VIENNA, Dec 13 (Reuters) - Nationalised Austrian lender Hypo Alpe Adria got a green light for 800 million euros ($1.1 billion) in more state aid on Friday when its board approved issuing more non-voting shares that the state will buy within days, it said on Friday.
The well-flagged move brings to 4.8 billion euros the amount of capital, direct cash infusions and guarantees that taxpayers have provided since 2008.
Austria had to take over Hypo from German landesbank BayernLB in 2009 to rescue a bank that had used guarantees from its home province of Carinthia to fuel unbridled expansion that drove it to the brink of insolvency.
Just what to do with Hypo had been left hanging by weeks of coalition negotiations between Austria’s two main parties, which culminated in an accord on Thursday.
New Finance Minister Michael Spindelegger now gets the job of figuring out whether and how to get other banks involved in setting up a “bad bank” for 19 billion euros in assets to be shifted off Hypo’s balance sheet as it breaks itself up.
The country’s political leaders, central bank and Hypo itself have ruled out letting the lender go bust, which would trigger around 14 billion in debt guarantees from Carinthia that the province cannot afford to pay.
Under a restructuring plan agreed with the European Commission, Austria can provide with Hypo 5.4 billion euros in capital from 2013 to 2017. Of that, up to 3.65 billion remains available, the bank said.
The coalition partners have agreed to earmark 5.8 billion euros in aid to struggling banks over the next five years.
Partly state-owned Volksbanken AG has also not ruled out requiring more aid, but has dismissed as speculation a report it needed 1 billion euros in 2014.
$1 = 0.7271 euros Reporting by Michael Shields; Editing by David Holmes