The Norwegian FSA has on 17 December 2021 set SpareBank 1 SMN's Minimum Requirement for Own Funds and Eligible Liabilities (MREL).
The MREL requirement is determined at 26.8 per cent of adjusted Risk Weighted Assets, applicable at all times. Since Common Equity Tier 1 (CET1) capital used to fulfill the risk weighted MREL cannot, at the same time, be used to fulfill the Combined Buffer Requirement (CBR), the calculated actual need for Own Funds and Eligible Liabilities will effectively be 34.8 per cent of adjusted Risk Weighted Assets.
The MREL requirement needs to be fulfilled with subordinated instruments, but FSA can make exceptions from this with the implementation of BRRD2. The FSA has determined that the bank is required to have Own Funds and subordinated liabilities of at least 27.8 per cent of the adjusted Risk Weighted Assets based on the relevant capital requirements as of 31 December 2020. The total requirements for subordination with risk-weighted method consists of two requirements: (I) the subordinated part of MREL (2 x pillar 1 + 2 x pillar2) and (II) the combined buffer requirement. Future changes in capital requirements will also affect the total requirement for subordination. The difference between the effective MREL requirement and the cap on subordination can be fulfilled with issued senior unsecured debt with a residual maturity of more than 12 months.
As of 1 January 2022, the effective minimum requirement for subordination is 21.5 % of adjusted Risk Weighted Assets (the minimum requirement for subordination of 13.5 per cent plus the combined buffer requirement of 8 per cent). The subordination requirement shall, as a minimum, be phased in linearly during the rest of the transitional period and shall be fulfilled entirely from 1 January 2024.
Contacts in SpareBank 1 SMN:
CFO Kjell Fordal, tel +47 905 41 672
CRO Ola Neråsen, tel +47 918 09 722
This information is subject to the information requirements pursuant to the Norwegian Securities Trading Act section 5-12.
