Treatment of non-grandfathered amount of bonds

In answer to the first point of the submitter, if an innovative Tier 1 security has more than 5 years to the first call date and is accompanied by a step up, then the security is not fully compliant under Article 63 of Regulation (EU) No. 575/2013 (CRR) and will therefore not be included in Tier 2 in its own right. In answer to the second point of the submitter, if a non-innovative Tier 1 security has more than 5 years to the first call date and the instrument otherwise complies with all the criteria under Article 63 of the CRR, then the instrument may be included in Tier 2 in its own right. If the instrument does not comply with Article 63 of CRR, the provisions of Article 487(2), for including items excluded from grandfathering in Additional Tier 1 in other elements of own funds, may nonetheless apply. The existence of dividend pusher and stopper clauses may interfere with an institution's flexibility to cancel distributions on other classes of capital instruments (as described in Q&A 2013_21 ).