The European Banking Authority (EBA) is tasked with monitoring and assessing the capital instruments that qualifies as Common Equity Tier 1 (‘CET1’) within each EU Member State per the Capital Requirement Regulations (CRR).
EBA: The CET1 Instrument List
There have been a number of changes to the CET1 Instrument list since it was first published by the EBA on 28 May 2014.
Most recently, the EBA updated the CET1 Instrument List on 22nd July 2019, which was the eighth revision to the list.
Member States CET1 instruments affected by the latest update include:
UNITED KINGDOM: One additional CET1 instrument now included
LITHUANIA: Two additional CET1 Instruments now included
AUSTRIA: One deletion of a previous qualifying CET 1 instrument
CYPRUS: One deletion of a previous qualifying CET 1 instrument
GREECE: One modification of an existing CET1 instrument
Per the EBA’s 22nd July 2019 CET1 Instrument List, the following instruments are considered eligible CET1 within the United Kingdom:
UK- Eligible as CET1 under CRR Article 28:
Ordinary Shares (with full voting rights) per the “Companies Act 2006” (see Chapter 2 of Part 17 Allotment of Shares);
Ordinary Shares (with fewer voting rights) per the “Companies Act 2006” (see Chapter 2 of Part 17 Allotment of Shares) that have also been issued with other CET1 instruments (including Ordinary Shares with full voting rights as above);
Ordinary Shares (with no voting rights) per the “Companies Act 2006” (see Chapter 2 of Part 17 Allotment of Shares) that have also been issued with other CET1 instruments (including Ordinary Shares with full voting rights as above);
Deferred Shares per the “Building Societies (Deferred Shares) Order 1991”
Partnership Capital per the “Partnership Act 1890”;
Limited Partnership (LP) capital per the “Limited Partnerships Act 1907”; and
Limited Liability Partnership (LLP) capital per the “Limited Liability Partnerships Act 2000”
UK - Eligible as CET1 under CRR Article 29:
Deferred Shares per the “Building Societies (Deferred Shares) Order 1991”
Remember that the reference to an instrument as being issued in addition to another does not mean that there is necessarily a joint issuance of those instruments or that the holders of both instruments are the same; it only means that it is possible for firms to include the two instruments in their CET1.
Also remember that as of the 8th September 2016, Royal Bank of Scotland Group plc (RBS) Series 1 Class B Shares and Series 1 Dividend Access Shares are no longer classified as eligible CET1 within the United Kingdom.
The full CET1 Instrument list for all jurisdictions can be found on the EBA website.
“the inclusion of an instrument in the list implies the instrument meets the eligibility criteria” of the CRR and therefore “can be included in the CET1 capital by all institutions in the Member State to which is refers”.