Point (d) of Article 45f(3) BRRD requires that the resolution entity ‘declare’, with the consent of the competent authority, that it guarantees the commitments entered into by the subsidiary. Point (d) of Article 45f(4) provides for a corresponding requirement in case of parent undertakings and subsidiaries established in the same Member State and being part of the same resolution group.

Those provisions do not specify the type of commitments entered into by the subsidiary that need to be covered by the declaration of the resolution entity (or the parent undertaking) in order to fulfill the condition under point (d). The provisions leave open the nature and content of the declaration of the resolution entity (or the parent undertaking) and the associated guarantee(s).

The provisions, however, must be read in light of the broader rationale underpinning the regime for setting MREL and the possibility to grant waivers from the application of Article 45f BRRD. In particular, it is recalled that, as specified in Recital (80) of BRRD, resolution authorities should ensure that loss-absorbing capacity within a group is distributed across the group in accordance with the level of risk in its constituent legal persons and the required level of loss-absorbing capacity should be assessed separately for each individual subsidiary. Similarly, Recital (20) of Directive (EU) 2019/879 clarifies that MREL at the level of entities that are not themselves resolution entities should allow resolution authorities to resolve a resolution group without placing certain of its subsidiaries under resolution, thus avoiding potentially disruptive effects on the market and should comply with the chosen resolution strategy for the group. Any decision by the resolution authority to grant a waiver for a specific subsidiary under Article 45f BRRD is likely to affect the distribution of the internal loss-absorbing capacity within the group.

In light of the above, the determination of MREL, of which a decision on waivers for subsidiaries is an integral part, should reflect the resolution strategy that is appropriate for a given group in accordance with the resolution plan. Granting a waiver under Article 45f(3) or (4) BRRD may have an impact on the subsidiary’s ability to absorb losses and, consequently, also on the resolution authorities’ ability to successfully implement the envisaged resolution strategy.

On this basis, the declaration of the resolution entity or the parent undertaking should be as broad as possible, subject to the need to ensure coherence with the broader framework governing eligibility criteria for own funds and eligible liabilities in accordance with BRRD and Regulation (EU) No 575/2013. In particular, the declaration should not have the effect of preventing the subsidiary from complying with eligibility criteria for the own funds and eligible liabilities it has issued. In terms of scope of counterparties to the commitments entered into by the subsidiary, the guarantee should, as a general rule, cover the commitments entered into by the subsidiary, irrespective of the character of the counterparty (i.e., whether it is external or internal to the group or whether it is a shareholder). This conclusion is further supported by the fact that the resolution entity (or the parent undertaking) must satisfy the competent authority regarding the ‘prudent management’ of the subsidiary as one of the conditions for granting the waiver. Conversely, the condition in point (d) could also be considered satisfied if the risks in the subsidiary ‘are of no significance’. The only exception to that general rule on scope of counterparties would arise in case the resolution entity or the parent undertaking were to guarantee a liability owed to them by the subsidiary. In such a case, the guarantor and the creditor under the liability would be the same legal person and in such circumstances the declaration does not need to cover the liabilities of the subsidiary towards the entity making the declaration (the guarantor).

The wide scope for the guarantee assumed by the resolution entity or the parent undertaking in the context of the waivers of internal MREL pursuant to paragraphs 3 and 4 of Article 45f BRRD is in contrast with the guarantee provided by the resolution entity that may replace, in full or in part, the internal MREL of a subsidiary under paragraph 5 of the same Article. Indeed, under the latter provision, the guarantee is provided ‘for at least an amount that is equivalent to the amount of the requirement for which it substitutes’. It should also be noted that, unlike the guarantee provided for the purpose of waivers, this guarantee is collateralized through a financial collateral arrangement for at least 50% of its amount.

As regards the question on the minimum duration of the guarantee or its legal form, these aspects should be assessed by the resolution authority in light of the distribution of loss-absorbing capacity within the resolution group and the broader goal of allowing for effective execution of the preferred resolution strategy, in line with the resolution plan.

Disclaimer:

The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.