Featured Product

    EBA Proposes Standards on Indirect Subscription of MREL Instruments

    July 27, 2020

    EBA proposed regulatory technical standards on indirect subscription of minimum requirement for own funds and eligible liabilities (MREL) instruments within groups. The standards specify the methods to avoid that instruments indirectly subscribed by the resolution entity for meeting the internal MREL hamper the smooth implementation of the resolution strategy of the resolution group. The patterns of indirect subscription are also known as “daisy chains of internal MREL.” The proposed technical standards provide a general deduction framework for indirect subscriptions of eligible instruments, present the sequence of deduction, and cover cases where the general deduction framework is not practicable. The consultation runs until October 27, 2020. The finalization of the draft technical standards and communication to EC is planned by December 2020.

    Under the draft technical standards, a general deduction framework applies in the general case and a “fall-back” solution applies where the deduction approach cannot apply. The deduction occurs at the level of any intermediate entity that has an MREL requirement in a chain of ownership inside a group. The amount of deduction of MREL-eligible instruments equals the full amount of the intermediate entity’s holdings of MREL-eligible instruments of the lower subsidiaries, with a risk-weight of 0% being applied to these holdings. This deduction framework complements the one already in place for own funds by including eligible liabilities. Where the general deduction framework is not practicable, the resolution authority assesses whether indirectly issued instruments hamper the smooth implementation of the resolution strategy and may apply the measures of Article 45k of the revised Banking Recovery and Resolution Directive or BRRD2 (2019/878) on the breach of MREL, including the removal of a substantive impediment to resolvability. 

    BRRD2 requires an entity that is not a resolution entity to issue own funds to any entity in the resolution group and eligible liabilities directly or indirectly to the resolution entity. The mandate under Article 45f(6) of this Directive calls for methods that avoid that indirectly issued instruments hamper the smooth implementation of the resolution strategy. To comply with this mandate, EBA proposed these draft regulatory technical standards. Internal MREL is the loss‐absorbing and recapitalization capacity that resolution entities have committed to subsidiaries. In general, this requirement recognizes that feasible and credible resolution strategy may involve the placement of loss‐absorbing capacity and recapitalization in all parts of the resolution group. Internal MREL should be set at a level that is sufficient to support the resolution strategy for the resolution group. Under point (a)(i) of Article 45f(2) of the BRRD2, internal MREL may be issued directly from a subsidiary to the resolution entity or indirectly through multiple legal entities within the group. The latter can include cases where the subsidiary issues internal MREL through another entity within the resolution group to the resolution entity, which itself is subject to internal iMREL (daisy chain)

     

    Related Links

    Comment Due Date: October 27, 2020

     Keywords: Europe, EU, Banking, MREL, BRRD2, Internal Model, Resolution Framework, Basel, TLAC, Resolvability, Regulatory Technical Standards, EC, EBA

    Featured Experts
    Related Articles
    News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News
    News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News
    News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News
    News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News
    News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    News

    IOSCO Welcomes Work on Sustainability-Related Corporate Reporting

    The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)

    September 15, 2022 WebPage Regulatory News
    News

    BoE Allows One-Day Delay in Statistical Data Submissions by Banks

    The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.

    September 14, 2022 WebPage Regulatory News
    News

    ACPR Amends Reporting Module Timelines Under EBA Framework 3.2

    The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.

    September 14, 2022 WebPage Regulatory News
    News

    ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies

    The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)

    September 13, 2022 WebPage Regulatory News
    News

    APRA to Modernize Prudential Architecture, Reduces Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.

    September 12, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8514