Article 141b

Description
Restriction on distributions in case of failure to meet the leverage ratio buffer requirement
Main content

1.    An institution that meets the leverage ratio buffer requirement pursuant to Article 92(1a) of Regulation (EU) No 575/2013 shall not make a distribution in connection with Tier 1 capital to an extent that would decrease its Tier 1 capital to a level where the leverage ratio buffer requirement is no longer met.

2.    An institution that fails to meet the leverage ratio buffer requirement shall calculate the leverage ratio related maximum distributable amount (L-MDA) in accordance with paragraph  4  and shall notify the competent authority thereof.

Where the first subparagraph applies, the institution shall not undertake any of the following actions before it has calculated the L-MDA:

(a)    make a distribution in connection with Common Equity Tier 1 capital;

(b)    create an obligation to pay variable remuneration or discretionary pension benefits or pay variable remuneration if the obligation to pay was created at a time when the institution failed to meet the combined buffer requirements; or

(c)    make payments on Additional Tier 1 instruments.
 
3.    Where an institution fails to meet or exceed its  leverage  ratio buffer requirement, it shall not distribute more than the L-MDA calculated in accordance with paragraph 4 through any action referred to in points (a), (b) and (c) of the second subparagraph of paragraph 2.

4.    Institutions shall calculate the L-MDA by multiplying the sum calculated in accordance with paragraph 5 by the factor determined in accordance with paragraph 6. The L-MDA shall be reduced by any amount resulting from any of the actions referred to in point (a), (b) or (c) of the second subparagraph of paragraph 2.

5.    The sum to be multiplied in accordance with paragraph 4 shall consist of:

(a)    any interim profits not included in Common Equity Tier 1 capital pursuant to Article 26(2) of Regulation (EU) No 575/2013 net of any distribution of profits or any payment related to  the actions referred to in point (a), (b) or (c) of the second subparagraph of paragraph 2 of this Article;

plus

(b)    any year-end profits not included in Common Equity Tier 1 capital pursuant to Article 26(2) of Regulation (EU) No 575/2013 net of any distribution of profits or any payment related to  the actions referred to in point (a), (b) or (c) of the second subparagraph of paragraph 2 of this Article;

minus

(c)    amounts which would be payable by tax if the items specified in points (a) and (b) of this paragraph were to be retained.

6.    The factor referred to in paragraph 4 shall be determined as follows:

(a)    where the Tier 1 capital maintained by the institution which is not used to meet the requirements under point (d) of Article 92(1) of Regulation (EU) No 575/2013 and under point (a) of Article 104(1) of this Directive when addressing the risk of excessive leverage not sufficiently covered by point (d) of Article 92(1) of Regulation (EU) No 575/2013, expressed as a percentage of the total exposure measure calculated in accordance with Article 429(4) of that Regu­ lation, is within the first (that is, the lowest) quartile of the leverage ratio buffer requirement, the factor shall be 0;

(b)    where the Tier 1 capital maintained by the institution which is not used to meet the requirements under point (d) of Article 92(1) of Regulation (EU) No 575/2013 and under point (a) of Article 104(1) of this Directive when addressing the risk of excessive leverage not sufficiently covered by point (d) of Article 92(1) of Regulation (EU) No 575/2013, expressed as a percentage of the total exposure measure calculated in accordance with Article 429(4) of that Regu­ lation, is within the second quartile of the leverage ratio buffer requirement, the factor shall be 0,2;

(c)    where the Tier 1 capital maintained by the institution which is not used to meet the requirements under point (d) of Article 92(1) of Regulation (EU) No 575/2013 and under point (a) of Article 104(1) of this Directive when addressing the risk of excessive leverage not sufficiently covered by point (d) of Article 92(1) of Regulation (EU) No 575/2013, expressed as a percentage of the total exposure measure calculated in accordance with Article 429(4) of that Regu­ lation, is within the third quartile of the leverage ratio buffer requirement, the factor shall be 0,4;

(d)    where the Tier 1 capital maintained by the institution which is not used to meet the requirements under point (d) of Article 92(1) of Regulation (EU) No 575/2013 and under point (a) of Article 104(1) of this Directive when addressing the risk of excessive leverage not sufficiently covered by point (d) of Article 92(1) of Regulation (EU) No 575/2013, expressed as a percentage of the total exposure measure calculated in accordance with Article 429(4) of that Regu­ lation, is within the fourth quartile (that is, the highest) quartile of the leverage ratio buffer requirement, the factor shall be 0,6.

The lower and upper bounds of each quartile of the leverage ratio buffer requirement shall be calculated as follows:

where:

Qn  = the ordinal number of the quartile concerned.

7.    The restrictions imposed by this Article shall only apply to payments that result in a reduction of Tier 1 capital or in a reduction of profits, and where a suspension of payment or failure to pay does not constitute an event of default or a condition for the commencement of proceedings under the insolvency regime applicable to the institution.

8.    Where an institution fails to meet the leverage ratio buffer requirement and intends to distribute any of its distributable profits or undertake an action referred to in points (a), (b) and (c) of the second subparagraph of paragraph 2 of this Article, it shall notify the competent authority and provide the information listed in Article 141(8), with the exception of point (a)(iii) thereof, and the L-MDA calculated in accordance with paragraph 4 of this Article.

9.    Institutions shall maintain arrangements to ensure that the amount of distributable profits and the L-MDA are calculated accurately, and shall be able to demonstrate that accuracy to the competent authority on request.

10.    For the purposes of paragraphs 1 and 2 of this Article, a distribution in connection with Tier 1 capital shall include any of the items listed in Article 141(10).