REFILE-UPDATE 2-Austrian bank Hypo told to boost capital further
(Corrects spelling in headline)
* Higher requirement could spark row with government
* New target of 2.19 bln euros by March 31, 2013
* Regulator mandates capital ratio of 12.67 pct
* Italian, Slovenian units already met capital ratio targets
VIENNA, Sept 6 (Reuters) - Austria's financial regulator has told nationalised lender Hypo Alpe Adria to raise even more capital as a buffer against recession and jittery markets, risking a row with a government reluctant to dole out more aid to banks.
The government took over Carinthia-based Hypo in 2009 to avoid a collapse that would have sent shockwaves through the region. The bank is now trying to shrink itself back to health and sell off units in Austria, Italy and southeastern Europe, a tough task in the current economic climate.
The bank said on Thursday that it had been told by the Austrian Financial Market Authority (FMA) to raise 2.19 billion euros ($2.76 billion) by March 31, 2013, versus its previous target of 1.5 billion euros by the end of this year.
Finance Minister Maria Fekter is concerned about the prospect of subjecting state finances to more stress by having to dole out extra aid to a bank that is already state-owned.
Fekter told Reuters last week that she disagreed with even the lower target of 1.5 billion euros, despite the government being on track to hit its 3 percent budget deficit target this year. "We aren't there yet, but I assume we will make it. It depends, of course, on how much the banks will cost us," she said.
The new target - which Hypo hopes to negotiate lower - also underscores rating agencies' concerns about the risk posed by Austria's relatively large banking sector, the members of which are the biggest lenders in emerging Europe.
"The value now stipulated by the FMA is based, above all, on the new, conservative estimate of credit risk because of the recession, and the increasingly tense situation in financial markets," Hypo Alpe Adria said in a statement.
The bank said it had been instructed to hit a capital ratio of 12.67 percent based on its portfolio in April 2012, exceeding its previous target of 12.04 percent by the end of 2012, set by the FMA and central bank.
Chief Executive Gottwald Kranebitter said that the tougher capital target was not entirely unexpected.
"Nevertheless, it is annoying that the 5 billion euro reduction in risk since the emergency nationalisation and the continual improvement in internal bank systems is wiped out by the economic situation," he said.
Hypo pointed out that it had already met the FMA's targets of a capital ratio of 10 percent for its Italian unit and 9 percent for its Slovenian unit.
The bank said it now had until Sept. 28 to put its case to the FMA.
Kranebitter in July dismissed as speculation a magazine report that his bank could require as much as 5 billion euros in additional state aid should its restructuring plan go off the rails. ($1=0.7935 euros) (Reporting by Georgina Prodhan and Michael Shields; Editing by David Goodman)
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