SRB Issues Guidance on Permission Regime for MREL-Eligible Liabilities
SRB published guidance clarifying what will happen once the minimum requirement for own funds and eligible liabilities (MREL) decisions under the revised Single Resolution Mechanism Regulation (SRMR2) are communicated by national resolution authorities. SRB also provides an update on the treatment of General Prior Permissions currently in place. With this, 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 the upcoming key regulatory changes.
The recent SRB guidance aims to explain and inform institutions under the direct SRB remit about two regulatory changes that require SRB to adapt its current permission regime procedure for calling, redeeming, repaying or repurchasing eligible liabilities instruments ahead of their maturity. The first regulatory change relates to the application of SRMR2 on December 28, 2020, with new MREL-eligibility criteria applying to liabilities that qualify for MREL. The regulation expands the scope of liabilities subject to the permission regime to all MREL eligible liabilities (including senior unsecured liabilities and internal MREL eligible liabilities) and to liabilities that are eligible for internal MREL. The guidance explains that, until the new MREL decisions adopted by SRB on the basis of the SRMR2 are communicated to institutions by the national resolution authorities, the existing MREL decisions taken on the basis of SRMR1/BRRD1 remain valid. After the communication of the SRMR2 MREL decisions by national resolution authorities, the transitional period set out in Article 12k of the SRMR2 will start and institutions will not need to apply for for early redemptions of MREL-eligible liabilities taking place until December 31, 2021. However, for redemptions of MREL-eligible liabilities to be performed after December 31, 2021, institutions will need to submit applications to the SRB four months in advance (for example, to perform a redemption as of January 01, 2022, an institution will need to submit an application to SRB at the latest by August 31, 2021).
The second regulatory change is the forthcoming Level 2 legislation on the permission regime. EBA is mandated under Article 78a(3) of the revised Capital Requirements Regulation (CRR2) to draft regulatory technical standards specifying the process for prior permission, including information requirements for permission applications and the timeframe for resolution authorities to assess applications. The EBA standards on the procedure applicable to early redemptions will have an impact on the current policy and procedure of SRB. SRB will continue to assess all new applications based on its current policy and procedure until the Delegated Regulation endorsing the EBA regulatory technical standards applies. SRB will use the statutory transitional period set out in SRMR2 to integrate the new elements of the Delegated Regulation into its policy and procedure, so that the updated permission regime can be operational as of January 01, 2022. SRB expects all applications for permission to include projections on total loss-absorbing capacity (TLAC) for the following three years.
Related Links
Keywords: Europe, EU, Banking, MREL, Resolution Framework, SRMR2, Permission Regime, CRR2, Basel, TLAC, Regulatory Capital, EBA, SRB
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Previous Article
MAS Proposes Notices on Management of Services Outsourced by BanksRelated Articles
BIS Innovation Hub Sets Out Work Program for 2021
BIS Innovation Hub published the work program for 2021, with focus on suptech and regtech, next-generation financial market infrastructure, central bank digital currencies, open finance, green finance, and cyber security.
EC Plans to Consult on Crisis Management and EDIS Framework Revisions
In an article published by SRB, Mairead McGuinness, the European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, discussed the progress and next steps toward completion of the Banking Union.
EBA Finalizes Remuneration Standards for Investment Firms in EU
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
ECA Recommends Actions to Enhance Resolution Planning for Banks
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE Publishes Key Elements of the 2021 Stress Testing for Banks in UK
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA Proposes Rules on Identity Verification of Depositor Protection
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB Publishes Work Program for 2021
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA Issues Update on Move to New Data Collection Platform
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank Publishes Derivation Rules for Reporting by Banks
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED Revises Capital Planning and Stress Testing Requirements for Banks
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.