The European Banking Authority (EBA) published today its fifth updated list of capital instruments that Competent Supervisory Authorities (CAs) across the European Union (EU) have classified as Common Equity Tier 1 (CET1). The list is for the first time accompanied by a Report, which includes additional information on the underlying objectives of the monitoring update as well as on the consequences of including or excluding instruments in or from the list. The EBA intends to update this report on a regular basis to give account of new developments in CET1 issuances and market practices.
Since the publication of its fourth updated list of CET1 capital instruments on 1 December 2016, the EBA has continued its monitoring and assessment of new CET1 instruments. In this new update, two new forms of CET1 instrument in one Member State have been assessed and evaluated as compliant with the CRR and added to the CET1 list.
Ten new forms of instruments have been included since the first publication of the list on 28 May 2014. The EBA has assessed the terms and conditions of all these new instruments against the regulatory provisions with the aim of identifying any discrepancy with the eligibility criteria. In several cases, the EBA requested amendments to the terms and conditions of the instruments, mainly relating to the flexibility of payments.
The accompanying report provides some background on the monitoring work done to establish the CET1 list. It provides external stakeholders with further guidance on the content and objectives of the 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 issuances across the EU. The report will be updated on a regular basis.
The EBA separately released today its Opinion on own funds
in the context of the European Commission's CRR review, which also touches on some aspects relevant to the CET1 list, including a possible strengthening of the EBA's role in terms of CET1 instruments.
Legal basis and background
Article 26(3) of the CRR mandates the EBA to establish, maintain and publish a list of all the forms of capital instruments in each Member State that qualify as CET1. In addition, Article 80(1) mandates the Authority to monitor the quality of own funds instruments and notify the Commission immediately where there is significant evidence of those instruments not meeting the criteria set out in Article 28 or, where applicable, Article 29.