Erste Bank Hungary (Bail-in Senior Preferred)

Location:

Hungary

Project number:

52983

Business sector:

Financial institutions

Notice type:

Private

Environmental category:

FI

Approval date:

10 Nov 2021

Status:

Signed

PSD disclosed:

04 Feb 2022

As permitted by paragraph 2.6 of Section III of the Access to Information Policy, disclosure of this PSD was deferred in accordance with paragraph 1.4.4 of the Directive on Access to Information.

Project Description

The EBRD invested EUR 60 million (17% of the issuance amount) in a Senior Preferred bond (the "Bond") issued by Erste Bank Hungary Zrt. ("EBH"), as part of a public international issuance of EUR 350 million. This is the first Senior Preferred instrument issued by a Hungarian bank since the introduction of the EU Bank Recovery and Resolution Directive that meets the regulatory minimum requirements for own funds and eligible liabilities (MREL). The SP bonds have a maturity of 4 years, with a call option after 3 years, and are listed both on the Vienna Stock Exchange ("VSE") and the Budapest Stock Exchange ("BSE").

Project Objectives

The Project supports the resilience of the fourth largest bank in Hungary, and contributes to the capital market development. The project also aims to support strong Green-impact targets with at least 120% of the EBRD's investment to be allocated to finance green projects in line with EBRD's Green Economy Transition ("GET") eligibility criteria.

Transition Impact

ETI score: 65

The expected transition impact stems from its contribution to the Resilient and Green qualities:

Resilient: The Bonds will contribute to (i) the optimisation of the bank's funding structure by building up the MREL-eligible instrument base and diversifying liability sources (ii) capital market development by introducing a new instrument and crowding in a diverse base of international and local institutional investors.

Green: The project will support the EBRD's GET approach in Hungary through EBH allocating 120% of EBRD's investments to GET-eligible projects further promoting the green agenda in Hungary.

Client Information

ERSTE BANK HUNGARY ZRT

EBH is the fourth largest bank in Hungary, with a market share by total assets of 7.4% as of end 2020. EBH is classified as other systematically important institution (O-SII) in Hungary. The ultimate owners of EBH are Erste Group Bank AG (70%), EBRD (15%) and Corvinus International Investment Ltd. (15%). EBH is rated Baa1/stable by Moody's and BBB+/stable by Fitch, both investment grade.

EBRD Finance Summary

EUR 60,000,000.00

Total Project Cost

EUR 350,000,000.00

Additionality

The Project depicts strong additionality by supporting EBH to issue the first SP bonds in capital markets by a Hungarian issuer, with EBRD's participation facilitating further mobilisation of stable, long-hold institutional investors. The project also involves standard-setting in the request to allocate EBRD participation proceeds to GET-eligible projects meeting certain demanding standards and certification requirements. This helps EBH to promote green projects and enhance awareness and deployment of funds in this area and sets a market example for sustainable finance.

Environmental and Social Summary

Categorised FI (ESP 2019). Erste Bank Hungary is an existing client under the equity investment project (DTM 47110). Since investment in EBH, the bank has provided information on its compliance with the Performance Requirements 2, 4 and 9 as well as submitting satisfactory Annual E&S Reports. EBH will be required to continue to comply with the EBRD's E&S requirements for this transaction.

Technical Cooperation and Grant Financing

N/A

Company Contact Information

Dóra Horváth
Dora.Horvath@erstebank.hu
https://www.erstebank.hu/
Erste Bank Hungary Zrt.. Népfürdő utca 24-26 H-1138 Budapest Hungary

PSD last updated

04 Feb 2022

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

For state-sector projects, visit EBRD Procurement:

Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

Specific enquiries can be made using the EBRD Enquiries form.

Environmental and Social Policy (ESP)

The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”.  The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.

More information on the EBRD’s practices in this regard is set out in the ESP.

Integrity and Compliance

The EBRD's Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.

OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank's countries of operation. The information provided must be made in good faith.

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form.

Independent Project Accountability Mechanism (IPAM)

If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).

IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM  via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.

 

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