Buoyant Credit Demand Could Only Partially Absorb High Liquidity Supply in the Banking Sector in 2021

Central banks continued their expansionary monetary policy stance unabated in 2021. Although the high supply of liquidity to the banking sector led to a significant expansion in loans to nonfinancial corporations and in mortgages, Austrian credit institutions accumulated excess reserves within the European System of Central Banks of 125 billion € until the end of 2021. At the same time, the high momentum in mortgages prompted the Austrian Financial Stability Board to prescribe macroprudential criteria. In this environment, the Austrian banking industry was able to reduce its refinancing costs and thus improve net interest income. A strong surge in stock prices also boosted income from fees and commissions, resulting in an overall increase in earnings. With its forward guidance, the Federal Reserve Bank prepared the financial market for a change in monetary policy; accordingly, the euro depreciated against the dollar in the course of 2021.