Regulatory Alerts2023-06-29
Eligibility of Limited Recourse Capital Notes as Tier 1 Capital Instruments
The Autorité des marchés financiers (AMF) confirms that Limited Recourse Capital Notes (LRCNs) qualify as Tier 1, Category B, or Tier 1B capital instruments provided they meet specific structural and economic substance criteria. The two-instrument LRCN structure, comprising deeply subordinated notes and perpetual preferred shares held by a special purpose vehicle, must demonstrate full payment cancellation discretion, a 60-year initial maturity, and absence of redemption incentives. Issuances are subject to institutional investor restrictions, minimum denominations, sector-specific caps and floors, and require prior AMF approval before issuance.
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