2023/0113/COD: Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2014/59/EU and Regulation (EU) No 806/2014 as regards certain aspects of the minimum requirement for own funds and eligible liabilities

A proposed new DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2014/59/EU and Regulation (EU) No 806/2014 as regards certain aspects of the minimum requirement for own funds and eligible liabilities was published in the Official Journal (OJ) of the EU. The proposed new directive is part of a series of legislative measures known as the so-called 2023 Crisis Management and Deposit Insurance Legislative Package. The key purpose of the package is to strengthen the current bank resolution and deposit insurance frameworks so as to increase financial stability in the event of bank failures, protect tax payers money from being used to bail out failing institutions, and to provide further protection for depositors.
This particular directive would modify the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR) to make some targeted amendments to the Minimum Requirement for Own Funds and Eligible Liabilities (MREL) framework under Regulation (EU) 2022/2036 („Daisy Chain Act“), particularly to ensure a level playing field of group entities that are part of varying group structures. Specifically, the directive would, among other things,
– permit intermediate entities of banking groups whose parent is a holding company to comply with MREL requirements on a consolidated basis;
– permit intermediate entities subject to own funds requirements or to combined buffer requirements on a consolidated basis to comply with MREL requirements on a consolidated basis;
– prohibit resolution authorities to set out MREL requirements of liquidation entities unless certain conditions are met;
– grant discretionary power to the resolution authority to permit derogation from the internal MREL requirements on a consolidated basis to ensure that sufficient capital is available in the group in case of resolution of an entity;
– align the eligibility criteria for MREL of subsidiaries subject to own funds requirements with those of entities subject to MREL on a consolidated basis;
– no longer require entities in the absence of MREL determining decisions by the resolution authority to seek prior permission when planning to call, redeem, or repurchase securities eligible for MREL; and
– expand the reporting requirement for the levels and composition of eligible MREL liabilities to liquidation entities which are currently exempt from this obligation.
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As these are only the key proposed changes, please review the enclosed document for more detailed, comprehensive information.