EBA Publishes Interim Report on MREL
The European Banking Authority (EBA) has published an interim report on the minimum requirement for own funds and eligible liabilities (MREL). Under the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD) the EBA is required to submit a report to the European Commission on the implementation of MREL by October 31, 2016. This report will assist the Commission in its work on a legislative proposal on the harmonized application of MREL as well as a legislative proposal to review MREL and implement the total loss absorbing capacity standard in the EU.
The EBA's interim report is intended to provide input into the Commission's deliberations ahead of the preparations of the EBA's final report and contains a number of provisional recommendations. Preliminary quantitative findings on the financing capacity and needs of EU banking groups are also available in the interim report, although these are subject to several methodological caveats. In the absence of MREL decisions for institutions to date, and given the limited information related to the resolution authorities' MREL policy approach, the EBA was required to make assumptions on the likely scope and calibration of MREL. These assumptions are by definition different from the actual levels of MREL which will ultimately be determined by resolution authorities in relation to each institution and group.
The interim report is available here.
ESMA Updates Q&A on Application of UCITS Directive
The European Securities and Markets Authority (ESMA) has published an updated version of its Q&A paper on the application of the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive (2009/65/EC) as most recently revised by UCITS V (2014/91/EU). The purpose of the Q&A is to promote common supervisory approaches and practices in the application of the UCITS and its implementing measures. The most recent updates reflect a Q&A relating to the valuation of OTC derivatives and are highlighted in yellow in the paper.
The latest version of the Q&A is available here.
EBA Final Draft RTS on Assessment Methodology for Internal Ratings-Based Approach
The EBA has published final draft regulatory technical standards (RTS) on the specification of the assessment methodology for competent authorities regarding compliance of an institution with the requirements to use the internal ratings-based (IRB) approach in accordance with Articles 144(2), 173(3) and 180(3)(b) of the Capital Requirements Regulation (Regulation 575/2013) (CRR).
The final draft RTS provide a mapping of the minimum IRB requirements as laid down in Chapter 3, Title II, Part Three of the CRR, into fourteen chapters. Each chapter starts with a brief description of the assessment criteria to be used by competent authorities relating to verification requests and of the methods to be used by competent authorities in this context. Under the IRB approach, institutions determine their own funds requirements for credit risk, taking into account their own estimates of risk parameters. Competent authorities may, under the CRR, permit institutions to use the IRB approach, provided that the relevant conditions set out in the CRR are met.
The draft RTS are available here and will now be submitted to the European Commission for endorsement.
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