Featured Product

    SRB Proposes Changes to MREL Policy Under the 2019 Banking Package

    February 17, 2020

    SRB launched a consultation on changes to its Minimum Requirement for Own Funds and Eligible Liabilities (MREL) policy under the 2019 Banking Package. The proposals cover, among others, the implementation of provisions related to MREL requirements for global systemically important institutions (G‑SIIs), changes to the calibration of MREL, and changes to the quality of MREL. The proposals also cover dedicated rules for certain business models and resolution strategies, such as multiple point of entry, and how all the proposed changes will be phased in. The consultation is open until March 06, 2020. The feedback will support SRB in preparing the final MREL policy statement, which is expected to be published by end April 2020. MREL decisions implementing the new framework will be taken based on this policy in the 2020 resolution planning cycle by the first quarter of 2021.

    The proposed changes would bring the policy in line with the amendments introduced by the 2019 EU Banking Package to EU regulations and directives. The regulatory framework for MREL has been affected by the Banking Package amendments to the EU Bank Recovery and Resolution Directive (BRRD or Regulation 2014/59/EU), the Single Resolution Mechanism (SRMR or Regulation 806/2014/EU), and the Capital Requirements Regulation (CRR) and Capital Requirements Directive (CRD). The key proposals in the consultation paper are described below: 

    • Calibration. SRB is proposing to modify and extend its approach to MREL calibration in accordance with the new framework. From 2021, the revised CRR (CRR 2) will require institutions to comply with a prudential leverage ratio requirement at all times, acting as a backstop to risk-based own funds requirements. To this end, the revised BRRD introduces MREL requirement based on the leverage ratio exposure measure to complement the risk-based MREL expressed in percentage of the total risk exposure amount or TREA. MREL for banking groups with a Multiple Point of Entry approach to resolution is also proposed to be further refined. The Banking Package introduced the total loss-absorbing capacity (TLAC) minimum requirement for G-SIIs, in line with the global standards set by FSB, and adapted the current MREL framework accordingly.
    • Subordination for resolution entities. SRB is proposing an approach to set subordination requirements under the new framework, in addition to a methodology to determine and quantify the no creditor worse off, or NCWO, risk. 
    • Internal MREL for non-resolution entities. SRB is proposing to define a criteria for granting permissions to non-resolution authorities for use of guarantees to meet the internal MREL within the member state of the resolution entity
    • MREL for cooperative groups. SRB is proposing minimum conditions to authorize certain types of cooperative networks to use eligible liabilities of associated entities other than the resolution entity to comply with the external MREL as well as minimum conditions to waive the internal MREL of the legal entities that are part of the cooperative network. The determination of the external and internal MREL must be fully aligned with the specific resolution strategy in a way that supports the implementation of resolution action.
    • Eligibility of liabilities issues under the law of a third country. The proposal expands on how liabilities issued under the law of third countries can be considered eligible through contractual recognition.
    • Transition arrangements. SRB is also explained the proposed implementation of transitional periods up to the 2024 deadline, including binding intermediate targets in 2022 and informative targets in 2023. Transition arrangements must be bank-specific because they depend on the MREL tailored to that bank and its resolution plan, along with the to date progress of a bank in raising the MREL-eligible liabilities.

     

    Related Links

    Comment Due Date: March 06, 2020

    Keywords: Europe, EU, Banking, MREL, MREL Policy, Banking Package, Leverage Ratio, MREL Calibrations, No Creditor Worse off Risk, G-SII, CRR, BRRD, SRME, Resolution Framework, SRB

    Featured Experts
    Related Articles
    News

    EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    EBA Updates Lists of Entities for Use in Capital Calculations under SA

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    MAS Amends Notice on Related Party Transactions of Banks

    MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.

    April 08, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Euro Short-Term Rate

    ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.

    April 07, 2021 WebPage Regulatory News
    News

    EBA Consults on Standards Related to FRTB-SA

    EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).

    April 07, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules Related to IRB Approach for Credit Risk

    PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.

    April 07, 2021 WebPage Regulatory News
    News

    BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK

    The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks

    FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks

    OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.

    April 06, 2021 WebPage Regulatory News
    News

    EU Amends CRR and Securitization Regulation in Response to Pandemic

    To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).

    April 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6826