On 3 June 2019, BAWAG received its first formal MREL decision from the authorities. The MREL requirement has been set at 11.94% of Total Liabilities and Own Funds (TLOF) and is applicable on the consolidated level of BAWAG P.S.K. AG. This is in line with the previously communicated expectation of BAWAG P.S.K. AG being the resolution entity under a single point of entry resolution strategy. It was calibrated to equate to c. 25.6% of RWA1). The MREL decision does not contain a subordination requirement.
BAWAG is in full compliance with the MREL requirement amounting to 11.94% of TLOF, based on the current legal framework and the SRB’s MREL policy for the first wave of resolution plans published on 20 November 2018. Therefore the current MREL decision does not provide for a transition period and is applicable with immediate effect.
As previously communicated, BAWAG expects future MREL decisions for 2020 and beyond to introduce stricter rules. This is likely to include a formal subordination requirement as well as the MREL eligibility being restricted to instruments issued by BAWAG P.S.K. AG only (i.e. the point of entry)2).
The MREL decision received on 3 June 2019 was fully in line with our expectations. We therefore maintain our previously stated MREL strategy, guiding to ~€0.5 -1.0bn of senior non-preferred issuance to meet the expected future subordination requirement.
1) based on financial statements as of 31 December 2017
2) Own funds instruments (i.e. CET1, Additional Tier 1 & Tier 2) are expected to remain eligible on a consolidated Basis.