Austria's Liebscher sees Hypo bad bank decision in Q1

VIENNA Sat Jan 4, 2014 5:51am EST

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VIENNA Jan 4 (Reuters) - The head of an Austrian task force handling ailing Hypo Alpe Adria wants the government to decide in the first quarter on what kind of "bad bank" could absorb toxic assets from the nationalised lender.

Klaus Liebscher, a former central bank governor who is also Hypo's chairman, told newspaper Die Presse he would prefer a model in which healthier Austrian banks would own a majority of the bad bank so that its debts stay off state books.

But other banks such as UniCredit unit Bank Austria, Erste Group and Raiffeisen Bank International have shown little appetite for such a move unless the government provides enticements such as cutting a bank levy.

The alternative would be a purely state-owned vehicle to wind down up to 18 billion euros ($24.5 billion) in Hypo assets over years, relieving pressure on the bank to meet regulatory capital minimums even while it gets more aid, he said.

This option would boost state debt by 5 to 6 percentage points, he said. State debt is now around 77 percent of economic output, near the 80 percent mark that worries ratings agencies.

"We still have to clear up some details, but the intention is to set up a wind-down company," Liebscher said. "My goal is to have a solution by the end of March 2014."

Austria had to take over Hypo from German bank BayernLB in 2009 to rescue a bank that used guarantees from its home province of Carinthia to fuel unbridled expansion that drove it to the brink of insolvency.

Taxpayers have provided it with 4.8 billion euros in capital, direct cash infusions and guarantees since 2008.

The country's political leaders, central bank and Hypo itself have ruled out letting the lender go bust, which would trigger around 14 billion in debt guarantees from Carinthia that the province cannot afford to pay.

Under a restructuring plan agreed last year with the European Commission, Austria can provide Hypo 5.4 billion euros in capital from 2013 to 2017.

Partly state-owned Volksbanken AG has also not ruled out requiring more aid, but has dismissed as speculation a report it needed 1 billion euros in 2014.

Liebscher said he assumed regional savings banks that own most of Volksbanken would contribute should it need more capital. He said he was unaware of any future capital needs at KA Finanz, nationalised lender Kommunalkredit's bad bank. ($1 = 0.7346 euros) (Reporting by Michael Shields; Editing by Susan Fenton)

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