Austria imposes debt moratorium on Heta 'bad bank'
Source: Reuters
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.
The step, allowed by new legislation that gives banking supervisors more power to intervene, followed an outside audit of Heta's balance sheet that exposed a capital hole of up to 7.6 billion euros ($8.51 billion) which the government was not prepared to fill, the FMA said.
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.
Carinthia guarantees back 10.7 billion euros worth of Heta debt. The federal government backs a 1 billion euro bond issued in 2012 that the ministry said would be honoured in full.
Read more: http://www.reuters.com/article/2015/03/01/austria-heta-idUSL5N0W30OR20150301
On March 1, the nationalized bank known as the Heta Asset Resolution in Austria was found to be vastly short of capital during an audit of this 'bad bank'. Subsequently, the finance ministry announced that the state would not be supplying emergency funds in the amount of 7.9 billion euros and instead approved measures that would allow a bail-in to occur where creditor assets would be free to be pillaged by the resolution bank to cover this capital shortfall.
Austria now becomes the second European Union (EU) country to implement bail-in measures where depositors and creditors of banking debt will be involuntarily forced to give up their capital and assets to fund a bail-in measure to protect a bank from insolvency.
The institutional and coalition wide program of bank bail-ins versus bank bail-outs stems from an agreement passed by the G20 late last year in Brisbane, Australia where a unanimous vote by the representatives on a treaty resolution meant that all signatories would ensure that legislation was passed or in place in their respective countries to accommodate bail-ins the next time a banking institution not covered by national insurance failed.
2015 has already seen several major economies and financial systems come under pressure for liquidity and toxic debt failures. Just two days ago, a large bank in Puerto Rico collapsed causing the FDIC in the U.S. to cover nearly three quarters of a billion dollars in assets as the ramifications of this bank failure could have spread to much bigger institutions. Additionally, the nation's of Greece and Ukraine are already on the cusp of financial collapse and hyper-inflation as both require massive and immediate transfusions of liquidity to stave off insolvency and currency destruction.
http://www.examiner.com/article/europe-cracking-as-austria-becomes-newest-country-to-force-depositor-bail-ins
