MREL funding gap adds to pressure on Polish banks
The need to raise funding in international markets comes at a bad time for a sector facing uncertainty over Swiss franc mortgage litigation and rising levies.
Pressure to start raising new debt to meet bail-in funding requirements will add to the challenges facing Polish banks going into 2020, according to analysts.
Banks in the eastern part of the European Union (EU) have lagged their counterparts in the west when it comes to building minimum requirement for own funds and eligible liabilities (MREL) buffers.
None has yet issued bonds in the necessary senior non-preferred format.
In Poland, the region’s largest market, the shortfall could be as high as PLN70 billion (€16.4 billion), according to local investment bank Trigon.
Most banks in emerging Europe have yet to disclose the MREL ratios assigned by local regulators to systemically important institutions, but Polish market leader PKO Bank Polski has indicated it will need to raise €2.3 billion to meet its target of 23.0% of risk-weighted assets.
Closest rivals Santander Bank Polska and Bank Pekao have funding gaps of €1.4 billion and €0.9 billion respectively, according to analysts at Raiffeisen Bank International (RBI).
As with other markets in the region, Polish banks have historically relied mainly on deposit funding. Issuing senior non-preferred bonds will put pressure on margins already squeezed by low interest rates and intense competition, particularly as the vast majority will likely have to be sold outside Poland.