klaus liebscher : overview of financial services in austria speech by dr klaus liebscher, governor of the austrian national bank, at the global financial services industry 2005 summit, vienna, 17 june 2005. * * * ladies and gentlemen, it is with great pleasure that i accepted the invitation to participate in the global financial services industry 2005 summit here in vienna, and i would like to extend to all of you a warm welcome on behalf of the oesterreichische nationalbank ( oenb ). in the next twenty minutes i will address some issues regarding the development of the financial services industry in austria. first, i would like to highlight the changes in the austrian economy and financial sector that have taken place since austria joined the european union ( eu ) ten years ago. second, i am going to outline how these developments and adaptations have made austria ’ s financial sector highly competitive, sound and stable. third, i will focus on the recent performance of the austrian financial sector and on the major challenges it will face in the near future. 1. changes in the austrian economy and financial sector since eu accession austria celebrates a number of important anniversaries this year. we commemorate not only the end of world war ii 60 years ago and the signing of the austrian state treaty 50 years ago, but also austria ’ s accession to the european union ten years ago. eu accession was an important milestone promoting the positive development of the austrian economy and had - among other things - beneficial effects on economic growth, price stability, the labor market and the country ’ s attractiveness to foreign investors. these effects - paired with the high adaptability and innovative character of the industrial and especially also the financial sector - strengthened austria ’ s competitiveness in the international arena. let me give you a few figures that attest to the favorable economic development in austria following its accession to the eu : • goods exports increased considerably from 25 % of gdp in 1995 to 38 % in 2004. • the trade deficit had been widening until 1995, but this trend clearly reversed following eu accession. • the volume of foreign direct investment from the eu - 15 in austria almost quadrupled from 10 billion euro to 38 billion euro over the last ten years, while the volume of austrian investments within the eu - 15 went up nearly five times from 4 billion euro to 19 billion euro. austria ’ s accession to the eu had a considerable impact on the financial services industry and the capital market. in this respect, the eu ’ s common market

in flux and constantly changing, we look at our north star, our three pillars, which remain constant : price stability, financial stability, and an efficient and secure payments and settlements system. let me go over our plans for this year to ensure that we keep delivering on our three pillars. 1 / 5 bis - central bankers'speeches on price stability. based on our inflation projections, inflation may have already peaked last december. of course, the [ actual ] numbers will come out soon. from that point on, we see inflation slowing down in the first half of 2023 and settling between 2. 0 - 4. 0 %, our target range, by the third quarter of 2023. by the fourth quarter, and hopefully for the rest of 2024, inflation is expected to approach the low end of the target range due to base effects. what does this mean for us? of course, our monetary settings will continue to be based on and be guided by data. and of course, we are also ready to explain when our forecasts are quite different from what actually happened because we can account for them in our models. by the way, some models do not have this ; they use the past [ figures ] and gut feel on what inflation will be - and it does [ it ] quite well. the problem with these models is they cannot explain itself when it's wrong unlike our [ bsp's ] models that have very specific exogenous variables. aside from investments in better models, we are now leveraging big data and advanced analytics to improve further our forecasting and analytical abilities. [ our ] investments in better models, technology, and big data help us ensure that our actions are responsive to the needs of the time and help us as well in our communications. now, our second pillar : financial stability. we look to the strength of our banks as a barometer of the economy's health. if banks are actively lending to households and businesses, then the economy is in a much stronger position. and as we all know, when banks over - lend, this usually is followed by long periods of slower lending and we hope [ that ] our regulations, our supervision, prevent that from happening. fortunately, the philippine banking system is on much more solid footing than it was back then. both regulators and the regulated institutions learned lessons from past crises and built their buffers in anticipation of future shocks. so, when we look at all the indicators at this time, you can clearly