14 February 2023
The European Banking Authority (EBA) has updated some of its existing Q&As on own funds and eligible liabilities to ensure consistency with the revised final draft Regulatory Technical Standards (RTS) on own funds and eligible liabilities submitted to the European Commission in May 2021. While the latter have not been finally adopted yet, the EBA deemed it important to already provide clarity to institutions and market participants on some undisputed aspects related to the RTS that are particularly relevant for their practical implementation of the Capital Requirements Regulation (CRR) and the RTS.
In particular, the EBA updated Q&A 2017_3277 on the notion of ‘sufficient certainty’ which relates to when an institution has to deduct from its own funds the amounts for which it has received a prior permission from the competent authority. The EBA has amended the Q&A as follows: when exercising a call option contained in the terms and conditions of an instrument, sufficient certainty is deemed to exist only at the time of the announcement of the call to the holders of the instrument, and the corresponding deduction will take place only at that point in time. The revised approach has benefitted from exchanges with market participants and is deemed to bring more clarity and convergence in existing practices. In addition, the revised Q&A extends the scope of the treatment to eligible liabilities instruments.
The EBA updates other existing Q&As with the aim of extending to eligible liabilities the treatment initially applied to own funds instruments. This is consistent with the approach announced when publishing the final draft RTS on own funds and eligible liabilities and recalling the importance of the prior permission regime for eligible liabilities, which pursues the same imperatives as the permission regime for own funds.
Article 1(5), second subparagraph, of Regulation (EU) No 1093/2010 (EBA Regulation), requests the EBA to ensure consistent, efficient, and effective application of acts referred to in Article 1(2) of that Regulation, which include the CRR. Regulation (EU) 2019/876 (CRR 2), amongst others, amended and introduced, respectively, Articles 77-78 and Article 78a of CRR on prior permission regime for reducing own funds and eligible liabilities. Consequently, the EBA amended its draft RTS to reflect the amendments to the Commission Delegated Regulation (EU) No 241/2014. Moreover, the EBA amended several replies to existing Q&As in accordance to these amendments. The existing Q&As have not been removed, but just updated. Changes to the existing Q&As have been made in track changes.
Franca Rosa Congiu