Austria ‘must split’ bad assets from bank
“We need a quick solution, in this quarter,” said Ewald Nowotny, the head of Austria’s central bank, in Vienna yesterday.
“If that doesn’t happen, there’s the risk that there will be more capital needs. It remains a risk for the budget.”
Austria’s government has spent €4.8bn on Hypo Alpe since its bailout. It will soon decide on how to set up a “bad bank” for the lender, finance minister Michael Spindelegger told journalists in Brussels yesterday. The choice is between a vehicle wholly state-owned or one that has other banks on board, Hypo Alpe chairman Klaus Liebscher has said.
Four years after Hypo Alpe’s rescue, Austria is still debating who should carry the cost of the bank’s ill-fated transformation from a provincial lender into a financier for the former Yugoslavia. The government has dismissed plans to require bondholders to take losses, leaving taxpayers with €18bn of problem assets, including delinquent property loans and seized collateral ranging from Adriatic hotels and shopping malls to yachts and cars.
The liabilities of a state-owned bad bank, like Germany’s FMS Wertmanagement, would be added to the government’s debt, pushing it beyond 80% of gross domestic product.
Setting up a vehicle majority-owned by Austrian banks, similar to Nama, would avoid that complication, according to the EU’s Maastricht rules.
“What’s important is to keep the actual costs as low as possible,” Mr Nowotny said. “This shouldn’t be just budget cosmetics to the tune of the Maastricht rules.”
The six Austrian lenders undergoing the ECB’s asset quality review won’t need state aid, Mr Nowotny said. That includes Oesterreichische Volksbanken, he said, denying a report in Austrian daily WirtschaftsBlatt yesterday that the partly nationalised lender may need as much as €200m of aid.
“I don’t think the issue will come up,” he said.
– Bloomberg
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