The EU’s new rules for winding down banks,
contained in the Bank Resolution and Recovery Directive (BRRD),
have now been put to the test by Austrian 'bad
bank’ Heta Asset Resolution.
Heta was established in November 2014 after troubled
Austrian lender Hypo Alpe Adria collapsed in 2013. It went on
to face difficulties after rapidly expanding into central and
eastern Europe before the financial crisis hit, operating under
guarantees issued by the Austrian province of Carinthia.
This is the first time in Europe that an AAA-rated country
has undergone both a debt reduction process and the bondholders
in one of its sub-sovereign entities have received any less
than 100% in return.
If found liable, the province of Carinthia would
have been the first to go insolventThe deal struck
with the senior bondholders, which took a number of months, is
a package comprised of a cash liability contribution from