Zero Hedge
Economy
Austria Bail-Ins Arrive After €7.6 Billion Banking Hole “Discovered”
from Zero Hedge.com:
Moments ago, Austrian ORF reported that there have been “spectacular developments” in the case of the Hypo Alpe Adria bad bank, also known as the Heta Asset Resolution, where an outside audit of Heta’s balance sheet exposed a capital hole of up to 7.6 billion euros ($8.51 billion) which the government was not prepared to fill, the Austrian Financial Market Authority said.
As a result, according to Reuters, the bad bank that was created in the aftermath of the Hypo collapse, is itself about to be unwound, as the bad bank itself goes bad!
“Austria’s Financial Market Authority stepped in on Sunday to wind down “bad bank” Heta Asset Resolution and imposed a moratorium on debt repayments by the vehicle set up last year from the remnants of defunct lender Hypo Alpe Adria.”
In short: Austria just cut off state support of what was until this moment a state-backed, wind-down vehicle and a key pillar of trust in what was already a shaky financial system.
Not surprisingly, today’s shock announcement comes a week after Austria’s Standard reported that up to a five billion euro impairment at Heta would take place, a report which the Finance Ministry called “pure speculation” and noted that the Bank was in good health. According to Standard, among the reasons for the massive capital shortfall was the plunge in collateral as a result of the continuing crisis in South East Europe which meant that the value of “real estate in South East Europe, shopping centers and tourism projects, deteriorated massively” driven largely by the appreciation of the Swiss Franc. “As a result, the volume of bad loans has increased significantly.”
Everyone was wondering who the first big casualty of the SNB’s currency peg failure would be. We now know the answer.
Further from Reuters, the finance ministry confirmed this in a statement, adding Heta was not insolvent and that debt guarantees by Hypo’s home province of Carinthia and the federal government were unaffected by the move.
