EBA · 2015_2266 Rejected question

Treatment of derivative liabilities in the denominator of MREL

Regulation
Directive 2014/59/EU (BRRD)
Article
45, para. 1
Topic
MREL
Submitted by
Competent authority
Submitted
2015-09-02
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Question

What does Article 45 (1) of Directive 2014/59/EU (BRRD) mean by including derivative liabilities in the total liabilities on the basis that full recognition is given to counterparty netting rights?

Background

Directive 2014/59/EU (BRRD) in Article 45 (1) stipulates that for the purpose of calculating MREL derivative liabilities shall be included in the total liabilities on the basis that full recognition is given to counterparty netting rights. In certain Member States (including Hungary) whose credit institutions are not obliged to report according to FINREP and use national accounting frameworks most of the derivatives (swaps, futures) are held off-balance sheet, whose inclusion is not clear from the level 1 text. If off-balance sheet derivatives shall be included beside on-balance sheet items, their valuation is another open question. Furthermore, the level 1 text is not clear whether prudential or accounting netting shall be used for the calculation of MREL.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2015_2266

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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