(1) Own-fund items shall be classified into 3 tiers.

(2) The classification of those items shall depend upon whether they are basic own fund or ancillary own-fund items and the extent to which they possess the following characteristics:

(a) the item is available, or can be called up on demand, to fully absorb losses on a going concern basis, as well as in the case of winding up (permanent availability);

(b) in the case of winding-up, the total amount of the item is available to absorb losses and the repayment of the item is refused to its holder until all other obligations, including insurance and reinsurance obligations towards policy holders and beneficiaries of insurance and reinsurance contracts, have been met (subordination).

(3) When assessing the extent to which own-fund items possess the characteristics set out in paragraph (2)(a) and (b), currently and in the future, due consideration shall be given to the duration of the item, in particular whether the item is dated or not and, where an own-fund item is dated, the relative duration of the item as compared to the duration of the insurance and reinsurance obligations of the undertaking shall be considered (sufficient duration).

(4) In addition, the following features shall be considered:

(a) whether the item is free from requirements or incentives to redeem the nominal sum (absence of incentives to redeem);