UPDATE 2-Austrian banks need up to $17 bln for Basel III

Fri Dec 14, 2012 8:17am EST

Related Topics

* Banking sector needs 8-13 bln euros to met Basel III rules

* Austrian banks' capital still lags international peers

* Central bank cites high risks in uncertain environment (Recasts with quotes from news conference)

By Michael Shields

VIENNA, Dec 14 (Reuters) - Austrian banks need up to 13 billion euros ($17 billion) extra capital to meet new Basel III rules designed to shore up the sector and keep taxpayers from footing the bill for bailouts, the central bank said on Friday.

Austrian banks, among the biggest lenders in emerging Europe, were urged to keep strengthening their balance sheets to be able to withstand "high" risks in an uncertain economic environment.

In its semi-annual financial stability report, the Austrian National Bank (OeNB) cited as risks the fallout from the European debt crisis, growing economic headwinds and a high but declining share of loans denominated in foreign currencies.

"Despite recent improvements, banks are still called upon to increase their capital buffers in order to be braced for these risks and other unforeseeable events," the OeNB said.

It noted Austria's top banks remain undercapitalised versus international peers operating in central and eastern Europe. Banks also face a 2017 deadline to replace some forms of state aid that Austria provided them as the 2008/09 financial crisis erupted but won't count as capital under Basel III rules.

"The one (factor) is the peer issue and the other is that capital is simply needed to enable these repayments (of non-voting state capital). That is why we have no choice but to say they have to keep building it up," OeNB bank supervision chief Andreas Ittner told a news conference.

He said it was up to banks to decide when to repay state aid but "repaying it all in the last year will probably be rather difficult".

Big banks such as Erste Group and Raiffeisen Bank International have said they are in no hurry to repay so-called participation capital they got from the state.

The OeNB estimated that the sector needs between 8 billion and 13 billion euros more to be fully Basel III compliant, although most of this was existing so-called tier 2 capital that had to be replaced if not recognised by regulators as valid.

He thought this would not be hard for banks to arrange.

"If they were able to build up around 8 billion in the past five years in conditions that were not very easy then the expectation is they can absolutely do again this in the next five years," he said.

The consolidated tier 1 capital ratio of Austrian banks was 10.6 percent at the middle of 2012, it said.

The report found no signs of a credit crunch or of a broad retreat from emerging Europe as banks deleverage.

"The concerns voiced by some countries and institutions that Austrian banks might curb their business operations in CESEE (central, eastern and southeastern Europe) have materialised only to a very limited extent," it said.

($1 = 0.7641 euros) (Editing by Elaine Hardcastle)

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