Belaisch, Agnés, Laura Kodres, Joaquim Levy, and Angel Ubide, “Euro Area Banking at the Crossroads,” forthcoming as an Occasional Paper, IMF.
Borio, C. E. V., 1995, “The Structure of Credit to the Non-government Sector and the Transmission Mechanism of Monetary Policy: A Cross-Country Comparison,” Bank for International Settlements, Working Paper No. 24 (Basle).
Drees, Burkhard, 1998, “European and Global Integration: the Challenges for Austria’s Financial Sector,” Austria—Selected Issues and Statistical Appendix, IMF, Washington.
Hubert, Georg, 1999, “Effects of the Euro on the Stability of the Austrian Banks,” Focus on Austria, No. 3, Oesterreichische Nationalbank.
Waschiczek, Walter, 1999, “The Austrian Banks at the Beginning of Monetary Union: The Effects of Monetary Union on the Austrian Banking System from a Macroeconomic Perspective,” Focus on Austria, No. 3, Oesterreichische Nationalbank.
Würz, Michael and Wolfgang Müller, 1998, “Prudential Supervision in Central and Eastern Europe: A Status Report on the Czech Republic, Hungary, Poland, and Slovenia,” Focus on Transition, Oesterreichische Nationalbank, No. 2.
A forthcoming paper on “Euro Area Banking at the Crossroads” discusses changes in the euro area financial landscape and resulting policy challenges (Belaisch et al., forthcoming).
A tax-bias against equity finance may have contributed to the small size of the equity market. This bias reflects the combination of full deductibility of interest payments on the corporate level (favors debt finance), the lack of effective taxation of capital gains (favors retained earnings), and “double taxation” of dividends. It has been calculated that the average tax wedge for equity financed investment equals 4.7 percentage points (compared to 0.1 percentage points in the case of debt finance and 1 percentage point in the case of retained earnings) when both corporate and personal taxes are taken into account (see Appendix II).
The two largest Austrian banks are joint stock savings banks: according to Fitch-IBCA, as of December 1999, Bank Austria A.G. was largely controlled by a holding company with close links to the City of Vienna with 23 percent of equity; and Erste Bank was controlled by an “ownerless” holding company with about 44 percent of equity. Floating shares accounted for 55 and 32 percent, respectively. While the assets of Creditanstalt A.G. are still included in the commercial banking sector, Creditanstalt was taken over by Bank Austria in 1997. In late July 2000, agreement was reached at management level for the takeover of the Bank of Austria financial group (including Creditanstalt) by Hypovereinsbank, a German bank.
Federal Law of January 24, 1979 on the Organization of the Saving Bank System.
While the Raiffeisen banks are organized in a three-tier system, the industrial credit cooperatives have only two tiers.
The subsidy is offered as a premium (pramie) of 3-8 percent of annual savings (with a ceiling of € 1,000 per individual in 1999) supplementing a saving plan. The pramie has to be repaid, if funds are withdrawn before the term of the savings plan.
The first cross-sector merger, which created Bank Austria, was completed in 1991 between Zentralsparkasse, a savings bank, and Landerbank, a joint stock bank.
In 1997, with a share of about 45 percent and 44 percent, respectively, the share of mutually-owned institutions was, however, even higher in Norway and Spain.
The political authorities in various EU countries have expressed a preference for “national solutions” and have been involved in brokering domestic alternative mergers to mergers involving foreign partners (see Belaisch et al., forthcoming).
While the national accounting standard allows the maintenance and increase in “hidden reserves,” the IAS requires that more market based asset prices be used in the accounts.
Total assets increased since the two banks were still reported separately, but, due to reorganization linked to the acquisition, the cross-holding of liabilities increased, beefing up the balance sheet for both banks.
A large loss reported for Erste Bank in 1998 reflects the cleanup of the balance sheet of Erste Bank Hungary (previously Mezóbank).
In the last two years, in total four small banks have either been declared bankrupt or have needed public support: Rieger and Diskont Bank (bankruptcy in November 1998); Trigon Bank (emergency liquidity assistance from the OeNB, in October 1999), and Bank Burgenland (support from the provincial government, its main owner, in June 2000). By far the largest of these banks was Bank Burgenland with about 0.5 percent of total bank assets. Although increased risk-taking was present in these cases, criminal action was at the origin of troubles in three of these banks.