BA chief says Basel III may scare off investors

Bank Austria (BA) CEO Willibald Cernko has warned tougher rules and new taxes could make it more difficult for banks to find investors.The former HypoVereinsbank manager said today (Weds): “I think the debate over investors should have an Austrian background or come from abroad is totally misleading. The decisive question will be whether we (the Austrian banks) will find investors at all who are willing to make capital available.”Cernko told the Kurier newspaper the Austrian banks were “condemned to make profits” after being forced to raise their equity ratio by the new Basel III financial market regulations.Referring to the billions of state aid the country’s leading financial institutes have received for around two years, the BA boss said: “Making profits will be the only thing that rules out asking taxpayers for help.”Cernko is one of the most outspoken opponents of the so-called bank solidarity tax which will come into effect in Austria next year. The levy will enforce the country’s biggest banks to hand over an overall 500 million Euros per year.Social Democratic (SPÖ) Chancellor Werner Faymann claimed the measure was “appropriate” and “balanced” considering the financial support the banks have received during the past two years.”Banks (like Hypo Group Alps Adria, or HGAA) were rescued because they are considered as relevant to the financial system. Struggling bakers might wish to be regarded as relevant to the system too,” the chancellor and SPÖ boss recently said.Cernko and other bank bosses made clear they would pass on extra costs caused by the levy to customers. The BA chairman also warned the bank tax – set to assist the government of SPÖ and the People’s Party (ÖVP) in reducing the state debt – may put jobs at risk. “We might be forced to lower our costs – which could mean reducing staff figures,” he said last month.The Federal Labour Chamber (AK) – which claimed earlier this year some banks raised their costs during the credit crunch on a higher level than the inflation rate – vowed to keep a close on whether the institutes increase activity fees and other costs because of the new bank tax.Asked by the Kurier whether he feared about the image of bankers considering the latest developments, Cernko said today: “A ‘crash in trust’ cannot be cured in little time, of course. But I think we learned our lesson. (…) We (BA) pay out comparable low bonuses. We didn’t reduce our investment in cultural initiatives and social issues (during the economic downturn) but even expanded it. We created 200 trainee positions in the middle of the crisis.”Speaking about the fragile economic state some European Union (EU) member states are currently in, the BA boss said he was not sure whether Europe tackled the debt crisis “with sufficient seriousness”. He said: “It’s important to keep a sense of proportion. Brutal cutbacks to restore federal finances are out of place.”Meanwhile, good news come for Austria from the international financial market as New York City-based rating agency Standard & Poor’s confirmed the country’s excellent solvency.The current AAA credit rating means Austria can borrow money with low interest rates. It also identifies the country as a reliable debtor and a good place to make investments due to its solid financial framework.Erste Bank CEO Andreas Treichl recently appealed to the SPÖ-ÖVP coalition to “step on the gas” next year to avoid Austria losing its top rating.