The Executive Board of Österreichische Volksbanken-AG (VBAG) decided in principle today to restructure VBAG: The central institution, Österreichische Volksbanken AG (VBAG), is to be split up. All those tasks which VBAG is 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: Volksbank Wien-Baden).
The transfer will also include service functions which VBAG provides to the Volksbank sector; these are service functions that are necessary for operating a bank in an orderly manner. VBAG’s aim is 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.
The wind-down process that has been running successfully over the last two years has brought matters to a stage where the action now planned can proceed. 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 2015. It is intended that VBAG will then leave the joint liability scheme. Final implementation will require official and supervisory approval.
General Director Stephan Koren said: "Now is the right time to take this step. We have been very successful in winding down VBAG over the last two years. If we continue to follow this route, a further burden to the taxpayer can be avoided.”
New future-orientated structure for Volksbanks
A meeting of all cooperative bank members of the Association of Volksbanks took place today in which discussions were held regarding how to implement a fundamental restructure; there was a 95 % approval in favour of the "9+3" 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.
This will facilitate the creation of much better cost structures and a stronger market presence than is possible at present with 44 Volksbanks and 7 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.
Koren: "I am pleased that this strategy for the future has now found wide support amongst Volksbanks. The world of banking and finance has changed a great deal in recent years. 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."
Successful VBAG wind-down
A large number of individual restructuring measures have been implemented since 2012 which bear witness to the success, thus far, in winding down VBAG.
The VBAG Group balance sheet total has been reduced by 62% since 2011 - from EUR 41.1 billion to EUR 15.5 billion (projected figure for 2014).
The extent of the Group's overall risk (risk-weighted assets) has been reduced by 60% over the same period - from EUR 26.3 billion to EUR 9.5 billion.
In line with the wind-down of assets, the number of people employed by the VBAG Group has been reduced from 2,038 (full-time equivalents) to 1,350 - a total of 688.
The equity ratio now stands at 15.8% (projected figure for 2014 VBAG Group, IFRS, Basel III);
The core Tier I ratio stands at 11.7% (projected figure for 2014 VBAG Group, IFRS, Basel III)
The wind-down effected in the last two years has been quicker and more extensive than was envisaged in the restructuring plan, demonstrating that people in VBAG have carried out their duties consistently and professionally. It is in the interests of taxpayers, shareholders and creditors that this process now be followed to its conclusion.
