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27 November 2013

EBA consults on draft RTS on own funds (part IV - multiple dividends and preferential distributions)


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These RTS are aimed at setting harmonised criteria for instruments with multiple distributions that would create a disproportionate drag on capital, as well as clarifying the meaning of preferential distributions. Comments are requested by 24 January, 2014.


Instruments with multiple distributions

Capital instruments may include provisions that give rise to distributions that are a multiple of the distributions paid on voting Common Equity Tier 1 (CET1) instruments (multiple distributions) or that are different from those paid on voting CET1 instruments (differentiated distributions). However, only a subset of those instruments would be considered not to create a disproportionate drag on capital, and could therefore be included in CET1.

The draft RTS aim at proposing harmonised criteria which are to be met by those instruments that are to be included in CET1, so as to ensure that the future loss absorbency of CET1 instruments is in no way compromised by disproportionate distributions that would create a drag on capital. In this respect, quantitative limits are proposed. These limits are expressed:

  • in terms of the amount of distribution on one non-voting instrument with a multiple dividend compared with the amount of distribution on one voting instrument and
  • in terms of the total amount of distribution paid on CET1 instruments.

Instruments with preferential distributions

Preferential distributions exist when holders of CET1 instruments have an advantage compared with other holders of CET1 instruments of the same institution, particularly regarding the timing and order of distribution payments. In addition, also those instruments where the distributions exceed the limits set with respect to multiple distributions are considered as preferential. In clarifying the definition of preferential distributions, these RTS aim at ensuring equal treatment among CET1 holders.

Comments can be sent to the EBA by 24 January, 2014. A public hearing for the three consultations will take place at the EBA premises on 16 December 2014 from 14:00 to 17:00 UK time. The EBA is expected to submit these draft RTS to the European Commission by 1 April, 2014.

Press release

Full consultation paper

Draft-RTS-on own funds



© EBA


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