* Government approves another capital injection
* Supervisory board may determine capital need on Friday
* Chancellor warns against flirting with bank bankruptcy
(Adds finance minister, chancellor comments, background)
VIENNA, March 12 Austria has approved a quick
capital injection for ailing state bank Hypo Alpe Adria
even though the exact amount it needs is not yet
Finance Minister Michael Spindelegger said on Wednesday the
state would stand behind the loss-making bank, which needs the
capital to finalise its 2013 accounts and is due to pay back a
750 million euro ($1.04 billion) bond on Monday.
"Auditors have sent a warning letter. We need fresh capital
for Hypo and relatively quickly. We have provided for this and
got cabinet authorisation for it," he told reporters after a
Hypo, which has already received 4.8 billion euros in state
aid since 2008, will hold a supervisory board meeting on Friday
at which it may determine how much more capital it needs to
close its 2013 accounts.
Two sources familiar with the matter said the bank had
sufficient liquidity for Monday's bond payment.
An expert group led by Austrian Central Bank Governor Ewald
Nowotny has recommended in a report to the government that Hypo
should be split into two - a bad bank for its toxic assets and
its Balkan banking network, which is to be sold.
But Spindelegger again on Wednesday refused to rule out the
option of letting Hypo go bankrupt, which could take down with
it the province of Carinthia, the bank's former owner, which
provided it billions of euros in guarantees.
Hypo was nationalised in 2009 after over-reaching itself in
an ambitious Balkan expansion.
Chancellor Werner Faymann, whose Social Democrats rule in
coalition with Spindelegger's conservative People's Party,
warned that Austria's creditworthiness should not be put into
play by flirting with the idea of bankruptcy.
Spindelegger expressed impatience over the need for another
capital injection for the bank on top of 800 million euros it
received in December.
"I would like to know from the bank where the money it
received in December went, and why they really need fresh
capital now. We will not lightly inject this into a wind-down
vehicle," he said.
Spindelegger, who has hired several experts and groups to
advise him on the Nowotny-led report, said the government was
sticking to its timetable to make a decision on what to do with
Hypo by the end of March.
($1 = 0.7212 Euros)
(Reporting by Angelika Gruber; Writing by Michael Shields and
Georgina Prodhan. Editing by Jane Merriman)