Treatment of Upper Tier 2 instruments under CRR

While a provision as the one in the question would not disqualify existing Upper Tier 2 instruments as fully eligible Tier 2 instruments under Regulation (EU) No 575/2013 (CRR), it could have an effect on the CET 1 and AT1 instruments it refers to. In the example described in the question, a decision not to make a distribution on CET1 or AT1 instruments gives the institution the right to defer on certain Tier 2 instruments. This 'right to defer' would generally not represent an indirect restriction on the institution according to the Article 28(1)(h)(vii)) of the CRR for CET1 instruments or according to Article 52(1)(l)(v) of the CRR for AT1 instruments. The assessment of the whether this 'right to defer' amounts to a such a restriction depends on the exact terms and conditions of the contract. In that respect this example is different from the mandatory deferral or cancellation of distributions in Q&A 2013 021 .