Erste May Lose Right to Use Savings Banks’ Capital in EU Plan

Erste Group Bank AG (EBS) may have to abandon using affiliated savings banks to bolster its reserves under the European Union’s proposed implementation of global capital rules.

The EU’s proposals don’t give Erste the leeway it would need for the capital to be recognized, spokesman Michael Mauritz said on the telephone from Vienna. Austria’s biggest lender will seek to lobby lawmakers at the European Parliament for an exemption for Erste, he said.

Erste in 2002 reached a deal with 51 regional savings banks to guarantee each other’s deposits. While Erste has little or no stake in the savings banks, the system gives the Vienna-based lender powers over them. Erste is counting the assets and the capital of the banks toward its reserves.

The EU plans are based on a global accord among members of the Basel Committee on Banking Supervision. The Basel deal would lead to Erste’s capital ratio dropping about 1.3 percentage points, the lender said last year.

The bank will seek to avoid the capital reduction by making tweaks to the guarantee system if it can’t convince the EU to change its proposals, Mauritz said.

“We have to see whether this capital will be considered in the negotiations” in the EU, “and if it’s not, we’ll have to make changes in the contract,” Mauritz said.

Erste is scheduled to report second-quarter results on July 29. Its core tier 1 capital excluding state aid stood at 8 percent at the end of the first quarter.

To contact the reporter on this story: Boris Groendahl in Vienna bgroendahl@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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