Erste Group in a Nutshell

General Information
Strategic Objectives
Status-quo
Conclusions

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Erste Group Profile

Future
Time
focus

Year 2011 - Q2

Past

Year 1997

Year 1819

EG was founded

EG expands its retail

business into CEE
Noo of clients: 0.6m

EG = one of the
largest financial
services providers in
CEE regarding:

Total assets:
0.214bn EUR

Noo of clients:
16.9m

95% of all the clients

are EU citizens

EG employs 50,425
people

EG has 3,180
branches in 8
countries (AU, RO,
HU, CZ, CRO, SK,
Serbia, UK)

EG ranks among
TOP 3 banks in: AU,
CZ, RO, SK, CRO

1st
st Austrian Spar-Casse
Business focus on retail

& SME banking

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Erste Group Strategic Objectives

Savings bank &

lender
Uses
deposits
to
finance the granted
loans
60.4% Retail deposits
=
key pillar of EG funding

Retail &SME banking

offers a favourable riskreward profile

executes classic
steering functions

simple product portfolio

with substantial crossselling potential

home to the two

operating divisions:
Group Markets

the opportunity to
operate in well
diversified markets
Make it less dependent
on external financing

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Efficiency focus

Group Corporate &

Investment Banking

a better group-wide
coordination
improved market
presence
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EG Status-quo
BASEL III

End of 2012: implementation of the international standards on strengthening bank capital and liquidity regulation
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EG Status-quo
The long journey: Basel II

Significant impact
Significant impact
of the Basel III proposals on capital
of the Basel III proposals on capital
requirements
requirements

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Basel III

more risk sensitivity higher & better quality of capital;

tighter liquidity standards;

increase in the capital requirements.
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EG Status-quo
CRD IV: the EC response to Basel III
Additional changes
BASEL III - New Key Changes

Increase
Increase in
in common
common equity
equity capital
capital ratio
ratio by
by Jan
Jan 2015
2015
-> to provide a higher proportion of capital for greater
loss absorption (higher & qualitative own funds bank)

Add
Add of
of aa capital
capital conservation
conservation buffer
buffer
-> above minimum regulatory requirements to
withstand future periods of stress
-> applied within all EU banks

Add
Add of
of aa countercyclical
countercyclical buffer
buffer
-> implemented according to national discretions
-> to achieve the worldwide prudential goal of
protecting the bank sector from periods of global excess
of credit growth

Global
Global liquidity
liquidity standards
standards
-> key elements of capital reform = LCR + NSFR

Introducing
Introducing aa leverage
leverage ratio
ratio requirement
requirement
-> as an international standard
-> non-risk based ratio as a backstop measure

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CRD IV proposals

%
2 -> 4.5

2.5

0 -> 2.5

Enhanced
Enhanced governance
governance
-> increasing the effectiveness of risk
management function
-> ensuring effective monitoring by
supervisors of risk governance
Sanctions
Sanctions
-> e.g., admin. fines of up to 10% of an
institutions annual turnover
Enhanced
Enhanced supervision
supervision
-> preparation of annual supervisory
programme for each monitored institution
on the basis of a risk assessment
Single
Single Rule
Rule Book
Book
-> a single market needs a single rule
book for banking regulation
-> the financial crisis highlighted the
danger of divergent national rules
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Conclusions
Basel III contains entirely new liquidity requirements: the Net Stable Funding ratio (NSFR or NSF ratio)
and the Liquidity Coverage Ratio (LCR). Both ratios are landmark requirements: it is planned that they will apply
to all banks worldwide if they are engaged in international banking activities.
These measures are aimed to promote the build up of capital buffers in good times that can be drawn
upon in periods of stress ("Reducing procyclicality and promoting countercyclical buffers").
Forward looking provisioning practices (Advocating a change in the accounting standards towards an
expected loss approach
Economic output is mainly affected by an increase in bank lending spreads as banks pass a rise in bank
funding costs, due to higher capital requirements, to their customers.
To meet the capital requirements effective in 2015 (4.5% for the common equity ratio, 6% for the Tier 1
capital ratio), banks are estimated to increase their lending spreads on average by about 15 basis points.
The capital requirements effective as of 2019 (7% for the common equity ratio, 8.5% for the Tier 1 capital
ratio) could increase bank lending spreads by about 50 basis points.

Core Tier 1 (Common equity) = common shares + retain earnings regulatory adjustments (deductions)
LCR (Liquidity Coverage Ratio) for improving short-term resilience of the liquidity risk profile of financial institutions
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THANK YOU !

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