BANK 3.2.14 Requirements — loss absorption at point of non-viability

(1) This rule applies to an additional tier 1 or tier 2 instrument issued by a banking business firm. It sets out additional requirements to ensure loss absorption at the point of non-viability.
(2) The terms and conditions of an instrument must give the Regulatory Authority the discretion to direct that the instrument be written-off or converted to common equity on the happening of a trigger event.
(3) The firm must be able to issue the required number of shares specified in the instrument if a trigger event happens. The issuance of any new shares because of a trigger event must happen before any public sector injection of capital so that capital provided by the public sector is not diluted.
(4) Trigger event, in relation to the firm that issued the instrument, is the earliest of:
(a) a decision of the Regulatory Authority that a write-off (without which the firm would become non-viable) is necessary; and
(b) a decision by the relevant authority in Qatar to make a public sector injection of capital, or give equivalent support (without which injection or support the firm would become non-viable, as determined by that authority).
(5) If the firm is a member of a financial group and the firm wishes the instrument to be included in the group’s capital in addition to its solo capital, the trigger event must be the earliest of:
(a) the decision in subrule (4) (a);
(b) the decision in subrule (4) (b);
(c) a decision, by the relevant authority in the firm’s home jurisdiction, that a write-off (without which the firm would become non-viable) is necessary; and
(d) a decision, by the relevant authority in the jurisdiction of the financial regulator that regulates the parent entity of the firm, to make a public sector injection of capital, or give equivalent support, in that jurisdiction (without which injection or support the firm would become non-viable, as determined by that authority).
(6) Any compensation paid to the holder of an instrument because of a write-off must be paid immediately in the form of common shares (or the equivalent for non-joint-stock companies).
(7) If the firm is a member of a financial group, any common shares paid as compensation to the holder of the instrument must be common shares of the firm or of the parent entity of the group.
Derived from QFCRA RM/2014-2 (as from 1st January 2015).