Important institutions in the financial market

Money, capital and foreign exchange markets

Financial markets are the place where money supply meets money demand. Financial markets and developments in these markets play a central role for the economy. A stable financial system is important for the proper functioning of trade relationships. If a financial system is stable, projects can be financed and money can be saved, stored and invested safely. This is how a functioning financial system contributes to a stable economy. 

There are three different types of financial markets: 

• The money market, where stakeholders trade money in the short term. Banks are the primary stakeholders in the money market.
• The capital market, where long-term financial products are traded, for example shares and bonds issued by companies or governments with terms of more than one year. 
• The foreign exchange market, where currencies such as the Euro, Dollar or Yuan are traded. 

Financial market stakeholders

In the financial market, people can redistribute surplus money so that it can be used productively and usefully A student may inherit money from his or her grandmother, for example, and may not need it right away. Instead, he or she may want to save it for later. A young couple for example may need a loan to buy an apartment. Banks or other financial intermediaries can help transfer money from an investor (also called creditor, in our example: the student) to a borrower (in our example: the young couple). 

So, on one side of the financial market you have creditors (also called "investors"). They can be private individuals, companies or banks with more money than they currently need. This  surplus money can be made available to the financial market as an investment. 

On the other side of the financial market, there are borrowers. These are private individuals, companies or governments in need of money for planned expenditures or investments. For example, a company might want to open a new training center for its employees. This requires capital which can be obtained in the financial market via a loan, for example. Borrowers who are looking for financial resources can obtain them in various ways. They can either directly get in touch with creditors or rely on financial intermediaries, such as banks, which take in deposits (often savings) and then use the deposited amounts to give out loans or invest in financial assets. 

The great advantage of financial intermediaries is that they can offer different financing options at a lower cost. This is possible because they have more information as they are in touch with many clients and involved in numerous business transactions. Without financial intermediaries, it would be very expensive and time-consuming to find a person willing to provide the exact amount of money you may need. 

Important institutions in the financial market

Apart from banks, which serve as important financial intermediaries between creditors and borrowers, there are various other institutions in the Austrian financial market. These institutions contribute to the financial sector’s stability, regulation and development. The most important institutions in Austria’s financial market are:

The Oesterreichische Nationalbank (OeNB)

The Oesterreichische Nationalbank (OeNB) is the central bank of the Republic of Austria and, as such, an integral part of the European System of Central Banks (ESCB). It implements the monetary policy of the European Central Bank (ECB). In the public’s interest, it helps ensure price stability and thus also supports economic development in Austria and the euro area. 

Main tasks of the OeNB:

• The OeNB supplies the economy with cash.
• It is responsible for the implementation of monetary policy.
• Supporting financial stability is another key task of the OeNB.
• It generates statistics about various aspects of the economy.
• Furthermore, it plays a decisive role in ensuring efficient payment systems and services. 

The OeNB is also involved in promoting science and research, the transfer of economic and financial knowledge, the arts and culture. In line with the principles of an eco-social market economy the OeNB is committed to diversity and sustainability.

The European Central Bank (ECB)

The European Central Bank (ECB) is the central bank of the euro area. It is responsible for monetary policy and monetary stability in all countries that belong to this area. The ECB maintains price stability in the euro area and ensures that the European banking system is secure and robust. By doing so, in other words the ECB is committed to making sure that your money is safe at your banks.

Financial Market Authority (FMA)

The Financial Market Authority (FMA) is an independent authority. It is responsible for monitoring and regulating the Austrian financial market. The FMA supervises banks, insurance companies and other financial services providers to ensure that the financial system remains secure and stable.

The Vienna Stock Exchange (Wiener Börse)

The Vienna Stock Exchange (Wiener Börse) is Austria’s most important trading platform for securities. Empress Maria Theresa established it in 1771 as one of the first stock exchanges in the world. Today, Wiener Börse operates the stock exchange in Vienna as well as in Prague. Stakeholders trade shares, bonds and other financial instruments there. On the stock exchange, supply and demand determine prices, e.g. for shares. The more stakeholders trade the easier it gets to buy and sell securities in order to turn them back into cash. 

Banks

Banks are companies that offer a variety of services in relation to money:

• They are key players in payment services (mainly because a bank account is required for many payment options).
• They accept money from economic stakeholders that would like to save or invest. 
• They provide money to those economic stakeholders that need it, for example by granting loans. 

Furthermore, banks provide advice on matters related to investment and financing, they provide safes and vaults for the secure storage of valuables and they act as brokers for securities as well as other forms of investment.

Other financial services providers

In addition to traditional banks, Austria counts a number of other financial services companies. These include:

• Fintechs (financial technology firms) are businesses that use new technologies to offer financial services. Fintech innovations range from payment apps to automated advice. Fintechs partly replace the financial services offered by banks and others. They do so by distributing financial products through new channels, like online platforms, apps or innovative technologies. 
• Investment companies are companies that specialize in the management of investment funds and assets. 
• Pension funds are institutions that specialize in managing occupational and private pension schemes.
• Finance consulting firms and asset management companies are independent companies that provide services in the areas of financial planning, diversification of wealth and investment advice. 
• Crowdfunding platforms are websites that allow organizations to raise capital directly from a large number of investors. 
• Investment services providers offer services related to the buying and selling of securities. They include brokerage firms and banks that trade securities, for example.

How to recognize a reliable financial services provider

Choosing a reliable financial services company is crucial in order to ensure that your finances are handled in a responsible and secure way. You can take into account various criteria to identify a reliable financial services company.

Regulation and licensing

A reliable financial services company should be licensed and regulated by appropriate supervisory authorities. 
In Austria, providing financial advice is a regulated profession. This means, financial advisors must prove that they are suitable and appropriately trained. Only then will they be able to officially register a financial services company. Reliable financial advisors must therefore undergo professional training and government checks both prior to registering their businesses as well as afterwards on a regular basis. This includes completing specific exams to become a licensed or academically trained financial advisor.

Transparency

A reliable financial services company should be transparent about fees, commissions, risks and conditions. If information and terms and conditions are not transparent or difficult to understand, be extra-cautious.

Customer service

Good customer service is another important indicator of professionalism. Most online banks or fintechs, however, offer rather limited customer care. This does not necessarily mean that they are unreliable. It can be helpful to look for a company’s imprint online. Companies are obliged to publish an imprint on their websites. There, you should find their headquarters location, the responsible supervisory authority or representative body and contact options, for example. You should be careful if there is no imprint or if essential information is missing.

Research and information

It is very important to do your own research and to get as much information as possible. When it comes to security matters regarding your own assets, information to help you find the right financial services provider can be limited. Therefore, it is important to ask as many questions as necessary in order to make sure you fully understand the offered product. 
You should be careful if a provider promises you unrealistic returns. If something seems too good to be true, it usually is not true (Let’s talk about money – FMA).