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    EC Issues Rules on Estimation of Own Funds and Critical Benchmarks

    July 09, 2021

    EC published Regulation 2021/1118 that supplements Bank Recovery and Resolution Directive (BRRD) with regard to the regulatory technical standards specifying the methodology to be used by resolution authorities to estimate the requirement referred to in Article 104a of the Capital Requirements Directive (CRD) IV. Regulation 2021/1118 also includes technical standards on the methodology for estimation of combined buffer requirement for resolution entities at the resolution group consolidated level, where the resolution group is not subject to those requirements under BRRD. Regulation 2021/1118 shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

    Where a resolution entity has not been subject to an additional own funds requirement at the resolution group consolidated level, resolution authorities shall estimate that requirement in accordance with Article 1 of Regulation 2021/1118 for determining the minimum requirement for own funds and eligible liabilities (MREL) of the resolution entity at the resolution group consolidated level. The Regulation 2021/1118 includes provisions for adjustments for the estimation of the additional own funds requirement. Additionally, the estimation of the combined buffer requirement of the resolution entity at the resolution group consolidated level shall be the sum of the capital conservation, global systemically important institution, other systemically important institution, and systemic risk buffer requirements referred to in CRD IV, as applicable.

    EC also published Regulation 2021/1122, which amends the Implementing Regulation 2016/1368 establishing a list of critical benchmarks used in financial markets pursuant to the Benchmarks Regulation (2016/1011). Regulation 2021/1122 is adding the Norwegian Interbank Offered Rate (NIBOR) to the list of critical benchmarks as well as removing the London Interbank Offered Rate (LIBOR) from the list. The Annex to Regulation 2021/1122 lists Euro Interbank Offered Rate (EURIBOR), Euro Overnight Index Average (EONIA), Stockholm Interbank Offered Rate, Warsaw Interbank Offered Rate, and NIBOR as critical benchmarks pursuant to the Benchmarks Regulation. Regulation 2021/1122 shall enter into force on the day following that of its publication in the Official Journal of the European Union.

     

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    Effective Date: July 28, 2021 (Regulation 2021/1118)/July 10, 2021 (Regulation 2021/1122)

    Keywords: Europe, EU, Banking, Securities, MREL, BRRD, Resolution Framework, Basel, Regulatory Technical Standards, Systemic Risk, Regulatory Capital, Benchmarks Regulation, NIBOR, Norway, LIBOR, CRD, Benchmark Reforms, EC

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