First published on 8 November 2016
Summary
This supervisory declaration (SS) is focused on Prudential Guideline Authority (PRA)-controlled financial institutions, constructing cultures and PRA marked investment company (firms).
This declaration lays out the PRA’s expectations on the relationship between the minimum requirement for very own funds and eligible liabilities (MREL) and both resources and leverage ratio buffers, in addition to the effects that a breach of MREL would certainly have for the PRA’s factor to consider of whether a company is failing, or most likely to fall short, to please the Limit Issues.
This SS provides more detail in relation to the high level assumptions detailed in ‘The PRA’s method to banking supervision’. As set out in the method paper, companies are expected to involve directly with policy material, consisting of SSs, and figure out– bearing in mind the overarching concept of safety and sturdiness– whether they fulfill the PRA’s assumptions.
This SS must be read along with the Financial institution of England’s (the Bank’s) statement of plan on its approach to establishing MREL, PRA SS 6/ 14 on capital buffers, and PRA SS 31/ 15 on leverage buffers.
Update on 16 July 2019 : On 7 June 2019, the Resources Requirements Law (CRR) II was published in the Official Journal of the European Union. As laid out in the updates on the CRD IV and Resolution website released on Monday 10 June 2019, CRR II presents brand-new needs for UK Global Systemically Vital Establishments (G-SIBs) and UK material subsidiaries of non-EU G-SIBs in respect of ‘own funds and qualified obligations’, some of which are straight appropriate from Thursday 27 June 2019
The PRA is in the process of assessing the relevant amendments to the EU’s modified risk monitoring actions (CRR II/ Resources Demands Directive V/ Financial Institution Healing and Resolution Regulation II), and it will take into consideration whether adjustments to SS 16/ 16 are required eventually. During, the PRA clears up that assumptions in SS 16/ 16 use in respect of minimum needs for very own funds and qualified liabilities (MREL) established by the Financial institution of England, as the UK resolution authority, and to the brand-new CRR II demands in respect of ‘very own funds and qualified liabilities’.