The European Banking Authority (EBA) has finished its dedicated monitoring of legacy instruments, emphasizing their phased removal to ensure clear capital structure ranking and reduce complexity.
The European Banking Authority (EBA) has decided to conclude its dedicated work on monitoring legacy instruments, in line with its long-standing expectation that such instruments should be eliminated over time.
The phasing out of legacy instruments is essential to maintain a clear subordination ranking within institutions’ capital structures and to avoid unnecessary complexity in the prudential framework.
Over recent years, the EBA has focused on the quality of own funds and eligible liabilities, particularly on legacy instruments benefiting from grandfathering provisions under the Capital Requirements Regulation (CRR1 and CRR2).
To support institutions and authorities in phasing out these instruments, the EBA published two opinions in 2020 and 2022 on the prudential treatment of legacy instruments and their implementation outcomes. The EBA has also conducted regular monitoring, including assessments of individual cases.
Given the extensive work already completed and confidence that authorities will continue monitoring remaining cases based on provided guidance, the EBA will not prioritize further monitoring of legacy instruments, while maintaining its review of the quality of own funds and eligible liabilities.
