05 June 2013

EBA publishes near-final draft RTS on own funds

The European Banking Authority (EBA) publishes today near-final draft Regulatory Technical Standards (RTS) on own funds covering, among others, areas such as Common Equity Tier 1 (CET1), additional Tier 1, deductions from CET1 and from own funds in general and transitional provisions on grandfathering, as a follow up to the EBA’s consultation on own funds (part 1) launched on April 4, 2012. Once formally adopted by the European Commission, these RTS will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in Europe and namely at strengthening the quality of capital

Main features of the RTS:

These draft RTS cover all areas of own funds, from features for instruments of the highest quality (CET1 instruments) to instruments of a lower quality (Tier 2 instruments). 

Various provisions of the RTS will contribute to increasing the permanence of capital instruments as well as the loss absorbency features of hybrid instruments. In particular, these RTS elaborate on provisions relating to additional Tier 1 instruments and, more specifically, on write-up and write-down mechanisms.

Status of these draft RTS:

Although these draft RTS reflect the current proposal of the EBA in the aforementioned areas, they remain of a preliminary nature pending the publication of the final Capital Requirements Regulation (CRR) in the Official Journal of the European Union. The publication of these draft RTS at this juncture, before their submission to the European Commission, is done on an exceptional basis to provide institutions with an early insight into the views of the EBA relating to capital instruments under the new regulatory framework and to give feedback on the way comments received during the consultation period have been addressed. 

The draft technical standards, therefore, are subject to final formal approval by the EBA Board of Supervisors, to a review by the European Commission, and to a period of potential objection by the Council and the European Parliament, before they become European law. 

Against this background, institutions that decide to issue capital instruments pursuant to these near-final draft technical standards, in the run-up to the adoption and entry into force of the final RTS, should be aware that the final rules may differ from the preliminary draft published today. 

Today’s publication of these near-final draft RTS does not constitute a precedent for the publication of other draft technical standards, which will normally take place upon their submission to the European Commission.

Press release

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