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    BaFin on Classification of Capital Instruments as CET 1 Instruments

    August 29, 2019

    BaFin updated its administrative practice for the classification of capital instruments as Common Equity Tier 1, or CET 1, instruments, in accordance with Article 26(3) of Capital Requirements Regulation (CRR). Under Article 26(3) of CRR, competent authorities shall evaluate whether issuances of Common Equity Tier 1 instruments meet the criteria set out in Article 28 or, where applicable, Article 29. With respect to issuances after June 28, 2013, institutions shall classify capital instruments as Common Equity Tier 1 instruments only after permission is granted by the competent authorities, which may consult EBA.

    In addition to the application procedure referred to in the first subparagraph of Article 26 (3) of CRR, institutions now have the possibility of notifying subsequent issues in accordance with the second subparagraph of Article 26 (3) CRR. The condition is that the institution has already been granted a license in accordance with the first subparagraph of Article 26 (3) of the CRR, which is no more than three years old and the instrument issued for capital increase is the same type of instrument. BaFin published a letter that sets out the documents to be submitted and declarations to be made in this regard. As specified in CRR, EBA also establishes, maintains, and publishes a list of all the forms of capital instruments in each member state that qualify as Common Equity Tier 1 instruments.

     

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    Keywords: Europe, Germany, Banking, CRR, CET 1, Capital Requirements, Basel III, Regulatory Capital, BaFin

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