February 2024
The European Savings and Retail Banking Group (ESBG) submitted its response to the consultation launched by the Single Resolution Board (SRB) in December 2023 on the future of the Minimum Requirement for own funds and Eligible Liabilities (MREL) policy. While most banks within the SRB’s jurisdiction have achieved their final MREL targets, this consultation is part of a strategic review to ensure the SRB is adequately prepared for future challenges.
Based on insights gained from recent crises, the SRB aims to enhance its focus to ensure effective implementation of all resolution strategies with sufficient loss-absorbing resources. ESBG advocates for stability in the MREL policy, emphasizing the need for transparency and maintaining a level playing field among banks operating in the Common Market.
ESBG recommends maintaining the current MREL calibration, as defined in the 2023 policy, to facilitate reliable planning for the issuance of MREL eligible instruments. Furthermore, it stresses the importance of considering various factors such as resolution strategy, business model, and risk profile when determining MREL requirements.
MREL Calibration and Resolvability Assessment
ESBG expresses concerns about linking MREL calibration with the resolvability assessment, arguing that MREL may not address all resolvability impediments. Such a link would only provide an illusion of transparency but would not remove the inherent subjectivity attached to that kind of assessment. The introduction of a harmonized floor and a single adjustment driver is rejected due to unclear applicability to institutions subject to normal insolvency proceedings, for which the competent resolution authorities regularly do not set MREL that exceed the own funds requirements
Market Confidence
ESBG suggests setting the external minimum capital requirement for resolution entities at zero, emphasizing the importance of reliable business reorganization plans and access to stable funding sources to sustain market confidence post-resolution.
Monitoring of MREL Eligibility
ESBG recommends a simplified process for monitoring MREL eligibility and clear allocation of roles between SRB and ECB to avoid duplication of work. This includes off-site eligibility checks and periodic self-assessment submissions by banks.
Contact Info:
Christophe Hennebelle
Advisor- Recovery, Resolution And Deposit Insurance Policy
e.:christophe.hennebelle@wsbi-esbg.org
t.:+32 2 211 11 62
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