Shearman & Sterling LLP | FinReg | Eurozone Single Resolution Board Publishes Policy Statement on First Wave of 2018 MREL Policy
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  • Eurozone Single Resolution Board Publishes Policy Statement on First Wave of 2018 MREL Policy

    11/20/2018
    The Eurozone Single Resolution Board has published its 2018 Policy Statement for firms’ minimum requirements for own funds and eligible liabilities under the first wave of 2018 resolution plans to be adopted under the Bank Recovery and Resolution Directive. The SRB is responsible for ensuring the compliance of Eurozone banks that are subject to the Single Resolution Mechanism (primarily Eurozone countries) with the Single Resolution Mechanism Regulation and BRRD. As part of this function, the SRB works with national regulators to determine relevant institutions’ MREL requirements. The purpose of the Policy Statement is to provide clarity for Eurozone banks on the SRB’s determination of 2018 MREL targets.

    The SRB’s 2018 resolution planning cycle has been split into two waves: the first wave relates to Eurozone banks that did not have binding MREL targets in 2017, while the second wave relates to the most complex banking groups. The first wave is based upon the SRB’s 2017 approach to MREL, but includes some additional features, namely catering for all resolution tools (not just those based on an open-bank bail-in) and removing references to the Basel I floor in the MREL formula (as it is no longer applicable). The Policy Statement provides guidance on the methodology for calculating MREL requirements, focusing on:
     
    • Targets and location;
    • Quality, subordination and eligibility criteria; and
    • Transition periods (the SRB plans to continue setting transition periods of up to four years for banks to meet their MREL targets).

    MREL decisions are reviewed annually and the SRB will revise applicable MREL targets, taking into account any changes stemming from supervisory decisions linked to the evolution of banks’ risk profiles and overall structures.

    View SRB's 2018 Policy for the first wave of resolution plans.

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