Nearly a month after the Hype Alpe Adria bad bank Heta Asset Resolution “unexpectedly” imploded under a house of non-GAAP and misreported cards, and which led to only the second European creditor bail-in after Cyprus in what until then was considered the safest European nation, unleashing a herd of black swans which will result in not only the insolvency of one of Austria’s provinces, Carinthia, but a week ago led to its first foreign casualty, German Duesseldorfer Hypothekenbank AG which had to be bailed out by the German FDIC-equivalent, the ECB has finally realized it may have a major problem at hand.
So, doing what it does best, a month after the fact and long after the black swans have left the stable so to speak, Mario Draghi’s ECB has asked Eurozone banks “to detail their exposure to Austria and provisions they plan to make after the country halted debt repayments by a “bad bank” winding down defunct lender Hypo Alpe Adria,” financial sources told Reuters.
From Reuters:
The questionnaire sent to banks and a video conference to discuss the potential fallout underscore the sensitivity of Austria’s path-breaking move to invoke new European rules on ensuring creditors, not just taxpayers, fund bailouts.
“They are taking this seriously,” one senior executive said of the ECB on the condition he not be identified. The ECB declined to comment.
Bankers say Austria’s credibility is on the line after the second move in two years to impose losses on creditors of Hypo, many of whom assumed they had iron-clad backing from the state.
Odd how these things happen: first EURCHF longs “assumed” iron-clad backing from the SNB… until it was yanked from under their feet. Then, creditors in what many saw as the safest European nation “assumed” they would never suffer losses and would be bailed out for ever… until they saw 50% losses in a matter of minutes.
