Austria Has $27 Billion at Risk Through Bank Assistance

Austria has 19.8 billion euros ($27 billion) at risk because of capital injections and guarantees given to the nation’s banks, the finance ministry said today.

The amount, equivalent to 6.6 percent of the Alpine republic’s gross domestic product, is split into 8.1 billion euros of equity-like capital injections and 11.7 billion euros of guarantees for bonds or risky assets, the ministry said in a statement on parliament’s website. The government has so far paid out 1.27 billion euros because of guarantees.

Austria’s deficit widened beyond the European Union’s 3 percent target last year because it provided additional aid to three ailing lenders hit by Greece’s debt swap and by bad loans in eastern Europe. The risks its banks pose prompted Standard & Poor’s to strip it of its top debt grade last year, and Moody’s Investors Service to give a negative outlook to its AAA rating.

Nationalized Hypo Alpe-Adria-Bank International AG received the most capital aid, totaling 1.85 billion euros. Next in line were Raiffeisen Bank International AG (RBI) with 1.75 billion euros and Oesterreichische Volksbanken AG (VBPS) with 1.25 billion euros, according to the statement.

KA Finanz AG, the bank managing the risky assets of nationalized Kommunalkredit Austria AG, received the most guarantees, measuring 6.9 billion euros, the ministry said. KA Finanz lost 1.03 billion euros on Greek government bonds and credit default swaps written on Greece last year.

Only Bawag PSK Bank AG, the Austrian lender controlled by two U.S. private-equity funds, has pledged to partially repay the 550 million euros in aid it received by the end of June, the ministry said. The country is trying to recoup some of the money by selling units of Kommunalkredit and Hypo Alpe.

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

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net