2018年-EBA欧洲银行管理局_AT1_report_Q2_2018_update_20页_659kb

EBA Report on the Monitoring of AT1 Instruments in EU Institutions - Third Update (2018)

Core Content

This report, published by the European Banking Authority (EBA) on 20 July 2018, is the third update of its monitoring work on Additional Tier 1 (AT1) instruments issued by EU institutions. The report aims to inform external stakeholders about the EBA's ongoing monitoring and to highlight key findings and recommendations regarding the terms and conditions of these instruments.

Main Purpose

• To monitor the quality of AT1 instruments issued by EU institutions in line with Article 80 of Regulation (EU) No 575/2013 (CRR).
• To provide guidance on provisions that may raise concerns or need revision.
• To support the standardisation of AT1 terms and conditions and promote convergence in regulatory treatment.

Key Information

• Scope of Monitoring: The EBA reviewed 23 additional AT1 issuances between May 2015 and December 2017, totaling EUR 11.41 billion.
• Types of Issuances: 8 under a conversion mechanism and 15 under a write-down mechanism.
• Total Monitoring Since 2014: 56 issuances for EUR 44.68 billion.
• Regulatory Basis: The CRR and Commission Delegated Regulation (EU) No 241/2014 (RTS on own funds) define eligibility criteria and technical standards for AT1 instruments.
• Standardised Templates: The EBA published standardised terms and conditions in October 2016, which have been increasingly adopted by issuers.

Main Findings and Recommendations

1. Avoiding or Revising Certain Provisions

• Regulatory Calls: Only full regulatory calls are acceptable. Partial calls due to write-down or conversion are not eligible triggers.
• Tax Calls: Tax calls should be based on a material and non-foreseeable change in tax treatment. Provisions must use precise terminology aligned with the CRR.
• Accounting Changes: Changes in accounting standards that do not affect tax treatment cannot be valid triggers for tax calls.
• Redemption and Repurchase: Provisions should not allow redemption after a trigger event. If a redemption notice is given after a trigger event, it should be null and void.
• Distribution Cancellation: The EBA recommends that terms should clarify that the cancellation of distributions does not constitute a default.

2. Write-Down and Conversion Mechanisms

• One-Cent Floor: The one-cent floor on write-down should not prevent the instrument from being fully written down, provided that the floor is not included in CET1 capital.
• Permanent Write-Down: If conversion is not possible, a permanent write-down should be included as a contingency.
• Conversion to Holding Company Shares: Convertible instruments should include an emergency permanent write-down clause if conversion to holding company shares fails.
• Curing Trigger Events: Trigger events should be cured automatically upon breach, not in two stages (e.g., coupon cancellation first).

3. Interaction with Other Instruments

• Loss Absorption: Provisions should clarify the interaction between AT1 and Tier 2 instruments and the sequencing of loss absorption events.
• Guarantees: If a subsidiary assumes obligations of the parent institution, the guarantee should be subordinated, not cover cancelled coupons, and be specific to restructuring or mergers.

4. Pre-emption Rights for Shareholders

• The EBA initially had reservations about pre-emption rights for shareholders but ultimately accepts them, as they do not affect loss absorption and may simplify 'fit and proper' rules post-conversion.

5. Formal and Prudential Issues

• Clarity and Precision: Provisions must be clear and precise, avoiding vague terms like "it is expected that" or "if required by the regulation".
• Use of CRR Terminology: Terms should use the exact wording from the CRR, not substitutes like "non-objection" for "supervisory permission".
• Trigger Event Calculation: Trigger events should be calculated at any time, not limited to specific reporting dates. The CET1 ratio should not be restricted to the last quarterly financial date.
• Avoiding Ambiguity: References to "applicable law" or "banking rules" should be avoided if the CRR or RTS already cover the relevant requirements.

Conclusion

The EBA continues to monitor AT1 instruments and encourages increased standardisation. It is optimistic that future issuances will be more aligned with prudential requirements and regulatory clarity. The report highlights areas where provisions may need revision or avoidance to ensure the effectiveness of loss absorption mechanisms and the clarity of terms for investors and supervisors.