Featured Product

    EBA Publishes Report on Monitoring of Additional Tier 1 Instruments

    June 24, 2021

    EBA published the fourth report on the monitoring of additional tier 1 (AT1) capital instruments. The updates to this report reflect the amendments to the Capital Requirements Regulation (CRR), the monitoring of the implementation of the EBA opinion on legacy instruments, and observations on new market trends, such as environmental, social, and governance (ESG)-linked capital instruments. The report is intended to inform external stakeholders about the continuing work of EBA in terms of monitoring the issuance of AT1 capital instruments and to present the results of this monitoring.

    EBA has focused its work primarily on the assessment of selected AT1 issuances. The terms and conditions of these selected issuances are assessed against the regulatory provisions to identify provisions that EBA would recommend to implement and, in contrast, recommend avoiding. Due to the high standardization of the AT1 issuances, only limited new observations have been added to the report since its last update. The observations are linked to some updates made necessary, for example, by the changes in the Level 1 text, such as the amended eligibility criteria for AT1 and Tier 2 instruments. However, in the context of the end of the transitional period for legacy instruments, EBA draws attention to the need to keep the capital structure simple and avoid additional layers within a capital class that would increase complexity. EBA expects that forthcoming issuances will continue to retain a high level of standardization. Further clarification on the implementation of options in the EBA opinion on legacy instruments is, therefore, provided in the report.

    The report also provides an overview of the identified risks and identifies differences of clauses based on a larger set of regulatory ESG transactions in comparison to the total loss-absorbing capacity (TLAC) and minimum requirement for own funds and eligible liabilities (MREL) monitoring report. The report discusses policy observations on how the clauses used for ESG issuances and the eligibility criteria for own funds and eligible liabilities instruments interact, with the ultimate aim of identifying best practices or practices/clauses that should be avoided. Therefore, the analysis is not meant to address potential compliance issues of ESG bonds with ESG requirements, but it is aimed at clarifying the extent to which some provisions included in ESG bonds may raise regulatory concerns in the context of the eligibility criteria for own funds and liabilities instruments. During the monitoring exercise, EBA has focused its work on the assessment of selected ESG own funds and TLAC and MREL-eligible liabilities instruments. EBA will continue its monitoring and include any new observations in the next update of the AT1 report, in particular on the monitoring of the implementation of the EBA opinion on legacy instruments at the end of the grandfathering period and on the development of ESG capital bonds.

     

    Related Links

    Keywords: Europe, EU, Banking, CRR, Basel, Additional Tier 1, ESG, Regulatory Capital, Green Bonds, TLAC, MREL, Sustainable Finance, EBA

    Featured Experts
    Related Articles
    News

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News
    News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News
    News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    News

    EU to Amend Credit Risk Adjustment Rules; ESAs Submit Queries on SFDR

    The European Council published a draft Commission Delegated Regulation to amend the regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.

    May 13, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.

    May 12, 2022 WebPage Regulatory News
    News

    MAS Amends Notice 635 and Issues Second Proposal on Green Taxonomy

    The Monetary Authority of Singapore (MAS) published amendments to Notice 635, which sets out requirements that a bank in Singapore has to comply with when granting an unsecured non-card credit facility to individuals.

    May 12, 2022 WebPage Regulatory News
    News

    EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA

    The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.

    May 11, 2022 WebPage Regulatory News
    News

    EC Mandates ESAs to Propose Amendments to SFDR Technical Standards

    The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.

    May 11, 2022 WebPage Regulatory News
    News

    EBA Examines Supervisory Practices, Issues Deposits Reporting Template

    The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),

    May 11, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8196