Yes, we agree on the proposal to disqualify all dividend multiple instruments when the 105% limit is breached, for joint stock companies or non-joint stock companies.
We have no example on circumstances for which this limit does not work or is breached without the institution being able to prevent this breach.
Yes it is
We agree on the applicability of the conditions.
No, the chosen approach should not be applicable to all instruments issued by non-joint stock institutions.
Article 28(1) of CRR set out conditions to be met by capital instruments to be included in CET1. One of these conditions relates to the distribution of such instruments:
1.h) the instruments meet the following conditions as regards distributions:
i. there is no preferential distribution treatment regarding the order of distribution payments, including in relation to other Common Equity Tier 1 instruments, and the terms governing the instruments do not provide preferential rights to payment of distributions;
ii. distributions to holders of the instruments may be paid only out of distributable items;
iii. the conditions governing the instruments do not include a cap or other restriction on the maximum level of distributions, except in the case of the instruments referred to in Article 27;
3. The condition laid down in point (h)(iii) of paragraph 1 shall be deemed to be met notwithstanding the instrument paying a dividend multiple, provided that such a dividend multiple does not result in a distribution that causes a disproportionate drag on own funds.
The point 3 above refers to paragraph 1.h) iii) of the same article, which excludes instruments referred to in Article 27. It does not apply to instruments issued by mutuals, cooperative societies, savings institutions or similar institutions.
This point is further reinforced by the introduction of a new paragraph to Article 28, which deals specifically with differentiated distributions for these instruments.
“4. For the purposes of point (h) (i) of paragraph 1, differentiated distributions shall only reflect differentiated voting rights. In this respect, higher distributions shall only apply to Common Equity Tier 1 instruments with fewer or no voting rights.”
Conditions relating to multiple or disproportionate distributions no longer apply to instruments issued by mutuals, cooperative societies, savings institutions or similar institutions.
The application of differentiated distributions is limited to equity instruments with different or no rights votes (Article 28.4).