PRA published clarifications in respect of the guidance on reporting and definitions to the minimum requirement for own funds and eligible liabilities (MREL) reporting templates available in Appendix 2 of the policy statement (PS11/18) on MREL reporting. The clarifications are being published following the publication of Capital Requirements Regulation or CRR 2 (EU/2019/876) in the Official Journal of the European Union.
CRR 2 introduces certain new requirements for UK global systemically important banks (G-SIBs) and UK material subsidiaries of non-EU G-SIBs in respect of own funds and eligible liabilities, some of which have been directly applicable from June 27, 2019. PRA provided the following clarifications in respect of the guidance on reporting and definitions:
- PRA considers acceleration rights as a non-standard term that firms are expected to report in "Any non-standard terms included in the instruments" (row 260) in the MRL003 template.
- Further to paragraph 2.13 of PS11/18, now that the CRR 2 cross-holdings regime for eligible liabilities is finalized and in effect, UK G-SIBs are expected to submit the information on cross-holdings (MRL001 and MRL002 templates rows 110 to 140).
Furthermore, in light of the application of the CRR 2 provisions related to the new requirements for own funds and eligible liabilities, reporting should no longer be on a best efforts basis:
- Information on "Investments in own non-regulatory capital MREL eligible liabilities" (row 100) in the MRL001 and MRL002 templates should be reported on the basis of the gross long positions. Where the exceptions in Article 72f of CRR 2 apply, firms should report the position that is permitted to be used in the relevant exception.
- Information on "Investments in non-regulatory capital MREL eligible instruments of financial sector entities where the institution does not own more than 10% of the issued common share capital of the entity" (row 120) in the MRL001 and MRL002 templates should be reported on the basis of the gross long positions, as referred to in Article 72g of CRR 2, and subject to the exceptions laid out in Article 72h of CRR 2.
- Information on "Investments in non-regulatory capital MREL eligible instruments of financial sector entities where the institution owns more than 10% of the issued common share capital of the entity" (row 140) in the MRL001 and MRL002 templates should be reported on the basis of the gross long positions, as referred to in Article 72g of CRR 2, and subject to the exceptions laid out in Article 72h of CRR 2.
PRA is reviewing the relevant amendments to the revised risk management measures (CRR 2/Capital Requirements Directive, or CRD 5/Bank Recovery and Resolution Directive, or BRRD 2) in EU and will consider whether changes to the MREL reporting templates that have been set out in SS19/13 will be required in due course.
Keywords: Europe, UK, Banking, MREL, Reporting, Resolution Planning, PS 11/18, SS 19/13, Reporting Instructions, CRR 2, CRD 5, BRRD 2, EU, PRA
Previous ArticleISDA Consults on Final Parameters for Benchmark Fallback Adjustments
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).