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Austria Cuts Estimate of Banks’ Basel Capital Needs by 30%

The Austrian central bank lowered its estimates on how much additional core Tier 1 capital the country’s lenders need to comply with global rules and pay back state aid by 30 percent to 7 billion euros ($10 billion).

This is less than the 10 billion euros estimated in December, said Andreas Ittner, the central bank’s director responsible for bank supervision. The lower amount is due to a relaxation of rules on counting minority shareholdings and lenders’ investments toward capital, as well as improved results at Austrian banks, Ittner told reporters in Vienna yesterday.

The figure includes about 6 billion euros of so-called participation capital provided by the Austria government and private investors during the financial crisis that still need to be repaid, he said. Current estimates are based on first-quarter earnings, while previous estimates used the numbers for full-year 2009.

The Basel Committee on Banking Supervision’s rules require banks to have common equity equal to at least 7 percent of their risk-weighted assets. Austrian banks will need from 11 billion euros to 14 billion euros to meet both the core Tier 1 and total capital ratios, down from a December estimate of 15 billion euros to 18 billion euros, according to the central bank.

“This is a relevant amount, but not something that will get the Austrian banking system into problems,” Ittner said.

Austria’s central bank, financial regulator and finance ministry are working on a response to a proposal for implementing the Basel rules in the European Union. The statement, which will be submitted in mid-September, will include calls for special rights for minority capital and state-issued participation capital, Ittner said.

-- With assistance from Boris Groendahl in Vienna. Editor: Anthony Aarons, Heather Smith

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