SRB published an article by Elke König in which she discussed the way forward with minimum requirement for own funds and eligible liabilities (MREL). She described the SRB approach and the work done so far toward MREL, also highlighting that MREL will continue to be one of the key areas of work for SRB in 2018. She highlights that SRB has taken a gradual, multi-year approach to MREL, which takes into account the specificities of the banks under its remit, with the goal of maintaining proportionality in the system while preserving a level playing field and upholding high resolution standards across the Banking Union.
To underpin resolution planning, SRB will develop guidance for the Internal Resolution Teams on solo/internal MREL and MREL calibration under transfer strategies. Internal loss-absorbing capacity is crucial to ensure that, within a group, losses are passed from the entities where they originate to those entities where resolution action is coordinated. SRB will also work further on defining the need for subordination, not least in light of assessing any challenges from the no creditor worse off, or NCWO, principle. SRB will develop its approach based on the current legislative framework and will strive to implement internal MREL for banking groups with resolution colleges during the 2018 planning cycle. Meanwhile, SRB is closely following the ongoing negotiations on the revision of the Bank Recovery and Resolution Directive and Single Resolution Mechanism (SRM) Regulation to prepare for a revision of its MREL policy, including on bank-specific targets and transition periods.
For the less significant institutions (LSIs) that are not within its remit, SRB will act through its oversight function and assess the conformity of draft resolution measures for LSIs that national resolution authorities notify SRB on, in accordance with the SRM Regulation. These include resolution measures to be adopted, such as draft resolution plans, MREL, and resolvability assessment, in addition to the decisions to apply simplified obligations. She concludes that MREL is a crucial tool to improve resolvability of banks and that no responsible management should take a "wait and see" approach.
Related Link: Article
Keywords: Europe, EU, Banking, SSM, MREL, Proportionality, Bank Resolution, SRB
Previous ArticleEC Issues Draft Report on Proposal Amending CRR and MiFIR
ECB published a decision allowing the euro area banks under its direct supervision to exclude certain central bank exposures from the leverage ratio.
ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).
ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.
ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.
EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).
APRA is consulting on updates to ARS 210.0, the reporting standard that sets out requirements for provision of information on liquidity and funding of an authorized deposit-taking institution.
FED released hypothetical scenarios for a second round of stress tests for banks.
FED is proposing to temporarily revise the capital assessments and stress testing reports (FR Y-14A/Q/M) to implement the changes necessary to conduct stressed analysis in connection with the re-submission of capital plans, using data as of June 30, 2020.
FED adopted a proposal to extend for three years, with revision, the information collection under the market risk capital rule (FR 4201; OMB No. 7100-0314).
EBA published a voluntary online survey seeking input from credit institutions on their practices and future plans for Pillar 3 disclosures on the environmental, social, and governance (ESG) risks.