A Tier 1 instrument, with no incentive to redeem, was issued prior to 31 December 2011, and, at the time of issue, was not callable for 5 years. It reaches its first call date in May 2014, and is callable quarterly thereafter. It is not called at its first call date. It does not meet all of the requirements as T1 capital under Article 52. Subject to grandfathering limits, does the instrument continue to count as Tier 1 capital? If it does not count toward Tier 1, would it count as Tier 2?
The basis for the question stems from the answer to question 2013_15. If the same instrument, outlined in the hypothetical case noted above, had a singular incentive to redeem in May 2014, but was not called, it would be precluded from counting toward Tier 1 or T2 capital because of the quarterly call features after the step date. Why would the non-step instrument be treated any differently given that it too would not meet the 5 year non-call requirement under Article 52?
Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.