As part of its role as the central resolution authority within the Banking Union, the Single Resolution Board (SRB) has set its expectations for banks in the resolution planning phase, to demonstrate that they are resolvable and prepared for crisis management. Banks are expected to have built up their capabilities on all aspects by the end of 2023, except where indicated otherwise.
To avoid the potential negative impacts of a bank failure on the economy and financial stability, the largest banks (G-SII and top-tier banks) under the remit of Single Resolution Board (SRB) (targets 120 banking groups) must follow 'Expectation of Banks' Operational Guideline, to ensure they are resolvable.
Relevant obligations apply to the areas of management, loss absorption and debt cancellation or conversion as well as business continuity. This includes, for all banks, a steady increase in Minimum Own Funds and Eligible Liabilities (MREL) requirements which is critical to the implementation of any bail-in strategy.
According to the latest Resolvability Assessment (page 7) the vast majority of banks met the intermediate MREL targets by 1 January 2022 and most of them already meet the final MREL target to be complied with at the end of the transition period, on 1 January 2024.
Although “overall sound progress has been made on the resolution capabilities that the SRB prioritised in 2020-2021” according to published Resolvability Assessment, complete, accurate and timely reporting is still the main concern and expectation to enhance banks' internal and supervisory controls.
CRR Quick-Fix to Policy for Multiple Point of Entry Banks
On 22 September 2022, SRB confirmed a change in its MREL policy applying to Multiple Point of Entry (MPE) banking groups. The SRB welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix". This quick-fix clarifies the treatment of total loss-absorbing capacity (TLAC) surplus capital (in the form of MREL eligible liabilities) held in third country subsidiaries within European banking groups with MPE resolution strategy.
The CRR quick-fix rules also address whether and when the resolution authority can take TLAC surpluses into consideration while calculating deductions from TLAC related to exposures to third country resolution groups.
More details on consideration of surplus towards the EU parent's MREL requirement, as well as recognizing of MREL surpluses in third countries that do not yet have a resolution regime, are available at the link.
While ensuring the efficient production of quality reports ATOME: Particles demonstrates its capability to exceed the requirements of regulators catering also to recommended measures*.
- SRB Level 3 data quality checks v1.0 are additional quality/plausibility checks outside of standard Resolution reporting requirements, however, SRB strongly encourages reporting entities to apply these data checks prior to submitting data to NRAs.
ATOME: Particles fully-covers resolution reporting obligations as imposed by SRB along with any related technical standards developed and adopted by EBA.
- Resolvability of Banking Union - Banks: 2021 (July 2022)
- Minimum Requirement for Own Funds and Eligible Liabilities (MREL) (June 2022)
*Quoted from SRB website: https://www.srb.europa.eu/ga/node/2110#timeline-for-the-2022-resolution-reporting-data-collection-process “the SRB recommends that all banks implement the following measures:
- To support high-quality and complete data, the resolution reports should be submitted in line with the published guidance, with validation checks performed by the bank ensuring, among others, reconciliation with its FINREP and COREP regulatory reports (where applicable) as detailed in the List of additional data checks.
- Banks should ensure that they have the necessary IT processes in place to facilitate a timely, controlled and robust reporting process generating consistent and reliable results”