The European Banking Authority (EBA) published today its third updated Report on the monitoring of Additional Tier 1 (AT1) instruments. The EBA's monitoring of capital instruments has been beneficial in the implementation of the Capital Requirements Regulation (CRR) and the provisions laid down in the related Regulatory Technical Standards (RTS) on own funds and has contributed to the enhancement of the quality of institutions' capital across the EU.
The updated AT1 monitoring Report is based on the review of 23 new AT1 issuances from EU institutions, which took place between May 2015 and December 2017, for a total amount of EUR 11.4 bn. Since the publication of the first report, the EBA has reviewed in total 56 issuances for a total amount of EUR 44.7 bn. Compared with the previous update, this Report assessed new provisions on calls, repurchases, redemptions, cancellation of distributions, tax events and gross-up provisions.
In the Report, the EBA noted that after more than three years of monitoring, the standardisation of the terms and conditions of AT1 issuances is still increasing, with some issuers using the provisions proposed in the EBA standard templates published in October 2016 for some definitions, and others using them to a greater extent. The EBA believes that this increased standardisation is partly due to the guidance regularly published by the EBA and regularly communicated by supervisors. As a result, a lower number of observations has been added compared to the previous versions. The EBA expects that forthcoming issuances will retain an even more increased level of standardisation.
Finally, it is to be noted that the first issuances of AT1 instruments made after the entry into force of the CRR would be callable, with the prior permission of the competent authorities, in 2018. The EBA will monitor AT1 calls and the rationale for calling/not calling instruments going forward.
Articles 51 to 55 of the CRR lay down eligibility criteria for AT1 instruments. These criteria are supplemented by the Commission Delegated Regulation (EU) No 241/2014 (Regulatory Technical Standards (RTS) on own funds).