Own funds – Share premium accounts

The first part of the question relates to the eligibility of share premium accounts on grandfathered shares as Common Equity Tier 1 ("CET1") instruments. Article 484 of Regulation (EU) No 575/2013 (CRR) applies to share premium accounts relating to instruments issued or eligible as own funds prior to 31 December 2011 and Article 485 of CRR applies to share premiums relating to instruments issued or eligible as original own funds prior to 31 December 2010. Article 484(3) of CRR provides that the related share premium accounts that qualified as original own funds under the national transposition measures for Article 57(a) of Directive 2006/48/EC shall qualify as CET1, subject to Article 485 of CRR and to the limits of Article 486(2) CRR, notwithstanding that the conditions of Article 28 of CRR (or Article 29 CRR where applicable) are not met. Article 485 of CRR provides that the share premium accounts related to instruments that were issued or were eligible as original own funds under the national transposition measures for Article 57(a) of Directive 2006/48/EC prior to 31 December 2010 shall qualify in full as CET1 if conditions of Article 28(1)(i) and (j) of CRR are met. The second part of the question relates to the eligibility of CET1 instruments (including share premium accounts on CRR-qualified shares) if the firm   institution also has loss-absorbing Tier 2 instruments. According to Article 28(2) CRR, the conditions laid down in Article 28(1)(i) CRR shall be deemed to be met notwithstanding a write-down on a permanent basis of the principal amount of Tier 2 instruments. Nevertheless, Article 28(2) CRR only encompasses permanent write-downs of Repaying  Tier 2 instruments after the deduction of net losses is economically equivalent to with  a trigger providing for a  permanent write down followed by redemption. Therefore, the possibility in the event   that those the CET1 ratio falls below a predefined level. Any other provision that would lead   Tier 2 instruments may to   absorb losses before or pari passu with   CET1 instruments   should  at any point in time might lead to the disqualification of CET1 instruments. Therefore, the conditions set out in Article 28(1)(i) would  not   automatically disqualify  be met if the institution has Tier 2  instruments   as CET1  without the aforementioned trigger event which may be repaid before liquidation after the deduction of the net losses incurred during their lifetime.   The Q&A was submitted based on CRR1 provisions according to which PLTAs were assessed as contradicting Article 28(1)(h)(v) CRR. To note that Article 28(3) CRR has been amended by Regulation (EU) 2019/876 and PLTAs are now accepted subject to specific conditions provided under this Article.