22. 11. 11. - 16:09

Banks asked to jack up equity

Austria’s biggest banks must increase their capital resources to weather a possible worsening of the economic climate.

The Austrian National Bank (OeNB) and Federal Financial Market Authority FMA said yesterday (Mon) the country’s leading banks, which are also strongly represented in Central and Eastern Europe (CEE), must hold a core tier capital of seven per cent step by step until 2013. Upcoming European Basel III regulations demand such a rate only by 2018.

Yesterday’s decision by the OeNB – which is headed by Ewald Nowotny – and FMA mean that Austria’s financial institutes have to increase their capital by 4.2 billion Euros. Erste Bank Group AG (Erste Bank), Bank Austria (BA) – which is owned by Italy’s UniCredit – benefited from the prospering of the economy in CEE for years before dark clouds tarnished the outlook for the once booming region.

The new Austrian rules mean that the banks must re-evaluate their lending policy as loans must not significantly surpass the volume of savings deposits of their subsidiary companies in CEE. The economic health of Austria’s most powerful finance institutes also has an impact on the domestic economy. Rating agencies have warned that the state could experience difficulties rescuing another bank with public funds in another recession. Most leading banks have been provided with participation capital by the OeNB since the outbreak of the crisis of 2008. Hypo Group Alpe Adria (HGAA) and Kommunalkredit were nationalised to save them from ruin.

HGAA announced only last month it decided to pull out from nautical leasing operations in Southeast Europe as part of its current attempts to reduce losses by focusing on its core business activities. A spokesman for the bank said around 320 leased HGAA vessels were currently operating, down from 700 in 2008. International consulting company PriceWaterhouseCoopers (PWC) claimed in 2009 that 400 HGAA ships had been stolen. HGAA said there had been just eight such cases.

Officials representing Austrian banks doing business in CEE which are affected by the stricter rules created by the OeNB and FMA said today they wanted to analyse the authorities’ decisions before expressing their points of view.

Meanwhile, BA boss Willibald Cernko denied plans to lay off staff despite the hard economic situation. The banker said last week his financial institute’s Austrian workforce level would be reduced by 800 to 10,000 in the coming four years to increase efficiency in times of great uncertainty. Cernko stressed that sackings were not planned. He explained some employees might leave the bank for personal reasons and added that BA planned to abstain from replacing retiring bank clerks.

BA will run UniCredit’s CEE businesses except in Poland until 2016. Business papers have claimed the Italian bank could sell some representations in the region to make some money. UniCredit chief Federico Ghizzoni denied having such plans. Cernko dismissed the reports as well.

UniCredit stock had to be taken off the market temporarily some days ago due to their low value after it emerged that the bank suffered losses of 10.6 billion Euros between July and September. Ghizzoni presented plans for a capital increase. UniCredit has 160,000 employees. It could make over 5,000 redundant in the next years.