2015年-EBA欧洲银行管理局_AT1_report_10页_237kb

EBA Report Summary: Monitoring of Additional Tier 1 (AT1) Instruments of EU Institutions

Core Content

The European Banking Authority (EBA) has published a report to monitor the quality of Additional Tier 1 (AT1) instruments issued by EU institutions, in line with Article 80 of Regulation (EU) No 575/2013 (CRR) and the Commission Delegated Regulation (EU) No 241/2014 (RTS). The report aims to inform external stakeholders about the preliminary work and results of the EBA's monitoring, and to identify areas for improvement in the design and implementation of AT1 instruments.

Main Purpose

• To monitor the quality of AT1 instruments across the EU.
• To highlight areas where current or potential AT1 provisions may raise concerns.
• To promote standardisation and clarity in the terms and conditions of AT1 instruments.
• To provide guidance on the interpretation of CRR provisions and to encourage further convergence in regulatory approaches.

Key Findings and Recommendations

1. Regulatory Calls

• The EBA reviewed nine AT1 issuances totaling EUR 11.6 billion, with three using a conversion mechanism and six using a temporary write-down mechanism.
• Partial regulatory calls are considered problematic under the current CRR framework, as there is no clear case of partial derecognition. The EBA recommends only full regulatory calls.
• For tax calls, a material effect on tax treatment is required, and partial calls may be acceptable in such cases.

2. Write-Down or Conversion

• The one cent floor for write-downs is questioned due to potential legal implications. The EBA suggests that the amount not written down should not be included in CET1 capital.
• Permanent write-downs are acceptable if they do not contradict the CRR's requirement for sufficient capital for conversion.
• Conversion linked to prior loss-absorbing instruments is discouraged, as it may create dependencies and reduce the effectiveness of the loss absorption mechanism.

3. Share Conversion Clauses

• The EBA advises against share conversion clauses that allow shareholders to buy shares from the conversion, as they may create confusion and dilution issues.

4. Formal Issues

• Prudential provisions should be clearly worded, avoiding ambiguous phrases like "it is expected that" or "if required by the regulation".
• The trigger event should be calculated at any time, not just on the last quarterly financial date.
• References to "applicable law" should be avoided, as they may cast doubt on the direct applicability of CRR and RTS.
• Covenants that affect prudential terms should not be referenced unless clearly defined.

5. Provisions for Future Issuances

• The EBA is cautious about contingent clauses that might require mandatory interest payments if AT1 status is lost.
• Adjustable trigger levels are considered a potential new issuance and are discouraged due to increased complexity.

6. Interpretation of CRR Provisions

• The EBA identifies differences in the interpretation of CRR provisions, particularly regarding triggers for loss absorption.
• When there are multiple triggers (e.g., on solo and consolidated levels), the write-up amount should be based on the lower net income to ensure consistency and clarity.
• The EBA recommends that triggers be based on the CET1 of the institution or banking group, depending on the supervision level, and that they should not be influenced by other factors.

Areas Under Investigation

• The EBA is working on the recognition of AT1 instruments at the group level when issued via a subsidiary in a third country.
• It is also investigating activation of loss absorption mechanisms in institutions with different trigger levels (e.g., 5.125% and 7%).
• The use of reserves to avoid explicit write-down floors is being considered.

Conclusion

The EBA's report outlines a preliminary review of AT1 instruments, highlighting the importance of standardisation, clarity, and prudential effectiveness. It encourages issuers to design instruments with simple and clear terms and to avoid overly complex or ambiguous provisions. The EBA will continue to monitor and provide guidance on these issues, aiming to promote a common interpretation of the CRR and to ensure that AT1 instruments remain effective in absorbing losses.