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April 26, 2018

SRB published an article by Elke König in which she discussed the way forward with minimum requirement for own funds and eligible liabilities (MREL). She described the SRB approach and the work done so far toward MREL, also highlighting that MREL will continue to be one of the key areas of work for SRB in 2018. She highlights that SRB has taken a gradual, multi-year approach to MREL, which takes into account the specificities of the banks under its remit, with the goal of maintaining proportionality in the system while preserving a level playing field and upholding high resolution standards across the Banking Union.

To underpin resolution planning, SRB will develop guidance for the Internal Resolution Teams on solo/internal MREL and MREL calibration under transfer strategies. Internal loss-absorbing capacity is crucial to ensure that, within a group, losses are passed from the entities where they originate to those entities where resolution action is coordinated. SRB will also work further on defining the need for subordination, not least in light of assessing any challenges from the no creditor worse off, or NCWO, principle. SRB will develop its approach based on the current legislative framework and will strive to implement internal MREL for banking groups with resolution colleges during the 2018 planning cycle. Meanwhile, SRB is closely following the ongoing negotiations on the revision of the Bank Recovery and Resolution Directive and Single Resolution Mechanism (SRM) Regulation to prepare for a revision of its MREL policy, including on bank-specific targets and transition periods.

For the less significant institutions (LSIs) that are not within its remit, SRB will act through its oversight function and assess the conformity of draft resolution measures for LSIs that national resolution authorities notify SRB on, in accordance with the SRM Regulation. These include resolution measures to be adopted, such as draft resolution plans, MREL, and resolvability assessment, in addition to the decisions to apply simplified obligations. She concludes that MREL is a crucial tool to improve resolvability of banks and that no responsible management should take a "wait and see" approach.


Related Link: Article

Keywords: Europe, EU, Banking, SSM, MREL, Proportionality, Bank Resolution, SRB

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