PRA Issues Clarifications in Respect of Guidance on MREL Reporting
PRA published clarifications in respect of the guidance on reporting and definitions to the minimum requirement for own funds and eligible liabilities (MREL) reporting templates available in Appendix 2 of the policy statement (PS11/18) on MREL reporting. The clarifications are being published following the publication of Capital Requirements Regulation or CRR 2 (EU/2019/876) in the Official Journal of the European Union.
CRR 2 introduces certain new requirements for UK global systemically important banks (G-SIBs) and UK material subsidiaries of non-EU G-SIBs in respect of own funds and eligible liabilities, some of which have been directly applicable from June 27, 2019. PRA provided the following clarifications in respect of the guidance on reporting and definitions:
- PRA considers acceleration rights as a non-standard term that firms are expected to report in "Any non-standard terms included in the instruments" (row 260) in the MRL003 template.
- Further to paragraph 2.13 of PS11/18, now that the CRR 2 cross-holdings regime for eligible liabilities is finalized and in effect, UK G-SIBs are expected to submit the information on cross-holdings (MRL001 and MRL002 templates rows 110 to 140).
Furthermore, in light of the application of the CRR 2 provisions related to the new requirements for own funds and eligible liabilities, reporting should no longer be on a best efforts basis:
- Information on "Investments in own non-regulatory capital MREL eligible liabilities" (row 100) in the MRL001 and MRL002 templates should be reported on the basis of the gross long positions. Where the exceptions in Article 72f of CRR 2 apply, firms should report the position that is permitted to be used in the relevant exception.
- Information on "Investments in non-regulatory capital MREL eligible instruments of financial sector entities where the institution does not own more than 10% of the issued common share capital of the entity" (row 120) in the MRL001 and MRL002 templates should be reported on the basis of the gross long positions, as referred to in Article 72g of CRR 2, and subject to the exceptions laid out in Article 72h of CRR 2.
- Information on "Investments in non-regulatory capital MREL eligible instruments of financial sector entities where the institution owns more than 10% of the issued common share capital of the entity" (row 140) in the MRL001 and MRL002 templates should be reported on the basis of the gross long positions, as referred to in Article 72g of CRR 2, and subject to the exceptions laid out in Article 72h of CRR 2.
PRA is reviewing the relevant amendments to the revised risk management measures (CRR 2/Capital Requirements Directive, or CRD 5/Bank Recovery and Resolution Directive, or BRRD 2) in EU and will consider whether changes to the MREL reporting templates that have been set out in SS19/13 will be required in due course.
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Keywords: Europe, UK, Banking, MREL, Reporting, Resolution Planning, PS 11/18, SS 19/13, Reporting Instructions, CRR 2, CRD 5, BRRD 2, EU, PRA
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