EBRD to support OTP Bank’s return to international bond market

By Axel  Reiserer

EBRD invests in OTP Mortgage Bank covered bonds

  • EBRD to invest €60 million in subordinated bonds by OTP Bank
  • Leading Hungarian bank returns to international markets
  • Proceeds to be invested in green economy projects

The EBRD is supporting the successful return of OTP Bank to the international capital markets with a €60 million investment in a €500 million issue of subordinated bonds by Hungary’s largest bank.

The EBRD’s funds will be used by OTP Bank to finance investments in the green economy such as energy efficiency and renewable projects.

The 10-year bonds is listed on the Luxembourg Stock Exchange. This is the first time OTP Bank has tapped the international markets with a benchmark size issue since 2006.

This is also the first issue of subordinated debt in Hungary following the implementation of the EU Bank Recovery and Resolution Directive, designed to make banking systems more robust in the wake of the financial crisis.

In a step that will strengthen OTP Bank’s overall capital structure, the bonds are compliant with Basel III-regulations and eligible as Tier 2 capital.

The bonds are also the first Euromarket issue by a borrower from central and eastern Europe to comply with EU requirements on the minimum capacity that banks have to have in order to absorb losses, the “Minimum Requirements of own funds and Eligible Liabilities” (MREL) and related MREL guidelines.

By investing in a bond compliant with the EU’s latest regulations, the EBRD is supporting a stronger capital structure for a systemically important financial institution.

Developing and strengthening local capital markets is of one of the EBRD’s priorities in Hungary. The Bank has been operating in the country since 1991 and to date has invested €3.1 billion in more than 180 projects.