Strengthening Stability: Updates to the EU Single Resolution Board's Policy on Minimum Requirements for Own Funds (MREL)
EU law mandates that banks must consistently maintain an adequate supply of eligible instruments to support an effective resolution strategy in an organized manner. The ratio is that banks have sufficient loss-absorbing capacity to prevent taxpayer bailouts in case of financial distress.
The Single Resolution Board (SRB) released its latest MREL 2024 Policy today. This document delves into the intricate details of how MREL calculations and calibrations should be conducted, offering essential insights for stakeholders.
The policy has been updated to include a revised approach to internal and external Market Confidence Charge (MCC) calibration and to the monitoring of MREL eligibility. The MCC is designed to reflect the market's perception of a bank's riskiness and its ability to access funding during periods of stress. The new policy states, for example, that when calibrating the MCC for resolution entities, the SRB will take into account downward adjustments for specific features and the situation of the bank, especially when there is progress towards resolvability.
The policy has been also updated to consider liquidation entities introduced by Directive 2024/1174 and Regulation (EU) 2022/2036 ("CRR-quick-fix"). The latter, for example, provides a deduction framework for intermediate entities.
Click here for the press release and to read more.
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