SRB published guidance clarifying what will happen once the minimum requirement for own funds and eligible liabilities (MREL) decisions under the revised Single Resolution Mechanism Regulation (SRMR2) are communicated by national resolution authorities. SRB also provides an update on the treatment of General Prior Permissions currently in place. With this, SRB has updated its approach to the prior permission regime for early calling, redeeming, repaying, or repurchasing of eligible liabilities instruments by banks, ahead of the upcoming key regulatory changes.
The recent SRB guidance aims to explain and inform institutions under the direct SRB remit about two regulatory changes that require SRB to adapt its current permission regime procedure for calling, redeeming, repaying or repurchasing eligible liabilities instruments ahead of their maturity. The first regulatory change relates to the application of SRMR2 on December 28, 2020, with new MREL-eligibility criteria applying to liabilities that qualify for MREL. The regulation expands the scope of liabilities subject to the permission regime to all MREL eligible liabilities (including senior unsecured liabilities and internal MREL eligible liabilities) and to liabilities that are eligible for internal MREL. The guidance explains that, until the new MREL decisions adopted by SRB on the basis of the SRMR2 are communicated to institutions by the national resolution authorities, the existing MREL decisions taken on the basis of SRMR1/BRRD1 remain valid. After the communication of the SRMR2 MREL decisions by national resolution authorities, the transitional period set out in Article 12k of the SRMR2 will start and institutions will not need to apply for for early redemptions of MREL-eligible liabilities taking place until December 31, 2021. However, for redemptions of MREL-eligible liabilities to be performed after December 31, 2021, institutions will need to submit applications to the SRB four months in advance (for example, to perform a redemption as of January 01, 2022, an institution will need to submit an application to SRB at the latest by August 31, 2021).
The second regulatory change is the forthcoming Level 2 legislation on the permission regime. EBA is mandated under Article 78a(3) of the revised Capital Requirements Regulation (CRR2) to draft regulatory technical standards specifying the process for prior permission, including information requirements for permission applications and the timeframe for resolution authorities to assess applications. The EBA standards on the procedure applicable to early redemptions will have an impact on the current policy and procedure of SRB. SRB will continue to assess all new applications based on its current policy and procedure until the Delegated Regulation endorsing the EBA regulatory technical standards applies. SRB will use the statutory transitional period set out in SRMR2 to integrate the new elements of the Delegated Regulation into its policy and procedure, so that the updated permission regime can be operational as of January 01, 2022. SRB expects all applications for permission to include projections on total loss-absorbing capacity (TLAC) for the following three years.
Keywords: Europe, EU, Banking, MREL, Resolution Framework, SRMR2, Permission Regime, CRR2, Basel, TLAC, Regulatory Capital, EBA, SRB
Previous ArticleMAS Proposes Notices on Management of Services Outsourced by Banks
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.
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.
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.
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
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.
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.
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.