COVID-19 crisis: the SRB's approach to MREL targets
In this blog, I would like to provide additional clarity on the SRB’s approach to minimum requirements for own funds and eligible liabilities (MREL), taking the impact of the COVID-19 crisis into account.
First of all, the banking industry has made substantial progress in building up MREL to date and overall it is in a good position today. Nevertheless, during this challenging period, we are committed to ensuring that short-term MREL constraints do not prevent banks from lending to business and the real economy.
To achieve this, we are already working together with the banks under our remit and national resolution authorities to prepare for the implementation of the 2020 resolution planning cycle, including, in particular, the changes to MREL decisions under the new banking package (BRRD2/SRMR2). As part of this cycle, new MREL targets will be set according to the transition period in SRMR2, i.e. setting the first binding intermediate target for compliance by 2022 and the final target by 2024. The decisions will be based on recent MREL data, and reflect changing capital requirements.
As regards existing binding targets (set in the 2018 and 2019 cycles), in the current crisis, the SRB intends to take a forward-looking approach to banks that may face difficulties meeting those targets before new decisions (with 2022 intermediate targets) take effect. Our focus will be on the 2020 decisions and targets, and we ask banks to continue to make all efforts to provide the necessary data on MREL for the upcoming cycle.
We believe that this approach provides banks with the flexibility they may need in the coming months, as well as ensuring a level playing field. At the same time, our collective work on resolvability should carry on at a steady pace to ensure stability in our financial system.
About the article author
Dr Elke König is Chair of the SRB, responsible for the management of the organisation, the work of the Board, the budget, all staff and the Executive and Plenary sessions of the Board. She is a former President of the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)) from 2012 until 2015. After qualifying in business administration and obtaining a doctorate, Dr König spent many years working for companies in the financial and insurance sector. Dr König was also a representative of the Supervisory Board of the Single Supervisory Mechanism.