1. UPDATE 1-Volksbanken eyes revamp to bolster capital -sources


    * Plan would boost capital, avert more state aid (Adds details and background)VIENNA/FRANKFURT, Oct 13 (Reuters) - Oesterreichische Volksbanken (OTVVp.VI), the Austrian lender that failed this year’s European stress test, plans a reorganisation to shore up its balance sheet and avert the need for more state aid, sources said.Vienna-based Volksbanken aims to form a mutual liability association with its main regional bank shareholders, four sources familiar with the matter said.The bank’s supervisory board was meeting on Thursday evening to discuss the plan, a source at one of the bank’s owners said, as did financial sources. If approved, it would let Volksbanken consolidate the regional banks’ capital while keeping them separate entities.”This is being discussed intently,” one financial source said, adding the partners were using Dutch lender Rabobank as model for the plan.”This strengthens the capital situation of each individual bank so you are more safely positioned for a crisis.”Volksbanken, Austria’s fourth-largest bank, which got 1 billion euros ($1.37 billion) in state aid during the financial crisis, declined to comment.Volksbanken has been at the centre of attention given its relatively weak finances. It has been trying to use asset sales to shore up its balance sheet and comply with Basel III capital rules.But it got less than it wanted for selling its VBI eastern European arm to Russia’s Sberbank and has been unable so far to sell its minority stake in Raiffeisen Zentralbank as planned.In April it had said its main shareholders would chip in money to help repay the 300 million euro aid tranche due this year, but that plan has yet to pan out.Volksbanken has issued a profit warning and said it was unlikely to make 2011 payments on shares and hybrid or supplementary capital.A failure to make the repayments would give Austria the right to convert state aid into equity and nationalise the bank, a step Finance Minister Maria Fekter says she would prefer not to take.Regional volksbanks own 60.8 percent of Volksbanken, Germany’s DZ Bank Group owns 23.4 percent, Victoria Group 9.4 percent, Raiffeisen Zentralbank 5.7 percent, and others 0.6 percent. ($1 = 0.730 Euros)