Featured Product

    EBA Response on Reclassification of Grandfathered Own Fund Instruments

    December 21, 2018

    EBA published a response to a letter it had received from a law firm (Akin Gump LLP) regarding the case of a reclassification by an institution of some specific grandfathered own funds instruments. EBA also addressed this issue through its Q&A process via the Q&A on Single Rulebook. Q&A 2018_4417 clarifies in more general terms the appropriate prudential treatment for such cases.

    In its answer, EBA has concluded that reclassifications of own funds instruments as described—that is, from a grandfathered category to a fully eligible category—although unusual, are not prohibited as such by the Capital Requirements Regulation (CRR). However, the EBA answer recalls that, as explained in the introductory recitals of the CRR (recitals 78 and 119), the general purpose of the grandfathering provisions as they relate to own funds is to ensure an appropriate continuity in the level of own funds, while also ensuring that institutions have sufficient time to meet the new required levels and definitions of own funds and that certain capital instruments that do not comply with the definition of own funds laid down in the CRR are phased out. To the extent that grandfathering allows for deviations from the new criteria on the quality of own funds instruments, those deviations should be limited to the largest extent possible. The possibility for institutions to benefit from a grandfathered treatment should, therefore, be subject to strict conditions.

    In cases where institutions operate such reclassifications, very close scrutiny should be exercised by the competent authority on the reasons for such a reclassification. This is particularly recommended if in contexts where no change in the relevant applicable laws or terms and conditions of the instruments has taken place prior to the reclassification, the reclassification has a significant impact on the capital ratios or any forthcoming changes to the CRR and related new grandfathering provisions in relation to eligibility of own funds are likely to come into force.

     

    Related Links

    Keywords: Europe, EU, Banking, Own Funds Requirements, CRR, Single Rulebook, Q&A, EBA

    Related Articles
    News

    FED Revises Capital Planning and Stress Testing Requirements for Banks

    FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.

    January 19, 2021 WebPage Regulatory News
    News

    ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020

    ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.

    January 19, 2021 WebPage Regulatory News
    News

    ESAs Publish Reporting Templates for Financial Conglomerates

    ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.

    January 18, 2021 WebPage Regulatory News
    News

    EBA Publishes Report on Asset Encumbrance of Banks in EU

    EBA published the annual report on asset encumbrance of banks in EU.

    January 18, 2021 WebPage Regulatory News
    News

    MAS Revises Guidelines on Technology Risk Management

    MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.

    January 18, 2021 WebPage Regulatory News
    News

    US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C

    FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.

    January 15, 2021 WebPage Regulatory News
    News

    EBA Proposes Guidelines for Establishing Intermediate Parent Entities

    EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.

    January 15, 2021 WebPage Regulatory News
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6462