Shareholder pain

Bad Bank, Bad Bailout

Hypo imago
Show me the money.
  • Why it matters

    Why it matters

    Munich Re chief executive Nikolaus von Bomhard warns that Austria’s  refusal to honor Hypo Alpe Adria’s debts will undermine European government guarantees.

  • Facts


    • Hypo Alpe Adria had to be bailed out by the Austrian government, and it is now being liquidated under the name Heta Asset Resolution.
    • The Austrian financial market regulatory agency imposed a moratorium on Heta, which invalidated the state guarantees.
    • Of Heta’s more than €10 billion in outstanding liabilities, €5.6 billion apply to banks and about €1.5 billion to insurance companies.
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German industry leaders don’t usually publicly criticize financial decisions other countries make.

But Nikolaus von Bomhard, chairman of the management board of the world’s largest reinsurer, Munich Re, has made an exception.

Mr. von Bomhard, angered by Austria’s handling of the “bad bank” Heta Asset Resolution, wrote a letter to shareholders of which Handelsblatt has received an exclusive copy.

After Greece negotiated a  debt haircut with its creditors, at great political cost, the Austrian state of Carinthia is threatened by “an erosion of public debt morality,” Mr. von Bomhard wrote.

“If this approach catches on, politicians from much less solvent regions will find their citizens asking them why they should continue to service their debts,” Mr. von Bomhard wrote.

Hypo Alpe Aldria, a small state-backed bank from the Austrian state of Carinthia, was the biggest victim in Austria of the financial crisis in 2008 and earlier this year, its debts were bundled into Heta Asset Resolution.

Carinthia has said it is unable to cover the €8 billion that the bank owes its creditors which include €5.5 billion to banks in Germany. The Austrian government has refused to help.

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