The future of Austria’s Volksbanken's structured products business is unclear following the announcement from its executive board to restructure Österreichische Volksbanken AG (VBAG) which will be split up.
SRP data shows that as a provider group Volksbanken has marketed more than 650 structured products since 2003, mainly in Austria and Germany but also in Hungary, Slovakia, the Czech Republic and Slovenia, of which 268 structures are still live including 266 in Austria, 93 in Germany, 13 in Hungary and one open-ended structure in Slovenia.
According to Volksbanken, all the tasks that VBAG was legally required to undertake in its capacity as the central body of the Volksbanks’ joint liability scheme are to be transferred to a large regional Volksbank (currently under consideration is Volksbank Wien-Baden).
The transfer will also include service functions which VBAG provides to the Volksbank sector. VBAG said it is aiming to carry on speedily with the wind-down process that has been running successfully for the last two years in order to fully liquidate its assets and to meet its liabilities to creditors on the relevant maturity dates.
“Now is the right time to take this step. We have been very successful in winding down VBAG over the last two years,” said general director Stephan Koren. “If we continue to follow this route, a further burden to the taxpayer can be avoided.”
Koren said that the concrete separation plan together with the relevant legal aspects will be worked out in more detail over the coming weeks. It is hoped that VBAG can be split up in the first half of next year.
New model
The plan is for small and medium-sized banks to merge together to form nine strong regional banks that will cooperate more closely with one another in future. These are to be augmented in due course by three specialist institutions.
Koren said this will facilitate the creation of much better cost structures and a stronger market presence than is possible at present with 44 Volksbanks and seven specialist institutions. This will allow Volksbanks to strengthen their profitability, thus enabling them to raise equity on the capital markets, should it be necessary for them to do so.
The Volksbanks’ branch network will continue to act as a local provider of finance in the regions and will continue to be a reliable partner for small and medium-sized businesses.
“The world of banking and finance has changed a great deal in recent years,” concluded Koren. “Only those banks that have good access to the capital markets can be assured of having a future. The idea behind having nine large regional banks is to provide a solid platform for Austrian Volksbanks to increase their profitability by a significant margin and to be able in future to raise equity in the capital markets.”
Final implementation of the banking group plans will require official and supervisory approval.