Austria’s RZB at Risk of Regulatory Intervention, Owners Say

  • Regional Raiffeisen banks write down RZB stake on low capital
  • European stress test last month indicated capital weakness

Raiffeisen Zentralbank Oesterreich AG, the Austrian lender that was among the worst performers in Europe’s stress test last month, is near capital levels that could prompt authorities to intervene, two of its biggest shareholders said.

Raiffeisenlandesbank Oberoesterreich AG and RLB Steiermark AG, which together own about 30 percent of RZB, wrote down the value of their stakes in the first half of the year partly because of RZB’s capital weakness, they said in their half-year earnings reports, using identical language. RZB is the central institute of Austria’s biggest cooperative group and 61 percent owner of publicly traded arm Raiffeisen Bank International AG.

The RZB writedowns were triggered “especially by the information that capital ratios are low in international comparison and close to the supervisory intervention trigger,” both reports say. Another reason cited was RZB’s sale of a stake in Uniqa Insurance Group AG.

The European stress test last month exposed the capital weakness. RZB’s direct parent Raiffeisen-Landesbanken-Holding’s common equity Tier 1 capital fell to 6.1 percent in the European Banking Authority’s stress test in the adverse scenario, beating only Banca Monte dei Paschi di Siena SpA and Allied Irish Banks Plc. The weakness is amplified by RZB’s multi-layered ownership structure and widespread holdings. RZB is considering merging with its main holding RBI, with a final decision by the companies’ boards due next month.

The RZB holders didn’t specify which regulatory triggers RZB is close to. Susanne Langer, a spokeswoman for RZB, declined to comment. Spokesmen for the RLBs didn’t have an immediate comment. A spokesman for Austria’s banking supervisor FMA declined to comment.

RZB is a credit cooperative co-owned by about 1.7 million Austrians through hundreds of local credit unions. Its biggest holder with a 35 percent stake, Raiffeisenlandesbank Niederoesterreich-Wien AG, hasn’t reported half-year results yet and didn’t have an immediate comment.