MNB Revises Principles for Setting MREL for Banks
MNB revised principles for setting the Minimum Requirement for own funds and Eligible Liabilities (MREL) for domestic credit institutions and investment firms. MNB first published these principles in November 2018 and this update was necessitated by the banking system reform package that entered into force EU on June 27, 2019 as well as the domestic legislation implementing it. The revised principles aim to provide the institutions affected by the requirement and the professional public with transparent information on how the MNB approaches the interpretation of certain legal provisions governing the determination of the MREL. As of January 01, 2021, MNB, acting in its resolution role, will apply the principles presented in this document.
The detailed criteria for establishing the MREL requirements in Hungary are governed by the Resolution Act. According to the Resolution Act, in accordance with the EU Bank Recovery and Resolution Directive (BRRD), domestic credit institutions and investment firms are required to comply with MREL on an ongoing basis. Under MREL, institutions must maintain an adequate quantity and quality of resources that can be partially or fully depreciated or converted into capital in the event of a crisis, thus ensuring the loss-making nature of owners and creditors and the continuous performance of critical functions during and after a crisis. The required institutions must comply with the MREL requirements on an ongoing basis from January 01, 2024. Considering that the MREL requirements in accordance with the new legislation will be laid down for the first time in 2021, MNB does not set out the planned MREL level prior to the mandatory intermediate MREL target level on January 01, 2022. The MREL framework presented in this document addresses the following topics:
- Institutional scope and the level of MREL requirements to be met
- Assumptions under which MNB determines the extent of the requirement
- Requirements to be met by institutions in terms of quality of resources, along with the subordination requirements that institutions must meet
- Rules for compliance with specific (internal) MREL requirements
- The deadline and milestones for meeting the requirements
- Restrictions on investment in MREL-capable instruments
Keywords: Europe, Hungary, Banking, MREL, Regulatory Capital, Basel, BRRD, Pillar 1, Systemic Risk, Resolution Framework, MNB
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.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Related Articles
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
PBC Issues List of Systemic Banks, Adds 2 Foreign Banks to CERB List
The China Banking and Insurance Regulatory Commission (CBIRC) published the administrative measures for internal control of wealth management companies, which come into force on the day of promulgation.
PRA Publishes Discussion Paper on Its Future Approach to Policy
The Prudential Regulation Authority (PRA) proposed its approach to policy-making as it takes on wider rulemaking responsibilities under the Financial Services and Markets Bill.
ECB Publishes Opinion on Proposed Regulation on Data Act
The European Central Bank (ECB) published its opinion on the proposal for a regulation on harmonized rules on fair access to and use of data (Data Act).
