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Austrian regulators confirm Volksbanken equity ratio goal
May 7, 2014 / 8:22 AM / 4 years ago

Austrian regulators confirm Volksbanken equity ratio goal

VIENNA, May 7 (Reuters) - Austrian regulators have confirmed the minimum 13.6 percent equity ratio target set for the Volksbanken group, the bank said, reiterating it may need “capital measures” at some stage to stay above that level.

Austria became loss-making Volksbanken AG’s second-biggest shareholder with a stake of 43 percent in 2012 and has so far ploughed 1.35 billion euros ($1.88 billion) of state aid into the bank to keep it afloat.

It is one of six Austrian lenders due to come under direct supervision of the European Central Bank this year.

The Association of Volksbanks, which comprises the flagship Volksbanken AG (VBAG) and dozens of regional banks that own a majority, had an overall equity ratio of 14.6 percent under Basel III rules at the end of last year.

But it said last month the ratio would inevitably fall in the years ahead as it repays 300 million euros in non-voting capital it acquired from the state and takes a hit from applying Basel III rules. It also faced “substantial” risks from winding down more of its portfolio under an EU-mandated revamp.

“VBAG’s managing board is therefore in the process of examining possible capital measures,” it said in a statement late on Tuesday.

Volksbanken has said it may use bonds issued by its regional savings bank owners to help fill any capital gap that emerges.

Volksbanken has enough capital to pass a European-wide health check this year without needing more state aid as it presses ahead with radical restructuring, it said last month.

Getting Volksbanken - which failed a similar stress test in 2011 - back onto solid ground would be a relief for Austria as it grapples with nationalised bank Hypo Alpe Adria, whose chronic need for capital will sharply inflate state debt and the budget deficit this year. ($1 = 0.7177 euro) (Reporting by Michael Shields; Editing by Dale Hudson)

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