Regulatory Alerts2013-10-18
Loss absorbency requirements for Additional Tier 1 and Tier 2 capital instruments
The South African Reserve Bank’s Registrar of Banks issued this guidance note to implement Basel III loss absorbency requirements for Additional Tier 1 and Tier 2 capital instruments. It mandates that qualifying instruments contain contractual provisions enabling conversion to equity or permanent write-off at the Registrar’s discretion upon a specified trigger event, such as a Common Equity Tier 1 ratio falling to or below 5.875 percent. The guidance details conversion pricing, statutory ranking, group treatment, and the priority of existing contractual terms over upcoming statutory bail-in legislation unless banks explicitly opt for replacement.
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