SRB Extends Permissions Procedure for Eligible Liabilities Instruments
SRB is extending prior permission procedure to assess applications to reduce eligible liabilities instruments under Article 78a of the Capital Requirements Regulation (CRR). This procedure will remain in place until the relevant regulatory technical standards of EBA come into force. Article 78 of the CRR addresses supervisory permission for reducing own funds. As per this article, a competent authority shall grant permission for an institution to reduce, repurchase, call, or redeem common equity tier 1, additional tier 1 or tier 2 instruments where certain predefined conditions have been met. To continue performing market-making and other secondary market activities as of January 01, 2020, banks must obtain a prior permission.
To cover the period until the EBA regulatory standards come into force, SRB confirms and extends the conditions published on June 25, 2019 in the CRR addendum to the Minimum Requirement for Own Funds and Eligible Liabilities (MREL) policy of SRB:
- The aggregate trading volume in these activities does not exceed 1% Total Risk Exposure Amount (TREA) on a consolidated basis at the level of the resolution group
- Any MREL shortfall, or increase thereof, resulting from these market-making activities is compensated with eligible liabilities instruments on a quarterly basis
EBA is mandated under Article 78a (3) of CRR to draft regulatory technical standards specifying the process for prior permissions, including the time limits and information requirements. Until this Level 2 Regulation comes into application, the following provisional procedure applies:
- Scope of instruments. At this stage, SRB considers that the permission regime applies to eligible liabilities instruments as defined in Article 72b of CRR.
- Time-limit for applications. Institutions shall transmit a complete application to SRB at least four months in advance of the date where one of the actions listed in Article 78a of CRR (hereafter: “Redemption”) is intended to be performed.
Related Links
Keywords: Europe, EU, Banking, MREL, CRR, Basel III, Regulatory Capital, SRB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
DNB Publishes Banking and Insurance Newsletters in December 2019Related Articles
FED Revises Capital Planning and Stress Testing Requirements for Banks
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs Publish Reporting Templates for Financial Conglomerates
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.
EBA Publishes Report on Asset Encumbrance of Banks in EU
EBA published the annual report on asset encumbrance of banks in EU.
MAS Revises Guidelines on Technology Risk Management
MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.
US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C
FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.
EBA Proposes Guidelines for Establishing Intermediate Parent Entities
EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.
EC Adopts Financial Reporting Changes Arising from Benchmark Reforms
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HMT Updates List of Post-Brexit Equivalence Decisions in UK
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.
