Austrian central bank says government threatens its financial independence

Austria’s central bank on Monday accused the right-wing government of seeking to undermine its financial independence as part of plans to strip it of its role as a banking supervisor.

Conservative Chancellor Sebastian Kurz’s government, which includes the far-right Freedom Party, announced plans last year to reform banking supervision in Austria, which is currently split between the Financial Market Authority and the central bank.

It says the plan, which will shift 180 jobs to the FMA from the Austrian National Bank (ONB) and do away with one of the two FMA co-chiefs’ jobs, will make for a more streamlined structure and save money.

The central bank, however, said the plan would make banking supervision more complicated and expensive.

“It is to be feared that supervision costs in Austria will increase as a result of these new, complicated structures, taking into account in particular the creation of three new sections in the Finance Ministry,” the ONB said in a statement.

It was responding to a government announcement earlier on Monday that draft legislation for the planned shake-up had been sent for legal review ahead of its submission to parliament before the summer.

“In order to at least partially offset these additional costs, the draft law provides for 95 percent of the central bank’s profits to be paid to the federal government instead of 90 percent currently,” the central bank said.

“That reduces the ONB’s ability to generate reserves and should therefore be seen as an encroachment on the ONB’s financial independence,” it added.

The Finance Ministry said in its earlier statement that its plan would generate 10 million euros ($11.3 million) in annual savings from 2020, the year it is due to take effect.

“We are following European best practice and what is common in many European countries,” a Finance Ministry spokesman said in response to the central bank’s remarks on its financial independence, adding that a payout rate of 95 percent or more existed in countries including the Netherlands.

The central bank, whose Governor Ewald Nowotny is close to the opposition Social Democrats, also denounced the decision to do away with the post of FMA co-chair Helmut Ettl, who was also appointed with the Social Democrats’ support.

The Finance Ministry spokesman said the decision was a structural one aimed at efficiency rather than a personal one.