Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Erste, RZB Preparing Participation Capital Swap, Regulator Says

Don't Miss Out —
Follow us on:

Dec. 13 (Bloomberg) -- Austria’s financial watchdog FMA expects Erste Group Bank AG and Raiffeisen Zentralbank Oesterreich AG to swap non-voting capital held by private investors into capital that is recognized internationally.

“Almost all participation capital constructions have the option of a swap,” FMA Co-Chairman Helmut Ettl told reporters in Vienna late yesterday. “It just depends on the conversion conditions.”

Erste and RZB, the majority owner of Raiffeisen Bank International AG, in 2009 sold so-called participation capital to private investors as part of their deal to get funds from the government. RZB and other Austrian banks have sold participation capital also on other occasions before and after the 2009 deal.

While those securities are loss-absorbing and counted toward the banks’ core Tier 1 capital, they were disqualified by the European Banking Authority for its stress tests this year and don’t help banks reach the EBA’s 9 percent minimum by mid-2012. This saddles the banks with securities which pay an 8 percent coupon and can’t be counted as capital.

The banks are “preparing a conversion and are confident” that such a swap would work, Ettl said.

RZB, which had a capital shortfall of 2.1 billion euros ($2.8 billion) in EBA’s most recent stress test, may swap as much as 1 billion euros of participation capital issued by RZB and Raiffeisen into common shares or contingent convertible bonds, Raiffeisen Chief Executive Officer Herbert Stepic said on Nov. 17.

Erste Chief Financial Officer Manfred Wimmer said on Dec. 9 that the bank, which had a capital gap of 743 million euros, could convert about half of its private participation capital into CoCos. Wimmer said that this was part of Erste’s fall-back option should its planned asset reductions fail.

Erste sold 540 million euros of participation capital in 2009, 250 million euros of which was taken up by Vienna Insurance Group AG.

To contact the reporters on this story: Zoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net; Boris Groendahl in Vienna at bgroendahl@bloomberg.net

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

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.