2.5.1.1 MREL approach of the SRB

In 2017, the SRB set bank-specific binding consolidated MREL targets for the majority of the largest and most complex banks including all G-SIIs and banks with resolution colleges under its remit. For these banks, the SRB calculated the loss absorption amount based on the Pillar 1 and Pillar 2 capital requirements as determined by the competent authority and the capital buffer requirement for a bank or the amount required to meet the Basel 1 floor. The calculation of the recapitalisation amount was based on the Pillar 1 and Pillar 2 capital requirements as determined by the competent authority or the amount required to meet the Basel 1 floor, complemented with a market confidence charge at the level of the fully-loaded capital buffer requirement less 125 basis points.1

At the end of 2018, the SRB published guidance for the first wave of resolution plans for the banks that did not have binding targets in 2017. For these banks, the MREL approach for 2017 was updated by catering for all resolution tools2 and by removing the reference to the Basel 1 floor in the MREL formula.3 The SRB also stated that it expects from banks a minimum level of subordinated instruments, depending on the size and systemic importance of banks.4

At the beginning of 2019, the SRB published guidance for the second wave of resolution plans which are those of the most complex groups. This guidance refines the MREL approach of 2017 and introduces a series of new elements strengthening the function of MREL as a key tool to achieve resolvability. It introduces a reduced perimeter of eligible liabilities for consolidated targets, binding subordination requirements at increased levels, binding targets at individual level and an additional step to tailor MREL to transfer strategies.5