funds

EBA Publishes Interim Report on MREL

The European Banking Authority (EBA) has published an interim report on the minimum requirement for own funds and eligible liabilities (MREL). Under the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD) the EBA is required to submit a report to the European Commission on the implementation of MREL by October 31, 2016.  This report will assist the Commission in its work on a legislative proposal on the harmonized application of MREL as well as a legislative proposal to review MREL and implement the total loss absorbing capacity standard in the EU.

The EBA’s interim report is intended to provide input into the Commission’s deliberations ahead of the preparations of the EBA’s final report and contains a number of provisional recommendations. Preliminary quantitative findings on the financing capacity and needs of EU banking groups are also available in the interim report, although these are subject to several methodological caveats.  In the absence of MREL decisions for institutions to date, and given the limited information related to the resolution authorities’ MREL policy approach, the EBA was required to make assumptions on the likely scope and calibration of MREL.  These assumptions are by definition different from the actual levels of MREL which will ultimately be determined by resolution authorities in relation to each institution and group.

The interim report is available here.

Financial Stability Board Issues Asset Management-Related Policy Recommendations

On June 22, 2016, the Financial Stability Board (FSB) published for public consultation Proposed Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities. The document sets out 14 proposed policy recommendations to address the following structural vulnerabilities from asset management activities that could potentially present financial stability risks:

  1. Liquidity mismatch between fund investments and redemption terms and conditions for fund units;
  2. Leverage within investment funds;
  3. Operational risk and challenges in transferring investment mandates in stressed conditions; and
  4. Securities lending activities of asset managers and funds.

The key recommendations for liquidity mismatch and leverage focus on both public and private funds.

The FSB reported that it “intends to finali[z]e the policy recommendations by the end of 2016, some of which will be operationalized by the International Organization of Securities Commissions (IOSCO).”

Rating Agency Developments

On August 17, S&P updated its outlook assumptions for the U.K. residential mortgage market.  S&P Report. 

On August 15, Fitch updated its criteria for securities firms.  Fitch Report. 

On August 15, Fitch updated its financial institutions recovery ratings criteria. Fitch Report. 

On August 15, Fitch updated its criteria for market value structures.  Fitch Report. 

On August 15, Fitch updated its criteria for U.S. closed-end funds.  Fitch Report. 

On August 15, Fitch updated its global financial institutions master criteria.  Fitch Report. 

On August 14, Fitch updated its tax-supported rating criteria.  Fitch Report. 

On August 14, Fitch updated its non-financial corporate recovery ratings and notching criteria.  Fitch Report. 

On August 14, Fitch updated its global bond fund rating criteria.  Fitch Report.

On August 13, Moody’s updated its criteria for Mexican RMBS.  Moody’s Report.

On August 13, Fitch updated its sovereign rating criteria.  Fitch Report.

On August 13, Fitch updated is country ceilings criteria.  Fitch Report. 

On August 13, DBRS updated its stability ratings for Canadian structured income funds.  DBRS Report. 

On August 13, DBRS updated its criteria for Canadian split share companies and trusts.  DBRS Report. 

On August 10, Fitch updated is U.S. Re-REMIC criteria.  Fitch Report.

On August 10, Fitch updated is U.S. RMBS surveillance criteria.  Fitch Report.

On August 10, Fitch updated is U.S. RMBS loan loss model criteria.  Fitch Report.

On August 10, Fitch updated its structured finance servicing continuity risk criteria.  Fitch Report. 

On August 10, Fitch updated its criteria for analysis of CRE loans securing covered bonds.  Fitch Report. 

On August 10, Fitch updated its criteria for financial institution subsidiaries and holding companies.  Fitch Report.  

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