The memorandum of understanding sets a minimum payment of €1.23 billion in favour of Bavaria for claims that Bayern LB has against Heta and would end the legal battle between the parties.
HIPO ALPE ADRIA FREE
In July 2015, the Austrian Government and the German Free State of Bavaria announced that they had reached an agreement that settles the legal disputes between Bayern LB and Heta. This decision was subject to an appeal by Heta. In doing so, the Munich court ordered Heta to pay Bayern LB approximately €2.3 billion. On, the Munich court of first instance refused to recognize the moratorium on the basis that the application of the Act to Heta goes beyond the scope of the Directive and, therefore, fell outside of Germany’s obligation under the Directive to give effect to measures taken by other resolution authorities. In order to ensure that the Directive would actually apply to Heta, the Austrian legislature explicitly made Heta subject to the Act. Heta as a wind down vehicle does not have such license. The uncertainty stemmed from the fact that the Directive only applies to financial institutions and banks. In the meantime a German bank, Bayerische Landesbank (Bayern LB), had initiated legal proceedings in Germany against Heta whereby one of the legal issues before the Munich local court was whether the Directive contemplates the application of its tools and powers to wind-down vehicles such as Heta. Liabilities affected by the moratorium include also bonds and all repayment claims arising out of Austria against the state of Carinthia and Kärtner Landesholding in relation to security granted for Heta liabilities.
The FMA has received far-reaching powers conveyed upon its activities as the resolution authority, in order to be able to execute an orderly resolution in the event of the failure or threat of failure of an institution, and to ensure that financial market stability is maintained in Austria. The FMA may take measures for ensuring the continuity of services and avoiding adverse effects on financial stability by separating performing assets from impaired or under-performing assets.Īccordingly, the FMA issued an administrative ruling deferring the maturities of all debt securities issued by Heta and all other liabilities – including interest due dates – until (the moratorium).
The Austrian Financial Market Authority (FMA) assumed the function of the national resolution authority on 1 January 2015. Heta is not a bank as defined by the EU’s Capital Requirements Regulation, but the application of the Directive to Heta has been achieved as a result of a discretionary additional article included during the transposition of the Directive into Austrian law. It transposed the EU Directive on the Recovery and Resolution of Credit Institutions and Investment Firms (the Directive) in Austria. The Austrian “Act on the Recovery and Resolution of Banks” (the Act), was passed in January 2015. When Hypo Alpe-Adria Bank International AG (Hypo), the Austrian bank, failed in 2014, the Austrian Government paved the way for the establishment of Heta Asset Resolution AG (Heta) as a wind-down vehicle to assume and manage large parts of its assets.
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