Question ID
2013_18
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Own funds
Article
484
Paragraph
1
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
N/A
Type of submitter
Competent authority
Subject matter
Grandfathering of own funds instruments
Question

May capital instruments be adjusted stepwise with the unadjusted part still being eligible for grandfathering? Take the following example: - An institution has issued a hybrid Tier 1 instrument that does not meet the requirements of Article 52 but is eligible for grandfathering; - starting in 2013, the bank adjusts in each year the terms and conditions of 10% of the nominal amount in order to make it fully eligible as Additional Tier 1 (AT1) under Regulation (EU) No 575/2013; - the terms and conditions of the remaining nominal amount of the capital instrument are kept unchanged. May the institution recognize the remaining part of the capital instrument as AT 1 under the grandfathering rules of the Regulation (EU) No 575/2013 given that only the nominal amount but not the terms and conditions of this remaining part are adjusted or does the change of the nominal amount also constitute a change of the whole contract, making the whole instrument no longer eligible for grandfathering since the new contract is concluded after the cut-off date mentioned in Article 484 (1)?

Background on the question

Not given

Submission date
Final answer

The change in the nominal amount would be considered as the issuance of a new instrument. In the specific case above, the instrument would be disqualified after the change in the nominal amount since the new contract is concluded after the cut-off date mentioned in Article 484 (1) and the instrument does not meet the requirements of Article 52 of Regulation (EU) No 575/2013.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.
Note to Q&A

Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.

Disclaimer

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