Article 1 › 1

All of the following shall be classified as equity exposures: (a) any exposure that meets all of the following conditions: (i) it is irredeemable in the sense that the return of invested funds can be achieved only by the sale of the investment or sale of the rights to the investment or by the liquidation of the issuer; (ii) it does not embody an obligation on the part of the issuer; (iii) it conveys a residual claim on the assets or income of the issuer; (b) instruments that would qualify as Tier 1 items if issued by an institution; (c) instruments that embody an obligation on the part of the issuer and meet any of the following conditions: (i) the issuer is able to defer the settlement of the obligation indefinitely; (ii) the obligation requires, or permits at the issuer’s discretion, settlement by issuance of a fixed number of the issuer’s equity shares; (iii) the obligation requires, or permits at the issuer’s discretion, settlement by issuance of a variable number of the issuer’s equity shares and, ceteris paribus, any change in the value of the obligation is attributable to, comparable to, and in the same direction as, the change in the value of a fixed number of the issuer’s equity shares; (iv) the holder of the instrument has the option of requiring that the obligation be settled in equity shares, unless one of the following conditions is met: (1) in the case of a traded instrument, the institution has demonstrated to the satisfaction of the competent authority that the instrument is traded on the market more like the debt of the issuer than like its equity; (2) in the case of non-traded instruments, the institution has demonstrated to the satisfaction of the competent authority that the instrument should be treated as a debt position; (d) debt obligations and other securities, partnerships, derivatives or other vehicles structured in such a way that the economic substance is similar to the exposures referred to in points (a), (b) and (c), including liabilities from which the return is linked to that of equities; (e) equity exposures that are recorded as a loan but arise from a debt-equity swap made as part of the orderly realisation or restructuring of the debt. For the purposes of the first subparagraph, point (c)(iii), obligations include those that require or permit settlement by issuance of a variable number of the issuer’s equity shares, for which the change in the monetary value of the obligation is equal to the change in the fair value of a fixed number of equity shares multiplied by a specified factor, where both the factor and the referenced number of shares are fixed. For the purposes of the first subparagraph, point (c)(iv), where one of the conditions laid down in that point is met, the institution may decompose the risks for regulatory purposes, subject to the prior permission of the competent authority.

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Source: EUR-Lex CELLAR · retrieved 2026-09-04