AI Summary of Article 31 Capital instruments subscribed by public authorities in emergency situations
The regulatory framework allows competent authorities to authorise the inclusion of specific capital instruments in Common Equity Tier 1 capital during emergency scenarios, provided that several pivotal conditions are satisfied. These conditions encompass the issuance date post-1 January 2014, classification as State aid, alignment with existing recapitalisation measures, and complete ownership by public authorities.
Furthermore, it is imperative that these capital instruments possess loss absorption capabilities, entitlement to residual assets in liquidation, and the existence of adequate exit mechanisms. Prior approval from the competent authority, alongside public disclosure of the decision, is a critical requirement for compliance in these instances.
Article 31 Capital instruments subscribed by public authorities in emergency situations
1. In emergency situations, competent authorities may permit institutions to include in Common Equity Tier 1 capital instruments that comply at least with the conditions laid down in points (b) to (e) of Article 28(1) where all the following conditions are met:
(a) the capital instruments are issued after 1 January 2014;
(b) the capital instruments are considered State aid by the Commission;
(c) the capital instruments are issued within the context of recapitalisation measures pursuant to State aid-rules existing at the time;
(d) the capital instruments are fully subscribed and held by the State or a relevant public authority or public-owned entity;
(e) the capital instruments are able to absorb losses;
(f) except for the capital instruments referred to in Article 27, in the event of liquidation, the capital instruments entitle their owners to a claim on the residual assets of the institution after the payment of all senior claims;
(g) there are adequate exit mechanisms of the State or, where applicable, a relevant public authority or public-owned entity;
(h) the competent authority has granted its prior permission and has published its decision together with an explanation of that decision.