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Hypo Group: Nowotny Calls for Fast Proceeding

Published: February 24, 2014; 15:45 · (Vindobona)

Newly designated head of Hypo Group’s task force, Governor of the Austrian National Bank (OeNB) Ewald Nowotny, calls upon the government to fastly proceed with the downsizing of the ailing bank.

Hypo Group: Nowotny Calls for Fast Proceeding / Picture: © Agenda Austria 2020

Nowotny took over the chair of the task force to avoid any further delays, the Governor of the Austrian National Bank said on Saturday, a day after the resignation of his predecessor Klaus Liebscher became known.

Currently the task force is working on a bad bank model for problem loans and liabilities. According to Nowotny, preparations for the bank model are supposed to be completed until March 3. The longer the establishing of a bad bank will take the more expensive it will become for the taxpayers and an even greater loss in confidence in the Austrian government has to be faced, the governor said. “We are under international monitoring. Time is really pressing”, he warned.

Nowotny still considers the amount of damages by the downsizing and restructuring of Hypo to come at € 4bn on top of the around € 4bn in state aids that have already been injected to the ailing bank. However, he pointed out that the remaining losses can only be estimated in about ten year’s time.

The governor does not consider a participation of the downsizing costs by Hypo Group’s bondholders realistic. He stressed that this was “not directly implementable”, particularly because of the high amount of liabilities of the province of Carinthia and the resulting strong positions of investors. Moreover, the implementation would be a challenge in technical terms. Klaus Kumpfmüller too, CEO of the Financial Market Authority (FMA), warned of a financial participation of creditors. “This is like playing with fire,” he warns.

However, instead of bondholders Nowotny believes that the province of Carinthia has to contribute to the restructuring costs. While the governor of Carinthia, Peter Kaiser, presented himself willing to negotiate he stressed that first of all a bad bank had to be established. Moreover he warned of burdening the province too much with additional contributions and sending it to ruin. “The main object cannot be to erase an entire province,” he said and pointed out that the federal Republic had helped other banks as well without demanding a financial contribution from the respective province.

The resignation of Klaus Liebscher, former head of Hypo Group’s task force, did not come as a surprise to Deputy Chancellor and Finance Minister Spindelegger. On Monday Spindelegger told a press conference of journalists that Liebscher had already announced internally to step down.

Moreover, the Finance Minister said that he was “open” to a “Council of the Wise” in regard to the assessment of the ailing bank, particularly since Chancellor Werner Faymann was in favor of consulting one. Spindelegger considers it crucial that the task force continued its work under Governor Ewald Nowotny and expressed his hope to be able to present the final report of the expert group next week in order to discuss on further steps.