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"Spectacular Developments" In Austria: Bail-In Arrives After €7.6 Billion Bad Bank Capital Hole "Discovered"

Tyler Durden's picture




 

Slowly, all the lies of the "recovery", all the skeletons in the closet, and all the bodies swept under the rug are emerging.

Moments ago, Austrian ORF reported that there have been "spectacular developments" in the case of the Hypo Alpe Adria bad bank, also known as the Heta Asset Resolution, where an outside audit of Heta's balance sheet exposed a capital hole of up to 7.6 billion euros ($8.51 billion) which the government was not prepared to fill, the Austrian Financial Market Authority said.

As a result, according to Reuters, the bad bank that was created in the aftermath of the Hypo collapse, is itself about to be unwound, as the bad bank itself goes bad!

"Austria's Financial Market Authority stepped in on Sunday to wind down "bad bank" Heta Asset Resolution and imposed a moratorium on debt repayments by the vehicle set up last year from the remnants of defunct lender Hypo Alpe Adria."

In short: Austria just cut off state support of what was until this moment a state-backed, wind-down vehicle and a key pillar of trust in what was already a shaky financial system.

Not surprisingly, today's shock announcement comes a week after Austria's Standard reported that up to a five billion euro impairment at Heta would take place, a report which the Finance Ministry called "pure speculation" and noted that the Bank was in good health. According to Standard, among the reasons for the massive capital shortfall was the plunge in collateral as a result of the continuing crisis in South East Europe which meant that the value of "real estate in South East Europe, shopping centers and tourism projects, deteriorated massively" driven largely by the appreciation of the Swiss Franc. "As a result, the volume of bad loans has increased significantly."

Everyone was wondering who the first big casualty of the SNB's currency peg failure would be. We now know the answer.

Further from Reuters, the finance ministry confirmed this in a statement, adding Heta was not insolvent and that debt guarantees by Hypo's home province of Carinthia and the federal government were unaffected by the move.

The problem is that going forward that nobody knows who insures what, what various other state and quasi-state guarantors suddenly unclear as to who is responsible for what: the province of Carinthia guarantees back €10.7 billion worth of Heta debt. The federal government backs a 1 billion euro bond issued in 2012 that the ministry said would be honored in full.

As a result of the "sudden" capital deficiency, there will be a moratorium on repayment of principal and capital lasts until May 31, 2016, giving the FMA time to work out a detailed plan to ensure equal treatment of all creditors, the FMA said in a decree published on its website.

Perhaps a badder bank to rescue the bad bank?

According to Reuters calculations, More than 9.8 billion euros worth of debt is affected, including senior notes worth 450 million due on March 6 and 500 million on March 20.

But the punchline, is that while the world was waiting for Greece to announce capital controls, or a bail-in over the past week, it was none other than one of the Europe's most pristeen credits (one which until recently was rated AAA/Aaa) that informed creditors a bail-in is imminent: "The finance ministry noted that creditors can be forced to contribute to the costs of winding down Heta - or "bailed in" - under new European legislation that Austria adopted this year so that taxpayers do not have to shoulder the entire burden."

Bloomberg confirms that the ministry announced that under new EU rules means creditors can be forced to share losses.

Of course, this being Austria, and the Creditanstalt, aka the bank which failed in 1931 under almost identical circumstances and set off the dominos that led to a global financial crisis which in turn bank fanned the flames of the Great Depression, also being Austrian, suddenly everyone is asking: "what just happened and what happens next?"

 

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Sun, 03/01/2015 - 16:16 | 5843376 rosiescenario
rosiescenario's picture

...and DB has derivatives equating to about 3X Germany's GDP, as I recall.

 

Though, after reading Fitch's commentary, it would appear that Austria will have to stand behind the notes from the bank.

Sun, 03/01/2015 - 14:32 | 5843034 Fukushima Fricassee
Fukushima Fricassee's picture

Bank run Bank run

Sun, 03/01/2015 - 14:59 | 5843140 Ineverslice
Ineverslice's picture

 

Uncle Billy, where's the fuckin' money!

Sun, 03/01/2015 - 15:37 | 5843281 fxpmtrader
fxpmtrader's picture

Never ever in Austria. There is everything completely under control.

Nowotny said so, government said so, EU said so and they have the best job numbers EU side.

So all is well in sheeples land, sheeples planet.

Sun, 03/01/2015 - 18:39 | 5843774 SubjectivObject
SubjectivObject's picture

Is'nt there a law against shouting ... BANK RUN ... in a crowded bourse?

Sun, 03/01/2015 - 14:33 | 5843037 saveUSsavers
saveUSsavers's picture

Day of Reconing "Pitchforks and Lamposts" SOON, hopefully.

Sun, 03/01/2015 - 14:33 | 5843038 Srebro
Srebro's picture

Is this the BLACK SWAN that falls first?

Sun, 03/01/2015 - 14:40 | 5843065 davidalan1
davidalan1's picture

As of late there have been so many black swan events its getting crowded.

Sun, 03/01/2015 - 14:43 | 5843076 Winston Churchill
Winston Churchill's picture

Full eclipse of the sun,there so many are airborn right now.

Must be getting tired, so I'm sure one will land soon.

Sun, 03/01/2015 - 14:39 | 5843055 Arnold
Arnold's picture

Just once I would like to misplace 5 billion dollars.

Me and John Corzine would able to wear the same Victory Tee shirts.

(Napalm in the Morning aftershave as a free gift for shipping cost only)

 

Sun, 03/01/2015 - 14:47 | 5843090 Winston Churchill
Winston Churchill's picture

Did you check your other jacket ?

Sun, 03/01/2015 - 14:44 | 5843070 dizzyfingers
dizzyfingers's picture

I pray Austria will let deadbeats paddle their own canoe.

 

 

 

Sun, 03/01/2015 - 16:24 | 5843393 GMadScientist
GMadScientist's picture

Uh, if they did that, they wouldn't have a 'bad bank' handling previous implosions.

Sun, 03/01/2015 - 14:44 | 5843079 Racer
Racer's picture

Heta Asset Resolution Bank

 

Har har, har har, we lost your money har har, har har

Sun, 03/01/2015 - 14:45 | 5843085 ms8173
ms8173's picture

Let me guess....this news shall too get swept under the rug!!!

Sun, 03/01/2015 - 14:48 | 5843093 Batman11
Batman11's picture

The bankers told us derivatives made the system more stable by spreading risk through the system.

When put to its first test in 2008, when a small section of the US housing market collapsed (sub-prime), the whole system collapsed.

So we can safely assume bankers have no idea what they are doing and are not up to the job of putting together a global financial system.

Put in place capital controls to limit the damage caused by idiot bankers.

They are going to mess up (sub-prime NINA mortgages defaulting were a black swan event for these half-wits) lets limit the damage with capital controls.

 

Sun, 03/01/2015 - 15:08 | 5843170 Monty Burns
Monty Burns's picture

"So we can safely assume bankers have no idea what they are doing and are not up to the job of putting together a global financial system."

My own belief is that they're not overly concerned about the viability of the 'system' once they have time to loot enough from it to make themselves super-wealthy for life.

Sun, 03/01/2015 - 15:35 | 5843272 Bangin7GramRocks
Bangin7GramRocks's picture

The system is perfectly constructed for the bankers.

Sun, 03/01/2015 - 14:52 | 5843109 Batman11
Batman11's picture

Setting up a bad bank and then letting it go under seems like a good idea to me.

An exercise that should be repeated globally.

 

Sun, 03/01/2015 - 14:54 | 5843115 Winston Churchill
Winston Churchill's picture

What is the FedRes for $200 Alex.

Sun, 03/01/2015 - 15:53 | 5843319 Rhal
Rhal's picture

I totally agree. I was thinking that a while ago. Create a bank, take on loads of toxic debt, let it all deflate to zero.

The more complex the system is, the more important localized collapses are. Tying them together as they have eventually collapses the whole framework.

Sun, 03/01/2015 - 14:52 | 5843110 AbbeBrel
AbbeBrel's picture

This sounds so familiar. I remember trying to figure out where the heck "Carinthia" was located... and discovered it is in teh outskirts on the south of Austria.

"Friends of the Can" will not be happy to know that the Austrian Can has been found and will soon be whapped down the road for some unknown distance further. Carinthia isn't Iceland and so I suppose this will fester for another furlong.

From one year ago:

http://www.zerohedge.com/news/2014-02-24/haa-haa-will-another-creditanst...

Sun, 03/01/2015 - 16:37 | 5843430 delacroix
delacroix's picture

erste group was bailed out as well

Sun, 03/01/2015 - 14:59 | 5843141 grunk
grunk's picture

Hopefully, no banker bonuses will be impaired. 

Sun, 03/01/2015 - 15:03 | 5843155 Winston Churchill
Winston Churchill's picture

Only danger is getting strangled by their golden parachute cords, by accident.

Sun, 03/01/2015 - 21:38 | 5844255 Arnold
Arnold's picture

They are going to be strangely suicidal.

In honor of Lenard Nemoy, a remake of 'In search of..........' will be in order to seek the reason for so many institutional banker deaths.

Sun, 03/01/2015 - 15:12 | 5843158 Monty Burns
Monty Burns's picture

Underlines once again the utter uselessness/corruption of the rating agencies.

But why can't the ECB print Euros to rescue them?  Or am I missing something?

Sun, 03/01/2015 - 15:26 | 5843247 Money_for_Nothing
Money_for_Nothing's picture

Because next time the losses would be 1,000 times greater. They need to have another name instead of "moral hazard". Sounds too innocuous.

Sun, 03/01/2015 - 16:10 | 5843364 Rhal
Rhal's picture

The ECB has always recognized that printing money too readily wreaks the economy. And as Money_for_Nothing points out the bailouts get exponentially larger.

But they will find out the hard way that stealing deposits from the middle class wreaks it too, just differently.

Sustainability is all about the middle class.

 

Sun, 03/01/2015 - 15:08 | 5843173 Who was that ma...
Who was that masked man's picture

I understand that nail guns have already sold out at Home Depot/Austria as of 10:30 AM this morning.

Sun, 03/01/2015 - 15:12 | 5843185 Lmo Mutton
Lmo Mutton's picture

Black swans. The new normal.
Now if you see a white swan.......

Sun, 03/01/2015 - 15:12 | 5843188 stevehem
stevehem's picture

It's 'pristine' not 'pristeen'. Bad spelling erodes credibility.

Sun, 03/01/2015 - 17:29 | 5843588 Mi Naem
Mi Naem's picture

Anybody can make spelling mistakes.  Failing to even try to check and remove them shows you don't give a crap, or don't have time to exercise caution in the presentation, let alone of the content.  Therein lies the credibility loss. 

Downarrowers maybe think that liberty miens spilling at thou whey ewe won't. 

Sun, 03/01/2015 - 18:57 | 5843833 Kprime
Kprime's picture

maybe the banks bailed in all the left over Is and he only had ees to subtitute.  Like chicken is the new beef....but there is no inflation.

Sun, 03/01/2015 - 15:15 | 5843198 rosiescenario
rosiescenario's picture

"In Fitch's opinion, the creditworthiness of the notes also remains unaffected by regulatory changes such as the implementation of the EU Bank Recovery and Resolution Directive in Austrian law in early January 2015 with the adoption of the Federal Act on the Recovery and Resolution of Banks (Bundesgesetz uber die Sanierung und Abwicklung von Banken). According to the guarantee, should the notes - due to regulatory or other developments including statutory loss absorption - bear losses such as a write-down, conversion into equity or any other resolution measure, then the guarantor would guarantee continued and punctual payment of the originally guaranteed payment amount according to the interest and principal payment schedule. The guarantee for the notes has been issued under Austria's 2008 Financial Markets Stability Act"

Sun, 03/01/2015 - 15:29 | 5843261 Chuck Knoblauch
Chuck Knoblauch's picture

And it's gone.

Sun, 03/01/2015 - 15:31 | 5843263 Government need...
Government needs you to pay taxes's picture

Just have the ECB conjure 9 billion euros and presto change-o, problem solved.  This isn't even a plunge protection team mustering event.

Sun, 03/01/2015 - 15:47 | 5843304 Chuck Knoblauch
Chuck Knoblauch's picture

Grab a chair before the music stops.

Suckers are still dancing in circles.

Sun, 03/01/2015 - 18:55 | 5843830 Kprime
Kprime's picture

I went to grab a chair...Wow, it wasn't there.

Sun, 03/01/2015 - 18:02 | 5843675 FrankDieter
FrankDieter's picture

ECB will simply do a PayPal for the first 60B euros to Austria banks.  That should fix the problem.

Depositors have nothing to worry about.  But just look at Cyprus.  Depositors were fucked up the arse by the

Euro motherfucker banksters.

Sun, 03/01/2015 - 15:48 | 5843307 Rhal
Rhal's picture

I'm very surprised they announced the hole before locking down deposits. Maybe they just want to see if such a "discovery" really triggers a bank run.

Sun, 03/01/2015 - 18:00 | 5843670 FrankDieter
FrankDieter's picture

They will lock down deposits after the bank runs start on Monday.

Money is not safe in these fucking banks.

Sun, 03/01/2015 - 18:28 | 5843755 El Vaquero
El Vaquero's picture

Safe?  Hell, it's not even real.

Sun, 03/01/2015 - 18:54 | 5843827 Kprime
Kprime's picture

Open Monday?  May never come.

Mon, 03/02/2015 - 01:35 | 5844778 Flagit
Flagit's picture

 

Money is not safe

 

There, fixed it for ya.

Sun, 03/01/2015 - 15:52 | 5843321 rejected
rejected's picture

BTFATH  or

BTFD

Hard questions...

 

Sun, 03/01/2015 - 15:53 | 5843322 PontifexMaximus
PontifexMaximus's picture

Who cares about Austria? We have Greece! What a super no brainer.

Sun, 03/01/2015 - 17:58 | 5843662 FrankDieter
FrankDieter's picture

"The finance ministry noted that creditors can be forced to contribute to the costs of winding down Heta - or "bailed in" - under new European legislation that Austria adopted this year so that taxpayers do not have to shoulder the entire burden."

This is definitely an one-off event, nothing to worry about. 

Bank runs across all of Austria next week.  As these fucking dumb muppets try to salvage whatever they can

from these crooked banks.

Sun, 03/01/2015 - 16:00 | 5843339 ZeroPoint
ZeroPoint's picture

If the bail-in 'works', just watch as other banks are purposely imploded to extract the savers savings. Just another wealth transfer to the top.

Sun, 03/01/2015 - 18:09 | 5843697 smacker
smacker's picture

+1 for knowing exactly how the minds of banksters/fraudsters work.

Sun, 03/01/2015 - 20:14 | 5844024 ISEEIT
ISEEIT's picture

+bureaucrats..

It isn't the truth until it hurts.

http://mises.org/sites/default/files/Bureaucracy_3.pdf

Sun, 03/01/2015 - 16:03 | 5843346 NEKO
NEKO's picture

What happens next?...

Well if the Austrian public have any sense they will scramble to get out what they can while they can - if there is no immediate bank run then logic has been defied once again. 

Sun, 03/01/2015 - 17:29 | 5843589 tarabel
tarabel's picture

 

 

If they had any sense, they got their money out of there a long time ago. It's a legacy "bad bank" holding company. If they kept their money there after the original bank collapsed, they deserve to lose all of it AND get a bill for their excess of stupidity.

Sun, 03/01/2015 - 17:54 | 5843650 FrankDieter
FrankDieter's picture

If they had any sense, they got their money out of there a long time ago. It's a legacy "bad bank" holding company. If they kept their money there after the original bank collapsed, they deserve to lose all of it AND get a bill for their excess of stupidity.

 

Good point !

Sun, 03/01/2015 - 16:12 | 5843367 robertocarlos
robertocarlos's picture

I withdrew another 800 this morning from the ATM. That's once every 5 days. My drug habit is getting really bad.

Sun, 03/01/2015 - 17:47 | 5843630 mastersnark
mastersnark's picture

And I just keep having to pull cash out of casino ATMs; I guess I'm just so unlucky

Sun, 03/01/2015 - 16:20 | 5843384 Make_Mine_A_Double
Make_Mine_A_Double's picture

How the fuck does Carthinia - population 500,000 + (mostly pensioners) and a landmass of most Alpine terrain guarantee Euro 10 billion plus?

That's a lot of lift tickets. But I presume any number over a Billion these days is never going to paid back.

Sun, 03/01/2015 - 16:26 | 5843397 GoldSilverBitcoinBug
GoldSilverBitcoinBug's picture

Aaannd It's gone !

 

Sun, 03/01/2015 - 17:01 | 5843499 Northern Lights
Northern Lights's picture

"Young man, the money in your account didn't do too well.......it's gone, poof!"

 

 

 

Sun, 03/01/2015 - 16:26 | 5843399 Trahald
Trahald's picture

Everybody was happy when they kept the over valued assets on the balance sheet, (same as all banks) what caused them to bring them down to market value? Greek exit?  Somethings happening, countries are writing off Euros.

Sun, 03/01/2015 - 20:16 | 5844003 zstard
zstard's picture

edit

Sun, 03/01/2015 - 16:28 | 5843405 Soul Glow
Soul Glow's picture

This is what happens -

A One Off Capital Levy?

 

The sharp deterioration of the public finances in many countries has revived interest in a “capital levy”— a one-off tax on private wealth—as an exceptional measure to restore debt sustainability.1 The appeal is that such a tax, if it is implemented before avoidance
is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair). There have been illustrious supporters, including Pigou, Ricardo, Schumpeter, and—until he changed his mind—Keynes. The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away (these, in turn, are a particular form of wealth tax—on bondholders—that also falls on nonresidents). 

Page 49

http://www.imf.org/external/pubs/ft/fm/2013/02/pdf/fm1302.pdf

Sun, 03/01/2015 - 18:04 | 5843681 smacker
smacker's picture

Two comments:

1. Is it not pathetic that the IMF needed to write a report of 107 pages to describe how governments should "steal" money from bank depositors/savers?

2. The actual "wealth tax" rate the IMF proposed was 10%, but when this matter was discussed on ZH a few months back, the general view was that 10% wouldn't scratch the surface of sovereign debt problems. Obviously the IMF already knew this. 30% was considered a more realistic rate to make a meaningful dent.

Then of course there's the question of whether this "wealth tax" would be a genuine once-off as the IMF liars claimed or if it would quickly be applied annually. I suspect that it would become enduring. The net result would be an impoverished society, ie: a levelling down of society as happens in any other Communist state.

Sun, 03/01/2015 - 17:03 | 5843500 natty light
natty light's picture

We need a double-secret bad bank.

Mon, 03/02/2015 - 01:40 | 5844787 Flagit
Flagit's picture

Hmmm, what scenario could lead to the Germans actually attacking Pearl Harbor?

Sun, 03/01/2015 - 17:20 | 5843563 saltoafronteira
saltoafronteira's picture

How are we now going to fit "A" for Austria in the PIIGS acronym ? PIIGAS ? GASP II ?

Sun, 03/01/2015 - 17:21 | 5843566 bugs_
bugs_'s picture

Giant holes in Siberia - huge capital holes in Eurpoean banks.......

Sun, 03/01/2015 - 17:50 | 5843639 FrankDieter
FrankDieter's picture

Ouchy ouchy ouchy

 

Depositors (aka creditors) get to be bailed-in and pay for this 8B eur loss.

 

What an ass reaming !  You lose all your money, banksters still get enormous bonuses.

 

Spain, Italy, Greece, Cyprus, Portgtual next.

 

Take your positions and bend over muppets.  All you dumb fucking bastards.

Sun, 03/01/2015 - 17:51 | 5843642 MeelionDollerBogus
MeelionDollerBogus's picture

Anyone else here notice there's no way to get to the user comments page now? I get error 403/denied just to see my own comments.

Sun, 03/01/2015 - 18:01 | 5843671 mastersnark
mastersnark's picture

Yes, the work around is click on "my account," then "follow this user's comments, then type in your name.

Sun, 03/01/2015 - 20:00 | 5843984 ISEEIT
ISEEIT's picture

Don't worry BITCH.

The 'american' FCC has your 'back' (ass)

It'll get different soon.

Sun, 03/01/2015 - 17:56 | 5843656 laesterzunge
laesterzunge's picture

I am an Austrian citizen and delighted, that our treasury seems to have stopped to feed the beast for now. So far our federal government has already poured 5,5 bn. Euro of tax payer's money into this black hole. Unfortunately we the people will resume paying, as soon as the creditors of 10 bn Euro of state guaranteed debt want their money back from Carinthia. Yes, it was the late Jörg Haider in the beginning, but idleness and complacency from the part of our federal FMs added a lot !

Sun, 03/01/2015 - 19:31 | 5843918 Eahudimac
Eahudimac's picture

I love Austria. I hope the Austrian people do not allow a bail-in to happen.

Mon, 03/02/2015 - 01:36 | 5844782 AbbeBrel
AbbeBrel's picture

Sorry to hear about your Klotz am Bein!

I hope the Austrian taxpayers survive the surgery...

http://www.vorarlbergernachrichten.at/politik/2014/02/19/klotz-am-bein.vn

Sun, 03/01/2015 - 18:00 | 5843668 mastersnark
mastersnark's picture

7.6 billion? Pfftt...that's a 15 minute print job. You want non-sequential bills so it's not so obvious? 20 minutes.

Sun, 03/01/2015 - 18:09 | 5843696 WTFUD
WTFUD's picture

The lizard people from pod nation are hemorrhaging extremely toxic financial products. LONG SUICIDES.

Sun, 03/01/2015 - 18:27 | 5843748 FrankDieter
FrankDieter's picture

Austria muppets depositors hacked to death by the banksters.  Take money out of the bank and buy gold and silver bitchezzz.

Sun, 03/01/2015 - 18:38 | 5843772 yrbmegr
yrbmegr's picture

In Siberia, they have actual holes.

Sun, 03/01/2015 - 20:43 | 5844106 jerry_theking_lawler
jerry_theking_lawler's picture

But they didn't dig those holes....

Sun, 03/01/2015 - 19:17 | 5843879 Jake Gittes
Jake Gittes's picture

Well that "spectacular development" was a huge yawner.  Looks like the Glibertarian "Chicken Littles" are going to be disappointed yet again.

Sun, 03/01/2015 - 19:53 | 5843973 ISEEIT
ISEEIT's picture

Ghee Wally, Why do the bad guy's (government...IN FACT) rape us?

I don't know Beav...I suppose beCAUSE we let them?

Sun, 03/01/2015 - 19:56 | 5843977 Farqued Up
Farqued Up's picture

Not to worry, they will print until the circuits lose their printed circuitry. I guess they figure it doesn't matter if the banks don't care for gaining or losing deposits nor care about making any loans. Boardwalk and Park Place don't need any houses nor hotels and they do nothing but pass GO and collect billions. I doubt the dice are even rolled in this rigged game. The bank just keeps getting infused with fiat and all are winners.

But..but...who will supply the bail-ins if the depositors leave?

Sun, 03/01/2015 - 19:56 | 5843978 thetruthhurts
thetruthhurts's picture

Shut up and just BYFD's!

Sun, 03/01/2015 - 20:05 | 5844000 Jake Gittes
Jake Gittes's picture

Which very much seems to be happening.

Sun, 03/01/2015 - 19:56 | 5843979 Grischun
Grischun's picture

Greetings from Switzerland. I have followed the Hypo / Heta story quite intensively. And it is a desaster. Last year the government simply voided a state guarantee by law to wipe out a subordinated bond (why there has been a state guarantee, dont ask, but it was). Now they used a sleazy way to introduce a paragraph into the new banking bail in law, that also bad banks can be included. They just did this to include Heta! S&P warned the government in front of journalists on Thursday that they watch carefully how senior bond holders are treated and how state guarantees are honored. What is the Austrian government doing? They dont call it insolvency, they call it bail in and argue that a payment moratorium does avoid the state guarantees to become effective. Ok, so lets think about this. A bond is not paid on time, no interest is paid, principal is not paid back on time. But it is no default, because the Austrian Financial Authority says a moratorium means no default. Got it? Remember: Austria is among the countries with the highest amount of debt hidden in state companies (railway copany, tollroad company etc.). Furthermore all its other federal states still have 57 billion Euros of state guarantees outstanding. Without an implicit federal guarantee they will never be able to pay for this! what are all these federal and state deficiencies worth?

The finance minister said, he can only speak for the federally guaranteed bond, not the state (Carnithia) guaranteed bonds. Carinthia has a yearly budget of 2 billion Euros. compare this to the size of nearly 9 billion Euros of state guaranteed bonds. If S&P and Moodys are to be taken serious they will have to downgrade Carinthia to junk levels, and all other federal states in Austria to at least "speculative grade".

Furthermore S&P has mentioned on Feb 4, 2015, that they will remove 2 to 3 "systemic support notches" from the large Austrian banks (Raiffeisen Bank International, Erste Group, Unicredit Bank Austria) if it becomes clear, that the state does not at least implicitly back senior bond holders of Austrian banks anymore. Here we go. This means that RBI will move to "speculative grade" soon. Watch the capital markets in the next few days. RBI bonds will suffer heavily. Note: RBI is part of Raiffeisen. All the lower tier banks of Raiffeisen guarantee for the top banks within the concern. Also: Raiffeisen controls nearly 50 % of Austria´s GDP through its immense cross deficiency guarantees. Not a good omen for Austria.

The whole action is an outcome of internal populist party fights. This has not been discussed with European partners, but it should have been. Mr. Schäuble (German Finance Minister) will thank Mr. Schelling (Austrian Finance Minister) for this well-planned action. If state guarantees by Austrian states can simply be deleted and deferred, who says that the same cant happen in the case of German federal states and their Landesbanks?

Watch this. This is going to get very interesting

Sun, 03/01/2015 - 21:22 | 5844214 Government need...
Government needs you to pay taxes's picture

The State can't trigger the CDOs . . . that would be the start of a global banking meltdown that would make Fukushima look like a warm sunny day at the park.

Mon, 03/02/2015 - 00:22 | 5844660 hedgiex
hedgiex's picture

Yes not calling a default a flu to calm contagion fear. In the real world, the virus cannot be dictated to. Are we sure that the bail-outs of the 1% did not precede these fancy bail-ins. Semantics however do work with muppets.

Mon, 03/02/2015 - 00:31 | 5844677 silverer
silverer's picture

Thank you for your post!  In Switzerland, are you sourcing your news from alternate media, or would you say the mainstream news there is reporting accurately on these things?

Mon, 03/02/2015 - 02:48 | 5844857 Grischun
Grischun's picture

Hi, I am Austrian, but living in Switzerland and I am working in the financial industry. Its pure intensive observation and primary research. The point some readers are missing here: there is no bail in of depositors, but of senior bond holders that are guaranteed by state deficiency guarantees of the federal state of Carinthia. Bloomberg and Financial times will take a few hours or even days to to understand the effect this will have. Because Austria does not want that the state guarantees become effective they issue a "payment moratorium" and call it "no default".

 

They basically put all the waste in the bad bank, saved other creditor banks by selling the "going concern banking units" and after this has happened they try to impose a bail in on senior bond holders and they try again to circumvent the state deficiency guarantees.

 

Since every Austrian federal states has billions of deficiency guarantees outstanding the financial market (as is S&P doing) is asking what the law and promised in a prospectus are worth in Austria. This is much more significant than many commentators are reconizing in their first comments.

That is why it will take a few hours or even days to understand what kind of sleazy action this is by Austria to break clear and explicit promises.

 

 

Mon, 03/02/2015 - 02:48 | 5844858 Grischun
Grischun's picture

Hi, I am Austrian, but living in Switzerland and I am working in the financial industry. Its pure intensive observation and primary research. The point some readers are missing here: there is no bail in of depositors, but of senior bond holders that are guaranteed by state deficiency guarantees of the federal state of Carinthia. Bloomberg and Financial times will take a few hours or even days to to understand the effect this will have. Because Austria does not want that the state guarantees become effective they issue a "payment moratorium" and call it "no default".

 

They basically put all the waste in the bad bank, saved other creditor banks by selling the "going concern banking units" and after this has happened they try to impose a bail in on senior bond holders and they try again to circumvent the state deficiency guarantees.

 

Since every Austrian federal states has billions of deficiency guarantees outstanding the financial market (as is S&P doing) is asking what the law and promised in a prospectus are worth in Austria. This is much more significant than many commentators are reconizing in their first comments.

That is why it will take a few hours or even days to understand what kind of sleazy action this is by Austria to break clear and explicit promises.

 

 

Mon, 03/02/2015 - 01:09 | 5844740 rex-lacrymarum
rex-lacrymarum's picture

I agree - this is a highly significant development. Note that there are not even any legal provisions for what to do if a provincial Austrian government goes bankrupt, as may now happen with Carinthia. 

Note also, only late last year, Carinthia sold 100ds of millions in new bonds to investors, and in its documentations/presentations was downplaying the issue of guarantees for Hypo Alpe Adria as something that had been "dealt with". 

Sun, 03/01/2015 - 20:07 | 5844006 Panic Mode
Panic Mode's picture

Bring up the nailgun. It's more like "Nail-In Arrives".

Sun, 03/01/2015 - 20:22 | 5844046 q99x2
q99x2's picture

Jump bankster Jump.

Sun, 03/01/2015 - 21:26 | 5844230 Government need...
Government needs you to pay taxes's picture

Except eventually, that bankster will take either all of us, or all our money with him out that window.

Sun, 03/01/2015 - 20:58 | 5844149 Paracelsus
Paracelsus's picture

Ok.  I'll say it.

You just couldn't make this shit up.

They wanted to give H.Schacht,ReichsBank under Hitler,a reaming at Nuremburg.

Turns out he resigned (1936) because all the dodgey accounting going on.

The Poles got their gold away in time,unlike Austria and the Czechs. 

Belgian gold was in Paris and didn't get away.No one thought France would fall in three

weeks....

Mon, 03/02/2015 - 00:52 | 5844709 Youri Carma
Youri Carma's picture

It gets even worse. Czech gold stored in London (Under a BIS account) was handed over to Hitler by the Bank of England. See: Banking With Hitler http://www.youtube.com/watch?v=veQfroRUWdM

 

Mon, 03/02/2015 - 02:42 | 5844850 gregga777
gregga777's picture

Paracelsus wrote, "…No one thought France would fall in three

weeks…"

The Battle of France really lasted 1 month and 15 days. That's 45 days or 6 weeks and 3 days.

The Germans were damned sure about the outcome! But, they were surprised at how quickly they routed the British Expeditionary Force, bagged the French Army in the North and defeated France entirely.

In 45 days of combat French casualties were:

KIA (killed in action): 85,310, including 5,400 Maghrebis
WIA (wounded in action): 120,000
MIA (missing in action): 12,000
POWs (prisoners of war): 1,540,000 including 67,400 Maghrebis

The French soldiers and airmen fought very bravely, heroically even, and sustained enormous casualties (KIA, WIA, MIA & POWs). But, they were afflicted by the criminal failure of their political, military and scientific elites to equip them with Command, Control and Communications technologies for modern warfare. The French Army was, for all practical purposes, mostly at a World War I level of telecommunications technology.

For instance, though France fielded about 1-1/2 times as many tanks, that were more heavily armed and armored, than their German counterparts virtually none were equipped with radio transceivers. Whereas every German tank was so equipped, as were other German motorized units.

The French army depended on the national telephone system until they took to the field. In the field they mostly depended on physical messengers at all levels of the command structure. By the time higher commands received communiques they were woefully outdated which prevented Corps and Army commanders from ever having an accurate mapped view of the the German threat facing them and the positions of their own units trying to stop them.

Whereas the German tank and motorized divisions in the spearhead or breakthrough formations were in real-time contact with each other and their commanders. Plus, though they were in short supply, they had motorized Luftwaffe forward air controllers to coordinate close air support by Luftwaffe aircraft. I have read that during Guderian's Corps'dash to the channel he never had to wait more than 15-to-20 minutes for close air support to arrive once called for.

Mon, 03/02/2015 - 03:04 | 5844870 Jano
Jano's picture

RUssian tanks, like T34, also didn't have any radio equipment.

The outcome depends rather on the team operating the machine and less on radio.

The same is valid today as well.

Mon, 03/02/2015 - 03:50 | 5844898 COSMOS
COSMOS's picture

I think you fail to realize that eventually they did all get radio and that allowed them to turn the tide..THE OUTCOME VERY MUCH DEPENDED ON THE RADIO!!!!

http://www.militaryphotos.net/forums/showthread.php?198165-Radio-communi...
http://rkka.pskov.ru/
http://www.kv1ehkranami.narod.ru/kv1_L11.html
http://mavr13.narod.ru/KV-1-pet/episod-1.html#links1

"....I started to research this topic and have found a lot of interesting facts. These articles state that prior the war Soviet Union had one single factory producing tank radio stations and that only 10-20% of produced tanks were equiped with radios. For example out of 115 T-34 produced in 1940 only 12 got radios. In 1941 situation became even worse, because that factory had to be evacuated. By the end of 1942 30-40% of new tanks received radio equipment. It wasnt until 1943 the soviet radio industry started to fully satisfy military needs and all of the soviet tanks got radios.

http://www.forum.odlr.ru/showthread.php?p=19655
http://www.rkk-museum.ru/documents/a...ages/as_v6.pdf
http://battle.nichost.ru/ru/soviet-r...equipment.html

I suggest that lack of radio equipment in soviet armoured units is one of the main reasons of Soviet military failures at the initial stage of war. Every German tank had radio station thus German crewmen received tactical advantage over Soviets. Soviet armoured units suffered much havier loses and lost fighting ability. The slow rifle divisions without cover from armored units quickly got into "pockets".

Sun, 03/01/2015 - 21:23 | 5844220 mijev
mijev's picture

Maybe Greece can bail them out.

Sun, 03/01/2015 - 21:29 | 5844236 mijev
mijev's picture

Whenever I go to Canada or England I like to ask for some Canadian bacon or an English muffin. I think it's time to go to Austria and ask whether they have any Austrian Economics on the menu.

Sun, 03/01/2015 - 22:04 | 5844340 Let Them Eat Cake
Let Them Eat Cake's picture

Bloomberg Television ain't all over it - So it can't be the big deal that 5 pgs of comments here would have it seem. Also of note, Futures markets yawned

Sun, 03/01/2015 - 22:07 | 5844347 Let Them Eat Cake
Let Them Eat Cake's picture

Of much graver importance, China central bank says EVERYTHING IS AWESOME with a rate cut & samsung has a new phone gadget doohicky

Mon, 03/02/2015 - 00:41 | 5844700 skilaki69
skilaki69's picture

So gold will go how high now...?

Mon, 03/02/2015 - 01:59 | 5844806 Duck077
Duck077's picture

There is a recovery for some, but not all, therin lies the problem.  Articles like this don't get me excited.

Mon, 03/02/2015 - 06:22 | 5844970 nathan1234
nathan1234's picture

3 important Home Truths

a) Austrians should have practised Austrian Economics not that of the EU.

b) They should have had their own currency.

c) Those who had their accounts at this bank ( Hypo Dermic Bank as suggested by one ZHer) and/or having accounts at other banks( all over the EU & the US) need to practise being their own bank The syringe will vaccum all.

Mon, 03/02/2015 - 06:29 | 5844972 Ghordius
Ghordius's picture

interesting. so Austrian School Economics does insist on national currencies? you do know that gold is the ultimate non-national currency, do you?

in fact, all "troubles" that are regularly trotted out against the EUR would apply even more to... gold

(see here http://www.zerohedge.com/news/2015-02-26/austrian-solution-greece#commen...)

Mon, 03/02/2015 - 09:11 | 5845108 nathan1234
nathan1234's picture

Yes I do know that.

That's why it's ironical that Austria has problems.

Because they did not have their own currency linked to Gold.

They chose to follow the Fed's system implemented by the EU

Mon, 03/02/2015 - 09:22 | 5845121 Ghordius
Ghordius's picture

nathan, Austrian School teaches to accept problems, downturns and busts. I'm not so sure you understood this part of the thing

the problems Austria faces at the moment are exactly the same as if they had gold as a currency

inversely, if they had a national currency and would prefer not to balance their budgets, they could have the two aspirins / NeoKeynesian approach to them

Mon, 03/02/2015 - 07:18 | 5844995 Shitgum Suicide
Shitgum Suicide's picture

Couldn't sleep so I was reading this article in the UK Telegraph about a singer for the group Happy Mondays. His interview starts out like you'd think but actually ends up with a rather illuminating conclusion.

He tells about how he doesn't have any savings and spends most of his money. But then he goes on to explain the problem we all talk about here.

Problem is that he gets but he doesn't get it. If we could help people like this GET IT maybe more people will be willing to do something about. If at the very least starve this fucking thing.

http://www.telegraph.co.uk/finance/personalfinance/fameandfortune/114368...

Do NOT follow this link or you will be banned from the site!