Could the failure of Austrian “bad bank” Heta Asset Resolution be the snowball that starts the next financial avalanche? Stay tuned. From zerohedge.com:
Just over a month ago, on March 1, the Austrian financial world was shaken by news that the first bank bail-in following Cyprus would not take place in Greece as many had expected, but in Vienna: judged by the rating agencies to be one of the safest places in the world, where the bad bank [Heta Asset Resolution] that was created to help with the wind-down of the defunct Austrian lender Hypo Alpe Aldria, would itself be unwound, with creditors suffering the bulk of the pain in the form of the first official “core Eurozone” bail in.
Truly a “black swan” event.
This, together with the revelation of the sordid state of Heta’s books which was only revealed after the bail-in fact, was certainly a shock to bondholders, who had been treating Heta bonds as money good as recently as last summer, only to face losses as large as 50%.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/04/20150412_HETA.jpg
Since then we have witnessed several disturbing downstream events, the first of which was the insolvency of Austria’s province of Carinthia, which it was revealed was a direct guarantor of Heta bonds. Since the liability of Carinthia was equivalent to €10.2 billion, or nearly five times the state’s 2014 operating revenue, it promptly became insolvent overnight (absent more sovereign bail outs).
A few days later we also found out who the first foreign casualty of Heta would be: a sleepy German bank, Duesseldorfer Hypothekenbank, which was just as quietly taken over by Germany’s banking association and FDIC equivalent, the Bankenverband. As we reported previously, the catalyst for the bank collapse was DuesselHyp exposure to Hypo debt, which according to a 2013 disclosure was 348 million euros.
This was Duesselhyp’s second bailout since the financial crisis.
The punchline? According to its latest interim financial report Duesselhyp had €10.9 billion in assets, or in other words, a 1.5% asset impairment led to the terminal collapse of a bank in what all consider to be Europe’s safest country.
To continue reading: Austrian “Black Swan”
