EBA finalizes guidelines on capital instruments for third-country branches

The EBA's new Guidelines specify the financial instruments third-country branches can use to meet their capital endowment requirement.

These instruments must be issued or guaranteed by central, regional, or local governments, central banks, public sector entities, multilateral development banks, or international organisations.

A key condition is that they must receive a 0% risk weight under the standardised approach for credit risk.

The primary objective is to ensure these capital assets are readily available for unrestricted and immediate use to absorb risks or losses, thereby protecting local depositors and satisfying local creditors in the event of resolution or winding-up of the branch.

The Guidelines also detail minimum operational conditions to ensure the instruments remain effective and accessible when needed.

These final Guidelines build directly on Article 48e(2) and 48e(4) of Directive 2013/36/EU, which mandates the EBA to specify requirements for capital endowment instruments.

The EBA conducted a public consultation in 2025, gathering feedback on the list of eligible instruments and their associated operational conditions.

This consultative process ensures that the final framework is robust and addresses industry concerns.

The Guidelines are a crucial step towards the consistent implementation of the new third-country branch regime introduced by the Capital Requirements Directive, fostering a harmonised regulatory environment across the EU.