4.19. Criteria for inclusion in T2 Capital
A capital instrument is eligible for inclusion in T2 Capital only if all the criteria in sub-rules (1) to (10) below are satisfied.
(1) The instrument is issued and paid up.
(2) The instrument is subordinated to the claims of depositors and general creditors.
(3) The paid-in amount is neither secured nor covered by a guarantee of the Bank or a related party, nor subject to any other arrangement that legally or economically enhances the seniority of the holder’s claim in relation to the claims of the Bank’s depositors and general creditors.
(4) The original maturity of the instrument is at least 5 years.
(5) The recognition in regulatory capital in the remaining 5 years before maturity is amortised on a straight line basis and there are no incentives to redeem.
(6) If the instrument is callable by the Bank, it can only be called 5 years or more after the instrument is paid-in and only with the approval of the AFSA. The Bank must not do anything to create an expectation that the exercise of the option will be approved, and, if the exercise is approved, the Bank:
- (a) must replace the called instrument with capital of the same or better quality with servicing costs sustainable for the income capacity of the Bank; or
- (b) must demonstrate to the AFSA that its capital will exceed the Bank’s minimum capital requirement after the call option is exercised.
(7) The holder has no right to accelerate future scheduled payments of coupon or principal, except in bankruptcy or liquidation.
(8) The instrument does not have a credit-sensitive-dividend feature under which a dividend or coupon is periodically reset based (wholly or partly) on the Bank’s credit standing.
(9) Neither the Bank nor a related party over which the Bank exercises control or significant influence has purchased the instrument, nor has the Bank directly or indirectly funded the purchase of the instrument.
(10) If the instrument is issued by a special purpose vehicle, the proceeds are immediately available without limitation to the Bank through an instrument that satisfies the other criteria for T2 Capital.