SRB Extends Permissions Procedure for Eligible Liabilities Instruments
SRB is extending prior permission procedure to assess applications to reduce eligible liabilities instruments under Article 78a of the Capital Requirements Regulation (CRR). This procedure will remain in place until the relevant regulatory technical standards of EBA come into force. Article 78 of the CRR addresses supervisory permission for reducing own funds. As per this article, a competent authority shall grant permission for an institution to reduce, repurchase, call, or redeem common equity tier 1, additional tier 1 or tier 2 instruments where certain predefined conditions have been met. To continue performing market-making and other secondary market activities as of January 01, 2020, banks must obtain a prior permission.
To cover the period until the EBA regulatory standards come into force, SRB confirms and extends the conditions published on June 25, 2019 in the CRR addendum to the Minimum Requirement for Own Funds and Eligible Liabilities (MREL) policy of SRB:
- The aggregate trading volume in these activities does not exceed 1% Total Risk Exposure Amount (TREA) on a consolidated basis at the level of the resolution group
- Any MREL shortfall, or increase thereof, resulting from these market-making activities is compensated with eligible liabilities instruments on a quarterly basis
EBA is mandated under Article 78a (3) of CRR to draft regulatory technical standards specifying the process for prior permissions, including the time limits and information requirements. Until this Level 2 Regulation comes into application, the following provisional procedure applies:
- Scope of instruments. At this stage, SRB considers that the permission regime applies to eligible liabilities instruments as defined in Article 72b of CRR.
- Time-limit for applications. Institutions shall transmit a complete application to SRB at least four months in advance of the date where one of the actions listed in Article 78a of CRR (hereafter: “Redemption”) is intended to be performed.
Related Links
Keywords: Europe, EU, Banking, MREL, CRR, Basel III, Regulatory Capital, SRB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Dieter Van der Stock
IFRS subject matter expert; LDTI subject matter expert; accounting authority; risk management specialist
Previous Article
IOSCO Publishes Annual Work Program for 2019Related Articles
EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules
The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.
BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks
As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.
BCBS and EBA Publish Results of Basel III Monitoring Exercise
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
PRA Updates Timeline for Final Basel III Rules, Issues Other Updates
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
US Treasury Sets Out Principles for Net-Zero Financing
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
EC Launches Survey on G7 Principles on Generative AI
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
ISSB Sustainability Standards Expected to Become Global Baseline
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
BCBS Assesses NSFR and Large Exposures Rules in US
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
