AI Summary of Article 28 Common Equity Tier 1 instruments
This summary outlines the essential criteria for capital instruments qualifying as Common Equity Tier 1 (CET1) instruments. Key conditions include direct issuance by the institution, full payment of instruments, and compliance with accounting frameworks. Furthermore, CET1 instruments must display characteristics such as perpetual nature, loss absorption capabilities, and no preferential treatment in distributions.
Moreover, instruments should remain unsecured, rank below other claims in insolvency, and ensure equitable distribution rights. The document also notes specific provisions regarding profit and loss transfer agreements and differentiated distributions, aiming for clarity in regulatory frameworks governing equity capital.
Article 28 Common Equity Tier 1 instruments
1. Capital instruments shall qualify as Common Equity Tier 1 instruments only if all the following conditions are met:
(a) the instruments are issued directly by the institution with the prior approval of the owners of the institution or, where permitted under applicable national law, the management body of the institution;
(b)the instruments are fully paid up and the acquisition of ownership of those instruments is not funded directly or indirectly by the institution;
(c) the instruments meet all the following conditions as regards their classification:
(i) they qualify as capital within the meaning of Article 22 of Directive 86/635/EEC;
(ii) they are classified as equity within the meaning of the applicable accounting framework;
(iii) they are classified as equity capital for the purposes of determining balance sheet insolvency, where applicable under national insolvency law;
(d) the instruments are clearly and separately disclosed on the balance sheet in the financial statements of the institution;
(e) the instruments are perpetual;