THE European Central Bank (ECB) has told Austria’s Volksbanken group to strengthen its balance sheet by next July as it rushes to wind down its flagship unit and plug a capital hole exposed by this year’s health checks on eurozone banks.

    Owners of part-nationalized Volksbanken AG on Tuesday approved in principle plans to turn the group’s lead institute into a “bad bank,” relieving pressure on other regional lenders in the Association of Volksbanks that own 52 percent of VBAG.

    By relinquishing its banking license next year VBAG would be freed from minimum capital requirements for banks, and simply run off its remaining assets over the years to come.

    It said that the ECB had now given the Association a draft target to maintain a common equity tier 1 (CET1) capital adequacy ratio of 14.63 percent of risk-weighted assets from July 26, 2015. The Association had a CET1 ratio of 11.5 percent at the end of September.

    (SD-Agencies)