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Nowotny: Decision About Bad Bank for Hypo Not Essential Right Now

Published: May 23, 2013; 19:18 · (Vindobona)

The Governor of Austrian’s National Bank confirms that the result for the ailing Hypo Group will not be “good” due to the losses that have amounted over the past years.

Nowotny: Decision About Bad Bank for Hypo Not Essential Right Now / Picture: © Wikipedia / Christian Wirth (Wirthi)

A fundamental decision for or against the establishing of a bad bank for state-owned Hypo Alpe Adria Group does not have to be made at the end of May already, Govenor of the Austrian National Bank (OeNB) Ewald Nowotny declared at the sideline of a press conference on Thursday. Until the end of May, only schedules need to be decided on but not in which form the restructuring has to be carried out. The Governor announced that there was still a little time left.

The EU Commission was, according to Nowotny, mainly interested in the question if there would a distortion of competition because of the support for the banking institute. This is why the Commission requests for the bank not to take up any new business. What happens with the relicts is of no interest to the Commission. “This is something that the Austrian taxpayer is interested in,” Nowotny explains. He expressed his hope to find a solution after all which meets the Commission’s requirements.

As far as Nowotny is informed, there are efforts on both sides to come to a solution. The result would probably not be considered a “good” result. “Once such drastic losses have amounted, like with Hypo, then there is no easy way out,” he confirmed. The solution should both meet the demands of the Commission and keep the burden for the taxpayers as low as possible. “I hope a formula will be found to come to an acceptable solution for both sides,” Nowotny said.

Austria still has a bit more than a week to present a sustainable restructuring plan for the Carinthian Hypo bank. Until the end of 2013 the operative banking units are supposed to be sold otherwise Brussel threatens to shut down the institute. According to the plans, downsizing and unsaleable bank units can be deposited in a bad bank.

According to an article by Presse (Thursday issue), the Indian Srei Group offers € 65.5m for the crisis-struck Austrian Hypo Alpe Adria affiliate. Hypo’s headquarter in Klagenfurt is not fore sale. Activities in CESEE and Italy are supposed to be organized from there. For the Austrian taxpayers the selling of Hypo Group would be a losing deal. Hypo Group has the Austrian affiliate listed at a value in the amount of € 120m. The selling of the Austrian banking institute is a compromise. The EU commission demands the selling or winding-down of the entire bank until the end of this year. Finance Minister Maria Fekter rejects this idea since it would burdent he budget with billions of Euros. However, it now seems that the Austrian state will get for time for the selling of other Hypo affiliates in Italy and CESEE by the EU.