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REPORT (COM(2023)0229 – C90134/2023 – 2023/0113(COD))

On the 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-9-2023-0344

Committee on Economic and Monetary Affairs · Rapporteur: Jonás Fernández

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Parliament's amended version of a proposed directive amending Directive 2014/59/EU and Regulation (EU) No 806/2014 on the minimum requirement for own funds and eligible liabilities (MREL). It defines 'liquidation entity' and stops resolution authorities from setting MREL for such entities, except where a higher amount is needed to protect financial stability. It lets resolution authorities set internal MREL on a consolidated basis for certain intermediate entities under conditions, and adjusts deduction and reporting rules. Member States must transpose the directive within six months of its entry into force.

Committee position. The Committee on Economic and Monetary Affairs proposes amendments to the Commission proposal, notably a definition of liquidation entity, a rule that no MREL be set for such entities, and a discretionary power for resolution authorities to set internal MREL on a consolidated basis for intermediate entities.

Key points

  1. Inserts a definition of 'liquidation entity' in Directive 2014/59/EU and in Regulation (EU) No 806/2014.
  2. Resolution authorities shall not set the MREL for liquidation entities.
  3. By derogation, the resolution authority may set MREL for a liquidation entity on an individual basis above the loss-absorption amount where justified by financial stability or contagion risk.
  4. Liquidation entities without a MREL decision are exempt from the prior permission regime for reducing eligible liabilities.
  5. Holdings of own funds or liabilities issued by liquidation entities without a MREL decision are not deducted under Article 72e(5) of Regulation (EU) No 575/2013.
  6. Resolution authorities may set internal MREL on a consolidated basis for an intermediate entity where it would otherwise be disproportionately affected by deduction rules and the stated conditions are met.
  7. Conditions include that the subsidiary is directly held by a Union parent financial or mixed financial holding company in the same Member State, or is subject to the Article 104a own funds requirement on a consolidated basis only.
  8. Consolidated compliance must not significantly harm the group's resolvability, the subsidiary's capacity to meet own funds requirements after write-down or conversion, or the internal loss transfer and recapitalisation mechanism.
  9. Eligible liabilities of an intermediate entity complying on a consolidated basis include liabilities issued to the resolution entity or to an existing shareholder outside the group, subject to a cap.
  10. Liquidation entities with a MREL set above the loss-absorption amount must meet reporting and disclosure obligations set by the resolution authority, limited to what is necessary.
  11. Member States must adopt and publish transposing laws within six months of entry into force and apply them from one day after the transposition date.
  12. The directive enters into force on the twentieth day after publication in the Official Journal; Article 2(3) applies one day after entry into force.

Who is affected

  • Credit institutions and investment firms subject to MREL, in particular subsidiaries of resolution entities.
  • Liquidation entities, which are no longer to be given a MREL decision except in specified cases.
  • National resolution authorities and the Single Resolution Board, which gain discretion to set consolidated internal MREL.
  • Member States, which must transpose the directive into national law.

Figures and deadlines

  • Transposition deadline: 6 months after the date of entry into force of the amending directive.
  • Application date: 1 day after the transposition date of the amending directive.
  • Entry into force: the twentieth day following publication in the Official Journal.
  • Article 2, point (3), applies from one day from the date of entry into force.

Legal basis: Article 114 of the Treaty on the Functioning of the European Union.