Question ID
2013_61
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Own funds
Article
490
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
N/A
Type of submitter
Credit institution
Subject matter
Grandfathering of own funds instruments
Question

Based on the answer to question 2013_16, if a step-up Tier 2 bond’s terms were changed so that all call options were removed – before the entry in force of the Regulation (EU) No 575/2013 (CRR) – could it be considered as fully eligible in Tier 2 capital assuming that the capital instrument meets the other conditions laid down in Article 63 of the Regulation?

Background on the question

See question.

Submission date
Final publishing date
Final answer

Q&A 16 states that where there is a material change in the terms and conditions of a pre-existing instrument, the instrument shall be considered in the same way as the issuance of a new instrument. Further, if all call options are removed then the instrument will no longer include a call with an incentive to redeem, and therefore Article 490 of Regulation (EU) No 575/2013 (CRR) does not apply. Therefore, provided that the instrument meets the requirements laid down in Article 63 of the CRR, it shall be considered fully eligible Tier 2 capital.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.
Note to Q&A

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.

Disclaimer

The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.