Minimum Requirement for Own Funds and Eligible Liabilities
With the EU Bank Recovery and Resolution Directive (BRRD), the European Commission has created a framework for the structured recovery and resolution of credit institutions to avoid future bailouts of failing banks by taxpayers. Within this framework, the minimum requirement for own funds and eligible liabilities (MREL) aims to ensure that banks’ losses can be offset by sufficient own funds and other liabilities (according to a pre-defined order) within the so-called “bail-in” recovery process.
The Single Resolution Board (SRB) and national regulatory authorities determine the individual MREL ratio of a credit institution as a function of its business model, risk profile and resolvability. Both authorities specify the reporting data, informed by the implementation standards of the European Banking Authority (EBA).
On 22 February 2016, the SRB published comprehensive MREL templates. Banking groups that require a resolution college must report by 15 May 2016. All other institutions must submit their data by 15 June 2016, to provide the basis of determining individual MREL ratios, which will be binding after a phase-in period of four years.
The reporting data, the frequency and submission dates for on-going, regular reporting as well as the determination of the MREL ratio for less significant institutions are still pending. There are also plans for an integration of MREL reporting into an existing report (possibly CoRep). Despite the remaining uncertainty, institutions need to prepare for the necessary analytical requirements, granularity of data collection, and the need to implement an integrated and flexible solution.
BearingPoint will provide software solutions for the implementation of the new reporting requirements as part of the Abacus product family. In addition, our specialists, with their many years of know-how in regulatory reporting, can support you with the your specific issues within the context of your individual implementation projects.