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Rethink regulatory reporting: MREL reporting

A summary of MREL Reporting for resolution planning

What is Minimum Requirement for Own Funds and Eligible Liabilities (MREL) reporting and how will it affect me?

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What is MREL reporting?

Recently, the Prudential Regulation Authority (PRA) released a consultation paper (CP1/18) detailing proposed expectations for reporting on the Minimum Requirement for Own Funds and Eligible Liabilities (MREL). As stated in the MREL Statement of Policy, MREL is a minimum requirement for loss absorbing resources that must be met by firms, at all times.

The Bank of England expects firms to comply with an end-state MREL from 1 January 2022. In the lead up to this, Global Systematically Important Banks (G-SIBs) are expected to meet interim MREL from 1 January 2019, and other firms from 1 January 2020.

With this reporting requirement, the PRA aims to reduce the adverse impact of failing firms on the financial system, by ensuring these issues are resolved in an orderly way. 

How is it reported?

The PRA has proposed that firms provide the necessary information via three templates:

  Resources Resources Forecast  Debt
Overview

Amount and maturity profile of MREL resources.

Supplemented by regulatory capital data from COREP C01.00

Projected MREL eligible resources.

Supplemented by regulatory capital forecast data from Capital+

Individual characteristics of internal and external MREL resources to monitor compliance with eligibility criteria
Level of application

UK consolidation group

UK resolution group

Material subsidiaries and material subgroups

Each relevant critical service provider

UK consolidation group

UK resolution group

Material subsidiaries and material subgroups

Each relevant critical service provider

One template for all entities within the UK consolidation group
Frequency Aligned with COREP C01.00 Aligned with Capital+ Every time there is a change to terms or the stock of outstanding issuances

 Reproduced from: https://www.bankofengland.co.uk/prudential-regulation/publication/2018/resolution-planning-mrel-reporting

The PRA has developed XBRL taxonomies and proposes that firms submit MREL information in XBRL format.

Who is affected?

MREL reporting is relevant to PRA-authorised UK banks, building societies, UK designated investment firms and their qualifying parent undertakings.

In particular, it’s most likely to affect:

  • Firms notified by the Bank of England that they are likely to be subject to external interim and/or end-state MREL in excess of regulatory capital requirements.
  • Firms notified by the Bank of England that they are likely to be subject to internal interim and/or end-state MREL in excess of regulatory capital requirements.

Timelines

Firms that have been notified prior to 1 January 2017 that they are likely to be set external MREL in excess of regulatory capital requirements:

These firms should start reporting at the same time and frequency as their Capital+ and COREP C01.00 reporting, starting 6 months after the publication of the final policy statement following CP1/18, but not before 1 January 2019.

Firms that have been notified that they are likely to be set internal MREL in excess of regulatory capital requirements:

These firms should start reporting, at the same time and frequency as their Capital+ and COREP C01.00 reporting,  later than:

  • 6 months after the publication of the final policy following CP1/18
  • 6 months after being notified by the Bank of England about their internal MREL levels; or
  • 1 January 2019

Firms that have been notified after 1 January 2017 that they are likely to be set internal or external MREL in excess of regulatory capital requirements:

These firms should start reporting at least 12 months prior to the end of the transitional period set by the Bank of England. The Bank of England intends to inform the firms of the first expected reporting date along with MREL levels.

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