Grandfathered step-up Tier 1 with 5 year re-sets does NOT become Tier 2
Bit of a detail issue - last Friday, 31 Jan 2014, the EBA clarified that old style Tier 1 instruments with longer (5 year) extension periods after the first call and step-up date will not qualify as tier 2 capital under the new CRD4 regulation. The EBA had already clarified this issue for Tier 1s with short (3 month) re-set periods, but at the time had left some residual uncertainty for instruments with longer re-sets. The EBA now said these will still be considered instruments with incentives to call after the first call and step-up date and therefore do not meet the requirements for Tier 2 capital under the new regulation.
Helpful and positive clarification and the actual ruling and text can be found on this link:
Single Rulebook Q&A - European Banking Authority