Featured Product

    SRB Issues Guidance on Permission Regime for MREL-Eligible Liabilities

    December 18, 2020

    SRB published guidance clarifying what will happen once the minimum requirement for own funds and eligible liabilities (MREL) decisions under the revised Single Resolution Mechanism Regulation (SRMR2) are communicated by national resolution authorities. SRB also provides an update on the treatment of General Prior Permissions currently in place. With this, SRB has updated its approach to the prior permission regime for early calling, redeeming, repaying, or repurchasing of eligible liabilities instruments by banks, ahead of the upcoming key regulatory changes.

    The recent SRB guidance aims to explain and inform institutions under the direct SRB remit about two regulatory changes that require SRB to adapt its current permission regime procedure for calling, redeeming, repaying or repurchasing eligible liabilities instruments ahead of their maturity. The first regulatory change relates to the application of SRMR2 on December 28, 2020, with new MREL-eligibility criteria applying to liabilities that qualify for MREL. The regulation expands the scope of liabilities subject to the permission regime to all MREL eligible liabilities (including senior unsecured liabilities and internal MREL eligible liabilities) and to liabilities that are eligible for internal MREL. The guidance explains that, until the new MREL decisions adopted by SRB on the basis of the SRMR2 are communicated to institutions by the national resolution authorities, the existing MREL decisions taken on the basis of SRMR1/BRRD1 remain valid. After the communication of the SRMR2 MREL decisions by national resolution authorities, the transitional period set out in Article 12k of the SRMR2 will start and institutions will not need to apply for for early redemptions of MREL-eligible liabilities taking place until December 31, 2021. However, for redemptions of MREL-eligible liabilities to be performed after December 31, 2021, institutions will need to submit applications to the SRB four months in advance (for example, to perform a redemption as of January 01, 2022, an institution will need to submit an application to SRB at the latest by August 31, 2021).

    The second regulatory change is the forthcoming Level 2 legislation on the permission regime. EBA is mandated under Article 78a(3) of the revised Capital Requirements Regulation (CRR2) to draft regulatory technical standards specifying the process for prior permission, including information requirements for permission applications and the timeframe for resolution authorities to assess applications. The EBA standards on the procedure applicable to early redemptions will have an impact on the current policy and procedure of SRB. SRB will continue to assess all new applications based on its current policy and procedure until the Delegated Regulation endorsing the EBA regulatory technical standards applies. SRB will use the statutory transitional period set out in SRMR2 to integrate the new elements of the Delegated Regulation into its policy and procedure, so that the updated permission regime can be operational as of January 01, 2022. SRB expects all applications for permission to include projections on total loss-absorbing capacity (TLACfor the following three years.

     

    Related Links

    Keywords: Europe, EU, Banking, MREL, Resolution Framework, SRMR2, Permission Regime, CRR2, Basel, TLAC, Regulatory Capital, EBA, SRB

    Featured Experts
    Related Articles
    News

    APRA Issues Interim Update to Policy Priorities for 2021 and Beyond

    In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.

    September 24, 2021 WebPage Regulatory News
    News

    EC Adopts Solvency II and Resolution Rules Package for Insurers

    The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.

    September 22, 2021 WebPage Regulatory News
    News

    OCC Issues Booklets on Regulatory Reporting and Earnings

    The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.

    September 22, 2021 WebPage Regulatory News
    News

    ECB Sets Out Results of Economy-Wide Climate Stress Tests

    The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.

    September 22, 2021 WebPage Regulatory News
    News

    EBA Examines Implications of Increasing Use of Digital Platforms in EU

    The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.

    September 21, 2021 WebPage Regulatory News
    News

    HKMA Issues Updates on Policy Measures Intended to Ease COVID Impact

    The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.

    September 21, 2021 WebPage Regulatory News
    News

    ISDA Responds to BCBS Proposal on Treatment of Cryptoasset Exposures

    The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.

    September 21, 2021 WebPage Regulatory News
    News

    BIS Quarterly Review Discusses Developments in Fintech and ESG Space

    BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.

    September 20, 2021 WebPage Regulatory News
    News

    BCBS to Consult on Supervisory Practices for Climate Risks by Year-End

    The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards

    September 20, 2021 WebPage Regulatory News
    News

    OCC Identifies Operational Risk Deficiencies in MUFG Union Bank

    The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.

    September 20, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7494