Giving a Tuppence for First Time Buyers. The Acronym Soup of Macro Prudential Skin in the Game. Bricks Without Straw and “The Nothing you get for something before you can buy anything”(Soddy)


December 2015 The Bank of England’s approach to setting a minimum requirement for own funds and eligible liabilities (MREL) Consultation on a proposed Statement of Policy

Mark Carney, Governor of the Bank of England said:

“The implementation of MREL is a crucial step forward in ensuring that any bank, large or small, carries sufficient resources to be resolved in an orderly way, without recourse to public subsidy and without disruption to the wider financial system.”

MREL can be satisfied by a combination of regulatory capital and certain long term unsecured debt resources. For firms that have a bail-in strategy, resources satisfying MREL requirements must be subordinate to operating liabilities of the firm.

MREL is the sum of two components:

a loss absorption amount: to cover losses up to and in resolution; and
a recapitalisation amount: to enable the firm (or parts of it) to continue to meet conditions for authorisation and maintain market confidence as necessary following resolution.
The Bank will base the loss absorption component of MREL on the minimum going-concern capital requirement set by the PRA (or FCA for firms regulated solely by the FCA). Currently, this comprises Pillar 1 (the minimum capital requirement that firms must meet at all times to comply with the Capital Requirements Regulation) plus Pillar 2A, which covers risks not captured or not adequately captured in Pillar 1, or any applicable leverage ratio if that is higher.

The recapitalisation component will be based on a firm’s recapitalisation needs post resolution as determined by the PRA as the supervisory authority and any additional requirements necessary to maintain market confidence. The recapitalisation component can be satisfied with capital maintained in excess of the loss absorption amount or qualifying unsecured debt instruments with a maturity of above 1 year.

The Bank will set MREL on a firm-specific basis, depending on the resolution strategy for the firm. The Bank intends to take a proportionate approach, with the strategy driven by a range of factors, including a firm’s size, the scale of its critical economic functions and the complexity of transferring these activities in resolution.

For firms which need a bail-in strategy to continue operating, the recapitalisation amount is likely to be at least equal to existing Pillar 1 plus Pillar 2A capital requirements.
For firms for which part of the business could be transferred to a private sector purchaser or temporarily to a bridge bank in resolution, the Bank proposes to set a recapitalisation amount that may be lower than existing Pillar 1 plus Pillar 2A capital requirements.
For firms which can be placed into insolvency their recapitalisation needs will be zero.

Actual and indicative minimum requirements for own funds and eligible liabilities (MREL)

Notes
1. Total Capital Requirements (TCRs) in the Tables are as at December 2018. For firms whose
binding minimum TCR is based on risk-weighted assets (RWAs), the Table contains each firm’s
Pillar 1 and Pillar 2A requirements expressed as a percentage of the firm’s RWAs. Where
otherwise specified, for firms with a leverage-based binding minimum TCR, the Table contains
each firm’s Requirement expressed as a percentage of the total value of the firm’s leverage
exposures (LEs).
2. Individual external ‘Minimum Requirements for own funds and Eligible Liabilities’ (MRELs) are
based on balance sheet data as at December 2018. For firms whose binding MREL is based on
RWAs, the Table shows each firm’s MRELs expressed as a percentage of the firm’s RWAs. For
firms with a leverage-based binding MREL, the Table contain each firm’s MREL expressed as a
percentage of the total value of the firm’s leverage exposures. MRELs expressed as a percentage

of LEs are given to the nearest 0.05% to align the number of decimal places with the leverage-
based TCR.

  1. The buffers included in the Table comprise:
    a. A capital conservation buffer of 2.5%;
    b. Financial Stability Board (FSB) global systemically important bank (G-SIB) buffers based on
    the FSB’s 2018 list of G-SIBs1
    ;

c. A firm-specific countercyclical capital buffer, estimated by assuming that a 1%
countercyclical capital buffer applies in the UK and a 0% countercyclical capital buffer
applies in all other jurisdictions (to avoid disclosing where other jurisdictions have positive
countercyclical buffer values); and
d. The systemic risk buffer, in line with the Prudential Regulation Authority (PRA)’s published
approach2 and rates3
.

The buffers in the Table do not include the PRA buffer, the size of which is firm-specific and
confidential. Firms whose binding TCRs are leverage-based are not subject to the capital
conservation buffer. The calculation of firms’ combined buffers above MREL is in line with PRA
Supervisory Statement 16/16(4)4, where appropriate.
4. The indicative MRELs for 2020-2022 set out in the Tables should not be construed as binding,
nor are they a definitive indication of future MRELs. The MREL set for a specific firm in any given
year will ultimately depend on a number of factors including, but not limited to:
a. Changes to the firm and its balance sheet;
b. The Bank’s preferred resolution strategy for the firm (which must be reviewed annually);
c. An assessment of the concerns regarding the resolvability of the firm, including the progress
of the firm in achieving resolvability;
d. Decisions made by resolution colleges and crisis management groups; and
e. Future changes in Bank, PRA or international policy, or in the applicable legal regime, which
change the way MREL or capital requirements are calculated.
Actual MRELs will require consultation with competent authorities and relevant European Union
resolution authorities.
5. Since 1 January 2019, UK resolution entities that are G-SIBs5 have been required to meet the
minimum requirements set out in the FSB’s Total Loss-Absorbing Capacity (TLAC) Standard6
, as implemented through the Bank’s Statement of Policy on MREL7

(the MREL SoP) in the UK, being
the higher of 16% of RWAs on a consolidated basis or 6% leverage exposures on a consolidated
basis. The FSB’s TLAC requirements, as implemented in the EU by the amended Capital
Requirements Regulation (CRRII)8

came into force on 27 June 2019. These set different
calculations of leverage requirements for G-SIBs than those set out in the MREL SoP. G-SIBs are
required to meet both requirements and will be bound by the higher of either requirement.
Where the binding MREL is the leverage-based requirement under the MREL SoP, it is calculated
based on the Financial Policy Committee’s (FPC’s) definition of the total exposure measure as set
out in the Bank’s Policy Statement on the FPC’s powers over leverage ratio tools, as updated in
October 20179

. Where the binding MREL is the leverage-based requirement under CRRII, it is
calculated based on the total exposure measure set out in Article 429(4) of the Capital
Requirements Regulation, as amended by CRRII. While this publication includes the CRRII
requirements specifically referred to above, it does not include assumptions about the future
application of other changes that may result from the revision of the Bank Recovery and
Resolution Directive (BRRD) and CRR. The Bank is committed to, before the end of 2020,
reviewing the calibration of MREL, and the final compliance date, prior to setting end-state
MRELs. In doing so, the Bank will have regard to any intervening changes in the UK regulatory

Prudential Regulation Authority (United Kingdom)

SONIA (interest rate)
History
SONIA was launched in March 1997 by WMBA Limited, and is endorsed by the British Bankers Association (BBA).[2]

The Bank of England took on administration of rate in April 2016. Two years later, in April 2018, the rate underwent a number of reforms.[1] In the same year efforts to promote SONIA as the standard Sterling interest rate benchmark for loans, derivatives and bonds were stepped up.[3][4]

In July 2019, UK transport group National Express obtained the first corporate loan referencing SONIA. The loan was drawn from NatWest as part of a pilot scheme before launch into the wider market.[5]

Technical details
On each London business day, SONIA is measured as the trimmed mean, rounded to four decimal places, of interest rates paid on eligible sterling denominated deposit transactions. The trimmed mean is calculated as the volume-weighted mean rate, based on the central 50% of the volume-weighted distribution of rates.[6]

Eligible transactions are[6]:

reported to the Bank’s Sterling Money Market daily data collection, in accordance with the effective version of the ‘Reporting Instructions for Form SMMD’;
unsecured and of one business day maturity;
executed between 00:00 hours and 18:00 hours UK time and settled that same-day; and
greater than or equal to £25 million in value.
The rate conventions are: annualised rate, act/365, four decimal places.[7]

In 2018, SONIA (floating rate) bonds accounted for 20.7 per cent share of UK issuance compared to 48.1 per cent share of Interbank Offered Rate (floating rate) bonds.[citation needed]
Libor
The London Inter-bank Offered Rate
For the Libor manipulation scandal, see Libor scandal. For the personal name, see Libor (name).

Libor gets its name from the City of London.
The London Inter-bank Offered Rate is an interest-rate average calculated from estimates submitted by the leading banks in London. Each bank estimates what it would be charged were it to borrow from other banks.[1][a] The resulting rate is usually abbreviated to Libor (/ˈlaɪbɔːr/) or LIBOR, or more officially to ICE LIBOR (for Intercontinental Exchange Libor). It was formerly known as BBA Libor (for British Bankers’ Association Libor or the trademark bba libor) before the responsibility for the administration was transferred to Intercontinental Exchange. It is the primary benchmark, along with the Euribor, for short-term interest rates around the world.[2][3] However, Libor will not be published any more after end-2021, and market participants are strongly encouraged to transition to other risk-free rates.[4][5]

Libor rates are calculated for five currencies and seven borrowing periods ranging from overnight to one year and are published each business day by Thomson Reuters.[6] Many financial institutions, mortgage lenders, and credit card agencies set their own rates relative to it. At least $350 trillion in derivatives and other financial products are tied to Libor.[7]


Market transition from LIBOR to SONIA

Interbank lending market
From Wikipedia, the free encyclopedia
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The interbank lending market is a market in which banks lend funds to one another for a specified term. Most interbank loans are for maturities of one week or less, the majority being over day. Such loans are made at the interbank rate (also called the overnight rate if the term of the loan is overnight). A sharp decline in transaction volume in this market was a major contributing factor to the collapse of several financial institutions during the financial crisis of 2007–2008.

Banks are required to hold an adequate amount of liquid assets, such as cash, to manage any potential bank runs by customers. If a bank cannot meet these liquidity requirements, it will borrow money in the interbank market to cover the shortfall. Some banks, on the other hand, have excess liquid assets above and beyond the liquidity requirements, and will lend money in the interbank market, receiving interest on such loans.

The interbank rate is the rate of interest charged on short-term loans between banks. Banks borrow and lend money in the interbank lending market in order to manage liquidity and satisfy regulations such as reserve requirements. The interest rate charged depends on the availability of money in the market, on prevailing rates and on the specific terms of the contract, such as term length. There is a wide range of published interbank rates, including the federal funds rate (USA), the LIBOR (UK) and the Euribor (Eurozone).


https://www.fooledbyrandomness.com/tenprinciples.pdf

http://teawithft.blogspot.com/

Stylized fact
In social sciences, especially economics, a stylized fact is a simplified presentation of an empirical finding.[1] A stylized fact is often a broad generalization that summarizes data, which although essentially true may have inaccuracies in the detail.

A prominent example of a stylized fact is: “Education significantly raises lifetime income.” Another stylized fact in economics is: “In advanced economies, real GDP growth fluctuates in a recurrent but irregular fashion”.

However, scrutiny to detail will often produce counterexamples. In the case given above, holding a PhD may lower lifetime income, because of the years of lost earnings it implies and because many PhD holders enter academia instead of higher-paid fields. Nonetheless, broadly speaking, people with more education tend to earn more, so the above example is true in the sense of a stylized fact.

List of acronyms associated with the eurozone crisis


https://whenthecrisishitthefan.wordpress.com/2012/01/24/the-irony-of-reading-plutarch/

https://issuu.com/corporatewatch/docs/corporate_watch_false_dilemmas_guid

#Tautology #CircularReasoning #RobbingPetertoPayPaul #MoneyisanAbstractRatio #CentralBankCoup #COP26 #ReithLectures #BraveNewWorldofCarbonTrading #SPASH #WrongKindofGreen #MODULOFT #AffordableHomes #CreditMisallocation #EphorsofDebt #EuroCrisis #Brexit #CronyCapitalistVirus

To Be Continued this is a Notebook Post , as have so many of my posts been this past two months.