The PRA has updated Supervisory Statement 16/16: The minimum requirement for own funds and eligible liabilities (MREL) – buffers and Threshold Conditions (SS16/16). SS16/16 sets out the PRA’s expectations on the relationship between the minimum requirement for own funds and eligible liabilities (MREL) and both capital and leverage ratio buffers, as well as the implications that a breach of MREL would have for the PRA’s consideration of whether a firm is failing, or likely to fail, to satisfy the Threshold Conditions.
SS16/16 has been updated following Consultation Paper 15/17: The minimum requirement for own funds and eligible liabilities (MREL) – buffers (CP15/17). This version of SS16/16 updates the version that was issued on 8 November 2016. In CP15/17, the PRA consulted on updates to SS16/16 to clarify its expectations regarding:
- the amount of common equity tier 1 (CET1) that firms should not count simultaneously towards buffer requirements and MREL (i.e. an amount equal to the size of the usable buffer derived from the two going-concern regimes); and
- the consequences of not maintaining sufficient CET1 to meet both the usable buffer requirement and MREL.