Question ID
2013_174
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Own funds
Article
63
Paragraph
1
Subparagraph
(g)
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
Article 63
Name of institution / submitter
KPMG
Country of incorporation / residence
Austria
Type of submitter
Accounting firm
Subject matter
Eligibility of Tier 2 after contractual change if already in amortisation phase
Question

This is a follow up question to 2013_16, where it is stated that "A material change in the terms and conditions of a pre-existing instrument shall be considered in the same way as the issuance of a new instrument, meaning that the changes shall aim at ensuring a full eligibility...". Does this principle apply only to changes that would lead to inclusion in grandfathering or also to instruments which after a contractual change (removal of call rights) would be fully eligible but already are within the last 5 years of their maturity and therefore recognized according to amortization rules?

Background on the question

An institution aims at changing the Terms & Conditions of Tier 2 instruments that have a residual maturity of less than 5 years.

Submission date
Final publishing date
Final answer

The answer to Q&A 16 introduces the general principle that a material change in the terms and conditions of a pre-existing instrument shall be considered in the same way as an issuance of a new instrument.

In particular, the removal of a call option is a material change in the terms and conditions governing the contract. Consequently, the eligibility of the 'new' instrument shall be assessed as if it had been issued from the date of the material change in accordance with Article 63 of Regulation (EU) No. 575/2013 (CRR).

Any changes to the terms and conditions after 31 December 2011 which do not lead to the full eligibility of the instruments as own funds under the CRR will lead to the immediate disqualification of the instrument from own funds.

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

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