Subordinated bond

DEFINITION AND CHARACTERISTICS

The subordinated notes enables Banque Raiffeisen members and clients to benefit from an investment on favourable terms. The rights and claims of the holders of the notes against the issuer will rank junior to those of the depositors and other unsubordinated creditors of the issuer. The notes are not secured by collateral or covered by any specific guarantee.

Features of the securities

The up to EUR 30,000,000, 5.00 p.a. per cent Notes due 04 July 2033 are issued by the Issuer.

Ranking

The Issuer’s obligations under the Notes will be unsecured and subordinated and will rank junior in priority of payment to the claims of the Senior Creditors. Senior Creditors are creditors of the Issuer (i) who are depositors and/or other unsubordinated creditors of the Issuer; (ii) whose claims are or are expressed to be subordinated (whether only in the event of the liquidation of the Issuer or otherwise) to the claims of unsubordinated creditors of the Issuer, other than those whose claims by law rank, or by their terms are expressed to rank, pari passu with, or junior to, the claims of the Noteholders. For the avoidance of doubt, this definition includes claims of holders of eligible liabilities instruments (within the meaning of the CRR (as defined in the “Maturity; Early Redemption” section)).

In the event of a liquidation of the Issuer, the rights of the Noteholders against the Issuer in respect of such Notes (including any damages (if payable)) shall:

be subordinated to the claims of all Senior Creditors;
rank pari passu with the claims of all other subordinated creditors of the Issuer which in each case by law rank, or by their terms are expressed to rank pari passu with the Notes (including holders of instruments that qualify as Tier 2 instruments); and
rank senior to the claims of holders of the Issuer’s shares (parts sociales) and any junior subordinated obligations or other securities of the Issuer which by law rank, or by their terms are expressed to rank, junior to the Notes.

Maturity; Early Redemption
The Issuer may, at its option, redeem all or some only of the Notes once every year starting at the end of the fifth anniversary of the Notes at their principal amount plus accrued interest. Also, the Issuer may, at its option, redeem all, but not some only, of the Notes at any time at their principal amount plus accrued interest, in the event of certain tax changes and in the event of certain regulatory changes. Any early redemption of the Notes is subject to the Issuer having obtained the prior approval of the regulator.

What are the key risks that are specific to the Issuer?

Risks related to the Issuer generally

The emergence of a significant international event such as a new pandemic, a war or a climate event and measures taken by governments of countries in response to it are all beyond the reasonable control of the Issuer and adversely affect the Issuer.
The profitability of the Issuer’s businesses could be adversely affected by a worsening of general economic conditions in its markets, as well as related factors, including governmental policies and initiatives.
While the Issuer believes it is positioned to compete effectively with local and international banking and non-banking competitors, there can be no assurance that increased competition will not adversely affect the Issuer in one or more of the markets in which it operates.
The Issuer’s business activities are subject to substantial regulation and regulatory oversight and the nature and impact of future changes in applicable policies are not predictable, are beyond the Issuer’s control and could have an adverse effect on the Issuer’s business and results of operations.

Risks related to the Issuer’s business activities

The Issuer’s credit risk may be exacerbated when the collateral it holds cannot be realised at, or is liquidated at prices not sufficient to recover, the full amount of the loan or derivative exposure it is due to cover, which could in turn affect the Issuer’s ability to meet its payments under the Notes.
The occurrence of any failures or interruptions resulting from inadequate or failed internal processes or systems, from people’s failings or from external events could have a material adverse effect on the Issuer’s financial condition and results of operations.

Risks related to the Issuer’s financial situation

Insufficient liquidity could have a material adverse effect on the Issuer’s solvency and its ability to make payments under the Notes.

What are the key risks that are specific to the securities?

Financial risks

The Notes may be early redeemed in certain circumstances. The fact the Issuer has the right to redeem any Notes at its option may limit the market value of the Notes concerned and an investor may not be able to reinvest the redemption proceeds to achieve a similar effective return.
The Notes do not benefit from any guarantee or protection from any deposit guarantee scheme in Luxembourg. Accordingly, investors in the Notes need to be aware that they will not be able to claim for any compensation from any deposit guarantee scheme in the event of unavailability of the Notes (or the payments thereunder).

Risks related to the market

There may be no or only a limited secondary market in the Notes and this could adversely affect the value at which an investor could sell his Notes.
The value of an investor’s investment may be adversely affected by exchange rate movements where the Notes are not denominated in the investor’s own currency.

Risk related to the occurrence of insolvency proceedings

The Issuer’s obligations under the Notes will be unsecured and subordinated and will rank junior in priority of payment to the claims of the senior creditors of the Issuer. There is a risk that an investor in the Notes could lose all or some of his investment should the Issuer become insolvent.
The sole remedy against the Issuer available to any Noteholder for recovery of amounts which have become due in respect of the Notes will be claiming during the liquidation proceedings of the Issuer.
If the Issuer is failing or likely to fail, there is no reasonable prospect that any alternative private sector measures would prevent the failure of the Issuer within a reasonable timeframe and a resolution action is necessary in the public interest, resolution tools and resolution powers could be applied to the Issuer. These include, among others, the power to sell or merge the business operations or parts of the individual business units with another bank, the power to convert liabilities under the Notes into equity of the Issuer or another legal entity or to permanently reduce their principal amount to potentially zero or the power to amend the terms and conditions of the Notes.
In the event of a liquidation or bankruptcy of the Issuer, the Issuer will, inter alia, be required to pay subordinated creditors of the Issuer, whose claims arise from liabilities that no longer fully or partially are recognised as an own funds instrument in full before it can make any payments on the Notes qualifying as own funds of the Issuer.