On May 4, 2015, the European Banking Authority published a report on the monitoring of Additional Tier 1 capital instruments issued by EU institutions. Under the EU Capital Requirements Regulation, the EBA must monitor the quality of own funds instruments issued by EU institutions. The report presents the EBA’s recent monitoring results and updates the EBA’s earlier report on the topic, published in October 2014. The EBA has examined fifteen AT1 issuances made between August 2013 and November 2014, five of which were made under a conversion mechanism and ten under a temporary write-down mechanism. The report states that certain provisions or wording of existing AT1 instruments should be avoided or revised so that uncertainty and complexity is minimized. Wording used should be consistent with that in the CRR, for example, “non-objection” cannot be used as a substitute for “supervisory permission,” a term used in the CRR. The EBA intends to continue monitoring certain AT1 issuances, expects that future issuances will use some level of standardization, and advises that terms and conditions should not be unjustifiably complex. The EBA will also develop standardized terms and conditions for AT1 issuances. These would be non-compulsory for institutions, but would help to ensure compliance with regulatory provisions. The EBA report is not fully comprehensive and a final report will be published at the end of May 2015.
The report is available at: http://www.eba.europa.eu/-/eba-updates-its-monitoring-of-additional-tier-1-capital-instruments.