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The EBA has reviewed fifteen AT1 issuances, which took place between August 2013 and November 2014. This report notably illustrates the EBA's views on clauses that it recommends be avoided in the terms and conditions of AT1 instruments.
In particular, this report clarifies the EBA's position on acceptable triggers for regulatory calls and on the conditions for the inclusion of tax gross-up provisions in the terms and conditions of AT1 instruments.
In addition, the report further details the triggers for loss absorption, in particular as concerns the Common Equity Tier 1 (CET1) (on a consolidated, sub-consolidated or individual level) that should be the basis for setting the triggers for AT1 instruments issued within a banking group.
Finally, the report elaborates on the rationale for disallowing contingent clauses where payments become mandatory if they lose the status of AT1 instruments.
The EBA will exchange views with institutions and market participants on this report and will hold a public hearing on the 18th May. The EBA expects to publish the final report by the end of May 2015.