Austria starts talks with banks to wind down Hypo Alpe

The Austrian government is beginning talks with the nation’s banks to gain their support for winding down nationalised Hypo Alpe-Adria-Bank International in a way that keeps it off the state’s books.

Austria will start negotiations immediately and will decide next month whether it’s possible to implement a model where they contribute to the cost, Finance Minister Michael Spindelegger told journalists in Vienna yesterday. It will also hold discussions with the European Union’s statistics office Eurostat about whether it can keep Hypo Alpe’s bad assets off government books under the EU’s debt rules, he said.

“There will be in-depth talks with the banks toward a participation model,” Spindelegger said. “At the same time we’ll also talk to Eurostat to make sure it’s accepted. This should all go rather quickly because we need the basis for a decision quickly.”

Four years after Hypo Alpe’s rescue, Austria is still debating who should carry the cost of the company’s ill-fated transformation from a provincial bank into a financier for the former Yugoslavia. Spindelegger and Chancellor Werner Faymann have dismissed plans to require bondholders to take losses, leaving taxpayers saddled with about €19bn of assets.

Setting up a vehicle majority-owned by Austrian banks, similar to Ireland’s National Asset Management Agency, could avoid adding the assets to Austria’s debt stock under the EU’s Maastricht debt rules.

A purely state-owned bad bank, like Germany’s FMS Wertmanagement AoeR, would push the country’s debt levels beyond 80% of gross domestic product.

The chiefs of Erste Group Bank and UniCredit Bank Austria, Austria’s two biggest banks, said last year they will only support a bad bank that’s “commercially viable” because they need to justify any decision to shareholders.

Hypo Alpe chairman Klaus Liebscher, who has led a group of experts advised by Germany’s SachsenAM and Bankhaus Lampe to study alternatives for a bad bank, presented his models together with Austrian central bank Governor Ewald Nowotny to Spindelegger and Faymann yesterday. According to his favoured plan, Austrian banks will contribute membership fees to a “bank stabilisation fund” that would own the bad bank. To make it commercially feasible for the lenders, contributions to the fund may be deductible from Austria’s bank levy and the fund could serve as a precursor to a bank restructuring fund Austria will have to set up, Liebscher said.

— Bloomberg