EBA · 2013_49 Final Q&A

Possibility to remove a Tier 1's call options to make the securities Tier 2 compliant

Name: Possibility to remove a Tier 1's call options to make the securities Tier 2 compliant: EBA Q&A — EU Financial Regulatory Q&A
Creator: European Banking Authority
License: https://creativecommons.org/licenses/by/4.0/

Regulation: Regulation (EU) No 575/2013 (CRR)
Article: 489, 490
Topic: Own funds
Submitted by: Credit institution
Submitted: 2013-07-08
Answered: 2013-12-06
Answer provided by: ESAs (EBA, ESMA, EIOPA)

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Question

Based on the answer to question 2013_16, if a step-up Tier 1 bond’s terms were changed (which had a call date in, say, 2016) so that all call options were removed, this could not prolong its grandfathering as Tier 1, if that were the sole rationale for removing the calls. However, if a removal of calls is to make the Tier 1 bonds count as eligible Tier 2 (as there is no call feature), then could they be reclassified as Tier 2?

Background

Extending question 2013_16 to the Tier 1 space.

Answer

The removal of call options would be considered a material change in the terms and conditions of the instrument, therefore the treatment laid down in QA 2013_16 would apply.

Original source: European Banking Authority, Q&A ID 2013_49

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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