The Single Resolution Board (SRB) published the minimum requirement for own funds and eligible liabilities (MREL) dashboard for the first quarter of 2021 (average MREL shortfall reached EUR 42.2 billion) and an article that explains the goal of the heatmap for assessing resolvability. Also published was the information on the SRB approach to prior permissions for eligible liabilities, in line with the upcoming regulatory changes. To contribute to a smooth transition to the framework in the upcoming Delegated Regulation on own funds and eligible liabilities and to limit the need for banks to re-submit a second authorization application for General Prior Permissions within the same calendar year (that is once the Delegated Regulation enters into force), SRB will amend its provisional policy in line with Section 2—Subsection 2—“Permission for reducing eligible liabilities instruments” of the draft EBA regulatory technical standards on own funds and eligible liabilities, for all permissions effective as of January 01, 2022.
This means that applications for permission for redemptions of eligible liabilities should be compliant with the requirements in the regulatory technical standards. Exceptionally, banks can file their applications until the end of September 2021, to allow them to familiarize themselves with the details. The draft technical standards includes some material changes on the conditions for authorization compared to SRB provisional policy, in particular regarding the authorized envelope for redemptions (pre-determined amount) and the need to deduct it upfront from the MREL resources of banks. Banks’ applications for authorizations from January 01, 2022 should be based on the list of information requirements as referred to in Articles 32(d) and (e) of the draft technical standards. An additional communication on the new regime will be published in early September.
Additionally, the article on assessing resolvability explains the goals of the heatmap on assessing resolvability, how it works, and how it will help foster convergence with other authorities’ resolvability monitoring. SRB has established harmonized horizontal criteria to classify banks’ progress, according to each resolvability condition and the impact the condition has on the feasibility of the resolution strategy; it also established criteria to determine materiality of the impediments and consider appropriate corrective action. Depending on how significant the impediments are, SRB will ask banks to address them either through dedicated corrective actions, under close monitoring by SRB’s internal resolution teams during the following twelve-month period, or by starting the formal procedure for addressing substantive impediments to resolvability. The need to trigger the substantive impediments procedure will result from a holistic assessment. The heatmap will also allow benchmarking across banks, peer groups, and resolution strategies to foster a level playing field in the Banking Union. An anonymized version of the heat-map according to various dimensions will be made public closer to the end of the phasing-in period of the Expectations for Banks. The heatmap approach not only promotes convergence and comparability in monitoring resolvability across Banking Union banks, but should also allow to draw holistic comparisons with the resolution frameworks outside the Banking Union.
- Approach to Prior Permissions Regime
- Article on Heatmap Approach on Resolvability Assessment
- MREL Dashboard
Keywords: Europe, EU, Banking, Eligible Liabilities, Regulatory Technical Standards, Own Funds, CRR, MREL, Basel, Resolvability Assessment, Heatmap, Resolution Framework, Permission Regime, MREL Dashboard, SRB
Previous ArticleCBE Amends Guidance on Governance and Rules on Licensing for Banks
Next ArticleEC Provides Update on IPSF Common Ground Taxonomy
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.
Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)
The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)