SRB Updates MREL Policy and PIA Approach in Resolution Planning
SRB updated the minimum requirements for own funds and eligible liabilities (MREL) policy and published the MREL dashboard for the fourth quarter of 2020. The dashboard highlights that funding costs were slightly above the pre-pandemic levels between January and April 2021 and average MREL shortfalls against the final target amounted to 0.58% of total risk exposure amount (EUR 39.6 billion) when including the combined buffer requirement. In a separate development, SRB published a revised approach to the Public Interest Assessment (PIA) in resolution planning. SRB has updated its approach on how to conduct the PIA, to consider potential system-wide events when identifying the preferred resolution strategy and tools in the resolution plan.
The updated policy introduces a number of new elements and refinements, based on the changes required by the Banking Package and in light of the experiences during the 2020 resolution planning cycle. The regulatory framework for MREL was revised in 2019 through amendments to the Bank Recovery and Resolution Directive (BRRD; 2014/59/EU), the Single Resolution Mechanism (SRMR; 806/2014/EU), and the Capital Requirements Regulation and Directive (CRR and CRD), all of which comprise the Banking Package. The updated policy introduces MREL maximum distributable amount (MDA), policy criteria to identify systemic subsidiaries for which granting of an internal MREL waiver would raise financial stability concerns, and the approach to MREL-eligibility of UK instruments without bail-in clauses. The updated policy sets out minimum conditions to authorize certain types of cooperative networks to use eligible liabilities of associated entities other than the resolution entity to comply with the external MREL as well as minimum conditions to waive the internal MREL of the legal entities that are part of the cooperative network. The determination of the external and internal MREL must be fully aligned with the specific resolution strategy, in a way that supports the implementation of resolution action. The updated policy also refines the:
- Methodology to estimate the Pillar 2 requirements post-resolution—that is, one of the components used for MREL calibration
- MREL calibration on preferred versus variant resolution strategy, confirming that SRB computes MREL in line with the preferred strategy
- MREL calibration methodology for liquidation entities, where SRB clarifies that the loss absorption amount may increase beyond the default adjustment in proportion to financial stability concerns
Related Links
- Press Release on MREL Policy and Dashboard
- Updated MREL Policy (PDF)
- MREL Dashboard (PDF)
- Press Release on PIA in Resolution Planning
- Revised PIA Approach (PDF)
- Article on PIA
Keywords: Europe, EU, Banking, MREL, MREL Dashboard, Resolution Planning, CRR2, BRRD2, Bail In, Public Interest Assessment, Regulatory Capital, Basel, SRMR2, Reporting, Resolution Framework, MREL Policy
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