The European Parliament’s Committee on Economic and Monetary Affairs (ECON) has published draft reports containing amendments to the proposed:
- Directive amending Directive 2014/59/EU on loss-absorbing and recapitalisation capacity of credit institutions and investment firms and amending Directive 98/26/EC, Directive 2002/47/EC, Directive 2012/30/EU, Directive 2011/35/EU, Directive 2005/56/EC, Directive 2004/25/EC, and Directive 2007/36/EC. This draft Directive amends the Bank Recovery and Resolution Directive so that the total loss absorbency capacity standard (TLAC) can be implemented and integrated into the general rules concerning the minimum requirement for own funds and eligible liabilities (MREL); and
- Regulation amending Regulation (EU) No. 806/2014 as regards loss-absorbing and recapitalisation capacity for credit institutions and investment firms. This draft Regulation makes targeted amendments to the Regulation establishing the Single Resolution Mechanism so that the TLAC standard may be implemented in the EU.
In the explanatory statement of both draft reports the rapporteur, Gunnar Hőkmark, welcomes the introduction of TLAC in European legislation but argues that it (and MREL) must be designed in a way that does not punish banks for increasing their level of capital or for maintaining a high level. Mr Hőkmark argues that this means that the requirements for MREL must be designed so that a bank with high levels of own capital must meet the same requirements on MREL as an otherwise equivalent bank (in terms of size, risk, business model) with a lower level of own capital.