EBA Proposes Revised Standards for Own Funds and Eligible Liabilities
EBA published a consultation paper on the draft amended regulatory technical standards on own funds and eligible liabilities. The draft regulatory technical standards align the existing provisions to changes introduced in the revised Capital Requirements Regulation (CRR) in the area of own funds. The consultation on amended regulatory standards ends on August 31, 2020. The final draft regulatory standards will be subsequently submitted to EC for endorsement before being published in the Official Journal of the European Union.
Last year, European legislators adopted a series of measures, including the “Risk Reduction Measures Package” that complements the existing banking framework to lower risks of failure, reduce the severity of failure, and minimize costs to the tax payer. Part of these risk reduction measures consists in applying targeted adjustments to the own funds framework set out in CRR to reflect EU specificities and a few broader policy considerations. In parallel, the CRR and the Bank Recovery and Resolution Directive (BRRD) have been amended to implement, in EU, the total loss absorbing capacity (TLAC) standard agreed upon for global systemically important institutions (G-SIIs) at the G-20 table. Own funds and eligible liabilities’ requirements have been set out alongside capital requirements to reinforce loss absorption capacity for banks, both going-concern and in resolution. EBA has historically been mandated to further specify some of the conditions of the own funds regime. With the introduction of eligible liabilities instruments in CRR, EBA is mandated to specify the eligible liabilities regime, in some cases with an explicit obligation for both regimes to be fully aligned. To ensure consistency across the spectrum of instruments with similar loss absorption features, it is necessary to approach both sets of mandates together.
For this reason, EBA has chosen to deal with the own funds regime and the eligible liabilities regime in a single set of regulatory technical standards. This consultation paper puts forward draft amendments to the Commission Delegated Regulation No 241/2014 with regard to the regulatory technical standards own funds requirements for institutions, which are now also applicable to eligible liabilities instruments. The consultation paper elicits stakeholder views on the design of the new provisions. With the revised Capital Requirements Regulation (CRR) introducing new criteria and requirements for eligible liabilities, these amended regulatory technical standards capture several aspects of eligible liabilities as well as the changes to the own funds framework. The changes also relate to the provisions for the regime of supervisory prior permission for the reduction of own funds and market making. The draft amended regulatory technical standards specify some of the newly introduced criteria for eligible liabilities instruments derived from the own funds regime, including the:
- Absence of direct or indirect funding for the acquisition of ownership of eligible liabilities
- Absence of incentives to redeem
- Need for the resolution authority’s prior permission for the reduction of eligible liabilities
Related Links
Comment Due Date: August 31, 2020
Keywords: Europe, EU, Banking, CRR, BRRD, Own Funds, Eligible Liabilities, Regulatory Technical Standards, TLAC, Resolution Framework, EBA
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
CBUAE Provides Guidance on Application of IFRS 9 and TESS FacilityRelated Articles
BIS Examines Use of Big Data and Machine Learning at Central Banks
BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.
APRA Finalizes Reporting Standard for Operational Risk Requirements
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
ECB Publishes Guide for Determining Penalties for Regulatory Breaches
ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.
MAS Sets Out Good Practices to Manage Operational Risks Amid COVID
MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.
ACPR Announces New Data Collection Application for Banks and Insurers
ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.
BCB Maintains CCyB at 0%, Initiates First Cycle of Regulatory Sandbox
BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.
EIOPA Launches Study on Non-Life Underwriting Risk in Internal Models
EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.
SRB Publishes Overview of Resolution Tools Available in Banking Union
SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.
EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR
EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting