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Revision of Prior permission regime: Commission Delegated Regulation (EU) 2023/827 applies from 9 May

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  • No impact on ongoing requests and permissions already granted by the SRB.
  • The Delegated Regulation mirrors the EBA draft RTS, except for the procedure for institutions with minimum requirement for own funds and eligible liabilities (MREL) equal to the Loss Absorption Amount (LAA).

On 9 May 2023, the Commission Delegated Regulation (EU) 2023/827[1] governing prior permissions to redeem eligible liabilities instruments enters into force. The Delegated Regulation will apply to all applications filed after the 9 May, and does not affect permission decisions already granted by the SRB - which continue to be valid until they expire - nor applications which have already been filed but which are still being processed by the SRB.

Since 1 January 2022, the SRB has been authorising redemptions under Article 78a of Regulation (EU) 575/2013 (CRR)[2], applying the provisions of the draft EBA Regulatory Technical Standards on own funds and eligible liabilities (draft EBA RTS)[3], and, in particular, its Section 2, Subsection 2 “Permission for reducing eligible liabilities instruments[4]. The objective was to allow banks to continue with their redemptions of eligible liabilities following the adoption of the Delegated Regulation without any disruption or need to submit new applications.

The Delegated Regulation reflects the content of the draft EBA RTS, except for the simplified procedure for institutions with minimum requirement for own funds and eligible liabilities (MREL) equal to the Loss Absorption Amount (LAA). While the draft EBA RTS established automatic applications and renewals of permissions, the Delegated Regulation will require such institutions to formally apply for permission under Article 78a CRR for both ad-hoc and general prior permissions. Applications need to be submitted three months in advance, specifying the rationale of the request and the relevant legal basis. A new procedure of tacit approval also provides that an application is deemed to be approved unless the resolution authority rejects it in writing within three months from the time of the application.

Finally, the SRB is following the EU legislative process finalising the implementation of the Basel III regulatory reforms closely. The Council of the European Union is proposing a change to Regulation (EU) No 806/2014 (SRMR) to exclude institutions with MREL equal to the LAA from the scope of the resolution prior permission regime.[5]

 

[1] Commission Delegated Regulation (EU) 2023/827 of 11 October 2022 laying down regulatory technical standards amending Delegated Regulation (EU) No 241/2014 as regards the prior permission to reduce own funds and the requirements related to eligible liabilities instruments, OJ L 104, 19.4.2023, p. 1–22.

[2] Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1–337), as amended by Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements, and Regulation (EU) No 648/2012 (OJ L 150, 7.6.2019, p.1-225).

[3] EBA Final report on the draft regulatory technical standards (RTS) on own funds and eligible liabilities, EBA/2021/RTS/05.

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