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Treatment of Tier 1 securities with calls every 5 years (as opposed to quarterly calls)

Could a Tier 1 security with an incentive to redeem and a first call date post January 1, 2014 (say, in 2016) and which is callable every 5 years after the first call date count as Tier 2 if not called at the first call date? This question is partly based on the answer to the question 2013_15, where the EBA gives clarity on the fact that non-called Tier 1 cannot count as Tier 2 post the first call date, as they are callable every quarter on so do not comply with Tier 2 requirement - which is not the case here.

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_48| Topic: Own funds| Date of submission: 08/07/2013

Valuation of qualifying holdings outside the financial sector for the purposes of Article 89 of Regulation (EU) No. 575/2013

What is the correct valuation to determine the 15% threshold of the eligible capital under Article 89(1) of Regulation (EU) No, 575/2013? Are the provisions of Article 4(77) also relevant for this purpose or should it be generally the amortized cost?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_367| Topic: Own funds| Date of submission: 09/10/2013

Assets controlled by a liquidity management function

Would only those assets which are directly controlled by the liquidity management function fall within the definition of liquid asset holdings (subject to meeting the other conditions) under Regulation (EU) No 575/2013 (CRR), or do those assets which are not directly controlled by the liquidity management function also qualify?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_280| Topic: Liquidity risk| Date of submission: 26/09/2013

Tap issues

Article 484 and 486 of Regulation (EU) No. 575/2013 (CRR) provide for the grandfathering treatment of Tier 2 instruments that do not meet the criteria of Articles 62 and 63. Article 63 provides that callable Tier 2 should have a first call date not before five years after the date of issuance or raising (except Article 78(4)). When an institution has issued before 31/12/2011 a callable (non step) Lower Tier 2 bond with a first call date at year 5 and then has made a tap on that issue (i.e. increased the amount of the original issue a year later, for example), what is the grandfathering treatment of the amounts raised through the tap? Is it the same as the original bond (i.e. fully eligible) or should the tap be considered non fully eligible Tier 2 because, as of the tap date, the first call was before year 5, in which case the tap should be included in the amortized stock according to Article 86.

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_238| Topic: Own funds| Date of submission: 11/09/2013

Requirement to establish a risk/audit committee

Article 76(3), first paragraph, requires significant institutions to establish a risk committee. According to the fourth subparagraph, "competent authorities may allow an institution which is not considered significant as referred to in the first subparagraph to combine the risk committee with the audit committee as referred to in Article 41 of Directive 2006/43/EC." Does this mean that all institutions in the EU are required to establish at least a joint risk and audit committee?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_228| Topic: Internal governance| Date of submission: 10/09/2013

Eligibility of Tier 2 after contractual change if already in amortisation phase

This is a follow up question to 2013_16, where it is stated that "A material change in the terms and conditions of a pre-existing instrument shall be considered in the same way as the issuance of a new instrument, meaning that the changes shall aim at ensuring a full eligibility...". Does this principle apply only to changes that would lead to inclusion in grandfathering or also to instruments which after a contractual change (removal of call rights) would be fully eligible but already are within the last 5 years of their maturity and therefore recognized according to amortization rules?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_174| Topic: Own funds| Date of submission: 21/08/2013

Grandfathering of own funds instruments

Based on the answer to question 2013_16, if a step-up Tier 2 bond’s terms were changed so that all call options were removed – before the entry in force of the Regulation (EU) No 575/2013 (CRR) – could it be considered as fully eligible in Tier 2 capital assuming that the capital instrument meets the other conditions laid down in Article 63 of the Regulation?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_61| Topic: Own funds| Date of submission: 12/07/2013

Meaning of Article 79 (b) of Directive 2013/36/EU (CRD)

What should standardised banks do in order to live up to CRD Article 79 (b)? Should standardised banks make their own assessment of the risk weights assigned to unrated counterparts? I.e. If a banking counterpart (institution) in a 0 % risk weight country is unrated and therefore assigned a risk weight of 20 % according to Article 121of Regulation (EU) No 575/2013 (CRR), but an internal assessment shows that other comparable counterparts with a rating get assigned a 50 % risk weight according to Article 120 of CRR, what should the calculating institution do? Should the calculating institution overwrite the 20% with 50 % or should the calculating institution add the difference in risk weighted assets under Pillar II?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_249| Topic: Supervisory review and evaluation (SREP) and Pillar 2| Date of submission: 16/09/2013

Inclusion of incurred (IFRS) CVA in the IRB Provision shortfall calculation

Can the incurred CVA charge related to IRB exposures be treated as an eligible provision for the purposes of calculating the own funds reduction for IRB provision shortfall (per Article 159 of Regulation (EU) No 575/2013 (CRR))?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_245| Topic: Own funds| Date of submission: 13/09/2013

Article 416 - Reporting on liquid assets

Can assets issued by credit institutions, investment firms, insurance undertakings, etc. (reference to Article 416(2)) qualify for reporting as liquid assets if these are guaranteed by one of the parties mentioned in article 416(1)(c)?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_222| Topic: Liquidity risk| Date of submission: 10/09/2013

Level of application of the new FINREP framework

Can a competent authority impose FINREP at a solo level. Moreover, would a competent authority be free to add to or delete information from a specific template?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)

ID: 2013_197| Topic: Supervisory reporting| Date of submission: 02/09/2013

Firm shorts covered by client longs

We assume that an outflow should be reflected under Article 423 (4) of Regulation (EU) No 575/2013 (CRR) for any firm short currently covered using a client long position, unless the residual term of the borrowing of the client stock used to cover the short is contractually committed beyond 30 days.

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_185| Topic: Liquidity risk| Date of submission: 27/08/2013

Possibility to increase the frequency of reporting with regard to information covered by Draft ITS on Supervisory Reporting.

Article 104(1)(j) of Directive 2013/36/EU (CRD) provides for competent authorities to have inter alia the power to impose additional or more frequent reporting requirements, including reporting on capital and liquidity positions. The draft Implementing Technical Standard on reporting (ITS on reporting) submitted by EBA to the European Commission on 26 July 2013 includes strict provisions regarding format and frequency of reporting. In light of this does the competent authority have the power to impose more frequent reporting requirements relating to information that to some extent is covered by parts of Draft ITS on reporting (for instance the tables CA1, CA2) .

COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (as amended)

ID: 2013_175| Topic: Supervisory reporting| Date of submission: 21/08/2013

Treatment of non-grandfathered amount of bonds

1. As of January 1, 2014, if an innovative Tier 1 security has more than 5 years to the first call date (e.g., a first call in 2020), does the non-grandfathered amount of bonds (i.e. 100%-80% = 20% in 2014) have any regulatory value? Could this be Tier 2 until 2015, given it will have at least 5 years to the first call date as per Article 63 Regulation (EU) No 575/2013 (CRR)? 2. In a similar vein, can the non-grandfathered part of non-innovative Tier 1 with no incentive to redeem count as Tier 2, either pre- or post-first call date?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_47| Topic: Own funds| Date of submission: 08/07/2013

Treatment of existing Tier 1 and Tier 2 instruments

This question is a supplement to Question 2013_46. For Tier 1 or Tier 2 instruments with an incentive to redeem and quarterly/semi-annual/annual calls beyond the first call date, would these instruments qualify as Tier 2 capital if the issuer gave an undertaking to its regulator and the market that it would not exercise its call option for at least 5 years after the first call date? This would save the issuer the time and expense of having to modify the actual instrument documentation but would achieve a similar outcome in terms of its capital position/quality.

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_105| Topic: Own funds| Date of submission: 31/07/2013

Determination of the appropriate currency to be used for calculating the base for grandfathering and phase-out limits

Can the base for grandfathering and phase out limits be calculated in the currency that the instrument eligible for grandfathering is denominated in?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_248| Topic: Own funds| Date of submission: 13/09/2013

How shall an institute explain a rating decision?

Article 431, paragraph 4 says that "institutions shall, if requested, explain their rating decisions to SMEs and other corporate applicants for loans, providing an explanation in writing when asked." Shall this be interpreted as institutions shall show the exact probability of default for the applicants or the applicants rating on the institutions internal rating scales or in any other way?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_240| Topic: Transparency and Pillar 3| Date of submission: 13/09/2013

Off-balance sheet items and definition of default

Please confirm that indeed the off-balance sheet part of a facility (e.g. undrawn amount) or any other off-balance sheet items e.g. acceptances, guarantees, etc should not be categorised in the "in default" exposure class even if the customer is classified as "in default".

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_239| Topic: Credit risk| Date of submission: 12/09/2013

Additional value adjustments

According to the Article 34 of Regulation (EU) No 575/2013 (CRR), institutions shall apply the requirements of Article 105 to all their assets measured at fair value when calculating the amount of their own funds and shall deduct from Common Equity Tier 1 capital the amount of any additional value adjustments necessary. Does the provision “to all their assets measured at fair value” mean that this Article concerns all trading book positions or this Article concerns all trading and banking book positions?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_213| Topic: Market risk| Date of submission: 05/09/2013

Inclusion of year-end profit in Common Equity Tier1 Capital as of the end of first quarter of the following year.

Can the year-end profit (reduced by the expected burdens and dividends), after verification by persons independent of the institution that are responsible for the auditing of the accounts of that institution, be included in Common Equity Tier1 Capital of the institution as of the end of first quarter of the following year without the prior permission of the competent authority in the situation in which the General Meeting of Shareholders approves the financial statements with the year-end profit (and approves the dividend in the amount reducing the year-end profit in the calculation) before the issuing date of the first quarter financial statements, but after the date of first quarter reporting period?

COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable

ID: 2013_208| Topic: Own funds| Date of submission: 03/09/2013