The EBA updates its list of Common Equity Tier 1 instruments

Purpose

The European Banking Authority (EBA) has updated its list of capital instruments classified as Common Equity Tier 1 (CET1), reflecting changes since the previous update in December 2022. This revision aims to provide a clear and accurate representation of CET1 instruments, removing grandfathered provisions that ended on 31 December 2021 and incorporating new or deleted instruments.

Effects on Industry

The updated list will impact banks and financial institutions across Europe, as they must align their capital structures with the revised EBA guidelines. This may require adjustments to their balance sheets, potentially affecting their ability to lend or invest in specific areas. The changes may also influence market perceptions of banks’ stability and solvency, impacting investor confidence and credit ratings.

Relevant Stakeholders

The updated list affects European banks and financial institutions that hold CET1 instruments, as well as regulatory bodies and supervisors responsible for enforcing the Capital Requirements Regulation (CRR). Additionally, investors, analysts, and other stakeholders who rely on accurate information about bank capital structures will be impacted by this update.

Next Steps

To comply with the revised EBA guidelines, banks and financial institutions must review their capital structures and ensure alignment with the updated list of CET1 instruments. This may involve recalculating their capital ratios, updating internal risk assessments, or implementing changes to their governance and oversight procedures. Institutions should consult with regulatory authorities and seek professional advice to ensure compliance.

Any Other Relevant Information

The EBA’s update reflects changes in national legislative provisions, highlighting the importance of harmonization across European jurisdictions. The revised list will provide clarity on CET1 instruments, promoting a more level playing field among banks and financial institutions. This update is part of ongoing efforts by the EBA to maintain the stability and integrity of the European banking system.