Question ID
2022_6588
Legal act
Directive 2014/59/EU (BRRD)
Topic
MREL
Article
45c
Paragraph
9
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
Not applicable
Name of institution / submitter
National Bank of Romania
Country of incorporation / residence
Romania
Type of submitter
Resolution authority
Subject matter
MREL determination in case of an entity that is subject to simplified requirements in respect of resolution plan
Question

In case of an entity that applies simplified requirements (according to which the resolution plan is updated every 2 years) how is MREL determined/decision taken?

Background on the question

According to Article 4 BRRD, resolution authorities can establish simplified requirements in respect of the resolution plans of credit institutions. The simplified requirements are those indicated in letters a)-d) of Article 4, including the frequency of updating the resolution plans.   

Also, in line with Article 10(7) letters o) and p) BRRD, MREL is a component of the resolution plan which is updated at least annually.

According to Article 45c(9) BRRD the decision of the resolution authority to impose MREL requirement shall be reviewed without undue delay to reflect any changes in the level of the requirement referred to in Article 104a of Directive 2013/36/UE.

Having regard to the before mentioned legal provisions, if MREL requirement needs to be reviewed annually, it is not clear how simplified requirements regarding frequency of updating resolution plan every 2 years can still apply.

Submission date
Final publishing date
Final answer

The question considers a case of an institution subject to the scope of application of simplified obligations on recovery and resolution planning (SO) (in accordance to Article 4 of Directive 2014/59/EU (BRRD)) resulting in a frequency for updating the recovery and resolution plans lower than the annual requirement provided for in Articles 5(2), 7(5), 10(6) and 13(3) BRRD.

In line with Article 10(7) letters o) and p) BRRD, the minimum requirement for own funds and eligible liabilities (MREL) is a component of the resolution plan, and as such needs to be updated with the same frequency as the respective resolution plan.

The application of SO resulting in a lower frequency of the update of the resolution plan should also affect the frequency of the regular MREL determination which will follow that of the update of the resolution plan.

However, Article 45c(9) BRRD requires the resolution authority to review any decision to impose MREL ‘without undue delay’ in order to reflect any changes in the level of the prudential requirement referred to in Article 104a of Directive 2013/36/EU.

While the MREL determination should be updated to reflect the change in the additional own funds requirement, this per se would not entail a change in the lower frequency of the update of the resolution plan (as per the SO agreed).

Article 45h(8) BRRD requires that MREL decisions are taken in parallel with the development and maintenance of resolution plans, but does not preclude, in these cases, the possibility of updating the MREL decision, without the need to simultaneously update all the other remaining elements of the resolution plan.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.

Disclaimer

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