Subsidiary repurchasing AT1 or Tier 2 instruments before five years from the date of issuance

1/ Could an institution’s subsidiary subject to prudential supervision purchase Additional Tier 1 or Tier 2 instruments issued by the institution before five years from the date of issuance of the instruments, given that this purchase would lead to a disqualification of the instruments? 2/ Could an institution’s subsidiary not subject to prudential supervision purchase Additional Tier 1 or Tier 2 instruments issued by the institution before five years from the date of issuance of the instruments, given that this purchase would lead to a disqualification of the instruments?

Articles 52(b) and 63(b) CRR state that capital instruments and subordinated loans cannot classify, respectively, as Additional Tier 1 or Tier 2 instruments of an institution if they are purchased by the institution or its subsidiaries (whatever the nature and situation of the subsidiary). Articles 77 and 78 CRR state that the competent authority has to grant prior permission for an institution to reduce, repurchase, call or redeem Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments. Article 78(4) CRR sets specific conditions for institutions to be allowed to redeem Additional Tier 1 or Tier 2 instruments before five years from the date of issuance. Certain specific conditions have to be met (change in regulatory classification or change in the applicable tax treatment). Article 28(3) of Commission Delegated Regulation (EU) No 241/2014 of 7 January 2014 states that the process and data requirements for an application by an institution to carry out redemptions, reductions and repurchases — for the purposes of Article 77 CRR shall apply at the consolidated, sub-consolidated and individual levels of application of prudential requirements, where applicable.