Page 47 - EBA 2015.1815 Annual report 2014 web 2

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Progress in the area of own funds
Regarding the area of regulatory own funds,
2014 was a transition year with a gradual shift
from the drafting of RTS to monitoring ac-
tivities and implementation issues. The EBA
completed all its CRR mandates for RTS’ on
own funds with the publication of the fourth
and final part of those RTS in March. Since the
finalisation of this work and the adoption as
EU delegated Regulation (Commission Dele-
gated Regulation (EU) No 241/2014) of most of
the delivered standards on own funds, the EBA
has been putting more emphasis on the review
of the implementation of the eligibility criteria
applicable to capital instruments on the basis
of the CRR and the technical standards.
Completion of RTS
In March 2014, the EBA published its final draft
RTS on own funds — Part IV. This was the last
package of technical standards on own funds,
previous parts had been delivered in 2013.
Part IV of the RTS aimed to set harmonised
criteria for instruments with multiple distri-
butions that would create a disproportion-
ate drag on capital, as well as clarifying the
meaning of preferential distributions.
In this particular area of own funds, the EBA’s
mandate is twofold: one is related to multiple
distributions and the other one to preferen-
tial distributions, which have been considered
separately for joint-stock companies and non-
joint stock companies. In particular, the provi-
sions of these final draft RTS detail whether
and when multiple distributions would create
a disproportionate drag on capital and clari-
fy the meaning of preferential distributions
— namely preferential rights to payments of
distributions and order of payments of dis-
tribution. Furthermore, these RTS deal with
the consequences of not meeting the criteria
provided for in the regulation in terms of (dis)
qualification of instruments as CET1 capital.
Monitoring the quality of capital
The EBA started monitoring the quality of
own funds instruments issued by institutions
across the EU and pursuant to Article 80 of
the CRR, the ‘EBA shall monitor the quality of
own funds instruments issued by institutions
across the Union’.
On May 2014, the EBA published a list of capi-
tal instruments across the EU that national
supervisory authorities have classified as
CET1. This list, which was compiled in accord-
ance with Article 26 of the CRR is based on
the information received from the 28 national
competent authorities across the EU and in-
cludes all the CET1 instruments issued by in-
stitutions and evaluated as compliant by the
national supervisory authorities. This list gives
an exhaustive overview of the CET1 capital in-
struments available in EU Member States, on
the basis of the information received as of 28
June 2013.
The EBA aims at updating this list on a con-
tinuous basis in order to monitor the quality of
new instruments issued by institutions across
and to assess their compliance with the eli-
gibility criteria laid down in the CRR. In the
first update to the list, which was published in
December 2014, three CET1 new instruments
have been added after having been assessed
and evaluated as compliant with the CRR,
while two instruments have been deleted.
The information provided in the list is consist-
ent with the information to be reported ac-
cording to the ITS on disclosure for own funds.
1. The EBA published a report presenting
the first results of the review on the is-
suances of Additional Tier 1 (AT1) capital
instruments in October 2014. The CRR
lays down eligibility criteria for AT1 instru-
ments (in particular Articles 51 to 55) and
those criteria are supplemented by the
Commission Delegated Regulation (EU)
No 241/2014 (RTS on own funds). Several
AT1 instruments have now been issued
by European institutions in accordance.
This review is a pilot and the EBA expects
to gather further insight on the basis of
Ongoing activity
In accordance with the EBA’s mandate to review and
monitor the quality of own funds instruments issued by
institutions across the Union (Article 80 of the CRR) the
EBA will carry on with its monitoring work on own funds
instruments throughout 2015.