Key Financial Indicators and Balance Sheet Analysis Q1 2023
MREL requirement
Comfortably exceeding MREL requirements
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The BRRD I approach to MREL has been codified in Icelandic law
MREL requirement as % of REA*
31,7%
Senior unsecured debt is MREL eligible unless it is excluded from the scope of bail-in
The Icelandic Resolution Authority (IRA) has published its MREL policy
23,0%
17.7%
Both Loss Absorption Amount (LAA) and Recapitalization Amount (RCA) equal Pillar 1 plus
Pillar 2, currently 11.5% of REA
11,5%
No Market Confidence Charge (MCC) because of the high level of combined buffer
requirement (CBR), currently 9.3% of REA
No subordination requirement
Iceland is obligated to introduce the BRRD II approach, the legislative process has
started but the date of the application of the requirements is uncertain
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The details of the implementation of the MREL requirement in accordance with BRRD II will
be introduced in secondary legislation
The Senior Non-Preferred (SNP) rank has been introduced into Icelandic law, but the
Bank does not see a need to issue SNP debt in the coming year
Arion Bank has updated the terms of senior unsecured borrowings so that new
issuances will be MREL eligible (senior preferred, SP) according to BRRD II
The graph shows
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MREL requirement for Arion Bank 23.0% of REA in addition to the CBR
-
Own funds and MREL eligible senior borrowings (>1yr to maturity)
14,0%
11,5%
9.3%
MREL requirement
9.3%
Own funds and eligible liabilities
The MREL policy
indicates a
subordination
requirement of 13.5%
of REA when BRRD II
is adopted. This is
currently fulfilled.
Loss Absorption Amount (LAA)
CET1 used for CBR
■MREL eligible senior borrowings
■Recapitalization Amount (RCA)
■Own funds not used for CBR
*According to BRRD I, MREL requirement should be expressed in terms of total liabilities and own funds (TLOF) but % of REA is more relevant for determining the
size of the requirement. Actual requirement is 14.7% TLOF which corresponds to 24.1% REA at 31.3.2023View entire presentation