SRB issues update on Permission Regime for the Reduction of Eligible Liabilities

The SRB has updated its approach to the prior permission regime for early calling, redeeming, repaying or repurchasing of eligible liabilities instruments by banks, ahead of upcoming key regulatory changes.

On 28 December 2020, the application of SRMR2 will mean that prior permission will be required for all MREL-eligible liabilities, including senior unsecured liabilities and internal MREL-eligible liabilities. On this date, the statutory transition period under the SRMR2 begins and authorisation to perform early redemption of eligible liabilities will need to be in place as of 1 January 2022. This is in line with the European Banking Authority’s Regulatory Technical Standards on procedural aspects of the permission regime, which are expected in 2021.

The guidance document (see below) also clarifies what will happen once MREL decisions under the SRMR2 are communicated by national resolution authorities (NRAs), and provides an update on the treatment of General Prior Permissions currently in place.

“MREL is a vital tool to ensure all banks under the SRB’s remit are resolvable. Today we are outlining the upcoming changes to the SRB’s current permission regime for calling, redeeming, repaying or repurchasing eligible liabilities instruments ahead of their maturity. As the new regime will come into force in January 2022 we urge all banks to take a prudent stance regarding early redemption in light of the upcoming MREL requirements. ” – Elke KÖNIG, Chair, SRB

About the Single Resolution Board

The SRB is the central resolution authority within the Banking Union (BU). Together with the national resolution authorities of participating Member States it forms the Single Resolution Mechanism (SRM). The SRB works closely with the European Commission (EC), the European Central Bank (ECB), the European Banking Authority (EBA) and national competent authorities (NCAs). Its mission is to ensure an orderly resolution of failing banks with minimum impact on the real economy and public finances of the participating Member States and beyond.