Featured Product

    HM Treasury Consults on Approach to Transposition of BRRD 2

    June 23, 2020

    HM Treasury is consulting on its approach to transpose the revised Bank Recovery and Resolution Directive 2 (BRRD 2) into the UK legislation, given the scheduled withdrawal of UK from EU. The comment period for this consultation ends on August 11, 2020. BRRD 2, which entered into force on June 27, 2019, amends the original 2014 BRRD provisions, to update the resolution policy of EU and the Minimum Requirements for Own Funds and Eligible Liabilities (MREL) framework. In considering the transposition of BRRD 2, the government will look to build on the current resolution regime in UK.

    During the Transition Period, and under the terms of the Withdrawal Agreement, the UK government will implement EU legislation that requires transposition before the end of 2020. This includes the transposition of BRRD 2 by December 28, 2020.  HM Treasury is consulting on the following provisions of BRRD2:

    • The introduction of the concepts of "resolution entities" and "resolution groups," which derive from the same terms used in the Total Loss Absorbing Capacity (TLAC) standard of FSB
    • The power for the resolution authority to prohibit certain distributions, where the entity fails to meet its combined buffer requirement, when considered in addition to its MREL requirements
    • The power for the resolution authority to suspend any contractual payment or delivery obligations after a firm is deemed failing or likely to fail, but before entry into resolution
    • Restrictions on the selling of subordinated eligible liabilities to retail clients
    • Amendments to the requirements on the contractual recognition of bail-in, to address circumstances in which it would be legally or otherwise impractical to include a contractual term
    • A requirement for entities to include, in financial contracts governed by third country law, a term by which the parties recognize that the financial contract may be subject to the exercise of powers by the resolution authority to suspend or restrict obligations

    The government does not intend to transpose the requirements in the Directive with which the firms do not need to be comply until after the end of the Transition Period, in particular Article 1(17) that revises the framework for MREL requirements across EU. MREL is the minimum amount of equity and debt that a firm must maintain to absorb losses and provide for recapitalization, in the event of resolution. The purpose of MREL is to ensure that investors and shareholders, and not the taxpayer, absorb losses when a firm fails. The UK already has in place a MREL framework in line with the international standards. BRRD2 states that the deadline for institutions and entities to comply with end-state MREL requirements shall be January 01, 2024. Given that this is after the end of the Transition Period, it is right that the UK exercises its discretion about whether to transpose those requirements. The scope of the BRRD2 covers credit institutions, certain investment firms, certain financial institutions, financial holding companies, mixed financial holding companies, and mixed-activity holding companies. 

     

    Related Links

    Comment Due Date: August 11, 2020

    Keywords: Europe, UK, Banking, BRRD2, MREL, TLAC, Bail-In, Transition Period, Withdrawal Agreement, Brexit, Basel, HM Treasury

    Featured Experts
    Related Articles
    News

    EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.10

    EBA published phase 2 of the technical package on the reporting framework 2.10, providing the technical tools and specifications for implementation of EBA reporting requirements.

    July 10, 2020 WebPage Regulatory News
    News

    FASB Proposes to Delay Implementation of Insurance Contracts Standard

    FASB issued a proposed Accounting Standards Update that would grant insurance companies, adversely affected by the COVID-19 pandemic, an additional year to implement the Accounting Standards Update No. 2018-12 on targeted improvements to accounting for long-duration insurance contracts, or LDTI (Topic 944).

    July 09, 2020 WebPage Regulatory News
    News

    APRA Updates Regulatory Approach to Loan Deferrals Amid COVID Crisis

    APRA updated the regulatory approach for loans subject to repayment deferrals amid the COVID-19 crisis.

    July 09, 2020 WebPage Regulatory News
    News

    BCBS and FSB Set Out Recommendations for Benchmark Transition

    BCBS and FSB published a report on supervisory issues associated with benchmark transition.

    July 09, 2020 WebPage Regulatory News
    News

    IAIS Sets Out Recommendations for Benchmark Transition for Insurers

    IAIS published a report on supervisory issues associated with benchmark transition from an insurance perspective.

    July 09, 2020 WebPage Regulatory News
    News

    ESMA Updates Reporting Manual on European Single Electronic Format

    ESMA updated the reporting manual on the European Single Electronic Format (ESEF).

    July 09, 2020 WebPage Regulatory News
    News

    EBA Calls on Resolution Authorities to Consider Impact of COVID Crisis

    EBA published a statement on resolution planning in light of the COVID-19 pandemic.

    July 09, 2020 WebPage Regulatory News
    News

    BCBS Finalizes Revisions to Credit Valuation Adjustment Risk Framework

    BCBS Finalizes Revisions to Credit Valuation Adjustment Risk Framework

    July 08, 2020 WebPage Regulatory News
    News

    ECB Guideline on Materiality Threshold for Credit Obligations Past Due

    ECB published a guideline (2020/97), in the Official Journal of European Union, on the definition of materiality threshold for credit obligations past due for less significant institutions.

    July 08, 2020 WebPage Regulatory News
    News

    FED Temporarily Revises FR Y-14 With Respect to PPP and CARES Act

    FED temporarily revised the capital assessments and stress testing reports (FR Y-14A/Q/M) to implement the changes in response to the COVID-19 pandemic.

    July 08, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5458