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QA2021-29 - row r0400 of template 2 – EBA_MCAP

QA2021-29 - row r0400 of template 2 – EBA_MCAP

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Feb 01, 2024
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QA2021-29

Question


Regarding row r0400 of template 2 – EBA_MCAP: 1. Firstly, the guidance to the 2021 ALR refers to the MREL requirement of BRRD 2, based on RWAs. Specifically, the guidance states: ‘(b) the minimum requirement for own funds and eligible liabilities pursuant to Article 45 BRRD, when calculated in accordance with point (a) of Article 45(2) BRRD.’ We understand that this can be ignored because there is no MREL requirement in terms of RWAs in force, is it correct? Or should we take the MREL requirement based on TLOF and express it in terms of RWAs? 2. Secondly, the guidance sets that the excess will be informed in terms of RWAs reported in template 1- EBA-KM2 and it will be identical for MREL and TLAC. The point here is that RWAs for TLAC and MREL in the case of a banking group with a MPE model differ significantly due to the deduction. Therefore, the same amount of excess will give different percentages in terms of RWAs linked to MREL or RWA linked to TLAC. 3. In a simplified way and because the deduction is applied first applies to eligible liabilities and then to own funds, we calculate the excess as the difference between the CET1 remaining after the deduction and the TLAC requirement. Is this approach accurate?


Response


Please find below the answers per sub-question. 1. For computing the CET1 surplus after complying with the MREL requirement, the reporting entity shall use the following MREL risk based requirement: - if the entity already received the BRRD2 MREL target decision before the reference date, the entity shall use the first interim risk based MREL target (to be complied with by 1-jan-2022) - if the entity has not received the BRRD2 MREL target decision by the reporting date (i.e. it was subject to BRRD1 target), the entity shall use the draft first interim risk based MREL target under BRRD2 framework communicated to the bank in the dialogue with the IRT. 2. Please use the Total risk Weighted Asset (TREA) value as defined in Point (a) of Article 45(2) of Directive 2014/59/EU, and Article 92(3) of Regulation (EU) No 575/2013 3. The deductions foreseen in art. 72e (1) CRR2 applies to eligible liabilities, and, to the extent there are not sufficient liabilities, those eligible liabilities instruments should be deducted from Tier 2 instruments (art. 66 point (e) CCR2).