The Austrian Black Swan Claims Its First Foreign Casualty: German Duesselhyp Collapses, To Be Bailed Out

Tyler Durden's picture

Precisely one week ago in "A Black Swan Lands In Southern Austria: The Ripple Effects Of "Mini-Greece Going Off In The Heartland Of Europe", when analyzing the consequences of the collapse of Austria's bad bank, we noted perhaps the biggest paradox of Europe's emergency preparedness response to the Greek collapse and imminent expulsion from the Eurozone: namely that the biggest threat to German banks was no longer in some Mediterranean nation, but in its very own back yard. To wit:

Irony #2, and the biggest one of all: while German banks had spent the past 3 years preparing for the inevitable Grexit and offloading all their exposure to the now insolvent Greek state, it was a waterfall chain of events which started in Germany's own "back yard", courtesy of auditors who decided it was unnecessary to mark losses to market until it was far too late, and the immediate outcome is that one ninth of until recently Aaa/AAA-rated Austria is now also insolvent. And that is just the beginning.


One can only imagine how many such other "0% risk-weighted" Pandora boxes lie in wait across what are otherwise considered Europe's safest banks, provinces and nations.

Indeed, it was just the beginning, and moments ago we got confirmation that the next domino has tipped over, following a Reuters report that Germany's deposit protection fund will take over the property lender Duesseldorfer Hypothekenbank AG (DuesselHyp), which has "run into problems" due to its exposure to Austrian lender Hypo Alpe Adria's "bad bank" Heta.

And while in the US FDIC Failure Fridays works like a well-greased machine, Germany has yet to get the hang of the whole "save the bad news for Friday after market close" thing and has for now has stopped on "Shocker Sundays."

Then again, this being Europe, denial persists even after the moment of failure, and according to Reuters, "the German banking association BdB, which runs the fund, is, however, not planning to wind down the bank, but wants to continue its operations."

"The deposit protection fund is granting a guarantee for the Heta bonds to eliminate the immediate risks. The goal is a complete takeover of Duesseldorfer Hypothekenbank," the BdB said in a statement on Sunday.

We described the consequences from the Heta fallout in minute detail last week, but for those who missed it, here are the Cliff notes:

Regulators this month took control of Heta and imposed a debt moratorium until May 2016 after an outside audit found writedown needs that blew a hole of up to 7.6 billion euros in its balance sheet. This leaves holders of Heta debt in limbo and facing the prospect of losses.


Heta could still be declared insolvent despite plans to wind it down, the Austrian regulator FMA has said, a move that could hit German banks harder than many of their Austrian rivals.


After regulators took control of Heta, the ratings agency Fitch said last week that DuesselHyp was in urgent need of capital support.


In its 2013 annual report, DuesselHyp said it had 348 million euros ($365 million) in Hypo Alpe Adria debt.

So a partial impairment on $365 million in debt is enough to send a German bank, which according to its latest interim financial report, had €10.9 billion in assets, into full out insolvency? As if the ECB's farcical stress tests needed any further validation they are nothing but the worst possible joke on Europe's depositors Goldman's head of the ECB could have conceived.

As for the biggest winner from today's surprise announcement, London-based Attestor which until this moment was supposed to buy the German bank. Talk about saved by the "bank failure"... and due diligence.

The planned takeover by the BdB also means that a planned sale of DuesselHyp to group of international buyers led by London-based Attestor is no longer being considered, a source familiar with the situation said.

One can almost see why. As for the guy who looked at DuesselHyp's balance sheet and "wisely" concluded it is worth X, good luck finding a job. Don't worry though, many more "analysts" at other banks will be joining you in the unemployment line as more European banks admit they are insolvent when a world that is "priced to perfection" is revealed to have been anything but.

Because if a 1.5% write down in the assets of a supposedly well-capitalized German bank can lead to almost overnight insolvency, one can almost imagine what will happen when the Austrian black swan wave reaches Europe's actually "undercapitalized" banks...

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Newsboy's picture

What a fungible world we live in!

Manthong's picture

Hypothecating Bank..?

NOT hypothetically busted.

Gotta’ love it.

Latina Lover's picture

And so it begins.....the EU financial system is breaking.

Fish Gone Bad's picture

Let me put this into perspective.

Politician-speak:  Black swans are ugly and only Hitler liked them.

As long as a conversation can be cratered into something to do with Hilter, it is considered a win

That said, yeah, the EU financial system is somewhat-less-than-healthy.





CrazyCooter's picture

Um, really? Let me get this straight ... "Duesseldorfer Hypothekenbank" ... is that really a bank name ... like "diesel dike hypoticat'in bank"? Like, hide the borrowed sausage toy bank?


Germans are great engineers, but this is kind of pervy.

@NewsBoy ... they are just putting the Eff-You-Enn back in Fungible. Buckle up (and trust your banker partner - safe word is "Shizer")!



walküre's picture

Duesseldorf has more millionaires than most cities on the planet. I danced with Claudia Schiffer at Checkers in DUS long before that slimy pig Karl L. got his greasy fingers on her. My memories are somewhat clouded. I danced at Checkers and there were plenty pretty girls. Claudia Schiffer was probably among them. I kicked Karl L. in his balls and he liked it. Perv.

Anyway, the term Hypothek just means mortgage. So a Hypothekenbank is a mortgage lender. They hold mortgage paper.

If Dusselhyp is broke it is not the end of the world. West LB was a huge deal. West LB was once one of the largest banks in Europe with HQ in DUS.

Karl L. is a grandiose douche. I'd kick his ass given the chance. He would probably like that too.

Sandmann's picture

Yes but check out if any of that mortgage paper is held through SIVs in Dublin's Waterfront Tax Haven

GetZeeGold's picture



And so it begins.....


I'm glad someone else said that....because I didn't want to.

Uchtdorf's picture

Folks, Hypothek does not mean mortgage. It means Corzined.

Ghordius's picture

Duesseldorf is a German city, Dorf means Village, so it means "Village at the Düssel", while the Düssel is that little river that flows there and gave the name to the original village

Hypothek means Mortgage, and Hypothekenbank is just a reminder of times when banking was segregated in business sectors (Glass-Steagall, for the US, until 1999)

and capitalism is a lot about how to cope with failure, which includes banks failing

Terminus C's picture

I wondered where the banking terminology of re-hypothecate came from...

Re-mortgaging assets...

Makes sense now...

Fucking thieves.

Beowulf55's picture

Oh ye of little faith..........those banksters have a lot of pots from which to draw their slush fund rainy day reserves.

Wake me when gold hits $2,000 then I might sit up and take notice.

GetZeeGold's picture



They've probably spent $10,000/oz to keep gold under $2,000/oz.


It got close......too close.


We've printed almost a trillion dollars a month for how long? This is all that gets us?

GMadScientist's picture

You have another world we can trade for this one?

Newsboy's picture

I have non-fungible-world, but I can't transfer it to anybody.

Oh, well...

Grow your own.

Never One Roach's picture

As long as the bankers still get their loan bonus+commissions they don't care to whom they lend to and not a worry in the world about risk.


Zero accountability in the financial industry.

Al Tinfoil's picture

Speaking of accountability in the financial industry, the Hypo-Alpe-Adria bank story is incredible (and darkly hilarious) when you start looking into it.

Google "Wiki Hypo Group Alpe Adria". (the Wikipedia piece is mercifully short). Then, under EXTERNAL LINKS click on Hypo Alpe Adria-A Bank Scandal in Austria.  That brings up: 

NACHRICHTEN HEUTE "Hypo-Alpe-Adria- A Bank Scandal in Austria",

Then click on the next article under External Links: "Hypo-Alpe-Adria-Bank (Scandalpe): Upddate of the Scandal".

Then for icing on the cupcake, Google "Jorg Haider".

According to these articles, Hypo originated with some persons of questionable reputation, then operations were taken over by a team of well-known con artists, involved itself in numerous scandalous deals, and was the darling of Joerg Haider the "controversial" right-wing Hitler-worshipper who has Governor of the Austrian province of Carinthia/Kaernten.  Carinthia/Kaernten was the majority shareholder in the Hypo bank at that time.

In May, 2007, with Haider promoting the deal, BayernLB, a county bank owned by the state of Bavaria, Germany, bought a 50% plus one share interest in Hypo bank, for 1.63 billion Euros.  The sale was accompanied by allegations of insider trading in the shares making a profit of 148 million Euros. BayernLB had been trying to enter the Austrian banking market for some time.  Carinthia/Kaernten retained a minority interest. 

It is alleged in the "Update" article that Bayern did no due diligence at best, or at worst its Directors colluded with the Austrians to carry out the crooked deal.  BayernLB found Hypo to be a black hole for its money.  The bank was riddled with bad loans and shady deals including money laundering, fraud, and arms financing.

In December, 2009, the bank was nationalized by the Austrian federal government to prevent its collapse.  Bayern turned over its interest for a symbolic 1 Euro, taking a hit on the overall deal of as much as 6.7 billion Euros.  The total losses on unrecoverable loans were estimated to be between 13 and 19 Billion Euros.

In February 2014, Chancellor Werner Faymann of Austria warned that the HYPO mess remained unresolved, and that its failure would be comparable to the Kredit Anstalt event of the 1930s.  In March 2014, Hypo was split into a Balkans unit, an Italian business, and a bad bank, Heta Asset Resolution. 

March 1, 2015, Austria's Financial Market Authority imposed a moratorium on debt and interest payments by Heta, "after an audit found that it had a capital shortfall of up to 7.6 billion Euros".  Gee, surprise surprise, where did that capital shortfall come from?

As for Haider, he killed himself in a high-speed single-vehicle crash in 2008. He was allegedly heading for his mother's birthday party, had a blood alcohol reading of 3 times the legal limit, travelling at twice the speed limit, had just left a gay bar and had just had a fight with his boyfriend.  His surviving wife disputed the allegation that Joerg was gay.  The police insisted that it was an accidental death, not a murder.

Various former high-ranking officers of Hypo have been arrested, convicted, or investigated for a number of alleged offences relating to Hypo, including fraud and issuing false balance sheets.   

Fíréan's picture

Thank You for posting this information and links. sometimes ( often) the greater story and finer details, or leads to them,  can be found posted in the comments sections. Makes dredging thro' the comments worth while.

GMadScientist's picture

Oh, I do, but we we're talking about worlds. ;)

Newsboy's picture

I was (obscurely) referring to the local existence, which has been typical of our species through the eons, which is an existence as part of place/ecosystem, and inherently non-transferrable. Becoming indigenous is the alternative to our current dependence on multinational corporations. It's no simple task, but it does begin with "growing your own".

I'm not accostomed to having the room to express things so expansively on ZH, mostly other sites like The Automatic Earth, with far fewer comments.

Keep "growing your own", brother. The transporter could start working at any moment.

GMadScientist's picture

We're certainly a lot less dangerous to ourselves when we keep to same.

Not sure I want a never noticed that everyone on Star Trek works for the Navy?

Newsboy's picture


Growing your own might be the "transporter" to non-fungible world, when fungible world suffers a wardrobe malfunction.

TheRideNeverEnds's picture

all news is good news.  even no news is good news.  buy buy buy!  


As the market explodes higher today just remember; you could have bought the dip...  

We are currently below the 50d moving average therefor drastically oversold. If you are not buying here with both hands you are retarded. Yea sure we may go lower however its a guarntee that we will go signifigantly higher then this level in the near future.

NoTTD's picture

One of the primary threats to fungible goods is inherent vice.  


Takes on a whole new meaning here.

davidalan1's picture

"To be bailed out" lmao....

JerseyJoe's picture

They have to stop the dominoes...

QQQBall's picture

They might be broke, but they can still pass the stress test!

Kprime's picture

They are totally underwater, but they are still homeowners.

wendigo's picture

In 2015, I may be proved to be prescient or insane. 

Winston Churchill's picture

They are not mutually exclusive.

wendigo's picture

A mad prophet? I should be so lucky. 

Hohum's picture

Mad profit?  Where's Cramer?

wendigo's picture

Why did the Romans stop persecuting Christians? The lions were eating all the prophets. 

GetZeeGold's picture



In 2015, I may be proved to be prescient or insane. 


Why not both?

GMadScientist's picture

Both is a distinct possibility, but the latter makes the former more difficult to monetize.

Urban Roman's picture

It was reHypthekenated.

In.Sip.ient's picture

Credit Anstalt ... anyone???



Winston Churchill's picture

Took around 90 days for the dominos to fall after Credit Anstalt.

Which would also line up with a different domino tumbling,oil derivatives.

Not to mention currency derivatives, where somebody must  be bleeding from their arse already.

We  really are about to find out just how powerful the FedRes is.Or not.

DanDaley's picture

Austrian deja vu all over again. How ironic.

Tall Tom's picture

Let's relive 1923 GLOBALLY.

Seize Mars's picture

In fiat money, you can do quite a bit of masquerading behind the central bank. But in reality you can't mask non-performing loans. At the end of the day, a non performing loan means your debt money has no value. And the minute you try to spend it, it's inflationary.

There is no escape from the collapse. And they know it. This is why they need war.

sun tzu's picture

What if the ECB buys all those bad loans from the banks and makes them whole again? Same thing the FedRes did from 2007-2014.

Ban KKiller's picture

That is STILL funny. Only because I have no $100.00 in the bank. 

29.5 hours's picture



"The planned takeover by the BdB also means that a planned sale of DuesselHyp to group of international buyers led by London-based Attestor is no longer being considered..."

I suppose this means all those analysts who did their skimming in "due diligence" operations on DuesselHyp's worthiness will give the money they were paid back...




Mentaliusanything's picture

But I spent it soon as I got it. Don't blame me every ones lying their asses off to keep in the game.

So Fuck off I spent it already.

stant's picture

We Gona pump you up

CuttingEdge's picture

Anyone got a handle on the collective noun for black swans?

A tsunami?

An armageddon?

Or how about a Draghi...

B2u's picture

How about Draghi Yellen...