EBA欧洲银行-PH-Draft-Technical-Standards-on-criteria-for-MREL-19-Jan-15_18页_1mb

EBA Draft Technical Standards on MREL Criteria Summary

Core Content

The European Banking Authority (EBA) has published draft technical standards outlining the criteria for determining the Minimum Requirement for Own Funds and Eligible Liabilities (MREL) for banks in the European Union. These standards aim to support the implementation of the Bank Recovery and Resolution Directive (BRRD), which establishes a common resolution regime to address failing banks and ensure cooperation between home and host authorities.

Main Features of the Draft Technical Standards

Resolvability and Capital

• Resolution authorities must determine:
  • The amount of losses the institution should absorb
  • The amount of recapitalisation needed to maintain authorisation and sustain market confidence
• These determinations should start from the regulatory capital (and leverage) requirements, with any differences justified.
• The amount of loss absorption may differ from capital requirements if the risk profile is different, but must be supported by a reasoned explanation.
• Recapitalisation may also differ if needed to address impediments to resolvability, such as liabilities excluded from bail-in.
• MREL for systemic institutions should be benchmarked against peers, and the resolution fund can only be accessed after at least 8% of total liabilities and own funds have been burden-shared.

Exemptions

• Liabilities may be excluded from bail-in under BRRD Article 44(2) or (3).
• EBA technical standards require resolution authorities to identify and quantify such liabilities.
• Excluding certain liabilities can affect the "No Creditor Worse Off" principle, requiring MREL adjustments.

Deposit Guarantee Schemes (DGS)

• DGS can cover losses to covered deposits in the event of liquidation.
• DGS may also contribute to resolution costs, up to the lower of:
  • The amount by which covered deposits would have been written down without protection
  • 50% of its target funding level (or a percentage set by the member state)
• This contribution can serve as a substitute for part of the MREL.

Transition

• A four-year transition period is proposed for MREL.
• The document raises the question of whether a shorter period should be considered for restoring MREL after resolution.

MREL and TLAC

• MREL and the Financial Stability Board's (FSB) Total Loss Absorbing Capacity (TLAC) share the goal of ensuring banks internalise the costs of failure.
• Both require banks to have sufficient resources to absorb losses and recapitalise without public support.
• Key differences:
  • MREL applies to all EU banks, while TLAC is primarily for Global Systemically Important Institutions (G-SIBs).
  • MREL is based on total assets, whereas TLAC uses risk-weighted assets (RWAs) or leverage exposure.
  • MREL does not have a general subordination requirement, but resolution authorities must assess the feasibility of bail-in instruments.
  • Capital buffers are additional to MREL, not part of it.
  • MREL is already in law but allows for transition through case-by-case requirements.
  • The draft includes a review clause for MREL legislation in 2016.

Process and Next Steps

• The consultation period for the draft technical standards closes on 27 February 2015.
• The EBA will review the responses and approve a final draft before submitting it to the European Commission for adoption.

Key Questions for Consultation

1. Are any components of the overall capital requirement not appropriate indicators of loss in resolution?
2. Should the resolution authority adjust the loss absorption amount downwards from the level of capital requirements?
3. Should any additional benchmarks be used to assess the necessary degree of loss absorbency?
4. Are any components of the overall capital requirement not appropriate indicators of the capital required after resolution?
5. Is it appropriate to have a single peer group of G-SILs, or should this be subdivided by the level of the G-SII capital buffer? Should the peer group approach be extended to O-SILs/other institutions?
6. Are there additional ways in which specific features of subsidiaries should be reflected?
7. Do you agree with the derogation for excluded liabilities which account for less than 10% of a given insolvency class?
8. Do you agree that resolution authorities should seek to ensure that systemic institutions have sufficient MREL to make it possible to access resolution funds fully?
9. Is the limit on the transition period appropriate?
10. Should the resolution authority also set a transitional period for the MREL of banks which are undergoing or have undergone a resolution process?
11. Overall, do you consider that the draft RTS strikes the appropriate balance between the need to adapt the MREL to the circumstances of individual institutions and promoting consistency in the setting of adequate levels of MREL across resolution authorities?
12. Are there additional issues which should be considered in the final impact assessment?