VIENNA, June 12 (Reuters) - Two of Austria’s top bankers urged the government to reconsider its plan to wipe out some subordinated debt investors in loss-making state bank Hypo Alpe Adria despite guarantees from the bank’s home province of Carinthia.
Austria unveiled draft legislation on Wednesday that for the first time in Europe would mean investors ostensibly protected by state guarantees must help shoulder the costs of winding down a nationalised bank.
Ratings agency Standard & Poor’s put seven Austrian banks and four Austrian provinces on CreditWatch negative this week given concerns about the impact of the law, which calls into question the commitment of Austria’s federal government to stand behind its states and banks.
“The price that the taxpayer will pay for the law will be very high,” Raiffeisen Bank International Chief Executive Karl Sevelda told newspaper Der Standard in comments published on Thursday.
“Insolvency (for Hypo) was rejected because one didn’t want to shake investors’ confidence. But failing to honour provincial guarantees has the same effect,” he said.
Sevelda and his boss, Chairman Walter Rothensteiner, wrote to Finance Minister Michael Spindelegger on Wednesday asking him to rethink the government’s approach given the “loss of confidence by investors” and the “fundamental intervention in contractual rights” that could arise, the paper reported.
A Raiffeisen spokeswoman confirmed his comments.
Austrian insurer and Hypo debt investor Uniqa and former Hypo owner BayernLB have already threatened legal action over the law, which could take effect by August should parliament approve it as planned in July.
In an interview broadcast on Thursday, S&P analyst Thomas Fischinger told broadcaster ORF that Austria’s reputation was at stake in the matter. (Reporting by Michael Shields; editing by Tom Pfeiffer)