Austria’s bank troubles will have euro-zone repercussions

Heta Asset Resolution is a "bad bank" created to wind down the assets of the nationalised Hypo Alpe-Adria Bank International (HAA). But it was thrown into disarray last month after an audit pointed to an impairment of Heta's assets and the need for extra financing of €4bn to €7.6bn.  

The ongoing uncertainty and legal suits over the wind-down of a small Austrian provincial bank might seem like the least of the euro-zone's current concerns. But the wind-down of Hypo Alpe Adria's bad bank may well set a precedent for the new euro-zone bail-in regime and hold back Austria's economic recovery and efforts to rein in government spending.

"Heta case will also be closely watched at a euro-zone level. Not only does it place a question mark over the strength of national support for state guarantees, but as it is the first bail-in under the new rules, it may also set a precedent for any future bail-ins." said Capital Economics in a report on Wednesday