Consultation on Technical Standards for Own funds – Part III

The European Banking Authority (EBA) launches today a consultation on Draft Regulatory Technical Standards (RTS) on own funds (Part III) related to criteria to define broad market indices, the calculation of minority interest and the deduction of indirect and synthetic holdings. The consultation runs until 18 July 2013.

In particular, the objectives of the draft RTS are:

• Deduction of indirect and synthetic holdings: achieve greater harmonisation as well as increased conservatism in the way the deductions of investments in financial sector entities as well as own capital instruments are applied;
• broad market indices: put forward criteria for broad market indices so as to avoid that the interest rate/dividend paid by institutions on floating rate capital instruments increase when the credit standing of the institution decreases (credit sensitive dividend features);
• minority interest: Harmonise the calculation of minority interests to be included in regulatory capital

The proposed RTS complement the draft RTS on own funds already published for consultation on 4 April 2012 (Part I) and 9 November 2012 (Part II). They stem from additional mandates granted to the EBA in the final compromise of the Capital Requirements Regulation.

These RTS will be part of the single rulebook aimed at enhancing regulatory harmonisation in Europe and namely at strengthening the quality of capital.