On February 17, 2015, the European Banking Authority published its opinion on the appropriateness of the definition of “eligible capital” under the Capital Requirements Regulation. The term “eligible capital” has been used since January 2014, replacing the earlier “own funds” term for defining large exposures and setting large exposure limits.

Under the “eligible funds” definition, the amount of Tier 2 capital recognized as eligible capital must not exceed   one third of Tier 1 capital. Under the “own funds” definition, there was no limit for Tier 2 capital. The EBA opinion states that it has not found any evidence to show that the new stricter regime would impact firms detrimentally and recommends that a review of the EU large exposures regime is carried out so that it can be further aligned with the final standard of the Basel Committee on Banking Supervision that was published in April 2014.

The opinion is available at:

http://www.eba.europa.eu/documents/10180/983359/EBA+Op+2015+01+%28Opinion+on+the+review+of+the+definition+of+eligible+capital%29.pdf.