Article 4
Conditions for classes of Other Instruments
1. Under the conditions laid down in Article 1(1), point (c) of this Regulation, Other Instruments satisfy the conditions laid down in Article 32(1), point (j)(iii), of Directive (EU) 2019/2034 in each of the following cases:
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(a) |
the Other Instruments fulfil the conditions laid down in paragraph 2 of this Article; |
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(b) |
the Other Instruments are linked to an Additional Tier 1 instrument or Tier 2 instrument and fulfil the conditions laid down in paragraph 3 of this Article; |
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(c) |
the Other Instruments are linked to an instrument which would be an Additional Tier 1 instrument or Tier 2 instrument but for the fact that it is issued by a parent undertaking of the investment firm which is outside the scope of consolidation pursuant to Part One, Title II, Chapter 2, of Regulation (EU) No 575/2013 and the Other Instruments fulfil the conditions laid down in paragraph 4. |
2. The conditions referred to in paragraph 1, point (a), are the following:
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(a) |
the Other Instruments shall be issued directly or through an investment firm, institution or financial institution included in the consolidation scope pursuant to Part One, Title II, Chapter 2, of Regulation (EU) No 575/2013 or Article 7 of Regulation (EU) 2019/2033, provided that a change to the credit quality of the issuer of the instrument can reasonably be expected to lead to a similar change to the credit quality of the investment firm using the Other Instruments for the purpose of variable remuneration; |
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(b) |
the provisions governing the Other Instruments do not give the holder the right to accelerate the scheduled payment of distributions or principal other than in the case of the insolvency or liquidation of the institution or investment firm issuing that instrument; |
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(c) |
at the time of the award of the Other Instruments as variable remuneration the remaining period before maturity of the Other Instruments is equal to or exceeds the sum of the deferral periods and retention periods that apply in respect of the award of those instruments; |
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(d) |
the provisions governing the instrument provide that, upon the occurrence of a trigger event, the principal amount of the instruments shall be written down on a permanent or temporary basis or the instrument shall be converted to Common Equity Tier 1 instruments; |
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(e) |
the trigger event referred to in point (d) occurs when the Common Equity Tier 1 capital ratio of the institution or investment firm issuing the instrument falls below either of the following:
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(f) |
one of the requirements in Article 2, point (c), is met. |
3. The conditions referred to in paragraph 1, point (b), are the following:
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(a) |
the Other Instruments fulfil the conditions of paragraph 2, points (a) to (e); |
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(b) |
the Other Instruments are linked to an Additional Tier 1 or Tier 2 instrument issued through an entity within the scope of consolidation pursuant to Part One, Title II, Chapter 2, of Regulation (EU) No 575/2013 or Article 7 of Regulation (EU) 2019/2033 (the ‘reference instrument’); |
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(c) |
the reference instrument fulfils the conditions of paragraph 2, points (c) and (f), at the time that the instrument is awarded as variable remuneration; |
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(d) |
the value of an Other Instrument is linked to the reference instrument such that it is at no time more than the value of the reference instrument; |
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(e) |
the value of any distributions paid after the Other Instrument has vested is linked to the reference instrument such that distributions paid are at no time more than the value of any distributions paid under the reference instrument; |
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(f) |
the provisions governing the Other Instruments provide that if the reference instrument is called, converted, repurchased or redeemed within the deferral or retention period the Other Instruments shall be linked to an equivalent reference instrument which fulfils the conditions in this Article such that the total value of the Other Instruments does not increase. |
4. The conditions referred to in paragraph 1, point (c), are the following:
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(a) |
the competent authorities have determined for the purpose of Article 55 of Directive (EU) 2019/2034 or Article 127 of Directive 2013/36/EU that the investment firm or institution that issues the instrument to which the Other Instruments are linked is subject to consolidated supervision by a third-country supervisory authority which is equivalent to that governed by the principles set out in Directive (EU) 2019/2034 in the case that the issuer is an investment firm located in a third country or Directive 2013/36/EU in the case that the issuer is an institution located in a third country and the requirements of Part One, Title II, Chapter 2 of Regulation (EU) No 575/2013; |
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(b) |
the Other Instruments fulfil the conditions referred to in paragraph 3, point (a) and points (c) to (f). |