Featured Product

    EBA Report Examines Quality of TLAC and MREL Instruments in EU

    October 29, 2020

    EBA published the first monitoring report that examines the issuance and quality of the minimum requirement for own funds and eligible liabilities (MREL) and the total loss-absorbing capacity (TLAC) instruments in EU. The report is intended to inform stakeholders about the implementation review performed by EBA on TLAC and MREL instruments so far and presents views and recommendations of EBA on specific features commonly seen in these instruments. The findings of EBA contain policy views on existing or new provisions, along with the identified best practices. The report also provides an insight into areas for monitoring or potential EBA guidance going forward.

    The report covers five main areas of assessment relevant to determine the quality of the TLAC and MREL instruments—availability, subordination, capacity for loss absorption, maturity, and other aspects including governing law, tax and regulatory calls, and tax gross-up clauses. The report contains 15 recommendations in total, four in the area of subordination, seven in the area of capacity for loss absorption, three in the area of maturity, and one on tax gross-up. It also stresses the areas where further work from EBA is ongoing. EBA plans further work on general consistency with own funds clauses and existing recommendations from the EBA in this field (including those provided via the additional tier 1 standard templates, for example) if deemed relevant to eligible liabilities instruments. In particular, the report highlights the importance of providing further guidance on the interaction between the clauses used for environmental, social, and governance (ESG) capital issuances and the eligibility criteria for eligible liabilities instruments, with the objective of ensuring that these eligibility criteria for the instruments are not affected..

     

    EBA has developed this report in accordance with Article 80(1) of the Capital Requirements Regulation (CRR). To perform its monitoring function, EBA has focused its work on the assessment of selected TLAC- and MREL-eligible liabilities instruments. EBA has designed specific assessment templates to drive the analysis of instruments. For this report, EBA has analyzed 27 transactions issued in 14 jurisdictions for a total amount of approximately EUR 22.75 billion, which is composed of EUR 21 billion senior non-preferred issuances and EUR 1.75 billion senior holding company issuances. The scope of the monitoring has been limited for now to these two types of issuances. In general, EBA observes that European banks have not waited for the adoption of the new banking package to start issuing MREL and TLAC instruments. However, EBA observes that, so far, in terms of legal drafting of the notes and programs, market participants have used quite simple and standardized provisions. This is conducive to legal certainty and reliability at the point of resolution. 


    Related Links

    Keywords: Europe, EU, Banking, TLAC, MREL, CRR, BRRD, Basel, ESG, Green Bonds, Regulatory Capital, EBA

    Featured Experts
    Related Articles
    News

    EC to Defer Application of SFDR Standards Till July 2022

    The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.

    July 23, 2021 WebPage Regulatory News
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    News

    US Agencies Propose Changes to Call Reports and Instructions

    Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.

    July 22, 2021 WebPage Regulatory News
    News

    PRA Finalizes Rulebook Definition of Higher Paid Material Risk-Taker

    The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Examines Asset Encumbrance in Banking Sector

    The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Publishes Methodological Guide to Mystery Shopping

    The European Banking Authority (EBA) published a methodological guide to mystery shopping.

    July 21, 2021 WebPage Regulatory News
    News

    APRA Issues Update on Capital Reform Policy Settings for Banks

    The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.

    July 21, 2021 WebPage Regulatory News
    News

    CPMI-IOSCO Assess Continuity Planning of Market Infrastructures

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.

    July 21, 2021 WebPage Regulatory News
    News

    ESMA Responds to Proposal Related to Sustainability Standards Board

    The European Securities and Markets Authority (ESMA) has responded to the IFRS consultation on targeted amendments to the IFRS Foundation constitution to accommodate an International Sustainability Standards Board (ISSB) to set IFRS Sustainability Standards.

    July 21, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7284