EBA publishes an Opinion on own funds in the context of the CRD CRR review proposal

The European Banking Authority (EBA) published today an Opinion addressed to the EU institutions expressing its views on a number of aspects related to own funds in the context of the European Commission's proposal to amend the Capital Requirements Regulation (CRR) and Capital Requirements Directive (CRD). In the Opinion, the EBA calls, in particular, for a possible strengthening of the Authority's role in assessing issuances of CET1 instruments. In addition, the Opinion elaborates on restrictions on distributions in the context of capital conservation measures and suggests introducing a general anti-circumvention principle. The views expressed in this Opinion are not meant to be exhaustive and focus on the areas deemed to be the most significant ones. 

 

The EBA has been monitoring CET1 instruments on a regular basis since the entry into force of the CRR. The EBA's monitoring of the quality of these instruments has been beneficial in the implementation of the CRR and the provisions laid down in the related Regulatory Technical Standards (RTS) on own funds and has resulted in enhancing the quality of EU banks' capital. The outcome of this monitoring is published today in a CET1 report accompanying the regular publication of a CET1 list of types of instruments for banks in the EU.   

 

However, in the context of the current CRR, the final responsibility of evaluating whether issuances of CET1 instruments meet the eligibility criteria lies with competent authorities. In this context, the EBA is of the opinion that a reinforcement of its role when it comes to the evaluation of the compliance of CET1 instruments should be considered to ensure the enforceability of the CRR and RTS provisions for CET1 instruments for all institutions in the EU. 

 

In addition, the Opinion elaborates on restrictions on distributions with regard to the Maximum Distributable Amount (MDA) and its definition, as well as on reduction, redemption and repurchase of capital instruments, the introduction of an anti-circumvention principle and of a point of non-viability criterion.

The EBA has drafted this Opinion in accordance with Article 34(1) of the Regulation establishing the EBA, which mandates the Authority to provide opinions to the European Parliament, the Council and the Commission on all issues related to its area of competence.