European Bail-Ins—Austria Next?

The European drive toward bail-ins continues unabated. So too does the increasing uncertainty for investors in European financial institutions, for whom the bail-in concept raises the spectre of the effective loss of their investments by way of contribution to any rescue. Investors in Austria's Hypo Alpe-Adria-Bank International AG ("HAA") appear to be next in the cross hairs.

HAA was nationalised in December 2009 in the midst of the credit crunch. Following fruitless rounds of recapitalisation (HAA has received €5.75 billion in state aid since being nationalised), on 11 June 2014 the Austrian government proposed new measures to wind down the bank's assets. These measures are expected to be adopted by the Austrian Parliament before its summer recess. As well as creating a bad bank, the draft legislation envisages an €890 million bail-in by the nullification of subordinated debt instruments with redemption dates pre-dating 30 June 2019 and an associated guarantee from