EBA · 2013_61 Final Q&A

Grandfathering of own funds instruments

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
490
Topic
Own funds
Submitted by
Credit institution
Submitted
2013-07-12
Answered
2014-01-24
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 2 bond’s terms were changed so that all call options were removed – before the entry in force of the Regulation (EU) No 575/2013 (CRR) – could it be considered as fully eligible in Tier 2 capital assuming that the capital instrument meets the other conditions laid down in Article 63 of the Regulation?

Background

See question.

Answer

Q&A 16 states that where there is a material change in the terms and conditions of a pre-existing instrument, the instrument shall be considered in the same way as the issuance of a new instrument. Further, if all call options are removed then the instrument will no longer include a call with an incentive to redeem, and therefore Article 490 of Regulation (EU) No 575/2013 (CRR) does not apply. Therefore, provided that the instrument meets the requirements laid down in Article 63 of the CRR, it shall be considered fully eligible Tier 2 capital.

Original source: European Banking Authority, Q&A ID 2013_61

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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