VIENNA May 8 Austria may adopt Ireland's "bad
bank" model to help reorganise nationalised lender Hypo Alpe
Adria before an end-May deadline from the European
Commission for a new and more effective revamp plan, sources
close to the matter said.
Brussels and Vienna are at loggerheads over the pace of
overhauling Hypo, with the Commission keen for its operating
assets to be sold by the end of the year but the Austrians
fearful rushed sales could hurt state finances ahead of
elections due by late September.
To break the impasse, Austrian officials are looking to
Ireland's National Asset Management Agency (NAMA), often
referred to as the country's "bad bank", as a potential model,
two sources close to the matter said.
Dublin set up NAMA in 2009 to relieve pressure on a banking
sector crushed by excessive property lending. It bought deeply
discounted loans - both good and bad - worth a nominal 74
billion euros from banks in return for state-backed bonds.
Its goal was to wring as much money as possible from the
loans over a decade. What makes the model attractive to Austria
is that NAMA set up a special investment vehicle in which three
private investors held the majority, thus allowing Ireland not
to count its debts as state debt.
Just which investors Austria could attract remains a
"If you want to do such a model, you can only force banks
and insurers to take part, but this is feasible only if certain
incentives are there: meaning they need something in return,"
one source familiar with the discussions told Reuters.
"I don't think that private institutions will take part in a
major way," the source said, noting most big Austrian lenders
had already taken state capital themselves and were not paying
it back for the time being.
Another suggested the financial sector might have to be
pushed into taking part in the plan, but did not say how.
Spain's bad bank, which is broadly based on the NAMA model,
has 4.8 billion euros in private capital, more than half of
which was contributed by Spain's healthy banks to reduce the
burden on state books.
Hypo Alpe Adria, which has swallowed more than 2 billion
euros in state aid, has said a quick sale of businesses in
Austria, Italy and the Balkans could saddle taxpayers with
losses of between 5 billion euros and 6 billion. The bill could
be even higher given its 16.5 billion in publicly guaranteed
But European Union Competition Commissioner Joaquin Almunia
has lost patience, warning Hypo may have to pay back its state
aid if it does not improve on its restructuring plans.
Finance Minister Maria Fekter has in the past opposed
creating a bad bank to handle the woes of nationalised lenders
including Hypo and Kommunalkredit, in part for fear
it could trip up her plans to generate a budget surplus by 2017
and get state debt under 60 percent of GDP by the end of the
"We have to see that wrong decisions don't jeopardise state
finances. This is all being negotiated with the European
Commission," she told a panel discussion late on Tuesday.
Almunia's pressure for quick bank sales comes at a time when
it is nearly impossible to do such deals, she said.
"It is a dilemma that no one wants to buy a bank at the
moment. It will be hard to do this in a way that protects
taxpayers," Fekter added. "All countries have state-owned banks
and they all have to sell them, so there are lots of banks on
the market but no buyers."
Officials say Austria hopes to enlist powerful allies to
help persuade Almunia that Hypo - nationalised under EU and ECB
pressure to ensure financial stability - was too important in
the Balkans to simply shut down.
They may also argue that the traditional five-year window
which countries get to exit state aid to banks should start from
the time of Hypo's nationalisation in 2009, rather than from the
time it first got state aid in 2008.
(Editing by Carmel Crimmins and David Holmes)