The European Banking Authority (EBA) has published the following:
- final draft regulatory technical standards (RTS) on criteria for determining the minimum requirement for own funds and eligible liabilities under the Bank Recovery and Resolution Directive (BRRD). To avoid institutions structuring their liabilities in a way that impedes the effectiveness of the bail-in or other resolution tools, and to avoid the risk of contagion or a bank run, the Bank Recovery and Resolution Directive (BRRD) requires that institutions meet at all times a minimum requirement for own funds and eligible liabilities (MREL). This will be set on a case-by-case basis by resolution authorities, based on at least six common criteria set out in the BRRD. The final draft RTS further specify these minimum criteria in order to achieve an appropriate degree of convergence in how they are applied and interpreted across Member States, and ensure that similar levels of MREL are set for institutions with similar risk profiles, resolvability, and other characteristics regardless of their domicile; and
- final draft RTS on the contractual recognition of write-down and conversion powers under Article 55(3) of the BRRD. Where liabilities within the scope of the write-down and conversion powers are governed by the law of a third country the BRRD requires agreements concerning such liabilities to include a contractual recognition term. This is a contractual term by which the creditor (or a party to the agreement creating the liability) acknowledges that the liability may be subject to these powers and agrees to be bound by any reduction of the principal or outstanding amount due, conversion or cancellation that is affected by the exercise of the powers by an EU resolution authority. The final draft RTS determine the cases in which the requirement to include the contractual term does not apply. In particular, the requirement is displaced where an adequate statutory regime in the relevant third country or an international agreement exists which provides for an administrative or judicial procedure to secure recognition of the application of the write-down and conversion powers by an EU resolution authority. The final draft RTS also specify that liabilities that are fully secured in accordance with EU regulatory requirements or equivalent third country law need not include the contractual term. Finally, the RTS also specify the minimum contents of the contractual term.
The final draft RTS will be submitted to the European Commission for endorsement, following which they will be subject to scrutiny by the European Parliament and the Council of the EU before being published in the Official Journal of the EU.