Guidelines for Hybrid Capital Instruments

10 December 2009

The Committee of European Banking Supervisors (CEBS) today publishes its implementation guidelines on hybrid capital instruments.

This work responds to the request in Article 63(a) of the current revised Capital Requirements Directive1  (CRD) that calls on CEBS to elaborate guidelines for the convergence of supervisory practices with regard to hybrid instruments. By setting out minimum requirements for the inclusion of hybrid instruments in original own funds, the quality of own funds is enhanced.

The guidelines, which are focused on areas where CEBS sees the need for further guidance, are structured into five main parts covering permanence, flexibility of payments, loss absorbency, limits and Special Purpose Vehicles (SPVs).

In developing its guidelines, CEBS has benefited from views gathered from a broad range of market participants. Input was provided in the industry's responses to the public consultation (CP27) published in June 2009 and through a public hearing organised in September 2009. CEBS has considered the feedback received and revised its initial proposals where appropriate. In addition, the guidelines are supported by a high-level Impact Assessment focused on those parts of the guidelines that will potentially have the largest impact.

Based on the current CRD provisions, CEBS expects its Members to transpose the guidelines into their national legal framework and apply them by 31 December 2010 at the latest.

Due to possible evolutions in the global regulatory framework with regard to the definition of capital instruments, CEBS is prepared to revisit its guidelines on hybrid capital instruments as far as necessary.

1) CEBS is also taking into account that the Directive amending the CRD is based largerly on CEBS's advice of April 2008

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