Savings bank bonds may plug capital gap at Austria's Volksbanken
VIENNA Dec 20 (Reuters) - Austrian lender Volksbanken may use bonds issued by the regional savings banks that own most of it to help fill any capital gap that emerges next year and avoid seeking more state aid, it said on Friday.
Regulators have told the part-nationalised group to meet a capital ratio of 13.6 percent of risk-weighted assets, the bank said on Thursday, a step that may necessitate raising fresh capital. The bank said it did not rule out seeking more funding from the state.
One of six Austrian lenders due to come under direct European Central Bank supervision next year, the group had a 15 percent capital ratio under Basel II standards in October.
But this was set to fall as it changes to new Basel III regulatory standards and taking into account expected full-year losses of more than 200 million euros ($273 million) at the flagship Volksbanken AG lender, it has said.
Volksbanken AG, of which the state holds 43 percent after a rescue last year, has dismissed as speculation a report that it might need 1 billion euros in extra aid in 2014.
A Volksbanken spokesman said on Friday the bank was reviewing ways it could strengthen its balance sheet, including generating more profit at the regional owners - also known as Volksbanken - that are part of a mutual liability pact in the group.
These banks could also issue lower-ranking tier-2 capital such as subordinated debt that still counts as capital under Basel III rules. Issuing fresh shares is something only the state could absorb, the spokesman said, adding: "We can't rule this out" either.
When Volksbanken needs to hit the new capital target is still unclear. More details are due by the end of January.
The move to ensure that Volksbanken's balance sheet is robust comes before big euro zone banks undergo a health check next year led by the ECB.
The bank has received 1.35 billion euros in state aid so far.
Volksbanken last month forecast losses through 2015 as it carries out a drastic restructuring ordered by the European Commission.
The longer it can go on shrinking back to health, the better the chances it can avoid tapping taxpayers for more help, sources close to the matter said.
"They are doing relatively well. That doesn't mean they won't need additional equity from the owners but it also doesn't mean that they need it urgently now," one source said.
Austria's government has earmarked 5.8 billion euros in aid over the next five years for struggling banks, primarily Hypo Alpe Adria.
($1 = 0.7316 euros) (Reporting by Angelika Gruber; Writing by Michael Shields; Editing by John Stonestreet)
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