Regulatory Technical Standards (RTS) on Own Funds

Status: Adopted by the European Commission and under scrutiny by EU legislators

These Regulatory Technical Standards (RTS) gather a number of mandates given to the EBA by the Capital Requirements Regulation (CRR) in relation to own funds. These RTS include provisions regarding: technical aspects in relation to Common Equity Tier 1, Additional Tier 1, deductions from Common Equity Tier 1 and from own funds in general, as well as transitional provisions on grandfathering; the treatment of gains on sale associated with future margin income in a securitisation context; the conditions under which competent authorities may determine that a type of undertaking is recognised under applicable national law as a mutual, cooperative society, savings institution or similar institution; the criteria to define broad market indices, the calculation of minority interest and the deduction of indirect and synthetic holdings.

*The RTS on Own Funds (Part 4) were submitted to the European Commission on 27 March 2014.

EBA final draft technical standards on own funds

27 March 2014

The European Banking Authority (EBA) published its final draft Regulatory Technical Standards (RTS) and final draft Implementing Technical Standards (ITS) on own funds. These final draft RTS and ITS will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in Europe and namely at strengthening the quality of capital.

RTS and ITS on own funds

These draft final RTS and ITS cover different areas of own funds. In particular, the RTS on own funds part I specify the different elements of own funds, including: Common Equity Tier 1 (CET1) capital, Additional Tier 1 capital, Tier 2 capital, deductions from the different types of capital, and transitional provisions for own funds in terms of grandfathering. The RTS on Gain on Sale specify further the concept and the treatment of a gain on sale, defined as any increase (or part of an increase) in equity under the applicable accounting framework arising from future margin income in the context of a securitisation transaction. The RTS on own funds part II specify the conditions under which competent authorities may determine that a type of undertaking recognised under applicable national law qualifies as a mutual, cooperative society, savings institution or similar institution for the purpose of calculating own funds. The draft RTS on own funds part III set out criteria to deduct indirect and synthetic holdings, to define broad market indices and to calculate minority interest. The ITS on disclosure for own funds focus on disclosure requirements and aim at increasing transparency on regulatory capital held by European institutions. Finally, the RTS on own funds part IV settle harmonised criteria for instruments with multiple distributions that would create a disproportionate drag on capital, as well as clarifying the meaning of preferential distributions.

Legal basis and next steps

These final RTS and ITS have been developed in accordance with Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (colloquially known as Capital Requirements Regulation or CRR).

The final standards have been sent to the European Commission for their adoption as EU Regulations that will be directly applicable throughout the EU.

Press contacts:

Ms. Franca Rosa Congiu

Mr. Ian Palombi

E-mail: press@eba.europa.eu - Tel: +44 (0) 207 382 1772