DIE ERSTE österreichische Spar-Casse ... - ERSTE Stiftung

that Erste Group will experience a materially adverse effect on its ability to access capital and
on its business, financial condition and results of operations.
As a consequence of the recent financial crisis and economic downturn, the Erste
Group is experiencing a deterioration in credit quality
As a consequence of the recent financial crisis and the economic downturn connected by the
current sovereign debt crises, the decline in consumer spending, the rise in unemployment
and the loss in value of private and commercial assets in certain regions have had and will
likely have in the future adverse effects on credit quality. The Erste Group is exposed to the
credit risk of borrowers if they are unable to meet their obligations under the credit contracts
and the collateral furnished is inadequate. As a significant portion of the Erste Group's lending
to consumers outside the euro zone is in foreign currency, the Erste Group and its customers
are exposed to foreign currency risks that may adversely affect its business and its operating
results. Due to the currency fluctuation caused by the current sovereign debt crises, the cost
of foreign-currency loans has increased substantially. As a result, the risk costs of the Erste
Group for non-performing loans have risen significantly and have had an adverse effect on
the financial position and the operating results of the Erste Group. In view of the uncertainty
regarding the pace and scope of the economic downturn as well as the timing of a potential
upturn it is very difficult to assess the extent to which credit quality will deteriorate and the
number of non-performing loans will increase. Under the current economic situation the
deterioration of credit quality could continue and even intensify despite the current
improvement in economic conditions and the business climate if the economic recovery is not
strong enough. Unforeseeable political developments or a lack of liquidity in the economies of
the CEE countries may also result in credit write-downs that might exceed the maximum
losses projected by risk management.
All of the above mentioned factors have and in future periods may have material adverse
effects on the Erste Group's operating results, financial position, and income.
Market risks may result in an impairment of the assets of the Erste Group and have a
negative effect on the business, results of operations and financial position (Market
Risk)
Fluctuations in the debt and equity markets may affect the market value and the liquidity of
Erste Group Bank and of the Erste Group's assets. The value of the Erste Group’s real estate
holdings is likewise subject to price fluctuations in the real estate market. Such developments
may adversely affect the Erste Group's income from investment banking and securities
trading and could affect its financial position and results of operations and, consequently, its
ability to meet its payment obligations under the Notes. In addition, the value of collateral
(such as securities, land, etc.) may decline and there is the risk that in the case of borrowers’
defaults the collateral may not be sufficient to cover the losses sustained by the Erste Group.
The members of the Erste Group are exposed to substantial counterparty default risk
and credit risk. The development of operating performance of the Erste Group, credit
default rates, write-downs and impairment losses may have a negative effect on the
development of its results (Credit Risk)
The Erste Group is exposed to a variety of counterparty and credit risks. Third parties that
owe members of the Erste Group money, securities or other assets may not be able to
perform their payment or other obligations due to insolvency, lack of liquidity, economic
downturns or falls in real estate values, operational failure or for other reasons.
The development of the Erste Group's operating performance, loan default levels or writedowns
and impairments could adversely affect its results and may result in capital
requirements that could constrain its operations, reducing the Issuer's ability to service
payment obligations under the Notes and potentially adversely affecting the trading price of
the Notes.
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