The Austrian Financial Market Authority (FMA) has in its capacity as the national resolution authority in accordance with the Bank Recovery and Resolution Act (BaSAG) today completed the investigation procedure by administrative decision in relation to the challenge procedure (Vorstellungsbescheid) carried out in accordance with the emergency administrative decision of 10 April 2016 regarding the resolution of HETA ASSET RESOLUTION AG. This administrative decision thereby replaces the emergency administrative decision. Following investigation and assessment of the objections lodged by the challenging parties and in the light of resolution successes realised in the interim period and accordingly updated expert opinions, the following measures in particular will be actioned:
- haircut of 100% for all capital instruments and subordinated liabilities;
- haircut by 35.60% to 64.40% for all eligible preferential liabilities;
- cancellation of all interest payments from 1 March 2015, at which point in time HETA was placed under resolution in accordance with BaSAG;
- standardisation of the maturities for all eligible liabilities to 31 December 2023; and
- cancellation of all rights and obligations associated with the existing units and titles of ownership.
The most significant change compared with the emergency administrative decision is a reduction in the creditor bail-in (haircut) in respect of eligible preferential liabilities. These were cut by 53.98% to 46.02% in the original emergency administrative decision, whereas a cut of 35.60% to 64.40% is now required in the newly issued administrative decision. This reflects the change so far in the realisation of the assets in the scope of the smooth resolution under the BaSAG regime. On the basis of the results achieved so far, taking account of prudent and conservative assumed valuations, according to the updated expert opinion, it appears that the realisation revenues have produced cash in the value of some € 2.5 billion higher than stated in the expert opinion applicable on the date of the emergency administrative decision. This cash will be available for servicing of the eligible liabilities. After including the capital instruments in the value of approximately € 3.5 billion, the subordinated and eligible preferential liabilities will be cut by an approximate total of € 6.7 billion.
The updated expert opinion has now also assessed the more advantageous approach of resolution pursuant to BaSAG against insolvency proceedings pursuant to the Austrian Insolvency Act (IO) and has thereby confirmed the improved figures: While the eligible creditors can expect the repayment level to increase from 46.02% (as per the emergency administrative decision of 10 April 2016) to 64.5% of the amounts owed, given the resolution case as outlined above, the level in any potential insolvency proceedings would have risen only from 34.83% to 41.66%.
“The progress made in the resolution of HETA proves the importance and benefits of the new BaSAG resolution regime. The orderly resolution under the guidance of the FMA as the national resolution authority secures better realisation revenues for creditors, avoids negative impact on the financial market and supports confidence in the ability of the financial markets to function correctly. Moreover, the creditors of the bank are taken up on their promises and taxpayers are thereby protected where possible. Investors and creditors of a bank can no longer rely on taxpayers’ protection against losses in the event that the bank fails, simply because of a supposed further risk to stability of the financial market,” explained FMA Directors Helmut Ettl and Klaus Kumpfmüller. They added, “With the resolution of HETA in accordance with BaSAG, the FMA has pioneered a new area of European law and shown that the orderly resolution of banks in the new European regime is an important and viable pillar of the European banking union.”
The second administrative decision in relation to the challenge procedure is available on the FMA website at https://www.fma.gv.at/en/resolution-of-heta-asset-resolution-ag/.
A page of FAQs on the second administrative decision is available on the FMA website at https://www.fma.gv.at/en/resolution-of-heta-asset-resolution-ag/faqs-2nd-heta-administrative-decision/.
Journalists may address further enquiries to
Klaus Grubelnik (FMA Media Spokesperson)
+43 1 24959 6006
+43 676 882 49516