VUKMIR + ASSOCIATES provided Croatian law legal assistance to Zagrebačka banka d.d. (UniCredit Group) (“ZABA”) in relation to the issue of internal MREL notes to its majority shareholder, UniCredit S.p.A. Vukmir’s team was led by partner Ivan Ćuk and also included partner Tomislav Pedišić as well as senior attorney Tea Cerinski.
The subject notes have been issued by ZABA with the purpose of compliance with MREL requirement set for ZABA and its Group by the European Single Resolution Board (“SRB”). This is a pioneer project on the Croatian market, as this is the first internal MREL issue in Croatia.
By way of background information, the Bank Recovery and Resolution Directive (BRRD) provides that credit institutions established in the European Union (EU) should meet a minimum requirement for own funds and eligible liabilities (‘MREL’) to ensure an effective and credible application of the bail-in tool. Failure to meet MREL may negatively impact institutions’ loss absorption and recapitalisation capacity and, ultimately, the overall effectiveness of resolution. This requirement is part of the necessary steps needed to make institutions resolvable. The BRRD requires that MREL is tailored to bank-specific features, including its size, business model, funding model and risk profile and the needs identified to implement the resolution strategy. MREL targets are set by EU resolution authorities, after consultation with prudential supervisors, and should be complied with by banks at the end of the transitional period, if any. MREL pursues the same regulatory aim of ensuring sufficient loss absorbing and recapitalization capacity in resolution as the TLAC standard developed by the Financial Stability Board (FSB) for global systemically important banks.