When a company trading in asset resolutions resolves not to be insolvent, it’s a bailin. Why Mario Draghi and German banks are really to blame. How the Austrian Government lied about the real situation.
Once upon a time there was a AAA, badly-run Austrian bank – a whopper – called Hypo. But then a German shareholder Bayerische Landsbank gave out some idiot loans in the Balkan States, and the Bavarian subsidiary stepped neatly out of the way just before the solids hit in 2009. So Hypo became a broke bank thanks to a naughty German bank, and the Austrian Government bailed it out.
As is the custom in these circumstances, a ‘bad bank’ was created. A naughty bank is different to a bad bank, in that the NB sprays merde everywhere, and it’s all tucked away into the BB.
The clue’s in the name when it comes to bad banks, but until quite recently this one – Heta – was rated AAA Aaa by some ratings agency somewhere of dubious ownership. So not surprisingly, lots of money piled into Heta.
Of course, some small change to the tune of 5.5bn euros had been needed to set up Heta and write off the ordures. But everyone seemed to be quite happy with the way things were going. Until yesterday.
Because yesterday, “the first results of an asset review suggested a dramatic change in the asset evaluation”. Don’t you just love financespeak? They ‘reviewed’ the assets, and lo, there had been a change, and so the managers were sore afraid. The ‘evaluation’ of the assets showed a great big hole to the tune of 7.6bn euros.
But here’s the beautiful irony: the bank’s full name is Heta Asset Resolution. Well guys, now’s the time to show us your resolve in the resolution of this seemingly unresolvable problem.
And so we arrive at the first, mainland major bailin under the new shiny template developed by Jereboam Dieselbang. Under his new ‘directive’ (the European Commission is a non-stop stream of Freudian slips) the immediate Heta debt moratorium declared by the Austrian government means 950 million euros of bonds due March 6 and March 20 won’t be repaid, nor will 9.8 billion euros in outstanding bonds, supplementary capital and Schuldschein loans, 1.24 billion euros owed to Pfandbriefbank (Oesterreich) AG….as well as loans given BayernLB – that wise German bank that caused all the trouble in the first place.
But here’s another beauty: they’ve resolved the problem by putting Heta into Resolution. I’m not making it up: this means there will be no insolvency procedure. God forbid an insolvent bank should be smeared with the title ‘insolvent’.
God forbids such things, you see, because insolvency would complicate the sale of Hypo Group Alpe Adria AG…the “good” part of the business that’s so good, the Austrians are gagging to sell it.
As the Buddhists say, “Good will always come from bad”. But I somehow don’t think they had the banking sector in mind.
So who’s to blame? Half the Austrian government is currently searching for a goat to scape – but for me, it is an overlinked banking system built on debt within a flaky Union making error after error because its members simply can’t stop thinking of their own back yard and dreams of global glory. However, in this case there are two we can point the finger at pretty immediately:
1. The dopey Bayernische Landesbank. Yesterday, sources suggested that relations between Heta and BLB “have soured somewhat”. An admirable bit of understatement, that one.
2. Mario Draghula, evil genius and squid tentacle at the ECB. The man who preceded his big QE-bang by bullying the Swiss into removing their euro-Swissy relative value cap must take a fair chunk of the rap for this one: according to the Austrian authorities, the Heta situation got rapidly worse – and this “was driven largely by the appreciation of the Swiss Franc – as a result of which, the volume of bad loans has increased significantly.”
Well done Mario. That’s one small step for Wall Street, and one giant leap for the USD. The euro, meanwhile, is currently sliding in value:it’s now in the 1.38 to 1.385 range against Sterling.
Footnote: just eight days ago, the Austrian finance ministry – faced with rumours that a five billion euro “impairment” at Heta was on the cards – called such reports “pure speculation”, and noted that the Bank “is in good health”.
Incompetence, irresponsibility, weakness and ruthless dishonesty. No change. Relax, everyone.