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Austrian Bank Collapse And Bail-In

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http://www.bloomberg.com/news/articles/2015-03-01/austria-on-track-to-bail-in-heta-creditors-after-aid-stop

After 5.5 billion euros ($6.2 billion) of taxpayer money was injected into Hypo Alpe in the last five years, Chancellor Werner Faymann’s administration decided to stop supporting its bad bank, Heta Asset Resolution AG, after learning it would need another 7.6 billion euros. The shortfall will now be met by forcing losses on creditors using tools created by the EU’s Bank Recovery and Resolution Directive.
Austria implemented the EU resolution rules with a law that made the bail-in option available this year, ahead of the bloc-wide deadline. Only Germany and the U.K. did the same, Standard & Poor’s said in February.

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A very interesting test case whatever the outcome. If it does result in a bail-in, I imagine it will become huge news. On the other hand, if the bank is allowed to fail and creditors take the fall, it will be interesting to see how the markets react to that. Since 2008, we've been living in never-never land where many investors seem to believe that there's no such thing as losing - just QE again and again if the numbers look bad.

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It looks as though the situation here continues to develop. From Twitter

Dick Darlington@Darlington_Dick 10m

*FMA SAYS BAIL-IN MUST BE LARGE ENOUGH TO COVER SHORTFALL #AustrianZombieBankAlert #HideYoWallet

*FMA SAYS LOSSES FROM BAIL-IN COVERED BY CARINTHIA GUARANTEE // LOL

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Can a bail in, be legal?

That's what several hundred lawsuits in Cyprus are challenging . . . with great difficulty.

Just one being that the Eurogroup as instigator is not really a legal entity, never mind being unelected . . .

Bloomberg: "Hypo Alpe was nationalized in 2009 to prevent its collapse under the weight of bad loans in the western Balkans, as shareholders led by Bayerische Landesbank walked away"

Bayern LB still had to be bailed out by local taxpayers . . . quite shocking. The bank did no 'due diligence' whatsoever . . .

The Austrians are very exposed in Eastern Europe. Can't imagine why it has taken this long to go really wobbly . . . especially now with Ukraine in meltdown.

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What I find odd is, every nation in the EU seems to have a couple of dodgy banks that have been nationalised, that keep racking up ever increasing losses, while most of the banks that weren't nationalised continue to make massive profits. Just unlucky, I guess.

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Fortunately for Austria/germany ECB is desperate to spend E1trillion+ over the coming year.....

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http://www.reuters.com/article/2015/03/03/austria-heta-idUSL5N0W51UB20150303?rpc=401

* Audit shows bad bank overvalued by nearly half

* Worst-case assumptions were grossly overoptimistic

* No sign that balance sheet was falsified - regulator

* Finance minister relieved "dramatic" facts are now in the open

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Who is to say we haven't been pumping more and more and more capital into RBS over the last 7 years?

It's a State secret these days.

They've been pumping us for 7 years

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http://www.telegraph.co.uk/finance/comment/jeremy-warner/11455671/Austria-is-fast-becoming-Europes-latest-debt-nightmare.html

Ah Austria, land of schnitzel, lederhosen, Mozart, alpine meadows and beer drinking. Less widely appreciated is its special place in the history of catastrophic banking crises.

It was the failure of Creditanstalt, a Viennese bank founded in 1855 by Anselm von Rothschild, that arguably sparked the Great Depression, setting off an unstoppable chain reaction of bankruptcies throughout Europe and America.

Lots of ostriches in the comments section.

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http://www.reuters.com/article/2015/03/15/duesselhyp-restructuring-idUSL6N0WH0SH20150315

Germany's deposit protection fund is planning to take over the property lender Duesseldorfer Hypothekenbank AG (DuesselHyp), which has run into problems due to its exposure to Austrian lender Hypo Alpe Adria's "bad bank" Heta.

The German banking association BdB, which runs the fund, is, however, not planning to wind down the bank, but wants to continue its operations.

"The deposit protection fund is granting a guarantee for the Heta bonds to eliminate the immediate risks. The goal is a complete takeover of Duesseldorfer Hypothekenbank," the BdB said in a statement on Sunday.

Regulators this month took control of Heta and imposed a debt moratorium until May 2016 after an outside audit found writedown needs that blew a hole of up to 7.6 billion euros in its balance sheet. This leaves holders of Heta debt in limbo and facing the prospect of losses.

Heta could still be declared insolvent despite plans to wind it down, the Austrian regulator FMA has said, a move that could hit German banks harder than many of their Austrian rivals.

And the first casualty is...

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