Prudential Regulation Authority Rulebook

1.

Distributions on Common Equity Tier 1 instruments referred to in Article 28 of the CRR shall be deemed not to constitute a disproportionate drag on capital where all of the following conditions are met:

1. (a) the dividend multiple is a multiple of the distribution paid on the voting instruments and not a predetermined fixed amount;
2. (b) the dividend multiple is set contractually or under the statutes of the institution;
3. (c) the dividend multiple is not revisable;
4. (d) the same dividend multiple applies to all instruments with a dividend multiple;
5. (e) the amount of the distribution on one instrument with a dividend multiple does not represent more than 125% of the amount of the distribution on one voting Common Equity Tier 1 instrument.
6. In formulaic form this shall be expressed as:
1. l ≤ 1.25 x k
7. where:
8. k shall represent the amount of the distribution on one instrument without a dividend multiple;
9. l shall represent the amount of the distribution on one instrument with a dividend multiple.
10. (f) the total amount of the distributions paid on all Common Equity Tier 1 instruments during a one year period does not exceed 105% of the amount that would have been paid if instruments with fewer or no voting rights received the same distributions as voting instruments.
11. In formulaic form this shall be expressed as:
1. kX + lY ≤ (1.05) x k x (X + Y)
12. where:
13. k shall represent the amount of the distribution on one instrument without a dividend multiple;
14. l shall represent the amount of the distribution on one instrument with a dividend multiple;
15. X shall represent the number of voting instruments;
16. Y shall represent the number of non-voting instruments.
17. The formula shall be applied on a one-year basis.

2.

Where the condition of point (f) of paragraph 1 is not met, only the amount of the instruments with a dividend multiple that exceeds the threshold defined therein shall be deemed to cause a disproportionate drag on capital.

3.

Where any of the conditions of points (a) to (e) of paragraph 1 are not met, all outstanding instruments with a dividend multiple shall be deemed to cause a disproportionate drag on capital.

[Note: This rule corresponds to Article 7a of Part 2 of Regulation (EU) No 241/2014 as it applied immediately before revocation by the PRA.]