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Austria Money and Banking
The Austrian banking system is under the broad direction of
the Nationalbank, the Austrian central bank, in coordination with
the Austrian government. The bank is centralized, unlike the
United States Federal Reserve System. It is the bank of issue and
enjoys substantial autonomy, while consulting with the Austrian
government.
Austria's currency, the schilling, is strong and stable.
There was an attempt to float it in 1973, when various global
currencies floated after the collapse of the Bretton Woods
system, but in July 1976 the schilling was formally pegged to
West Germany's currency, the deutsche mark. This policy was
abandoned in December 1977, but the schilling remained stable in
relation to the deutsche mark through management of short-term
interest rates and through careful efforts to control the
Austrian monetary supply. In practice, the policy meant that
Austria was an informal member of the European Monetary System
(EMS--see Glossary)
and its exchange rate mechanism
(ERM--see Glossary)
since their establishment in 1979, and the country was
expected to join the European Monetary Union (EMU) under whatever
arrangement and timing might finally be agreed.
The principal banks are full-service banks, of which there
were about fifty-five with approximately 850 branches at the end
of 1991. They transact all kinds of business and also channel
credit for all purposes. Many of them function only regionally,
but the two largest--the Creditanstalt-Bankverein and the
Österreichische Landesbank--operate throughout Austria. The state
owns majority shares in both those banks. A 1991 merger between
the Österreichische Landesbank and the Zentralsparkasse created
Austria's largest bank, Bank Austria, and other mergers could
follow to make Austrian banking more competitive within the
larger European framework.
The banking system consists of a number of other kinds of
institutions as well. These include the ten provincial mortgage
banks (Hypobanken), with 124 branches in 1989; the savings
banks (Sparkassen), of which there were about 126 with
1,278 branches in 1988 that function as regular local banks
despite their name; the people's bank (Volksbanken), of
which there were 103 with 323 branches in 1989 that serve small
business as commercial credit cooperatives; the agricultural
credit cooperatives (Raffeisenkassen), of which
there were 863 in 1989 with over 1,600 branches; and a small
number of private banks and specialized institutions.
The system is locally and regionally based, with savings and
credit channeled at the district level; full-service banks serve
large companies. The post office system, with over 2,000 branch
offices throughout Austria, also plays an important role in
household savings. Austria has one of the highest savings rates
in the OECD, and most of the funds saved are deposited in the
banking system.
Banks play the central role in the Austrian financial system,
especially in corporate finance. They carry out not only regular
deposit and lending activities but also such other functions as
portfolio management and investment advice. Because most savings
are deposited in banks, banks are the principal source of funds
for business. Austrian banks tend to maintain close relations
with industry, especially with the firms to which they have
extended credit. Banks are often represented on supervisory
boards or, at the very least, play prominent roles in advising
firms with respect to business and investment decisions.
Austrian financial markets reflect this situation. There is an
important bond market, largely for government and bank issues and
for utilities, about eight times as large as the equity market.
The debt-to-equity ratio for corporate financing is high, more
like the German model than the British or United States model. In
the early 1990s, the Vienna stock exchange was a very limited
market, although it will probably become more important as the
privatization of nationalized companies continues. The money
market is also dominated by banks.
Data as of December 1993
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