Our thinking

Financial Regulatory Observer – March 2019

What's inside

The Financial Regulatory Observer sets spotlights on selected topics driving regulatory and technological changes in the financial industry.

Brexit preparedness for financial services: The German response

It is yet unclear if and when the House of Commons will again decide about the Withdrawal Agreement and whether the date for the UK leaving the EU will be changed. Under the current circumstances, a hard Brexit on 29 March 2019 still remains an option. To prepare for this possibility, the UK, EU Commission and EU27 have taken measures to minimize disruption in various areas.

London skyline

EU Regulatory Capital Wall Chart

Essential features of bank capital regulation across Europe in one handy wall chart.

circuit board

Banks face steep climb in MREL issuance

The upcoming enforcement of the MREL requirement will require European banks to issue a significant amount of subordinated and senior notes. But political instability and differing levels of investor demand could push up pricing and stifle access in some European markets, write Stuart Willey, Paul Alexander and Angelo Messore of global law firm White & Case.

FRO in-depth: The future of cryptoassets regulation

Partners Julia Smithers Excell and Stuart Willey, and associate Laura Kitchen of global law firm White & Case take a deep dive on the latest publications from EU and UK regulators aimed at providing supervisory clarity on the nascent cryptoasset market.

Navigating uncertainty: Corporate governance for foreign banks in the US

With the regulatory agenda for the US operations of foreign banks in a state of flux, Kevin Petrasic, Paul Saltzman, Glen Cuccinello, Will Giles and Alexander Abedine of global law firm White & Case provide a map to help boards navigate an uncertain terrain.

computer server
circuit board

EU Regulatory Capital Wall Chart

Essential features of bank capital regulation across Europe in one handy wall chart.

2 min read

Regulatory capital requirements for prudentially supervised financial services companies across Europe are complex and changing rapidly. To keep track of the regulatory framework in the region, we have brought together the essential features of bank regulation in our EU Regulatory Capital Wall Chart.

The Wall Chart provides a list of regulatory capital acronyms, the most important definitions and key ratios of the current regulatory framework, as well as an overview of the loss absorption waterfall deriving from rules on the hierarchies of creditors’ entitlements in bank insolvency and resolution scenarios.

The Wall Chart also highlights the interplay between regulations on total loss-absorbing capacity (TLAC) and the Minimum Requirement for own funds and Eligible Liabilities (MREL), which is a requirement under the EU Bank Recovery and Resolution Directive.

On the Wall Chart there are columns setting out the basics of Bank Regulatory Capital in the European Economic Area (EEA). The key features are:

  • The “Paradigm Business Model” contains the European Banking Authority (EBA)’s standardized description of bank business models, showing where exposures and liabilities can arise
  • The “Asset Stack,” which refers to the basic capital requirements of the Capital Requirements Regulation (CRR) which defines, within the framework created by the Capital Requirements Directive CRD IV), the requirements imposed on banks and certain investment firms to hold specific levels of regulatory capital, dependent on the institutions’ specific exposures and liabilities. The CRR requires regulated institutions to issue identified categories of equity and debt instruments to build a regulatory capital base (referred to as “Own Funds”) to a prescribed amount, such that when a bank looks at the ratio of its exposures to its liabilities, (with assets being determined on a risk-weighted basis), the ratio will not fall below certain specified percentages for the different categories of regulatory capital being issued. Broadly speaking, the riskweighted asset total is calculated by adding together all of the institution’s assets and some off-balance sheet items. Both assets and off-balance sheet items are determined in accordance with the specific valuation and risk-weighting multipliers set out in CRR
  • The “Creditor Hierarchies,” which indicate the current creditor hierarchies at the EU level and UK level. As the national insolvency regimes are not fully harmonized, creditor hierarchies differ from country to country, although, the recently implemented Directive 2017/2399 on the ranking of unsecured debt instruments in insolvency hierarchy aims to achieve a consistent approach across the EU, thereby leveling the playing field


Click here to view EMEA Regulatory Capital chart


Click here to download PDF.




This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2019 White & Case LLP