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.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
MAS Proposes Notices on Management of Services Outsourced by BanksRelated Articles
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
FSB Reports Assess NBFI Sector and Progress on LIBOR Transition
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.