250 Years Vienna Stock Exchange – Anniversary Publication

The Next 250.

Editorial / Federal President of Austria

“The fundamental mission of creating trust and transparency, initiated by founder Maria Theresa, is still of great importance for Austria’s modern economic development today.”

Dear ladies and gentlemen, It is quite an achievement to be able to celebrate a 250th anniversary! The Vienna Stock Exchange has chartered an exciting course throughout its history: From what was initially a purely state-run stock exchange, to an independent chamber, to a modern corporation, the Vienna Stock Exchange has always been an important institution for ­Austria’s capital market and its investors. ­Founded

by Empress Maria Theresa (German: Kaiserin Maria Theresia) in order to create trust in the ­creditworthiness of the Habsburg state budget, many aspects of its fundamental mission are still of great significance for the modern republic that Austria is today.

History connects us all. Especially in Austria, a country that boasts such a rich past. Maria ­Theresa attracted many progressive minds to

Vienna, stimulated the economy while also laying the foundation for today’s stock exchange. She was a fascinating figure and the only female regent in the era of the Habsburgs, which lasted more than 600 years. There was great distrust among the population regarding government securities, as the price was set by private houses. As a result, there was unregulated trade on the streets and in the coffee houses. A single regulated market was to put a stop to this uncontrolled growth. Maria Theresa took the first steps in this direction as early as 1761. She was a progressive thinker for her time, which shows that innovation is the very cornerstone of sustainable success. Therefore, it is reassuring that our country can count on a strong stock exchange, which opens the doors for ­companies to finance innovation and gives investors financial decision-making power. Over its ­250-year history, the Vienna Stock Exchange has been an essential factor in the success of the national economy and has contributed to the prosperity of companies and society as a ­whole.

Particularly in times like these, when dealing with the COVID-19 pandemic, companies need trust, courage and confidence and, of course, a strong equity base. This will help to accelerate ­economic recovery, which is of utmost importance in ­overcoming any crisis.

One thing is quite certain: the Vienna Stock ­Exchange has a promising future ahead of it.

With this in mind, I would like to send my heartfelt congratulations and my best wishes on the 250th anniversary.

Alexander Van der Bellen © Wolfgang Zajc

Federal President of Austria

The complete statement is available in German at: wienerboerse.at/250

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Editorial / Management Board of the Vienna Stock Exchange

“The capital market will play a key role in the transformation towards a carbon-free future. It ­provides a competitive edge to nations and continents.”

Christoph Boschan, CEO

How will our economy and society cope over the forthcoming decades? What part can we play in creating a better future? How can we reconcile economic, environmental and social goals? On the occasion of this special anniversary, rather than building a business time capsule with artefacts, we want to inspire and fuel the next generation of European entrepreneurs. Our legacy is a respon­ sibility for the future. As we embark on the next 250 years, we have set up a “Future Forum”. This publication gathers the ideas of business pioneers, historians, journalists and scholars to address the pressing issues of our times and discuss solutions going forward.

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Dear ladies and gentlemen, A quarter of a millennium – what an honour to reach this milestone. And what a year to celebrate amid a global pandemic. The first one in history that could be slowed down by a human-made remedy. In the past eventful 250 years, the Vienna Stock Exchange witnessed many ­transformations and developments. Currencies, governments, nations and technologies came and went. ­ evelopments in transportation went from railway D locomotives to exploring space. 250 years ago, we were placarding daily prices in hand-written letters on the door of the Exchange. Today, information technology allows thousands of exchange trades to be disseminated globally in real time. While we are still busy with digital transformation, ­quantum computing is promising even greater power. ­Humans are still evolving and the pace of change is picking up.

The stock market is the best indicator of the future that we have. If history has taught us anything, open, reliable, and transparent markets are a ­deciding factor for moving forward. Liberal ­democracies and the human pursuit of growth and happiness will continue to bring forth concepts and inventions which we can only dream of today.

The capital market will provide the necessary equity for innovation so the next generation can continue to enjoy prosperity. This stock exchange has proven its agility over and over again. Stock exchanges and their trading participants have always been pioneering users of new ­technology.

We will use our know-how and tradition, and continue to provide the most efficient and reliable infrastructure to connect companies with investors worldwide.

In this spirit, we are looking forward to the next 250 years. Thank you to all the supporters and contributors on this shared journey, especially the entrepreneurial forces in our region.

Management Board

Christoph Boschan Chief Executive Officer

Andrea Herrmann Chief Financial Officer

Petr Koblic Shareholdings

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250 years wiener boerse

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Contents

Spotlight on Empress Maria Theresa, founder of the Vienna Stock Exchange.

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History of the Vienna Stock Exchange

Vienna Stock Exchange reloaded

Trust is the hardest currency

From the historic palais into the digital world

Milestones on the 250-years journey from a state-­owned marketplace to a modern ­information technology and service provider.

A historian, a journalist and a manager talk about the past and the next 250 years. An article on the changing role through the ages.

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OeNB Governor Robert ­Holzmann on the sibling ­relationship between the ­Vienna Stock Exchange and the ­Austrian National Bank, and the history of money.

A walk through history along historic Vienna Stock Exchange locations and an interview with Heike Arbter, who witnessed the digitalisation in trading first hand.

Spotlight on Rich Lesser, who advocates that shareholder and societal value go hand in hand.

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48

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Voices from the capital market

Becoming a global player through the Vienna Stock Exchange

From World Savings Day to World Investment Day

Austria’s first unicorns: uplift for tech start-ups

Bernd Spalt and Christoph Boschan discuss the time-­ honoured saving culture. Future challenges can be better met through a strong capital market.

The emergence of tech ­scale-ups in a growing ­ecosystem. Statements from venture capital and private equity funds.

CEOs, CFOs and experts voice their aspirations for the next 250 years. Market representatives at a glance.

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The oldest and the youngest listed companies in an interview on opportunities offered by the capital market.

Spotlight on Yuval Noah Harari, an inspiring defender of liberal democracies.

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84

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Blockchain in the financial world – revolution or hype?

Predicting the future: uncertainty beyond crisis

Financing the industry of the future

Technology is not the ­challenge. A discussion about pilot projects, regulation and ­decentralised finance.

Professor Didier Sornette and analyst Monika Rosen discuss the risks of life, money and the reward.

A panel discussion about ­innovation “made in Austria”.

What do companies need to thrive and support welfare?

De-growth: A misunderstanding turns into a political agenda

ETFs and ESG engagement: two investment trends spotted

Christian Helmenstein explains why growth is the result of our human pursuit of happiness.

Managers of Amundi and ­Vanguard in an interview on the future of investing.

Spotlight – our past

“ the For the true best of action and the

Maria Theresa was the ruler of the Habsburg dominions from 1740 until her death in 1780. She was one of the most influential ­monarchs of this era. Maria Theresa ­(German: Maria Theresia) spurred educational, financial, institutional, medical and state reforms, which strengthened Austria’s international standing.

­ ublic credit, then p for the control of ­usury, a public stock ­exchange shall be ­established in Vienna.

© Wikimedia Commons

It shall be open every day, except on Sundays and public holidays.

For the prevention of all disorder, it shall be manned by a military guard. And the entrance to the same shall be open to all persons, regardless of status, who are otherwise authorised to conduct the business pertaining thereto. All negotiations and transactions of bills of exchange and public securities shall take place at this ­exchange and are therefore excluded from all other places under penalty of fine. The same punishment shall be inflicted upon those who knowingly permit their negotiation in their homes.

The sale of public papers which takes place without the consent of the Sensale (official brokers) shall be null and void. All ­transactions carried out by the Sensale shall be recorded daily in an initialled journal without naming the parties involved. The Sensale shall ­publish a daily price list of the bills of exchange as well as of the public papers.

Vienna, 1771

”

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1855

Foundation of the Vienna Stock Exchange

by Maria Theresa.

First step towards autonomy with creation of the Vienna Stock Exchange Chamber.

1873

1956

2002

1949

1968

BAWAG Group AG goes public – Austria’s largest IPO ever.

2019

First government bond issue after the war.

Vienna Stock Exchange Index WBI created.

1991

Wiener Börse AG was founded and moves to today’s headquarters.

Launch of new prime market segment.

In the quarter of a millennium and despite technological moderni­ sation, the fundamental mission of the Vienna Stock Exchange has not changed: to serve as the central marketplace for the ­pricing of securities. Creating trust and transparency with a clear ­focus on ­delivering a high-quality service has been its fundamental duty since 1771 – this is proven day by day in a highly regulated ­environment with intense competition. The following article highlights the most important milestones in the history of the Vienna Stock Exchange and takes you on a journey through 250 years.

Opening of historic Stock Exchange Building on Vienna’s Ringstrasse.

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Liberalisation steps and wave of privatisation in Austria.

1997

History of the Vienna Stock Exchange

PORR AG and Wienerberger AG use capital market for innovation financing.

1877

Stock Exchange closes during the First and Second World Wars.

Biggest fire since end of WWII destroys historic Stock Exchange Building.

1985

1869

First foreign shares listed on the Vienna Stock Exchange.

1914 & 1938

2017

1818

Austrian Central Bank first jointstock company to be listed on the Vienna Stock Exchange.

2004 Start of the SME “direct market” segment.

Launch of Austrian benchmark index ATX.

1999

Electronic trading system XETRA® is launched.

Establishing a partner network in Eastern Europe – providing IT services.

2021

© Austrian State Archives

1771

History of the Vienna Stock Exchange

The Vienna Stock Exchange founding patent by Maria Theresa from 2 August 1761.

250 years wiener boerse – our past

Maria Theresa creates stability in formerly unregulated market

However, the stock market was curbed by the nationalisation of individual industries.

As a result of the Seven Years’ War with ­Prussia, the Austrian state budget was completely ­shattered. Agents of the Treasury had to ­borrow money abroad at a high loss of coinage. In ­addition, the Habsburgs lived an ­exuberantly luxurious lifestyle and paid little attention to economic relationships and the effects of their money printing. There was great distrust amongst the population regarding government securities as prices were set by private houses. Trading was unregulated, it took place on the streets and in coffee houses. A single regulated market was to put a stop to this uncontrolled growth. Maria ­Theresa took the first steps in this direction as early as 1761.

Privatisation wave – ­policymakers ­recognise the potential of the ­domestic capital market

In 1771, Maria Theresa founded the Vienna Stock Exchange to raise state capital based on the French model. Initially, the focus was on trading bonds, bills of exchange and foreign exchange.

Stockbrokers, also called Sensale, ensured that everything ran smoothly. The Vienna Stock Exchange brought anonymity and uniformity. ­Business transactions became faster and safer.

The first shares and international reputation In 1818, the Oesterreichische Nationalbank (OeNB) was the first share quoted on the Stock Exchange price list. One of its first shareholders was Ludwig van Beethoven, who purchased eight shares in 1819. In the following years, the Vienna Stock Exchange gained a growing international reputation due to the importance of the Habsburg monarchy. Companies from the transportation and traffic sectors used the capital market to finance their businesses.

An autonomous stock exchange for the realisation of ideas and ventures The new Stock Exchange Patent set the course towards the autonomy of the Vienna Stock ­Exchange. The framework was regulated in the Stock Exchange Act and business operations were taken over by the newly created Stock Exchange Chamber. Between 1867 and 1873, the ­Austro-Hungarian Empire e ­ xperienced a ­tremendous surge in industrialisation and

From 1985 onwards, there was a strong demand for Austrian shares. This period also saw a change in the previously restrained attitude of economic policy towards the stock market. Starting in 1987 and triggered by the privatisation wave, numerous renowned Austrian companies went public. These included OMV AG (1987), Austrian Airlines AG (1988), VERBUND AG (1988) and EVN AG (1989).

The first shares of the Austrian National Bank listed on the Vienna Stock Exchange.

­ conomic growth. There were numerous new e listings on the Vienna Stock Exchange, especially bank, railway and industrial shares. The stock exchange listings of two companies that still exist today, PORR AG and Wienerberger AG, also fell into this period. At over 150 years, they are the oldest listed shares.

Creation of one of the most modern stock exchange laws in Europe A liberal economic policy also favoured unsound business start-ups. The wave of speculation ended on 9 May 1873 as the Vienna stock market crashed. About half of the stock corporations disappeared from the stock exchange list. The need for a new legal framework was recognised and the Stock Exchange Act was created in 1875.

It was considered one of the first modern stock exchange laws in Europe and, with few changes, it continued to regulate Austria’s stock exchange system until 1989.

The Austrian Traded Index (ATX) was first published in 1991.

Electronic trading increases efficiency

Vienna Stock Exchange facilitates the financing of reconstruction As an institution, the Vienna Stock Exchange has been located in many places during its 250-year history. The best-known venue is the ­historic Stock Exchange Building on ­Schottenring, where the Vienna Stock Exchange conducted its ­business operations between 1877 and 1997.

The Stock Exchange only closed during the World Wars. As a result, trading shifted to the ­surrounding streets and coffee houses. Official trading on the Vienna Stock Exchange resumed in November 1948. The bond market recovered ­quickly. In 1949, the first federal bond of the Second Republic – known as the Aufbauanleihe – became tradeable on the Vienna Stock Exchange.

­ xchange (ÖTOB) to form the new Wiener E Börse AG. A market-oriented company ­owned by ­domestic banking institutions and listed ­companies was founded. Through cooperation agreements, it has been building up its network in Central and Eastern Europe since 2004. The Prague Stock Exchange is a direct subsidiary of Wiener Börse AG.

Globally recognised data hub and index provider The Austrian Traded Index (ATX) was first ­published in 1991. To this day, it has reflected the development of the 20 most liquid stocks on the Vienna Stock Exchange. The oldest index ­calculated by the Vienna Stock Exchange is the Wiener Börse Index (WBI). It was introduced in 1968 and tracks the performance of the domestic capital market. 150 tradeable indices covering countries, sectors, regions as well as various investment themes and styles are now used by more than 140 financial institutions worldwide as underlyings for their products. The Vienna Stock Exchange is the number one contact for market data from Central and Southeastern Europe: As a one-stop shop, it offers market information from eleven exchanges via one data feed.

Reliability and transparency are a central mission

From 1989, trading on the Vienna Stock ­Exchange was increasingly operated ­electronically. In 1999, all trading was fully automated. By 2012, the Wiener Börse AG as a company also ­implemented the electronic trading system at its future ­partner ­exchanges. This strengthened the role of the ­Vienna Stock Exchange as an infrastructure ­provider. As such, it now provides the markets of Austria, Croatia, the Czech Republic, ­Hungary and Slovenia with the trading system and ­complementary IT services. © Money Museum OeNB

Foundation of the Vienna Stock ­Exchange to raise state capital

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History of the Vienna Stock Exchange

Cooperation agreements open the door to CEE growth region In 1997, the Vienna Stock Exchange Chamber merged with the Austrian Futures and ­Options

The Vienna Stock Exchange is the clear market leader in trading Austrian equities and is known for its international network of trading participants, investors and data vendors. As the heart of the Austrian capital market and a reliable i­nfrastructure provider, it builds bridges for companies to the world’s leading financial centres and opens the door for investors to the growth region of Central and Eastern Europe.

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Vienna Stock Exchange reloaded

Vienna Stock Exchange reloaded CEO Christoph Boschan and Professor Clemens Jobst discuss the changing role of the Vienna Stock Exchange through the ages. The conversation about the past and next 250 years covers a series of interesting questions: How does the company of today mirror the Habsburg Monarchy? Why does the investment culture in the German-speaking world differ from the Anglosphere? What are the financial and technological challenges of the future?

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Clemens Jobst is an Austrian economic historian. He teaches at the Chair of Economic and Social History with a special emphasis on the history of the world economy in the 19th and 20th centuries at the Department of Economic and Social History, University of Vienna.

Christoph Boschan

© Wiener Börse AG

is CEO of Wiener Börse AG which operates the stock ­exchanges in Vienna and Prague. Previously, the ­former ­securities trader worked for ­several trading venues in Germany and focused on the topic of stock exchanges in his doctoral thesis.

Text: Anneliese Rohrer The complete interview is available in German at: wienerboerse.at/250

250 years wiener boerse – our past

Why was the composer Ludwig Van Beethoven one of the first investors of the Vienna Stock Exchange in the early 19th century?

That is one of the questions the historian ­Clemens Jobst answers when he and CEO Christoph Boschan travel up and down memory lane from the foundation of the Vienna Stock Exchange in 1771 to the present day. Clemens Jobst ­explains: “­Beethoven faced the same p ­ roblems as ­everybody else at that time. There were few ­options to invest money. Only government bonds, real estate and not much else. ­Beethoven ­obviously saw an opportunity to manage his ­financial security.”

Looking in the rear mirror of history, it became quite clear that every fundamental change in the Vienna Stock Exchange was due to a combination of historical events. Its establishment was due to the financial problems of the Habsburg Empire.

Professor Jobst explains that it took decades and two important events to stimulate trading at the Stock Exchange. First, Austria’s defeat in the war

Vienna Stock Exchange reloaded

nomy and investments too in order to begin new business ventures. The agreement with ­Hungary had a similar effect. Business was booming, investments in infrastructure, such as railway projects in Austria and other parts of the empire, became extremely lucrative. The prospect of the World Exhibition in Vienna in 1873 constituted another driver to an eventually overheated market.

The crash of 1875 had long lasting effects.

The overtrading of that period and the related mass hysteria is a recurring phenomenon. As Christoph Boschan notes: “Think of the crash in the USA in 1929, of the dotcom crisis in 2000, the loan and eventually the financial crises of 2008. Such reactions can still happen today. In any ­liberal society, people are free to choose their investments, even disregarding all relevant ­fundamental data.”

Christoph Boschan emphasises that those periods paint a distorted picture of the Stock Exchange.

One side talks about enormous profits, mostly through semi-legal methods. The other side sees

From left to right: Clemens Jobst, Anneliese Rohrer and Christoph Boschan explore the journey taken by the Stock Exchange from a state-run market regulator to a modern infrastructure provider.

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17 80 per cent of the gross domestic product before World War I when trading was suspended, as Professor Jobst points out. Banks and bonds were more ­important than shares. After the economic crises of the 1920s and 1930s, the renewed suspension during World War II and a period when the Vienna Stock Exchange was regarded as a rather dormant institution, the next notable trigger occurred in the late 1980s when the demise of Austria’s national industry coincided with the fall of the Iron Curtain. The opening up of Eastern Europe and a series of privatisations in Austria led to new investment opportunities and an unprecedented economic boom.

How important are cultural aspects?

with Prussia, and second, the establishment of the dual monarchy after the peace between Austria and Hungary. The humiliation of 1866 had the paradoxical effect of relieving Austria of its military burdens. The time had come to boost the eco-

rapid losses of wealth, often resulting in bank­ ruptcy. Those are extremes, he stresses, which seldom reflect reality. The Vienna Stock Exchange remained a very ­important player in financing the Austrian ­economy, up to a capitalisation of

© Wiener Börse AG

Clemens Jobst

It is always a matter of concurrence not only of historical events but also of cultural aspects.

Christoph Boschan points to the difference between the Anglo-American attitudes ­regarding investments and managing wealth and the continental European one: “If you look at the Anglo-American scene, you can see ­investment experiences that overlap generations. The ­great-grandfather invested in shareholder funds, the grandfather did it, the parents did it. And you do it yourself.” Moreover, one is more ­obliged to manage one’s own financial security in a ­society that stresses individual responsibility more than social safety nets. In contrast, there

is the ­collective experience in German speaking ­countries: the crash of 1873, the two World Wars, including the total destruction of the ­industrial ­sector and hyperinflation combined with an ­enormous public spending ratio, and an almost paternalistic social security system. All this ­resulted in a totally different orientation in the field of financial security. Moreover, the background of potential ­investors is completely different in ­Germany and Austria, for instance.

Why was the organisation different?

Not only this but also the organisation of stock ­exchanges was different, as Professor Jobst points out. The government-controlled trading with bonds at stock exchanges is the classical version. In countries like the Netherlands or Great Britain, the traders themselves pushed for more ­regulation. They had met in coffee shops and pubs, and eventually opted for a more controlled system to stop the chaos. They wanted to control who could trade, what was allowed and what was not. They wanted to have rules and ­consequences for those who did not pay up and those who did not deliver. The traders and customers in ­other countries dealt with all those specifications autonomously. In Austria they were issued by the government.

Those differences are still at play today, as

250 years wiener boerse – our past

Vienna Stock Exchange reloaded

He points to his not so popular theory that a highly paternalistic security system weakens any personal responsibility plus the drive to ­innovation.

People trust they will be taken care of by the government, especially in terms of their retirement and their assets, without having to be actively participating themselves. Countries with a strong capital market have a low public spending ratio.

If the government does not provide security, the individual has to.

Why is there an echo of the Habsburg Empire?

In recent years, the Austrian Stock Exchange ­looked east, so to speak. Its focus is on partner­ ships with the stock exchanges in Hungary, ­Croatia and Slovenia and on the 100 per cent ­ownership of the stock exchange in the Czech ­Republic. Moreover, Vienna provides services in ten ­additional countries. Christoph Boschan: “If you look at our service charts, it is actually kaiserlich und königlich (imperial and royal) at its best.”

Austria is held in high regard in these countries. Its positive image is a big plus ­wherever the company tries to sell its services. But Wiener Börse cannot rely on allies alone since it ­competes with the big players, which are primarily the German Stock Exchange and Euronext, as well as newly founded trading platforms. Nevertheless, it can be proud of its performance.

Christoph Boschan

What are the differences between ­continental Europe and the US?

According to Christoph Boschan, the ­difference between the US and continental Europe is easily explained: “As a nation, the US is an ­uninterrupted success story. But if you look at the ­continental European families’ history, you can see a ­grandfather that served in a mercenary army, a grandfather who served in the emperor’s army, a father in the people’s army, a son in the German armed forces and his son may be in the Austrian army. Five generations of ethnic Germans in five different national military organisations plus the total depreciation of the capital. All this is mirrored in the developments of the stock exchanges.”

Why is the Austrian public a reluctant investor?

In countries like Austria, the wider public does not really engage with taking out private investments in shares and bonds. However, Christoph Boschan sees substantial changes, privately and politically. In his view, the countries that have a highly developed capital market will generate growth and recover from the current crisis more quickly. Capital markets have to be promoted in

various ways. Things do not work without a strong national investment culture.

As for the Wiener Börse, company growth can only be generated on the international ­market. ­Internationalisation is the order of the day ­because the Austrian market itself is too small. “It is somewhat tragic,” the CEO explains, because international investors value Austrian stocks, their stability, their value and – in comparison to others – their increased dividends. Thus, capital is ­transferred to Austria from outside, but the dividends then leave the country. One can call it an export of prosperity. There needs to be a better balance between foreign and domestic ­capital, a problem that gets more political attention ­nowadays. This is dealt with to some extent in the government’s new plan with schemes such as tax breaks for investors if they keep shares for more than a year. Christoph Boschan: “I just hope that it will be implemented soon.”

Austrians prefer to put their money in savings accounts rather than in investment portfolios.

And Christoph Boschan calls that “tragic” too, ­especially during a time of substantial national debt. The question we should ask ourselves is as follows: How do we attract private capital to reduce stress on the budget? Something has to happen in this respect, and the present crisis could serve as a catalyst.

Austrians have a reputation of shying away from risky investments. Christoph Boschan sees a strong connection with the public spending ratio.

Christoph Boschan once announced that he will stay in Vienna until the capital market is fully revitalised. As a business model, Wiener Börse’s expansion strategy is working and the company is successful, he explains. But this is not what serves the broader public and the national economy.

Austria needs to stimulate investment. Plans have been developed to this end, proposals have been tabled and hopes are high.

Christoph Boschan begs to differ. He believes ­there is one problem with refinancing based on loans and that is financing innovation. This raises questions on how to best generate growth. ­Christoph Boschan believes there are two ways: “You can work harder, but there is a limit to it.

Or you change your ways of operating. You can ­automate; you can digitalise and force innovation.

“But you cannot finance innovation with loans; you need equity. To get a loan you have to be solvent.

You are not automatically creditworthy if you i­nvest in innovation. Therefore, you need the capital market for your equity to boost innovation, which provides the only chance to grow these days.”

Why are traditional stockbrokers no longer needed?

With all the changes that have taken place over the centuries, decades and years, none has been more affected by them than stockbrokers. Once the centre of buying and selling, they have now all but vanished from the trading floor. They have become a victim of innovation. As Christoph Boschan summarises, “The stock exchanges have always been the avant-garde of ­digitalisation ­because the transaction chain was set up ­electronically very early during the last decades.

The stock exchange system is currently undergoing another modernisation push. What we call digitalisation today is not the same as what we know from the 1980s and 1990s. Today, artificial intelligence and decentralised database structures are bringing a new wave of digitalisation.” ­­

However, the last word lies with the ­politicians because it concerns some basic corporate ­decisions. These need courage and the Stock Exchange alone cannot provide it. All the ­company can do is put forward arguments and point ­towards ­desirable developments.

Why is innovation the biggest ­challenge? © Wiener Börse AG

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­ hristoph Boschan explains. On the European C continent, the stock exchanges are partly ­under government control. Public authorities issue ­licences to private organisations who then ­organise trading and listing. Admission to trading is still being coordinated with the Stock Exchange Commissioner, a representative of the Ministry of Finance.

functions in the national and in the European con­ text. It cannot be compared with New York, for instance.

According to Professor Jobst, it does not make that much difference how a stock exchange is ­organised. There are markets that emphasise the capital markets and others prefer the ­involvement of banks. Both systems can be successful. ­Austria’s stock exchange has its own specific

Anneliese Rohrer is an Austrian journalist. She worked for the Austrian daily newspaper Die Presse and for the Kurier. Her ­doctoral thesis focused on stock market history.

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Trust is the hardest currency

Robert Holzmann Robert Holzmann is an ­Austrian economist and Governor of the Austrian National Bank (Oesterreichische Nationalbank, OeNB).

He worked for the Organisation for Economic Cooperation and Development (OECD) in Paris and for the ­International ­Monetary Fund (IMF) in ­Washington, DC. He also held various positions at the World Bank in Washington, DC.

Trust is the hardest currency

© OeNB / Lisi Niesner

OeNB Governor Robert Holzmann looks back on the long-shared history of the Oesterreichische Nationalbank (OeNB) and the ­Vienna Stock Exchange. Both institutions have been key players on the financial market in the heart of Europe for more than two centuries.

An essay on the history of money, the changing roles of institutions and the evolution of financial markets.

Text: Robert Holzmann

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250 years wiener boerse – our past

The Oesterreichische Nationalbank (OeNB), Austria’s central bank, and the Vienna Stock ­Exchange, have shared ­close ties for more than two hundred years. The Vienna Stock Exchange was founded in 1771 by ­Empress Maria Theresa, when the Habsburg monarchy was in great need of money after the Seven Years’ War with Prussia. The foundation of a national stock exchange is closely ­connected with the evolution of paper money as we know it today because it went hand in hand with the creation of what were known as Bancozettel. These were debt ­certificates issued by the ­government, which were predecessors of modern banknotes. When Maria Theresa and her ­advisers established the Stock Exchange, moving the trading of bills of exchange and bonds from ­Vienna’s coffee houses to an institutionalised setting, coins were still the most trusted means of payment. The foundation of the Stock Exchange was meant to strengthen trust in the newly ­introduced bank­ notes.

By 1790, one-third of government revenues were being used to pay interest on government debt. As a consequence, trust in the ­Bancozettel waned, and the burden of sovereign debt ­became ­insurmountable. The Vienna Congress of 1815 not only established a new political order in ­Europe, but also paved the way for a reform of the ­monetary system in the Habsburg ­empire.

The state bankruptcy of 1811 and repeated bouts of inflation finally led to the establishment of an early version of today’s Central Bank after the ­Napoleonic Wars. In 1816, the Privilegirte ­Oesterreichische Nationalbank was founded. In contrast to its predecessor, the Wiener Stadtbank, the new Central Bank was established as a private sector enterprise fully owned by its shareholders.

And it is exactly this fact – the foundation as a stock corporation – which, right from the ­beginning, linked the OeNB to the Vienna Stock Exchange, the second major financial institution of the Habsburg empire, which marks its 250th ­anniversary this year. The shares of the OeNB made history on 27 May 1818 as the very first stocks listed on the Vienna Stock Exchange. Ever

The shares of the OeNB made history on 27 May 1818 as the very first stocks listed on the Vienna Stock Exchange.

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Emperor ­Ferdinand I in 1846, Karl Friedrich von Kübeck, then President of the Hofkammer, and as such the first Austrian Minister of Finance, said that the OeNB and the Vienna Stock Exchange had to be seen as “the two correlating foundations” of monetary ­transactions.

As the considerably older sister institution, the Vienna Stock Exchange had already gathered several decades of experience as a trading venue for government bonds and foreign currencies before the listing of the OeNB’s shares marked the beginning of a new era. It took another two ­decades, however, for railway stocks to be listed as the second major category of shares. But as we all know, even siblings that are close tend to squabble a lot, especially when they are ­younger.

And so, the first half of the 19th century saw quite a few skirmishes between the OeNB and the ­Vienna Stock Exchange.

Robert Holzmann

and carried a fine. The quotations lists from the first Stock Exchange years still show the rate ­applied to the exchange of coins for paper money.

In the early years, only bonds, foreign currencies and bills of exchange were traded on the Vienna Stock Exchange.

since, they have been two fundamental, strongly connected pillars of the Austrian monetary and financial system. The perception that they were inseparable, though very different, sister institutions is not new; it is also very much how eminent contemporaries viewed them. Speaking before

© Wiener Börse AG

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Trading was only permitted on the stock ­ex­­change, while bucket shop trading was ­banned

Trust is the hardest currency

In the early years, when the Central Bank, as the younger institution, started to stake out and broaden its field of activities, the Stock Exchange feared that it would lose importance. In 1843, the Sensale – government-authorised stockbrokers who arranged, documented and monitored all transactions on the Stock Exchange – ­complained

bitterly before the commercial court that the foundation of the OeNB had deprived them of important sources of income. To fully under­stand this complaint, it is crucial to know that throughout most of the 19th century and beyond, the OeNB

“For twelve years, the OeNB and the Vienna Stock ­Exchange were roommates at the Palais Ferstel.”

Robert Holzmann

was in a position to grant loans to any person and company doing business in the Habsburg ­empire.

This lending took place through its ­standing ­f­acilities known as the discount window and ­secured advances. Or put differently: Since the younger sister had entered the scene, the ­turnover generated by the Stock Exchange through ­discounting bills of exchange had dropped.

250 years wiener boerse – our past

Trust is the hardest currency

What is more, as a side effect of the OeNB’s lending activities, which were becoming more and more important, changes in lending ­conditions often caused mood swings in the “elder ­sister”. If the OeNB restricted lending by tightening ­conditions or raising interest rates, this ­increasingly had a direct impact on share prices.

On the other hand, stock market booms and busts sometimes irritated the younger institution.

To understand these concerns, we have to bear in mind that it was the OeNB’s legal mandate to safeguard the convertibility of its banknotes into silver coins at all times. Strong fluctuations in the stock market often considerably affected demand for liquidity and, as a consequence, demand for OeNB loans. Managing the OeNB’s silver and gold reserves thus became a nerve-racking, sometimes uncontrollable job.

followed were decades of hard-currency policy, and, in a sense, Austria returned to a policy of free floating exchange rates only upon entering the Economic and Monetary Union (EMU) and adopting the euro.

We see that already the early years of their co-existence were quite eventful, and anything but dull, for the Vienna Stock Exchange and the OeNB. In fact, the entire history of ­these two ­pillars of the Austrian financial system has been characterised by changing roles and ­responsibilities. In the early days, for instance, the Stock Exchange had a monopoly on foreign exchange trading.

These reflections about the close ties between the Wiener Börse and the OeNB, which have ­endured over the centuries, highlight the importance of good and respectful cooperation – the kind of cooperation we have and value to this day. This is also very relevant for capital market financing for companies, especially in the current situation.

This changed radically in the 20th century, ­however, with the imposition of capital and foreign exchange controls during the interwar period and the establishment of the Bretton Woods ­system, when the OeNB took over the helm. What

A highly developed, strong capital market can support a quicker recovery after the COVID-19 pandemic, benefiting both the European and the Austrian economy in the longer term. It ensures quick and easy access to funding for financial and non-financial enterprises and the government too and allows households to make investments to build wealth.

Compared to other countries, Austria’s capital market still has potential for development. A number of enterprises listed on the Vienna Stock Exchange bear testimony to successful capital market financing.

Robert Holzmann

© Wiener Börse AG

24

Robert Holzmann

Therefore, strengthening the capital market in Austria, and a capital market union at the European level, makes sense. To this end, households and enterprises, in particular small and mediumsized enterprises, need to reinforce their equity base. Among households, increasing the share of homeowners and stepping up private pension insurance may be steps in the right direction. In addition, improving financial literacy is key. The OeNB – just like the Wiener Börse – has been actively involved in financial education for many

years and is going to step up its efforts in this field even further to increase young people’s financial knowledge and skills.

In their long common history, both the ­Wiener ­Börse and the OeNB have witnessed and ­promoted major change. Looking ahead, we see that the next innovation to our monetary system is about to happen. The European Central Bank (ECB), together with the national central banks of the Eurosystem, including the OeNB, is currently ­considering the launch of a digital euro. If the ECB decides to issue a digital euro, consumers in the euro area could be able to use the new digital currency as soon as in five years’ time. Safety is of utmost importance in this context. And indeed, a digital euro would be a safe currency. Even if a commercial bank may get in trouble in a crisis, nothing can happen to a digital currency that is backed by the Central Bank. Transparency and trust – these are values both the Wiener Börse and the OeNB have always subscribed to, and they will also be our guiding principles as we embark on the next 250 years. Thus, the two sister institutions will continue to crucially contribute to safeguarding the stability of Austria’s financial system.

Please see references on pages 96–97.

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250 years wiener boerse – our past

From the historic palais into the digital world

From the historic palais into the digital world

The first day of trading in Vienna was 2 September 1771. ­Since then, the Stock Exchange has evolved continuously from a ­state-owned marketplace to a modern information technology and ­service provider. Trading shifted from the floor to the digital ­network.

Today, it combines tradition and reliability with ­future-­forward ­thinking and speed.

Text: Peter Eigner Mini documentary is available at: wienerboerse.at/250

Palais Ferstel The Palais Ferstel was ­originally built as a bank and Stock Exchange Building in 1855.

The Vienna Stock Exchange was ­co-located here with the ­Oesterreichische Nationalbank.

Stock Exchange on Schottenring From 1877 to 1998, the ­Vienna Stock Exchange was ­domiciled on Schottenring. The ­magnificent trading floor of the building, designed by Theophil Hansen, was considered one of the most beautiful in the world.

Wallnerstrasse 8 Since the beginning of the 2000s, Wiener Börse AG has been located at the baroque Palais Caprara-Geymüller in the heart of Vienna.

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250 years wiener boerse – our past

From the historic palais into the digital world

Major historical locationsof of the the Vienna Stock Exchange Historical locations Vienna Stock Exchange

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The history of the Vienna Stock Exchange’s locations still holds some secrets and missing blanks as far as the early days are concerned.

The address Kohlmarkt 16 is often erroneously ­mentioned as the first more permanent site from 1771 to 1801. Before 1795, three houses with the conscription numbers 136, 137 and 138 were originally located there. The house standing on this site today was built by Franz Kupka in 1898.

In 1912, the pioneer of modern architecture, Adolf Loos, constructed the portal of the Manz bookshop. The Stock Exchange occupied the first floor. Today, a house built in 1875 is situated at

1877 1872

Historical Stock Exchange Building at the Schottenring

e as

Our walk takes us chronologically along the majority of detectable sites of the Vienna Stock Exchange. The focus is on the history of the Stock Exchange and Vienna as a financial centre, but it is also a walk through the history of the city of ­Vienna. We will meet great personalities, the architects of the Ringstrasse era and of the turn of the century; we will encounter the glamour and splendour of bygone Vienna, while also being

Initially, the Vienna Stock Exchange was ­leading an itinerant life. In 1761, the first (small) stock ­exchange was located at Kärntnerstrasse 23.

Before that, it was provisionally located at ­Bauernmarkt 11 (Seiterisches Haus) and in the Grosserisches Haus at Kohlmarkt 6.

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Johann Heinrich Geymüller (1754–1824) was also one of the co-founders of the Oesterreichische Nationalbank (OeNB), the Austrian Central Bank, in 1816. The Geymüller banking house supported the Empire during the Napoleonic Wars. In 1841, the private bank went bankrupt.

Nomadic existence in founding years

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Wiener Börse has been located in the Palais ­Caprara-Geymüller since the late 1990s. It ­gradually moved its offices to the new location between 1997 and 2002. The Palais was built in 1698 for Field Marshal General, Enea Silvio Count Caprara, and is amongst the oldest ­baroque ­buildings in Vienna. In 1798, the Palais was ­acquired by the Swiss private bankers, ­Johann Heinrich and Johann Jakob Geymüller, and ­became one of the centres of Viennese social life.

It was in this Palais that the Austrian writer, Franz Grillparzer met his eternal bride Kathi Fröhlich.

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Palais Caprara-Geymüller, Wallnerstrasse 8

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Wallnerstraße 8 Strauchgasse 3 and Wallnerstraße 8

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The establishment of a stock exchange in Vienna was initiated through a patent by Empress Maria Theresa in 1761; the first stock exchange ­probably only existed until 1762. The reason behind its foundation was financial hardship. Following the Seven Years’ War with Prussia, the Austrian state budget was in ruins. The Stock Exchange was supposed to “facilitate the replacement and ­conversion of old estate and government bonds, while helping to bring new ones to the market.”1 The official foundation date, however, was 1 August 1771. The Vienna Stock Exchange was established by patent as a compulsory stock exchange for the raising of capital by the State, based on the French model. The Stock Exchange Patent consisted of 30 paragraphs whose main features remained in force until 1854. Imbeciles, as they were called at the time, women, bankrupts and other delinquents were not allowed to enter the Stock Exchange. Trading was conducted in bonds, bills of exchange and foreign currencies.

In the early days, the Vienna Stock Exchange was primarily an institution for buyers and ­sellers of government bonds and, apart from that, it also functioned as a currency exchange. The first price list shows the prices of traded bonds; it included government debts, prices of the Wiener Stadt Banco, estate bonds and exchange rates. ­Stockbrokers – known as Sensale – ensured smooth trading. Stock market activity was soon dominated by wholesalers.

2002 1998

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Exploring the ­history of the Vienna Stock ­Exchange via a visit to its former locations.

confronted with some dark chapters of the city’s history, anti-Semitism and the Nazi era.

today

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Source: Franz Franz Baltzarek und Wiener Börse AG Source: Baltzarek and Wiener Börse AG

this address. All further sites of the Vienna Stock Exchange can be regarded as verified.

and all of Oppenheimer’s creditors, including the Frankfurt Stock Exchange, plunged into turmoil.

From 1801 to 1812, the Stock Exchange was located in the Gundelhof at Bauernmarkt 4.2 At the time, the Gundelhof was owned by ­Emperor ­Joseph II’s brother, Archduke F ­ erdinand d’Este. The courtyard of the building used to ­accommodate vending stalls and the goose market. At Bauernmarkt 2, there is now a building designed by Otto Thienemann and erected in 1880 for the Triestine insurance company, Assicurazioni Generali. Bauernmarkt 2a is a late-secessionist residential and commercial building.

In 1703, Austria’s first bank, the Banco del Giro, was founded as a reaction or way out, followed in 1706 by Wiener Stadt-Banco, the Vienna City Bank, which began issuing banknotes – known as Bancozettel – in the second half of the 18th century. In times of war, however, the state took direct control of the banknote issue. Initially a success, this paper money experiment ended in “state bankruptcy” during the Napoleonic Wars in 1811 and in a shake-up of the Viennese financial market. It was not until 1816, when the “­Privilegirte Oesterreichische National-Bank” was founded as a private joint-stock bank and granted the issuance monopoly in 1817 that the financial and monetary system calmed down.

The Oppenheimersche Haus stands opposite, at Bauernmarkt 1. Samuel Oppenheimer was a Jewish court factor and the most important money lender of Emperor Leopold I. After the expulsion of the Jews in 1670, Oppenheimer was ­allegedly the only Jew to be granted the right to settle in the city and to build a residence in the heart of Vienna. Around 1700, riots broke out and the ­Oppenheimersche Haus was looted. Following the outbreak of the War of the Spanish ­Succession in 1701, the Austrian State was on the verge of ­bankruptcy and became heavily indebted to Oppenheimer (with an amount of 6 million florins).

After Oppenheimer’s death in 1703, the State ­ordered bankruptcy against the estate; partial ­repayment of state debt dragged on for years

The years 1771 to 1854 can be described as the period of compulsory state stock exchange3.

The Stock Exchange mainly took over state functions, and borrowings by the state from anonymous lenders replaced personal loans.

Debt ­securities received a uniform nominal value, uniform ­denomination and full transferability. The Stock Exchange served as the sole buying and selling point for state securities with a compulsory ­function; bucket shops – known as Winkelbörsen – were prohibited. At the same time, the Stock Exchange also determined the value ratio between

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250 years wiener boerse – our past

From the historic palais into the digital world

r­ estaurant, Zu den 3 Husaren. In 1938, the building was sold to Zentral­sparkasse, the Central Savings Bank, and “forcibly ­Aryanised”. In 1951, the shop on Kärntnerstrasse was restored to the bank, but not the rest of the property.

From 1841 to 1843, the Vienna Stock Exchange moved temporarily for two years (due to the ­reconstruction of the building on Weihburggasse) to the Palais Ulfeld, better known as Dietrichsteinpalais, at Minoritenplatz 3. After reconstruction work in 1807, the Palais took its present shape and is now part of the Federal Chancellery. From 1853, it was owned by the Dietrichstein family and since 1955, it has been the property of the ­Austrian Republic.

Palais Ferstel – the Vienna Stock Exchange trading floor

30

paper money, issued since 1762, and coins; bills of exchange were traded only incidentally and there was no commodity exchange. Economic life was dominated by wholesalers conducting the banking and stock exchange business. When ­Bancozettel increasingly lost in value compared to coins, bucket brokerage and bucket shops began to proliferate.4 In 1810/11, the Stock Exchange was regulated against the backdrop of “state bankruptcy” and the devaluation of paper ­money. In 1818, the OeNB was the first jointstock ­company to be listed on the Vienna Stock ­Exchange.

From 1812 to 1841 and from 1843 to 1855, the Stock Exchange was located at Weihburggasse 4, in the Colloredosche Haus or Pereirapalais.5 The building belonged to private banker and industrial magnate Ludwig Freiherr von Pereira-Arnstein. ­Together with Bernhard Freiherr von Eskeles, he was a public shareholder and partner of the Arnstein & Eskeles banking house from 1834. In 1841, a new building was constructed by Ludwig Foerster. From 1876, the house belonged to the Triestine Insurance Company, Riunione ­Adriatica di Sicurtà.

In 1921, it was acquired by Ella ­Zirner-Zwieback, who ran Ludwig Zwieback & ­Bruder, a clothing shop for high-end clientele in the adjoining building at the corner of Kärntnerstrasse 11/15 and Weihburggasse 2. From the 1930s, the premises accommodated the famous and exclusive

Between 1843 and 1855, the Stock Exchange ­returned to Weihburggasse 4 and moved into a new building. In the revolutionary year of 1848, the seat of the Stock Exchange was ­temporarily ­located in the Imperial Armoury (Renngasse 5–9); the address Herrengasse 17/corner ­Bankgasse 1 is also mentioned. In this building, newly ­constructed from 1819 to 1824, the OeNB had been domiciled since 1823 (previously ­Singerstrasse 17–19).

During the Vormärz period (also called The Age of Metternich, which describes the period ­preceding the 1848 March Revolution that was ­characterised by political uprising), mainly traffic and transport companies were listed on the Vienna Stock ­Exchange: the Nordbahngesellschaft and the DDSG in 1842, the Wien-Gloggnitzer Bahn and the shipping company, ­Österreichischer Lloyd, in 1843. The securities market of the Stock Exchange was dominated by large ­government bonds granted by private bankers, such as ­Rothschild, Sina, Stametz, etc. Salomon ­Rothschild alone is said to have procured over 200 million florins for the Metternich regime. The Stock Exchange was still facing competition from some bucket shops. However, the Vormärz period also saw major bank failures, usually associated with share price collapses. The great era of private bankers seemed to be gradually coming to an end; the future was to belong to joint-stock banks that were increasingly being established from the 1850s onwards.

During the Vormärz period and beyond, ideas and projects to erect a separate stock exchange building repeatedly emerged in connection with city expansion plans. Even at the time of the construction of the first building that was ­exclusively

Peter Eigner

used as bank and exchange building, the Stock Exchange may have been forced to wander ­elsewhere. In 1855, the Stock Exchange was ­located in the Traunsche Häuser (Herrengasse 14) for a year and, in 1856, once again (as in 1848) at Renngasse 5.

Palais Ferstel, Herrengasse 14

This slightly overlaps with the period from 1855 to 1872, usually found in the literature, when the Stock Exchange was located at Herrengasse 14/ Strauchgasse 2–4/Freyung 2, today known as Ferstel-Palais. There are also indications that the Stock Exchange did not start operations in the new building until 1860 or 1861.6 This would mean there was a gap between the years 1856 and 1860. The Central Bank and Stock Exchange ­Building, constructed by Heinrich Ferstel from 1855 to 1860, enclosed the Hardeggpalais and had a shopping arcade and a passageway.

The Austrian Central Bank, from 1878, Austro-­ Hungarian Bank (until 1922, then Oesterreichische Nationalbank, or OeNB) moved into its new ­building on today’s Otto-Wagner-Platz in 1925.

The construction project, however, was ­probably not very far-sighted. As early as 1861 (by 1860, the structure of stock market financing had changed, and the State had completely withdrawn ­financially), a request was made to the Emperor to erect a separate building. Prior to the ­completion of the Stock Exchange Building constructed by Theophil Hansen, the Vienna Stock Exchange moved into a provisional building.

The location of the temporary building, which took over the function of the Stock Exchange from 1872 until 1877, was at Schottenring 19

(to 25). This provisional Stock Exchange Building was erected by the Allgemeine ­Oesterreichische ­Baugesellschaft (now PORR AG) as a timber frame building, whose interior, in particular, did not bear any ­characteristic features. This is where the Black ­Friday took place on 9 May 1873, the stock market crash that put an end to the (speculative) boom of the Gründerzeit, the period of promoterism.

In 1854/55, the first step towards stock ­exchange autonomy was taken with the establishment of the Chamber of the Vienna Stock Exchange. The Exchange withdrew from its original ­function and task as an intermediary for state loans and ­developed into a genuine stock ­exchange. The foundation of the Credit-Anstalt für ­Handel und Gewerbe (CA) in 1855, in turn, marks the ­beginning of the universal banking system that was characterised by banks ­conducting shortand long-term banking business, ­issuance and ­foundation business, securities and ­commodities trading, and engaging in securities ­turnover. ­Austrian banks also had large industrial share­ holdings. The liberal era saw a retreat of the state, which was reflected in the sale of railways as well as in an upswing of the private sector and the foundation of joint-stock companies; less ­important still were land loans (mortgage bonds).

In 1863, the Suez Canal Company was the first foreign company to be listed on the Stock ­Exchange. The Gründerzeit years from 1867 until 1873 saw a stock market boom that was heavily based on speculation and lasted until the stock market crash on 9 May 1873. Half of the jointstock companies disappeared from the stock exchange list. The companies, PORR AG and Wienerberger AG, both converted into ­joint-stock

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250 years wiener boerse – our past

From the historic palais into the digital world

Schottenring 16 – the historic Vienna Stock Exchange on Schottenring by architect Theophil Hansen

First dedicated Stock Exchange Building, Schottenring 16

In 1877, the Stock Exchange moved into the new magnificent building constructed between 1873 and 1877 in the (Neo-)Renaissance style by the contemporary and fashionable Ringstrasse ­architect Theophil Hansen, with the assistance of Carl Tietz. The Stock Exchange stayed in the historic Stock Exchange Building at Schottenring 16 or Börseplatz 2 from 1877 to 1998.7 Its trading floor, with the impressive dimensions of 59 x 26 metres, was considered to be one of the most beautiful in the world. From 1914 (until 1919) and from 1938 (until 1949), respectively, the Stock Exchange was closed due to the World Wars. A bomb hit in 1945 and a major fire in 1956 severely destroyed parts of the Stock Exchange Building (including the trading floor); only fragments of the building were reconstructed while the façade remained unchanged. After the blaze, trading

sessions moved to the hall of the Commodities Exchange (Taborstrasse 10) and in late 1959, the Stock Exchange reopened. After the relocation to the new premises, the Stock Exchange Building on Schottenring has been referred to as the Old Stock Exchange.

In the early 1920s, the stock market was booming, fuelled by the inflationary economy and fed by the nouveau riche who seemed to demonstrate how easily and quickly wealth could be ­accumulated.

The practices of issuing syndicates became common, where members purchased new issues at 40 to 50 per cent below the stock market price, reselling them on the exchange at a profit.

The bull market lasted until 1924, but speculations against the French franc and a ­subsequent bear market put an end to all euphoria. The time of ­spectacular bank failures started with the collapse of the ­Depositenbank in 1924, ending with the Credit-­Anstalt crash in 1931, which was accompanied by a shrinking stock market. In the 1930s, the banks that had survived after a radical concentration process lost most of their remaining holdings in the successor states. Not least after the ­collapse of Credit-Anstalt in 1931, Vienna had lost its ­international importance as a financial centre it had previously possessed, if only to a limited ­extent. The end of the Habsburg monarchy also had a significant impact on the status of the ­Vienna Stock Exchange; its position

as an international financial market for Central and Southeastern Europe had been lost, or at least weakened.8 In the other successor states of the former Habsburg Monarchy, separate securities exchanges, often modelled on the Vienna Stock Exchange, were established whose competition was being felt by Vienna. But even after 1918, the Vienna Stock Exchange remained an important complement to the national securities markets.

Out of 205 shares traded in 1937, 75 were still of old Austrian provenance and were therefore ­classified as foreign from this point onwards.

© Wiener Börse AG, Peter Eigner

companies in 1869, rank among the oldest ­surviving listings on the Vienna Stock Exchange. In 1873, the Italian bond was the first official foreign listing on the Vienna market. The stock market crash put an end to the liberal economic climate.

The Stock Exchange itself suffered badly from the aftermath of the crash. It was discredited and there was also a rise in anti-Semitism. The Stock Exchange and Jewishness were seen by many people as being synonymous.

© iStock

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Wallnerstrasse 8 – the Vienna Stock Exchange is headquartered in the heart of Vienna with a view over the historical Palais Ferstel.

The Anschluss resulted in a serious rupture. The Stock Exchange was closed as early as 12 March 1938 (reopening at the end of October 1938).

In April 1938, all “Jewish banking transactions” were placed under the provisional administration of the Giro- und Cassen-Verein, and as of July, Jews were no longer allowed to enter the Stock Exchange. The Vienna Stock Exchange lost its ­independence and was subordinated to the ­German Stock Exchange Act in 1938/39.

Just before the end of the war, on 4 April 1945, the Vienna Stock Exchange was closed. Official trading was only resumed at the end of 1948 after the restoration of the Stock Exchange’s full autonomy through the Stock Exchange Transition Act of 8 July 1948. The following year, in 1949, the first federal bond was issued after the war, known as Aufbauanleihe. While the bond market soon

showed signs of recovery, the stock market was curtailed, in particular, by the nationalisation of major sections of large-scale industry.

Today’s headquarters of the Vienna Stock Exchange at Wallnerstrasse 8

In 1997, the Chamber of the Vienna Stock ­Exchange merged with the Austrian Futures and Options ­Exchange to form Wiener Börse AG, and in ­January 1998, it moved to the premises of the Oesterreichische Kontrollbank in Strauchgasse 1–3 and Wallnerstrasse 8. The building at Strauchgasse 1–3, known as Montenuovo Palace, was built in 1851 for Prince Montenuovo. From 1871, it ­belonged to Anglobank, which turned it into a bank palace. It was later converted into an office and commercial building by Credit-­Anstalt.

From 2002 until today, the seat of the Vienna Stock ­Exchange has been located on Wallnerstrasse.

Please see references on pages 96–97.

Peter Eigner is a professor at the Department of Economic and Social History of the University of Vienna. His main research focus is on the economic development of the Habsburg Monarchy.

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250 years wiener boerse – our past

From the historic palais into the digital world

“Today, thousands of exchange ­transactions can be made in a few ­seconds.”

Heike Arbter counts amongst the first registered female ­traders on the Vienna Stock Exchange. She worked on the digital ­transformation process in trading and built up the structured ­products ­business from scratch. Over the more than 30 years she has worked as a securities expert, she has made a significant ­contribution to the ­development of the Austrian capital market.

Her wealth of experience gives her a unique understanding of the ­technological evolution of the stock market. Here she looks back over the many changes that have occurred during her career.

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Can you describe the start of your ­career as a trader?

When I started as a market maker in 1991, it was a very exciting time of innovation and change in stock exchange trading. Stockbrokers (known as Sensale) and traders were still coming to the Vienna Stock Exchange in person to build prices, and to trade equities and other securities. At that time, the ÖTOB (Österreichische Termin- und Optionenbörse) was founded and I was one of the first market makers for equity options.

Heike Arbter

How has technology changed stock trading? © Raiffeisen Centrobank

is a member of the ­Management Board of Raiffeisen ­Centrobank AG. She holds a seat on the ­supervisory body of the ­Stuttgart Stock ­Exchange and is Vice President of ­Arbitration of the Vienna Stock Exchange. Furthermore, she is ­President of the European Structured ­Investment Products ­Association EUSIPA.

The digitalisation of pricing and trading has now come into effect and today it is not possible to imagine being able to execute orders or trade without a powerful high-tech set-up. A revolution in terms of quoting and execution speed and capabilities has taken place. There is continuous innovation and development in trading systems

when it comes to speed and efficiency. It is no longer necessary for traders to come to a stock exchange in person. Everything is computer-based or even based on algorithmic trading. The number of matched trades has increased ­exponentially, which would certainly no longer be possible through in-person interaction. Traders sit on the trading floors of banks and observe the markets on various screens. The pricing and matching is a highly automated process which happens ­within milliseconds. That is best practice all around the world.

What are the most important values of a stock exchange in your view?

Regardless of the technical processes, the core v­ alues of a stock exchange are definitely ­transparency and clear trading rules for all market participants on how prices are quoted and orders executed.

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Spotlight – our present

“ We all have a ­responsibility to act and use our ­unique capabilities to ­address the needs of the world.

37

Rich Lesser

The Vienna Stock Exchange has worked diligently to build a b ­ righter future through a forward-looking perspective and ­commitment to the sustainable development of the Austrian and Central European economy. This past year has been challenging as we faced a ­public health and economic crisis. It is more important than ever that we understand and elevate purpose. Purpose gives us the focus, ­clarity, alignment and meaning necessary to increase stability and reduce fear. It allows us all to see past current crises and to plan for a stronger future.

© Boston Consulting Group

has served as CEO of Boston Consulting Group (BCG) from 2013 to 2021. He is also Chief Advisor to the World ­Economic Forum’s Alliance of CEO Climate Leaders, on the board of directors of the Business Roundtable where he leads the CEO COVID-19 recovery task force, and a member of several leading organisations, such as the WEF’s International ­Business Council.

Improving TSI (total societal impact) along with financial ­performance will be essential to survive and thrive through the ­uncertainties of this decade and the next 250 years. Publicly listed companies and marketplaces like the Vienna Stock Exchange play a critical role in society and advancing this commitment to ESG principles. Increased transparency and the creation of total societal impact to create a virtual circle is what yields consistent benefits.

”

Voices from the capital market

Vienna skyline UNIQA Tower, a Vienna ­landmark situated on the Danube Canal, was illuminated to mark the 250th anniversary of the Vienna Stock Exchange.

More than 160,000 twinkling LED lights represent a spirit of optimism for the next 250 years.

Voices from the capital market

© Wiener Börse AG / Nik Pichler

The success story of the Vienna Stock Exchange and those of the listed companies are closely linked. Access to a strong capital ­market is crucial for financing sustainable growth and innovation in the future. Numerous congratulatory messages on the occasion of the 250th anniversary are presented on the following pages. ­Representatives from Austrian enterprises, long-standing partners and important players sum up the importance of public markets.

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250 years wiener boerse – our present

Voices from the capital market

“The stability of the ­Austrian economy has been ensured by the Vienna Stock Exchange for 250 years.”

“The Vienna Stock Exchange and Erste Group, as its shareholder, ­market maker and issuer, build bridges between the real economy and the capital market together.”

Stefan Dörfler CFO, Erste Group Bank AG

Heimo Scheuch CEO, Wienerberger AG

“The Vienna Stock Exchange has been an ­important partner for VERBUND as we set about ­becoming Austria’s leading energy company. ­Today, we are setting new benchmarks in the area of sustainable energy generation, secure energy supply, green hydrogen and green finance.”

“A strong equity capital basis is ­crucial for innovation and therefore for the continuing success of ­Austria’s companies and our ­country’s ­economy.”

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Georg Knill President of The Federation of Austrian Industries

“We have written a success story that would have been very difficult to achieve without ­capital market access.”

Franz Gasselsberger CEO, Oberbank AG

© Erste Bank / Daniela Beranek, www.christianjungwirth.com, AMAG Austria Metall AG, STRABAG

Jim Rogers US investor & best-selling author

“The IPO enabled AMAG to ­create the most modern ­aluminum rolling mill in Europe.”

© Wienerberger AG / Elke Mayr, IV / Alexander Müller, Jim Rogers, Oberbank AG

“In the 1980s, the Austrian stock market was ready to be revived.”

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Michael Strugl CEO, VERBUND AG

Gerald Mayer CEO, AMAG Austria Metall AG

“Without the IPO in 2007, STRABAG would not be the company it is today.”

Thomas Birtel CEO, STRABAG SE

250 years wiener boerse – our present

Voices from the capital market

“The Vienna Stock Exchange has made it possible to finance and successfully implement our ­expansion strategy through capital ­increases.”

“We are very proud of our 20 years being listed on the Vienna Stock Exchange, which was also a ­major cornerstone of our international expansion.”

Norbert Nettesheim CFO, ANDRITZ AG

“Austrian Post is proud to have been part of the Vienna Stock Exchange ­family since 2006.”

Elisabeth Stadler CEO, Vienna Insurance Group AG

“After its foundation by Empress Maria Theresa and having gone through turbulent times, listed companies have found their way back to the markets of Central and Eastern Europe following the fall of the Iron Curtain.”

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Georg Pölzl CEO, Österreichische Post AG

“S IMMO appeals to ­politicians to strengthen financial literacy.”

Friedrich Mostböck, CEFA President of ÖVFA

Stefan Szyszkowitz CEO, EVN AG

© Andritz AG, Österreichische Post AG, Andreas Jakwerth, ICMA, Palfinger AG

Alfred Felder CEO, Zumtobel Group AG

“Since EVN’s initial listing in 1989, the Vienna Stock Exchange has ­provided valuable ­international capital ­market ­access for our ­company. We are ­convinced that this ­professional and ­reliable ­partnership will also help us ­withstand the ­challenges of ­transitioning to ­sustainable energy.”

© Ian Ehm, Erste Bank, Zumtobel Group AG, severin wurnig / studio totale

“The Zumtobel Group ­appreciates the Vienna Stock Exchange as a partner and ­provider of an essential and state-of-the-art i­ nfrastructure that establishes important framework conditions for the further development of our ­economy.”

Bruno Ettenauer CEO, S IMMO AG

“It is a true landmark to ­celebrate 250 years in the market. ­Congratulations to the Vienna Stock ­Exchange, one of the most important listing hubs in Europe!”

Bryan Pascoe Chief Executive, International Capital Market Association

“Our country’s stock exchange plays an important role for us and many other Austrian industrial and ­infrastructure companies in terms of future growth in Austria as a business location. ” Andreas Klauser CEO, Palfinger AG

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250 years wiener boerse – our present

Voices from the capital market

“Without the ­Vienna Stock Exchange, many success stories in ­Austria would not have been written.”

“An excellently positioned Vienna Stock Exchange is an essential precondition for domestic companies, enabling them to quickly access fresh capital and for investors to take advantage of interesting investment opportunities.”

Dieter Hengl CEO, Schoellerbank AG, Head of Wealth Management Austria, UniCredit Bank Austria AG

Johann Strobl CEO, Raiffeisen Bank International AG

“voestalpine’s listing in ­October 1995 paved the way for our successful growth strategy to become a global steel and technology group.”

“The Vienna Stock Exchange serves as a functional platform, bringing ­together the interests of investors with the ­interests of companies who are ready to take the capital and ­invest it into a prosperous, bright and positive future.”

44

Andreas Brandstetter CEO, UNIQA Insurance Group AG

“Since 1987, CA Immo has been ­listed on the Vienna Stock ­Exchange, which has ­accompanied us on our way to becoming a ­European player and enabled our steady growth.”

“UBM’s ­competitive ­advantage is the stock listing in ­Vienna.”

Thomas G. Winkler CEO, UBM Development AG

© David Sailer, UNIQA, CA Immo, Philipp Horak

Andreas Quint CEO, CA Immobilien Anlagen AG

© UniCredit Bank Austria AG, voestalpine AG, Österreichische Post AG, Rosenbauer AG

Herbert Eibensteiner CEO, voestalpine AG

“The Vienna Stock Exchange is the Austrian IROs preferred platform for international ­investor ­conferences in financial centres ­worldwide.”

Harald Hagenauer President of CIRA – Cercle Investor Relations Austria

“With the IPO in 1994, we used the ­proceeds to finance our entry into the US market and added aerial rescue to our product portfolio. We are now a ­full-range supplier and the world’s ­leading manufacturer of firetrucks.”

Sebastian Wolf CFO, Rosenbauer International AG

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250 years wiener boerse – our present

Voices from the capital market

“FACC values the Vienna Stock Exchange as a powerful ­partner and important link to the ­international capital markets.”

“The IPO on the Vienna Stock Exchange 30 years ago was a decisive milestone on AGRANA’s path to success and international expansion.”

Markus Mühleisen CEO, AGRANA Beteiligungs-AG

Robert Machtlinger CEO, FACC AG

“As VIG is the best rated ­company in the ATX, the VIG share has been a fixed component on the Vienna Stock Exchange since 2005 and represents the highest liquidity and reliability.”

“As in racing, nothing would run here without innovation.”

Ferdinand Habsburg-Lothringen Descendant of Empress Maria ­Theresa and Austrian racing car driver

Liane Hirner CFRO, Vienna Insurance Group AG

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“The Vienna Stock Exchange is a real gateway to new markets and stable growth.”

Peter M. Werth CEO, Wolftank-Adisa Holding AG

© FACC AG, Ian Ehm, Kurt Prinz, Wolftamk-Adisa Holding AG

Reinhard Florey CFO, OMV AG

© AGRANA Beteiligungs-AG, Flughafen Wien AG, Schoeller-Bleckmann Oilfield Equipment AG

“To make our economy emission neutral, we need a reliable financial marketplace, such as the Vienna Stock Exchange has been for the past 250 years.”

47

“The COVID-19 pandemic clearly shows that we won’t get far without aviation. A central transport and ­cargo hub is a crucial part of the supply infrastructure. Our partnership with the Vienna Stock Exchange is therefore of major importance.”

Günther Ofner CFO, Flughafen Wien AG

“One of my first decisions as new CEO was to bring ­Schoeller-Bleckmann back to the Vienna Stock Exchange and I never regretted that.”

Gerald Grohmann CEO, Schoeller-Bleckmann Oilfield Equipment AG

Becoming a global player through the Vienna Stock Exchange

Becoming a ­global player through the Vienna Stock ­Exchange

© Marinomed AG, Frequentis AG, Wienerberger AG / Elke Mayr, PORR AG / Astrid Knie

Having been listed continuously for over 150 years, PORR AG and Wienerberger AG are the oldest companies on the Vienna Stock Exchange today. Frequentis AG and Marinomed Biotech AG have been listed since 2019. This panel discussion takes a look at the key factors of being a public company and examines the kinds of experiences that have shaped their entrepreneurial journeys.

Norbert Haslacher

Eva Prieschl-Grassauer

is CEO of Frequentis AG. His goal is to expand the ­global ­position of the ­corporation, which is an international ­supplier of communication and information systems for control centres that deal with safety-­ critical tasks.

is one of the founders of ­Marinomed Biotech AG and has been CSO ever since.

The ­company researches and develops pioneering ­technology platforms that pave the way for innovative therapies to treat respiratory and ophthalmic conditions.

Heimo Scheuch

Karl-Heinz Strauss

is CEO of Wienerberger AG, a leading international supplier of building materials and infrastructure solutions, and the world’s largest producer of bricks. Heimo Scheuch is Chairman of the Supervisory Board of Wiener Börse AG.

is CEO of PORR AG. The company has been one of the leading full-service providers in the field of construction for more than 150 years. The service portfolio covers the entire ­spectrum of the building industry.

Interview: Esther Mitterstieler The complete interview is available in German at: wienerboerse.at/250

49

250 years wiener boerse – our present

HEIMO SCHEUCH Wienerberger AG looks back

50

on a long history at the Vienna Stock Exchange.

The step to go public was made in 1869. ­Having been a publicly listed company for more than 150 years therefore makes the corporation one of the oldest securities on the Vienna Stock ­Exchange. After the IPO, Wienerberger’s focus has been on Austria for more than 100 years. In the ­early 2000s, Wienerberger AG became a pure free float company: Its two major shareholders sold their shares on the stock exchange which made ­Wienerberger AG the only Austrian c ­ ompany to have all its shares publicly traded. With no controlling majority shareholder and the fact that most of our current shareholders are based in the ­Anglo-American region, Wienerberger AG is known for its unique market positioning and the way it manages its international operations. ­

“Having been listed on our home stock exchange for more than two years has allowed various financing options for our growth path and has brought us additional awareness and trust in Austria and ­internationally.”

Nobert Haslacher

NORBERT HASLACHER Frequentis AG

looks back on a somewhat different history than many other companies as it is a family business. The IPO presented itself as the ­optimal way to ­transform from an owner-led to a ­management-led company. Behind this stands a strong ­commitment by the owner family to continue developing the business in a sustainable way. The listing on the Vienna Stock Exchange was therefore the only logical and appropriate way forward. The access to the capital market offers an

additional financing option to debt capital, which we only embed to a manageable extent. Overall, we have high liquidity and, thanks to the IPO, a high equity ratio. Additionally, a stock market listing leads to increased national and international visibility, which is important to us as we have a 97 per cent export quota. Regulatory requirements and the dialogue with capital market participants and investors have made the company even more professional. A final important driver was the implementation of employee participation. Last year, a new corporate programme was launched, which enabled 460 colleagues – so every fourth employee – to become a shareholder.

KARL-HEINZ STRAUSS PORR AG has been

l­isted since its foundation. The company has ­always been a leader at the Vienna Stock ­Exchange. It is indeed the oldest listed company there and even gave out the first corporate bonds in Austria. In 1869, it was quoted at 200 florins and despite the natural ups and downs, the stock market helped to make PORR AG 150 years old with successful results. I see parallels to what Mr Haslacher said. You are the centre of attention, you are in the public eye, you are ­transparent.

These are all factors which a company must be mindful of to be successful. About ten years ago, we took a close look at the advantages of staying on the stock market and the decision to continue the listing was very clear. This has been ­especially evident in times when it was not as easy to gain access to funding through other means. ­Publicity and transparency have greatly contributed to ­professionalism and this makes up for the ­increased effort and cost. The discussion with stake­holders is different and much more ­transparent due to a stock exchange listing, which is some­thing that is good for the company.

EVA PRIESCHL-GRASSAUER With the listing on the stock exchange, we wanted to take a new step and bring equity capital into the company and thus strengthen its capital cover. We planned to ­implement new projects, which we might not have been able to do otherwise. For example, this year during the COVID-19 pandemic, we used the ­capital to initiate clinical trials to fight the virus. Even though we have only been on the stock ­market since 2019, the experience is pretty similar to the long-established companies.

Of course, being listed is more effort, but it was a very ­positive experience for us. The ­increased ­transparency obligations have also ­contributed to our ­professionalism and for us it was certainly the right step.

There is consensus on the importance of raising capital via the stock exchange as well as other benefits such as enhanced transparency criteria and increased visibility.

Now you are listed, what plans do you have for the future? Through your ­experience, can you make ­recommendations for younger ­companies in need of capital?

the challenge arose to get more capital into ­companies, but tools such as seed financing and venture financing hardly existed in Austria.

Today, at any rate, banks are needed in certain

EVA PRIESCHL-GRASSAUER The biotech s­ ector

© Wiener Börse AG

Why did your company decide to go public? Could you elaborate on the ­experiences you have had being a public company and provide your insights on what it is like being a listed company today?

Becoming a global player through the Vienna Stock Exchange

is probably a bit special as the risk in this area is high, the development cycles are long and many companies do not generate revenues for quite some time. This means it is a not very appealing field for highly conservative investors. On the other hand, the opportunities in the field of biotech are extremely large. For us, the listing was the end of the financing cycle because typically biotech companies start with seed financing. We found an investor relatively quickly, who is still supporting M ­ arinomed Biotech AG today. This is usually followed by venture capital financing, which we skipped as we moved towards the direction of the Stock Exchange swiftly. From our point of view, with the support of the Stock Exchange, lawyers and banks, this went optimally, despite the high effort and the many conversions. It has opened a lot of opportunities, such as the employee stock ownership programme that we implemented. This strongly binds our employees and makes them believe in the company. I would be happy if there were more companies from the technology sector at the Vienna Stock Exchange because I think that a listing is the right step.

KARL-HEINZ STRAUSS For a long time, debt capital took Austrian SMEs a long way. Then

“For PORR, the Vienna Stock Exchange has always been the gateway to the national and international capital markets, whether it was the initial ­listing in 1869, numerous issues of equity and debt capital or the future development of the ­company.”

Karl-Heinz Strauss

­ reas, but the options for raising capital are a now much ­broader, which I think is partly due to ­internationality. And I believe that the capital ­market is a ­suitable instrument for companies at any stage and that they could benefit from the ­advantages of the stock market, such as the ­openness and transparency. The stock exchange

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250 years wiener boerse – our present

Becoming a global player through the Vienna Stock Exchange

topic will become more and more important in the future because there is enough money in the world, but the important question ­centres on ­whether this money is going to the right places.

Following the exact regulations of the stock ­exchange, ­money can be well d ­ istributed. This also raises the ­question of financial ­education, which is far too weak in Austria. With more ­knowledge in this field, people would not ­immediately call for government intervention when share prices fall.

NORBERT HASLACHER Our customers are

“Looking ahead to post-pandemic times, the state would be well advised to activate private capital and put it on the stock market so that Austria’s economy can move uphill more quickly.”

Heimo Scheuch

the “hidden” in “hidden champion” and to continue to have an appetite in the M&A area. Even though we are ­currently very strongly positioned on the equity side, it is possible that additional capital will be raised via the stock market in the event of major M&As.

HEIMO SCHEUCH The Vienna Stock Exchange inspires trust and admiration due to the quality of its services and new initiatives in a challenging

Karl-Heinz Strauss and Eva Prieschl-Grassauer: The experi­ences of young and long-established companies on the Stock Exchange overlap.

Eva Prieschl-Grassauer

­ ompetitive environment. It provides the best c possible infrastructure for domestic companies, global investors and regional partners. Looking ahead to post-pandemic times, the state would be well advised to activate private capital and put it on the stock market so that Austria’s economy can move uphill more quickly. No other instrument ­simultaneously provides more financing, e ­ nhances the visibility of the company and ensures a sustain­ able professional corporate organisation like a listing on the stock exchange. With 100 per cent of the shares held in free float, Wienerberger AG is going to continue the transparent dialogue and will add value for shareholders through stable earnings growth.

when someone falls down is something that should be stopped.

NORBERT HASLACHER I also see the culture of failure as an issue. If you compare entrepreneurs in the US who immediately try the next thing after failing to entrepreneurs from Europe who do not dare to try a second time because they are considered to have “failed”, then there really is a cultural difference. As a result, there is no need to be surprised about less entrepreneurship in Europe than in the US. I also believe that successful entrepreneurs could do a bit more to give young people a chance to implement their ideas. In our corporation, we have our own start-up centre for this purpose, which is privately financed and is intended to give young people the chance to implement their ideas in specially designated office space. You can not always rely on the state to provide the right opportunities for start-ups, so I believe that business and entrepreneurs can also contribute.

What measures are needed in Austria to strengthen entrepreneurship?

EVA PRIESCHL-GRASSAUER I see the fact that failure is seen as the end point in Europe as a ­problem. Especially in comparison with ­Anglo-Saxon cultures, differences become clear.

The second factor is education. There are few incentives in universities to lead students into business or too few training modules that would encourage technicians or scientists to found a start-up. I think you just must be allowed to dare to be bold. You have to be able to know that even if something goes wrong, you can get up again and keep going. So, this attitude of being ­pleased

HEIMO SCHEUCH Innovation is essential for

© Wiener Börse AG

52

­ ublic authorities that must operate national p security-critical infrastructures and in this ­segment reputation naturally plays a crucial role. The listing has certainly given us a boost in terms of ­international awareness. A stock market listing naturally creates confidence among customers, suppliers, employees and M&A targets. ­Since going ­public in 2019, we have acquired two European ­companies and just recently announced a US acquisition. The stock market listing has certainly contributed to this because it signals a certain international size and stability on the world market, which suppliers, partners and customers ­appreciate very much. With the help of the ­acquisitions, we have moved up into a new league. Now we see it as our priority to get rid of

growth, both for Wienerberger AG and the entire Austrian economy. Difficult market environments hinder growth, yet it is necessary to act entrepreneurially smart. By focusing on innovation, Wienerberger AG is able to achieve outstanding organic growth and a significant increase in dividend payments. Further financial targets are important, so there needs to be a clear commitment to value

creation. Furthermore, education in the financial field is necessary to strengthen public knowledge and to motivate young people to take risks with, for example, the founding of a company.

KARL-HEINZ STRAUSS I think a lot is already

happening in Austria on the part of entrepreneurs to support start-ups, for example. In my view, the state has nothing to do with entrepreneurship ­because entrepreneurship is about free will; something where you dare to do things. When you fail, people should not smirk at you; you should be reassured that next time everything will be fine.

This mentality needs to change. Young people should be funded and encouraged to try out their ideas. The COVID-19 pandemic is again a turning point in our history, where more opportunities arise than old threats remain. I am fundamentally ­optimistic that we will emerge stronger from the crisis with very clear goals and a focus on what we need now. This requires many new young ­companies because jobs are created there and those who have jobs can grow, consume and hopefully lead decent lives.

Esther Mitterstieler has worked as a journalist in Austria, Germany and Italy. Her experience includes newspapers, radio and TV. Currently, she works for the Austrian Broadcasting Corporation (ORF).

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From World Savings Day tbd to World Investment Day

From World ­Savings Day to World ­Investment Day­ In this interview with Christoph Kalbhenn from the daily ­Börsen-­Zeitung, Bernd Spalt and Christoph Boschan discuss the ­time-­honoured culture of conventional saving in German-­speaking countries and the dilemmas that have arisen from this. Bernd Spalt and Christoph Boschan firmly believe that the challenges of ­climate change and ageing societies can be better met through a strong capital market. This ­article considers the types of m ­ easures that could ignite the ­national economy and the role of political ­decision-makers.

Bernd Spalt is CEO of Erste Group Bank AG and Chair of Division Bank and Insurance Austrian Federal Economic Chamber. Since 1991, he has built his entire career within Erste Group and held multiple board-level positions in CEE and at holding company level. He earned a master’s degree in Law from the University of Vienna.

© Erste Bank / Wolfgang Zac, Wiener Börse AG

Christoph Boschan is CEO of Wiener Börse AG which operates the stock ­exchanges in Vienna and Prague. Previously, the former ­securities trader worked for several trading venues in Germany and focused on the topic of stock exchanges in his doctoral thesis.

Interview: Christopher Kalbhenn

55

250 years wiener boerse – our present

The Erste Group is more than 200 years old. Can you explain the kind of conditions the company was born into?

significance in general and for you in particular?

BERND SPALT The Erste Group grew out of

long history. It was started in Milan in 1924 by representatives from international savings banks.

Our organisation started to celebrate it for the first time in 1925. This is something that is very much at the core of our business model. It was about making people aware that they could safely and profitably put aside the little money they had available. World Savings Day experienced its heyday from the mid-1950s onwards. It has not been celebrated as extensively as it was then over recent decades. However, there has been a renaissance in economic and financial education in Austria, al­ though the subject of saving has not been supported or perceived in the same way that it was during the years of the economic miracle. Having said that, the idea of saving has under­gone a revival during the coronavirus pandemic. It was obviously not possible to spend much money at all due to the lockdowns. During this time of uncertainty people have tended to prioritise saving again. Now that we are coming out of the crisis when a lot of money was saved but no interest could be earned, both the public and private capital markets have been playing a critical role in helping people do something useful with their money.

What were the conditions like 250 years ago when the Vienna Stock ­Exchange was founded?

CHRISTOPH BOSCHAN The reasons ­behind

56

the founding of the Vienna Stock Exchange were similar to the founding of all other stock ­exchanges: the need for order and financing. The Exchange was founded after the Seven Years’ War, which had wreaked havoc both in a physical and financial sense. The Habsburg state coffers were empty, so the Vienna Stock Exchange was basically set up to trade state credit – or bonds, in other words.

When did stock trading begin in ­Vienna?

CHRISTOPH BOSCHAN The actual stock exchange system developed due to the industrial revolution that took place from the middle of the 19th century. New industries with large capital requirements started to emerge. This meant that individuals, banks and even states were no longer able to offer finance, so it had to be provided on a broader footing. This is when the Exchange started to gain in stature and grew to a remarkable size.

Its size naturally reflected the economic area that it was operating in. We need to remember that the Habsburg Empire was very large. The start of equity trading on the Vienna Stock Exchange ­coincided with this period in the mid-19th ­century. The first share to be listed was the Austrian National Bank (Oesterreichische Nationalbank, OeNB) in 1818.

The two oldest stocks that have been continually listed for 150 years belong to the companies PORR AG and Wienerberger AG – two brands that are well respected in Austria and around the world.

World Savings Day is coming up ­towards the end of October. What is its

BERND SPALT World Savings Day has a very

Bernd Spalt and Christoph Boschan agree that strengthening the capital market is a win-win situation for everyone.

How do things look like for ­capital market culture in Austria versus ­Germany? Has there been ­renewed ­interest in equities recently – ­especially among young people?

­ hristoph Boschan and I, along with many others, C are trying to make it clear to policymakers that a strong ­capital market is good because it encourages growth and new opportunities. We are in a ­situation where a lot of cash has been saved, while a great deal of growth needs to be financed.

Regulatory ­structures for venture fund capital laws need to be put in place so that private and institutional investors can invest in growth in Austria and in our region. The SICAV act will be the first step in the right direction.

BERND SPALT There are a few differences,

CHRISTOPH BOSCHAN There have ­definitely

but the similarities outweigh the differences, mainly in the way that the capital market is not very well understood. This is why I am pleased that at a recent conference our finance ­minister pledged to ­implement a SICAV act [similar to the one ­implemented in Luxembourg]. In ­Austria, the whole topic had become shaped by ­ideological and ­political thinking for a long time.

People had ­started to misunderstand the capital ­market and the stock market and ­regarded them as ­synonymous with evil speculation.

Financial ­literacy has become a real problem. I do not just mean financial literacy in schools but at all levels, including the policy-making side.

Our ­policy­makers need to understand exactly how it all works. We actually have a risk-averse and ­ideologically driven capital market culture in Austria, which significantly constrains our ­national economy. We all need to work on this.

© Wiener Börse AG

the Erste österreichische Spar-Casse which was founded in 1819. Its founding mission was to provide the “average person in the street” with the opportunity to set aside savings and accumulate assets. Our initial public offering (IPO) in 1997 then laid the foundations for realising this mission in the Central and Eastern European region as well. The Erste Group would not have been able to grow as much as it has without the IPO.

From World Savings Day to World Investment Day

been some positive developments. We have a ­clear perception and a growing awareness of ­returns on the investor side. We are also ­celebrating the ATX’s 30-year anniversary this year. It is interesting to note that people who have ­invested in the ATX Total Return from the ­beginning have notched up returns of over 600 per cent. Good investment returns are clear proof of the benefits of capital investment. The capital market plays an absolutely crucial role no matter which major issue we are talking about, whether it be retirement planning, the COVID-19 recovery, financial inclusion or wealth distribution.

This has slowly – and now visibly – worked its way into the political opinion-forming process. In Germany, we have recently seen this across the board in almost all the election programmes. In Austria, the government programme includes four pillars: first, the avoidance of regulatory gold ­plating or

any over-regulation beyond the European level; second, a financial education initiative; third, a strengthening of the second and third pillars of old-age provision; and the fourth and perhaps most important pillar, the introduction of a holding period, or tax exemption period, if you hold shares for a certain amount of time. Unfortunately, this has not been implemented yet, although there have recently been positive signs that implementation is imminent. I think this is exactly the right way to go because as I have already emphasised, the capital market plays a critical role in all major societal themes. After all, the state can only really take two alternative courses of action. It can either borrow more or raise taxes. Private capital should be activated to ease the burden on public finance.

BERND SPALT I would like to make a suggestion that would complement this. We have had many discussions and have also explained to politicians in detail what the problem is. We now need to do it together. I think that in terms of active design, ­progress has been disappointing so far. It would be a win-win situation for everyone which would unleash certain forces. We have not even talked about climate transformation yet, which will bring about major changes not only in the economy but in society in general. And this needs to be ­financed. We are now in the midst of tax reform, but we are not seeing a debate on how major investments are going to be financed. This simply cannot be done without the capital market.

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250 years wiener boerse – our present

even those relating to the security of ­pension funds and COVID-19 recovery, appear to be ­dwarfed by the key issue of innovation ­funding.

We are an ageing society. Austria is in the ­comfortable position of being 10 to 15 ­years ­behind Germany in terms of demographic ­development. Demographic meltdown will happen much sooner in Germany and we will therefore be able to see a blueprint for this. But we are ­seeking a kink in the demographic curve in Austria. There are only two possible paths to growth. You can either work more – though that is not going to happen. We are an ageing society. We will never again work more. Young people are demanding to work considerably fewer hours. There is only one other option and that is to do things ­differently.

If you do not want to work more, then we need to maintain our innovative strength. After all, ­financing innovation means equity financing.

Credit is only of limited help here. Maintaining our ability to innovate – as an economy poor in natural resources – is a key capital market issue.

58

“There are only two ­possible paths to growth. You can either work more or do things ­differently. That is called ­innovation.”

Christoph Boschan

How do you approach ESG issues?

BERND SPALT ESG is important on three levels

for a bank. The first is on a purely regulatory level. This means I need to be compliant; I have to ­create transparency; I have to ensure risk ­management takes climate risks into account, and I have to align my business management ­strategy with this. The second level relates to my own carbon footprint. I have to present my own plans on how to become climate neutral. The third and most important level concerns our core business. I have to ask myself how I should support the ­transformation toward our desired future – a green future which includes renewable energy.

This means equipping our core business for

t­ ransformation. However, this does not mean we should shut everything down that is not completely green. We need to consider how companies can get to where they need to be. Banks will play an extremely important role here because they can finance and support this change. This is the big issue we are dealing with, apart from all the green bonds, which are here to stay. The main question we need to ask ourselves is how are we going to get our economy and our core markets to move towards sustainability.

Bernd Spalt

CHRISTOPH BOSCHAN We are obviously

­affected as a company too. We are striving to operate as a carbon neutral company. We are a member of the Sustainable Stock Exchange Initiative and have naturally set up a green bond segment.

We have also been calculating the VÖNIX sustainability index for 15 years. This is not a new topic for us at all. However, I would like to raise a somewhat contentious point, namely that the capital market is now being talked about by the very people who did not actually want a capital market in the past. I am very surprised that people are now talking about the capital market and I am naturally very pleased that it is being seen as a potential lever. But I would strongly advise developing the capital market first. This would then ensure that it can ­serve as a lever. I would like to really emphasise this fact and say that this also applies to ­Germany: The EU taxonomy is coming as sure as night ­follows day.

Economies with developed capital markets will be able to take greater advantage of this. They will ­transform faster to create a ­carbon-free future; they will transform more ­sustainably and ­transformation will involve higher growth rates. You will be left behind if during this transformation ­process you do not have a developed capital market. This process has already begun and is now being cast into a set of rules. I would like to reiterate that the time has come to act.

Can you explain why the Central and Eastern European region is important to you? How have you positioned yourself in this region?

BERND SPALT In a nutshell, our core strategy

focuses on becoming the leading provider of retail and commercial banking in the eastern part of the European Union. This has been our goal since our IPO in 1997. We actually realised back then that this region would become Europe’s future growth engine – and this has proven to be the case.

The CEE region will continue to achieve a higher growth trajectory over the next twenty years than the rest of Europe. Even though it is important to stress that these countries are very different, they are all seeing highly dynamic economic growth and an enormous amount of pent-up demand.

This is helping our business model a great deal.

If you reduce banking to its essence, it is a ­leveraged play on local economies. This works very well in countries that can follow this type of growth trajectory. Our founding mission to create wealth for the region is working extremely well in all of these countries. This is part of our long-term strategy.

The IPO market has been quite strong.

How have things developed in the Austrian market this year?

How has the Vienna Stock Exchange positioned itself in the region?

CHRISTOPH BOSCHAN Unfortunately, the

for us when you look at our core businesses. We provide indices, consolidate the data from over ten markets in the region in a central data feed and we run the technical side of­­other exchanges, including our subsidiary in Prague, of course, as well as the exchanges in ­Budapest, Ljubljana and Zagreb. We do not just run the trading systems in these five ­markets but a lot of other IT services too. So, being firmly rooted in the region is part of our DNA. We are also opening up the markets to

­ arket has not seen large-scale activities this m year. There was a whole series of new stock ­market ­entries in the junior market. There were one or two capital increases and we have ­achieved a bond listing record this year with over 5,000 bonds. This has positioned the Exchange among the old market leaders in this area, namely Dublin, ­Luxembourg and Frankfurt. We even overtook Frankfurt in the MTF segment this spring.

CHRISTOPH BOSCHAN This region is crucial

© Christopher Kalbhenn

CHRISTOPH BOSCHAN Societal ­challenges,

From World Savings Day to World Investment Day

the west ­where there is the greatest willingness to pay. Our big ­clients include J.P. Morgan, ­Citigroup, BNP, ­SocGen etc. We are therefore trying to serve as a kind of hub. Our issuers also have a disproportionate amount of exposure in this growth region, that has twice the growth rate that we see in the west. If you are an investor looking for exposure in this area, Austrian issuers are the best option.

Would you therefore advise inter­ national investors to think about ­investing in the Austrian stock ­market?

CHRISTOPH BOSCHAN When building a

­ uropean portfolio, I would urge them not to E ­overlook this attractive market with its comparatively high dividend yield of 3.5 to 4 per cent. If you are ­currently looking for value with a diversified business model and an exceptional track record of delivering income in the form of dividends, you are in good hands in Austria.

BERND SPALT It needs to become more

­ idely known that investing on the Vienna Stock w ­Exchange means investing in a hub that is orientated towards the Eastern European growth engine.

It almost does not matter which stock you invest in, you are not just investing in the Austrian economy but also in the rapidly growing economies of ­Central and Eastern Europe.

Christopher Kalbhenn heads up the Stock Exchange and Capital Market Department at the German daily newspaper BörsenZeitung where he has worked since 1995.

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250 years wiener boerse – our present

Austria’s first unicorns: uplift for tech start-ups

Austria’s first unicorns: uplift for tech start-ups

A growing ecosystem is attracting international investment, though local funding sources are limited. For Austria’s venture capital and start-up ecosystem, 2021 has proved to be a landmark year: the emergence of the country’s first tech unicorns – companies valued at more than $1 billion – and many other sizeable fundraisings point to money and talent flowing into the country.

The Zebra describes companies which focus on sustainable prosperity.

They strive for profitability and try to improve society. Rather than focusing on competition, they foster a collaborative spirit.

For this reason, they are known as both black and white.

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The Unicorn is a fast-growing company ­valued more than $1 billion that has not yet undergone an initial public offering (IPO). ­Competition is usually the lifeblood of ­these companies, who triumph in attracting venture ­capital ­investors with impressive ­pitches.

The Bull refers to an investor who can benefit from an up-trend. A bull market features a ­generally positive investor sentiment, thriving economies and high employment levels. This is represented by the bull taking prices on its horns and throwing them up into the air.

© iStock, Shutterstock

© Patrick Münnich

Text: Kit Gillet Published in the Financial Times’ “Special Report – Vienna as a Financial Centre”, September 2021

250 years wiener boerse – our present

Since 2018, Austria has experienced a boom in venture capital backing for start-ups. In 2020, new businesses in the country took ­investments totalling €234 million, according to Florian Kandler, Editor-in-Chief of Startup Report Austria – ­almost three times the amount invested in 2016.

This ­year’s numbers are likely to surpass this ­significantly.

In August 2021, Vienna-based cryptocurrency ­trading platform Bitpanda announced that it had raised $263 million in Series C funding, at a valuation of $4.1 billion – more than triple its value in March.

It was the third sizeable fundraising announced in Vienna in less than a month. Refurbed, the leading marketplace for refurbished electronics in the German-speaking region, announced $54 million in Series B funding in early August, while logistics and warehousing platform Storebox raised €52 million in July. In March, online education ­platform GoStudent raised €205 million, at a ­valuation of €1.4 billion.

“We have been waiting for our first unicorns to come out, and this year we’ve had two with Bitpanda and GoStudent,” explains Oliver Holle, Co-Founder and Managing Partner at the Viennabased venture capital fund Speedinvest, which focuses on the seed stage of funding. For Oliver Holle, it is an indication of how quickly Austria’s

start-up scene is growing, with much of it based in Vienna.

“With these two, I think we have now arrived, and we have a handful of significant scale-ups that really create a fertile ground for everything to follow,” he says. “We have five to ten in Vienna that all have a couple of hundred people in their organisations.” But Austria’s start-up ecosystem still lags behind many of its European peers. Most of the money flowing into Austrian start-ups right now, especially for later-stage companies, comes from outside the country – highlighting the appeal of the country’s start-ups but also the lack of local funding options.

Eva Arh is a venture capital investor at 3VC partnering up with visionary European founders across the German-speaking region and CEE.

According to Nina Wöss, Chair of the Austrian Private Equity and Venture Capital ­Organisation (AVCO), 90 per cent of venture capital money invested in Austria over the past six months came from international investors and funds. Austriabased venture capital and private equity funds ­combined managed only around €600 million in assets. This was not always the case. According to Nina Wöss, around 15 years ago, there was quite an active venture capital and private equity scene in Austria, but the 2008 financial crisis knocked out most of the funds. “At one point, there were no venture funds left that were active and trusted by the community,” she says. Today, around eight are actively deploying money – a number that Nina Wöss describes as still “far too little”.

According to Speedinvest’s Oliver Holle, in some ways, the pandemic has helped to make initial contact between start-ups and venture capital funds easier, since most communication is now online. However, he points out that most of the money has been going to proven founders in more established start-up ecosystems, “which makes it more difficult for fringe ecosystems like Vienna”.

Even so, Oliver Holle envisages the start of a positive funding cycle in the country, with earlier founders beginning to invest in other, newer startups. “The Bitpanda founders are investing,” he notes. “The guys from the German neobank N26 are coming back to invest. That’s all positive.”

© Patrick Münnich

Oliver Holle is head of Speedinvest, the largest venture capitalist for start-ups in Austria.

While Speedinvest has been around for more than a decade, 3VC is part of a newer wave of venture capital funds that have set up in Austria in the past few years. “We started investing in January 2018, focused on the Series A stage because we saw there is Speedinvest doing seed deals, but there is basically nothing for follow-on rounds,” explains Eva Arh, a principal at 3VC. “Puzzle pieces are coming together and I see a lot more interest from funds from other countries looking at the Austrian ecosystem,” she adds. © Klaus Vyhnalek

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Austria’s first unicorns: uplift for tech start-ups

3VC, which raised $50 million for its first fund, is working on a second fund, which will be at least twice that size. Arh also views Austria as a gateway to Central and Eastern Europe: “I think we are

well positioned here to invest in those countries.”

For start-ups operating out of Vienna, the outlook is very different from only a few years ago. “When we started the company four years ago, there was basically no start-up scene,” explains Peter Windischhofer, Co-Founder and Chief Executive of Refurbed.

“There were a couple of bigger companies who maybe had a Series A round of a couple of million dollars. This year, there have been multiple rounds of $50 million or more, including ours. Of course, it is not at the level of Berlin or London, but it is going in the right direction,” he says.

Still, according to Peter Windischhofer, funding after seed rounds is hard to source in Austria without looking to international investors. “There’s a lack of capital across every stage, but everything beyond seed is extremely tricky to get capital from Austria,” he explains.

Nevertheless, he argues that is unlikely to hinder the growth of the ecosystem. “Of course, it would be beneficial to have these later stage funds in Austria, but it is not necessarily required,” he says.

“Even if you look at Germany, which is obviously a much bigger ecosystem, you also do not have these big growth funds that will fund a Series C or so on.”

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Spotlight – our future

“ The speed of change will increase.

Yuval Noah Harari

At the close of the twentieth century it appeared that the great ­ideological battle between fascism, communism and liberalism ­resulted in the overwhelming victory of liberalism. Democratic ­politics, human rights and free-market capitalism seemed destined to conquer the entire world. Humankind is losing faith in the liberal story, exactly when the merger of biotech and infotech confronts us with the biggest challenges humankind has ever encountered.

is an Israeli public intellectual, historian and a professor in the Department of History at the Hebrew University of Jerusalem.

He is the author of the popular science bestsellers Sapiens: A Brief History of Humankind (2014), Homo Deus: A Brief History of Tomorrow (2016), and 21 Lessons for the 21st Century (2018). His writings examine free will, consciousness, intelligence and happiness.

© Getty Images

Though the technological challenges are unprecedented and, though the political disagreements are intense, humankind can rise to the occasion if we keep our fears under control and are a bit more humble about our views. I believe liberal democracy is the most successful and most versatile political model humans have so far developed for dealing with the challenges of the modern world.

”

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Blockchain in the financial world – revolution or hype?

Blockchain in the ­financial world – revolution or hype?

Innovations and new technologies are largely financed via the ­capital market. But the financial market institutions themselves are also focusing heavily on new technologies. In this panel ­discussion, we delve into the latest technological developments and their ­potential areas of use in the financial world.

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Angelika Sommer-Hemetsberger

© OeKB / David Sailer, Mischa Nawrata, Brutkasten

is a Member of the Board of Executive Directors of Oesterreichische Kontrollbank AG (OeKB). She is also a Member of the ­Supervisory Board of Oesterreichische Entwicklungsbank AG as well as ­Deputy Chair of the Supervisory Board of Wiener Börse AG. She has ­decades of experience in capital markets infrastructure.

Stefan W. Schmitz

Alfred Taudes

is the Head of the Macro­ prudential Supervision Unit at Oesterreichische Nationalbank (OeNB). Key areas of interest ­include: the analysis, ­supervision and regulation of systemic risk, economic impact assessments of financial ­regulation, and monetary theory.

is Professor at the Department of Information Processing and Process Management at the Vienna University of ­Economics and Business, Scientific Director of the COMET Centre (K1), Austrian Blockchain Center (ABC) and Board Member of the Research Institute for ­Cryptoeconomics.

Text: Sara Grasel The complete interview is available in German at: wienerboerse.at/250

250 years wiener boerse – our future

Blockchain technology has been playing a key role for a number of years now. “It is something extraordinary,” the well-known digitalisation thought leader and best-selling author Don Tapscott said about blockchain in 2016. “A non-manipulable, non-hackable decentralised database of digital assets. It is a platform for truth and a platform for trust. The implications are huge, not just for ­finance, but for virtually every sector of ­society.”

Five years later, the great revolution is still a long way off, but the financial industry is already trying to determine whether blockchain can help it become faster, more efficient and more reliable in certain areas.

A secure environment for innovation

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“Blockchain technology is a technology that you can use but you do not have to,” ­emphasises Angelika Sommer-Hemetsberger, CEO of ­Oesterreichische Kontrollbank AG (OeKB). She ­explains that technology should never be a ­purpose in itself but must always create added value. The Austrian capital market has been trying to explore the added value opportunities provided by blockchain technology for several years. “The Austrian capital market is very secure and crisisresistant. That is why all players in the financial market can deal with new technologies,” explains Sommer-Hemetsberger, who is also Deputy Chair of the Supervisory Board of the Vienna Stock Exchange.

Blockchain projects in Austria

OeKB is one of the pioneers amongst the financial market institutions that deal with areas of

Angelika Sommer-Hemetsberger

­ pplication for blockchain. In 2018, the ­technology a was already used in live operations. “In the issuance of federal bonds, we have already used blockchain in a support process, namely in data authentication. That worked out so well that it is still used that way,” explains the OeKB Board Member. The goal of using blockchain in this case is to increase security.

With the help of blockchain-based ­authentication, the authenticity of the original document is ­guaranteed. An encryption process is used for this purpose to determine an unmistakable electronic fingerprint of documents, also known as hash ­value. This hash value can be clearly assigned to the original document, but conversely does not allow any conclusions to be drawn about ­specific data contents. “This means that the original document can be stored securely in OeKB’s data centres and the authenticity of the document can be guaranteed. The blockchain implementation enables OeKB to integrate another security layer based on blockchain in addition to the ­already existing high security standards,” Angelika ­Sommer-Hemetsberger explains.

From left to right: Sara Grasel, Alfred Taudes, Angelika Sommer-Hemetsberger and Stefan W. Schmitz discuss pilot projects and the effects of “Decentralised Finance”.

The institutions participating in DELPHI are the Oesterreichische Nationalbank (OeNB), the ­Oesterreichische Bundesfinanzierungs­ agentur (OeBFA), which manages Austria’s ­public debt, OeKB CSD GmbH, the subsidiary of ­Oesterreichische Kontrollbank AG which specialises in the central custody of securities, and the two major banks Erste Group Bank AG and Raiffeisen Bank International AG (RBI). The research project simulates how an Austrian federal bond can be issued and settled as a securities token on a blockchain. For this purpose, the OeNB will provide what is known as CBDC (Central Bank Digital Currency), i.e. a digital currency issued by a central bank.

In 2021, a new, very broad-based research project was launched in Austria that not only breaks new ground technically. The DELPHI project is about testing the issuance of federal bonds against the issuance of a digital euro. So, it is no longer just about a support process but about the issue itself.

“It is about finding out whether it is technically possible, what the legal framework has to look like and whether the whole thing is economically ­feasible,” Angelika Sommer-Hemetsberger ­concludes.

© Brutkasten

Blockchain in finance: Technology is not the challenge

Blockchain in the financial world – revolution or hype?

for example, can also increase the need for l­iquidity on ­exchanges – if they replace delayed ­net-­settlement systems by real time gross settlement systems. The former ­involve trading during the day, but the net ­positions are only settled and paid out in the evening: “Settlement in the evening is very cheap ­because the liquidity is not needed during the day.” However, if the transactions are settled in real time via the blockchain, you need much more liquidity during the day – which leads to higher costs.

In addition, the legal requirements for this type of solution will be investigated at both EU and national levels. DELPHI aims to identify where the existing legal framework may need to be changed to enable blockchain-based solutions such as those being tested in the project.

On the other hand, the stability of the­­system ­increases, which is a plus from the central ­bankers’ point of view. Central banks from all over the world already switched to real-time gross settlement (RTGS) in the 1990s, Stefan Schmitz explains. At that time, costs were cushioned by central banks offering market participants ­daylight overdrafts, i.e. comparatively uncomplicated short-term loans.

Experiments within the existing s ­ ystem

Decentralised finance: controversial paths in the financial sector

The Viennese economist Stefan Schmitz sees the future in projects like DELPHI: These kinds of projects experiment with business models and technologies within the existing financial ­system to increase its efficiency. However, not all ­applications that are currently being tested – by stock exchanges, for example – convince Stefan Schmitz. Blockchain-based systems,

While institutions like the OeNB and the OeKB are researching blockchain projects, an entire industry has already formed in the private sector around decentralised finance (DeFi). ­Decentralised ­finance works outside the traditional banking ­system.

“These are open protocols on which you can, for example, lock your cryptocurrencies for interest,” explains Alfred Taudes, Head of the ­Institute for

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250 years wiener boerse – our future

Around $90 billion are currently managed in DeFi systems. Systems that the economics ­professor finds interesting from a research ­perspective because they function quite differently than the ­traditional financial market. “Decentralised exchanges do not have an order book like a ­traditional ­exchange, but they have liquidity pools that stabilise prices through arbitrage. You can earn interest on that,” Alfred Taudes explains. Until then, you could only bet on price movements of cryptocurrencies. “You also have a new kind of governance.

That is very important. Such systems usually have their own governance tokens and a decentralised governance system. It is definitely appealing to come up with new ways to address fundamental problems in the financial sector,” he adds.

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“It is definitely appealing to come up with new ways to address fundamental problems in the financial sector.”

Alfred Taudes

But he does not think that the regulated financial sector needs to feel threatened in any way. As Stefan Schmitz points out, the global financial market is estimated at around $400 trillion – so the $90 billion in DeFi is comparatively negligible. To assess its growth potential, he suggests looking at the sustainability of business models rather than at the underlying technologies. A payment system is only sustainable when it is redeemable in the ­dominant currency at all times at a stable 1:1 ratio.

In the case of today’s banking system, this requirement is achieved but only due to a ­comprehensive governance system. The latter consists of regulation, supervision and a safety net, among other things. The requirement does not hold for bitcoin and many other digital means of payment.

Hence, their business models are not sustainable. ­Stablecoins aim at a 1:1 exchange rate. “However, they are actually banks without banking licenses, without capital or liquidity ­requirements, without supervision or a safety net. In my opinion, this is not a sustainable business model either.” Stefan

Schmitz also doubts the scalability of many DeFi business models. Many of them are just not very efficient because of their decentralised nature: “Of course, it is more expensive to run several decentralised books than just one.” In addition, many DeFi applications are not very user-friendly: “They only work for people with a high affinity for IT.” This limits the potential market size.

“A complex but very good system.”

In order to be able to scale blockchain-based solutions at all, regulation is needed. Angelika Sommer-Hemetsberger is also convinced. She considers it very important that only regulated players are involved in the DELPHI research ­project: “If such a solution is to be suitable for mass use, it must be regulated and these ­actors have ­experience with it.” Stefan Schmitz ­emphasises that investor protection also plays a central role: “The traditional financial system has created a complex but very good system when it comes to the question of who I give my money to and how they will then handle it.”

As an expert in macroprudential supervision, Stefan Schmitz also sees certain risks at the intersection of DeFi and the traditional financial system. DeFis access the financial ­infrastructure, such as the traditional payment system, through banks. “But a lot of those access points are not at the best addresses globally which ­poses a risk to stablecoin investors.” He therefore believes that governance risks and technological risks are also important. They pose a risk to banks as DeFis are not always top-in-class when it ­comes to ­compliance with Anti-Money-­ Laundering and Anti-Terror Financing regulations.

Many DeFi projects claim that their code would ­solve ­these ­challenges. However, Stefan Schmitz argued convincingly that code cannot act as a­­substitute for sound corporate ­governance and risk ­management; ­business models ­without sound ­corporate ­governance and rigorous risk ­management are not sustainable and are ­unlikely to be successful in a mass market. He ­concluded that delegation risk is prevalent in all DeFi ­applications – just like in ­traditional financial ­institutions. This suggests that a complete overhaul of the structure of the ­financial system due to DeFi is unrealistic. It is more likely that DeFis will be regulated like their traditional ­counterparts and converge together, which can lead to ­increased efficiencies within the ­traditional ­financial system.

Blockchain in settlement

For the exchanges, however, another question

Stefan W. Schmitz

arises: Does it make sense at all to use blockchain solutions for exchange trading – or is the ­technology simply too slow for that? The strengths of blockchains are security and transparency – but this comes at the expense of speed. “Stock exchange trading via blockchain would not be possible at the moment, if only in terms of speed,” explains Angelika Sommer-Hemetsberger. The sheer number of transactions that take place in the millisecond range would simply not work via the blockchain.

“Public blockchains like Bitcoin or Ethereum are slowed down on purpose,” explains ­economist Alfred Taudes. The energy-intensive proof-ofwork mechanism to validate ­transactions is ­necessary to map a consistent ledger: “­Otherwise, you have an incentive to cheat,” he explains. ­Ethereum plans to switch to a different ­validation ­mechanism, called proof of stake, which ­Alfred Taudes says in some respects has more ­similarities to approaches used by traditional banks.

But the problems of blockchains like Bitcoin and Ethereum are not necessarily relevant for ­traditional financial institutions anyway. According to Alfred Taudes, “The systems that the traditional financial sector uses are not open blockchains but private blockchains. There, it is known who runs the nodes and their number is limited.

© Brutkasten

Cryptoeconomics at the Vienna ­University of Economics and Business.

Blockchain in the financial world – revolution or hype?

These chains use a completely different protocol for security. Such systems would have a massively higher throughput and would also not consume as much energy. The planned blockchain solution for the digital euro can process 40,000 transactions per second. That is not high-frequency trading, but it is feasible for a payment system.” However, most blockchains in this context would not be

used for trading anyway – but for settlement, i.e. the fulfilment of an exchange transaction.

The Swiss Stock Exchange is currently ­developing a combined settlement and trading system based on blockchain, which should soon go into real use. The Australian Securities Exchange is ­implementing a blockchain-based settlement system. “There are many other ­experiments and projects,” Alfred Taudes explains. Things are also happening at the European level: As Alfred ­continues, “I recently wrote a paper together with the OeNB on what the European ­blockchain-based settlement system could look like.” The advantage of such a solution is speed and flexibility: “These systems can then trade ­relatively generic assets, not only traditional ­securities, but also crypto ­assets, for example, as soon as this is possible from a regulatory point of view.”

In Austria, an important digitalisation step in stock exchange trading was achieved this year with an amendment to the Custody Act. ­­­“A digital global certificate is now fully equivalent to a ­physical one for securities such as bonds or certificates. What does not yet work on this basis, however, are shares. Here, one would have to intervene intensively in company law,” Angelika ­Sommer-Hemetsberger explains. She would like to see a harmonisation of the relevant legal systems in the EU – because the technological challenge is ultimately not as great as the regulatory one.

Sara Grasel is a business journalist. She started her career at the daily newspaper Die Presse and is now Editor-in-Chief at the business information portal ­brutkasten.com.

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Predicting the future: uncertainty beyond crisis

Predicting the future: uncertainty beyond crisis Monika Rosen and Didier Sornette are thinking about risk all the time because they have to deal with it on a professional basis. ­While it is important to be aware of the threats and pitfalls in life, the world’s obsession with eradicating all risk is keeping people from pursuing opportunities, dreams and goals.

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Monika Rosen-Philipp is the Head of Research at UniCredit Bank Austria AG’s private banking unit. With over 20 years of experience, she has already managed investments amounting to €33 billion.

© UniCredit Bank Austria AG, Didier Sornette

Didier Sornette is a Professor on the Chair of Entrepreneurial Risks at the Swiss ­Federal Institute of Technology Zurich (ETH Zurich). His main ­research area is the analysis and prediction of extreme events in complex systems, especially in the field of financial markets, ­speculative bubbles and their collapse.

Text: Matthias Wabl The complete discussion is available at: wienerboerse.at/250

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250 years wiener boerse – our future

The risks of the stock market

Didier Sornette would say that the stock market should perfectly reflect all the views about the future from all investors. In a certain way, the levels of stock indices are the result of the ultimate crowd wisdom as people are well informed and well educated so they can make the right choices.

Looking at stock markets today as we get out of the COVID-19 pandemic, one would have to expect that most Austrians should be looking forward to a bright future. The worst of the health crisis is probably behind us and economists are forecasting strong economic growth in the second half of the year 2021.

Governments and central banks are making sure that the conditions for an economic pick-up are sustained. Unemployment is falling though not as fast as hoped. Inflation is somewhat accelerating, forcing central banks to walk on a tightrope, trying to figure out how to end the biggest monetary manoeuvre in history without doing any harm.

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China and the US are sending unfriendly ­messages to each other every week, jockeying for

s­ truggling to ramp up vaccine production quickly and make sure that supply chains are running smoothly.

Yet, scientists worked together to develop an ­effective vaccine less than a year after the ­pandemic started, and corporations and ­governments collaborated together to almost finish a vaccination campaign about half a year later. So, there are many reasons to believe that an investment in stocks and bonds should be part of everybody’s strategy to accumulate enough savings to live a financially free life. A life where your economic power allows you to make choices, buy the camera that you love or travel to the lake that you have always wanted to sail on.

However, Europeans are sitting on the sidelines, avoiding taking too much risk for fear of losing something. Americans, in contrast, would jump on most opportunities, benefiting from hundreds of years of experience that the explorer and the ­risk-taker will be rewarded with serendipity and learn to navigate uncharted territory. Where does this come from? The Europeans focus on a ­possible loss rather than what is to be gained.

There is no doubt that mistakes were made by governments as they were trying to ­battle the ­pandemic and even the biggest and ­best-­organised corporations in the world were

Didier Sornette

easier when you do not take risks and when you do not make mistakes. That has an impact on your financial life. When you do not want to make a mistake when investing your money, you often end up doing nothing for fear of making a wrong decision. Doing nothing in a zero-interest world is a guarantee that you lose wealth rather than gain financial freedom.

According to Didier Sornette, we need to teach all students that they immediately have to add the word “upside” when they think about risk. Others would just say that you should teach pupils and students that they should see “opportunities” or “calculated risks” when they think about their money and the stock market.

Monika Rosen-Philipp

economic and political leadership. Climate change and pollution are threatening the planet, and if that were not enough, there are hot and cold wars from Korea to Russia and the Ukraine, and people are fleeing from disasters and dictators.

Predicting the future: uncertainty beyond crisis

The pain in the brain is bigger when you lose something that you think already belonged to you. That is the same all over the world. The ­experience of two World Wars and the loss of almost ­everything still resonates among young generations even though they have no first-hand experience of what it means to lose everything.

Then there is a school system that still focuses on finding the mistake rather than the success.

Young people learn that your school life becomes

Or as ice hockey legend Wayne Gretzky answered when asked about his way to think about risk and reward on the ice rink: “You miss 100 per cent of the shots you do not take.”

The risks of wisdom and artificial ­stupidity

Didier Sornette states that we used to have w ­ isdom and now we have data. Meanwhile, wisdom was downgraded to knowledge and then knowledge was downgraded to information. Then information was downgraded to data. And with lots of data, there is lots of noise, so now we have data noise.

The question whether we can predict the future

has been a constant one ever since the human brain started to process information. While the Oracle of Delphi, palm reading or the ­Kabbalah are no longer the most trusted sources of ­deciphering tomorrow, predicting the future is still a big ­business, and whoever utters the words “artificial intelligence” is hoping go get invited to a ­presentation or a pitch with a significant mark-up on the price for his or her services.

There is no doubt that computers and the data processing capacity that comes along have ­improved the overall set of information that can be used to make informed decisions. Satellites and computers can track storms or fires around the world, allowing farmers to better protect their crops.

Closely monitoring your personal health ­parameters may help a computer to give you a warning signal at the right time, preventing a stroke or another serious illness. Using drones to track the activity of trucks or ships may help you to make a better investment decision and make money.

Google may help governments and health ­authorities to identify the coming influenza wave and prompt officials to send a warning message to all mobile phones in a particular geographic area.

All these applications are useful, but do humans

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250 years wiener boerse – our future

Predicting the future: uncertainty beyond crisis

want all that data? And are some algorithms also leading to artificial stupidity where data is only interpreted along hard rules without the necessary context?

The homo economicus, the person who makes decisions purely based on rational thoughts, died probably more than 20 years ago, and looking around you will realise that there will not be a resurrection any time soon. The number of single passengers in SUVs circling Vienna’s first district is rising fast, there is no need to scientifically track that number; opening your eyes is enough.

Didier Sornette

The baker charging twice as much for a croissant compared to an established quality baker next door prompts dozens of people to line up in front of the store.

That contradicts, to some extent, the approach of investment professionals who spend hours and weeks analysing data before deciding. Research analysts, experts and committees spend lots of time analysing before making a decision. The promise is often that decisions are based on data and scientific evidence, and while that helps, all decisions must be taken at some point.

In hindsight, the first or second thought may have been the right one, but the often false ­assumption that more data and more time mean better ­decisions stands in the way of making a decision at all.

Often, the result of data collection and feedback solicitation from various groups leads to delayed decisions that make things worse. Discussions with constitutional lawyers and consultations with judges during a pandemic are necessary, but if they mean that no decisions are taken at all, lives are at risk. It may be better to take the risk and make a decision that is only based on 80 per cent of the potentially available information and ­arguments.

In that respect and in Monika Rosen’s words, there is “an element of art” in any decision. The art of making a decision is an important life skill as life is full of decisions that are made with imperfect

Life in industrialised nations starts with ­parents who are – understandably – trying to keep all ­danger away from their children for fear of ­inflicting pain on them. Kids are shuttled from their home to the school door in a car. Kids are not allowed to spend time in the park just with their friends – without an adult who is monitoring their movements. Often, the result is an ambition to lead a risk-free life.

Monika Rosen and Didier Sornette talk about the risks of life.

Taking no risks also means that you are missing out on a number of opportunities and if you seek opportunities there is also a certain danger of experiencing harm. Monika Rosen would say that sometimes you “have to jump and the net will appear”.

information. The human brain is lazy to the extent that it is striving to remain in a static state without too many unexpected events.

That is reflected in a number of life choices. Many people prefer a secure government job over a position at a start-up. Many people prefer a ­vacation in a country where they can still order a dish they know from home. It is understandable: The human brain is processing lots of information, any opportunity to lower the number of decisions it has to make is welcome.

The human brain is designed to detect risks all the time and immediately spot the lion that is lurking behind a rock. That is good, but lions are gone, and while the modern lions may be cars on a busy street, it is exhausting to permanently look for cars even on a Sunday morning when the streets are empty.

The art of predicting the future lies in the ­acceptance that there is only one constant in life: Things will change. There will be risks and ­opportunities – losses and rewards. Preparing the brain for both will make it easier to deal with the unexpected things.

Didier Sornette argues that you need a “dynamic risk assessment” depending on the situation that you are in. There is no point trying to detect that brick when you are lying on a meadow in the park, it will exhaust your brain. There is a point though to constantly monitor when you drive along a winding coastal road on a motorbike, as Didier Sornette often does in the summer.

The risks of life

What does it do to your brain if you think and see risk the moment you get up in the morning or leave the house? How do you become an explorer or an adventurer in a world that is obsessed with avoiding risk and danger?

© Matthias Wabl

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So, is all the data and science useless as people rarely make rational decisions? Monika Rosen thinks that “sometimes there is a feeling that we overestimate data”. She says sometimes the right decision is to “go with the flow” and rely on your experience.

As he points out, there is an “illusion to eradicate all risk, and we really try to eradicate all risk.” But there can only be failure and frustration as it is

i­mpossible to do so. The challenge is to learn to deal with risk, reward and failure.

It makes a difference if you teach your children to avoid risks and failures at all costs. When the fear of losing or failing is larger than the prospect of glory or reward, nothing will happen, society will remain static. Do not try, do not fail. It is a ­question of generations not years, but also in Europe it is getting more common that people change careers, try different things, start all over after a failure or a mistake.

So whether it is regarding the stock market, the decision to buy a house, or the decision to start a conversation with a person that you find attractive or likeable, there is only one real option: Try, fail, fail better, try again, fail even better, try one more time, succeed.

Matthias Wabl had been working as a ­financial journalist at Bloomberg for 19 years.

He is Managing Partner of the management and communications ­consultancy Theseus in Vienna.

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Financing the industry of the future

Financing the industry of the future Equity is a booster for innovation and research. Companies that want to play a pioneering role in international competition need the capital market for financing. Where do our strengths and ­opportunities lie? What do companies need to thrive and support welfare? A panel discussion about innovation “made in Austria” and the European continent.

© Wiener©Börse TTTech Auto AG, Infineon Technologies Austria AG, AT&S Austria Technologie & Systemtechnik AG, Wiener Börse AG

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Georg Kopetz

Sabine Herlitschka

is CEO at TTTech Auto AG, an innovative Austrian company that designs highly automated driving solutions using space and aerospace technology.

A potential public or ­private ­offering could support its growth on a global scale.

was appointed CEO of Infineon Technologies Austria AG in 2014 and elected Vice President of the Federation of Austrian Industries in 2020. She is among Austria’s most experienced managers in biotechnology, research and development.

Andreas Gerstenmayer Christoph Boschan has been CEO of AT&S Austria Technologie & Systemtechnik AG for more than eleven years.

Under his leadership, the listed company evolved into a top global manufacturer of high-end printed circuit boards and IC substrates.

Moderator: Rainer Nowak The complete interview is available in German at: wienerboerse.at/250

is CEO of Wiener Börse AG which operates the stock ­exchanges in Vienna and Prague. Previously, the ­former ­securities trader worked for ­several trading venues in Germany and focused on the topic of stock exchanges in his doctoral thesis.

250 years wiener boerse – our future

Editor-in-Chief of Die Presse Rainer Nowak asks the ­expert p ­ anel to kick off the discussion with the ­question, “What is the current state of ­Austrian ­industry in the middle of the year of the ­COVID-19 ­pandemic?” Senior Manager S ­ abine ­Herlitschka compares the local industrial leaders to very fit athletes: “Due to their high focus on export, ­domestic industrial companies are strongly oriented towards global ­competition.

The ­crises of recent years have urged us to ­further ­increase ­productivity. Over the last 15 years, it has ­increased by 40 per cent.” ­Andreas Gerstenmayer shares this observation.

He ­explains that although the companies tend to be small- and medium-­sized by inter­national ­comparison, they are highly internationally ­focused. “In the ­respective ­industries, we are very well positioned on the world market with hidden champions,” Andreas Gerstenmayer, CEO of AT&S, adds.

Financing the industry of the future

wants to play in the international concert. Global success must be the goal, he emphasises.

“In the US and Asia, the purpose of growth is not questioned. In Europe, on the other hand, it is – and that slows things down,” Christoph Boschan, CEO of Wiener Börse, adds. “What’s worse, the de-growth movement in Europe does not even accept growth under the premise that it is carbon neutral. The mindset of mature, ageing European societies is programmed in such a way that we are quickly satisfied with what we have achieved. These are fundamental political ­attitudes that will have extreme consequences for the future development of our financial markets, our ­industrial landscape and our prosperity,” the Vienna Stock Exchange CEO argues, pleading for more ­economic education. “Basic economic ­literacy topics are currently completely being ­ignored in school education,” he criticises.

From left to right: Rainer Nowak (Die Presse) discussed European solutions on site with Christoph Boschan (Wiener Börse) and Georg Kopetz (TTTech Auto). Andreas Gerstenmayer (AT&S) and Sabine Herlitschka (Federation of Austrian Industries, Infineon Technologies Austria) joined the discussion online.

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problems, but do nothing to solve them,” Andreas Gerstenmayer states bluntly. That means we should change our attitude.

Europe is at a crossroads

The experts agree on the fact that Europe must consider what European industry stands for.

“To do this, we need to clearly define where our core strengths and technology fields lie,” Georg Kopetz points out. “Currently, we have too little d ­ ifferentiation in the technology landscape in Europe.” He believes wanting to play in all areas is the wrong strategy. A better approach would be to set priorities. According to Andreas ­Gerstenmayer, Europe’s strengths lie in the auto-

Sabine Herlitschka

Despite his company showing positive growth in the previous year, CEO Georg Kopetz thinks the pace in Austria and Europe is too slow. “Yes, industry recognised the crisis early on and ­reacted well, but sometimes the brakes were applied too tenaciously, where competitors from the US and Asia already had their feet back on the ­accelerator,” Georg Kopetz comments using in ­automotive analogy. In Austria, the focus should be more on the opportunities. “These ­opportunities are not in the regional market, but in the ­global market.” Here, he continues, the ­European ­economy must become more aware of the part it

Tomorrow’s workforce

Along with the educational issue goes the ­potential shortage of skilled labour. “The ­companies themselves are very active in enabling tomorrow’s innovation and are taking care to counteract a lack of know-how,” explains ­Sabine Herlitschka. “More should also happen here from the political side to show both young people and adults the highly ­attractive opportunities, ­especially in the technology sector.” Topics such as innovative strength, lack of skilled workers, etc. are not new and yet one has the feeling that too little is happening. Rainer Nowak wanted to know why. “We are world champions in identifying

© Ronald Rudolph

Concert of the big players

Andreas Gerstenmayer

motive industry and industrial electronics. Europe has automated and mobilised the world. But now we need to find out where the challenges and the technologies of the future are. As long as we do not get European answers to these questions, we are too slow.

Global networks

When discussing key technologies, Andreas Gerstenmayer sees challenges on two levels: “One is to identify the competitive applications and the other to focus on enabling technology.” In the case of digitalisation, this includes microelectronics, for example, and data management becomes more and more important. A common direction of the companies is crucial for the European path.

Kopetz could imagine that global networks are the solution. “Companies need to be connected with each other. There is not enough impetus coming from individual companies. Innovative networks are needed that also stand up to the US and Asia,” Georg Kopetz continues. Going it alone, ­companies do not stand a chance in the ­concert of the big players. The fact that cooperative ventures already exist in the core strength areas is cause for optimism.

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Financing the industry of the future

“Autonomous driving does not only apply to cars, ­planes and trains but also to ­agriculture, construction and refuse trucks. This is a huge opportunity for European ­engineering.”

Georg Kopetz

However, Georg Kopetz adds that it would take ­determination and courage to take the reins. ­“Europe has a solid technology base in the ­industrial tech segment, but Asia and the US are not asleep at the wheel. We need to be fast and gain core advantages. This can be achieved through good network organisation. Furthermore, if we can prove to other markets that Europeans are the best in this segment, they will buy from us.”

Financing the future

Equity is an essential factor in promoting ­research and innovation of domestic companies. The Vienna Stock Exchange can proudly call itself the home of Austrian industry. “The market ­capitalisation of industrial companies amounts to €55 billion. That is around 40 to 45 per cent of total market capitalisation. 12 billion is in the ­industrial tech sector,” explains C ­ hristoph

innovation financing is by definition venture capital financing and requires equity. “The ­government programme lists useful measures to promote the capital market, but these have not yet been implemented. These include, for example, tax ­benefits for investors who hold their ­investments for a certain period. This would be a helpful ­incentive to build a broader investor base. The ­proposed ­measures also include financial ­education ­initiatives.

On the negative side, the 2008 financial crisis prompted Europe to introduce a veritable flood of regulations. Compared to the US and Asia, there were no positive developments in the scope of capital raising, reducing the complexity of market access, etc. The expert panel hopes that a similar scenario will not unfold after the ­COVID-19 crisis. “The financial crisis, in particular, ­demonstrated that economies with well-developed capital ­markets recovered much faster and more ­sustainably,” Christoph Boschan adds. “The capital market is a lever to achieve higher growth rates.”

­ oschan. “That can become more, which is what B investors would like to see.” Stable ­innovation financing requires a functioning capital market.

“This is characterised by liquidity and interest­ ing investors and companies,” adds Andreas ­Gerstenmayer, CEO of AT&S AG. The ­panellists ­point out that politics plays a decisive role in ­shaping the mood on the capital market through public dialogue. It creates the underlying ­conditions for the capital market.

Financial education drives ­participation

Incentives for investors

In Austria, a lot of money is tied up in conservative investments. The big challenge is to make private capital available to industry in the future and to motivate foundations to focus more on corporate investments. Christoph Boschan emphasises the importance of a substantial European investor base: “It will not work without equity. In Austria, credit financing dominates. This works very well with established business models where the repayment schemes are clear. As a result, banks show a high willingness to finance. ­However,

© Ronald Rudolph

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The panellists are the best proof of this: TTTech Auto AG, for example, has Infineon Technologies Austria AG on board as a major core share­holder, along with Audi AG and ­Samsung Group. “We work in partnership with AT&S ­printed circuit boards. Networking is very ­important,” Georg Kopetz explains. “I am ­convinced it is a great opportunity for Europe’s industry if companies join forces, engage in dialogue with policymakers and try to be at the forefront of topics like autonomous driving.” As he continues to explain, autonomous driving affects not only cars, planes and trains, but also ­countless machines, ranging from a ­ gricultural vehicles to construction machinery and refuse trucks. “It is all about products that achieve more and more ­output with less and less manpower.

There are huge ­opportunities for the European engineering, supply and automotive industries to set trends here.”

Christoph Boschan

Better financial education also reduces fears of contact with the stock market. In this area, the Federation of Austrian Industries participates in a newly established educational foundation, where, among other things, business and financial education are being strengthened. Likewise, both domestic banks and the Vienna Stock Exchange are committed to education and training. Georg Kopetz, CEO of TTTech Auto AG, thinks there is enough potential in the domestic market. “It is important to emphasise that the Vienna Stock Exchange is an attractive location where you can invest in your future, and higher returns can be

achieved from shares than if the money is kept in a savings account. At the moment, we are not yet managing to show that investing in a ­company that wants to be successful on the global ­market is a good way to provide for your personal ­wealth,” Georg Kopetz concludes.

Tech boost through the stock market

Companies that want to play a pioneering role in international competition in the future rely on the capital market for financing. No other financing instrument brings more capital, visibility and at the same time useful governance than an initial public offering (IPO). Tech companies, in particular, have a high demand for equity capital to finance their innovations. “With 85 per cent turnover from international trading members, the Vienna Stock Exchange is extremely well connected to global capital-raising institutions. Morgan Stanley, J. P. Morgan, Credit Suisse and Goldman Sachs rank among the top trading participants in Vienna.” ­According to Christoph Boschan, the need to develop a relevant European investor base can also be seen as an opportunity that opens up a ­reservoir of future growth potential. ­“Companies that jump on this bandwagon now have a ­unique selling point,” the Stock Exchange CEO ­concludes.

Rainer Nowak comes from a family of journalists.

After various positions at daily news­ papers, he has been Editor-in-Chief of the Austrian daily Die Presse since 2012 as well as publisher since 2014.

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De-growth: A misunderstanding turns into a political agenda

De-growth: A misunderstanding turns into a political agenda

Since the beginning of the 19th century, global economic growth has lifted a large and growing part of humankind out of poverty.

This success story of market-coordinated economies has led to a sizeable increase of income and life expectancy, coupled with a shortening of working hours and various other intangible ­positive spill-over effects. The negative ecological, including climate-­related consequences of this historically unique economic upswing, have spawned an academic as well as socio-political movement that gathers under the keywords “de-growth”, “zero growth” or ­“post-growth economics”.

Text: Christian Helmenstein

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Growth is not an economic end in itself, although the economic, ecological and social ­challenges mankind is facing cannot be met in a stationary economy.

Growth is rather the result of ­individual and collective action of ­human beings in their pursuit of ­happiness.

© iStock

250 years wiener boerse – our future

250 years wiener boerse – our future

De-growth: A misunderstanding turns into a political agenda

“There is no ­guarantee that once a society leaves the path of prosperity, it will return to it ­within a short time, not even within a couple of ­generations.”

Niko Paech is a German ­economist. He teaches and researches at the University of Siegen. Niko Paech coined the term “post-growth economics” in Germany and is considered a ­vehement advocate of the critique of growth.

economic history, with global real GDP falling by 3.5 per cent in 2020.2 As such, the COVID-induced recession even dwarfs the economic plunge in the wake of the Lehman Brothers’ insolvency and the financial market crisis it triggered in 2008/2009.

Not in its scale, but in its speed, the COVID-­driven collapse of economic activity even surpassed the Great Depression following the crash on New York’s Wall Street in the autumn of 1929.

of growth critics,3 which is, however, characterised by different levels of growth critique based on ­various motives, which can be of an ecological, social or even ideological nature.4 Among ­economists in the German-speaking world, Niko Paech is currently one of the leading ­representatives of the ­post-growth economy who propagates an ­economic system that is not ­dependent on ­economic growth.5 He sees the necessity for a stationary economy in what he considers the failed decoupling of environmental damage and the consumption of raw materials from value creation. Nicholas Georgescu-­Roegen is counted among the global “forefathers” of the movement with his main work “The Law of Entropy and the Economic Process”,6 in which he predicted that an ever-­increasing use of resources must lead to an exhaustion of the Earth’s capacities. The ­various forms of de-growth/no-growth/ post-growth economics are united in their goal of overcoming growth orientation, especially in practical terms, in order to achieve a stationary economy.

Nicholas Georgescu-Roegen

in China at the year-end quarter of 2019, has become striking. COVID-19 and the regulatory restrictions put in place to contain it triggered the most severe global economic downturn in modern

Despite the successful economic management of COVID-19, a mood of crisis prevails in much of the media public reporting and in political discussion forums. The effects of climate change, ­rhetorically (over-)elevated as a “climate crisis” or even as a “climate catastrophe”, have been moving ­markedly into the foreground. Thus it seems to support the arguments of the “de-growth“ ­proponents that economic growth is detrimental to the future of planet Earth and would also change the world climate to the lasting perdition of future generations.

Since the 1970s, a relatively broad de-growth ­movement has emerged from a small circle

© Federation of Austrian Industries

Unlike post-Lehman, but above all in contrast to the state of the world economy in the 1930s, the global economy has been recovering from the ­COVID-19 recession with an extremely high ­momentum. Global real economic growth is ­expected in a magnitude of around 6 per cent by the World Bank and the International Monetary Fund for 2021, which represents the strongest upswing in almost half a century. The last time the global economy grew more strongly was before the first oil price shock in 1973.

© Wikimedia Commons

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A real economic experiment of unimagined­ ­magnitude opened the third decade of the ­ 21st century: COVID-19. Addressed for many years by epidemiologists in academic papers and by security experts in strategic analyses,1 the risk of a pandemic, based on initial infection findings

Christian Helmenstein

So, has the market economy – and with it the financial markets – reached the end of its story?

Even in an eco-social form? An eco-social market economy represents the ambition to combine an efficient with a just and sustainable economic and social order. It was a successful model that acted as the key to the “economic miracle” in both Germany and Austria. Within the framework of a social market economy, enormous ­prosperity has become possible. In Austria, incomes have ­increased far more than a hundredfold since 1948. In the same period, the price level has also markedly risen. In fact, it has increased more than

tenfold. In real terms, Austrian real income today is more than thirteen times what it was in 1948. That is why, 70 years after its debut in 1948, the social market economy, in its eco-social manifestation, may still be no less attractive today.

The social market economy was not only a catalyst of domestic prosperity, but it was also a passe-partout for development worldwide: As a coordination mechanism, the market economy has been historically successful, so that even former socialist countries have turned into state capitalist actors who use it like a blueprint for the ­development of their own countries. In striking contrast to this impressive track record, ­confidence in the market economy’s ability to find solutions has profoundly eroded.

Throughout human history, prosperity has been a transient phenomenon. This finding is ­illustrated by an unusual indicator of prosperity, namely ­global lead production.7 Of course, lead ­production is no longer a reliable indicator of ­prosperity, if only ­because of the toxicity of the material. But in ­earlier centuries, it was different.

This was due to the main uses of lead apart from its military use. It was applied for tubes, for ­reservoirs to store goods and as a sealing ­material. Such uses ­represented considerable wealth at the time of the Roman Empire. After its heyday and later ­collapse, it took 1,700 ­years to regain the former output level of lead. And that also means that it took roughly just as long for ­Europe to ­re-reach the ­prosperity level of the ­Roman Empire. So, there is no guarantee ­whatsoever that once a society leaves the path of prosperity, it will automatically return to it within a

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250 years wiener boerse – our future

De-growth: A misunderstanding turns into a political agenda

Joseph Stiglitz is an American economist and Professor at ­Columbia University. He was Chief Economist of the World Bank from 1997 to 2000. Stiglitz is a representative of New Keynesianism and received the Alfred Nobel Memorial Prize in Economics in 2001 for his work on the relationship between­ ­information and markets, ­together with George A. Akerlof and Michael Spence.

Christian Helmenstein

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When the topic of economic growth comes up, the discussion often seems to suffer from a ­fundamental misunderstanding.8 What is the ­economic discipline actually about? Economics is the science of rational decision-making to increase the utility of human beings. It is ­therefore about human happiness. What does happiness (the left side of the “happiness equation”) ­depend on?

From an economist’s point of view, it depends on three factors: first, on securing material needs, ­represented by a bundle of consumer goods, which of course includes services as well, also taking into account environmental and other forms of damage. A ­second factor that drives h ­ appiness is leisure/recreation time. These two factors should be enough to describe Robinson Crusoe as a happy man on his lonely island. In fact, however, he was in a state of deep unhappiness in the days leading up to the appearance of a certain man called Friday. That is, happiness requires a third element, social context. It is these three pillars that create utility and happiness. That is what ­economics is essentially about.

Consequently, growth is not an end in ­itself.

If it were, growth would have to appear in the ­utility function. But this is not the case.

A ­reverse ­conclusion follows immediately: ­Anyone ­propagating stagnation or even shrinkage, ­“de-growth”, is a false prophet, because this will not benefit people. What does growth stand for from the perspective of an economist?

The ­expansion (contraction) of GDP describes, in approximate terms, the positive (negative)

change in (national) income over time. Now, there is undoubtedly a link between the utility function – especially in terms of the first pillar – consumption possibilities and the income level.

But directly, as a ­policy-making goal, growth in itself does not ­provide any direct benefit. A policy goal can only be what is on the left side of the happiness ­equation: the increase of utility.

The ways to ­achieve this are found on the right side of the ­happiness equation, i.e. consumption ­opportunities (net and in the broadest sense), leisure and social context.

­ ppreciation, there is nothing to ­prevent its a use, as long as it remains clear what is meant.

In terms of human capital, we find ­quantitative growth in terms of ­headcount and qualitative growth in terms of abilities and ­capabilities as a result of education and ­training. As far as the quantitative component is ­concerned, ­population growth, a stationary ­population, i.e., one that is no longer growing, would spare us the ­consumption of (limited) ­additional natural resources. The sooner world population growth comes to a halt, the better the prospects of overcoming the overexploitation of the planet’s resources. The world population is ­currently growing by ­about the population of ­Austria every month and by more than the ­population of Germany every year. All these ­newly-born human beings need ­additional ­resources, even if it is only for the bare ­necessities. And who among us would want to ­deprive them of a higher standard of living? But that puts even more strain on the planet’s ­resources. So the focus of the first pillar

Remarkably, every doubling of disposable ­income is still accompanied by an increase in life ­satisfaction. The global society is not yet “rich enough” that a doubling of income would not still contribute to higher life satisfaction. This finding is actually not surprising because if we were richer as a society, we would be able to afford the currently more expensive emission-free mobility sooner and the most promising of the downright astronomically expensive “targeted therapies” in oncology would spread more rapidly, to name just two examples.

There are only three main drivers of growth, one of which breaks down into a ­quantitative and a ­qualitative component. The most ­important driver is the accumulation of human ­capital.9 To avoid semantic irritation at this point, ­human capital is a terminus technicus of the ­economic discipline, which does not re­ duce people to the function of a mere factor of production. ­Economists value ­“capital”; it has positive ­connotations. If ­another term such as “human capital” is better able to ­express this

© Jérémy Barande

short period of time, and worse, not even within a couple of generations.

Joseph Stiglitz

is not about quantitative growth but ­qualitative growth through the accumulation of human capital as a result of investment in education and training. The second growth driver is the accumulation of ­physical capital and the third is innovation.

Against this background, the question of what is meant by GDP growth can now be ­answered materially, not just technically. Growth is not a goal in itself but growth is an indicator of ­creative freedom.10 It is even the most singularly ­important ­indicator, despite all the ­shortcomings of the ­concept in detail, which, however, may hardly be relevant for the usefulness of the indicator in the end.11 In this regard, Joseph Stiglitz et al. have ­explicitly acknowledged that ­“measuring ­production – a ­variable which among ­other things determines the level of ­employment – is essential for the ­monitoring of economic ­activity.”12 In ­addition, the flow concept of growth as­r­ epresented by GDP should definitely be

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250 years wiener boerse – our future

De-growth: A misunderstanding turns into a political agenda

Dani Rodrik is the Ford ­Foundation Professor of ­International Political Economy at Harvard’s John F. Kennedy School of Government. Professor Dani Rodrik’s research focuses on globalisation, economic growth and development, and political economy. He is the ­recipient of numerous awards.

The protagonists of de-growth envision a ­stationary economy – just as Plato conceived a perfect polis with its stationary society. If Plato’s ideal had been realised, the world would have ­remained in antiquity. From today’s ­perspective, this is an absolutely non-ideal state. Even ­worse, the economic, ecological and social ­challenges humankind are facing cannot be met in a ­stationary economy. Harvard economist Dani Rodrik projected the situation for a post-COVID-19 world: “COVID-19 reinforces economic dualism

reversed in the short term without enormous sunk costs.

within nations, the gap between technologically advanced and globally integrated parts of the economy/society and the companies, sectors and regions that lag behind. This creates inequality, economic insecurity within countries, a backlash against hyper-globalisation [and] premature de-­ industrialisation.”13

In this context, there is yet another relationship to consider. In the long run, economic growth and productivity growth go hand in hand, even independently of the prevailing e ­ conomic s­ ystem. As Bouscasse et al. (2021)14 have r­ecently shown, productivity growth already set in around the year 1600, about two centuries before the i­ndustrial ­revolution, and hence long before m ­ odern ­capitalism established itself. Their fi ­ ndings ­support the notion that productivity-driven e ­ conomic growth preceded institutional reforms and p ­ ropelled history forward. And conversely, Tokic (2012) showed that a de-growth policy would crash the stock market, trigger further de-­leveraging in all sectors and thus massive deflation.15 As a result, the entire economy would implode. As an e ­ conomic policy ­strategy option, de-growth is therefore e ­ cologically, ­economically and socially unsustainable.

If growth does not happen, it could mean there has been a failure to provide better education and training for the population. Where growth cannot be observed, access to health care may have become so difficult for large parts of the population that even average height and ­average life expectancy are already decreasing.

Where growth is absent, there may be a lack of trust in the reliability of legal, environmental and social framework conditions with the result of investment reluctance because investing means commitment to a location, at least for a couple of years. Once committed, an investment cannot be

By implication, where growth does not take place, individuals or society as a whole have not been able to realise their creative and innovative potential. Because if there were better products, more efficient processes, new business models and better institutions, growth would inevitably be the result. So, where we observe little or no growth over a period of several years, there is something fundamentally wrong because those societies fail to unleash their growth drivers.

Thus, “the good old days”, at any rate, were only ever old on closer examination, but in ­comparison to the present in almost every ­utility-relevant respect they were actually inferior. Upon ­proper information about the implications and ­consequences of a permanent de-growth-induced economic depression, the vast majority of people would probably not want to participate in such an experiment.

Dani Rodrik

© Federation of Austrian Industries

Please see references on pages 96–97.

© Andrzej Barabasz

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s­ upplemented by a stock concept in national ­accounting. For companies, this has been a matter of course for centuries, not just decades, but not yet for public entities like regions or countries.

Especially in times of increasing digitalisation, conventional national accounting is likely to miss important welfare elements since the creation and use of network capital, among other things, is currently not recorded for by and large.

Christian Helmenstein

Christian Helmenstein is Chief Economist of the Federation of Austrian Industries and Professor of economics at Seeburg Castle University in Salzburg as well as founder and Head of the Cognion Research Group.

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ETFs and ESG engagement: two investment trends spotted

ETFs and ESG ­engagement: two investment trends spotted Investors have been debating the merits of “active” versus ­“passive” investing for a while now. While ETFs are on the rise, active strategies have a firm place in today’s investment world.

Which trends are shaping the future of asset management? How will information as a basis for investment decisions be gathered in the future? Two managers of major institutional investors in ­Austrian stocks share their views on the role of stock exchanges and the ­impact the financial industry has on the socio-economic ­development.

Valérie Baudson has been Deputy Chief Executive Officer of Crédit Agricole S.A. and CEO of Amundi since May 2021. She is a member of the Executive Committee of Crédit Agricole S.A. Valérie Baudson held various positions within the Group since she joined in 2007.

© Delporte, Vanguard

Sean Hagerty is Managing Director of Vanguard Europe and responsible for ­leading the operations and distribution efforts of the European business. ­Prior to this role, he was a principal in the Portfolio Review ­Department in the US, responsible for overseeing all of Vanguard’s mutual funds and ETFs, assessing fund performance and portfolio ­consistency, and monitoring Vanguard’s external advisers.

Interview: Wiener Börse

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250 years wiener boerse – our future

Valérie Baudson

What is the role of a stock exchange and how will it change in future?

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VALÉRIE BAUDSON Equity funding is crucial for innovation, productivity and overall economic growth. Stock exchanges are the main places for companies to access capital through r­egulated markets and therefore vital factors for strong ­economies, companies and overall prosperity. ­While stock trading remains the core business, going forward stock exchanges have to adapt to changing landscapes with efficiency, innovation and the expansion of their offerings. This is a path that the Vienna Stock Exchange is already s­ uccessfully following through its t­ransformation from a stateowned financial marketplace to a m ­ odern information technology and service p ­ rovider.

What impact does the financial ­industry have on social and economic development?

VALÉRIE BAUDSON A strong financial sector

is a sign of a healthy economy and critical to the ­prosperity of a country’s population. Asset ­managers play an important role in allocating ­capital and managing risk and return for their clients. At Amundi, we truly believe that our duty to our customers is to deliver robust ­performance and promote a transition to a more ­sustainable, inclusive low-carbon economy in order to ­preserve long-term economic, natural and human ­capital. There is also a need to strengthen social ­cohesion, as inequalities fuel social divisions and foster political and financial market ­instability in our ­societies. As a leading European asset ­manager, deeply committed to ESG, and a major ­shareholder, we use our influence to support issuers on integrating ESG issues on two levels: contributions to energy transition, which is a major challenge for our society today, and ­contributions to social cohesion, which is an important ­balancing factor for our democracies.

SEAN HAGERTY The financial industry plays

a hugely important role on the impact of socio-­ economic development. The European ­population is ageing. A large number of EU citizens find

themselves in an increasingly precarious financial s­ ituation even now. In many cases they do not know how to save for old age. This may be due to a gap in their understanding of financial markets and products or possibly also due to a lack of trust in providers and intermediaries, or a barrier in the form of high fees. But it does not have to be this way. This is where the financial industry as well as the European regulators need to come together to act and really work their impact. If policymakers reduce barriers to investing, ensure consumers have access to a fair deal and simplify rules across the EU, there will be a positive change in the investment culture of European investors that will improve their long-term financial wellbeing.

ETFs and ESG engagement: two investment trends spotted

take a stand for all investors, to treat them fairly and to give them the best chance for investment success. This is important because if you think about today’s markets, you arrive at a simple truth: Investors cannot control the markets, but they can control costs associated with investing.

Because every euro paid in fees is a euro less of potential return. That is why we focus on low-cost, uncomplicated funds that can help investors meet their long-term goals. And this is where ETFs will continue to thrive. They are low-cost, long-term oriented and broadly diversified products that are truly democratising the market. ETFs give end investors the ability to access the financial markets at prices that were formerly only available to large

What investment opportunities do you currently see in Central and Eastern Europe (CEE)?

Which investment strategies are you currently focusing on? Which future trends do you predict?

VALÉRIE BAUDSON ESG is and will remain

in the coming years a central investment theme for investors. The COVID-19 crisis has accelerated the trend towards sustainable investments. Since 2010, Amundi has been a pioneer in responsible investment, based on two strong convictions: The first one is that companies and investors have a responsibility towards ­society, ­heightened in the context of the social crisis resulting from the ­pandemic. The second is that ESG and ­responsible investments are an ­enabler of long-term financial performance at a time when the energy transition is barely gathering ­momentum five years after the adoption of the Paris ­Agreement. Amundi initiated a three year action plan in 2018, with the ambition of mainstreaming ESG investing, fostering innovation to expand ESG-related financing needs and championing ESG integration vis-à-vis all our counterparts around the world. I am proud to say that we are now recognised as an asset management leader in responsible investment with almost €800 billion ­responsible investment assets under management.

SEAN HAGERTY If I had to pick one investment trend, it would be the continued rise of ETFs as a product suitable for the end investor.

Let me explain why: Vanguard’s mission is to

­ anaged funds. As investors increasingly take m control of their financial future, we believe better access to clear and concise financial guidance is needed to help consumers make informed financial decisions. Vanguard research shows that the value of (good) advice is quantified as a plus of around 3 per cent per year in return on investment. It also shows that good information helps investors to stay calm in times of volatile markets and stick to their financial plan. In order to give everyone an equal chance of a good return on investment, there should be more advisory and guidance options, including low-cost, technologybased advice. This will meet the different needs and wishes of the EU’s investing public: The aim should be to provide consumers with information that stimulates competition, that will improve services and reduce costs and that will therefore improve investor returns and increase the financial well-being of people in the long term.

VALÉRIE BAUDSON Amundi’s local flagship fund

Sean Hagerty

i­nstitutional players. We see more investors taking control of their future, we see more investors ­seeking financial advice and ETFs play a major role in this development. More democratisation is needed across Europe to help more people to invest and save for retirement at the right price, diversification and time orientation to achieve the best results. Vanguard’s mission and its underlying index funds and ETFs support this.

What are your preferred sources for ­obtaining ­information when investing in ­companies, sectors and countries?

SEAN HAGERTY As one of the largest providers of index and actively managed funds worldwide, Vanguard takes a deliberate approach to ­providing broadly diversified, low-cost, high-­ quality ­invest­ments to meet the needs of our ­investors. We undertake this through our proprietary ­academic research, our time-tested principles of investing as well as working closely with index providers and sub-advisors for our actively

(Amundi Austria Stock) is one of the b ­ iggest equity funds in Austria with a long history and a very strong track record. In Austria there are a lot of very interesting companies, which are kind of niche players or mid-caps in a g ­ lobal c ­ ontext but at the same time world market leaders in their b ­ usiness. The investment opportunities in A ­ ustria from a ­sectorial perspective are very wide r­ anging, from renewable energy to information technology or even biotech.

Amundi is already present in Central and Western Europe. In the coming years, opportunities will come up as the funding of the EU R ­ ecovery Funds will help to accelerate two transformational trends: digital transformation and the Green R ­ evolution.

In terms of digital­­transformation, there will be investment o ­ pportunities in companies ­exposed to ­e-commerce sectors that will benefit from c ­ hanging consumer and c ­ ommunication ­habits. The green deals will accelerate the t­ransition of countries moving away from use of fossil fuels. This is very relevant for countries such as Poland which relies heavily on coal for energy production. We also see opportunities in r­enewable energy projects in the Baltic region. The main c ­ atalyst for the CEE bank stock prices will come from rising interest rates as growth and inflation pick up in the region. This process has a ­ lready started in the Czech Republic and Hungary, l­eading to a better outlook for interest margins and profitability for banks.

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250 years wiener boerse

References

References PAGES 20–25

PAGES 26–33

From the historic palais into the digital world

De-growth: A misunderstanding turns into a political agenda

Bagehot, W. (1873). Lombard Street. London: Henry S. King & Co.

The article is largely based on Franz Baltzarek, Die Geschichte der Börselokalitäten, in: Wiener Geschichtsblätter 26. Jg., 3(1971), 193–199.

The author is grateful to Markus Fichtinger for his valuable suggestions and for supporting this research work.

1) On the history of the Vienna Stock Exchange, cf. also in the following Franz Baltzarek, Die ­Geschichte der Wiener Börse. Vienna 1973, here p. 20.

1) Cf. e.g. WHO (2013), Pandemic Influenza Risk Management, WHO Interim Guidance, Geneva; Robert Koch-Institut (2017), Nationaler Pandemieplan Teil I & II, Berlin.

2) www.geschichtewiki.wien.gv.at/Gundelhof. In 1808, the stock exchange was briefly located in the St-Anna building in Schulerstrasse. Baltzarek, Geschichte der Börselokalitäten, p. 193.

2) World Bank Group (2021), Global Economic Prospects, June edition, Washington D.C.

Trust is the hardest currency

Baltzarek, F. (1971). Die Geschichte der Wiener Börse. Vienna: Österreichische Akademie der Wissenschaften.

Jobst, C. and H. Kernbauer. (2016). Die Bank. Das Geld. Der Staat. Nationalbank und Währungspolitik in Österreich 1816–2016. Vienna: Campus Verlag.

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Jobst, C. and K. Rieder. (2016). Principles, ­circumstances and constraints: the Nationalbank as lender of last resort from 1816 to 1931. In: Monetary Policy & the Economy Q3–Q4. OeNB. 140–162.

Jobst, C. and K. Rieder. (2021). Liquidity Regulation Long before Basel: Evidence from Rediscount Limits at the Austro-Hungarian Bank. Unpublished Working Paper.

Rieder, K. (2018). Haunting the Specter of Credit Rationing: Unconventional Last Resort Lending during the Austro-Hungarian Gründerkrach of 1873. Chapter 2 of PhD Dissertation. University of Oxford.

Schmit, J. (2003). Die Geschichte der Wiener Börse – Ein Vierteljahrtausend Wertpapierhandel.

Wien: Bibliophile Edition.

3) Baltzarek, History of the Vienna Stock ­Exchange, 19–53 4) Bucket shops were located in the café, “Zum Hugelmann” on the Salzgries and in the inns, “Zum weißen Ochsen” and “Zum Krebsen”, ­Baltzarek, Geschichte der Wiener Börse, fn. 109, p. 41.

5) www.geschichtewiki.wien.gv.at/Pereirapalais.

6) See Baltzarek, Geschichte der Börselokalitäten, 197 as well as entries in GeschichteWienWiki www.geschichtewiki.wien.gv.at/Ferstelpalais or on Wikipedia https://de.wikipedia.org/wiki/­Palais_ Ferstel.

7) To the old Stock Exchange Building www.geschichtewiki.wien.gv.at/B%C3%B6rse_ (Geb%C3%A4ude).

8) On this and in the following Baltzarek, ­Geschichte der Wiener Börse, p. 117 et seq.

PAGES 84–91

3) Cf. D. Meadows et al. (1972), The Limits to Growth – A Report for the Club of Rome’s ­Project on the Predicament of Mankind, Study on ­behalf of Potomac Associates, Washington D.C., ­Universe Books, New York (NY).

4) An overview of criticism related to economic growth is, inter alia, provided by R. Steurer (2010), Die Wachstumskontroverse als Endlosschleife: Themen und Paradigmen im Rückblick, Wirtschaftspolitische Blätter, ed. 4/2010, pp. 423–435. A documentation of work related to economic growth and its limits is also provided by Deutscher Bundestag (2017), Wachstum und Grenzen des Wachstums, Wissenschaftlicher Dienst, WD 5 - 3000 - 007/17, Berlin.

5) Cf. N. Paech (2012), Befreiung vom Überfluss.

Auf dem Weg in die Postwachstumsökonomie, Verlag oekom, München.

6) N. Georgescu-Roegen (1971), The Entropy Law and the Economic Process, Harvard University Press, Cambridge (MA.).

7) Data retrieved from https://historum.com/ threads/world-lead-production-for-the-last2750-years.21841/. Source: S. Hong, J.-P. Candelone, C.C. Patterson, C.F. Boutron, 1994, Greenland Ice Evidence of Hemispheric Lead Pollution Two Millennia Ago by Greek and Roman Civilizations, Science, vol. 265, pp. 1841–1843.

8) For the following passages, cf. C. Helmenstein (2017), “Wachstum, das dem Menschen dient”, Future Wealth, 3rd Congress, Stift Göttweig, 27–29th April, pp. 13–33.

9) Cf. R.M. Solow (1956), A Contribution to the Theory of Economic Growth, Quarterly Journal of Economics, vol. 70, pp. 65–94; P.M. Romer (1986), Increasing Returns and Economic Growth, Journal of Political Economy, vol. 94, pp. 1002–37; R.E. Lucas Jr. (1988), On the Mechanics of Economic Development, Journal of Monetary Economics, vol. 22, pp. 3–42; P.M. Romer (1990), Endogenous Technological Change, Journal of Political Economy, vol. 98, pp. S71–S102; G.M. Grossman and ­ E. Helpman (1991), Quality Ladders in the Theory of Growth, Review of Economic Studies, vol. 58, pp. 43–61; P. Aghion and P. Howitt (1992), A Model of Growth Through Creative Destruction, Econometrica, vol. 60, pp. 323–351; P. Aghion and P. Howitt (1996), Research and Development in the Growth Process, Journal of Economic Growth, vol.

1, pp. 49–73; P.S. Segerstrom (1998), Endogenous Growth without Scale Effects, American Economic Review, vol. 88, pp. 1290–1310; C.I. Jones (1999), Growth: With or Without Scale Effects?, American Economic Review, vol. 89, pp. 139–144; R.M. Solow (2007), The Last 50 Years in Growth Theory and Next 10, Oxford Review of Economic Policy, vol. 23, pp. 3–14.

10) Cf. C. Helmenstein (2017), “Wachstum, das dem Menschen dient”, Future Wealth, 3rd ­Congress, Stift Göttweig, 27–29th April, pp. 13–33.

11) For high-profile international initiatives to ­replace or supplement GDP with new indicators, cf. in particular J.E. Stiglitz, A. Sen and J.-P. Fitoussi (2009), Report by the Commission on the Measurement of Economic Performance and Social Progress, Paris; see also OECD (2007), Measuring and Fostering the Progress of Societies, Second OECD World Forum on “Statistics, Knowledge and Policy”, Istanbul.

12) Stiglitz et al. (2009), p. 11.

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