On 29 May 2020, the European Banking Authority (EBA) published a consultation paper on the draft amended regulatory technical standards (RTS) on own funds and eligible liabilities. Since their entry into force, the RTS on own funds have significantly enhanced regulatory harmonisation of prudential rules and contributed to strengthening the quality of regulatory capital. With the revised Capital Requirements Regulation (CRR) introducing new criteria and requirements for eligible liabilities, these amended RTS capture several aspects of eligible liabilities as well as the changes to the own funds framework.
The draft RTS align existing provisions to changes introduced in the revised CRR in the area of own funds. This is the case, in particular, for provisions relating to the regime of supervisory prior permission for the reduction of own funds and market making.
In addition, the draft amended RTS specify some of the newly introduced criteria for eligible liabilities instruments derived from the own funds regime. These include the absence of direct or indirect funding for the acquisition of ownership of eligible liabilities, the absence of incentives to redeem, the need for the resolution authority’s prior permission for the reduction of eligible liabilities. For some of these aspects, the mandates attributed to the EBA explicitly require to ensure full alignment between eligible liabilities and own funds.
The consultation runs until 31 August 2020.