EBA consults on technical standards on indirect subscription of MREL instruments within groups

The European Banking Authority (EBA) launched today a public consultation on its draft Regulatory Technical Standards (RTS) specifying the methods to avoid that instruments indirectly subscribed by the resolution entity for the purpose of meeting the minimum requirement for own funds and eligible liabilities (MREL), applicable to entities that are not themselves resolution entities, hamper the smooth implementation of the resolution strategy. These patterns of indirect subscription are also known as “daisy chains of internal MREL”. The consultation runs until 27 October 2020.

Under these draft RTS, a general deduction framework applies in the general case, and a “fall-back” solution applies where the deduction approach cannot apply.

The deduction occurs at the level of any intermediate entity which has an MREL requirement in a chain of ownership inside a group. The amount of deduction of MREL-eligible instruments equals the full amount of the intermediate entity’s holdings of MREL-eligible instruments of the lower subsidiaries, and a risk weight of 0% is applied to these holdings. The deduction framework complements the one already in place for own funds by including eligible liabilities.  

Where the general deduction framework is not practicable, the resolution authority assesses whether indirectly issued instruments hamper the smooth implementation of the resolution strategy, and may apply the measures of Article 45k BRRD2 on the breach of MREL, including the removal of a substantive impediment to resolvability.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 27 October 2020.

The EBA will hold a public hearing on the draft RTS, which will take place via conference call on Tuesday 29 September 2020 from 14:00 CET. The dial in details will be communicated in due course.

All contributions received will be published following the closure of the consultation, unless specifically requested otherwise.

Legal basis and next steps

These draft RTS have been developed in accordance with Article 45f(6) of the BRRD, which mandate the EBA to develop draft regulatory technical standards further specifying methods to avoid that instruments indirectly subscribed by the resolution entity for the purpose of meeting the minimum requirement for own funds and eligible liabilities applicable to entities that are not themselves resolution entities under Article 45f of Directive 2014/59/EU hamper the smooth implementation of the resolution strategy.