The PRA has published Consultation Paper 1/18: Resolution planning: MREL reporting (CP1/18).
The purpose of the proposals in CP1/18 is to provide the PRA and the Bank of England (BoE) with information to monitor firms’ progress towards meeting the interim minimum requirement for own funds and eligible liabilities (MREL), and eventual compliance with end-state MREL to ensure that the policy objectives that underpin MREL are met.
CP1/18 is relevant to PRA-authorised UK banks, building societies, UK designated investment firms and their qualifying parent undertakings (collectively ‘firms’), to which the Resolution Part of the PRA Rulebook applies. In particular, CP1/18 would be most relevant to:
- firms notified by the BoE 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 BoE’s November 2016 statement of policy on its approach to setting MREL; and
- firms notified by the BoE 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 BoE’s October 2017 consultation paper on internal MREL (Internal MREL – the BoE’s approach to setting a minimum requirement for own funds and eligible liabilities (MREL) within groups, and further issues).
The Appendix to CP1/18 sets out proposed amendments to Supervisory Statement 19/13: Resolution planning, draft reporting templates and instructions.
The PRA proposes that firms provide information on MREL resources using three templates:
- MREL Resources (MRL01.00). This template is intended to collect information on the amount and maturity profile of MREL eligible liabilities, cross-holdings of MREL and regulatory capital that does not qualify as MREL resources. This data would be supplemented by regulatory capital data from COREP C 01.00;
- MREL Resources Forecast (MRL02.00). This template is intended to collect information on projected MREL eligible resources. The data would be supplemented by regulatory capital forecast data from Capital+; and
- MREL Debt (MRL03.00). This template is intended to collect data on individual characteristics of internal and external MREL resources to monitor compliance with eligibility criteria.
The PRA proposes in CP1/18 the following three different implementation timelines:
- firms that have been notified by the BoE prior to 1 January 2017 that they are likely to be set external MREL in excess of regulatory capital requirements (whether interim and/or end-state) should start reporting, at the same time and frequency as their Capital+ and COREP C 01.00 reporting, starting 6 months after the publication of the final policy statement following CP1/18, but not before 1 January 2019;
- firms that have been notified by the BoE that they are likely to be set internal MREL in excess of regulatory capital requirements (whether interim and/or end-state) should start reporting, at the same time and frequency as their Capital+ and COREP C 01.00 reporting, starting the later of: (i) 6 months after the publication of the final policy statement following CP1/18; (ii) 6 months after being notified by the BoE about their internal MREL levels. The BoE has not yet informed firms about their internal MREL levels and any such notification will only occur following the finalisation of an internal MREL statement of policy; or (iii) 1 January 2019; and
- firms that have been notified after 1 January 2017 that they are likely to be set internal or external MREL in excess of regulatory capital requirements (whether interim and/or end-state) by the BoE, should start reporting at least 12 months prior to the end of the transitional period set by the BoE. The BoE will inform firms of the first expected reporting data along with MREL levels.
The deadline for comments on CP1/18 is 9 April 2018.
View Consultation Paper 1/18: Resolution planning: MREL reporting, 8 January 2018
