The EBΑ concludes work on legacy instruments monitoring

The European Banking Authority (EBA) has decided to conclude its dedicated work on the monitoring of legacy instruments, in line with its long-standing expectation that such instruments should be eliminated over time. The phasing out of legacy instruments is essential to maintain a clear subordination ranking within institutions’ capital structures and to avoid unnecessary complexity in the prudential framework.

In the context of its broader monitoring of the quality of own funds and eligible liabilities, the EBA has over recent years devoted significant attention to legacy instruments, namely on own funds instruments benefiting from grandfathering provisions under the Capital Requirements Regulation (CRR1 and CRR2).

To support institutions and competent authorities in phasing out these instruments, the EBA has undertaken a series of actions. These encompassed the publication in 2020 and in 2022 of two Opinions on the prudential treatment of legacy instruments (Opinion on the prudential treatment of legacy instruments and Opinion on legacy instruments: outcome of its implementation) and the regular monitoring of the stock of such legacy instruments, including through assessments of individual cases.

Given the extensive work already carried out and with confidence that competent authorities will continue to monitor the remaining limited and specific cases on the basis of the guidance provided, the EBA will not prioritise the monitoring of legacy instruments, while maintaining its review of the quality of own funds and eligible liabilities.