Following on from my earlier post on multiples, EBA just published its last draft technical standards on bank capital (own funds). EBA looked into two dimensions of payments on own funds instruments: one related to multiple distributions and the other to preferential distributions.

According to EBA, preferential distributions exist when holders of CET1 instruments have an advantage compared with other holders of CET1 instruments of the same institution, particularly regarding the timing and order of distribution payments.

This is interesting: EBA shows that preferential distributions differ from “multiple” distributions, where the latter are a multiple of the amount of dividend paid on shares. The CRR outlaws preferential distributions, but the RTS accepts “multiple” distributions. Note that, for obvious prudential reasons, EBA’s RTS explains whether and when multiple distributions would create a disproportionate drag on capital. Of course.