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The draft RTS prescribe that the institutions' long-term interests be reflected in the classes of instruments used for variable remuneration -including additional Tier 1, Tier 2 and other instruments.
In particular, 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.
To ensure a write down or conversion at going concern conditions, the draft RTS introduce for all instruments a uniform trigger event of 7 per cent of the Common Equity Tier 1 capital and defines the respective mechanisms. Instruments must have a sufficient maturity to cater for deferral and retention arrangements and must be issued at market conditions. The draft RTS require that a significant portion of at least 60 per cent be issued publicly or privately to other investors. If instruments are used for the sole purpose of variable remuneration a cap is set on the distributions paid out.
These draft RTS have been sent to the European Commission for their adoption and will enter into force after their publication in the Official Journal of the European Union.
RTS on instruments for variable remuneration