Single Rulebook Q&A

Question ID: 2018_4253
Legal act : Directive 2014/59/EU as amended by Directive (EU) 2019/879 – BRRD2
Topic : MREL
Article: Preamble (79), Art. 45
Paragraph: 1
Subparagraph:
COM Delegated or Implementing Acts/RTS/ITS/GLs: Not applicable
Article/Paragraph : Not applicable
Name of institution / submitter: RGF Division of Financial and Capital Market Commission
Country of incorporation / residence: Latvia
Type of submitter: Resolution authority
Subject matter : MREL requirement if resolution strategy is liquidation (no bail-in tool used)
Question:
Question 1:
 
Should the MREL requirement be set for a bank if its resolution strategy is liquidation and there is no plan to use a bail-in tool?
 
Question2:
 
What is the legal basis and the rationale for setting the MREL requirement for the bank if its resolution strategy is liquidation and there is no plan to use a bail-in tool?
Background on the question:

It is not clear what the legal basis or the rationale would be for setting the MREL requirement for a small sized bank if the proposed resolution strategy is liquidation and there is no plan to use a bail-in tool and so far no MREL has been set.

Date of submission: 10/09/2018
Published as Final Q&A: 28/06/2019
EBA answer:

Article 45(1) of Directive 2014/59/EU (BRRD) requires Member States to ensure that all institutions meet their minimum requirement for own funds and eligible liabilities (MREL).

Article 45(6) clarifies that MREL for each institution shall be determined by the resolution authority, after consulting the competent authority.
 
Hence, resolution authorities shall set MREL for all institutions, including institutions that have liquidation under normal insolvency proceedings as their resolution strategy, except for institutions that are explicitly exempted from compliance with the requirement in accordance with Article 45(3) BRRD or that benefit from the waiver in accordance with Articles 45(11) or (12) BRRD.
 
Disclaimer:
 
This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General Financial Stability, Financial Services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.
Status: Final Q&A
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