CEBS published a summary of the open hearing on the further convergence on own funds in Europe. The objective of the event was to hear about the range of concerns the current definition of own funds in the EU, and especially Tier 1 hybrid capital instruments, causes for market participants and their views on what a more consistent definition would look like.
Industry encouraged CEBS to define clearly the economic characteristics of Tier 1 eligible hybrid instruments. Some market participants questioned how realistic CEBS's convergence proposals can be in practice, referring to the overall discussion on Level 3 tools which are not legally binding.
Market participants proposed that CEBS consider making some sort of trade off between the eligibility criteria and the limits to the inclusion of hybrids as eligible Tier 1 capital.
If CEBS offers a clear understanding of sufficiently robust criteria, and is sure that the hybrids can meet them, then there is room for having limits which are less stringent.
If however CEBS cannot reach a clear understanding of these criteria, or if there is uncertainty whether hybrids are really loss-absorbent, the need to impose a stringent limit would be greater.
Press release
© Graham Bishop
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