Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.

SECTION 2 Conversion or write-down of the principal amount

Article 21 Nature of the write-up of the principal amount following a write-down for the purposes of Article 52(1)(n) and Article 52(2)(c)(ii) of Regulation (EU) No 575/2013

  1. (1)

    The write-down of the principal amount shall apply on a pro rata basis to all holders of Additional Tier 1 instruments that include a similar write-down mechanism and an identical trigger level.

  2. (2)

    For the write-down to be considered temporary, all of the following conditions shall be met:

    1. (a)

      any distributions payable after a write-down shall be based on the reduced amount of the principal;

    2. (b)

      write-ups shall be based on profits after the institution has taken a formal decision confirming the final profits;

    3. (c)

      any write-up of the instrument or payment of coupons on the reduced amount of the principal shall be operated at the full discretion of the institution subject to the constraints arising from points (d) to (f) and there shall be no obligation for the institution to operate or accelerate a write-up under specific circumstances;

    4. (d)

      a write-up shall be operated on a pro rata basis among similar Additional Tier 1 instruments that have been subject to a write-down;

    5. (e)

      the maximum amount to be attributed to the sum of the write-up of the instrument together with the payment of coupons on the reduced amount of the principal shall be equal to the profit of the institution multiplied by the amount obtained by dividing the amount determined in point (1) by the amount determined in point (2):

      1. (1)

        the sum of the nominal amount of all Additional Tier 1 instruments of the institution before write-down that have been subject to a write-down;

      2. (2)

        the total Tier 1 capital of the institution.

    6. (f)

      the sum of any write-up amounts and payments of coupons on the reduced amount of the principal shall be treated as a payment that results in a reduction of Common Equity Tier 1 and shall be subject, together with other distributions on Common Equity Tier 1 instruments, to the restrictions relating to the Maximum Distributable Amount as referred to in Directive 2013/36/EU UK law which implemented Article 141(2) of Directive 2013/36/EU.

  3. (3)

    For the purposes of point (e) of paragraph 2, the calculation shall be made at the moment when the write-up is operated.