Brussels, 22/01/2003 (Agence Europe) - The European has requested that Austria phase out State guarantees (Ausfallhaftung) in favour of some Austrian banks. The Commission had, earlier in April 2002, informed Austria that its system of State guarantees for some banks contravened State aid rule. Now, a new step has been taken with the formal suppression of State aid. This decision can be seen in parallel with the ending of State guarantees given to CDC IXIS (see other article) and the decision taken regarding German banks a year earlier.
The Commission considers that the guarantees given to regional or local authorities credit institutions, regional mortgage banks ("Landeshypothekenbanken") and some savings banks - as a form of State aid.
This is because State guarantees enable their beneficiaries to expand their banking business at the expense of competitors. Ausfallhaftung is a concept similar - the so-called "Gewährträgerhaftun" in Germany, for which the Commission called an end to a year ago because it creates the obligation for public bank to step in, should the bank risk becoming insolvent.
The guarantees are neither limited in duration nor amount and thus gives a substantial competitive advantage to the establishments concerned by improving their solvability. At this moment the Commission estimates that seven "Landeshypothekenbanken" and approximately 27 savings banks benefit from the guarantee.
However, since most the guarantee dates back to before Austria's accession to the Community, the Commission can only demand changes for the future, but cannot recover the aid retroactively. The Austrian Government has two months to accept the proposal for appropriate measures in its entirety. In this case Austria has until the end of June 2004 to communicate the relevant measures adjusting the aid scheme to the Commission, which should be phased out by 31 December 2004.
The Commission has, nevertheless explained that it remains open to a resolution at a later date, should this be necessary for allowing an orderly transition to protect existing creditors, which provided funds to the banks relying on the guarantee system and which will need to recover their funds.