2012-03-06
The Board of the Bank of Lithuania allowed AB DnB NORD bank to repay nine subordinated loans prior to their stated maturities, which were received in 1998 and in the period 2003 to 2008. The permission was issued in view of the fact that the bank’s reserve capital would be increased by the amount bigger than the amount of subordinated loans to be included into the bank’s capital and the increase would have no negative impact on the banks’ capitalisation.
All subordinated loans to the bank total LTL 402.3 million, but only LTL 269.2 million of the sum will be included into AB DnB NORD bank's Tier II capital according to the current procedures. In future, the amount of subordinated loans to be included into the capital is expected to go down, as the loans will be approaching their maturity date. Terminating subordinated loan agreements would allow the bank to reduce its borrowing costs.
The Board noted the bank’s plans to boost its reserve capital by LTL 364.3 million before repaying the subordinated loans. The reserve capital increase and repayment of subordinated loans would lead to an increase of LTL 95.1 million in the bank’s capital and a rise of 1.14 percentage point in the capital adequacy ratio. According to the bank calculations, the repayment of subordinated loans and increase of its reserve capital would help to increase the bank's capital adequacy ratio up to 13.5 per cent (15 per cent for the group) at the end of 2011 instead of 12.36 per cent (13.86 per cent for the group) in the event that subordinated loans were not repaid and reserve capital not increased.