EBA publishes final technical standards to ensure effective resolution under the BRRD
The European Banking Authority (EBA) published its final draft Regulatory Technical Standards (RTS) on the Minimum Requirement for Own Funds and Eligible Liabilities (MREL), and on the contractual recognition of bail-in. Both standards provide further specification of essential elements to ensure the effectiveness of the resolution regime established by the Bank Recovery and Resolution Directive (BRRD).
The draft RTS on Minimum Requirement for Own Funds and Eligible Liabilities first seek to clarify how the resolution authority’s assessment of the amount of MREL needed to absorb losses and, where necessary, recapitalise a firm after resolution, should be linked to the institution’s going concern capital requirements. They provide that resolution authorities should, as a default, seek to rely on supervisory assessments of the degree of loss that a bank needs to be able to absorb and the capital it needs to operate. In addition, resolution authorities should consider any additional MREL needed to successfully implement the resolution plan.
The draft RTS on Contractual recognition of bail-in determines the list of liabilities to which the exclusion from the requirement to include the contractual term applies. For example, the draft RTS specify key elements which Union resolution authorities should assess as present before determining that the liabilities or instruments referred to in the first subparagraph of Article 55(1) of the Directive can be subject to write-down and conversion by a resolution authority pursuant to the law of a third country or to a binding agreement with that third country. This will ensure that the exclusion is interpreted homogenously across the Union (and therefore that contractual terms are required to be included in the same cases across the Union).