EBA publishes final draft technical standards on own funds

The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) on own funds ‘Part three', which set out criteria to deduct indirect and synthetic holdings, to define broad market indices and to calculate minority interest. These final draft RTS will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in Europe and namely at strengthening the quality of capital.

In particular, three are the key objectives of the draft RTS:

• On deduction of indirect and synthetic holdings: to achieve greater harmonisation as well as increased conservatism in the way deductions of investments in financial sector entities as well as own capital instruments are applied;

• On broad market indices: to set criteria for broad market indices so as to avoid that the interest rate/dividend paid by institutions on floating rate capital instruments increases when the credit standing of the institution decreases (credit sensitive dividend features);

• On minority interest: to harmonise the calculation of minority interests to be included in regulatory capital.

Legal basis

These RTS stem from additional mandates granted to the EBA in the final version of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (colloquially known as Capital Requirements Regulation or CRR). They complement the final draft RTS on own funds (‘Part one' and ‘Part two'), which were submitted to the EU Commission and published on the EBA website on 26 July 2013.