AI Summary of Article 52 Additional Tier 1 instruments
Additional Tier 1 (AT1) instruments qualify if they meet strict criteria, ensuring they are directly issued, fully paid, and rank below Tier 2 instruments in insolvency. Ownership restrictions prevent institutions or closely linked entities from holding these instruments, reinforcing their loss-absorption capacity. Key provisions include perpetual nature, the absence of guarantees enhancing seniority, and discretion in distribution cancellations without incurring default.
The European Banking Authority (EBA) is mandated to establish regulatory technical standards, addressing aspects such as redemption incentives and trigger events for write-downs, further cementing the robustness of AT1 instruments in regulatory frameworks.
Article 52 Additional Tier 1 instruments
1. Capital instruments shall qualify as Additional Tier 1 instruments only if the following conditions are met:
(a) the instruments are directly issued by an institution and fully paid up;
(b) the instruments are not owned by any of the following:
(i) the institution or its subsidiaries;
(ii) an undertaking in which the institution has a participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of that undertaking;
(c)the acquisition of ownership of the instruments is not funded directly or indirectly by the institution;
(d) the instruments rank below Tier 2 instruments in the event of the insolvency of the institution;
(e) the instruments are neither secured nor subject to a guarantee that enhances the seniority of the claims by any of the following:
(i) the institution or its subsidiaries;
(ii) the parent undertaking of the institution or its subsidiaries;