Austrian watchdog warns against Hypo insolvency

VIENNA Mon Feb 10, 2014 6:02am EST

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VIENNA Feb 10 (Reuters) - Austria's markets watchdog warned the government on Monday against letting nationalised lender Hypo Alpe Adria go bust, saying it was impossible to gauge the risk that such a move entailed.

"This is an incalculable adventure. We should orient ourselves toward countries like Germany that wind down banks in an orderly way. We should not orient ourselves to countries like Cyprus," Financial Market Authority (FMA) co-head Helmut Ettl told reporters.

"The biggest risks are of course an infection of creditworthiness of the Republic (of Austria) given the Carinthian guarantees," he said, referring to around 12.5 billion euros ($17 billion) worth of debt guarantees from Hypo's home province.

The government wants healthier banks such as Raiffeisen Bank International, Erste Group and Bank Austria to support a bad bank that would absorb toxic assets from Hypo and relieve its chronic need for fresh capital, but has not ruled out letting Hypo, nationalised in 2009, go bust. (Reporting by Georgina Prodhan)

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