Minimum Requirement for own funds and Eligible Liabilities (MREL)
The Single Resolution Board (SRB) is the resolution authority for participating Member States within the Banking Union (BU). It began operating as an independent European Union (EU) agency on 1 January 2015. The SRB assumed its full legal powers for resolution planning and resolution decisions on 1 January 2016. Its primary scope covers significant and cross-border banking groups established in the BU.
The Bank Recovery and Resolution Directive (BRRD), which has been transposed in all participating Member States, requires banks to meet a minimum requirement for own funds and eligible liabilities (MREL) so as to be able to absorb losses and restore their capital position, allowing banks to continuously perform their critical economic functions during and after a crisis.
To achieve this outcome, the SRB, together with the BU national resolution authorities (NRAs), started to develop its MREL approach in 2016. This preliminary approach consisted of informative targets that sought to enable banks to prepare for their future MREL requirements. The SRB is further enhancing its gradual MREL multi-year policy, and in 2017 introduced binding requirements and started to address both the quantity and quality of MREL with bank-specific features.
During 2017, the SRB developed its MREL policy, starting to develop binding targets for major banking groups. Looking forward to 2018, these targets will be defined, with an increased focus on quality and internal location of MREL, in particular ensuring that there are sufficient subordinated instruments to implement banks’ preferred resolution strategies.
Looking further, beyond 2018, decisions on MREL will be regularly updated in the light of possible changes in the structures and degrees of riskiness of banks, as well as keeping up to date with potential regulatory developments.