EBA concludes monitoring of legacy instruments

The European Banking Authority (EBA) has decided to conclude 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 vital 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 assist 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. It has also conducted regular monitoring, including assessments of individual cases.

Considering the extensive work already completed and confidence that authorities will continue to monitor the remaining cases based on provided guidance, the EBA will not prioritize further monitoring of legacy instruments. It will, however, maintain its review of the quality of own funds and eligible liabilities.