Response to consultation Paper on ITS on disclosure and reporting of MREL and TLAC
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Basically, the overriding principle should be to ensure a standardised calculation method both for the determination of the MREL-ratio and for Resolution Planning Reporting as well as for MREL-Reporting. The definitions and derivations based on the MREL requirements and MREL compliance may not differ.
The submission dates (12 May, 11 August, 11 November and 11 February) for quarterly data proposed in Art. 2 of the draft implementing provision coincide with the COREP submission dates for reporting Pillar 1 information. Because of the dependence on upstream computation processes to determine significant parameters (own funds, leverage ratio, RWA etc…) that are fed into MREL reporting and taking into account the time-related dependencies mentioned above, a deferring of the submission dates (by a week/5 working days) would in our opinion be justified.
In glancing through the templates and the relevant instructions, it is often unclear which forms have to be filled in for which of an institution’s reporting entities (resolution entity, resolution group). We therefore request consistency and transparency with regard to extent/application areas.
In tables 1 and 2 on pp. 11 and 12 of the Consultation Paper, moreover, there is only a partial indica-tion “Conso (if group) or ind (if no group)” given. For a better overview, we would like to see the over-view tables for resolution entities and resolution groups shown separately.
Particularly with regard to the templates that according to table 2 of the Consultation Paper have to be submitted only by entities that belong to a resolution group but are themselves not resolution enti-ties it is not clear to us how broadly this term is to be defined. We request your clarification that this can involve only those group institutions that pursuant to Art. 45f (1) sentence 2 BRRD2 are obliged to comply with a minimum requirement at single-institution level.
Re area of application in (reportable entities) in Annex 1, Template M03.00
The title of Template M03.00 initially mentions only “non-EUG-SIIs” as entities to be reported. In the corresponding instructions (Annex 2, p. 15 – part 2, section 2.2.1., no. 10, first bullet point), however, entities are mentioned in general which are not resolution entities (e.g. subsidiaries) – along the lines of the Additional Liability Report (ALR) of the SRB Data Collection 2020. We request clarity here: which entities should report the required information.
Re Annex 1, Template M05.00 (TLAC2)
With regard to Templates M05.00 (TLAC2) and M06.00 (TLAC3), we assume that a report on these templates is done so at the aggregated level of insolvency rankings and investor affiliation with the resolution group and that completing of the template does not have to be decided at single-instrument level. We request conformation of this interpretation.
With regard to Template M05.00 (TLAC 2) as well as M06.00 (TLAC 3) it should be clarified that per insolvency rank solely bail-in-eligible instruments and no “liabilities excluded from bail-in” are to be stated. Given that the volume of bail-in-eligible instruments should be itemised here (cf. provision in Art. 45i para. 1. a) and b) BRRD II), this requirement, which is not in line with the law, should be delet-ed without any replacement.
Re area of application (reportable entities) in Annex 1, Template M 06.00 (TLAC 3)
The title of the template also calls for a group presentation (“resolution entities and groups”). In the relevant instructions (Annex 2, p. 22 – part 2, section 3, no. 15) this is not the case, however. Here, “solo level” is mentioned even explicitly (“This template is reported at solo level.”). This therefore raises the question at which level (only solo, only group level or also both levels) is a report expected from the institutions, particularly given the fact that other templates are to be filled in at solo and group level and in the aforementioned instructions solo level is required.
In addition, cf. also comments made with regard to Template M05.00 (TLAC2).
Re Annex 2, M 01.00 / r0250 “Other bailinable liabilities”
With regard to Z02.00, instead of c0190, presumably you mean c0090, and c0010 is to be included in M02.00.
Re Annex 2, M 04.00 (LIAB-MREL)
Our understanding of Annex 2, note 6 is that accured interest is to be added to “Outstanding nominal amount”. Only for Template M04.00 (LIAB MREL) is accured interest accounted for separately. In our view and/or according to the instructions on resolution reporting, accured interest is generally not MREL-eligible, for which reason separate treatment is in our opinion necessary in further templates too (e.g. KM2 or TLAC1). Here, we also refer to the comments on Q1: the differing reporting require-ments for resolution planning and/or MREL/TLAC with regard to the underlying definitions and distinc-tions must not be allowed to diverge.
Re Annex 1, M 07.00 (Instruments governed by third-country law (MTCI))
For column 0110 we request elaboration on the term “normal insolvency proceedings” and whether or in which form “Ranking in normal insolvency proceedings” differs.
Any information on “MREL-/TLAC-Holdings” for “non-G-SIIs” is, in view of the clear limitation of the areas of application in Art. 72e CRR 2 to G-SIIs, not understandable. For “non-G-SIIs”, the preparation would thus involve a disproportionate effort. We request that in keeping with Art. 72e CRR 2 such in-formation be required only from G-SIIs.
In particular, lines 300 to 330 in Form TLAC1 require from “non-G-SIIs” evidence of subordinated eli-gible instruments. As part of the finalisation of the risk-reduction package, the regulator decided to waive a suitable deduction regime. Such a deduction rule has an effect not only on raising capital but is also very time-consuming in its calculation / implementation. Unlike with own funds, where the de-duction regime applies only to a manageable and – now with help of available securities master data systems identifiable number of instruments, eligible liabilities involve a significantly larger number of types/categories of securities. Classification in the master data systems (such as WM class data) are still being developed. We assume that with the decision against a direct deduction regime and in fa-vour of a review by the EBA (Art. 504a CRR 2) the banks should purposely be given temporary relief. Had the regulator wanted to waive only the deduction, s/he would have included an appropriate provi-sion in the reporting mandate pursuant to Art. 45i para. 5 BRRD 2. The inclusion of Memorandum Items in the reporting package means that the regulator’s relief has now been in part withdrawn.
We therefore request that initially Memorandum Items be waived from the reporting package.
Re Annex IV “Standardised Ranking”
Stating the insolvency ranking in the LDR is based on the Insolvency Ranking published by the SRB, while the proposed Annex IV refers to the national liability cascade. For the purposes of a standard-ised approach for the institutions and the supervisory and resolution authorities, the ITS and the LDS should be based on an identical “standardised Ranking”. To this end, it would be desirable if the EBA could see to it that on this point in future a consistent and harmonised approach be adopted by the resolution authorities.
Q1. The proposed standards would measure own funds in terms of carrying amounts and eligible liabilities in terms of out-standing nominal amounts. This approach aligns the reporting and disclosure on MREL/TLAC with the reporting in the context of the ITS on Resolution Planning Reporting, where the same measurement basis is used. In contrast, presenting both the amount of own funds and eligible liabilities as carrying amounts would potentially align the reporting more with the vast majority of prudential reporting and disclosure requirements and with the internal approaches of institutions for the monitoring of MREL/TLAC compliance on a daily basis. There is also ongoing work at the level of the BCBS to clarify the measurement of non-equity capital. What are the advantages and challenges of presenting MREL/TLAC figures, and in particular the amount of eligible liabilities, on the basis of a) outstanding amounts or b) carrying amounts for the purposes of reporting (and disclosure)?
Basically, we would like to stress that defining a measurement basis for own fund instruments and eligible liability instruments should take place in the relevant Level 1 regulatory text and should not be defined in implementing technical standards (ITS). If the ITS prescribes something (e.g. carrying amount for own funds) that deviates from the calculation required by the level 1 text (i.e. CRR for own funds & TLAC, and BRRD/SRMR for eligible liabilities (MREL/TLAC-add-on)) we would be concerned that this could cast doubt on the calculations required by the level 1 text (that will necessarily differ from accounting or notional in certain cases and details) and might create “deviating numbers/ratios”. If the ITS prescribes a measurement basis it should in any case be made clear that this does not “overwrite” or “overrule” the level 1 texts (CRR, BRRD, SRMR).Basically, the overriding principle should be to ensure a standardised calculation method both for the determination of the MREL-ratio and for Resolution Planning Reporting as well as for MREL-Reporting. The definitions and derivations based on the MREL requirements and MREL compliance may not differ.
The submission dates (12 May, 11 August, 11 November and 11 February) for quarterly data proposed in Art. 2 of the draft implementing provision coincide with the COREP submission dates for reporting Pillar 1 information. Because of the dependence on upstream computation processes to determine significant parameters (own funds, leverage ratio, RWA etc…) that are fed into MREL reporting and taking into account the time-related dependencies mentioned above, a deferring of the submission dates (by a week/5 working days) would in our opinion be justified.
Q2. Are the scope and level of application of the reporting requirement and the content of the templates and the instructions M 01.00 to M 07.00 clear and appropriate?
Resolution entity and resolution groupIn glancing through the templates and the relevant instructions, it is often unclear which forms have to be filled in for which of an institution’s reporting entities (resolution entity, resolution group). We therefore request consistency and transparency with regard to extent/application areas.
In tables 1 and 2 on pp. 11 and 12 of the Consultation Paper, moreover, there is only a partial indica-tion “Conso (if group) or ind (if no group)” given. For a better overview, we would like to see the over-view tables for resolution entities and resolution groups shown separately.
Particularly with regard to the templates that according to table 2 of the Consultation Paper have to be submitted only by entities that belong to a resolution group but are themselves not resolution enti-ties it is not clear to us how broadly this term is to be defined. We request your clarification that this can involve only those group institutions that pursuant to Art. 45f (1) sentence 2 BRRD2 are obliged to comply with a minimum requirement at single-institution level.
Re area of application in (reportable entities) in Annex 1, Template M03.00
The title of Template M03.00 initially mentions only “non-EUG-SIIs” as entities to be reported. In the corresponding instructions (Annex 2, p. 15 – part 2, section 2.2.1., no. 10, first bullet point), however, entities are mentioned in general which are not resolution entities (e.g. subsidiaries) – along the lines of the Additional Liability Report (ALR) of the SRB Data Collection 2020. We request clarity here: which entities should report the required information.
Re Annex 1, Template M05.00 (TLAC2)
With regard to Templates M05.00 (TLAC2) and M06.00 (TLAC3), we assume that a report on these templates is done so at the aggregated level of insolvency rankings and investor affiliation with the resolution group and that completing of the template does not have to be decided at single-instrument level. We request conformation of this interpretation.
With regard to Template M05.00 (TLAC 2) as well as M06.00 (TLAC 3) it should be clarified that per insolvency rank solely bail-in-eligible instruments and no “liabilities excluded from bail-in” are to be stated. Given that the volume of bail-in-eligible instruments should be itemised here (cf. provision in Art. 45i para. 1. a) and b) BRRD II), this requirement, which is not in line with the law, should be delet-ed without any replacement.
Re area of application (reportable entities) in Annex 1, Template M 06.00 (TLAC 3)
The title of the template also calls for a group presentation (“resolution entities and groups”). In the relevant instructions (Annex 2, p. 22 – part 2, section 3, no. 15) this is not the case, however. Here, “solo level” is mentioned even explicitly (“This template is reported at solo level.”). This therefore raises the question at which level (only solo, only group level or also both levels) is a report expected from the institutions, particularly given the fact that other templates are to be filled in at solo and group level and in the aforementioned instructions solo level is required.
In addition, cf. also comments made with regard to Template M05.00 (TLAC2).
Re Annex 2, M 01.00 / r0250 “Other bailinable liabilities”
With regard to Z02.00, instead of c0190, presumably you mean c0090, and c0010 is to be included in M02.00.
Re Annex 2, M 04.00 (LIAB-MREL)
Our understanding of Annex 2, note 6 is that accured interest is to be added to “Outstanding nominal amount”. Only for Template M04.00 (LIAB MREL) is accured interest accounted for separately. In our view and/or according to the instructions on resolution reporting, accured interest is generally not MREL-eligible, for which reason separate treatment is in our opinion necessary in further templates too (e.g. KM2 or TLAC1). Here, we also refer to the comments on Q1: the differing reporting require-ments for resolution planning and/or MREL/TLAC with regard to the underlying definitions and distinc-tions must not be allowed to diverge.
Re Annex 1, M 07.00 (Instruments governed by third-country law (MTCI))
For column 0110 we request elaboration on the term “normal insolvency proceedings” and whether or in which form “Ranking in normal insolvency proceedings” differs.
Q3. Do you see any discrepancies between these templates and instructions and the requirements set out in the underlying regulation, i.e. do these templates and instructions reflect the substance of the TLAC requirement and MREL in a proper manner? Do you agree that the proposed reporting requirement is fit for purpose?
Widening of obligations to “non-G-SIIs” (MREL-/TLAC-Holding / subordinated instruments)Any information on “MREL-/TLAC-Holdings” for “non-G-SIIs” is, in view of the clear limitation of the areas of application in Art. 72e CRR 2 to G-SIIs, not understandable. For “non-G-SIIs”, the preparation would thus involve a disproportionate effort. We request that in keeping with Art. 72e CRR 2 such in-formation be required only from G-SIIs.
In particular, lines 300 to 330 in Form TLAC1 require from “non-G-SIIs” evidence of subordinated eli-gible instruments. As part of the finalisation of the risk-reduction package, the regulator decided to waive a suitable deduction regime. Such a deduction rule has an effect not only on raising capital but is also very time-consuming in its calculation / implementation. Unlike with own funds, where the de-duction regime applies only to a manageable and – now with help of available securities master data systems identifiable number of instruments, eligible liabilities involve a significantly larger number of types/categories of securities. Classification in the master data systems (such as WM class data) are still being developed. We assume that with the decision against a direct deduction regime and in fa-vour of a review by the EBA (Art. 504a CRR 2) the banks should purposely be given temporary relief. Had the regulator wanted to waive only the deduction, s/he would have included an appropriate provi-sion in the reporting mandate pursuant to Art. 45i para. 5 BRRD 2. The inclusion of Memorandum Items in the reporting package means that the regulator’s relief has now been in part withdrawn.
We therefore request that initially Memorandum Items be waived from the reporting package.
Re Annex IV “Standardised Ranking”
Stating the insolvency ranking in the LDR is based on the Insolvency Ranking published by the SRB, while the proposed Annex IV refers to the national liability cascade. For the purposes of a standard-ised approach for the institutions and the supervisory and resolution authorities, the ITS and the LDS should be based on an identical “standardised Ranking”. To this end, it would be desirable if the EBA could see to it that on this point in future a consistent and harmonised approach be adopted by the resolution authorities.
Q4. Template KM2 in the BCBS standard includes special rows to reflect the own funds amounts on an IFRS9 fully loaded basis. There is a template implemented in the EU with this information at the level of the prudential scope of consolidation. The instructions for KM2 ask institutions to explain any material difference between the own funds amounts disclosed and the IFRS 9 fully loaded amount at the resolution group level. They are also asked to explain any material difference between the IFRS 9 fully loaded amount at the resolution group level compared to the prudential group level. Do respondents agree that this is a good way to request this information, rather than adding specific rows, considering that this information will cease to be relevant once the IFRS 9 transition period is over?
Yes, we welcome the EBA’s decision not to include the additional lines to take into account “IRFS 9 fully loaded” as intended in the BCBS-Standard. Apart from the fact that the regulatory transition peri-ods for the conversion to IFRS are to expire shortly, many banks have decided against using this. For many banks, the additional reporting obligations would not be relevant from the start, likewise the explanations proposed in their place by the EBA.Q5. Are the instructions, tables and templates clear and appropriate to the respondents?
Cf. our comments in the enclosed document (text box does not work).Q6. Do you identify any discrepancies between these templates and instructions and the calculation of the requirements set out in the underlying regulation?
Cf. our comments in the enclosed document (text box does not work).Q7. Do you agree that the new draft ITS fits the purpose of the underlying regulation?
Cf. our comments in the enclosed document (text box does not work).Q8. Are the scope and level of application of the reporting requirement, the content of the ‘forecast’ templates and the instructions clear and appropriate?
Cf. our comments in the enclosed document (text box does not work).Q9. What are the particular benefits and challenges you see with regard to the reporting of the ‘forecast’ information?
Cf. our comments in the enclosed document (text box does not work).Upload files
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