Austrian Hypo Alpe Failure Probe Hones in on Supervisors

Austrian lawmakers investigating the multibillion-euro failure of Hypo Alpe-Adria-Bank International AG will focus on why regulators didn’t intervene before 2008 and why the government kept the bank alive thereafter.

The opposition Green party released a list on its website today of 47 issues for an investigative committee that’s due to be installed by Parliament in Vienna next week. The probe is also supported by the nationalist Freedom Party and the Neos group. The three parties have enough seats to set up the investigation.

The committee will look into Hypo Alpe’s rise since 2000, its near-collapse in 2009 and the government’s management after nationalization, according to the motion. It will also question why the government decided against plans last year to let Hypo Alpe go insolvent, and instead spun off a “bad bank” in a move that will require further taxpayer support.

Hypo, which has so far cost taxpayers about 5.5 billion euros ($6.5 billion), remains an embarrassment for the government five years after its rescue. A group appointed by the Finance Ministry last month dismissed the government’s actions as amateurish and ill-informed. The parliamentary committee will have more powers to summon witnesses, and the Neos group already presented a list of 200 it plans to question.

The committee will investigate whether the central bank and the Finanzmarktaufsicht regulator, Hypo Alpe’s supervisors, were influenced by government officials while it was owned by the state of Carinthia until 2007. It will also question why Austria supported it with aid in 2008 without requesting a restructuring plan, and whether the government sufficiently considered alternatives to its emergency nationalization a year later, according to the motion.

Hypo sold its Austrian banking business and agreed to sell its lenders in the former Yugoslavia. It now lives on as Heta Asset Resolution AG, the vehicle that has to wind down about 18 billion euros in assets that couldn’t be sold.

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