The European Banking Authority has decided to conclude its monitoring of legacy instruments, emphasizing their phased elimination to ensure clear capital structure and reduce complexity.
The European Banking Authority (EBA) has announced the conclusion of its dedicated work on monitoring legacy instruments. This aligns with its long-standing expectation that such instruments should be phased out over time.
The phasing out of legacy instruments is crucial for maintaining a clear subordination ranking within institutions’ capital structures and reducing unnecessary complexity in the prudential framework.
Over recent years, the EBA has focused on the quality of own funds and eligible liabilities, particularly on instruments benefiting from grandfathering provisions under the Capital Requirements Regulation (CRR1 and CRR2).
To assist institutions and authorities in this process, the EBA published two opinions in 2020 and 2022 on the prudential treatment of legacy instruments and their implementation outcomes. It also conducted regular monitoring, including case-by-case assessments.
Given the extensive work completed and confidence that authorities will continue to monitor remaining cases based on provided guidance, the EBA will no longer prioritize monitoring of legacy instruments. However, it will continue reviewing the quality of own funds and eligible liabilities.
