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Bank Bail Ins Begin as EU Bank “Bailed In” In Austria
Bank Bail Ins Begin as EU Bank “Bailed In” In Austria
Bank bail ins in the EU are here after Austria’s financial markets regulator FMA imposed a hefty haircut on creditors in an Austrian bank. Creditors in the bank Heta Asset Resolution will receive less than half of their money back according to the country’s financial regulator, the FMA.
Senior bondholders in the so called “bad bank” could expect to receive around €0.46 for each euro which would be paid from the realisation of assets by 2020, according to the FMA statement. It said that this had been calculated using “very conservative” assumptions.
“This package of measures also ensures the equal treatment of creditors. Orderly resolution is more advantageous than insolvency proceedings,” the FMA said.
Bond maturities, however, will be extended to 31 December 2023 as “all currently outstanding legal disputes will realistically only be concluded by the end of 2023”. “Only at that point will it be possible to finally distribute the assets and to liquidate the company,” the regulator said.
In November 2015, the largest collection of creditors, which included Pacific Investment Management Co (PIMCO), Commerzbank , FMS Wertmanagement AoeR and a collection of distressed debt investors, proposed to extend bond maturities for 30 years in return for repayment in full.
Representatives of Austrian province Carinthia and creditors of the failed regional lender are to meet in London tomorrow to try to break the impasse over a bond buyback scheme, an Austrian newspaper reported. Carinthia, a southern Austrian province, guaranteed the debt of local lender Hypo Alpe Adria before the bank collapsed and now faces the threat of insolvency if it had to honour the 10.8 billion euro ($12.3 billion) debt in full.
Heta Asset Resolution was formed to wind down the bank but regulators froze Heta’s debt repayments after discovering a gaping capital hole at the bad bank.
…click on the above link to read the rest of the article…
Italy Seeks “Last Resort” Bailout Fund To “Ringfence” Troubled Banks, Meeting Monday
Italy Seeks “Last Resort” Bailout Fund To “Ringfence” Troubled Banks, Meeting Monday
Italy’s finance minister, Pier Carlo Padoan, wants to “ringfence” its troubled banks.
Padoan called a meeting of the executives of Italy’s troubled banks in Rome on Monday. The banks allegedly will come up with a “Last Resort” bailout fund.
Last resort or first resort, is there a difference at this point in time?
Please consider Italy Pushes for Bank Rescue Fund. I highlight the key buzzwords and phrases italics.
Finance minister Pier Carlo Padoan has called a meeting in Rome on Monday with executives from Italy’s largest financial institutions to agree final details of a “last resort” bailout plan.
Yet on the eve of that gathering, concerns remain as to whether the plan will be sufficient to ringfence the weakest of Italy’s large banks, Monte dei Paschi di Siena, from contagion, according to people involved in the talks.
Italian bank shares have lost almost half their value so far this year amid investor worries over a €360bn pile of non-performing loans — equivalent to about a fifth of GDP. Lenders’ profitability has been hit by a crippling three-year recession.
The plan being worked on, which could be officially announced as soon as Monday evening, recalls the Sareb bad bank created in 2012 by the Spanish government to deal with financial crisis in its smaller cajas banks, say people involved.
Although the details remain under discussion, it foresees the establishment of a private vehicle that will include upwards of €5bn in equity contributions — mostly from Italy’s banks, insurers and asset managers — and then a larger debt component. The fund will then mop up shares in distressed lenders.
A second vehicle will seek to buy non-performing loans at market prices.
“It is a backstop fund,” said one person involved in the talks.
…click on the above link to read the rest of the article…
Austria Just Announced A 54% Haircut Of Senior Creditors In First “Bail In” Under New European Rules
Austria Just Announced A 54% Haircut Of Senior Creditors In First “Bail In” Under New European Rules
Just over a year ago, a black swan landed in the middle of Europe, when in what was then dubbed a “Spectacular Development” In Austria, the “bad bank” of failed Hypo Alpe Adria – the Heta Asset Resolution AG – itself went from good to bad, with its creditors forced into an involuntary “bail-in” following the “discovery” of a $8.5 billion capital hole in its balance sheet primarily related to ongoing deterioration in central and eastern European economies.
Austria had previously nationalized Heta’s predecessor Hypo Alpe-Adria-Bank International six years ago after it nearly collapsed under the bad loans it ran up when it grew rapidly in the former Yugoslavia. Having burnt through €5.5 euros of taxpayers’ money to prop up Hypo Alpe, Finance Minister Hans Joerg Schelling ended support in March 2015, triggering the FMA’s takeover.
This was the first official proposed “Bail-In” of creditors, one that took place before similar ad hoc balance sheet restructuring would take place in Greece and Portugal in the coming months. Or rather, it wasn’t a fully executed “Bail-In” for the reason that creditors fought it tooth and nail.
And then today, following a decision by the Austrian Banking Regulator, the Finanzmarktaufsicht or Financial Market Authority, Austria officially became the first European country to use a new law under the framework imposed by Bank the European Recovery and Resolution Directive to share losses of a failed bank with senior creditors as it slashed the value of debt owed by Heta Asset Resolution AG.
The highlights from the announcement:
Today, the Austrian Financial Market Authority (FMA) in its function as the resolution authority pursuant to the Bank Recovery and Resolution Act (BaSAG – Bundesgesetz über die Sanierung und Abwicklung von Banken) has issued the key features for the further steps for the resolution of HETA ASSET RESOLUTION AG. The most significant measures are:
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Italian Banks Sink As “Bad Bank” Plan Underwhelms
Italian Banks Sink As “Bad Bank” Plan Underwhelms
“Italian banks’ share prices have been volatile YTD, given the market’s renewed fears over asset quality and potential developments on a possible bad bank creation,” Citi wrote, in a note analyzing which Italian banks are most exposed. “Total gross NPLs in Italy have increased by c160% since 2009 and now represents c18% of loans (vs c8% in 2009).”
Essentially, Italy was slow to tackle its NPL problem relative to other countries and the chickens have now come home to roost.
The idea was to create a “bad bank” for the “assets” (because that’s worked so well in other countries), but the plan was stalled by the European Commission due to concerns about whether Italy was set to run afoul of restrictions around when countries can provide state aid to the financial sector.
In short, creditors at Italy’s banks would need to take a hit before PM Matteo Renzi’s government would be allowed to extend state aid. That is unless Italy could devise some kind of end-around, which is precisely what Renzi was attempting to do last week.
As a reminder, this would have been easier had it been negotiated last year before new rules on bank resolutions came into effect in 2016. That’s why Portugal pushed through the Novo Banco bail-in and the Banif rescue in December.
In any event, Italy has indeed managed to strike a deal with Brussels to help alleviate banks’ NPL burden.
Essentially, Italian banks will securitize their souring loans, sell them to investors, and the government will guarantee the senior tranches of the new paper.
…click on the above link to read the rest of the article…
Italy Races To Defuse €200 Billion Bad Loan Time Bomb With “Bad Bank”
Italy Races To Defuse €200 Billion Bad Loan Time Bomb With “Bad Bank”
When Portugal “surprised” senior Novo Banco bondholders with a €2 billion bail-in late last month, the market got an unwelcome reminder that euro periphery banks are far from “solid.”
Novo was supposed to house the “good” assets salvaged from the wreckage of failed lender Banco Espirito Santo, but as it turned out, a lot of those “good” assets were actually bad, and Novo ended up needing to plug a €1.4 billion hole. Initially, the plan was to sell assets but seizing €2 billion from bondholders ended up being a whole lot easier and far more efficient.
News of the bail-in came just a week after Lisbon announced that a second bank – Banif – would need state aid after running out of cash to repay a previous cash injection from the government.
As we head into the weekend, periphery banks are back in the spotlight, only this time in Italy where PM Matteo Renzi is scrambling to put the finishing touches on a plan to guarantee hundreds of billions of NPLs sitting on the books of Italian banks.
Talks with the EU Commission “have already dragged on for two years,” FT notes and need to be concluded over the next few days lest “the whole initiative should collapse.”
Of course Renzi missed what amounted to a deadline on “fixing” the problem under the old rules governing bank resolutions.
One reason the Novo Banco and Banif bail-in and bailout (respectively) were pushed through in what appeared to be a kind of haphazard, ad hoc fashion was because new rules came into effect on January 1 that would have put uninsured depositors on the hook for losses. The same rules require 8% “of a bank’s liabilities to be wiped out before public money can be used,” FT adds.
…click on the above link to read the rest of the article…
Creditors Accuse Portugal Of “Unfair, Populist Short-Cut” In €2 Billion Bank Bail-In
Creditors Accuse Portugal Of “Unfair, Populist Short-Cut” In €2 Billion Bank Bail-In
Two weeks ago, The Bank of Portugal shocked markets by bailing in senior Novo Banco bondholders.
Novo Banco was the “good” bank forged from the ashes of Banco Espirito Santo which had to be bailed out by the state in August of 2014. The idea was to sell Novo Banco to pay for the cost of the bailout, but the auction process eventually floundered amid turmoil in Chinese markets (at least two of the potential bidders were Chinese) and uncertainty about whether this “good” bank would in fact need more capital given the elevated level of NPLs already on its books.
In November, the ECB told Novo it woudl indeed need to raise some €1.4 billion in fresh capital which the bank initially said would come from asset sales. A little over a month later, Portugal’s central bank essentially just gave up. On December 29, the bank announced it was transferring €2 billion in NB senior notes back to Banco Espirito Santo which, like a ghost skyscraper in China, is set for demolition.
In other words, Novo Banco plugged the €1.4 billion hole by essentially declaring €2 billion in bonds null and void.
There were five issues affected but you can get a pretty good idea about what happened next by having a look at how the 2017s traded that morning:
The reason this had to be done quickly was because if Portugal had waited until January, uninsured depositors would have been at risk under the EU’s new bank resolution mechanism. Plus, Portugal is anxious to get the auction process started again to avoid the decidedly unappealing prospect of having to keep the cost of the bailout on Lisbon’s books in perpetuity thus inflating the fiscal deficit by an extra 3% of GDP.
…click on the above link to read the rest of the article…
Austrian Bad Bank “Black Swan” Bail-In Is Unconstitutional, Austria Declare
Austrian Bad Bank “Black Swan” Bail-In Is Unconstitutional, Austria Declare
The subject of bail-ins and bank resolutions is back in the news this month as every eurocrat in Brussels scrambles to determine the best way to recapitalize Greece’s ailing banking sector, which, you’re reminded, is sinking further into insolvency with each passing day thanks to the unyielding upward pressure on NPLs that’s part and parcel the country’s outright economic collapse.
And while you could be forgiven for focusing squarely on the trainwreck that’s occurring in Athens, it would be a mistake to ignore the fact that just a few months back, a black swan landed in Austria when a €7.6 billion capital hole was “discovered” in Heta Asset Resolution, the vehicle set up to resolve the now defunct lender Hypo Alpe-Adria-Bank.
In short, the bad bank went bad, and when it became clear that no further state support was forthcoming, Heta Asset Resolution was itself put into resolution and a moratorium on bond payments was declared.
The debacle raised a number of troubling issues not the least of which involves the beautifully picturesquesouthern Austrian province of Carinthia, which had guaranteed some €10 billion worth of Heta debt despite the rather inconvenient fact that annual provincial revenues only amount to around €2.3 billion.
…click on the above link to read the rest of the article…
“Spectacular Developments” In Austria: Bail-In Arrives After €7.6 Billion Bad Bank Capital Hole “Discovered”
“Spectacular Developments” In Austria: Bail-In Arrives After €7.6 Billion Bad Bank Capital Hole “Discovered”
Slowly, all the lies of the “recovery”, all the skeletons in the closet, and all the bodies swept under the rug are emerging.
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.”
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