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Article 54 - Write down or conversion of Additional Tier 1 instruments

Article 54

Write down or conversion of Additional Tier 1 instruments

1.  

For the purposes of point (n) of Article 52(1), the following provisions shall apply to Additional Tier 1 instruments:

(a) 

a trigger event occurs when the Common Equity Tier 1 capital ratio of the institution referred to in point (a) of Article 92(1) falls below either of the following:

(i) 

5,125 %;

(ii) 

a level higher than 5,125 %, where determined by the institution and specified in the provisions governing the instrument;

(b) 

institutions may specify in the provisions governing the instrument one or more trigger events in addition to that referred to in point (a);

(c) 

where the provisions governing the instruments require them to be converted into Common Equity Tier 1 instruments upon the occurrence of a trigger event, those provisions shall specify either of the following:

(i) 

the rate of such conversion and a limit on the permitted amount of conversion;

(ii) 

a range within which the instruments will convert into Common Equity Tier 1 instruments;

(d) 

where the provisions governing the instruments require their principal amount to be written down upon the occurrence of a trigger event, the write down shall reduce all the following:

(i) 

the claim of the holder of the instrument in the insolvency or liquidation of the institution;

(ii) 

the amount required to be paid in the event of the call or redemption of the instrument;

(iii) 

the distributions made on the instrument;

(e) 

where the Additional Tier 1 instruments have been issued by a subsidiary undertaking established in a third country, the 5,125 % or higher trigger referred to in point (a) shall be calculated in accordance with the national law of that third country or contractual provisions governing the instruments, provided that the competent authority, after consulting EBA, is satisfied that those provisions are at least equivalent to the requirements set out in this Article.

2.  
Write down or conversion of an Additional Tier 1 instrument shall, under the applicable accounting framework, generate items that qualify as Common Equity Tier 1 items.
3.  
The amount of Additional Tier 1 instruments recognised in Additional Tier 1 items is limited to the minimum amount of Common Equity Tier 1 items that would be generated if the principal amount of the Additional Tier 1 instruments were fully written down or converted into Common Equity Tier 1 instruments.
4.  

The aggregate amount of Additional Tier 1 instruments that is required to be written down or converted upon the occurrence of a trigger event shall be no less than the lower of the following:

(a) 

the amount required to restore fully the Common Equity Tier 1 ratio of the institution to 5,125 %;

(b) 

the full principal amount of the instrument.

5.  

When a trigger event occurs institutions shall do the following:

(a) 

immediately inform the competent authorities;

(b) 

inform the holders of the Additional Tier 1 instruments;

(c) 

write down the principal amount of the instruments, or convert the instruments into Common Equity Tier 1 instruments without delay, but no later than within one month, in accordance with the requirement laid down in this Article.

6.  
An institution issuing Additional Tier 1 instruments that convert to Common Equity Tier 1 on the occurrence of a trigger event shall ensure that its authorised share capital is at all times sufficient, for converting all such convertible Additional Tier 1 instruments into shares if a trigger event occurs. All necessary authorisations shall be obtained at the date of issuance of such convertible Additional Tier 1 instruments. The institution shall maintain at all times the necessary prior authorisation to issue the Common Equity Tier 1 instruments into which such Additional Tier 1 instruments would convert upon occurrence of a trigger event.
7.  
An institution issuing Additional Tier 1 instruments that convert to Common Equity Tier 1 on the occurrence of a trigger event shall ensure that there are no procedural impediments to that conversion by virtue of its incorporation or statutes or contractual arrangements.
In Force

Version from: 08/07/2022

Amendment History