The Total Loss-absorbing Capacity (TLAC) and Minimum Requirement for Own Funds and Eligible Liabilities (MREL) regulations were introduced as part of post-crisis reforms to strengthen the financial system’s ability to withstand shocks, ensure continuity of essential banking services during periods of stress.
These harmonized rules, which became applicable on 27 June 2019 as part of the EU’s Banking Package, provide clear guidelines on eligible liabilities for resolution. They also instruct national resolution authorities on managing resolutions through defined creditor hierarchies and liabilities.
The European Banking Authority (EBA) recently released a technical package for version 3.5 of its reporting framework. This update includes standard specifications such as validation rules, the Data Point Model (DPM), and XBRL taxonomies to support reporting requirements, including the Fundamental Review of the Trading Book (FRTB), diversity benchmarking guidelines, the Digital Operational Resilience Act (DORA), and MREL/TLAC.
Key amendments include updates to the reporting and disclosure technical standards on MREL and TLAC, reflecting changes in the prior permission regime and updates to the daisy chain framework. Namely, the updated Implementing Technical Standards (ITS) modify templates and reporting instructions to address:
- The requirement to deduct investments in eligible liabilities instruments issued by entities within the same resolution group (the “daisy chain” framework).
- The prior permission regime for buybacks of eligible liabilities instruments issued by reporting entities and groups.
- Minor updates to the ITS and accompanying technical package to resolve previously identified issues.
These regulatory updates will come into effect on 27 December 2024, with the Implementing Regulation now in force.
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