EU Report and Standardized Templates for Additional Tier 1 Instruments


Shearman & Sterling LLP

The European Banking Authority published an updated Report on the monitoring of Additional Tier 1 instruments and standardized templates for AT1 instruments. This follows a consultation in July 2016. The Capital Requirements Regulation sets out the eligibility criteria for AT1 instruments, which are further detailed in Regulatory Technical Standards. The CRR requires the EBA to review the quality of own funds instruments issued by banks across the EU. The Report sets out the results of its monitoring the issuances of AT1 capital instruments, assessing the terms and conditions of selected issuances against the criteria provided for in CRR and the related RTS. The Report is based on the review of 33 AT1 issuances from EU banks, which took place between August 2013 and December 2015, for a total amount of EUR 35.5 billion. The Report sets out detailed analysis of some of the clauses reviewed, including the EBA's views on those clauses, and interpretation of some of the CRR provisions, in particular the provisions relating to triggers.  

The standardized template for AT1 instruments sets out the EBA's proposed terms and conditions for inclusion in AT1 issuances and includes both essential terms, as well as optional terms, relating to flexibility of payments, permanence and loss absorbency. The EBA confirms that use of the template terms and conditions is not legally binding and an issuance would not be considered non-compliant because they were not used. The EBA intends to update the template over time to reflect regulatory developments and market practice.

View the updated report.

View the AT1 standard template

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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