Austria’s Volksbanken AG (VBAG) officially closed its doors as a bank yesterday after getting restructuring approval from European authorities as part of a wind-down plan that began with a €1.35 billion rescue three years ago.
Volksbanken, crushed in the financial crisis following a break-neck expansion into eastern Europe, surrendered its licence at noon and became a ‘bad bank’ called Immigon Portfolioabbau, whose sole goal is to sell €7 billion in assets left from the VBAG empire.
Under Stephan Koren, brought in by the government to stabilise the crisis-stricken bank, Austria’s Association of Volksbanks has compressed some 51 banks into 10, with Volksbank Wien-Baden now leading the constellation of lenders with some €31 billion in combined assets.
Volksbank Malta was one of the victims of the bailout conditions – and was sold to Mediterranean Bank in September 2014 for €35.3 million.
The Austrian state owns a 43 per cent stake in VBAG, the former flagship bank in the association, which was left waiting until yesterday for official approval from several European authorities before it could hand in its licence.
Before winding down, the association required approval from the European Central Bank (ECB), the European Commission, European competition authorities, and Austria’s FMA market watchdog. The final confirmations arrived yesterday, Volksbanken said.
The association expects to earn some €200 million in profit a year
On Thursday, the Commission was the first to publicly give the green light, saying the association’s restructuring made the group viable in the long-term without further state support.
Winding down VBAG will relieve pressure on the other regional lenders in the association, which owns 52 per cent of VBAG.
It also cures one headache for the Austrian government, which is struggling separately to wind down Heta, the state vehicle for failed lender Hypo Alpe Adria, which declared a capital shortfall of some €7 billion at the end of 2014 after writing down overvalued assets.
Last year, the ECB ordered the Volksbanken group to strengthen its balance sheet by July 2015 to plug a capital hole exposed by a health check on eurozone banks, a demand that ultimately led Volksbanken to voluntarily wind itself down instead of seeking new capital.
The association expects to earn some €200 million in profit a year, a quarter of which it will use to repay the Austrian government, to which it owes some €300 million for aid received during the crisis.