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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

SA - Retail Classification - EUR1 million limit

In the definition of the retail exposures it states "...excluding exposures fully and completely secured on residential property collateral that have been assigned to the exposure class laid down in point (i) of Article 112..." of Regulation (EU) No. 575/2013 (CRR). Does this mean that exposures that are in default but fully secured on residential property (meeting all minimum requirements and limits) are not excluded?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_72
  • Topic: Credit risk
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Grandfathering

Article 486(3)(c) of Regulation (EU) No 575/2013 (CRR) states: “the amount of instruments referred to in Article 484(4) which on 31 December 2012 exceeded the limits specified in the national transposition measures for point (a) of Article 66(1) and Article 66(1a) of Directive 2006/48/EC;..” is to be deducted from the amount eligible for inclusion.” This same rule is also applied for Tier 1 grandfathering under CRR. This in effect preserves the current Tier 2 restrictions. Because that amount is at an aggregate level i.e. not by instrument, how then are the individual instruments to be treated under CRR? Each instrument may have different terms including maturity and so how should aggregated restricted amount be spread across instruments?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_60
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Old-style Tier 1 requalifying as CRR Tier 2 capital

When an old-style Tier 1 instrument with an incentive to call passes its step-up date and ceases to be recognised as grandfathered Tier 1 capital under Regulation (EU) No 575/2013 (CRR), can it qualify as Tier 2 capital going forward if it were to meet all the requirements of Article 63 of CRR? For many existing instruments, the quarterly calls following the first call date of the Tier 1 instrument would prevent the inclusion in Tier 2 capital under CRR. If an old-style Tier 1 instrument had the Issuer's Call entirely removed from the instrument's documentation by the Issuer or Trustee, could it theoretically requalify as Tier 2 if it met all the other provisions for Tier 2 capital (Article 63 etc) after the removal of the Call provision?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_46
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Grandfathering, cascading and phasing out limits

In the case of an issuer whose outstanding Tier 2 instruments as at December 2012 are fully CRR compliant (ie bullet Tier 2 bonds), should Article 486(4) apply? To put it simply: can an issuer still have some disqualfied parts of Tier 1 instruments (for limit reasons) cascaded into Tier 2 even if the issuer has no phased out Tier 2 amount as at December 2012 (and hence no phased out limits for Tier 2) ?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_44
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Recognised amount as regulatory capital for an Additional Tier 1 with a write-down mechanism

According to Regulation (EU) No 575/2013 (CRR) Article 54(3): “The amount of Additional Tier 1 instruments recognised in Additional Tier 1 items is limited to the minimum amount Common Equity Tier 1 items that would be generated if the principal amount of the Additional Tier 1 instruments were fully written down or converted into Common Equity Tier 1 instruments”. Given the fact that a write-down may be seen as a profit under local accounting GAAP, and hence taxable (NB: true should the issuer be supposed to pay taxes at this time. However, it is unlikely that the issuer records a profit at a time where a write-down is operated), one can think that the recognized amount as Additional Tier 1 at the issue date is the nominal amount less the foreseeable paid tax amount in case of write-down. What's the final view of EBA? Can the entire nominal issue amount be recognized as Additional Tier 1 at the issue date or only a reduced amount (i.e. the nominal amount - the foreseeable paid tax amount in case of write-down)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_29
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Grandfathering limit

Once applicable percentages in the range are specified by the local regulator, would it be applied: (1) at the beginning of the period; (2) at the end of the period or (3) on a straight-line basis throughout the 12 months period?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_30
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Anerkennung der Kapitalrücklage "zugehörig zu" deutschen Vorzugsaktien als Kernkapital - Recognition as Tier 1 equity of share premiums related to German preference shares

Sind deutsche Vorzugsaktien nach der Aktienrechtsnovelle kernkapitalfähig, so dass auch das Agio, das mit dem Instrument "verbunden" ist, im Kernkapital anerkannt werden kann?Translation to EN: Do German preference shares qualify as Tier 1 capital under the amended Companies Act, which would mean that share premium accounts ‘linked to’ the instrument may be recognised as part of Tier 1 capital?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_24
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 29/11/2013

Prudential Consolidation of Financial Institutions

'Financial Institution' means an undertaking other than an institution, the principle activity of which is to acquire holdings or to pursue one or more of the activities listed in points 2 to 12 and point 15 of Annex 1 to Directive 2013/36/EU, including a financial holding company, a mixed financial holding company, a payment institution within the meaning of Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market (1), and an asset management company, but excluding insurance holding companies and mixed-activity insurance holding companies as defined in point (g) of Article 212(1) of Directive 2009/138/E. The definition in Article 4(1)(26) Regulation 575/2013 is in line with the definition of financial institution under Article 4(5) of Directive 2006/48/EC in that it encompasses firms whose principle activity is to acquire holdings or to perform the activities under Annex 1 of Directive 2013/36/EU. The EU had issued guidance on its Your Question on Legislation ('YQOL') site that indicated that, for Article 4(5) of 2006/48/EC it was correct to consider holding companies as financial institutions. We understand that t his has been interpreted differently by different regulators in the EU, in particular, where a bank owns shares in a holding company that owns a non-financial group (i.e. a group that does not undertake an Annex 1 activity), certain regulators have taken the view that the holding company as a legal entity should be consolidated for regulatory capital purposes whilst the non-financial subsidiaries are deconsolidated. However, other regulators have considered the nature of the activities of the group (holding company plus non-financial subsidiaries) and determined that the holding company need not be consolidated. Could the EBA please clarify which interpretation is correct?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_310
  • Topic: Other issues
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Treatment of commodity indices

Must exposures to commodity indices be broken down into its underlying constituent commodities or can a commodity index be treated as if it were an individual commodity, just like stock indices (see Article 344 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_163
  • Topic: Market risk
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Scope of application of Articles 341 to 344 of Regulation (EU) No. 575/2013 (CRR)

Article 341 starts with "The institution shall separately sum all its net long positions and all its net short positions in accordance with Article 327.". Does "all positions" also include positions in the banking book, or are Articles 341-344 only valid for positions in the trading book?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_157
  • Topic: Market risk
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Scope of application of Articles 339 and 340 of Regulation (EU) No 575/2013 (CRR)

Article 339 of Regulation (EU) No. 575/2013 starts with "In order to calculate own funds requirements against general risk all positions shall be weighted...". Does "all positions" also include positions in the banking book or are Articles 339 and 340 only valid for positions in the trading book?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_155
  • Topic: Market risk
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Scope of calculation of own funds requirements for CVA risk

Can you provide some details on what criteria and/or thresholds are likely to apply in order to determine that securities financing transactions are material in the context of article 382(2)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_130
  • Topic: Market risk
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Information to be declared under the concept of "discretionary pension benefits" in the annex of EBA/GL/2012/5 and in annex 2 of EBA/GL/2012/4

(1) What is the information to be declared by institutions under the concept of “total discretionary pension benefits” established in the annex 1  of EBA/GL/2014/07? A. Contributions made, during the year, by the credit institution to the company’s pension scheme, on behalf of the employee as part of their variable remuneration, or B. Amounts to be paid, or already satisfied, by the credit institution to the employees who have left the institution or got retired during the year. (2) What is the information to be declared by institutions under the concept of “total discretionary pension benefits” established in the annex 2 of EBA/GL/2014/08? A. Contributions made, during the year, by the credit institution to the company’s pension scheme, on behalf of the employee as part of their variable remuneration, or B. Amounts to be paid, or already satisfied, by the credit institution to the employees who have left the institution or retired during the year.  

  • Legal act: Directive 2013/36/EU (CRD)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_103
  • Topic: Remuneration
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Exclusion of provisioned counterparties from the CVA capital charge

Could you confirm that a defaulted or doubtful counterparty that is subject to specific provisions/cost of risk shall not be subject to the CVA capital charge?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_99
  • Topic: Market risk
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Grandfathering on own funds instruments

What will be the treatment of the "phased-out" amounts which exceed the applicable percentages according to Article 486 (5)) of grandfathered Additional Tier 1 instruments which are non-eligible due to an incentive to redeem (accord. to Art 489) or a coupon pusher (accord. to Art 53 (a)), during the grandfathering period (accord. to Art. 486 (5)). Will the phased-out amounts flow into grandfathered Tier 2 amounts (subject to applicable limits) or will they lose their regulatory recognition completely (i.e. are these amounts entirely eliminated from regulatory own funds)?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_56
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Grandfathering of Non-Step Tier 1 instruments

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?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_52
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Treatment of non-step Tier 1 hybrids post grandfathering

This query concerns “non-innovative” (i.e. non step) hybrid Tier 1 instruments that fully qualified as original own funds which are now callable every quarter, which do not meet the requirements of Article 52 but are eligible for grandfathering under Article 484 of Regulation (EU) No. 575/2013 (CRR). Once they cease to be eligible (in part or in full) as AT1 due to the grandfathering limits, is the de-recognised amount eligible as Tier 2?"

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_40
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Grandfathering of capital instruments

This question concerns two types of non-innovative Hybrid Tier 1 instruments (both issued before 31 December 2011): -- Type A: securities with first call date occurred in year 5, and before 31 December 2012; -- Type B: securities with first call date occurred in year 5, and after 31 December 2012. Questions: 1. For both A and B, is it correct to follow Article 484(4) & Article 486(3) for grandfathering guidelines? 2. For both A and B, is it correct to assume that the amount in excess of the applicable Tier 1 grandfathering percentage limit will be treated as grandfathered Tier 2 capital, i.e. being subject to the Tier 2 cap, as per Article 487(2)? 3. Alternatively, for both A and B, can the amount in excess of the applicable Tier 1 grandfathering percentage limit be treated as Tier 2 in full from 1 January 2014? Since they are meeting all the criteria for Tier 2 capital under Regulation (EU) No. 575/2013, as per Article 63 post the call date?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_28
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 15/11/2013

Grandfathering of Tier 1 instruments

In your response to the following question "What will be the treatment of an Additional Tier 1 (AT1) instrument structured with a first call date and one step up after 5 years prior to 1 January 2013, callable quarterly thereafter at every interest payment date without any step up (subject to supervisory approval)? Is the instrument eligible for grandfathering if not called at the first call date? If the instrument is derecognized as AT1 on 1 January 2013, can it be included into Tier 2 and, if so, what amount will be eligible (full amount or gradually phased out amount)?”, you mention that: "because in particular of the quarterly call, the instrument would not meet the eligibility criteria for inclusion in fully eligible Tier 2 capital. It would also not meet the eligibility criteria for inclusion in grandfathered Tier 2 capital as foreseen under Article 484 (5) of Regulation (EU) No 575/2013." Does that mean that an existing non-innovative (i.e. non-step) Tier 1 instrument with quarterly calls will also not be grandfathered in Tier 2 capital because of the quarterly calls?

  • Legal act: Regulation (EU) No 575/2013 (CRR)
  • COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
  • ID: 2013_31
  • Topic: Own funds
  • Date of submission:
  • Published as final Q&A: 15/11/2013