Banks need an authorisation under Articles 77 and 78a of Regulation (EU) 575/2013 (CRR) in order to redeem Eligible Liabilities Instruments . This authorisation framework is further specified by Commission Delegated Regulation (EU) No 241/2014 of 7 January 2014 and the SRB published a Q&A document on its administrative practises on the prior permission process.
The main objective of the permission regime is to enable resolution authorities to monitor the actions that result in a reduction of the stock of eligible liabilities and to prohibit any action that would amount to a reduction beyond a level which resolution authorities deem to be prudentially sound. The regime is applicable to institutions and entities subject to the MREL and to the instruments issued to comply with MREL, not excluding eligible liabilities instruments with a maturity below one year.
The SRB can authorize reductions of eligible liabilities instruments in the context of the General Prior Permission and Ad hoc Permission without Replacement only if the institution demonstrates to meet their MREL and Combined Buffer Requirement with a certain margin, after the transaction has been performed. Following an agreement with the European Central Bank, the margin would in principle be set at the lower value of either the requested predetermined amount or the institution’s Pillar 2 Guidance. Nonetheless, a different margin may be set depending on the circumstances of the case.
