AUSTRIAN AUTHORITIES have arrested the former chief executive of Hypo Group Alpe Adria, the troubled Austrian bank nationalised last year after making big losses in the Balkans.

Wolfgang Kulterer was detained by police in Klagenfurt, southern Austria, yesterday morning, following a long investigation into the bank’s activities.

The former bank chief is being investigated for breach of trust and giving false evidence to an inquiry in Carinthia, the state prosecutor’s office said.

Prosecutors said Mr Kulterer allegedly posed a “danger of flight, danger of collusion and danger of repeat offences”.

The arrest, together with that of an unnamed associate, coincided with police raids in 10 locations in Vienna and Carinthia.

Mr Kulterer’s lawyer could not be reached for comment. Mr Kulterer has rejected a variety of allegations made against him in connection with the bank’s troubles.

In December, the Austrian state nationalised HGAA after it ran into trouble following rapid expansion in the Balkans.

Mr Kulterer presided over this rapid growth with the backing of Jörg Haider, the right-wing premier of the state of Carinthia, which at the time owned a majority stake in HGAA. Haider died in a car crash in 2008.

Leasing businesses in Croatia, Bulgaria and Ukraine and cross-border financing portfolios run from Austria are thought to have been at the root of HGAA’s troubles and these losses threatened to erode the bank’s thin capital base.

Since HGAA’s nationalisation, Austrian prosecutors have begun an intensive investigation into what went wrong at the bank amid huge political pressure to explain how taxpayers were left to bail it out. – (Copyright The Financial Times Limited 2010)