On 7 November 2023, the European Parliament’s Economic and Monetary Affairs Committee (ECON) voted for targeted changes to the so-called ‘Daisy Chain’ proposal ensuring proportionality and a level playing field between banks.
The ‘Daisy Chain’ proposal introduces targeted adjustments that will help improve the resolvability of bank institutions. It seeks to amend the EU bank resolution framework by:
- Incorporating a dedicated treatment for the indirect subscription of instruments eligible for the internal minimum requirement for own funds and eligible liabilities (MREL).
- Further aligning the treatment of global systemically important institution groups with a Multiple Point of Entry resolution strategy with the treatment outlined in the Financial Stability Board’s international Total Loss-absorbing Capacity Term Sheet (the ‘TLAC standard’).
- Clarifying the eligibility of instruments in the context of the internal TLAC.
The compromises agreed in ECON extended the definition of “liquidation entity”. Furthermore, MEPs focused on how to frame the discretion of national resolution authorities (NRAs) to determine the internal MREL exceeding the own funds requirement for liquidation entities on an individual basis as well as on the discretion of NRAs to determine the MREL on a consolidated basis for specific subsidiaries in a resolution group.
Once the European Parliament mandate to start negotiations with the Council is announced in plenary, negotiations with the Council are expected to start.