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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.

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List of Q&A's

Article 89 of Regulation (EU) No. 575/2013 (CRR) – risk weighting and prohibition of qualifying holdings outside the financial sector

This question is about the valuation of qualifying holdings outside the financial sector in order to determine whether the 15 % cap under Article 89 of Regulation (EU) No 575/2013 (CRR) is exceeded or not. It is also in relation with the phase out of unrealized gains measured at fair value under Article 468.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_749
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 19/12/2014

Application of phase-in regime

What is the compatibility between Recital (117) of Regulation (EU) No 575/2013 (CRR) and the provisions of aforementioned Basel III Q&A with Articles 472, 475 and 477, which provide for the deduction of the share not deducted as an effect of the phase-in period (described in Articles 469, 474, 476 and 478)? Literal application of these provisions, which effectively impose a 100% deduction, to items which, under the current regulations (of the individual member states, enacting the Basel II regulations), would not be deducted, would appear to in contrast with very logic of the phase-in regime.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_723
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 23/05/2014

Own funds - Prudential Filters

Regarding the calculation of the prudential filters defined in Article 32 and 33 of Regulation (EU) No. 575/2013 (CRR) it is not clear if such filters shall be considered net or gross of the related tax effects. It seems reasonable to consider the filters net of tax effects. This will be consistent with the aim of such filters to exclude from Common Equity Tier 1 any increase in the institution's equity due to securitised assets and changes in its own credit risk, which are registered in the accounting framework net of tax effects.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2014_720
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Handling of unrealised gains/losses in Own Funds and Exposures

Does unrealised gains/losses refer to all gains and losses for financial instruments accounted at fair value which occured life to date or only unrealised gains/losses of the current year? Will unrealised gaines and losses despite being deducted from own funds be still part of the exposure? How should the position "Losses for the current financial year" be calculated? Without taking into account unrealised gains/losses?

  • 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: 2014_716
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 06/03/2015

Grandfathering

Linked to 2013_47, prior to the first call date, can the amount of a step up Tier 1 in excess of the Tier 1 grandfathering limit work in the Tier 2 grandfathering limit (if there is space) as is permitted for non-step Tier 1 instruments?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_696
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 23/05/2014

Holding in an undertaking that is neither a financial sector entity nor outside the financial sector

According to Article 89 (1) of the CRR, a holding in an undertaking that is not a financial sector entity, carrying on certain ancillary activities (for which guidelines are pending to be issued by the EBA), shall not be treated as a qualifying holding outside the financial sector. In addition, the aforementioned holding does not seem to be captured neither by the deductions from eligible capital items (Articles 36, 56, 66) since relevant deductions relate only to holdings in financial sector entities. Therefore, shall a holding in an undertaking that is not a financial sector entity, carrying on certain ancillary activities, be treated as a holding in a financial sector entity or as an exposure which should be risk weighted?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_630
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 22/08/2014

Additional Tier 1 and Tier 2

Should the Additional Tier 1, Tier 1 ,Tier 2 and own funds stemming from undertakings of third countries outside Europe and subject to local requirements equivalent to those requirements under Regulation (EU) No 575/2013 (CRR) and Directive (EU) 2013/36 (CRD), be included in the consolidated own funds?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_620
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 31/10/2014

Application of transitional provisions to Additional Tier 1 and to Tier 2 instruments with an incentive to redeem

When all the call options from an AT1 (or T2) instrument which has an incentive to redeem occur during the period that an institution is under state aid and, thus, subject to a ban on exercising call options on own funds instruments, should the AT1 (or T2) instrument be subject to the provisions of Article 489(5) (or 490(5) of Regulation (EU) No 575/2013 (CRR) assuming that the effective maturity date, as defined in Article 491, is the first call date after the referred ban has been removed?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_590
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 04/04/2014

Application of specific national filters and deductions when computing threshold deductions

When applying the transitional provisions calculation of Common Equity Tier 1, the threshold deductions exist: (a) associated with non-significant holdings in financial sector entities (FSE) which are covered by Articles 36(1)(h) and 46 of Regulation (EU) No 575/2013 (CRR); and, (b) the ones associated with the significant holdings in FSE and Deferred Tax Assets that arise from temporary differences that are covered in article 470 of CRR. Both take into account theoretical values for a “relevant Common Equity Tier 1” (or “aggregate amount of Common Equity Tier 1” in the wording of 46(1)(a) of CRR which serves as a base for the calculation of the threshold that determines the deductions arising from these assets. Assuming there are specific national deductions and filters subject to transitional provisions to be applied at the Common Equity Tier 1 level pursuant Article 481, how should these be incorporated when determining the “relevant CET1” for the thresholds calculations in both cases?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_588
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 08/05/2014

Requirement to disclose each individual instrument in the disclosure of capital instruments' main features

For the requirement to disclose a description of the main features of the Common Equity Tier 1 and AT1 and T2 instruments issued by the institution under Article 437(1)(b) of Regulation (EU) No. 575/2013, does the disclosure template require each individual security to be disclosed in the main features template that entities are expected to produce on an external website (BCBS Composition of Capital disclosure requirements - June 2012 - Appendix III)? Would it possible to agree a "de minimis" threshold and allow small securities to be presented en masse given the same value date, maturity date and other terms and conditions?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_553
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 30/04/2014

Tier 2 instruments

In question 2013_31 the EBA clarified that non-step-up legacy Tier 1 instruments could be eligible, for the amounts exceeding the grandfathering limits, as fully eligible Tier 2 instruments with no time limit and independently of the frequency of calls, if conditions set in Article 63 are met. Article 63 (j) states that such Tier 2 instruments may be called where conditions in article 77 are met. Could the EBA confirm that article 77 would apply to such legacy non step Tier 1 bonds potentially fully eligible as Tier 2 and would effectively impose a constraint on the bank, so that the bank does not need to have a contractual call provision in the non-step-up legacy Tier 1 bond that states that the call can only be exercised with the approval of the regulatory authority to get this bond approved as Tier 2 ?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_544
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Eligibility of capital instruments for classification as Common Equity Tier 1 instruments when the instruments are supplemented by a contractual obligation of the majority-holder of those instruments to pay compensation to the minority shareholders even in loss years

Paragraph 1 (I) (ii) of Article 28 Regulation (EU) No. 575/2013 (CRR) states that “the instruments are not secured, or subject to a guarantee that enhances the seniority of the claim by the parent undertaking of the institution”. The question is, whether a contractual obligation of the majority shareholder of a credit institution to pay a compensation to the minority shareholders even in loss years (by reason that the majority shareholder and the credit institution have entered into a profit and loss transfer agreement) is permissible according to paragraph 1 (I) (ii) of Article 28 CRR? In more general terms, what is the meaning of the word “claim” in paragraph 1 (I) of Article 28 CRR (claim only to the substance/equity of the credit institution, or also to a dividend or to a compensation payment or all)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_543
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Grandfathering of own funds

In question 2013_15 the EBA clarified that legacy step-up Tier 1 instruments with quarterly calls will not be eligible as fully CRR compliant Tier 2 instruments after their first call and step-up date. In question 2013_31 the EBA clarified that non-step-up Tier 1 instruments could be eligible, for the amounts exceeding the grandfathering limits, as fully eligible Tier 2 instruments with no time limit and independently of the frequency of calls, with an important caveat : should the terms of the legacy non-step-up Tier 1 instruments interfere with Articles 28(1)(h)(vii)) (CET1) and 52(1)(l)(v) (AT1), then such AT1 and CET1 instruments could be disqualified, while the legacy non-step-up Tier 1 instrument would remain in fully eligible Tier 2. By doing so the EBA referenced to questions 2013_21 and 2013_54. However, these two questions mainly dealt with "stopper provisions" and more precisely about cases where the legacy non-step-up Tier 1 instruments have terms that could prevent (optionally or in a mandatory way) coupons being paid if distributions are skipped on CET1 or AT1 instruments. I have several questions related to this : 1. My first question is to confirm that the same reasoning would apply during the grandfathering period independently of the fact that the bonds would still be within the grandfathering limit or not. Logically the answer should be yes as questions 2013_21 and 2013_54 clarify that the impact of the terms of the legacy instrument is not on the regulatory eligibility of this instrument but on the AT1 / CET1 instruments. The effect of the terms of the grandfathered bonds on the CET1 / AT1 bonds is obviously totally independent of the grandfathering status of the grandfathered bond (with the possible exception of contractual provisions that make an explicit reference to pushers / stoppers only on bonds that are included in regulatory capital.) 2. My second question is to confirm that the same reasoning would apply to step-up bonds as I see no reason why the impact of pusher / stopper provisions on CET1 / AT1 bonds would be different if there is a step up or not and application of articles 28(1)(h)(vii)) (CET1) and 52(1)(l)(v) (AT1) would be the same for step / non step bonds. 3. My third question is on pusher provisions. Many legacy Tier 1 instruments have pusher provisions saying that a coupon being paid on the legacy Tier 1 instrument forces a payment on "pari passu" bonds, such pari passu bonds being defined in the contract. Could the EBA confirm that, if an additional Tier 1 is included in the list of pari passu bonds defined in the legacy Tier 1 contract, then the AT1 instrument would not be eligible? This is because of the fact that [not paying on AT1 implies not paying on Legacy Tier 1] is logically strictly the same as [paying on Legacy Tier 1 implies paying on AT1], so in such cases not paying coupons on the AT1 would obviously trigger restrictions for the bank, the case specifically considered by the EBA in question 2013_21.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_542
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 28/05/2014

Eligibility of capital instruments for classification as Common Equity Tier 1 instruments when the instruments are supplemented by a contractual obligation of the majority-shareholder to pay a fixed yearly compensation to the minority shareholders

Para 1 point (i) of Article 28 of Regulation (EU) No 575/2013 (CRR) states that "compared to all the capital instruments issued by the institution, the instruments absorb the first and proportionately greatest share of losses as they occur, and each instrument absorbs losses to the same degree as all other Common Equity Tier 1 instruments". The question is, whether a contractual obligation of the majority shareholder of a credit institution to pay a fixed yearly compensation to the minority shareholders even in loss years (by reason that the majority shareholder and the credit institution have entered into a profit and loss transfer agreement) is permissible according to para 1 point (i) of Article 28 CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_541
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 16/05/2014

Grandfathering of Tier 1 instruments w.r.t. Dividend Stoppers and Pushers

When considering the eligibility into Tier 2 for grandfathered Tier 1 instruments - lets use an example where a T1 bond (step or non-step) has a recurring call date only once every 5 years (therefore, from an original maturity perspective it should be eligible for Tier 2 capital as a 5 year bond) Does your comment re. dividend pusher/stopper language restrict the ability of such a bond (assuming it has a dividend pusher/stopper) exclude it from Tier 2 eligibility? If Yes, why are these being treated differently from regular Tier 2 instruments (which do not have dividend pushers/stoppers) that have must pay coupons i.e. an obligation to pay a coupon, which if not paid constitutes a default and thus has stronger implications than on stopping coupons on a T1 bond as mentioned above

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_537
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Grandfathered Instruments and Deduction Threshold Exemptions

When calculating the amount of Common Equity Tier 1 (CET 1) that is multiplied by 10%/17.65% for the purposes of threshold exemptions for deductions, should grandfathered instruments be included in the amount of CET1 to the extent that they qualify as CET 1 during the grandfathering period?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_527
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 30/04/2014

Capital requirements for a subgroup integrated by a parent holding company in a Member State and its institutions and subsidiary financial institutions

What are the capital requirements for the subgroup and/or any of the undertakings included in it if the Member State: i) imposes capital requirements for the holding company by virtue of a national law? ii) does not impose any additional requirements to those in the CRR? As it is explained in the “background on the question”, we understand that for the second question (ii), the following topics must be clarified: a) What is the scope of the sub-consolidation, i.e. which companies need to be included in the respective sub-consolidation group? b) Are the capital requirements to be applied at the “subsidiary institution” level or at the “parent holding in the member state” level?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_521
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 09/01/2015

Exemption from deduction of Equity Holdings in an insurance company from CET1

Pursuant to Article 471(1)(d) of Regulation (EU) No 575/2013 (CRR), in order not to deduct the equity investment in an insurance company, should “the amount of the equity holding which is “not deducted” not exceed (i) the “amount of shares” (13% share of the insurance company’s capital) or (ii) the “book value” (EUR 2 billion), held in the Common Equity Tier 1 instruments in the Insurance company as of December 31, 2012?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_502
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Minority interests

Article 81(1) of Regulation (EU) No 575/2013 (CRR) defines minority interests which are part of CET-1 instruments where the sum of share premium accounts related to those instruments, retained earnings and other reserves are noted. On the other hand the other comprehensive income defined in Article 26(1)(d) of CRR is not noted in Article 81(1). Further, Article 84(1)(a) refers to the CET-1 capital of the respective subsidiary which means for us the other comprehensive income is part of the calculation. How does other comprehensive income have to be treated in case of calculation of the minority interests?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_487
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 07/11/2014