Commenting on the publication today by the European Commission of the package of proposals including the fifth Capital Requirements Directive (CRD V)/second Capital Requirements Regulation (CRRII) and Total Loss Absorbing Capacity (TLAC)/ minimum requirement for own funds and eligible liabilities (MREL), Michael Lever, Head of Prudential Regulation at AFME, said:
“AFME welcomes the publication of the Commission’s proposals today as another significant piece of the global financial reform programme in Europe.
“The CRDIV/CRR has already greatly reduced the likelihood that banks will fail by increasing significantly the quantity and quality of capital they hold and by making them less leveraged and more liquid. The present CRDV/CRRII package builds on what has been achieved so far, introducing a binding stable funding and leverage ratio requirement. AFME supports the implementation of these requirements in the EU in a manner that will enable the sector to support economic growth and the development of the Capital Markets Union, as we communicated to the Commission in its call for evidence.
“We also welcome the proposed implementation of TLAC in the EU, together with revisions to the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR) to increase alignment of European MREL requirements with global standards. Following substantial progress, these parts of the package represent the final steps in establishing an effective recovery and resolution framework. While the CRD/CRR significantly reduces the likelihood banks will fail, the TLAC/BRRD/SRMR package ensures that authorities have the tools to deal effectively with banks should they fail. In practice, this means that banks can be resolved in an orderly manner while continuing to carry out functions that are critical to the economy and financial stability, and importantly without taxpayers footing the bill. AFME continues to be very supportive of this objective.
“We look forward to reviewing the proposals and engaging with the co-legislators over the coming months to ensure that the EU has a financial stability framework in place that achieves the most appropriate balance between a robust, resilient and resolvable financial sector and a vibrant, growing economy.”
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