Regulation (EU) No 575/2013 of the European Parliament and of the CouncilShow full title

[X1 Article 54 U.K. Write down or conversion of Additional Tier 1 instruments

1. For the purposes of point (n) of Article 52(1), the following provisions shall apply to Additional Tier 1 instruments:

(a) a trigger event occurs when the Common Equity Tier 1 capital ratio of the institution referred to in point (a) of Article 92(1) falls below either of the following:

(i)

5,125 %;

(ii)

a level higher than 5,125 %, where determined by the institution and specified in the provisions governing the instrument;

(b) institutions may specify in the provisions governing the instrument one or more trigger events in addition to that referred to in point (a);

(c) where the provisions governing the instruments require them to be converted into Common Equity Tier 1 instruments upon the occurrence of a trigger event, those provisions shall specify either of the following:

(i)

the rate of such conversion and a limit on the permitted amount of conversion;

(ii)

a range within which the instruments will convert into Common Equity Tier 1 instruments;

(d) where the provisions governing the instruments require their principal amount to be written down upon the occurrence of a trigger event, the write down shall reduce all the following:

(i)

the claim of the holder of the instrument in the insolvency or liquidation of the institution;

(ii)

the amount required to be paid in the event of the call or redemption of the instrument;

(iii)

the distributions made on the instrument.

2. Write down or conversion of an Additional Tier 1 instrument shall, under the applicable accounting framework, generate items that qualify as Common Equity Tier 1 items.

3. The amount of Additional Tier 1 instruments recognised in Additional Tier 1 items is limited to the minimum amount of Common Equity Tier 1 items that would be generated if the principal amount of the Additional Tier 1 instruments were fully written down or converted into Common Equity Tier 1 instruments.

4. The aggregate amount of Additional Tier 1 instruments that is required to be written down or converted upon the occurrence of a trigger event shall be no less than the lower of the following:

(a) the amount required to restore fully the Common Equity Tier 1 ratio of the institution to 5,125 %;

(b) the full principal amount of the instrument.

5. When a trigger event occurs institutions shall do the following:

(a) immediately inform the competent authorities;

(b) inform the holders of the Additional Tier 1 instruments;

(c) write down the principal amount of the instruments, or convert the instruments into Common Equity Tier 1 instruments without delay, but no later than within one month, in accordance with the requirement laid down in this Article.

6. An institution issuing Additional Tier 1 instruments that convert to Common Equity Tier 1 on the occurrence of a trigger event shall ensure that its authorised share capital is at all times sufficient, for converting all such convertible Additional Tier 1 instruments into shares if a trigger event occurs. All necessary authorisations shall be obtained at the date of issuance of such convertible Additional Tier 1 instruments. The institution shall maintain at all times the necessary prior authorisation to issue the Common Equity Tier 1 instruments into which such Additional Tier 1 instruments would convert upon occurrence of a trigger event.

7. An institution issuing Additional Tier 1 instruments that convert to Common Equity Tier 1 on the occurrence of a trigger event shall ensure that there are no procedural impediments to that conversion by virtue of its incorporation or statutes or contractual arrangements.]

Editorial Information

X1 Substituted by Corrigendum to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).