Sebastiano Laviola of SRB Outlines Next Steps for MREL Policy
In a recent article, the SRB Board Member Sebastiano Laviola outlined the next steps with respect to minimum requirements for own funds and eligible liabilities (MREL) policy. SRB updated its MREL policy last month resulting in changes to the deadlines for binding MREL targets. SRB will decide on the level of MREL that institutions should hold in its 2020 resolution planning cycle. These decisions, which will be communicated to banks in early 2021, will include two binding MREL targets—the binding intermediate target to be met by January 01, 2022 and the MREL (final target) to be met by January 01, 2024. The decisions will reflect changing capital requirements and will be calibrated taking the most recent information into account, where relevant.
The article highlights that the new MREL targets allow SRB to take a forward-looking approach to banks that may face short-term difficulties in meeting the existing targets set in earlier cycles, due to the COVID-19 crisis. SRB is committed to the continued build-up of MREL, while ensuring that short-term MREL constraints do not prevent banks from lending to businesses and households. The article also states that MREL is being steadily built up in quantity and quality over time. While the COVID-19 crisis has caused severely reduced new issuances in March and April, there have been signs of recovery in recent weeks. Progress on MREL requirements means banks are more resolvable. SRB aims to set ambitious but realistic objectives for the build-up of MREL quantity and quality, taking the situation of financial markets and market capacity into consideration where needed. This loss-absorbing capacity is vital for strengthening resolvability, and, in turn, financial stability.
The updated MREL policy, published last month, implements the new requirements in the 2019 Banking Package, which introduced a number of risk-reducing measures for the financial sector. The updated policy introduces changes to MREL requirements for large global systemically important banks, integrating the global standard for total loss-absorbing capacity (TLAC). There are changes to the way it is calculated and in its quality (subordination). It also sets out dedicated rules for different business models, such as cooperatives, and resolution strategies, such as multiple-point-of-entry (MPE).
Related Link: Article by SRB Board Member
Keywords: Europe, EU, Banking, MREL, Banking Package, COVID-9, TLAC, Resolution Planning, Resolution Framework, 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.
Trevor Howes
IFRS 17 technical advisor; AXIS actuarial modeling system expert; extensive experience in life insurance and life reinsurance, with focus on modeling, valuation, and financial reporting
Previous Article
BCBS Publishes Additional FAQs on International Basel FrameworkRelated Articles
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
