UPDATE 1-Hypo bad bank doesn't change Austria ratings - S&P
(Adds market reaction, other agencies, background)
VIENNA Feb 11 (Reuters) - Austria's plan to set up a state-run "bad bank" to absorb toxic assets from nationalised lender Hypo Alpe Adria will have no immediate impact on the country's sovereign debt ratings, Standard & Poor's said on Tuesday.
S&P has a long-term AA+ rating with a stable outlook.
"The ratings already incorporate the expected impact on Austria's public finances of the wind-down unit," the agency said, a day after Austria said it may adopt a public vehicle to absorb up to 19 billion euros ($25.9 billion) in Hypo assets.
"Although the establishment of the wind-down unit will increase Austria's ratio of net general government debt to GDP, expected contingent liabilities will decrease by a comparable amount," it added in a statement.
Austrian 10-year bond spreads over benchmark German Bunds were little changed at around 29 basis points.
Other ratings agencies had no immediate comment.
Fitch, which rates Austria AAA with a stable outlook, had said in October that the risk of additional material costs to public finances from supporting domestic banks was low.
"The high exposure of banks to emerging Europe leaves them vulnerable to risk from that region. Unexpected costs from restructuring banks already in receipt of government aid could also affect the sovereign's credit profile," it said at the time.
Moody's, which rates Austria Aaa, said its negative outlook reflected "still-elevated risks to the government's balance sheet that could arise from contingent liabilities in the Austrian banking system" and from further financial support for distressed euro-area sovereigns.
"Austria's rating could be downgraded if further material government support were needed to assist the domestic banking sector, whose asset quality and capitalisation remain weak," it had said then.
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