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Phase 2 of the 3.0 reporting framework published by the EBA

Phase 2 of the 3.0 reporting framework published by EBA

On the 18th of March, EBA published the second phase of the 3.0 reporting framework.

The 3.0 reporting framework is comprised of amendments that are linked to the CRD V and CRR II package, BRDD2 and IFR, and is expected to become applicable from the 30th of June 2021.

The EBA 3.0 “Phase 2” release covers MREL, AE, GS-II IMPRAC and REM frameworks.

Breaking down the technical package

The technical package, aside from the new Implementing Technical Standards (ITS) on supervisory reporting, also covers reporting requirements on the minimum requirement for own funds and eligible liabilities (MREL) and the total loss absorbency requirement (TLAC). The TLAC applies only to Global Systemically Important Institutions (G-SIIs), whereas MREL is applicable for both G-SIIs and non-G-SIIs. Entities must ensure that MREL and TLAC requirements are always complied with and are required to report and disclose their MREL/TLAC capacity.

What does the Phase 2 release cover?

The release covers reporting requirements on MREL/TLAC, MREL decisions and IMPRAC.

What are MREL and TLAC?

MREL is a regulatory requirement that European banks are obliged to meet, intended to build a solvency buffer capable of absorbing the losses of a financial institution in the case of resolution.

The TLAC standard requires G-SIIs to have financial instruments available during resolution proceedings to absorb losses and enable them to be recapitalised so that they can continue to perform their critical functions during ongoing resolution proceedings.

What is the impracticability of contractual recognition of bail-in (IMPRAC)?

Where contracts are governed by the law of a third country, it is required that these contracts include a contractual recognition term by which the parties acknowledge that the contract may be subject to bail-in powers and agree to be bound by their effect. In certain situations, it might be legally or otherwise impracticable to achieve contractual recognition of the bail-in powers.

Amendments to previous releases

Additionally, the second phase of the 3.0 release includes new versions of Remuneration (REM), G-SII, and Assets Encumbrance (AE) packages, as well as a hotfix version of COREP 3.0 and FINREP 3.0.

See more on the EBA website:

https://www.eba.europa.eu/eba-updates-phase-2-its-30-reporting-framework