Resolution planning: MREL reporting

Published 13 June 2018

Resolution planning: MREL reporting - PS11/18

Overview

This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses from the Consultation Paper (CP) 1/18 ‘Resolution planning: MREL reporting’. It also sets out the PRA’s final expectations for the reporting on the minimum requirement for own funds and eligible liabilities (MREL). The appendices to this PS set out the updated Supervisory Statement (SS) 19/13 ‘Resolution planning’ (Appendix 1) and the reporting templates and guidance (Appendix 2).

This PS is relevant to PRA-authorised UK banks, building societies, UK designated investment firms and their qualifying parent undertakings (collectively referred to as ‘firms’), to which the Resolution Pack Part of the PRA Rulebook applies. In particular, this would be most relevant to:

firms notified by the Bank of England (the Bank) that they are likely to be subject to external interim and/or end-state MREL in excess of regulatory capital requirements as articulated in the Bank’s statement of policy on its approach to setting MREL (‘MREL Statement of Policy’); and
firms notified by the Bank that they are likely to be subject to internal interim and/or end-state MREL in excess of regulatory capital requirements, as articulated in the MREL Statement of Policy.

In CP1/18, the PRA consulted on the proposed reporting expectations for MREL resources, together with the level of application, frequency, format and implementation timetable, through an update to SS19/13.

Summary of responses

The PRA received three responses to CP1/18. Respondents were broadly supportive of the proposals. However, some respondents questioned whether the frequency of reporting would place a disproportionate burden on firms, and some sought further clarity on the details of the draft templates and guidance.

Implementation

The updated SS19/13 will take effect from Tuesday 1 January 2019.

Policy Statement 11/18

Appendices

Appendix 1: Supervisory Statement 19/13 'Resolution planning'

Appendix 2: Reporting templates and guidance:

Update 18 September 2019: On 7 June 2019, the European Union published a new Regulation (EU/2019/876) amending Regulation (EU/575/2013) and Regulation (EU/648/2012) (CRR II) in the Official Journal of the European Union. As set out in the updates on the CRD IV and Resolution pages published on Monday 10 June 2019, CRR II 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 Thursday 27 June 2019.

We are in the process of reviewing the relevant amendments to the EU’s revised risk management measures (CRR II /Capital Requirements Directive V / Bank Recovery and Resolution Directive II), and will consider whether changes to MREL reporting templates set out in SS19/13 are required in due course. In the interim, we provide the following clarifications in respect of the guidance on reporting and definitions:

We consider 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 II cross holdings regime for eligible liabilities is finalised and in effect, we expect UK G-SIBs to submit the information on cross-holdings (MRL001 and MRL002 templates rows 110 to 140). Furthermore, in light of the application of the CRR II 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 II 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 II, and subject to the exceptions laid out in Article 72h of CRR II.
- 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 II, and subject to the exceptions laid out in Article 72h of CRR II.

Name

Data item

Guidance

MRL001

MREL Resources

MREL reporting templates

Guidance on reporting templates and definitions

MRL002

MREL Resources Forecast

MRL003

MREL Debt

Published 8 January 2018

Resolution planning: MREL reporting - CP1/18

Background

In this consultation paper (CP), the Prudential Regulation Authority (PRA) sets out its proposed expectations for reporting on the minimum requirement for own funds and eligible liabilities (MREL) through updates to Supervisory Statement (SS) 19/13 ‘Resolution planning’.

The CP is relevant to PRA-authorised UK banks, building societies, UK designated investment firms and their qualifying parent undertakings (collectively referred to as ‘firms’), to which the Resolution Pack Part of the PRA Rulebook applies. In particular, this would be most relevant to:

firms notified by the Bank of England (the Bank) that they are likely to be subject to external interim and/or end-state MREL in excess of regulatory capital requirements as articulated in the Bank’s statement of policy on its approach to setting MREL (‘MREL Statement of Policy’); and
firms notified by the Bank that they are likely to be subject to internal interim and/or end-state MREL in excess of regulatory capital requirements, as proposed in the Bank’s CP on internal MREL published on 2 October 2017 (‘Internal MREL CP’) . Any references to the Internal MREL CP are to the proposals contained within it and do not therefore reflect finalised policy.

Summary of proposals

The purpose of the proposals in this CP is to provide the PRA and the Bank of England (authorities) with information to monitor firms’ progress towards meeting interim MREL, and eventual compliance with end-state MREL to ensure that the policy objectives that underpin MREL are met. The CP includes three implementation timelines in Chapter 2.

Responses and next steps

This consultation closed on Monday 9 April 2018. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP1_18@bankofengland.co.uk.

Consultation Paper 1/18

Documents in appendix to draft supervisory statement: