Hypo Alpe Probe Climbs Up Supervisors’ Command Chain

Austria’s deputy central bank governor and the nation’s top bank supervisor will next week become the most prominent witnesses yet in a parliamentary probe into what went wrong at Hypo Alpe-Adria-Bank International AG.

Parliament’s investigative committee looking at the bank failure that has cost Austrian taxpayers 5.5 billion euros ($6.1 billion) so far summoned the central bank’s Andreas Ittner and Helmut Ettl, co-president of the Finanzmarktaufsicht supervisor, to testify on May 27. Two previous FMA presidents will be questioned the following day, according to a statement on the parliament’s website.

“What we’re trying to clarify is why the bank supervisory bodies failed and how they can be improved,” Werner Kogler, the Green Party’s leading deputy in the committee, said in an e-mailed response to questions. “How did a dead Carinthian-Bavarian bank manage to pretend it was alive to politicians and supervisors?”

Hypo Alpe, the former state bank of the Carinthia province, then a unit of Bayerische Landesbank, remains an embarrassment for Austria more than five years after its emergency nationalization. A group of experts appointed by the Finance Ministry last year found “multiple organ failure” spread over a decade contributed to the disaster.

Questioning next week will focus on the rise of Hypo Alpe in the first decade of this century, Kogler said. Ittner at that time headed the central bank’s department also responsible for banking supervision and Ettl led the central bank’s team of on-site bank auditors. Both will have to return to the committee later when Hypo Alpe’s state aid, its nationalization and the government’s management since are in focus.

Hypo Alpe has spun off its “good” banking units and lives on as Heta Asset Resolution AG, the “bad bank” that has to wind down about 18 billion euros in assets that couldn’t be sold. In his new role as FMA president, Ettl ordered a moratorium on Heta’s debt on March 1, causing reverberations across Europe’s banking sector.

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