The European Commission clears Austrian authorities plan to orderly wind down the Austrian bank Hypo Group Alpe Adria (HGAA)

03-9-2013 — /EuropaWire/ — The European Commission has approved a plan to orderly wind down the Austrian bank Hypo Group Alpe Adria (HGAA). The Commission found that the plan presented by the Austrian authorities is compatible with EU state aid rules. Together with the approval of the plan, the Commission cleared both the aid hitherto granted to HGAA and additional aid possibly required for the wind-down.

Commission Vice President in charge of competition policy Joaquín Almunia said: “After a long time spent trying to agree on a plan to reestablish a viable business model for HGAA, the moment has come to adopt a final decision that closes this chapter once and for all, gradually restores the level playing field in the market and minimises the cost for taxpayers, who have already paid a high price.”

According to the plan the operative parts of the bank will be sold while the non-viable remainder is put into an orderly wind-down process. A sales contract for the Austrian subsidiary was already signed in May and the South-Eastern European network will be sold by 30 June 2015 at the latest.

Until the sales process is complete, Austria commits to a number of restrictions for new business, in particular relating to risk control, thus ensuring that the marketability of the subsidiaries is enhanced and that competition distortions are kept to a minimum.

On the basis of this plan, the aid granted to HGAA is compatible with the EU crisis rules applicable to state aid to the banking sector.

The approval of the plan closes one of the longest lasting state aid cases in the banking sector since the outbreak of the financial crisis. HGAA received a first aid measure from the Republic of Austria already in December 2008. Since then a number of further public support measures have been taken in favour of the bank. All together it has received EUR 2.85 billion in capital or guarantees on capital, EUR 300 million in guarantees on assets, and EUR 1.35 billion in refinancing guarantees. The plan was notified by Austria on 29 June 2013.

Background

HGAA is an internationally active finance group with headquarters in Klagenfurt/Carinthia, from where the group’s banking and leasing activities, including the wind-down part, are controlled and steered via Hypo Alpe Adria Bank-International (“HBInt”). Currently, the group is active in Austria and the South-Eastern European (“SEE”) countries Slovenia, Croatia, Bosnia and Herzegovina, Serbia and Montenegro. At the end of 2012, HGAA had an overall balance sheet total of EUR 33.8 billion and risk weighted assets (“RWA”) of about EUR 21 billion. HGAA is 100% owned by the Republic of Austria.

The bank has already started a wind-down process for some of its business in a number of countries, in particular its leasing business in South-Eastern Europe, as well as its Italian operations.

Over the past years HGAA has received several aid measures. In December 2008, HGAA received a EUR 900 million Tier-1 instrument capital injection without voting rights (Partizipationskapital) from Austria on the basis of the Austrian bank support scheme. In addition, HGAA received guarantees of EUR 1.35 billion for bond issues under a debt issuance programme on the basis of the same scheme. At the end of 2009, the bank received State capital amounting to EUR 450 million and an asset guarantee of EUR 100 million. Moreover, Austria granted an asset guarantee amounting to EUR 200 million at the end of 2010, and, in December 2012, a further EUR 500 million capital increase and a state guarantee on subordinated Tier-2 capital instruments with a nominal value of EUR 1 billion. The plan provides for the possibility of further potential aid for the winding-up in a stress case scenario.

The non-confidential version of the decision will be made available under case number SA.32554 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.