Notice on redemption and write-down of hybrid kernekapital1)
Pursuant to § 132 paragraph 9 and § 373, paragraph 4, of the financial business Act, see. lovbekendtgørelse nr. 1125 by 23. September 2010, fixed: scope and definitions
§ 1. This Ordinance shall apply to: 1) financial institutions.
2) mortgage companies.
3) stockbroking companies.
4) Investment management companies.
(2). Institutions and the companies referred to in paragraph 1 are hereinafter referred to as ' undertakings '.
§ 2. For the purposes of this order: 1) issuing process initial interest basis:
The interest basis, as it has been agreed that the issue be remunerated with from the time they were issued. Used term corresponding time to finance the increase. Interest amount can be either fixed-rate or variable-rate.
2) interest rate increase comes interest rate basis:
The interest basis, as it has been agreed that the issue be remunerated with after interest-rate increase. Used term corresponding time to finance the increase. Interest amount can be either fixed-rate or variable-rate.
3) Conversion rate:
The number of shares, guarantor evidence or proof, as a cooperative unit hybrid core capital can be converted to.
4) Conversion rate at the time of issue:
The number of shares, guarantor evidence or proof, as the value of a cooperative entity hybrid core capital if they meet at the time of issue.
Redemption of hybrid core capital at the company's initiative
§ 3. The company can only redeem hybrid core capital, if it has sufficient capital for redemption and in the foreseeable future then, so the financial and solvency situation remain reassuring.
(2). In the assessment, see. (1) the company must involve, how much and what quality of capital base which is necessary for adequate to cover the risks to which the company is or may be exposed. In this context, the company must consider its liquidity position and earning capacity.
§ 4. Hybrid core capital that are due on a predetermined time may only be cashed out at expiration time, if the company's financial and solvency situation allows this.
§ 5. The company shall, as soon as the decision to deliver the hybrid core capital is taken, apply to the FSA for authorization for redemption. This also applies to hybrid core capital, which is due at a predetermined time.
(2). The company with the application for redemption must enclose the following documents: 1) An adequate explanation as to why the company would make good on the hybrid core capital.
2) Solvency data including the level and composition of core capital before and after the settlement, as well as a confirmation that the company will continue to comply with the prudential requirements provided for in legislation or in regulations issued in implementation thereof after redemption. The liquidity situation as well as a confirmation that the company will continue to meet the regulatory and supervisory requirements for redemption.
3) Information on the expected development of the data given in point 1. 2 for at least 3 years based on the company's business plan, including the expected development in the balance sheet and the profit and loss account.
4) an assessment of the risks to which the company is or may be exposed against, and about the level of capital base ensures that these risks are covered, including a stress test of the principal risks that show potential losses in various scenarios, as well as the company's recent solvency requirement statement.
(3). If the hybrid core capital must be replaced by other hybrid core capital, the FSA require that the company prove that this is possible. The company must also disclose the amount that the importance of earning power, including expected price and terms.
(4). The Danish financial supervisory authority may require additional information, if necessary for processing of the application.
(5). The company may, after agreement with the FSA may refrain from submitting a full set of information, if the hybrid core capital already has been replaced with capital of equal or better quality.
§ 6. The Danish financial supervisory authority may require the company to replace the outstanding hybrid core capital with capital of equal or better quality when redemption occurs within 5 years after the date of deposit or, when the compensation is necessary in order for the solvency and financial position remain reassuring.
Incentives for repayment
§ 7. Incentives for repayment are the terms and conditions relating to the hybrid core capital, which can give an expectation that the redemption will take place. An agreed-upon rate hike, when there is an opportunity for redemption, is an example of an incentive for redemption. A conversion to shares of guarantee capital or cooperative capital at a predetermined time or at the request of the owner of the hybrid core capital, when there is an opportunity for redemption, is also an example of an incentive for redemption.
(2). Terms and conditions, which can give an expectation that the redemption will take place is an incentive for repayment no matter that they are not temporally coincident with the possibility of redemption.
(3). An obligation on the issuer or owner to convert the hybrid core capital to shares of guarantee capital or cooperative capital as a result of financial or solvency problems is not an incentive for redemption.
(4). An opportunity for redemption, do not of themselves constitute an incentive for redemption.
(5). The existence of incentives for repayment is determined at the time of issue or by renegotiation of terms and conditions. Hybrid core capital with incentives for repayment is converted so as not to hybrid core capital without incentive for redemption when the incentive has lapsed as a result of the development or lapsed as a result of the renegotiation.
§ 8. A rate increase is a moderate incentive for the fulfillment of the basic regulation. section 132 (1) (8). 5, in the financial business Act, if it causes an increase in the initial interest, which is not greater than the highest of 1) 100 base points deducted from the swap spread, and 2) 50% of the initial credit spread deducted from the swap spread.
(2). Swap spreads (1). 1 at the time of issue shall be determined as the difference between the interest rate increase comes interest rate basis and issuing process initial interest basis.
(3). Credit spread in (1). 2, shall be determined at the time of issue thereof as the difference between the initial interest and the initial interest basis.
(4). The agreement on hybrid core capital must not contain more than one rate increase in service life of the instrument.
§ 9. A conversion to shares of guarantee capital or cooperative capital at a predetermined time or at the request of the owner of the hybrid core capital is a moderate incentive for redemption, if the agreement is a restriction on conversion rate, so it cannot exceed 150 percent of the conversion rate at the time of issue.
Write-down of hybrid core capital
§ 10. The agreement on hybrid core capital pursuant to § 132 (1) (8). 11, in the financial business Act contain a possibility that the company may write down the hybrid core capital. This option may be restricted, see. section 132 (4) of the financial business Act. May be set further restrictions on write-down option, given that the restrictions must not prevent a sufficiently early and prudent write-down, which can ensure the company's continued viability. Impairment of the hybrid core capital as a result of section 132 (1) (8). 11, in the financial business Act, however, must, as a minimum, be able to be done both in the event that the company's basic capital is lower than the sufficient capital base, and in the event that the core‐capital ratio, after deduction of the basic regulation. section 131 of the financial business Act, is less than 5 per cent.
(2). Write-down of hybrid core capital must at least could be done with the same percentage as stock-guarantee-or andelskapitalen is reduced by.
(3). The write-down of the hybrid core capital can be combined with an option for subsequent appreciation. A subsequent revaluation of the loan principal must not happen before that again is security for the company's continued viability. The company's capital base must be higher than the sufficient capital base, and the core‐capital ratio after deducting higher than 5 per cent after the appreciation. The appreciation may not match the previously made write-downs.
(4). There must not be treated in the terms and conditions of the agreement on hybrid core capital, which lengthens the time for implementation of the write-down.
(5). There may not be interest payments on part of the hybrid core capital, while this share is recorded. These payments will be canceled and will lapse on a permanent basis.
§ 11. The hybrid core capital cannot be secured or covered by a guarantee from the issuer or a related entity or have other events such as legal or economic modgår the write-down.
§ 12. The concrete framework for depreciation, without prejudice. section 10, shall be published, in order to ensure adequate transparency to the market. This can URf.eks. happen in connection with the fulfilment of the company's disclosure obligations according to annex 20 to the Ordinance on capital adequacy.
Penal provisions and entry into force
§ 13. Violations of section 5, paragraph 1, articles 11 and 12 be punished by a fine.
(2). That can be imposed on companies, etc. (legal persons) criminal liability according to the rules laid down in the Penal Code Chapter 5.
§ 14. The notice shall enter into force on the 1. November 2010.
(2). Executive Order No. 938 by 21. July 2010 on repayment and amortization of hybrid core capital be lifted.
The Danish financial supervisory authority, the 27. October 2010 Ulrik Nødgaard/Kristian Vie Madsen Official notes 1) Ordinance contains provisions implementing parts of the European Parliament and of the Council directive 2009/111/EC of 16. September 2009 amending directives 2006/48/EC, 2006/49/EC and 2007/64/EC as regards banks connected to the central bodies, certain components of the own funds, large exposures, supervisory arrangements, and crisis management (CRD II) (Official Journal of the European Union 2009 nr. L 111, p. 97).