EBA · 2013_44 Final Q&A

Grandfathering, cascading and phasing out limits

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
465
Topic
Own funds
Submitted by
Individual
Submitted
2013-07-08
Answered
2013-11-29
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

In the case of an issuer whose outstanding Tier 2 instruments as at December 2012 are fully CRR compliant (ie bullet Tier 2 bonds), should Article 486(4) apply? To put it simply: can an issuer still have some disqualfied parts of Tier 1 instruments (for limit reasons) cascaded into Tier 2 even if the issuer has no phased out Tier 2 amount as at December 2012 (and hence no phased out limits for Tier 2) ?

Background

A lot of issuers have seen their bullet Tier 2 instruments being fully recognized under CRR (because there is no need to have a non viability language in the existing documentations). Are they still able to cascade the portion of disqualified Tier 1 instruments into the Tier 2 phasing out limits?

Answer

Items referred to in Article 484(4) of Regulation (EU) No. 575/2013 (CRR) and exceeding the limits in Article 486(3) may only be treated as items referred to in Article 484(5) within the limits referred to in Article 486(4). If the amount referred to in Article 484(5) of the CRR is zero, it cannot be increased in the following years.

Original source: European Banking Authority, Q&A ID 2013_44

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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