Shearman & Sterling LLP | FinReg | UK Prudential Regulation Authority Consults on Relationship between Regulatory Buffers and <span >Minimum Requirement for Own Funds and Eligible Liabilities</span >
Financial Regulatory Developments Focus
This links to the home page
Financial Regulatory Developments Focus
FILTERS
  • UK Prudential Regulation Authority Consults on Relationship between Regulatory Buffers and Minimum Requirement for Own Funds and Eligible Liabilities

    12/11/2015

    The Prudential Regulation Authority published its proposed approach setting regulatory buffers in light of a firm's Minimum Requirement for own funds and Eligible Liabilities (known as MREL) requirement as well as the relationship between MREL and the PRA's Threshold Conditions which are a set of minimum requirements that authorized firms must meet in order to continue carrying out their regulated activities. MREL is the equivalent of the US Total Loss Absorbing Capacity (known as TLAC) rule. The proposals are relevant to PRA-regulated banks, building societies and PRA-designated investment firms. The PRA-proposed approach is to prohibit firms from being able to double-count common equity Tier 1 capital towards MREL and to risk-weighted capital and leverage buffers. Some guidance has been given on enforcement: when a firm is in breach of its MREL requirements, the PRA may investigate whether that firm is failing or likely to fail to meet the Threshold Conditions, although investigation will not be automatic. The PRA's approach is in line with the Financial Stability Board's TLAC standards. The proposals should be read in conjunction with the Bank of England's consultation on setting MREL. Responses to the PRA's consultation are due by March 11, 2016.
     
    View the PRA's consultation paper.
     
    View the BoE's consultation paper.
     
    View the FSB's TLAC term sheet