Cebs draft proposal for a common Eu definition of Tier 1 hybrids
The Committee of European Banking Supervisors (CEBS) has published a proposal for a common definition of Tier 1 hybrids, the group of securities that combine the elements of debt and equity securities.
The goal is to define guidelines for a common EU interpretation of the eligibility criteria and to advise the European Commission with regard to the implementation of these criteria into EU legislation.
Content
CEBS proposes that hybrid capital instruments should only be eligible as Tier 1 capital if they meet all of the following requirements: they must be issued and fully paid up, publicly disclosed and easily understandable. They must be permanent, able to absorb losses in liquidation and on a going concern basis and allow the cancellation of payments. In stress situations, the instrument should help prevent its insolvency and make the recapitalisation of the issuer more likely.
ABI Position
ABI underlines that the CEBS proposal create a principle-based framework which would allow member States the flexibility to interpret the spirit of the principals in line with any specific concerns they may have with their domestic legal and regulatory regime. The current draft proposal contains a level of detail that raises a number of concerns in certain juristidctions and, despite the general aim to align and facilitate the issue of hybrid securities, as currently drafted, could even hinder the issue.
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