September 2, 2014 / 10:46 AM / in 3 years

Minister leaves door open for more aid for Austria's Volksbanken

VIENNA, Sept 2 (Reuters) - Austria’s Economy Minister Reinhold Mitterlehner has not ruled out giving further aid to part nationalised Volksbanken AG, potentially opening the way to more support after a previous minister dismissed this option.

Volksbanken has already received 1.35 billion euros ($1.77 billion) of taxpayer support, but two sources close to the situation said last week the bank believes it does not have enough capital to meet the demands of the European Central Bank’s landmark review of euro zone lenders.

Mitterlehner, who became Austria’s vice chancellor when Michael Spindelegger quit last week in a row over tax reform, said further aid was still under discussion.

Spindelegger, who had also been finance minister, had ruled out more aid for the bank.

“First we have to see what the analysis of the problem is. Second, what is the situation with a view to possibilities - several are possible,” Mitterlehner told a news conference on Tuesday.

“We will discuss this in the government and then take a decision with the finance minister,” he added, saying he did not want to create uncertainty by speculating about possible capital injections from Volksbanken’s regional savings bank owners or the state, which now has a 43 percent stake in the bank.

Volksbanken has said it intends to solve its problems without more public help. It was not immediately available to comment on Tuesday.

The ECB is examining whether about 130 of the euro zone’s top banks have properly valued their assets and have enough capital to withstand future crises, in a bid to banish doubts about their health six years on from the global credit crunch.

Results of the ECB exercise will not be finalised until October, but preliminary estimates Volksbanken has prepared internally show the group needs more capital, one source with direct knowledge of the matter said last week.

Volksbanken, which has declined comment on the ECB health check until the final results, has said its ability to issue bonds to boost capital seemed limited at the moment.

Ratings agency Fitch said last month that the bank may need to rely on capital injections from the government.

Mitterlehner did not comment on media reports that Volksbanken could shift some of its problem assets into a “bad bank” that Austria is setting up for another nationalised lender, Hypo Alpe Adria.

New Finance Minister Hans Joerg Schelling, who became Volksbanken chairman in 2012 after a state rescue, took office this week but has yet to comment on Volksbanken’s health.

1 US dollar = 0.7621 euro Reporting By Shadia Nasralla; editing by Susan Thomas

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