The International Monetary Fund said Austria should consider the overbanked nature of its market when exiting nationalized banks.
“The exit strategy from the government ownership following balance sheet clean-up should take into account the need to reduce overbanking in the Austrian market,” the IMF said in an Article IV Consultation statement distributed in Vienna today.
Austria has more banks, bank branches and bank employees per capita than most euro-area countries, leading to more competition, higher costs and lower margins in the domestic business, according to the central bank. The last major merger between two Austrian banks was Bawag’s purchase of PSK in 2005. Most of its big banks have started operations in eastern Europe to add to their modest profits at home.
The Alpine republic’s government acquired a stake in Oesterreichische Volksbanken AG (VBPS) earlier this year when it had to bail out the cooperative lender and may convert that into majority control. It also owns municipal lender Kommunalkredit Austria AG, its “bad bank” KA Finanz AG and Hypo Alpe-Adria- Bank International AG, which is mainly active in southern Austria, the former Yugoslavia and Italy.
“The recent experience with medium-sized banks has shown the cost of delaying the disposal of legacy and non-core assets,” the IMF said in the statement. “Regarding troubled banks with significant government ownership, we encourage the authorities to develop a strategy for a more efficient disposal of these assets with the goal of minimizing final fiscal costs.”
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