Shearman & Sterling LLP | Financial Regulatory Developments Focus | UK Prudential Regulator Confirms its Approach to MREL Reporting
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  • UK Prudential Regulator Confirms its Approach to MREL Reporting
    06/13/2018
    The U.K. Prudential Regulation Authority has published a Policy Statement on reporting the minimum requirement for own funds and eligible liabilities and an updated Supervisory Statement "Resolution Planning", following a consultation which ran from January 8 to April 9, 2018. MREL is a minimum requirement for firms to maintain equity and eligible debt liabilities that can bear losses before and in resolution and results in a top up to standard regulatory capital requirements, similar in concept to the old Tier 3 requirements under Basel II. The requirement will apply to U.K. authorized banks, building societies and PRA-designated investment firms, parent undertakings of those firms that are financial holding companies and to U.K. authorized subsidiaries of such firms. The MREL requirement is the EU implementation, in the Bank Recovery and Resolution Directive, of the standard for total loss-absorbing capacity (TLAC) set by the Financial Stability Board.

    The PRA is implementing its proposals largely as consulted on. However, due to queries from some respondents on the frequency of reporting and on the draft reporting templates and guidance, the PRA has made some minor amendments to provide clarification on the reporting templates and guidance and some changes to reflect the fact it will take a more proportionate approach to the frequency of reporting so as to not place a disproportionate burden on certain firms.

    The updated Supervisory Statement on Resolution Planning sets out the PRA's expectations on the information firms should provide in relation to their MREL requirement. The PRA will share the information received with the U.K.'s resolution authority, the Bank of England. The PRA intends to use the information received to monitor a firm's progress in complying with its MREL requirement and to assess whether a firm is, or is likely to be, in breach of its MREL requirement.

    The updated Supervisory Statement will apply from January 1, 2019. Returns must be submitted using the BoE's Electronic Data Submission portal, BEEDS, which the BoE will make available by that time.

    View the Policy Statement (PRA PS 11/18).

    View the reporting guidance and links to reporting templates.

    View the updated Supervisory Statement (SS 19/13).

    View details of the January 2018 consultation.

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