Director: "Subordinated"

OeNB expects billions in losses again this year

The Oesterreichische Nationalbank (OeNB) will also post a loss in the billions in 2024 - this is due to the ultra-loose monetary policy in the eurozone in recent years. However, OeNB Director Thomas Steiner is only concerned about the negative result to a limited extent. This is "a secondary result of its mandate", explains OeNB Director Thomas Steiner. 

It will take the OeNB even longer to recover from its balance sheet losses. After an operating result of minus 2.21 billion euros in 2023, a loss is also expected for this year - "certainly in the billions", Steiner said on Friday. It will be many years before the federal government receives distributions again.

Forecasts beyond 2024 are difficult. However, as the balance sheet still contains large sums of securities from ECB purchase programmes, which now have to be reduced, it will probably take even longer for the SNB's balance sheet situation to stabilize again.

Profit distribution only likely in the 2030s
As soon as profits are generated again, they will initially be used to cover past losses, Steiner continued. A profit distribution to the Republic is therefore not likely until the 2030s. The federal government was already left empty-handed in 2022, when the OeNB was able to avoid a loss on its balance sheet by reversing provisions.

In 2023, the OeNB's bottom line was a balance sheet loss of 2.06 billion euros. As in 2022, this was due to the ultra-loose monetary policy in the eurozone in recent years, followed by a rapid rise in interest rates in the wake of rising inflation.

The Director of the Austrian National Bank, Thomas Steiner(Bild: APA/TOBIAS STEINMAURER)

Due to the ultra-loose monetary policy of the European Central Bank (ECB) over many years, the OeNB has many securities with rather low interest rates on its balance sheet. The interest income from these amounted to 494 million euros in 2023. On the liabilities side, however, the central bank has to pay higher interest to commercial banks for their deposits at the central bank due to the rise in interest rates since 2022. Interest expenses therefore amounted to minus 3.48 billion euros.

Governor calls for minimum reserve requirements for banks
In order to curb this so-called "asset-liability mismatch", OeNB Governor Robert Holzmann once again spoke out in favor of raising the minimum reserve requirements for banks. Banks must hold a minimum reserve with the National Bank. This currently stands at one percent of a bank's customer deposits, and the ECB has already lowered the interest rate to zero percent.

The rate could be increased to five to ten percent, according to Holzmann. This would reduce the total interest payments made by the monetary authorities to banks. From the banks' point of view, however, this would be like a tax, according to Holzmann.

However, the OeNB itself is only concerned about the negative result to a limited extent. "Whether a central bank makes profits or losses is a secondary result of its mandate," said Holzmann. This would not affect its financial strength and ability to act. The OeNB's negative balance sheet would also have no impact on the domestic population, said Steiner.

Institutions' balance sheets are solid
With regard to the stability of the domestic banking system, the OeNB remained confident today. Despite the challenging environment due to the war in Ukraine, higher inflation and a phase of economic weakness, the banks' balance sheets are solid. Although the ratio of non-performing loans (NPLs) has risen slightly due to a higher number of insolvencies, this is not a cause for concern. However, a good capital and liquidity base will remain essential in the future, said Deputy Governor Gottfried Haber.

With regard to bank lending, the National Bank pointed out that the number of variable-rate loans in Austria was back above 50 percent at the end of 2023. Variable-rate loans always carry a risk for borrowers. However, since the stricter lending rules were introduced in mid-2022, lending standards for housing loans have improved significantly, said Haber.