EBA · 2018_4416 Rejected question

Own funds

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
63, para. j
Topic
Own funds
Submitted by
Investment firm
Submitted
2018-12-11
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Question

Article 63 j) of CRR states that "the instruments or subordinated loans, as applicable, may be called, redeemed or repurchased or repaid early only where the conditions laid down in Article 77 are met, and not before five years after the date of issuance or raising, as applicable, except where the conditions laid down in Article 78(4) are met". If an institution has a right of early redemption (not connected to the conditions laid down in Article 78(4)) which is effective five years after issuance but which has to be notified at least two years before redemption, is the instrument eligible as Tier 2 Capital ?

Background

Some instruments have very long prior notification periods before redemption, which means that the bank must take the irrevocable decision to call the instrument e.g. two years before redemption. It is important to know if an instrument for which the bank can take the decision to call three years after issuance, but then only redeems five years after issuance, is eligible as Tier 2 capital (or Additional Tier 1 capital.)
No answer published yet.

Original source: European Banking Authority, Q&A ID 2018_4416

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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