QA2018-2 - Subordinated liabilities T01.00

Owned by SRB Services
Feb 01, 2024
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Resolution Reporting Subject Matter Guidance
Guidance Documents Intragroup-liabilities
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QA2018-2

Question


Page 10 of the guidance provides an example on 'r370 - Subordinated liabilities': "As an example, a Tier 2 instrument with a remaining maturity of 3 years at the reporting date should be included for 3/5 of the outstanding amount into Tier 2 capital (r531) in accordance with article 64 of the CRR. The remaining 2/5 would be reported under subordinated liabilities (r370)." However as stated in EBA GL/2017/02 applying guiding rule 2: T2 instruments under the amortisation regime should be subject to the same treatment as T2 instruments fully included in own funds: "According to the amortisation regime laid down in Article 64 Regulation (EU) No 575/2013, the value of a T2 instrument that can be included in own funds is its nominal value amortised on a straight line basis in the final 5 years before maturity. The amount subject to amortisation is not included in own funds, even if the T2 instrument is eligible according to Article 63 of Regulation (EU) No 575/2013. When determining the order and amount of writedown or conversion the resolution authority should treat in the same way T2 instruments included in the same class and should not apply a discriminatory treatment to issuance of the same T2 instruments." We propose to delete the example of Tier2 instruments reporting under r370 from the LDT Guidance, as in our opinion all T2 instruments should be recorded in the same class.


Response


We confirm the understanding of the EBA guidelines with respect to the necessity to apply write-down and conversion to T2 instruments. However, the reporting under T01.00 does not automatically inform the decision on write-down and conversion, or even bail-in. In order to apply these tools, a granular detail of those liabilities is required, which should be available through the tables with granular information. As such, the split indicated in T01.00 merely informs about the (partial) qualification as own funds, no more, no less.