The PRA has published Consultation Paper 44/15: The minimum requirement for own funds and eligible liabilities (MREL) – buffers and Threshold Conditions (CP44/15).
In CP44/15 the PRA sets out proposals regarding the relationship between the minimum requirement for own funds and eligible liabilities (MREL) and regulatory buffers. It also sets out the PRA’s proposals regarding the relationship between MREL and the PRA’s Threshold Conditions, which provide the minimum requirements that firms must meet in order to be permitted to carry on the regulated activities in which they engage.
- the PRA proposes that firms should not be able to double count common equity tier 1 (CET1) capital towards, on the one hand, MREL, and, on the other, risk-weighted capital and leverage buffers;
- with regard to the Threshold Conditions, chapter 4 of CP44/15 covers the PRA’s proposals that a firm in breach of MREL should expect the PRA to investigate whether the firm is failing, or likely to fail, to satisfy the Threshold Conditions with a view to taking further action as necessary; and
- the PRA has considered the Financial Stability Board’s total loss absorbing capacity (TLAC) standard when proposing the policies in CP44/15. The policies are aligned with the TLAC proposals not to double count CET1 capital towards, on the one hand, TLAC, and, on the other, regulatory buffers. They are also aligned with the TLAC proposals to treat a breach, or likely breach, of TLAC as seriously as a breach or likely breach of minimum capital requirements.
The deadline for comments on CP44/15 is 11 March 2016.