The European Banking Authority (EBA) has published its final draft Regulatory Technical Standards (RTS) on classes of instruments that can be used for the purposes of variable remuneration. These RTS are part of the Single Rule Book aimed at enhancing regulatory harmonisation in the banking sector in the European Union. The aim of these draft RTS is to ensure that instruments for variable remuneration reflect the credit quality of an institution and incentivise prudent risk taking, hence making them appropriate for this purpose. These draft RTS specify the classes of instruments that can be used for variable remuneration and introduce specific requirements for additional tier 1, tier 2 and other instruments. They define the write-down, write-up and conversion mechanisms for tier 2 and other instruments.
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