Single Resolution Board keeps MREL policy stable and publishes MREL dashboard Q4.2022

MREL policy

The SRB has decided to maintain its policy on the calibration of MREL (total and subordinated component) with minimal changes this year. “We aim to provide a stable regulatory environment in a phase where some banks are still building up their MREL stock ahead of the upcoming deadline on 1 January 2024,” said SRB Chair Dominique Laboureix. “As part of our ongoing strategic review, we will launch a public consultation on MREL for the 2024 cycle and beyond in the second half of this year.”

The only change concerns the scope of entities subject to internal MREL, as previously announced. The SRB reduces the size threshold for credit institutions considered as Relevant Legal Entities from EUR 10bn to EUR 5bn, keeping the other thresholds unchanged, from now on. In light of the deduction framework for intermediate entities recently introduced by Regulation 2022/2036, the SRB may also decide to set internal MREL for certain intermediate financial holdings companies not subject to prudential requirements after a case-by-case assessment, where it is deemed instrumental to ensure a sound execution of the resolution strategy.

The policy is available in a clean version, and one with changes highlighted.

MREL dashboard Q4.2022

The SRB also publishes today its MREL dashboard for Q4.2022. The MREL dashboard presents the evolution of MREL targets and shortfalls for resolution (external MREL) and non-resolution entities (internal MREL) as well as the level and composition of resources of resolution entities in that quarter. In addition, it highlights recent developments in the cost of funding and provides an overview of gross issuances of MREL-eligible instruments in Q4.2022.

Key findings:

• For resolution entities, the average MREL final target (including the Combined Buffer Requirement, CBR) was equal to 27% of the Total Risk Exposure Amount (TREA), showing an increase compared to Q3.2022.
• In aggregate terms, the total MREL shortfall (including the CBR) both for external and internal final targets reduced significantly over the last quarter of 2022, respectively amounting to EUR 21.5 bn and EUR 12.4 bn. For external MREL targets, in particular, this represented about 0.3% TREA of the banks under the SRB remit, concentrated in 15 countries and 30 banks.
• Banks under the SRB remit kept their Q4.2022 issuances (EUR 72.5 bn) broadly at the same level as in the previous quarter, showing the continuous efforts to meet their final targets. 
• After improving between the last quarter of 2022 and the beginning of 2023, the cost of funding spiked in mid-March following the turmoil generated by the crises of SVB and Credit Suisse. The indexes had progressively decreased towards end-April.
• With the end of the transition period approaching (1 January 2024), the SRB will continue monitoring the closing of the shortfall and the MREL funding conditions.