Austria to help banks with up to 100 billion euros (1st Lead)

Oct 13, 2008, 14:14 GMT

Vienna - The Austrian government announced Monday it would provide up to 100 billion euros (134 billion dollars) to strengthen the country's banks in reaction to the international financial crisis.

Up to 85 billion euros would be used to guarantee lending between banks, Vice Chancellor and Finance Minister Wilhelm Molterer said, according to Austrian news agency APA.

Up to 15 billion euros would be used to increase the banks' capitalisation, 'in order to strengthen the solidity of the banks,' Molterer said.

If necessary, the government is also ready to take over shares of financial institutions through a government holding.

Under the package, the state also provides unlimited guarantees for private bank savings and bans short-selling of securities, a practice in which traders seek to profit from falling prices.

So far, none of the Austrian banks have reported liquidity problems, although heavyweights Raiffeisen International Bank-Holding AG and Erste Bank Group AG both saw their shares tumble last week in Vienna.

Europe's banking system, leaders of the eurozone countries proposed on Sunday in Paris a rescue package including government guarantees for interbank loans, as well as plans to inject capital to the financial sector and to partially nationalize banks.