EBA欧洲银行-2018-07-20-EBA-Letter-to-Caius-Capital-LLP_3页_218kb

Caius Capital LLP BUL Request Summary

Core Content

Caius Capital LLP has submitted a Breach of Union Law (BUL) Request to the European Banking Authority (EBA), alleging that the European Central Bank (ECB) and the Bank of Italy have failed to correctly apply Union law in the regulatory treatment of a transaction known as Convertible And Subordinated Hybrid Equity-Linked Securities (CASHES) by Unicredit S.p.A. The request is dated 3 May 2018 and is referenced as EBA/2018/D/1926.

Main Points of the BUL Request

• Nature of the Transaction: CASHES is a complex financial instrument that Unicredit issued in 2008 as part of a capital increase. It involves a combination of share issuance and subordinated debt.

• Regulatory Capital Treatment: Caius Capital claims that the proceeds from CASHES are incorrectly treated as Tier 2 capital and that the ordinary shares of Unicredit are also treated as Common Equity Tier 1 (CET1), which is a breach of Union law under the Capital Requirements Regulation (CRR).

• Legal Basis: The main legal basis for the claim is Article 28(1) of the CRR, which outlines conditions for instruments to be classified as CET1. Caius Capital also references Article 437 of the CRR, which requires disclosure of certain agreements related to capital instruments.

• Impact of the Alleged Breach: The alleged incorrect treatment undermines the European level playing field and risks weakening the perceived quality of CET1 capital across the EU.

• Role of Competent Authorities: Caius Capital asserts that the Bank of Italy and ECB SSM have permitted this treatment, which they believe is a breach of Union law.

Key Information

• CASHES Transaction: Approved in 2008, with a total capital increase of approximately €3 billion. The share premium reserve was capitalised in 2011.

• EBA's Initial Response: In 2012, the EBA's Board of Supervisors reviewed the restructuring and the CASHES transaction, noting its complexity but accepting the capitalisation of the share premium as Core Tier 1 (CT1) on a one-off basis.

• Current Treatment: The amount accepted as CT1 has since qualified as CET1 under the CRR. The remaining nominal amount of the CASHES instrument is currently treated as Additional Tier 1 (AT1) and reported accordingly.

• EBA's Discretion: The EBA has the discretion under Article 17 of Regulation (EU) No 1093/2010 to initiate a BUL investigation. However, it also considers whether the request is more suitable to be addressed by other entities or treated through other means.

• EBA's Final Decision: Based on the preliminary enquiries, the EBA does not find clear grounds to believe that the ECB has breached Union law in its supervisory responsibilities regarding the CASHES transaction. Therefore, the EBA does not intend to open an investigation.

EBA Procedure

The EBA follows its published procedure for BUL investigations (EBA/DC/2016/174). This procedure outlines factors that may influence the decision to initiate an investigation, including the suitability of the request for other entities or mechanisms.

Conclusion

Caius Capital's BUL Request challenges the regulatory capital treatment of the CASHES transaction by Unicredit, asserting breaches of the CRR. However, the EBA has determined that the allegations do not provide sufficient grounds for initiating a BUL investigation, due to the complexity of the transaction, the previous position of the EBA, and the discretion available to competent authorities in their supervisory roles.