The Single Resolution Board (SRB) has published a report on its approach to the minimum requirement for own funds and eligible liabilities (MREL) in 2016 and its approach towards setting MREL in 2017 and beyond.

The SRB determined that a final MREL methodology would not be available in 2016 for two main reasons:

  • MREL is not a common regulatory standard but more a Pillar 2 instrument driven by the risk and resolvability profiles of each institution. This means that developing a methodology covering all relevant aspects represents a considerable challenge given the wide range of baking groups in participating member states; and
  • the current rules are likely to change following the release of the European Commission’s legislative proposal on Total Loss Absorbing Capacity (TLAC) and MREL in November 2016. However, SRB is committed to ensuring that it can resolve banks without significant negative impacts on financial stability, and so banks must therefore have sufficient and adequate MREL.

In terms of upcoming developments, the SRB intends to develop its MREL policy in 2017 with a view to setting binding MREL targets for the most systemic important banking groups in the EU Banking Union. The SRB will remain closely involved in the ongoing European legislative process in respect of TLAC and MREL while refining its MREL approach for 2017 and beyond.

The SRB intends to develop additional policies and methodologies in respect of MREL based on existing legislation and other relevant regulatory developments. These will include the calibration of MREL targets, the assessment of eligibility criteria, including subordination, as well as MREL positioning within banking groups and appropriate transition periods for banks in the Banking Union.

View Single Resolution Board report on approach to MREL in 2016 and next steps, 17 February 2017