Shearman & Sterling LLP | FinReg | Eurozone Single Resolution Board Publishes Update to MREL Policy
Financial Regulatory Developments Focus
This links to the home page
Blog
FILTERS
  • Eurozone Single Resolution Board Publishes Update to MREL Policy
    06/25/2019
    The Eurozone Single Resolution Board has published an addendum to its 2018 policy statement on minimum requirements for own funds and eligible liabilities. The addendum takes into account changes made as part of the EU’s “Banking Package”, published in the Official Journal of the European Union on June 7, 2019, in particular the EU’s implementation of the Total Loss Absorbing Capacity (TLAC) standard by changes made under the revised Capital Requirements Regulation (CRR2). The purpose of the addendum is to explain how the SRB will take the changes into account in its MREL determinations.

    The SRB is responsible for ensuring the compliance of Eurozone-based institutions that are subject to the Single Resolution Mechanism (primarily Eurozone countries) with their resolution and recovery planning requirements and works with national regulators from Eurozone countries to determine MREL requirements. The SRB’s policy statement provides clarity for Eurozone banks on its determination of MREL targets. The SRB published the second part of its 2018 MREL policy on January 16, 2019, which introduced a series of new features to strengthen banks’ resolvability. The addendum amends the SRB’s policy statement by focusing on two particular changes under CRR2 that will affect the SRB’s MREL determinations, namely:
     
    1. Global systemically important institutions must satisfy CRR2 external TLAC requirements from June 27, 2019. The SRB is entitled to grant an allowance for senior instruments in accordance with specified thresholds and will conduct its assessment in the current resolution planning cycle on the basis of the applicable SRB MREL policy to decide whether to maintain any such allowance. The major elements of the SRB’s new MREL framework, other than the TLAC requirement, will become applicable on December 28, 2020. Until then, Eurozone banks must comply with the new TLAC requirements and the existing MREL requirements.
    2. As of June 27, 2019, institutions must seek SRB approval to redeem, repay or repurchase eligible liabilities instruments before they reach their contractual maturity. As a transitional arrangement, no prior permission will be required to perform market making and other secondary market activities in own eligible liabilities instruments until December 31, 2019.

    The SRB intends to publish its “MREL policy 2020” by the beginning of 2020, establishing the basis for MREL setting under the revised EU Bank Recovery and Resolution Directive (i.e. BRRD 2) and the revised Single Resolution Mechanism Regulation (i.e. SRMR 2) framework. The SRB intends to communicate these future MREL decisions to banks in early 2021.

    View the addendum to the SRB's 2018 MREL Policy.

    View details of the SRB's 2019 work program.

    View details of the SRB’s 2018 second wave MREL policy statement.

    View details of CRR2 and CRD5.
     
    View details of BRRD2.
     
    Return to main website.