECB Statute and applied since 1999.From 2003 a direct method as pro-vided for under Article 32.2 will beapplied.

The Introduction of Euro Banknotes and Coins

on January 1, 2002 —Impact on the Financial Statements for 2001

The introduction of euro notes andcoins on January 1, 2002, beginsthe second-to-last phase (3b) of thethree-stage process of Economic andMonetary Union described in theTreaty. Pursuant to Article 10 ofCouncil Regulation (EC) No. 974/98 of 3 May 19982) on the introduc-tion of the euro banknotes and coinsdenominated in euro have the statusof legal tender in all participatingMember States (in the euro area)from January 1, 2002. While theschilling was legal tender for pay-ments next to the euro during a dualphase lasting until February 28,2002, the single currency becamethe sole legal tender from March 1,2002. The euro banknotes are issuedby the ECB (to which 8% of the totalvalue of banknotes in circulation areallocated) and by the NCBs (amongwhom the remaining 92% of the

banknotes in circulation are allo-cated3)). The amount of euro bank-notes in circulation allocated to eachof the 12 participating NCBs is deter-mined in accordance with their sharein the paid-up capital of the ECB. OnDecember 20, 2001, the GoverningCouncil of the ECB authorized the is-sue of euro coins by the MemberStates pursuant to Article 106 ofthe Treaty.

FrontloadingIn order to ensure that a sufficientquantity of euro notes and coins weredistributed to businesses and thegeneral population in time for thechangeover and to facilitate a rapidexchange during the dual circulationperiod, the OeNB frontloaded exten-sively to selected banks. The total offrontloaded euro banknotes came tosome EUR 9.8 billion, and EUR 0.5

1 Decision of the EuropeanCentral Bank of 6 December2001 on the allocation ofmonetary income of thenational central banks ofparticipating member statesfrom the financial year2002 (ECB/2001/16).

2 Federal Law Gazette Part INo. 2000/72, Article I,paragraphs 1 and 2 �FederalAct adopting measures in thefield of currency inconnection with the issuanceof euro banknotes and coinsare to be adopted (Euro Act)and amending the AustrianCoinage Act of 1988 andthe Central Bank Act of1984.� This law is based onCouncil Regulation (EC)No. 974/98 of 3 May1998 on the introduction ofthe euro, Official JournalL 139, 11 May 1998.

3 Decision of the EuropeanCentral Bank of 6 December2001 on the issue of eurobanknotes(ECB/2001/15).



billion of euro coins were front-loaded. In a second step, these bankssubfrontloaded notes and coins tobusinesses and other banks. TheOeNB frontloaded euro banknotes,euro and cent coins and euro starterkits for businesses and households de-signed to help ensure that enoughsmall change would be available fortransactions in the first days following

the changeover. From December 15,2001 euro starter kits and euro andcent coins were sold or distributedto Austrians for the most part bybanks, but also by the OeNB directly.In line with the guidelines of theECB, the frontloaded euro banknotesand coins were not posted to thebalance sheet, as they were not yetlegal tender.

Notes to the Balance Sheet

Assets1. Goldand gold receivables

EUR million

Closing balance Dec. 31, 2001 3,519.118Closing balance Dec. 31, 2000 3,556.162

Change — 37.044—1.0%

This item comprises the OeNB�sholdings of physical and nonphysicalgold, which amounted to approxi-mately 347 tons on December 31,2001. At a market value of EUR314.990 per fine ounce (i.e. EUR10,127.16 per kg of fine gold), theOeNB�s gold holdings were worthEUR 3,519.118 million at the bal-ance sheet date.

The year-on-year change resultsfrom revaluation gains on the orderof EUR 200.578 million, as offset bysales (30 tons worth EUR 273.599million). On balance realized revalu-ation gains and book value reconcilia-tions increased gold and gold hold-ings by EUR 35.976 million.

The gold sales complied with theCentral Bank Gold Agreement con-cluded by 14 NCBs — among themthe OeNB — and the ECB in Septem-ber 1999; this agreement limits totalgold stock sales to 2,000 tons over afive-year period.

An additional 30 tons were sold inthe form of forward transactions in2001.

2. Claims on non-euroarea residentsdenominated in foreigncurrency

EUR million


Change — 1,082.395—7.2%

These claims consist of receiv-ables from the International Mone-tary Fund — including the �receivablesfrom the IMF,� �holdings of SpecialDrawing Rights� (SDR) and �otherclaims against the IMF� — and claimsdenominated in foreign currencyagainst non-euro area countries, i.e.counterparties resident outside theeuro area.



The receivables from the IMFcomprise the following items:

Drawings on behalf of memberstates and the revaluation of euroholdings by the IMF as well as allo-cations by the IMF to its accountboosted the receivables from theIMF1) by a total of EUR 329.817million. Revaluation gains (+EUR19.831 million) and realized ex-change rate gains and book value rec-onciliation (+EUR 25.900 million)further increased these claims. Con-versely, drawings by member statesreduced the receivables from theIMF by a total of EUR 108.391 mil-lion.

The national IMF quota remainedunchanged at SDR 1,872.3 million in2001.

The IMF remunerates participa-tions in the Fund at a rate of remu-neration that is updated weekly. In2001 this rate hovered between2.2% and 4.6% p.a., mirroring theprevailing SDR rate.

The holdings of Special Draw-ing Rights2) were recognized inthe balance sheet at EUR 264.007million on December 31, 2001,which is equivalent to SDR 185 mil-lion. The net rise by EUR 120.157million in 2001 resulted from SDRpurchases and interest credited(+EUR 194.054 million), above allremunerations of the participationin the IMF. SDR sales diminishedholdings of Special Drawing Rightsby EUR 76.546 million.

No purchases arising from desig-nations by the IMF were effectedin 2001. Principally the OeNB con-tinues to be obl iged under theIMF�s statutes to provide currencyon demand to participants using SDRsup to the point at which its holdingsof SDRs are three times as high asits net cumulative allocation. TheOeNB�s current net cumulative allo-cation is SDR 179.045 million.

Other claims against the IMFcomprise the OeNB�s other contribu-tions to loans under special borrow-ing arrangements. In the financialstatements for 2001 this item relatesmainly to claims (over SDR 40 mil-lion) arising from contributions tothe Poverty Reduction and GrowthFacility (PRGF). The PRGF is a spe-cial initiative designed to supportthe IMF�s aims by granting the poor-est countries credits at highly conces-sional terms in order to finance eco-nomic programs targeted at fosteringeconomic growth and ensuring astrong, sustainable recovery of thebalance of payments.

Dec. 31,2000

Dec. 31,2001

Change

EUR million %

Receivables from the IMF 674.539 941.696 +267.157 +39.6Holdings of SDRs 143.850 264.007 +120.157 +83.5Other claims against the IMF 70.004 56.981 — 13.023 —18.6

Total 888.393 1,262.684 +374.291 +42.1

1 Pursuant to federal law aspromulgated in Federal LawGazette No. 309/1971,the OeNB assumed the entireAustrian quota at the IMFon its own account on behalfof the Republic of Austria.

2 Pursuant to federal law aspromulgated in Federal LawGazette No. 440/1969,the OeNB is entitled toparticipate in the SDRsystem on its own account onbehalf of the Republic ofAustria and to enter theSDRs purchased or allocatedgratuitously on the assetsside of the balance sheet ascover for the totalcirculation.



Balances with banks, secu-rity investments, external loansand other external assets coverthe following:

Balances with banks outside theeuro area include foreign currencydeposits on correspondent accounts,deposits with agreed maturity andovernight funds. Securities relate toinstruments issued by non-euro arearesidents. As a rule, operations arecarried out only with financiallysound counterparties.

Loans extended to non-euro arearesidents include a standby credit tothe Turkish central bank, which wasrecorded in the financial statementsof December 31, 2000, with a re-maining value of EUR 537 million(USD 0.5 million). This loan, ex-tended in February 1981 for an initialamount of USD 15 million, was fullyredeemed on schedule in February2001, with the last of 30 semiannualinstallments of USD 0.5 million eachpayable from August 1986.

The other external assets com-prise only non-euro area banknotes.

3. Claims on euro arearesidents denominatedin foreign currency

Foreign currency-denominated claimson euro area residents are as follows:

4. Claims on non-euroarea residentsdenominated in euroThis item includes all euro-denomi-nated investments and accounts withcounterparties who are not euro arearesidents.

On December 31, 2000, and De-cember 31, 2001, the subitems ofthis balance sheet item closed asfollows:

Dec. 31,2000

Dec. 31,2001

Change

EUR million %

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

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

Dec. 31,2000

Dec. 31,2001

Change

EUR million %

Balances with banks 947.617 494.146 —453.471 —47.9Securities 595.973 614.419 + 18.446 + 3.1

Total 1,543.590 1,108.565 —435.025 —28.2

Dec. 31,2000

Dec. 31,2001

Change

EUR million %

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

Total 1,860.162 1,569.220 —290.942 —15.6



5. Lending to euro areacredit institutionsrelated to monetarypolicy operationsdenominated in euroThis balance sheet item representsthe liquidity-providing transactionsexecuted by the OeNB.

The principal components of thisitem are:

The main refinancing opera-tions are regular liquidity-providingreverse transactions, executed bythe NCBs with a weekly frequencyand a maturity of two weeks in theform of standard (fixed or variablerate) tender operations. Bids may besubmited, within one day, by allcounterparties who fulfill the generaleligibility criteria. In 2001 all mainrefinancing operations were carriedout in the form of variable rate ten-ders. The main feature of the variablerate tender procedure is that eligiblecounterparties may submit bids at upto ten different interest rates. In eachbid they state the amount they arewilling to transact with the nationalcentral banks and the respective in-terest rate. Bids at a rate below theminimum bid rate announced by theECB will be discarded. The bids with

the highest interest rates are acceptedfirst and bids with successively lowerrates are then accepted until the totalliquidity to be allotted is exhausted.

The main refinancing operationsare the most important open marketoperations conducted by the Eurosys-tem, playing a pivotal role in signal-ing the stance of monetary policy.They provide the bulk of liquidity tothe financial sector.

The longer-term refinancingoperations are regular liquidity-providing reverse transactions with amonthly frequency and a maturityof three months. They are aimed atproviding longer-term refinancing tothe financial sector and are executedthrough standard tenders by theNCBs. All longer-term refinancingoperations conducted in 2001 werecarried out in the form of variablerate tenders.

Fine-tuning reverse opera-tions are executed on an ad-hoc basiswith a view to managing the liquiditysituation in the market and steeringinterest rates, in particular to smooththe effects on interest rates caused byunexpected liquidity fluctuations inthe market. The choice of instru-ments and procedures depends onthe type of transaction and the under-lying motives. Fine-tuning operationsare normally executed by the NCBsthrough quick tenders or through bi-lateral operations. It is up to the Gov-erning Council of the ECB to em-power the ECB to conduct fine-tun-ing operations itself under excep-tional circumstances.

The Eurosystem conducted li-quidity-providing fine tuning opera-tions totaling EUR 2.9 billion mid-September 2001. Each of these quicktenders had a one-day maturity andwas settled the same day. The finetuning operations were executed inthe wake of the terrorist attacks in

Dec. 31,2000

Dec. 31,2001

Change

EUR million %

5.1 Main refinancingoperations 4,843.971 379.072 —4,464.899 —92.2

5.2 Longer-termrefinancing operations 2,126.794 911.478 —1,215.316 —57.1

5.3 Fine-tuningreverse operations — — — —

5.4 Structural reverseoperations — — — —

5.5 Marginal lendingfacility — — — —

5.6 Creditsrelated to margin calls — — — —

Total 6,970.765 1,290.550 —5,680.215 —81.5



the U.S.A. on September 11, 2001,which had created a technical liquid-ity shortage on the money markets.The transactions were conducted asquick tenders at a fixed rate of4.25%. The money market through-out the Eurosystem received a totalof EUR 110 billion though these op-erations, which reestablished suffi-cient liquidity.

The ECB may use structural re-verse operations to adjust the struc-tural position of the Eurosystem vis-a‘-vis the financial sector.

Structural operations in theform of reverse transactions totalingEUR 702.238 million (rate: 4.77%to 4.80% p.a.) were conducted fromApril 30 to May 6, 2001; operationstotaling EUR 208.739 million (rate:3.28% to 3.30% p.a.) were con-ducted from November 30 to De-cember 4, 2001. Both additionalone-week operations were used toaddress structural liquidity require-ments in April and November 2001.

Counterparties may use themar-ginal lending facility to obtainovernight liquidity from NCBs at aprespecified interest rate against eli-gible assets. The facility is intendedto satisfy counterparties� temporaryliquidity needs. Under normal cir-cumstances, the interest rate on thefacility provides a ceiling for theovernight interest rate. The marginallending facility was accessed numer-ous times in 2001.

Credits related to margincalls arise when the value of under-lying assets regarding credit extendedto credit institutions increases be-yond collateral requirements, obli-gating the central bank to providecounterparties with additional creditto offset the value in excess of re-quirements. If such credit is providednot by the return of securities butrather by an entry on an account, a

claim on the counterparty is recordedin this subitem. No claims were re-corded under this item in 2001.

6. Other claims on euroarea credit institutionsdenominated in euro

EUR million

Closing balance Dec. 31, 2001 182.270Closing balance Dec. 31, 2000 166.357

Change + 15.913+9.6%

This item includes EUR 179.685million of claims on credit institu-tions resulting from the delivery offrontloaded euro starter kits for con-sumers (with a value of EUR 14.54)and companies (with a value of EUR145.50). The claim on the credit in-stitutions resulting from the front-loaded starter kits was debited intheir respective accounts with theOeNB (on January 2, January 23and January 30, 2002) according tothe linear debiting model.

7. Securitiesof euro area residentsdenominated in euro

EUR million


Change + 361.079+26.1%

This item covers all marketablesecurities (including governmentsecurities stemming from beforeEMU) denominated in constituentcurrencies of the euro that are notused in monetary policy operationsand that are not part of investmentportfolios that have been earmarkedfor specific purposes.

The annual change is mainly dueto additions resulting from net sales.



8. General governmentdebt denominatedin euro

EUR million


Change + 31.988+12.5%

This balance sheet item subsumesthe �claim on the Austrian FederalTreasury from silver commemorativecoins issued before 1989,� based onthe 1988 Coinage Act as promulgatedin Federal Law Gazette No. 425/1996.

In theory, the maximum federalliability of EUR 1,295.630 millionis the sum total of all silver commem-orative coins issued before 1989,minus any coins returned to and paidfor by the central government, minusany coins no longer fit for circulationand hence directly withdrawn by theAustrian Mint. The figure actuallyshown in the books is lower becauseit has been adjusted for coins in circu-lation (EUR 905.800million) and cash inhand (EUR 102.197million), both of whichare not yet redeemable.Repayment is effectedby annual installmentsof EUR 5.814 million(equivalent to ATS80 million) out of thecentral government�sshare of the OeNB�sprofit. The proceeds from metal re-covery are also designated for repay-ment. Any amount outstanding onDecember 31, 2040, will have to berepaid in the five following years(2041 to 2045) in five equal install-ments.

The silver commemorative coinsreturned to the central government

in the course of 2001 had a total facevalue of EUR 42.332 million. The re-demptions made out of the centralgovernment�s share in the OeNB�sprofit for the year 2000 plus the pro-ceeds from metal recovery totaledEUR 10.344 million.

9. Intra-EurosystemclaimsThis balance sheet item consists ofthe claims arising from the OeNB�sshare of the ECB�s capital and theclaims equivalent to the transfer offoreign reserves to the ECB. Further,this item shows TARGET balancesand other (net) claims within theEurosystem, provided that theseitems closed the reporting year withnet claims. Since November 30,2000, the TARGET balances withthe central banks of nonparticipatingcountries have also been recognizedin this item.

Other claims within theEurosystem (net) consisted of thefollowing subitems on December31, 2001:

The share that the OeNB holds inthe capital of the ECB — EUR 5 bil-lion in total — corresponded to2.3594% at the balance sheet date,unchanged from December 31, 2000.

The following table contains abreakdown of the various NCBs�shares in the capital of the ECB:

Dec. 31,2000

Dec. 31,2001

Change

EUR million

9.1 Participating interest in the ECB 117.970 117.970 —9.2 Claims equivalent to the transfer

of foreign reserves 1,179.700 1,179.700 —9.4 Other claims within

the Eurosystem (net) — 1,855.761 +1,855.761

Total 1,297.670 3,153.431 +1,855.761



The transfer of foreign re-serves from the Eurosystem NCBsto the ECB is based on the provisionsof Article 30 of the ESCB/ECB Stat-ute. The euro-denominated claims onthe ECB in respect of those transfersare shown under this item.

The reserves that the OeNB hastransferred are managed on behalfand for the account of the ECB sepa-rately from the OeNB�s own holdingsand therefore do not show up in itsbalance sheet.

The ECB remunerates the nonre-deemable euro-denominated claimswith which it has credited the NCBsin return for the transfer at 85% ofthe current interest rate on the mainrefinancing operations on a dailybasis.

The other claims within theEurosystem (net) largely representnet claims arising from balances ofTARGET accounts with the other 14NCBs (i.e. including nonparticipatingNCBs) and the ECB. Moreover, this

item covers net claims arising atyear-end from the difference be-tween monetary income to be pooledand distributed as well as net claimsarising from the correspondent ac-counts1) of individual NCBs.

The individual bilateral end-of-day balances of the OeNB with theother NCBs are netted by novatingthem to the ECB. In 2000 this itemwas shown as a net liability underitem 10.3 �Other liabilities withinthe Eurosystem (net).�

The ECB remunerates the net bal-ance on a daily basis, settling paymentat the end of the month. The ECBcalculates this remuneration cen-trally, using the prevailing interestrate for main refinancing operations.The corresponding payments are set-tled ex post monthly via the TARGETsystem. 1 These correspondent

accounts may be used for alimited amount oftransactions e.g. when atemporary disruption of theTARGET system occurs.

The 15 EU central banks� shares in the capital of the ECBabsolut share thereof paid up relative share

% EUR %

Deutsche Bundesbank 24.4935 1,224,675,000 1,224,675,000 30.2410Banque de France 16.8337 841,685,000 841,685,000 20.7838Banca d�Italia 14.8950 744,750,000 744,750,000 18.3902Banco de Espan�a 8.8935 444,675,000 444,675,000 10.9804De Nederlandsche Bank 4.2780 213,900,000 213,900,000 5.2819Banque Nationale de Belgique 2.8658 143,290,000 143,290,000 3.5383Oesterreichische Nationalbank 2.3594 117,970,000 117,970,000 2.9130Bank of Greece 2.0564 102,820,000 102,820,0001) 2.5389Banco de Portugal 1.9232 96,160,000 96,160,000 2.3745Suomen Pankki 1.3970 69,850,000 69,850,000 1.7248Central Bank of Ireland 0.8496 42,480,000 42,480,000 1.0490Banque 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 36,702,750Sveriges Riksbank 2.6537 132,685,000 6,634,250Danmarks 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.



10. Items in courseof settlementThis claim results from the prefinanc-ing of the pension costs for 2001. Thetransfer of the funds from the pensionreserve to a designated OeNB ac-count was effected at the beginningof January 2002.

11. Other assetsOther assets comprise the followingitems:

Coins of euro area representthe OeNB�s stock of fit coins of euroarea. At the balance sheet date, thisitem consisted of Austrian schillingcoins only. The rise in coins and thesimultaneous decline in coin in circu-lation is the result of increased re-turns of coins in the runup to the in-troduction of euro cash.

Coin in circulation is a statisticalfigure not apparent from the OeNB�sbalance sheet. By provision of the1988 Coinage Act, the face value ofall coins struck by the Austrian Mintand put into circulation by theOeNB, plus the special quality coinsand gold bullion coins issued directlyby the Austrian Mint, minus any coinsthat have been withdrawn, add up tothe �coin in circulation� figure. This isin line with the harmonized proce-dure for recording coin circulationon which the Eurosystem centralbanks have agreed.

Tangible and intangiblefixed assets comprise Bank prem-ises and equipment (including machi-nery, computer hardware and soft-ware, motor vehicles) and intangiblefixed assets.

Premises developed as follows:

Dec. 31,2000

Dec. 31,2001

Change

EUR million %

11.1 Coins of the euro area 67.952 151.995 + 84.043 +123.711.2 Tangible and intangible

fixed assets 109.891 135.623 + 25.732 + 23.411.3 Other financial assets 2,432.098 2,548.766 +116.668 + 4.811.4 Off-balance-sheet

instruments�revaluationdifferences 41.598 6.571 — 35.027 — 84.2

11.5 Accruals and deferredexpenditure 399.076 355.593 — 43.483 — 10.9

11.6 Sundry 1,040.819 1,185.456 +144.637 + 13.9

Total 4,091.434 4,384.004 +292.570 + 7.2

CostincurreduntilDec. 31,2000

Purchasesin 2001

Salesin 2001

Re-assign-ment(—)

Accu-mulateddepre-ciation

Bookvalue onDec. 31,

2001


2000

Annualdepre-ciationin 2001

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 theschilling opening balance sheet (Federal Law Gazette No. 190/1954).



Equipment developed as fol-lows:

Movable real assets worthEUR 32.918 million represent theOeNB�s collection of antique stringinstruments1). This collection wasenlarged in 2001 with the purchaseof 2 violins. On December 31,2001, the OeNB�s collection ofvaluable instruments encompassed23 violins, 4 violoncellos and 2 vio-las. These instruments are on loanto musicians deemed worthy ofspecial support.

Intangible fixed assets (theright to use an apartment) devel-oped as follows:

Other financial assets com-prise the following subitems:

Of the OeNB�s securities port-folio, EUR 1,483.782 million repre-

sented investments of the pensionreserve and another EUR 13.923

investments ofthe OeNB�s Fundfor the Promo-tion of ScientificResearc h andTeaching. Unre-alized valuationgains of EUR77.318 millioncompare with

unrealized valuation losses of EUR39.271 million.

Participating interests —booked at their net asset value — de-veloped as follows:

The partici-pating interestswere valued attheir net assetvalue in the an-nual accountsfor 2001.

The OeNB�sprinting works,OesterreichischeBanknoten- undSicherheitsdruckGmbH (OeBS),i n c r e a s e d i t snominal capitalfrom its corpo-rate resources in2001. The capi-tal of ATS 100million was con-

verted into EUR 7.267 mill ionand, after an increase by EUR 2.733

CostincurreduntilDec. 31,2000

Purchasesin 2001

Salesin 2001

Re-assign-ment(+)



2001


2000


EUR million

77.900 17.197 10.1171) 0.065 51.335 33.710 36.062 19.274

1) The balance between the book value of the sales and the underlying historical costs is EUR 9.777million.

1 The OeNB began acquiringantique string instrumentsin 1989.

Net assetvalue onDec. 31,2000

Purchasesin 2001

Salesin 2001


2001


2000


Revalua-tion

in 2001

EUR million

695.851 7.046 0.1141) 815.825 695.851 0.428 113.356

1) The balance between the book value of the sales and the underlying historical costs is EUR 114 million.

Costincurred untilDec. 31,2000

Purchasesin 2001

Salesin 2001



2001


2000


EUR million

0.720 — — 0.031 0.689 0.704 0.015

Dec. 31,2000

Dec. 31,2001

Change

EUR million %

Securities 1,716.261 1,497.705 —218.556 —12.7Participating interests 695.851 815.825 +119.974 +17.2Sundry assets 19.986 235.236 +215.250 x

Total 2,432.098 2,548.766 +116.668 + 4.8



million, totals EUR 10.000 million.The OeBS is wholly owned by theOeNB. The stockholders� equitycame to EUR 83.842 million on De-cember 31, 2000, and the profit forthe year amounted to EUR 6.660million.

In 1999 the OeBS began to printthe euro banknotes to be put into cir-culation from January 1, 2002. TheOeBS invoiced the OeNB for deliv-eries of euro banknotes of EUR62.232 million in 2001; these areshown under �banknote productionservices,� item 10 of the Profit andLoss Account.

Moreover, the item participatinginterests shows the OeNB�s 100%stake in the Austrian Mint (Mu‹nzeO‹ sterreich AG).

T h e Au s t r i a nMint increased itsshare capital fromcorporate resourcesin 2001. The capitalof ATS 75 millionwas converted toEUR 5,450,462.56and boos ted byEUR 549,537.44 toEUR 6.000 million.As at December 31,2000, the stockhol-ders� equity ran toEUR 223.858 million, and the profitfor the year amounted to EUR 4.899million. In 2001 the Austrian Mintreleased dividend earnings of EUR3.634 million to the OeNB for thebusiness year 2000, the same amountas in 2000 for the business year 1999.

In 2001 the OeNB�s participatinginterest in the cash services companyGELDSERVICE AUSTRIA Logistikfu‹r Wertgestionierung und Trans-portkoordination G.m.b.H. (GSA)came to 93.4% of the company�scapital stock. GSA primarily offerscurrency processing, foreign cur-

rency exchange and quality assuranceservices. The company�s nominalcapital amounts to EUR 0.036 mil-lion. In 2001 cash centers went intooperation in four provincial capitals:Bregenz, Innsbruck, Klagenfurt andSalzburg; all seven cash centers arenow in operation. The Vienna andGraz centers were relocated to newpremises in 2001.

Article 241 of the CommercialCode applies to the other equity in-terests.

Sundry assets include assetsearmarked for investment for thepension reserve and the Fund forthe Promotion of Scientific Researchand Teaching.

Asset item 11.6, sundry, consistsof the following subitems:

According to Article 3.2 of theERP Fund Act, the ceiling of theOeNB�s financing commitment cor-responds to the sum by which thefederal debt was written down ini-tially (ATS 4,705,404,000; EUR341.955 million) plus interest ac-crued (EUR 534.078 million onDecember 31, 2001). The ERP loanportfolio managed by the OeNBtotaled EUR 876.033 million onDecember 31, 2001. The provisionsgoverning the extension of loansfrom this portfolio are laid down inArticle 83 of the Nationalbank Act.

Dec. 31,2000

Dec. 31,2001

Change

EUR million

Claims arising from ERP loans to companies 732.226 748.807 + 16.581OeKB overnight account for ERP lending 124.928 127.226 + 2.298

ERP loan portfolio managed by the OeNB 857.154 876.033 + 18.879Advances to prefinancethe production of euro coins 145.346 145.346 —Advances on salaries 7.083 6.332 — 751Stock of euro starter kits — 8.093 + 8.093Other claims 31.236 149.652 +118.416

Total 1,040.819 1,185.456 +144.637



The residual terms of advances onsalaries are generally more than oneyear. Security on all advance pay-ments is in the form of life insuranceplans.

Euro starter kits were front-loaded to businesses and householdsbefore the launch of euro cash on Jan-uary 1, 2002, so that enough eurocoins would be broadly available.Starter kits delivered by the Mint tothe OeNB were frontloaded to creditinstitutions from September 1, 2001(6,518,768 starter kits with a valueof EUR 179.685 million), with anequivalent claim entered into thebalance sheet for settlement underthe linear debiting model (see assetsitem 6. �Other claims on euro areacredit institutions denominated ineuro�). In addition, 177,567 starter

kits (EUR 2.924 million) were soldat the OeNB�s counters, with pay-ment effected directly in schillingcash. The amount of EUR 8.093 mil-lion shown on the balance sheet dateof December 31, 2001, representsthe total of undistributed euro starterkits.

Other claims contain minor itemsarising from day-to-day business.Moreover, this item contains theclaim on Austrian Mint in respect ofstill unsettled schilling coin returnsof EUR 104.376 million. This claimand the claim resulting from the pre-financing of the production of eurocoins (EUR 145.346 million) was off-set by the OeNB�s liability from as-suming delivery of the euro starterkits and settled between the partieson January 2, 2002.



Liabilities1. Banknotesin circulation

EUR million


Change — 3,761.453—27.0%

This figure is derived from theamount of schilling banknotes in cir-culation adjusted for the banknotesreceived and held by other NCBs par-ticipating in the Eurosystem.

The qualification regarding bank-notes held by other NCBs is basedon Article 9.1 of the GuidelineECB/2000/18 and follows from theimplementation of Article 52 of theESCB/ECB Statute.1) Those provi-sions ensure the proper representa-tion of the aggregate �banknotes incirculation� figure of the Eurosystemin the consolidated Eurosystem bal-ance sheet, both during the transitionperiod and after the introduction ofeuro banknotes. An NCB receivingschilling banknotes will — in compli-ance with its commitments arisingunder Article 52 of the ESCB/ECB

Statute — record those banknotes asan intra-ESCB claim against theOeNB as the issuing NCB. Upon no-tification, the OeNB will adjust itsbanknotes in circulation figure ac-cordingly. Over time, depending onthe repatriation volumes agreed bilat-erally, the schilling banknotes re-ceived by other NCBs will be re-turned to the OeNB.

The sharp contraction of thebanknotes in circulation figure bymore than a quarter is the conse-quence of stepped-up returns ofschilling banknotes by businessesand households in the runup to theintroduction of euro banknotes.

The table below shows the annualaverage banknotes in circulation fig-ures of the past five years:

1 Article 52 obliges the NCBsto ensure that the exchangeof — household amounts of —banknotes denominated incurrencies with irrevocablyfixed exchange rates isoffered at the respective parvalues free of charge at onelocation per country at least.The OeNB has arranged forauthorized agents to offerthis service at the OeNB�sbranch offices (except at theSt. Po‹lten branch office) andin the OeNB�s name for theagents� account.

Banknotesin circulation,annual average

Annual change

EUR million %

1997 11,913 +370 +3.21998 11,688 —225 —1.91999 12,095 +407 +3.52000 12,851 +756 +6.32001 12,519 —332 —2.6

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Banknotes in circulation postedan annual high of EUR 13,934 millionon January 1, 2001, and an annuallow of EUR 10,172 million on De-cember 31, 2001.

2. Liabilities to euro areacredit institutionsrelated to monetarypolicy operationsdenominated in euroOn December 31, 2000, and Decem-ber 31, 2001, the subitems of thisbalance sheet item closed as follows:

The current accounts (cover-ing the minimum reservesystem) primarily comprise creditinstitutions� accounts for minimumreserves.

Banks� minimum reserve balanceshave been remunerated on a daily ba-sis since January 1, 1999, at the pre-vailing interest rate for the ESCB�smain refinancing operations.

The deposit facility item refersto overnight deposits placed with theOeNB by Austrian banks that accessthe Eurosystem�s liquidity-absorbingstanding facility at the prespecifiedrate. In 2001 the volume of suchtransactions averaged EUR 3.940million.

3. Other liabilitiesto euro area creditinstitutions denominatedin euro

EUR million

Closing balance Dec. 31, 2001 1,059.618Closing balance Dec. 31, 2000 —

Change + 1,059.618

This item showed the liabilitiesarising from deposits pledgedby credit institutions as collateralfor frontloaded euro banknotes

from September3, 2001. The de-posits are remun-erated at the rateapplicable to mini-mum reser ves.The Guideline oft h e Eu rope anCentral Bank of10 January 2001adopting certainprovisions on the2002 cash change-over (ECB/2001/1)

represents the legal basis for thisprocedure.

5. Liabilitiesto other euro arearesidentsdenominated in euro

EUR million


Change +23.900+131.3%

This item comprises general gov-ernment deposits of EUR 21.299million and the current accounts ofother nonbanks.

Moreover, it contains the depositsof the International Fund for theClearance of the Fairway of the Dan-ube, an international organization

Dec. 31,2000

Dec. 31,2001

Change

EUR million %

2.1 Current accounts(covering the minimumreserve system) 3,402.808 5,497.601 +2,094.793 + 61.6

2.2 Deposit facility — — — —2.3 Fixed-term deposits — — — —2.4 Fine-tuning

reverse operations — — — —2.5 Deposits

related to margin calls — — — —

Total 3,402.808 5,497.601 +2,094.793 + 61.6



under the patronage of the EuropeanCommission. This Fund (also knownas the �Danube Fund�) was estab-lished in Vienna by the Danube Com-mission and is entrusted with han-dling the funding of the project to re-store free navigation on the Danubein the Novi Sad region. Under theprovisions of the Federal Act on theInternational Fund for the Clearanceof the Fairway of the Danube (FederalLaw Gazette I No. 70/2000), theOeNB places the funds for the Dan-ube Commission, 85% of which areprovided by the European Commis-sion and 15% of which are providedby neighboring countries and otherdonors, on an interest-bearing ac-count.

6. Liabilitiesto non-euro arearesidents denominatedin euro

EUR million


Change +56.353+785.2%

This item contains euro-denomi-nated liabilities to non-Eurosystemcentral banks and monetary institu-tions. In 2001 this item also capturedliabilities of EUR 60.270 million re-sulting from euro frontloading tocentral banks and commercial banksoutside the euro area.

7. Liabilitiesto euro area residentsdenominated in foreigncurrency

EUR million


Change — 21.961—6.6%

This item mainly comprises swaptransactions with the financial sector.

8. Liabilitiesto non-euro arearesidents denominatedin foreign currency

EUR million


Change + 84.770+9.4%

Foreign currency liabilities arisingfrom swap operations and from re-purchase agreements with financialsector counterparties are shownunder this heading. The increase re-sulted from the higher volume of re-purchase agreements.

9. Counterpartof Special Drawing Rightsallocated by the IMF

EUR million


Change + 4.373+1.7%

This item represents the counter-part of the Special Drawing Rights al-located gratuitously to the OeNB.Measured at current market valueson the balance sheet date, the coun-terpart was worth SDR 179 million.The OeNB was allocated SDRs insix installments from 1970 to 1972and from 1979 to 1981, always onJanuary 1.

10. Intra-Eurosystemliabilities

EUR million

Closing balance Dec. 31, 2001 —Closing balance Dec. 31, 2000 5,024.024

Change —5,024.024—100.0%



This item shows TARGET balan-ces and other (net) liabilities withinthe Eurosystem, provided that theseitems closed the reporting year withnet liabilities. As the TARGET balan-ces and other claims or liabilitieswithin the Eurosystem showed netclaims on the balance sheet dateDecember 31, 2001, they are repre-sented under assets item 9.4 �Otherclaims within the Eurosystem (net).�

11. Items in courseof settlement

EUR million

Closing balance Dec. 31, 2001 507.385Closing balance Dec. 31, 2000 —

Change +507.385

Th i s i t em compr i s e s EUR443.982 million resulting from thedelivery of schilling cash by creditinstitutions which could not besettled on the TARGET closing dayDecember 31, 2001, and weresettled at the beginning of January2002 by credits to the banks� currentaccounts. Moreover, it includes EUR24.126 million of frontloaded eurobanknotes and euro coin rolls handedout at OeNB counters, as they werenot legal tender on December 31,2001. From the beginning of January2002 the euro banknotes becamebanknotes in circulation and the eurocoins were debited to assets item11.1 �Coins of euro area.�

12. Other liabilitiesOther liabilities are broken down asfollows:

The off-balance-sheet instru-ments� revaluation differencessubsume the revaluation losses arisingon off-balance-sheet positions, whichare posted to the profit and lossaccount (EUR 0.605 million). Therise from December 31, 2000,resulted from book value reconcilia-tions and realized losses.

Item 12.3 (sundry) is composedof the following subitems:

Pursuant to Article 69 paragraph3 of the Nationalbank Act, the cen-tral government�s share ofprofit corresponds to 90% of theprofit for the year after tax.

The amount of EUR 22.643 mil-lion shown as earmarked fundsof the Fund for the Promotionof Scientific Research andTeaching consisted of pledged funds

Dec. 31,2000

Dec. 31,2001

Change

EUR million %

12.1 Off-balance-sheetinstruments�revaluation differences 3.976 207.999 +204.023 x

12.2 Accrualsand deferred income 79.671 109.868 + 30.197 +37.9

12.3 Sundry 1,017.665 1,198.924 +181.259 +17.8

Total 1,101.312 1,516.791 +415.479 +37.7

Dec. 31,2000

Dec. 31,2001

Change

EUR million %

Central government�sshare of profit (without dividends) 988.429 975.009 — 13.420 — 1.4Liquid funds of the Fundfor the Promotion of ScientificResearch and Teaching 17.033 22.643 + 5.610 +32.9Liability to the Austrian Mint —euro starter kits — 190.702 +190.702 xOther 12.203 10.570 — 1.633 —13.4

Total 1,017.665 1,198.924 +181.259 +17.8



not used up by December 31, 2001.According to the General Meeting�sdecision, EUR 70.250 million of theprofit for the year for 2000 were ap-propriated to the OeNB�s Fund forthe Promotion of Scientific Researchand Teaching to support researchprojects, with EUR 61.529 millionapportioned to projects with a highlypractical thrust. In the year 2001, theGeneral Council decided to appor-tion an additional EUR 69.530 mil-lion for 398 projects and EUR3.366 million to promote four insti-tutes; EUR 67.767 of this amounton balance were paid out on balance.This means that a total EUR 490.966million of the funds pledged as finan-cial assistance since 1966 have beenpaid out.

The liability to the Austrian Mintreflects the assumption of a total of6,820,520 euro starter kits and wassettled between the parties onJanuary 2, 2002.

13. Provisions

Under the OeNB�s initial retire-ment plan it is solely the liability ofthe Bank to provide retirement bene-fits to employees. The members ofthis scheme are �contracted out� of

the state pension system. To securethis liability the OeNB is obligatedby law to establish a �pension reserve�corresponding to the actuarial pre-sent value of its pension liabilities.

Following a change in the retire-ment plan, staff recruited afterMay 1, 1998, stands to receive a statepension supplemented by an occupa-tional pension from an externallymanaged pension fund. For this sup-plementary pension the OeNB tookout a contract effective May 1, 1999,which also applies retroactively toemployees taken on in the 12 monthsfrom May 1, 1998. With the OeNB�sdirect liability to pay retirement ben-efits now limited to staff recruitedbefore May 1, 1998, the pension re-serve set up to secure this liabilityhas become a closed system. There-fore starting with the year 2000, theOeNB has used its pension reserveto pay out retirement benefits.

Pension benefits as covered bythe pension reserve augmented byEUR 2.524 million to EUR 83.405

million. This in-cludes the remu-neration of 15 re-tired board mem-b e r s o r t h e i rdependents (to-taling EUR 3.778mil l ion ; 2000 :EUR 3.969 mil-lion).

T h e E U R83.405 million ofincome on invest-ment relating tothe pension re-serve was trans-ferred to the pen-

sion reserve when the financial state-ments for 2001 were prepared, sothat the pension reserve remainedunchanged from the level of Decem-ber 31, 2000.

Dec. 31,2000

Transferfrom

Transferto

Dec. 31,2001

EUR million

Pension reserve 1,780.867 83.405 83.405 1,780.867Personnel provisionsSeverance payments 42.649 — 1.462 44.111Anniversary bonuses 10.689 450 — 10.239Residual leave entitlements 8.279 — 1.008 9.287

Other provisionsCorporate income tax 76.216 76.216 — —Supplies of goods and services 5.310 4.713 5.253 5.850Repatriation of banknotes 1.331 1.331 1.182 1.182Administration of premises 1.289 27 374 1.636Supplies from subsidiaries 9.337 9.337 389 389Other 1.281 1.048 2.264 2.497

Total 1,937.248 176.527 95.337 1,856.058



The pension reserve on Decem-ber 31, 2001, was calculated accord-ing to actuarial principles; a discountrate of 3.50% p.a. was applied(December 31, 2000: 3.40% p.a.).

Provisions for severance pay-ments (EUR 44.111 million) are cal-culated according to actuarial princi-ples, applying a discount rate of3.50% p.a. (December 31, 2000:3.40% p.a.). Requirements to topup the account led to an increase.

Actuarial calculations put theneed for anniversary bonuses at EUR10.239 million as at the balance sheetdate. Consequently, EUR 0.450 mil-lion were allocated to provisions foranniversary bonuses when the finan-cial accounts for 2001 were closed.

Provisions for residual leave enti-tlements amounted to EUR 9.287million (+EUR 1.008 million).

No provisions for pending law-suits were made, as they are not ex-pected to have a material impact.

14. Revaluation accountsThis item consists of the followingaccounts:

The amounts recorded in the re-valuation accounts on a currency-by-currency and code-by-code basisare in their entirety gains that aroseon the valuation of assets as at De-cember 31, 2001. Those gains arerealizable only in the context of fu-ture transactions in the respectivecategory; otherwise they can be usedto reverse revaluation losses that mayarise in future years. The revaluationgains in each currency, moreover,cover the risks that the nondomesticassets carry (as established with theVaR method).

In line with requirements, the in-itial valuation gains recorded in theopening balance sheet of January 1,1999, were partly realized during2001 in the course of sales of under-lying assets.

Article 69 paragraph 1 of the Na-tionalbank Act obliges the OeNB tomaintain a reserve covering exchangerisks which may arise on nondomesticassets. The reserve fund for ex-change risks posted in the finan-cial statements 2001 contains ex-change gains accrued in the runup

to 1999 to t a l i ngEUR 1,842.748 mil-lion. On the one handthe annual change re-flects the realizationo f exc h ange r a t egains resulting fromthe sale of underlyingassets. On the otherhand the fund is usedto cover unrealizedexchange losses thatmust be expensed, aswell as any exchangerisks (as calculatedwith the VaR ap-proach) that are notoffset by the balanceson the revaluationaccounts. As from

Dec. 31,2000

Dec. 31,2001

Change

EUR million

Eurosystem revaluation accountsGold 566.078 700.470 +134.392Foreign currency 1,664.603 1,459.230 —205.373Securities 213.323 203.909 — 9.414Participating interests 71.515 184.872 +113.357Off-balance-sheet operations 8.134 6.571 — 1.563

Subtotal 2,523.653 2,555.052 + 31.399

Unrealized valuation gains fromJanuary 1, 1999 (initial valuation)Securities 29.892 2.320 — 27.572Participating interests 279.933 279.933 —

Subtotal 309.825 282.253 — 27.572

Reserve fund for exchange risks(funded up to the end of 1998) 2,075.237 1,842.748 —232.489

Total 4,908.715 4,680.053 —228.662



January 1, 1999, no further alloca-tions may be made to this fund.

15. Capital and reservesA summary of the OeNB�s reservesshows the following developments:

The reserve for nondomestic andprice risks serves to offset any ECBlosses which the OeNB may have tocover according to its share in theECB�s capital as well as any unrealizedlosses resulting from a fall in the priceof securities. The total risk to becovered is calculated by applyingrecognized risk assessment models.According to the General Meeting�sdecision, on May 17, 2001, EUR34.390 million were allocated to thereserve for nondomestic and pricerisks out of the profit for the year2000. When the financial statementsfor 2001 were drawn up, EUR118.500 million from the freely dis-posable reserve fund were reallocatedand EUR 66.072 million were usedto cover a fall in the price of secur-ities invested by the OeNB.

In April 1966, EUR 7.267 millionwere allocated out of the net incomefor the year 1965 to the Fund forthe Promotion of Scientific Re-search and Teaching for the pur-pose of profitable investment.

Other financial liabilities(off-balance-sheetpositions)Apart from the items recognized inthe balance sheet, the following fi-nancial liabilities and financial deri-vatives are stated off the balance sheeton December 31, 2001:— Foreign currency forward trans-

actions and swap transactions ofa total of EUR 1,629.416 million.These forward transactions alsoinclude forward sales of 30 tonsof gold.

— Contingent liabilities arising fromthe statutory direct charge on theOeNB of EUR 193.164 millionresulting from the allocation ofthe ECB�s loss according to theNCBs� shares in the ECB�s capital.

— Contingent liabilities on the orderof EUR 235.940 million to fundunrealized losses which arose onthe ECB�s foreign currency posi-tions and gold; these liabilities re-sult from the fact that the OeNBmay waive a maximum of 20%of its claims arising under thetransfer of foreign reserves.

Dec. 31,2000

Dec. 31,2001

Change

EUR million %

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

Total 4,248.243 4,235.440 — 12.803 — 0.3



— Liabilities resulting from designa-tions under �Special DrawingRights within the IMF� of EUR501.147 million.

— Contingent liabilities to the IMFunder the �New Arrangementst o B o r r ow � t o t a l i n g EUR586.898 million.

— The obligation to make a supple-mentary contribution of EUR33.045 million (equivalent to15 million gold francs) to theOeNB�s stake in the capital ofthe Bank for International Settle-ments (BIS) in Basel, consistingof 8,000 shares of 2,500 goldfrancs each.

— Liabilities of EUR 26.154 millionfrom foreign currency invest-ments effected in the OeNB�sname for third account.

— Repayment obligations to theamount of EUR 10.505 millionarising from pension contribu-tions paid by OeNB staff mem-bers payable on termination ofemployment contracts.Moreover, the OeNB reports

liabilities outstanding on unmaturedgold/interest rate swaps involving27.9 tons of gold.

Notes to the Profit and Loss Account

2000 2001 Change1)

EUR million %

1. Net interest income 1,014.446 873.100 —141.346 — 13.92. Net result of financial operations,

writedowns and risk provisions 896.515 994.712 + 98.197 + 11.03. Net income from fees and commissions 383 — 320 — 703 —183.64. Income from equity shares

and participating interests 6.268 54.095 + 47.827 +763.05. Net result of pooling of monetary income — 653 — 607 — 46 — 7.06. 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 + 5.48. Administrative expenses — 89.265 — 110.604 + 21.339 + 23.99. Depreciation of tangible

and intangible fixed assets — 12.299 — 19.946 + 7.647 + 62.210. Banknote production services — 37.837 — 62.232 + 24.395 + 64.511. 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 — 2.613. Central government�s share of profit

and transfer to the pension reserve —1,002.9662) — 975.0092) — 27.957 — 2.814.1 Net income 109.825 108.334 — 1.491 — 1.414.2 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 government�s share of profit only.



1. Net interest incomeWith interest rates for foreign cur-rency investment having declinedsharply from 2001, interest income,net of interest expense, contractedby EUR 141.346 million (—13.9%)to EUR 873.100 million.

Net interest income from assetsand liabilities denominated in foreigncurrency and euro totaled EUR841.188 million. Refinancing opera-tions yielded EUR 213.075 million,and the ECB remunerated the trans-fer of foreign reserves with EUR43.970 million. Conversely, interestexpenses of EUR 171.436 millionresulted from TARGET liabilities,and the remuneration of minimumreserves came to EUR 171.436 mil-lion.

2. Net result of financialoperations, writedownsand risk provisionsRealized gains or losses from day-to-day financial operations resultedfrom — receivable or payable — differ-ences between the acquisition costand the market value of gold, for-

eign currency, securities orother transactions. Among otherthings, these gains include price gainsfrom the sale of 30 tons of gold.

Net gains augmented by EUR295.370 million (+42.2%) to EUR995.745 million. EUR 752.283 mil-lion (+EUR 87.884 million) thereofstem from gold and foreign currencyoperations, EUR 240.990 million(+EUR 205.015 million) from secur-ities transactions.

The writedowns on financialassets and positions were trig-gered by the downtrend in marketprices observed in 2001, amid whichthe market value dropped below theaverage acquisition cost of the respec-tive currencies or securities on thebalance sheet date.

The item transfer to/fromprovisions for foreign exchangerate and price risks resulted fromtransfers from the reserve fund forexchange risks that the OeNB fundedup to the end of 1998 with a view tocovering unrealized foreign currencylosses. Thus, in compliance with Ar-ticle 69 paragraph 1 of the National-bank Act, these losses did not havean impact on profit. Moreover, thisitem reflects the offsetting of unreal-ized losses on security price lossesagainst the �reserve for nondomesticand price risks.�

The breakdown of this profit andloss account item is described under�Realized Gains and Losses and Re-valuation Differences and their Treat-ment in the Financial Statements ofDecember 31, 2001.�

4. Income from equityshares and participatinginterestsIncome from equity shares and par-ticipating interests stems from thefirst distribution of profit by theECB for 2000 and from dividend pay-

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ments by the Austrian Mint, the BIS,AUSTRIA CARD-Plastikkarten undAusweissysteme Gesellschaft m.b.H.,and Austrian Payment Systems Ser-vices (APSS) GmbH.

5. Net result of pooling ofmonetary incomeArticle 32 of the ESCB/ECB Statuteprovides for the redistribution ofthe income accruing to the NCBsfrom their monetary policy opera-tions at the end of each fiscal year.The net charge on the OeNB mirrorsthe redistribution effect within thesystem, which results from the differ-ence between what the OeNB entersinto the pool (which is determined byits liability base) and the proportionfrom the pooled income that is allo-cated to the OeNB according to theredistribution key laid down in theESCB/ECB Statute.

For a detailed portrayal, see thechapter entitled �Monetary Incomein the Eurosystem.�

7. Staff costsSalaries, severance payments and theemployer�s social security contribu-tions and other statutory or contrac-tual social charges fall under thisheading. Staff costs were reduced byrecoveries of salaries and employees�pension contributions.

As of January 1, 1997, the pen-sion contributions of employees whojoined the OeNB after March 31,1993, and who qualify for a Bankpension, were raised from 5% oftheir total basic pay to 10.25% of thatpart of their basic salaries which isbelow the earnings cap on social se-curity. A rate of 2% applies to incomeabove the earnings cap.

With effect from May 1, 1998,new entrants are enrolled into thenational social security system andin addition are covered by a defined

contribution pension plan. TheOeNB opted for this approach in or-der to bring its retirement plan inline with the retirement provisionsystems prevailing in Austria, wherethe statutory state pension is the firstpillar and occupational and privatepension funds are the second andthird pillars.

Salaries net of pension contribu-tions collected from staff membersexpanded by EUR 5.092 million or6.9% to EUR 79.418 million. Thisincrease may be traced primarily tothe wage increase negotiated for thebanking sector and activities con-nected to the introduction of eurocash (such as more overtime and ad-ditional personnel). The OeNB�s out-lays were reduced by recoveries ofsalaries totaling EUR 9.028 millionfor staff members on secondment tothe subsidiaries and foreign institu-tions.

In a comparison of staff levels onDecember 31, 2000, and December31, 2001, the number of persons em-ployed by the OeNB (including mem-bers of the Governing Board, ad-justed for staff on secondment andin subsidiaries) declined by 12 per-sons from 955 to 943 persons.

The average number of staff em-ployed by the OeNB (excluding themembers of the Governing Board)widened from 1,121 employees in2000 to 1,153 in 2001, a rise by2.9% or 32 persons. Adjusted foremployees on leave (such as mater-nity leave and parental leave), 921persons were employed on average(2000: 938 persons). The numberof blue-collar workers declined byone person to ten workers.

The emoluments of the fourmembers of the Governing Board (in-cluding remuneration in kind, such asprivate use of company cars, subsi-dies to health and accident insurance)



pursuant to Article 33 paragraph 1 ofthe Nationalbank Act totaled EUR0.988 million (2000: EUR 1.013million). The emoluments of thePresident and Vice President of theOesterreichische Nationalbankamounted to EUR0.046 million (2000:EUR 0.045 million).

Outlays for sever-ance payments de-c re a s ed by EUR0.282 mi l l i on o r6.5% to EUR 4.051million in 2000.

S tatutory orcontractual socialcharges totalingEUR 11.349 million (+EUR 1.156million) contain municipal tax pay-ments of EUR 2.443 million, socialsecurity contributions of EUR 5.145million and contributions of EUR3.669 million to the family burdenequalization fund.

10. Banknote productionservicesExpenses for banknote productionservices resulted from the purchaseof euro banknotes from the OeBS.In 2000 this item had shown the costof the last batch of schilling bank-notes produced by the OeBS.

12. Corporate income taxA corporate income tax rate of 34%was applied to the taxable income ac-cording to Article 72 of the National-bank Act and in line with Article 22paragraph 1 of the Corporation TaxAct 1988.

13. Central government�sshare of profitand transfer to thepension reserveThis item developed as follows in2001:

Under Article 69 paragraph 3 ofthe Nationalbank Act, the centralgovernment�s share of profit is 90%of the net income for the year aftertax, as in the previous years.

2000 2001 Change

EUR million %

Transfer to the pensionreserve under the provisionsof the Nationalbank Act 14.537 — —14.537 —100.0Central government�sshare of profitunder the provisionsof the Nationalbank Act 988.429 975.009 —13.420 — 1.4

Total 1,002.966 975.009 —27.957 — 2.8




Governor Klaus LiebscherVice Governor Gertrude Tumpel-GugerellExecutive Director Wolfgang DuchatczekExecutive Director Peter Zo‹llner

General Council (Generalrat)

President Adolf WalaVice President Herbert SchimetschekAugust AstlHelmut ElsnerHelmut FrischLorenz FritzRene Alfons HaidenMax Kothbauer (until May 17, 2001)Richard LeutnerJohann MarihartWerner MuhmWalter RothensteinerKarl Werner Ru‹schEngelbert WenckheimJohann Zwettler (from May 17, 2001)

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

Vienna, March 25, 2002



Report of the Auditors

We have audited the accounting records and the financial statements of theOesterreichische Nationalbank for the year ending December 31, 2001, andhave found that they are presented in accordance with the provisions of theFederal Act on the Oesterreichische Nationalbank of 1984 as amended andas promulgated in Federal Law Gazette I No. 60/1998. The financial state-ments were prepared in conformity with the accounting policies defined bythe Governing Council of the European Central Bank, as set forth in theGuideline of the European Central Bank of 1 December 1998 on the legalframework for accounting and reporting in the European System ofCentral 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 OeNB�s finan-cial position and the results of its operations. The annual report complies withthe provisions of Article 68 paragraph 1 and paragraph 3 of the NationalbankAct as amended and as promulgated in Federal Law Gazette I No. 60/1998 andcorresponds with the financial statements.

Vienna, March 25, 2002

Pipin HenzlCertifiedPublic Accountant

Peter WolfCertifiedPublic Accountant



Profit for the Year

and Proposed Profit Appropriation

With the statutory allocations of the OeNB�s profit having been made in con-formity with Article 69 paragraph 3 of the Nationalbank Act (item 13 ofthe profit and loss account), including the central government�s share ofEUR 975.009 million (2000: EUR 988.429 million), the balance sheet andthe 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 theGeneral Council for the appropriation of profit:

to pay a 10% dividendon the OeNB�s capital stock of EUR 12 million EUR 1,200,000.�to allocate to the Leopold Collection EUR 4,194,888.91to allocate to the reserve for nondomestic and price risks EUR 32,575,750.79to allocate to the Fund for the Promotionof Scientific Research and Teaching EUR 70,250,000.�to carry forward a retained profit of EUR 118,388.57

EUR 108,339,028.27



ˆ

Report of the General Council (Generalrat)

on the Annual Report

and the Financial Statements for 2001

The General Council (Generalrat)fulfilled the duties incumbent on itpursuant to the Nationalbank Act1984 by holding its regular meetings,by convening its subcommittees andby obtaining the information re-quired.

The Governing Board (Direkto-rium) periodically reported to theGeneral Council on the Bank�s oper-ations and their current state, onthe conditions on the money, capitaland foreign exchange markets, onimportant matters which arose inthe course of business, on all devel-opments of importance for an ap-praisal of the monetary situation, onthe arrangements made for supervis-ing the OeNB�s financial conduct andon any other significant dispositionsand events affecting its operations.

The Financial Statements for theyear 2001 were given an unqualifiedauditors� opinion after examinationby the auditors elected by theGeneral Meeting of May 17, 2001,

the certified public accounts PipinHenzl and Peter Wolf, on the basisof the books and records of theOesterreichische Nationalbank aswell as the information and evidenceprovided by the Governing Board.

In its meeting of April 25, 2002,the General Council approved theAnnual Report of the GoverningBoard and the Financial Statementsfor the business year 2001. The Gen-eral Council submits the Annual Re-port and moves that the GeneralMeeting approve the FinancialStatements of the OesterreichischeNationalbank for the year 2001 anddischarge the General Council andthe Governing Board from responsi-bility for management during thepreceding business year. Moreover,the General Council requests thatthe General Meeting approve theallocation of the profit for the yearin accordance with the proposal madein the notes to the Financial State-ments 2001 (page 101).

ˆ

Publications,

Imprint

Published

Statistisches Monatsheft monthly

Focus on Statistics monthlyEnglish translation of �Statistisches Monatsheft� http://www.oenb.at

Leistungsbilanz O‹ sterreichs, revidierte Jahresdaten annuallygegliedert nach Regionen und Wa‹hrungen

Berichte und Studien quarterly

Focus on Austria quarterlySelected chapters from �Berichte und Studien�

Finanzmarktstabilita‹tsbericht semiannually

Financial Stability Report semiannuallyEnglish translation of �Finanzmarktstabilita‹tsbericht�

Focus on Transition semiannually

Gescha‹ftsbericht annually

Annual Report annuallyEnglish translation of �Gescha‹ftsbericht�

Volkswirtschaftliche Tagung annually

The Austrian Financial Markets — annuallyA Survey of Austria�s Capital Markets — Facts and Figures


Periodical Publications

For a comprehensive overview of the OeNB�s publications, please refer to theDecember 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 publishedby the OeNB. The publications are available to interested parties free of chargefrom the Secretariat of the Governing Board and Public Relations. Pleasesubmit orders in writing to the postal address given on the back of the titlepage. You may also order copies of publications by phone.

For a complete list of the documents published by the OeNB, please visitthe OeNB�s website (http://www.oenb.at).

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

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

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

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

Austrian Bond MarketAustrian Bond Market Developments 1/2001

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


Selected Publications of the OeNBin 2000 and 2001

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

External SectorNew Statistical Frameworkfor the Portfolio Investment Position 4/2000Austria�s International Investment Position annuallyAustrian Outward and Inward Direct Investment annuallyBalance of Payments quarterly

Overview of Studies Published in Focus IssuesFocus on Austria (issue 2/2000)The Monetary Policy of the EurosystemMonetary Policy and Monetary Policy Strategy in EMU:New Framework — New ChallengesThe Credibility of the EurosystemMonetary Growth during the Changeover to Economicand Monetary UnionIndicators for Assessing Price ChangesEstimate and Interpretation of the Taylor Rule for the Euro AreaModifications to the Monetary Policy Frameworkand Structural Changes in the Austrian Money Marketin Stage Three of EMU


Selected Publications

Focus on Austria (issue 3/2000)A New Capital Adequacy Framework as Proposed by Basel and BrusselsRegulatory Capital Requirements for Austrian Banks —A Supervisory Tool Subject to ChangeSupervisory ReviewCredit Risk — Proposal on a Capital Charge for Credit Risk Putforward by the Basel Committee on Banking Supervisionand the European Commission — Current Debate and Possible Implicationsfor the Austrian Banking IndustryCritical Evaluation of the Basel Committee�sand the European Commission�s Proposals on the Treatmentof Other Risks in the New Capital Adequacy FrameworkInterest Rate Risk in the Banking Book

Focus on Austria (issue 2/2001)The New Framework for Fiscal PolicyFiscal Policy Design in the EUMeasures and Strategies for Budget Consolidationin EU Member StatesDistributive Aspects of Economic Policy in EMU —An Analysis from an Employee PerspectiveProblems Relating to the Taxation of Cross-Border Capital IncomeAustria�s Sovereign Debt Management Against the Backgroundof Euro Area Financial MarketsCyclically Adjusted Budgetary Balances for Austria

Focus on Austria (issue 3-4/2001)Aspects of the Transmission of Monetary PolicyThe Transmission Mechanismand the Role of Asset Prices in Monetary PolicyAsymmetric Transmission of Monetary Policythrough Bank Lending —Evidence from Austrian Bank Balance Sheet DataBalance Sheet and Bank Lending Channels:Some Evidence from Austrian FirmsFinancial Innovation and the Monetary Transmission MechanismTransmission Mechanism and the Labor Market:A Cross-Country AnalysisMonetary Transmission and Fiscal PolicyPrinciples for Building Models of theMonetary Policy Transmission Mechanism



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



Working PapersNo. 40 Central Banks in European Emerging Market

Economies in the 1990s 2000No. 41 Is there a Credit Channel in Austria?

The Impact of Monetary Policyon Firms� Investment Decisions 2000

No. 42 Integration, Disintegration and Trade in Europe:Evolution of Trade Relations During the 1990s 2000

No. 43 The Bank, the States, and the Market:An Austro-Hungarian Tale for Euroland, 1867—1914 2001

No. 44 The Euro Area and the Single Monetary Policy 2001No. 45 Is There an Asymmetric Effect of Monetary Policy

over Time? A Bayesian Analysis Using Austrian Data 2001No. 46 Exchange Rates, Prices and Money.

A Long Run Perspective 2001No. 47 The ECB Monetary Policy Strategy

and the Money Market 2001No. 48 A Regulatory Regime for Financial Stability 2001No. 49 Arbitrage and Optimal Portfolio Choice

with Financial Constraints 2001No. 50 Macroeconomic Fundamentals

and the DM/$ Exchange Rate:Temporal Instability and the Monetary Model 2001

No. 51 Assessing Inflation Targeting after a Decadeof World Experience 2001

No. 52 Beyond Bipolar: A Three-Dimensional Assessmentof Monetary Frameworks 2001

No. 53 Why Is the Business-Cycle Behavior of FundamentalsAlike Across Exchange-Rate Regimes? 2001

No. 54 New International Monetary Arrangementsand the Exchange Rate 2001

No. 55 The Effectiveness of Central Bank Interventionin the EMS: The Post 1993 Experience 2001



Other PublicationsArchitektur des Geldes —Vom klassizistischen Palais zum zeitgeno‹ssischen GeldzentrumThe Architecture of Money — From the Classicistic Bank Palace to the ModernMoney CenterThe Austrian Financial Markets —A Survey of Austria�s Capital Markets — Facts and FiguresGuidelines on Market Risk (six volumes)The New Millennium — Time for a New Economic Paradigm?Results of the 28th OeNB�s Economics ConferenceThe Single Financial Market: Two Years into EMU —Results of the 29th OeNB�s Economics Conference



Publisher and editor:Oesterreichische NationalbankOtto-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 DivisionOtto-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 DivisionHelmut Gruber, Treasury — Strategy DivisionGerhard Havelka, Organization DivisionOliver Huber, Secretariat of the Governing Board and Public RelationsGeorg Hubmer, Financial Markets Analysis and Surveillance DivisionMartin Taborsky, Section Cashier�s Division Branch OfficesBeat Weber, European Affairs and International Financial Organizations DivisionManfred Zipko, Financial Statements DivisionViktor Zorn, Planning and Controlling Division

Layout and design:Peter Buchegger, Secretariat of the Governing Board and Public RelationsWalter Grosser, Printing Office

Photographs:Herbert Fidler, Foto Simonis, Ulrich SchnarrOesterreichische Nationalbank,GELDSERVICE AUSTRIA Logistik fu‹r Wertgestionierung und Transportkoordination G.m.b.H.European Central Bank, Claudio HillsMu‹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 RelationsOtto-Wagner-Platz 3, A-1090 ViennaPostal address: P. O. Box 61, A-1011 ViennaTelephone: (+43-1) 404 20, ext. 6666Fax: (+43-1) 404 20, ext. 6696

Orders:Oesterreichische Nationalbank, Documentation Management and Communications ServicesOtto-Wagner-Platz 3, A-1090 ViennaPostal address: P. O. Box 61, A-1011 ViennaTelephone: (+43-1) 404 20, ext. 2345Fax: (+43-1) 404 20, ext. 2398

Internet:http://www.oenb.at

DVR 0031577

Vienna 2002

Annual Report 2001 - oenb.at

Documents

Transcript of Annual Report 2001 - oenb.at