SRB Publishes Second Part of 2018 MREL Policy
Brussels – 16/01/2019
The Single Resolution Board (SRB) has today published the second part of its 2018 policy on the minimum requirement for own funds and eligible liabilities (MREL) pertaining to the second wave of resolution plans; i.e. the plans for the most complex banking groups.
MREL represents one of the key tools in enhancing banks’ resolvability. The SRB continues to develop its MREL policy, step-by-step. This gives banks the clarity needed on the SRB’s requirements for them to build up MREL.
Concretely, in order to increase the quantity and quality of MREL, this second part of the 2018 MREL policy introduces a series of new features to strengthen banks’ resolvability within the Banking Union. Among them, the main new ones are: a refined approach for eligible instruments for consolidated MREL-targets, increased binding subordination requirements and, last but not least, the introduction of binding MREL targets at individual level.
The SRB will continue to develop its MREL policy going forward. After the adoption of the Banking Package, the SRB policy will need to be adapted to address in particular the TLAC implementation and the new internal MREL requirements.
See the policy here
Visit the MREL page here
Further Information on the main new features:
- A Point-of-Entry approach will now apply to liabilities other than own funds instruments to meet consolidated MREL targets. Only liabilities issued directly by the resolution entity will be considered eligible to meet consolidated targets on the ground that resolution tools will be applied only to this entity in resolution.
- Subordination levels will now be set based on a combination of a general level and take into account of the bank-specific nature of the assessment of No-Creditor-Worse-Off risk in the senior layer. A general level of 16% risk weighted assets (RWA) plus the combined buffer requirement (CBR) will apply for global systemically important institutions (G-SIIs), and of 14% RWA plus CBR for other systemically important institutions (O-SIIs) and other resolution entities.
- The SRB will determine binding targets at the individual level for subsidiaries of banking groups, prioritising the most relevant entities for this wave of decisions, with a view to ensuring a sufficient quantum of loss absorbing capacity in all parts of the resolution group.
About the Single Resolution Board
The Single Resolution Board (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.
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