26 May 2021
The European Banking Authority (EBA) published today its final draft Regulatory Technical Standards (RTS) on own funds and eligible liabilities. Since their entry into force, the RTS on own funds have significantly enhanced regulatory harmonisation of prudential rules and contributed to strengthening the quality of regulatory capital. With the revised Capital Requirements Regulation (CRR) introducing new criteria and requirements for eligible liabilities, these amended RTS capture several aspects of eligible liabilities as well as the changes to the own funds framework.
The draft RTS align existing provisions to changes introduced in the revised CRR in the area of own funds. This is the case, in particular, for provisions relating to the regime of supervisory prior permission for the reduction of own funds.
In addition, the draft RTS specify some of the newly introduced criteria for eligible liabilities instruments derived from the own funds regime. These include the absence of direct or indirect funding for the acquisition of ownership of eligible liabilities, the absence of incentives to redeem, the need for the resolution authority’s prior permission for the reduction of eligible liabilities. For some of these aspects, the mandates attributed to the EBA explicitly require to ensure full alignment between eligible liabilities and own funds.
Following the feedback received during the public consultation, the calibration of the threshold for determining the predetermined amount for the general prior permission for reducing eligible liabilities instruments was increased from 3% to 10% of the total amount of outstanding eligible liabilities instruments. Moreover, the final draft RTS have been revised in order to recognise some relief for the renewal of general prior permission both for own funds and eligible liabilities and for introducing a proportionate approach for liquidation entities for which their minimum requirement for own funds and eligible liabilities (MREL) does not exceed the loss absorption amount.
The EBA has updated the RTS on own funds, in accordance with the original RTS mandates granted to the EBA under Articles 28(5), 29(6), 52(2), 76(4), 78(5) and 79(2) of Regulation (EU) No 575/2013 (‘CRR’). The provisions of the RTS related to eligible liabilities have been developed in accordance with Articles 72b(7) and 78a(3) CRR. The final standards have been sent to the European Commission for their adoption as EU Regulations that will be directly applicable throughout the EU.
Franca Rosa Congiu