EBA · 2013_60 Final Q&A

Grandfathering

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
486, para. 3
Topic
Own funds
Submitted by
Accounting firm
Submitted
2013-07-12
Answered
2013-11-29
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

Article 486(3)(c) of Regulation (EU) No 575/2013 (CRR) states: “the amount of instruments referred to in Article 484(4) which on 31 December 2012 exceeded the limits specified in the national transposition measures for point (a) of Article 66(1) and Article 66(1a) of Directive 2006/48/EC;..” is to be deducted from the amount eligible for inclusion.” This same rule is also applied for Tier 1 grandfathering under CRR. This in effect preserves the current Tier 2 restrictions. Because that amount is at an aggregate level i.e. not by instrument, how then are the individual instruments to be treated under CRR? Each instrument may have different terms including maturity and so how should aggregated restricted amount be spread across instruments?

Background

It poses a problem to our CRR planning models.

Answer

Articles 483 to 491 of Regulation (EU) No. 575/2013 provide for grandfathering of capital instruments. This grandfathering is based on amounts of grandfathered items assigned to the three capital tiers. While individual instruments may be eligible for grandfathering treatment, it is the amount of several instruments that is grandfathered, not the individual instrument itself. Hence the grandfathering rules do not determine or prescribe which instrument is exceeding any grandfathering limits if applicable.

Original source: European Banking Authority, Q&A ID 2013_60

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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