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  • Additional Tier 1 Capital (AT1)

    • CA-2.1.4

      AT1 capital consists of the sum of the items (a ) to (d):

      (a) Instruments issued by the bank that meet the criteria for inclusion in AT1 outlined in Paragraph CA-2.1.6;
      (b) Stock surplus (share premium) resulting from the issue of instruments included in AT1;
      (c) Instruments issued by consolidated subsidiaries of the bank and held by third parties that meet the criteria for inclusion in AT1 and are not included in CET1. See section CA-2.3 for the relevant criteria; and
      (d) Regulatory adjustments applied in the calculation of AT1 (see CA-2.4).
      January 2015

    • CA-2.1.5

      [This paragraph has been left blank.]

      January 2015

    • CA-2.1.6

      For an instrument to be included in AT1, it must meet or exceed all the criteria below:

      (a) It is issued and paid-in;
      (b) It is subordinated to depositors, general creditors and subordinated debt of the conventional bank licensee;
      (c) It is neither secured nor covered by a guarantee of the issuer or related entity or other arrangement that legally or economically enhances the seniority of the claim vis-à-vis conventional bank licensee creditors;
      (d) It is perpetual, i.e. there is no maturity date and there are no step-ups or other incentives to redeem;
      (e) It may be callable at the initiative of the issuer only after a minimum of five years and a conventional bank licensee must not do anything which creates an expectation that the call will be exercised. A conventional bank licensee may not exercise such a call option without receiving prior written approval of the CBB and the called instrument is replaced with capital of the same or better quality; or the conventional bank licensee demonstrates that its capital position is well above the minimum capital requirements after the call option is exercised;
      (f) In all early call situations, replacement of existing capital must be done at conditions which are sustainable for the income capacity of the conventional bank licensee;
      (g) Any repayment of principal (e.g. through repurchase or redemption) must be with prior written approval of the CBB and the conventional bank licensee must not assume or create market expectations that supervisory approval will be given;
      (h) The conventional bank licensee must have full discretion at all times to cancel distributions/payments. This means that 'dividend pushers' are prohibited. A dividend pusher obliges a bank to make a dividend or coupon payment on an instrument if it has made a payment on another capital instrument or share. Also features that require the conventional bank licensee to make distributions in kind are not permitted;
      (i) Cancellation of discretionary payments must not be an event of default;
      (j) Conventional bank licensees must have full access to cancelled payments to meet obligations as they fall due;
      (k) Cancellation of distributions/payments must not impose restrictions on the conventional bank licensee except in relation to distributions to common stockholders;
      (l) Dividends/coupons must be paid out of distributable items;
      (m) The instrument cannot have a credit sensitive dividend feature (this might serve to increase the dividend payable if a bank's credit rating falls from A to BBB, for example) which may lead to the dividend/coupon being reset periodically based in whole or in part on the conventional bank licensee's credit standing;
      (n) The instrument cannot contribute to liabilities exceeding assets if such a balance sheet test forms part of national insolvency law. This means that instruments accounted for as liabilities must be able to be written down in some way as described in subparagraph (o);
      (o) All instruments must have principal loss absorption through either (i) conversion to common shares at an objective pre-specified trigger event; or (ii) a write-down mechanism which allocates losses to the instrument at a pre-specified trigger event. The write-down will reduce the claim of the instrument in liquidation and reduce the amount that will be re-paid when a call is exercised and partially or fully reduce coupon/dividend payments on the instrument;
      (p) Neither the conventional bank licensee nor a related party over which it exercises control or significant influence can have purchased the instrument, nor can the conventional bank licensee directly or indirectly have funded the purchase of the instrument. This also means that own holdings of AT1 instruments and AT1 instruments purchased or funded by the bank for employee share purchase schemes must be deducted from AT1. Any of the conventional bank licensee's AT1 instruments used as collateral for the advance of funds to its customers must be deducted from AT1 ;
      (q) The instrument cannot have any features that hinder recapitalisation, such as provisions that require the issuer to compensate investors if a new instrument is issued at a lower price during a specified time frame; and
      (r) If the instrument is not issued out of a fully consolidated subsidiary bank or the parent conventional bank licensee in the consolidated group (e.g. a special purpose vehicle — "SPV"), proceeds must be immediately available without limitation to the parent bank in the consolidated group in a form which meets or exceeds all of the other criteria for inclusion in AT1.
      Amended: January 2016
      January 2015

    • CA-2.1.7

      [This paragraph has been left blank.]

      January 2015

    • CA-2.1.7A

      The issuance of any new shares as a result of a trigger event must occur prior to any public sector injection of capital so that the capital provided by the public sector is not diluted.

      January 2015

    • CA-2.1.7B

      Where an issuing bank or SPV is part of a banking group and the issuer wishes the instrument to be included in the capital base of the group (in addition to its solo capital where applicable), the terms and conditions must specify an additional trigger event.

      January 2015

    • CA-2.1.7C

      Any common stock paid as compensation to the holders of the instrument must be common stock of either the issuing bank or the parent bank of the group (including any successor in resolution).

      January 2015