* Finance ministry takes harder line in row over who pays
* Insolvency, voluntary debt haircuts among options -
* Split between regulators and government widens
(Adds quotes and background)
VIENNA, Feb 20 Creditors of Hypo Alpe Adria
should contribute to the costs of winding down the
nationalised Austrian lender, the finance ministry said on
Thursday, listing insolvency or voluntary debt haircuts as
The comments widen a split between the government and bank
supervisors over how to handle Hypo, whose chronic capital needs
have required 4.8 billion euros ($6.6 billion) in taxpayer
support since 2008.
A ministry spokesman said Austria had commissioned outside
experts to review the situation, adding: "The political goal is
that not just taxpayers bear all the costs, but that others such
as creditors or the province of Carinthia do their part."
Carinthia is Hypo's home province and still has 12.5 billion
euros in guarantees on Hypo debt. The central bank and FMA
market watchdog have warned the government not to let Hypo go
under. Such an eventuality would triggering guarantees that
Carinthia - with an annual budget of around 2 billion euros -
cannot honour on its own.
The government at this stage favours creating a "bad bank"
to absorb toxic assets from loss-making Hypo, which it had to
take over from BayernLB in 2009, but has refused for
weeks to rule out letting the bank go bust.
BayernLB has 2.3 billion euros in funds stuck in Hypo, which
has refused to repay the money that it says must be treated as
equity rather than loans until it gets back on its feet.
BayernLB is trying to get the money back in court.
The Puls 4 broadcaster released comments from an interview
it said it would air with Finance Minister Michael Spindelegger
in which he takes the same line when asked about an orderly
"I believe that creditors as well have to contribute, and
Carinthia too has a moral obligation because the provincial
government there caused the problem," he was quoted as saying.
Spindelegger was referring to the previous Carinthian
government under far-right leader Joerg Haider, which provided
generous debt guarantees that let the bank embark on breakneck
expansion at home and in the Balkans that pushed it to the brink
He said it was a political decision to determine to what
extent creditors and Carinthia should be asked to support Hypo's
resolution costs, but a decision to be taken only after the
government had a chance to review all its options.
Questions about the solidity of Austrian public guarantees
given the Hypo debate has already prompted Moody's to slash its
ratings on Hypo and downgrade Carinthia. It downgraded more debt
of Austrian banks this week on these concerns.
Fitch will release its latest sovereign review of Austria on
Friday, and Moody's follows on Feb. 28.
($1 = 0.7293 euros)
(Reporting by Angelika Gruber and Michael Shields; Editing by
Georgina Prodhan and Pravin Char)