Tier 2 Flashcards
(4 cards)
1
Q
Describe Tier 2 Instruments
A
- Debt Instruments that are structurally subordinated
i.e. they take losses ahead of other kinds of debt
2
Q
For regulatory capital purposes, how are Tier 2 instrument affected by amortisation?
A
For regulatory capital purposes, they amortize 5 years before call date on a straight line basis
3
Q
For MREL purposes, how are Tier 2 instrument affected by amortisation?
A
For MREL purposes, Tier 2 instruments full amortize one year before call
4
Q
What happens if a tier 2 instrument is down-streamed to another entity?
e.g. BBPLC to IHC
A
Like AT1, there is a significant holdings deduction at an entity level (not at Group) for any Tier 2 instrument down-streamed to subsidiaries
e.g. If BBPLC down-streamed to IHC
BBPLC can no longer use it and so it cannot count towards it’s own T2
