TEXT-Fitch assigns Erste's Tier 2 issue 'BBB+' rating

Oct 2 () - Fitch Ratings has assigned Erste Group Bank AG's

(Erste; 'A'/Stable/'F1') USD500m subordinated Tier 2 notes a rating of 'BBB+'. The notes (ISIN XS0836299320) are issued directly by Erste and have a 5.5-year issuer call option and a 10.5-year maturity.

To ensure continued regulatory recognition as Tier 2 capital, the notes' documentation (in the risk factors) makes reference to potential statutory loss absorption once the point of non-viability for the issuer has been reached. This is in line with the ongoing implementation of Basel III requirements in the European Union.

The notes are rated one notch below Erste's 'a-' Viability Rating (VR), in accordance with Fitch's criteria for "Rating Bank Regulatory Capital and Similar Securities" (published 15 December 2011 at

). Under these criteria, Basel III-compliant Tier 2 notes with point of non-viability language and no coupon deferral flexibility in a going-concern scenario are notched down once from the VR to reflect potential loss severity relative to average recoveries.

As the notes do not have any interest deferral features, no additional notches for non-performance risk have been applied.

The notes' rating is notched from Erste's VR and therefore the rating is sensitive to any changes in Erste's VR. The notes are rated in line with Erste's outstanding lower Tier 2 notes.

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The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 15 August 2012, and 'Rating Bank Regulatory Capital and Similar Securities', dated 15 December 2011, are available at

. Applicable Criteria and Related Research: Erste Group Bank AG Global Financial Institutions Rating Criteria Rating Bank Regulatory Capital and Similar Securities (New York Ratings Team)

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