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Spindelegger defends handling of Hypo scandal

Finance Minister Michael Spindelegger (ÖVP) sees no need for explanation to his counterparts in the EU about the planned investor's 'haircut' at Hypo Alpe Adria Bank.

Spindelegger defends handling of Hypo scandal
Austrian finance minister Michael Spindelegger. Photo: EPA/Janerik Henriksson
Before starting the European Stability Mechanism (ESM) session ahead of the Euro Group on Thursday in Luxembourg, Spindelegger said "my ministerial colleagues would understand that very clearly."
 
He went on to explain that as part of the unified approach within the EU, that "as of January 2016, the same rules apply for all banks when they are being rehabilitated. If it's a bail-in, there must be a creditor participation.  That's the only approach we have anticipated. But this is only valid for subordinated bonds, and never for senior bonds."
 
Asked if he would thus see a need for explanation in relation to other EU finance ministers, the minister said: "I was asked by no one."
 
The Hypo Alpe Adria Bank scandal caused massive losses for Austria, and led to the jailing of a senior banker.
 
A haircut is a financial term reflecting the percentage of an asset that may be deducted to reflect its risk.  The lower the haircut, the lower the risk.

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HYPO

Agreement reached on failed bank bailout

Austrian Finance Minister Hans Joerg Schelling said Wednesday an agreement in principle had been reached with the stricken Hypo bank's creditors that had threatened to bankrupt the state of Carinthia.

Agreement reached on failed bank bailout
Hypo Group Alpe Adria headquarters. Photo: HGAA Website

“We're drawing a definitive line under the Hypo affair” the minister told journalists, referring to state bank Hypo Group Alpe Adria (HGAA), which has saddled Carinthia with 11 billion euros in debt.

The deal will see creditors receive 75 percent of the face value of the HGAA bonds they own. They will be offered to buy that value of Austrian government bonds at 75 percent face value.

The proposal is better than the one creditors rejected in March as the Austrian government bonds mature in 13 instead of 18 years.

Schelling said an agreement in principle has been signed with a portion of creditors and compensation could be launched in September.

The creditors include Germany's Commerzbank and a Dexia unit, according to Bloomberg.

The saga is a legacy of late Austrian far-right political Joerg Haider, formerly premier of Carinthia, who died in 2008.

Under Haider, HGAA expanded into the Balkans as well as Italy and Germany via acquisitions and risky investments, expanding its balance sheet fourfold to some 40 billion euros.

Bavaria's state lender BayernLB bought a majority stake in 2007 in HGAA but two years later, as the global financial crisis raged, the bank came close to collapse and Austria nationalised it.

After a long and bitter dispute, Austria finally agreed last November to pay Bavaria 1.23 billion euros to put an end to the feud.

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