Single Resolution Board Launches Consultation on Minimum Requirements for Own Funds and Eligible Liabilities Policy
02/17/2020The Single Resolution Board has launched a consultation on proposed changes to its policy on minimum requirements for own funds and eligible liabilities (MREL) for Eurozone banks, designed to bring the SRB’s MREL policy in line with the changes introduced by the 2019 EU banking package for EU banks. MREL is the EU's precursor to total loss-absorbing capacity (TLAC) standards at international level. 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. It works with national regulators from Eurozone countries to determine MREL requirements. Responses to the consultation should be submitted by March 6, 2020. The SRB expects to publish its final MREL Policy Statement based on these responses by the end of April 2020 and will apply the policy to MREL decisions taken in early 2021.
The revised Capital Requirements Regulation and Directive and revised Bank Recovery and Resolution Directive, each of which came into force in June 2019, make up the EU’s Banking Package. Among other changes, the revised legislation amended the provisions governing EU banks’ capital requirements. In particular, BRRD II imposed a fixed MREL upon EU global systemically important institutions, with institution-specific MREL being applied where appropriate. The BRRD II MREL provisions will apply from January 1, 2024. The SRB’s consultation does not concern TLAC standards, the policy for which the SRB published in June 2019 and subsequently updated in December 2019.
In response, the SRB’s consultation proposes the following changes to its MREL policy for Eurozone banks:
- Calibration of MREL reflecting the new Banking Package framework, including the introduction of MREL based on the leverage ratio and the multiple point of entry approach;
- Subordination requirements for resolution entities;
- Internal MREL for non-resolution entities; and
- MREL for cooperative groups.
The paper also discusses how contractual recognition might be employed to guarantee the eligibility of liabilities issued under third-country law and the transitional periods for introduction of the requirements up to the 2024 MREL target deadline.
View the SRB's consultation on changes to its MREL policy.
View details of the SRB's addendum to its 2018 MREL policy statement.
View details of CRR II and CRD V.
View details of BRRD II.
View details of the SRB's TLAC policy.
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