Having worked hard and diligently: the European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) on own funds (=regulatory capital) ‘Part three’, which set out criteria to deduct indirect and synthetic holdings, to define broad market indices, and to calculate minority interest.
- On deduction of indirect and synthetic holdings: to achieve greater harmonisation as well as increased conservatism in the way deductions of investments in financial sector entities as well as own capital instruments are applied;
- On broad market indices: to set criteria for broad market indices so as to avoid that the interest rate/dividend paid by institutions on floating rate capital instruments increases when the credit standing of the institution decreases (credit sensitive dividend features);
- On minority interest: to harmonise the calculation of minority interests to be included in regulatory capital.
I will read the RTS and comment later.