Austria Nationalises Hypo Group to Avert Threat to Austrian, East Europe Economies – Reuters

Austria is taking over 100% of Hypo from Germany's Bayerische Landesbank (BayernLB), Austrian insurer Grawe and the Austrian state of Carinthia, after shareholders agreed to inject around 1.0 billion euro ($1.5 billion) in capital, Reuters quoted Austrian Finance Minister Josef Proell as saying.

"The risk situation of this bank has created an enormous threat to Austria in the past days," Proell was quoted as saying on Monday. The bailout decision follows a weekend of crisis talks with his counterpart from the German state of Bavaria, Georg Fahrenschon, and the other shareholders.

The owners will give away their stakes in Hypo to Austria and provide an additional round of capital, Reuters said. BayernLB, which is owned by Bavaria, will give an additional 825 million euro in capital, and leave three billion euro of liquidity in the bank.

"With (this rescue) the risk of an insolvency, with all the negative consequences for the bank's customers, has been averted," Austrian central bank chief Ewald Nowotny said in a statement, as quoted by Reuters.

He said the rescue had also avoided "a massive risk to the entire Austrian economy at a critical point," adding the bank must urgently restructure because of its important role in Austria and Southern Europe.

Bayern LB, said it would sell its 67% stake in the bank for one euro. Hypo has up to 1.7 billion euros of writedowns and loan losses which threatened to wipe out a large part of its capital, Reuters said.

In southeastern Europe, Hypo Group has operations in Bulgaria, Serbia, Montenegro, Bosnia, Croatia, Macedonia and Slovenia.

($=0.6833 euro)