Question 1: The last bullet point mentions “Liability accounted instruments must set the loss absorption trigger at a level of 7.625%.” Is it Central Bank decision to have this trigger set at 7.625%? Are any triggers likely to be set for equity accounted instruments?
It is Central Bank’s decision for the trigger level. However, the trigger level derives directly from Basel. Minimum capital requirement plus 0.625%. Note, that the consultation documents do not consult on a trigger for equity accounted AT1. However, in particular in conjunction with the development of a recovery/ resolution regulation, the introduction of a trigger level may also be discussed again, as pointed out in the presentation that was circulated with the Tier capital instrument documents.

Question 2: Point of Non-Viability mentions that “A Point of Non-Viability means that the Regulator has determined that the issuer has or will become, Non-Viable without: (a) a Write-down; or (b) a public injection of capital (or equivalent support).”. We need clarification as to whether the PONV will be determined by the regulator or the issuer. Also, please advise under what circumstance will partial Write-down be permitted. The regulator determines whether the bank is non-viable or not. Partial write-down will be permitted only for exceptional cases. Explicit examples will not be provided to prevent any expectation.

Question 3: Appendix A: Application Process 1.4: It is mentioned that “Stress Testing with a stress scenario of top 2 customers are defaulting”. Since many UAE banks have concentrations in this area, what loss rate needs to be applied in this stress scenario?
Current status quo is two sub scenarios: 75% loss rate and average loss rate of the bank for such customers.