The Single Resolution Board published guidance on solvent wind-down of derivatives and trading books in resolution, the annual work program for 2022, and the minimum requirement for own funds and eligible liabilities (MREL) dashboard for the second quarter of 2021. The dashboard shows that the average MREL shortfall including the combined buffer requirement (CBR) reached 0.56% of the total risk exposure amount (TREA) (or EUR 39.7 billion) for resolution entities, reducing from the value of 0.59% (or EUR 41.5 billion) TREA in the first quarter of 2021. Also, the average MREL final target including the CBR amounted to 23.59% TREA for non-resolution entities while the average MREL shortfall including the CBR stood at 2.16% TREA or EUR 42.8 billion.
The guidance on solvent wind-down of derivatives and trading books in resolution is in line with the Expectations for Banks document, which was published in April 2020. Solvent wind-down is an approach that can be used for exiting trading activities in an orderly manner and avoiding posing risks to financial stability. The lack of a credible solvent wind-down plan could jeopardize the credibility and feasibility of the resolution strategy of any bank with material trading books. The guidance was developed following work at Financial Stability Board level, surveys, a pilot exercise and consultation with global systemically important banks (G-SIBs). It applies to all banks with material trading books. The application of this guidance is specific to each bank and it may be adapted to individual situations in a proportionate manner. The guidance sets out the scope and minimum expectations for solvent wind-down planning and potential execution, with the main objectives to:
- adequately prepare, develop and maintain bank capabilities for the planning of a solvent wind-down in resolution
- to ensure execution capabilities of the solvent wind-down plan in a reasonable timeframe
As part of the work program for 2022, SRB plans to work on enforcing and operationalizing the guiding principles laid down in the SRB Expectations for Banks and the MREL policy. SRB priorities lie in five strategic areas, in line with the 2021-2023 Multi-Annual Program. The focus for the year ahead will be on achieving resolvability of SRB entities and less significant institutions; fostering a robust resolution framework; carrying out effective crisis management, operationalizing the Single Resolution Fund, with the Common Backstop set to enter into force in early 2022; and establishing a lean and efficient organization. In terms of achieving resolvability, for 2022, the common priorities are liquidity and funding in resolution; separability and reorganization plans; and management information system (MIS) capabilities. In addition, SRB has addressed banks with bespoke priorities, to steer each bank’s progress toward resolvability. SRB also plans to update and enhance the MREL policy by reviewing the no-creditor-worse-off (NCWO) approach; implementing upcoming European Banking Authority (EBA) regulatory technical standards timely into the SRB policy; and reviewing the MREL calibration for transfer strategies. SRB plans to expand the policy work on Financial Continuity by introducing the operational guidance for the assessment of the identification and mobilization of collateral for the resolution planning cycle of 2022.
- Press Release on Guidance
- Guidance on Solvent Wind-Down (PDF)
- Press Release on Work Program
- Work Program for 2022 (PDF)
- Multi-Annual Work Program (PDF)
- Press Release on MREL
- MREL Dashboard (PDF)
Keywords: Europe, EU, Banking, Resolution Planning, Banking Union, Resolution Framework, Solvent Wind Down, Guidance, EDIS, MREL, Regulatory Capital, Basel, Work Program, Common Backstop, SRB
Previous ArticleMAS Revises Notices on Risk-Based Capital Adequacy Requirements
The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.
The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.
The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.
The Australian Prudential Regulation Authority (APRA) granted license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.
EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).
The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.
The French Financial Markets Authority (AMF) published its 2022 work priorities, along with the supervisory priorities for 2022.
The U.S. Department of the Treasury issued a determination on a request for an exemption, by RBC US Group Holdings LLC, from certain requirements of the rule implementing the qualified financial contracts (QFC) recordkeeping requirements under the Dodd-Frank Act.
The Financial Conduct Authority (FCA) announced that publication of 24 LIBOR settings has ended and that, going forward, the 6 most widely used sterling and Japanese yen settings will be published using a changed methodology.
The People’s Bank of China (PBC) formulated the recently issued Fintech Development Plan (2022 to 2025) under the Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives through the Year 2035.