2016年-EBA欧洲银行管理局_EBA_draft_AT1_templates_2016_34页_886kb

EBA Draft Standardised Templates for Additional Tier 1 Instruments

Core Content and Objectives

The European Banking Authority (EBA) has published draft standardised templates for Additional Tier 1 (AT1) instruments, aiming to increase standardisation across the EU banking sector. These templates are not legally binding and are proposed for use on an opt-in basis by institutions. The primary objectives of the templates include:

• Enhancing clarity and consistency in the terms and conditions of AT1 instruments for investors and supervisors.
• Assisting smaller institutions in meeting regulatory requirements through simplified structures.
• Facilitating the EBA’s monitoring role by aligning with regulatory expectations and reducing complexity.
• Providing a framework for comparison of terms and conditions across different issuances.

The EBA has based its work on existing market practices and regulatory texts, including the Capital Requirements Regulation (CRR), Regulatory Technical Standards (RTS), and the AT1 monitoring report. The templates are intended to cover prudential aspects only, such as definitions, terms, and conditions related to loss absorption, while excluding non-prudential elements like taxation and risk factors.

Structure of the Templates

The templates are divided into two main sections:

1. Essential Provisions

These provisions are deemed necessary or recommended based on regulatory requirements and market practices. They include:

• Definitions and Main Terms of the Notes: The EBA has aligned definitions with the CRR and RTS. Key terms such as "Issue Date," "Issue Price," and "Maturity Date" are left to the discretion of the institution, as they are jurisdiction-specific. The term "Notes" may be replaced with other terms like "AT1 instrument."
• Status of the Notes: The Notes are defined as unsecured, subordinated, and rank in a specific hierarchy relative to other capital instruments and creditors. This ranking is subject to the CRR capital hierarchy and may need local adaptation.
• Cancellation of Distributions: The Issuer may cancel distributions at its discretion, and such cancellation does not constitute a default. Mandatory cancellation occurs if the payment would exceed the Maximum Distributable Amount (MDA) or cause the Distributable Items to be exceeded, or if ordered by the Competent Authority. Cancellations are non-cumulative and do not affect the validity of the instrument.
• Redemption: AT1 instruments are generally perpetual and may only be redeemed under specific conditions, such as regulatory requirements, tax-related events, or with prior approval from the Competent Authority. Redemption is subject to the CRR and Delegated Regulation (CDR) provisions.

2. Optional Provisions

These provisions are considered acceptable but not essential. They include:

• Gross-up Clauses: May be used to adjust distributions for tax purposes.
• Substitution/Variation Clauses: Allow for changes to the terms of the instrument, provided they remain compliant with regulatory requirements.
• Pre-emption Rights: May be included to grant existing shareholders priority in new issuances.

Loss Absorption Mechanisms

The EBA has proposed three forms of loss absorption mechanisms:

1. Full Conversion: The instrument is converted into equity.
2. Partial Temporary Write-down: The principal amount is temporarily reduced.
3. Full Permanent Write-down: The principal amount is permanently reduced, with the possibility of a write-up.

The templates are designed to reflect the most commonly observed mechanisms in the market. Other combinations, such as permanent partial write-down, may also be possible but are not included in the current draft.

Regulatory and Market Considerations

• The EBA has previously developed a common term sheet for Buffer Convertible Capital Securities (BCCS) in 2011, which has been used by some institutions.
• The templates are not intended to cover aspects related to Bank Recovery and Resolution Directive (BRRD), except for contractual bail-in language for third country law instruments.
• The EBA acknowledges that templates may not cover all possible cases, especially for institutions with unique structures. Therefore, they are meant to be adapted to local laws and regulations.
• The EBA intends to update the templates regularly in line with regulatory developments and market practices.

Process and Timeline

• The EBA conducted a targeted consultation with industry participants, including law firms, and is now publishing the draft templates for public comment.
• A public hearing is scheduled for 26 July 2016 at the EBA premises.
• Comments from the hearing will be used to refine the templates, which are expected to be finalized by the end of 2016.
• The templates are accompanied by a draft second update of the EBA’s AT1 monitoring report, which provides additional context and guidance.

Key Considerations for Issuers

• The use of the templates is optional, and institutions may continue to use their own terms and conditions, provided they are compliant with regulatory requirements.
• The EBA encourages issuers to liaise with competent authorities to ensure that any adaptations to the templates are consistent with applicable laws.
• The EBA will continue to monitor AT1 instruments and update both the report and the templates as needed to reflect new developments.

Conclusion

The EBA's draft standardised templates for AT1 instruments aim to improve clarity, consistency, and regulatory compliance across the EU. While not legally binding, they offer a useful framework for institutions to follow, particularly smaller ones, and help supervisors assess compliance more effectively. The EBA will update the templates and monitoring report as necessary to reflect changes in legislation and market practices.