Featured Product

    EBA Report Examines Quality of TLAC and MREL Instruments in EU

    October 29, 2020

    EBA published the first monitoring report that examines the issuance and quality of the minimum requirement for own funds and eligible liabilities (MREL) and the total loss-absorbing capacity (TLAC) instruments in EU. The report is intended to inform stakeholders about the implementation review performed by EBA on TLAC and MREL instruments so far and presents views and recommendations of EBA on specific features commonly seen in these instruments. The findings of EBA contain policy views on existing or new provisions, along with the identified best practices. The report also provides an insight into areas for monitoring or potential EBA guidance going forward.

    The report covers five main areas of assessment relevant to determine the quality of the TLAC and MREL instruments—availability, subordination, capacity for loss absorption, maturity, and other aspects including governing law, tax and regulatory calls, and tax gross-up clauses. The report contains 15 recommendations in total, four in the area of subordination, seven in the area of capacity for loss absorption, three in the area of maturity, and one on tax gross-up. It also stresses the areas where further work from EBA is ongoing. EBA plans further work on general consistency with own funds clauses and existing recommendations from the EBA in this field (including those provided via the additional tier 1 standard templates, for example) if deemed relevant to eligible liabilities instruments. In particular, the report highlights the importance of providing further guidance on the interaction between the clauses used for environmental, social, and governance (ESG) capital issuances and the eligibility criteria for eligible liabilities instruments, with the objective of ensuring that these eligibility criteria for the instruments are not affected..

     

    EBA has developed this report in accordance with Article 80(1) of the Capital Requirements Regulation (CRR). To perform its monitoring function, EBA has focused its work on the assessment of selected TLAC- and MREL-eligible liabilities instruments. EBA has designed specific assessment templates to drive the analysis of instruments. For this report, EBA has analyzed 27 transactions issued in 14 jurisdictions for a total amount of approximately EUR 22.75 billion, which is composed of EUR 21 billion senior non-preferred issuances and EUR 1.75 billion senior holding company issuances. The scope of the monitoring has been limited for now to these two types of issuances. In general, EBA observes that European banks have not waited for the adoption of the new banking package to start issuing MREL and TLAC instruments. However, EBA observes that, so far, in terms of legal drafting of the notes and programs, market participants have used quite simple and standardized provisions. This is conducive to legal certainty and reliability at the point of resolution. 


    Related Links

    Keywords: Europe, EU, Banking, TLAC, MREL, CRR, BRRD, Basel, ESG, Green Bonds, Regulatory Capital, EBA

    Featured Experts
    Related Articles
    News

    EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation

    The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).

    May 23, 2022 WebPage Regulatory News
    News

    EBA Publishes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.

    May 23, 2022 WebPage Regulatory News
    News

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News
    News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News
    News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    News

    EU to Amend Credit Risk Adjustment Rules; ESAs Submit Queries on SFDR

    The European Council published a draft Commission Delegated Regulation to amend the regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.

    May 13, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.

    May 12, 2022 WebPage Regulatory News
    News

    MAS Amends Notice 635 and Issues Second Proposal on Green Taxonomy

    The Monetary Authority of Singapore (MAS) published amendments to Notice 635, which sets out requirements that a bank in Singapore has to comply with when granting an unsecured non-card credit facility to individuals.

    May 12, 2022 WebPage Regulatory News
    News

    EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA

    The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.

    May 11, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8201