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    EBA Updates List of Common Equity Tier 1 Instruments for EU Entities

    July 22, 2019

    EBA published an updated list of capital instruments in EU member states that qualify as common equity tier 1 (CET1) instruments. Also published was a report that includes information on the underlying objectives of the monitoring and on the consequences of including or excluding instruments in, or from, the CET1 list. Since the first publication of the list on May 28, 2014, EBA has included 16 new forms of instruments issued after the entry into force of the Capital Requirements Regulation (CRR) and assessed their terms and conditions against the regulatory provisions, with the aim of identifying any discrepancy with the eligibility criteria.

    The CET1 report includes background information on the monitoring work done to establish the CET1 list. It provides external stakeholders with further guidance on the content and objectives of the published CET1 list, clarity on the consequences of the inclusion (or exclusion) of an instrument in (or from) the list, and feedback on the outcome of the EBA monitoring work on CET1 issuance across EU. The main results of the monitoring and assessment of CET1 instruments are summarized in a lessons learned section, which highlights areas where EBA deemed it necessary to amend the terms and conditions of the instruments, the national laws of a given jurisdiction, or the institutions' by-laws/statutes to make a given instrument eligible as CET1 capital. The report will be updated on a regular basis to reflect the EBA's findings from the assessment of different forms of CET1 instruments.

    In cooperation with competent authorities, EBA is conducting a review of the pre-CRR CET1 instruments. In several cases, EBA requested amendments to the terms and conditions of the instruments, mainly related to the eligibility criteria flexibility of payments and permanence. The monitoring of capital instruments by EBA contributes to the enhancement of the quality of institutions' capital across EU.

     

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    Keywords: Europe, EU, Banking, CET 1, CRR, Regulatory Capital, Basel III, EBA

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