VIENNA, March 9 Austria's central bank governor
recommends putting nationalised bank Hypo Alpe Adria's
toxic assets into a limited company without blanket
state guarantees, he said on Sunday.
Rather than a state-owned "bad bank" that could continue to
be a drain on public finances, Ewald Nowotny said Hypo's 17.8
billion euros ($24.7 billion) in non-performing assets should be
transferred into a wind-down vehicle.
The vehicle would have no banking licence and would no
longer enjoy the unlimited backing of the Austrian government,
which has already put 4.8 billion euros into the bank to shore
up its capital, Nowotny said.
Nowotny chairs a task force charged with making an expert
recommendation to the Austrian government on how to wind down
the loss-making bank that was nationalised in 2009. He said it
had handed its report to the government on Friday night.
"There would be no blanket state guarantees," Nowotny told
ORF television. "Still, it will naturally have an effect on the
budget... state debt will rise by 17.8 billion euros."
The Austrian government wants to decide by the end of March
on how to wind down Hypo, which was nationalised after years of
breakneck expansion in the Balkans pushed it to the brink of
Finance Minister Michael Spindelegger has repeatedly refused
to rule out letting the bank go insolvent, or bailing in
creditors who include Bavarian state bank BayernLB, a
former owner of Hypo.
Nowotny said his recommended solution would push state debt
to around 80 percent of gross domestic product from currently
74.4 percent, but did not believe this would endanger Austria's
credit ratings, as the agencies had already priced this in.
He said, however, it could push Austria's state deficit
slightly over its Maastricht target of 3 percent of GDP. "It
would not be serious to rule it out," he said.
Nowotny said it was possible that Austria would have to
inject more capital into Hypo to boost its balance sheet for
2013, which was not yet finalised.
Nowotny again urged the government not to allow Hypo to go
insolvent, which would trigger 12.5 billion euros in guarantees
given by the Austrian province of Carinthia, the bank's home
province, and most likely send Carinthia into bankruptcy.
He said those guarantees would remain with the wind-down
vehicle, in his recommended solution.
Hypo's Balkan banking network, with 8.3 billion euros' worth
of assets, would remain in the bank with the aim of being sold
off, Nowotny said.
Hypo's chief executive said last week said there were five
parties seriously interested in bidding for the Balkan network.
Nowotny also urged Austria and Bavaria to come to a general
settlement over several lawsuits they are fighting about whether
BayernLB was duped into buying Hypo, and the extent to which
BayernLB was responsible for Hypo's disastrous strategy.
"It's not good to have so many open questions just at the
time the ECB is investigating," he said, referring to a series
of health checks the European Central Bank is making on euro
zone banks before taking over as financial sector supervisor.
($1 = 0.7214 euros)
(Reporting by Georgina Prodhan, editing by Louise Heavens)