7 minute read
The invisible hand and lifeblood of the economy
Businesses need capital to keep running. Austria’s banks play a responsible role.
The economy doesn’t work without money – and supplying the economy with its lifeblood is the banks’ main task. There is hardly a company that can keep its operations afloat without a financial cushion. Banks take care of providing this capital, often without the general public really being aware of it. They serve as an invisible hand, so to speak, that gets everything started and then up and running. A tremendously important job for the economy.
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During the corona crisis this became clear like never before with people needing their cash supply. In Austria you can get your cash from about 9,000 cash machines as well as from cash registers in retail stores and petrol stations. This extensive infrastructure paid off during the corona crisis as the public cash flow was never in danger. Austria has a tight network of bank branches, in fact one of the tightest in Europe with about 600 financial institutes and 3,600 branches.
Economy and banks
“Banks are only doing well if the businesses and the economy are doing well,” says Robert Zadrazil, banker and President of the Association of Austrian Banks. “All Austrian banks are doing their best to help their customers through these hard times. And they are in a good position to do so, as Austrian banks are equipped with sufficient capital and liquidity. This is the significant difference to the financial crisis of 2008. Back then, the capital market was part of the problem. During the Covid crisis 2020 banks and other financial institutions are part of the solution.”
Globally leading system
The Austrian banking system is running smoothly and is considered one of the best and most secure in the world. And the figures are backing this up. Not necessarily in terms of absolute numbers – due to its population Austria is hardly a giant – but when you look at the percentual development. In 2019, corporate loans rose by an impressive 6.2 percent to 163.4 billion euros. Private loans went up by 4.2 percent to 168.8 billion euros.
At the same time, the deposits of businesses at Austrian banks increased by 5.2 percent to a new all-time high of 70.9 billion euros. Saving is obviously still in fashion, in Austria.
Liquidity is the economy’s lifeblood. Austria’s banks ensure a seamless supply.
Austrian banks bolstered their equity over the last few years. Their financial cushion for times of crises, i.e. their core capital, went up two-fold from eight percent in 2008 to about 16 percent in 2019. The volume of bad loans decreased from 14 to about two percent. Thanks to a stable financial performance, the low interests on borrowings and the high amount of quickly available bank deposits, Austrian banks were well-equipped to master the particular challenges of the corona crisis.
The cash flow keeps everyone afloat
One issue that affects the economy is home-made and has historical roots, though it hardly is not just an Austrian problem: “Unfortunately, bureaucracy is still a big hurdle for businesses,” Bosek says. “Some procedures had been eased during the height of the crisis, significantly speeding up many processes such as corporate loans or deferrals.”
But that is not enough, he believes: “We urgently need further simplification for businesses. Requirements need to be more proportional. For example, there really is no point in constantly getting on the nerves of small business owners and restaurateurs with rules and regulations. We urgently need a discussion to remove some of the hurdles and give back entrepreneurs the joy of owning a business,” says the Erste Bank CEO.
Making banking pleasant for customers
One of the most important banks for the Austrian economy is RBI, Raiffeisenbank International. It sees itself as a relationship bank and is therefore keeping close ties to the Austrian economy, RBI says: “One of our biggest concerns is to serve our relationship customers in the best way possible, also during the crisis with financing solutions and advice. This includes our expert advice on all state subsidies and support mechanisms that were introduced during the Covid-19 pandemic.”
But Raiffeisenbank International doesn’t want to stand still: “We want to make banking as pleasant as possible for our customers and keep expanding our online offer such as the digitisa-
Raiffeisen Bank International has more than 16 million customers in Central and Eastern Europe.
tion of the KYC process (“eKYC”) and the digital opening of accounts (eAccountOpening).”
A reliable partner
RBI is a reliable partner and financer of the Austrian economy: “This becomes evident when you look at the investments in Austria on the one hand and how we work with Austrian businesses on our core market CEE on the other hand. Within Austria, the Raiffeisen Group is the market leader: about one third of all corporate loans are issued by Raiffeisen – and that figure keeps rising,” the bank says.
RBI faces the challenges for the entire banking sector: “Even though 2020 has been heavily impacted by Covid-19, we are also looking into the future: In addition to digitisation, the fight against climate change will influence the financial sector in the long term. This, in turn, will have an effect on the business model of many Austrian companies.” Raiffeisenbank International sees changes as an opportunity though: “We are ready to walk this path hand in hand with our customers by offering green financing solutions. It is important to us to take up social responsibility in this area.”
Big and small
Robert Zadrazil is not only President of the Association of Austrian Banks but also CEO of UniCredit Bank Austria. He likes to describes his company’s role in the Austrian economy as this: “Being Austria’s leading bank for entrepreneurs, we are a stable and reliable partner for domestic businesses – from sole proprietors to large corporations. We have a strong footing and enough equity and liquidity to finance and support private households and businesses of all sizes. We are able and willing to honour our responsibility.”
Providing liquidity is a central concern of Zadrazil: “Every week we issue hundreds of millions worth of loans. At the be-
ginning of the Covid crisis, for example, we issued loans of about 2.7 billion euros within a few weeks, and we processed tens of thousands of deferrals to support private households. We are therefore one of the country’s leading banks and a reliable partner for our customers.”
The Bank Austria CEO wants to boost the economy with all the instruments that banks have to offer: “As a bank it is in our best interest to do everything we can to help the economy overcome the crisis and start flying high again.”
Opening up new markets
During the first phase of the crisis it has been extremely important to ensure customers’ liquidity and contribute to domestic demand with measures such as bridging loans and deferrals, Zadrazil says: “It is necessary to both help businesses steer clear of the crisis and to support the ease of lockdown measures in the best way possible. We can advise businesses with our extensive financial know-how. In addition to our core competence of financing and subsidy consultation, we offer expert advice for liquidity planning, revising
Photo: Lukas Bezila business plans or when opening up new markets,” says Robert Zadrazil. Robert Zadrazil is CEO of UniCredit Bank Austria and President of the Association of Austrian Banks Looking forward The crisis highlighted customers’ access to their banks. Due to the lockdown measures many people realised that they can easily do their banking online. The Association of Austrian Banks believes that this development will continue in future and branches will mostly be needed for advice on complex products and individual solutions. Mobile payment was another thing that many people tried for the very first time during the corona crisis. If customers had positive experiences with it and realised that everything works smoothly, they will continue to use this payment option, the association believes. ◆
