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Q&As refer to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.

Please note that the Q&As related to the supervisory benchmarking exercises have been moved to the dedicated handbook page. You can submit Q&As on this topic here.

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List of Q&A's

Grandfathering on own funds instruments

What will be the treatment of the "phased-out" amounts which exceed the applicable percentages according to Article 486 (5)) of grandfathered Additional Tier 1 instruments which are non-eligible due to an incentive to redeem (accord. to Art 489) or a coupon pusher (accord. to Art 53 (a)), during the grandfathering period (accord. to Art. 486 (5)). Will the phased-out amounts flow into grandfathered Tier 2 amounts (subject to applicable limits) or will they lose their regulatory recognition completely (i.e. are these amounts entirely eliminated from regulatory own funds)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_56
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Treatment of Upper Tier 2 instruments under CRR

Can existing Upper Tier 2 instruments with a provision such as "the institution has the right to defer the payment of interest because the institution has not paid dividends on ordinary shares (Core Equity Tier 1 – CET1) and on hybrid instruments (Additional Tier 1 – AT1)" qualify as fully eligible Tier 2 instruments under Regulation (EU) No 575/2013 (CRR)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_54
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 31/10/2013

Applicability of the re-securitisation definition to securitisation positions being subject to tranched credit protection according to Article 264(1) of Regulation (EU) No 575/2013 (CRR)

Do the portions of a securitisation position covered and uncovered by senior unfunded credit protection have to be treated as re-securitisation positions in accordance with Article 4(64) of Regulation (EU) No 575/2013 (CRR) for the purposes of determining the risk-weighted exposure amounts of these portions in accordance with Article 249(1) of Regulation (EU) No 575/2013 as amended by Regulation (EU) 2017/2401 and for other regulatory purposes?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_53
  • Topic: Securitisation and Covered Bonds
  • Date of submission:
  • Published as final Q&A: 31/10/2013

Grandfathering of Non-Step Tier 1 instruments

A Tier 1 instrument, with no incentive to redeem, was issued prior to 31 December 2011, and, at the time of issue, was not callable for 5 years. It reaches its first call date in May 2014, and is callable quarterly thereafter. It is not called at its first call date. It does not meet all of the requirements as T1 capital under Article 52. Subject to grandfathering limits, does the instrument continue to count as Tier 1 capital? If it does not count toward Tier 1, would it count as Tier 2?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_52
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Unrealised Gains and Losses

Under to Article 467 and 468 of Regulation (EU) No 575/2013 (CRR), what is the appropriate level of aggregation with respect to unrealised gains or losses at which the percentages have to be applied respectively? Please indicate the appropriate level of application.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_51
  • Topic: Own funds
  • Date of submission:

Capital instruments that were issued with an incentive to redeem but no longer contain one

In EBA Q&A Question: 2013_15 you state "The fact that the instrument is not called does not mean that the instrument may be reclassified as an instrument without an incentive to redeem". Was this meant specifically within the context of grandfathering or more broadly. For example, a T1 instrument with its first call prior to 31 December 2011 and therefore can be subject to grandfathering but also on a forward looking basis no longer contains an incentive to redeem, if this instrument has call resets every 5 years will this instrument be eligible for T2 qualification under CRR when it falls out of grandfathering. More specifically does the fact a bond was ISSUED with an incentive to redeem in the past specifically preclude it from being eligible for T2 treatment, even if following the call date and on a forward looking basis this incentive to redeem no longer exists?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_50
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 20/06/2014

Possibility to remove a Tier 1's call options to make the securities Tier 2 compliant

Based on the answer to question 2013_16, if a step-up Tier 1 bond’s terms were changed (which had a call date in, say, 2016) so that all call options were removed, this could not prolong its grandfathering as Tier 1, if that were the sole rationale for removing the calls. However, if a removal of calls is to make the Tier 1 bonds count as eligible Tier 2 (as there is no call feature), then could they be reclassified as Tier 2?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_49
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 06/12/2013

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.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_48
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 31/01/2014

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?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_47
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 20/12/2013

Old-style Tier 1 requalifying as CRR Tier 2 capital

When an old-style Tier 1 instrument with an incentive to call passes its step-up date and ceases to be recognised as grandfathered Tier 1 capital under Regulation (EU) No 575/2013 (CRR), can it qualify as Tier 2 capital going forward if it were to meet all the requirements of Article 63 of CRR? For many existing instruments, the quarterly calls following the first call date of the Tier 1 instrument would prevent the inclusion in Tier 2 capital under CRR. If an old-style Tier 1 instrument had the Issuer's Call entirely removed from the instrument's documentation by the Issuer or Trustee, could it theoretically requalify as Tier 2 if it met all the other provisions for Tier 2 capital (Article 63 etc) after the removal of the Call provision?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_46
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Grandfathering, cascading and phasing out limits

In the case of an issuer whose outstanding Tier 2 instruments as at December 2012 are fully CRR compliant (ie bullet Tier 2 bonds), should Article 486(4) apply? To put it simply: can an issuer still have some disqualfied parts of Tier 1 instruments (for limit reasons) cascaded into Tier 2 even if the issuer has no phased out Tier 2 amount as at December 2012 (and hence no phased out limits for Tier 2) ?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_44
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Preferential risk weight of covered bonds containing securitisation positions of sovereign exposures as cover pool assets

Would UCITS compliant covered bonds containing public sector securitisation exposures qualify for preferential risk weights under Article 129 of Regulation (EU) No 575/2013 (CRR)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_42
  • Topic: Securitisation and Covered Bonds
  • Date of submission:
  • Published as final Q&A: 31/10/2013

Treatment of non-step Tier 1 hybrids post grandfathering

This query concerns “non-innovative” (i.e. non step) hybrid Tier 1 instruments that fully qualified as original own funds which are now callable every quarter, which do not meet the requirements of Article 52 but are eligible for grandfathering under Article 484 of Regulation (EU) No. 575/2013 (CRR). Once they cease to be eligible (in part or in full) as AT1 due to the grandfathering limits, is the de-recognised amount eligible as Tier 2?"

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_40
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Local Regulations versus the CRR

Will national regulations, maintained by domestic regulators (such as those in the Capital Principal Circular (7/2012) of the Bank of Spain, as an example) which set requirements for Tier 1 instruments compatible with, but in excess of, those set in Regulation (EU) No 575/2013 (CRR) for Additional Tier 1 instruments, continue to have force after the date (1st Jan 2014) at which CRR itself comes into force?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_39
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 31/10/2013

Application of the Discretion outlined in Article 99 (6) of the CRR to non-IFRS institutions

We wish to clarify whether, in exercising the discretion afforded to it in Article 99 (6) of the CRR, a competent authority may consult the EBA in order to extend the (new FINREP) reporting requirements outlined in Article 99 (2) to non-IFRS banks, but not to non-IFRS investment firms in its jurisdiction.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
  • ID: 2013_38
  • Topic: Supervisory reporting - Other
  • Date of submission:
  • Published as final Q&A: 31/10/2013

Applicability of Own Funds Reporting Requirements to Investment Firms Out of Scope

Should the reporting requirements of Regulation (EU) No 575/2013 (CRR) for institutions be interpreted to include reference to both investment firms and firms referred to in point (2)(c) of Article 4(1) that provide the investment services and activities listed in points (2) and (4) of Section A of Annex 1 to Directive 2004/39/EC that are excluded from the definition of investment firm, yet subject to Pillar 1 capital requirements under Article 95(2)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
  • ID: 2013_37
  • Topic: Supervisory reporting - COREP (incl. IP Losses)
  • Date of submission:
  • Published as final Q&A: 31/10/2013

Grandfathering of Tier 1 instruments

In your response to the following question "What will be the treatment of an Additional Tier 1 (AT1) instrument structured with a first call date and one step up after 5 years prior to 1 January 2013, callable quarterly thereafter at every interest payment date without any step up (subject to supervisory approval)? Is the instrument eligible for grandfathering if not called at the first call date? If the instrument is derecognized as AT1 on 1 January 2013, can it be included into Tier 2 and, if so, what amount will be eligible (full amount or gradually phased out amount)?”, you mention that: "because in particular of the quarterly call, the instrument would not meet the eligibility criteria for inclusion in fully eligible Tier 2 capital. It would also not meet the eligibility criteria for inclusion in grandfathered Tier 2 capital as foreseen under Article 484 (5) of Regulation (EU) No 575/2013." Does that mean that an existing non-innovative (i.e. non-step) Tier 1 instrument with quarterly calls will also not be grandfathered in Tier 2 capital because of the quarterly calls?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_31
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Grandfathering limit

Once applicable percentages in the range are specified by the local regulator, would it be applied: (1) at the beginning of the period; (2) at the end of the period or (3) on a straight-line basis throughout the 12 months period?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_30
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Recognised amount as regulatory capital for an Additional Tier 1 with a write-down mechanism

According to Regulation (EU) No 575/2013 (CRR) Article 54(3): “The amount of Additional Tier 1 instruments recognised in Additional Tier 1 items is limited to the minimum amount Common Equity Tier 1 items that would be generated if the principal amount of the Additional Tier 1 instruments were fully written down or converted into Common Equity Tier 1 instruments”. Given the fact that a write-down may be seen as a profit under local accounting GAAP, and hence taxable (NB: true should the issuer be supposed to pay taxes at this time. However, it is unlikely that the issuer records a profit at a time where a write-down is operated), one can think that the recognized amount as Additional Tier 1 at the issue date is the nominal amount less the foreseeable paid tax amount in case of write-down. What's the final view of EBA? Can the entire nominal issue amount be recognized as Additional Tier 1 at the issue date or only a reduced amount (i.e. the nominal amount - the foreseeable paid tax amount in case of write-down)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_29
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013