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Q&As refer 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.

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List of Q&A's

Eligibility of capital instruments for classification as Common Equity Tier 1 instruments when the instruments are supplemented by a contractual obligation of the majority-shareholder to pay a fixed yearly compensation to the minority shareholders

Para 1 point (i) of Article 28 of Regulation (EU) No 575/2013 (CRR) states that "compared to all the capital instruments issued by the institution, the instruments absorb the first and proportionately greatest share of losses as they occur, and each instrument absorbs losses to the same degree as all other Common Equity Tier 1 instruments". The question is, whether a contractual obligation of the majority shareholder of a credit institution to pay a fixed yearly compensation to the minority shareholders even in loss years (by reason that the majority shareholder and the credit institution have entered into a profit and loss transfer agreement) is permissible according to para 1 point (i) of Article 28 CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_541
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 16/05/2014

Grandfathering of Tier 1 instruments w.r.t. Dividend Stoppers and Pushers

When considering the eligibility into Tier 2 for grandfathered Tier 1 instruments - lets use an example where a T1 bond (step or non-step) has a recurring call date only once every 5 years (therefore, from an original maturity perspective it should be eligible for Tier 2 capital as a 5 year bond) Does your comment re. dividend pusher/stopper language restrict the ability of such a bond (assuming it has a dividend pusher/stopper) exclude it from Tier 2 eligibility? If Yes, why are these being treated differently from regular Tier 2 instruments (which do not have dividend pushers/stoppers) that have must pay coupons i.e. an obligation to pay a coupon, which if not paid constitutes a default and thus has stronger implications than on stopping coupons on a T1 bond as mentioned above

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_537
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Grandfathered Instruments and Deduction Threshold Exemptions

When calculating the amount of Common Equity Tier 1 (CET 1) that is multiplied by 10%/17.65% for the purposes of threshold exemptions for deductions, should grandfathered instruments be included in the amount of CET1 to the extent that they qualify as CET 1 during the grandfathering period?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_527
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 30/04/2014

Capital requirements for a subgroup integrated by a parent holding company in a Member State and its institutions and subsidiary financial institutions

What are the capital requirements for the subgroup and/or any of the undertakings included in it if the Member State: i) imposes capital requirements for the holding company by virtue of a national law? ii) does not impose any additional requirements to those in the CRR? As it is explained in the “background on the question”, we understand that for the second question (ii), the following topics must be clarified: a) What is the scope of the sub-consolidation, i.e. which companies need to be included in the respective sub-consolidation group? b) Are the capital requirements to be applied at the “subsidiary institution” level or at the “parent holding in the member state” level?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_521
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 09/01/2015

Exemption from deduction of Equity Holdings in an insurance company from CET1

Pursuant to Article 471(1)(d) of Regulation (EU) No 575/2013 (CRR), in order not to deduct the equity investment in an insurance company, should “the amount of the equity holding which is “not deducted” not exceed (i) the “amount of shares” (13% share of the insurance company’s capital) or (ii) the “book value” (EUR 2 billion), held in the Common Equity Tier 1 instruments in the Insurance company as of December 31, 2012?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_502
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 04/07/2014

Minority interests

Article 81(1) of Regulation (EU) No 575/2013 (CRR) defines minority interests which are part of CET-1 instruments where the sum of share premium accounts related to those instruments, retained earnings and other reserves are noted. On the other hand the other comprehensive income defined in Article 26(1)(d) of CRR is not noted in Article 81(1). Further, Article 84(1)(a) refers to the CET-1 capital of the respective subsidiary which means for us the other comprehensive income is part of the calculation. How does other comprehensive income have to be treated in case of calculation of the minority interests?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_487
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 07/11/2014

Non material losses

The definition of what is a non-material loss is not defined within Article 472 of Regulation (EU) No 575/2013 (CRR); is it possible to clarify what ‘material’ / 'non-material' is? Can you advise how- if applicable- such non-material losses are treated?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_448
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Eligibility of CET 1 in case of an agreement for transfer of profit and coverage of losses

As a requirement for Common Equity Tier 1 (CET1) instruments with regard to distributions, the conditions governing the instruments may not include any obligation for the institution to make distributions to their holders and the institution is not otherwise subject to such an obligation (Article 28 (1)( h) (v) of Regulation (EU) No 575/2013 (CRR)). Is a contract with the 100% mother company of an institution according to which distributable profits of the subsidiary need to be fully distributed to the mother company at the end of each year and losses of the subsidiary are to be compensated in full by the mother company to be regarded as an obligation hindering eligibility of the instrument as CET1?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_408
  • Topic: Own funds
  • Date of submission:

Application of Article 52 of Regulation (EU) No 575/2013 (CRR) at consolidated level

What is the treatment at consolidated level of AT1 instruments issued by a third country subsidiary where the 5.125% CET1 conversion/write down trigger that refers only to the subsidiary CET1 ratio? To the effect of this calculation, which definition should be used, the one in the home country law or the one of the host country law?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_385
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 24/10/2014

Inclusion of interim profits / Deduction of losses in own funds

1. How should the interim profits be calculated for the purposes of inclusion in own funds? E.g. if the bank has monthly P/L as follows: Jan -10, Feb -20, March +100 (Year-to-date +70). The results are not verified by external audit. Should the bank take deduct the losses from Jan and Feb, but ignore the March gain as it is unaudited (capital impact compared to IFRS equity -100) or can the losses be netted with the gains and the YTD gain (unaudited) be filtered out (capital impact -70)? 2. What constitutes 'adequate level of assurance' in context of verification by external auditors? Is a full audit required or is an interim review sufficient?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_384
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 20/02/2015

Inclusion of insurance undertakings in prudential consolidation

Should an insurance undertaking be included in prudential consolidation according to Art. 18 of CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_383
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 02/10/2015

Inclusion of ancillary services undertakings in prudential consolidation

Should the ancillary services undertakings be included in prudential consolidation according to Article 18 and 19 of Regulation (EU) No 575/2013 (CRR)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_382
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 04/04/2014

Valuation of qualifying holdings outside the financial sector for the purposes of Article 89 of Regulation (EU) No. 575/2013

What is the correct valuation to determine the 15% threshold of the eligible capital under Article 89(1) of Regulation (EU) No, 575/2013? Are the provisions of Article 4(77) also relevant for this purpose or should it be generally the amortized cost?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_367
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 24/01/2014

Calculation of outstanding Tier 2 capital, following pre-payment of amounts that have been amortised or phased-out

This question, background information and proposed answer are posed on behalf of an institution we supervise. In accordance with Regulation (EU) No 575/2013 (CRR), subordinated debt with defined maturity is gradually deducted from Tier 2 in each of the last five years. Amortization shall occur on the basis of the number of days that have passed in the last five years (Article 64). The institution considers the possibility to repay subordinated debt in the portion corresponding to the amortized amount, assuming that this will have no impact on the basis for the calculation on the amount classified as Tier 2. Is this interpretation correct?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_314
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 20/06/2014

Repurchase and cancellation of Tier 2 in the open market less than 5 years from issue

Can you please confirm if Article 78(4) is meant to apply only to the redemption of T2 securities within 5 years of issuance (as specified in the terms and conditions of the instrument), or if it also prohibits the use of liability management exercises to repurchase (and cancellation) T2 notes at market levels within 5 years of the issuance.

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_290
  • Topic: Own funds
  • Date of submission:

Holdings of own funds instruments issued by financial sector entities included in the scope of consolidated supervision not deducted from own funds on an individual basis

According to Article 49(2) of Regulation (EU) No. 575/2013 (CRR) “for the purposes of calculating own funds on an individual basis and a sub-consolidated basis, institutions subject to supervision on a consolidated basis in accordance with Chapter 2 of Title II of Part One shall not deduct holdings of own funds instruments issued by financial sector entities included in the scope of consolidated supervision, unless the competent authorities determine those deductions to be required for specific purposes, in particular structural separation of banking activities and resolution planning. Such provisions mean, if understood correctly, that starting from 1 January 2014, all significant investments in financial entities of a bank subgroup will not be deducted from own funds on an individual basis, but according to Article 49(4) of the CRR will be risk weighted according to Article 133 (for standardised approach). With the above in mind, what risk weight should be applied for such exposures? According to Article 133(2) of the CRR “equity exposures shall be assigned a risk weight of 100 %, unless they are required to be deducted in accordance with Part Two, assigned a 250 % risk weight in accordance with Article 48(4), assigned a 1250 % risk weight in accordance with Article 89(3) or treated as high risk items in accordance with Article 128.” In Article 133(2) of the CRR there is no reference to equity exposures treated under Article 49(2). Does this mean that such exposures should be treated simply with 100% risk weight?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_268
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 31/01/2014

Consistency regarding the specification of the transition period according to Articles 469(1), 470(2) and 478(2) CRR

How can the applicable percentages of Article 478(2) CRR be applied for the purposes of Article 469(1)(c) CRR until 31.12.2023 provided that the provisions of Article 469(1)(c) and Article 470(2) CRR are applicable only until 31.12.2017?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_261
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Applying the two different applicable percentages of Articles 478(1) and 478(2) CRR to the amount exceeding the thresholds of Article 470(2) CRR

How should the two different applicable percentages of Articles 478(1) and 478(2) CRR be applied to the total amount required to be deducted according to Article 36(1)(c) and (i) CRR after applying Article. 470 CRR?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_260
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022

Applicable provisions for determining deferred tax assets that rely on future profitability that existed before 1.1.2014

Are the provisions of Article 26(2) CRR regarding independently verified financial statements and permission of competent authorities applicable for determining deferred tax asset that rely on future profitability that existed before 1.1.2014?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_259
  • Topic: Own funds
  • Date of submission:
  • Published as Rejected Q&A: 11/02/2022