Banks and Economy

Banks are terrible institutions – worst of all the ECB! This wants to abolish cash and ensures that billions (in EURO) are transferred to bankrupt southern European states every year.

At least, if you follow the reports in the tabloids. But is that all true? Let me make it clear right from the start: I don’t want to take a stand for the banks, but the current populist actions of our (top) politicians and the media portrayal of the banking landscape really bother me.

Of course, the interest rate gap between virtually non-existent deposit rates and lending rates, not to mention double-digit overdraft rates, is disturbing and follows almost seamlessly on the bad image of banks and credit institutions since the Lehman collapse. This skewed view had been foreseeable for weeks and would have been avoidable if the responsible bank directors had reacted to it in good time.

The domestic banks were the clear losers in the period of negative interest initiated by the ECB – but also by other central banks. Nobody could predict whether the “money glut” initiated by Mario Draghi (“Whatever it takes …) and later by Christine Lagarde and gradual interest rate cuts down to negative interest rates could avoid a global economic crisis and mass unemployment, like in the 1920s of last century. A few years later, Jerome Powell (FED) knew exactly what he would achieve by raising interest rates again. These are steps that have a significant impact on our lives, beyond any populism on the part of some politicians. Even if that may be unpopular, this requires expert knowledge and a lot of experience, but certainly not a pre-election strategy.

Austria, as well as most European countries, has a well-functioning banking system with an old tradition. Those institutes that have not neglected the ABCs of banking through all the crisis years of our young century came through the difficult years of negative interest rates, seemingly never-ending glut of money, “haircuts” in southern Europe – yes, that’s what the government measures were called when on Friday afternoon the Banks were closed, and bank customers found a significantly reduced amount in their accounts on Monday morning.

Banks have been part of the economy for centuries. They not only handle payment transactions, but also letters of credit, bank guarantees, collections, etc. Professionally trained bankers support you in structuring export transactions, structuring payment terms and securing foreign business, often in cooperation with ECAs (OeKB, Euler Hermes etc. or also private credit insurers) and help with the sometimes-difficult KYC process.

Bank collateral is still considered the best tool for securing payments in foreign trade!

Experts in banking and the institutes behind them are indispensable partners in business life, especially in foreign trade.