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When the Capital Requirements Regulation (CRR) entered into force, grandfathering provisions were introduced. In order to ensure that institutions had sufficient time to meet the requirements set out by the new definition of own funds, certain capital instruments that, at that time, did not comply with the new definition of own funds were grandfathered for a transition period with the objective of phasing them out from own funds.
The beneficial treatment provided by the grandfathering provisions will come to an end on 31 December 2021. In line with its mandate to monitor the quality of own funds and eligible liabilities instruments issued by institutions across the Union, the EBA intends to provide clarity on the appropriate end-treatment to ensure a high quality of capital for EU institutions and a consistent application of rules and practices.
While reflecting on this issue, the EBA will also clarify the interaction with the new grandfathering provisions introduced by the recent Banking Package and the corresponding amendments to the CRR and the Bank Recovery and Resolution Directive (BRRD), where relevant for own funds instruments and eligible liabilities.
In developing its work, the EBA will ensure an appropriate interaction with all concerned stakeholders. In the meantime, institutions are encouraged to engage with their respective competent authorities with regard to the magnitude and intended future treatment of their outstanding ‘legacy' instruments in the context of the supervisory dialogue on their capital planning.