EBA concludes monitoring of legacy financial instruments

The European Banking Authority (EBA) has announced the conclusion of its dedicated work on monitoring legacy financial instruments. This aligns with its long-standing goal that such instruments should be phased out over time.

The phasing out of legacy instruments is important to maintain a clear subordination ranking within institutions’ capital structures and to avoid unnecessary complexity in the prudential framework.

Over recent years, the EBA 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, the EBA issued two opinions in 2020 and 2022 regarding the prudential treatment of legacy instruments and their implementation, along with ongoing monitoring of the stock of such instruments, including case assessments.

Considering the extensive work already 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 but will continue reviewing the quality of own funds and eligible liabilities.