On 3 March 2020 an insolvency proceeding was opened for the assets of Anglo Austrian AAB AG, the former Anglo Austrian AAB Bank AG (also known as Meinl Bank AG). This was the last step in a long-lasting dispute between the bank and Austrian and EU regulators, leading to the revocation of the former bank's licence.
Apart from the interesting procedure that led to the revocation of the licence, this case is notable because it is the first application of the newly enacted deposit guarantee scheme and it was expected to be the first application of the insolvency provisions provided for in the Federal Act on the Recovery and Resolution of Banks (BaSAG).(1)
The former Meinl Bank AG and the Austrian financial markets supervisory authority engaged in a lengthy, fierce and public fight about alleged shortcomings in the bank's fulfilment of its money laundering obligations. Even though the bank had initiated a voluntary wind down of its deposit business, the European Central Bank (ECB) as a first step revoked the bank's licence in mid-November 2019. This decision was effective immediately, but was suspended within a few days by order of the president of the General Court following a request for interim relief by the bank and its main shareholder. Finally, at the beginning of February 2020, the General Court dismissed the bank's application to temporarily suspend the revocation of its banking licence, arguing that:
- the bank had already decided on its unwinding before the ECB revoked its licence; and
- the applicants had not succeeded in showing that they risked "serious and irreparable damage from this decision".(2)
Soon after the decision to reinforce the revocation of the licence and end the bank's almost 100-year history of offering banking services, the former bank terminated the wind-down process and filed for the opening of insolvency proceedings. Based on information available, assets of approximately €148 million are available against creditors' claims of approximately €280 million.
Einlagensicherung AUSTRIA GesmbH (ESA), one of the entities established under the Deposit Guarantee and Investor Compensation Act, has already confirmed that a payout event was triggered. Pursuant to information available, the ESA has identified approximately 9,000 local and international clients holding approximately 20,000 accounts. Deposits of approximately €60 million will be covered by the deposit guarantee scheme.
Even though the insolvency proceeding has already been opened against the former bank's assets, some of the creditor protection associations represented on the creditors' committee expressed their opinion that the Austrian financial markets regulator could decide to apply a resolution measure provided for under the BaSAG. Following expiry of the statutory seven-day deadline, the official insolvency database contains no indication to this effect. Accordingly, the standard Austrian insolvency procedure will apply, rather than the BaSAG class insolvency model.
Considering the long-lasting dispute with the financial markets regulating authorities, neither the revocation of the bank's licence nor its insolvency following the voluntary wind down were entirely surprising. However, considering the fact that a bank may operate only with a valid licence, the procedure pursued by the authorities (which led to immediate revocation, a re-instatement and another revocation, albeit that the case has not been definitively decided by the courts) shows structural deficits which could undermine customer confidence in efficient banking regulation.
Further, from a legal point of view, it is interesting to see that the Austrian financial markets regulator decided to adhere to the concept of the EU Banking Recovery and Resolution Directive (2014/59/EU), which restricts itself to credit institutions (ie, banks holding a valid licence), rather than applying the BaSAG provisions on a legal entity, whose banking licence had just recently been revoked and that still holds deposits.
Finally, the bank's customers will have to take action if the deposit guarantee scheme does not cover the full amount of their respective deposits. Creditors have to file their claims with the insolvency court. Foreign creditors with no domestic delivery point must name an Austrian authorised person at the same time as they file their claim or within 14 days thereafter in order to ensure proper notification by the court.
Endnotes
(1) The BaSAG had previously been applied to HETA Asset Resolution AG, the wind down entity of former Hypo Alpe-Adria Bank International AG. Based on Article 1(2) of the EU Banking Recovery and Resolution Directive – which allows resolution authorities to adopt stricter rules – the legislature also included special provisions for so-called 'wind-down entities' (Section 162 of the BaSAG). Wind-down entities are subject to the same rules as so-called 'reduction units' (Section 84 of the BaSAG). For further details please see "Let's bail 'em in! Austria and its failing Hypo Alpe-Adria-Bank/HETA".
