EBA · 2016_2958 Rejected question

Difference between a reduction and a write-down

Regulation
Directive 2014/59/EU (BRRD)
Article
60, para. 1
Topic
Write-down and conversion of capital instruments
Submitted by
Competent authority
Submitted
2016-10-19

Question

What is the difference between reduction and a write-down in Article 60(1)?

Background

According to Article 60(1) of Directive 2014/59/EU (BRRD), “[…] (a) Common Equity Tier 1 items are reduced first in proportion to the losses and to the extent of their capacity and the resolution authority takes one or both of the actions specified in Article 47(1) in respect of holders of Common Equity Tier 1 instruments; (b) the principal amount of Additional Tier 1 instruments is written down or converted into Common Equity Tier 1 instruments or both, to the extent required to achieve the resolution objectives set out in Article 31 or to the extent of the capacity of the relevant capital instruments, whichever is lower; (c) the principal amount of Tier 2 instruments is written down or converted into Common Equity Tier 1 instruments or both, to the extent required to achieve the resolution objectives set out in Article 31 or to the extent of the capacity of the relevant capital instruments, whichever is lower.” It is not clear what exactly the difference between a reduction and a write-down is.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2016_2958

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