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DRAFT 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

ECON-PR-752913

Committee on Economic and Monetary Affairs · Rapporteur: Jonás Fernández

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This is the rapporteur's draft report on 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 adopts Parliament's position at first reading with amendments. The amendments let resolution authorities set internal MREL on a consolidated basis for intermediate entities under conditions, and stop setting MREL for liquidation entities except where a higher amount is needed. They also exempt institutions without an MREL decision from the prior permission regime for reducing eligible liabilities, and adjust deduction rules for holdings in liquidation entities.

Committee position. The rapporteur proposes that Parliament adopt its first reading position with amendments to the Commission proposal, allowing consolidated internal MREL for intermediate entities under conditions and adjusting the treatment of liquidation entities.

Key points

  1. Adopts Parliament's position at first reading on the Commission proposal, and calls on the Commission to refer the matter to Parliament again if it substantially amends the proposal.
  2. Allows resolution authorities to set internal MREL on a consolidated basis for intermediate entities, as a discretionary power subject to conditions.
  3. Requires the intermediate entity to be the only direct subsidiary of a resolution entity that is a Union parent financial holding company or Union parent mixed financial holding company, established in the same Member State and in the same resolution group.
  4. Requires that consolidated internal MREL compliance not negatively affect the resolvability of the resolution group or the write-down or conversion of relevant capital instruments and eligible liabilities.
  5. Aligns the eligibility criteria for eligible liabilities used for consolidated internal MREL with the rules on calculating consolidated own funds in Regulation (EU) No 575/2013.
  6. Provides that resolution authorities should not set MREL for liquidation entities, since their MREL is normally limited to the amount for loss absorption.
  7. Allows resolution authorities to determine a MREL for a liquidation entity exceeding the loss absorption amount where necessary to protect financial stability or address contagion risk.
  8. Exempts institutions or entities for which no MREL decision has been adopted from obtaining prior permission of the resolution authority to call, redeem, repay or repurchase liabilities meeting MREL eligibility requirements.
  9. Provides that holdings of liabilities that do not qualify as own funds instruments issued by subsidiaries which are liquidation entities without a determined MREL shall not be deducted under Article 72e(5) of Regulation (EU) No 575/2013.
  10. Amends the condition for consolidated internal MREL so that the subsidiary is subject to the requirement in Article 104a of Directive 2013/36/EU on a consolidated basis only.
  11. Defines a liquidation entity as a legal person for which the resolution plan provides winding up under normal insolvency proceedings or does not envisage the exercise of write-down and conversion powers.
  12. States that the directive's objectives of adjusting treatment of liquidation entities and allowing consolidated internal MREL cannot be sufficiently achieved by member states and are better achieved at Union level.

Who is affected

  • Credit institutions and investment firms established in the Union, and other entities under Directive 2014/59/EU or Regulation (EU) No 806/2014.
  • Intermediate entities that are subsidiaries of resolution entities and control other subsidiaries within the same resolution group.
  • Liquidation entities, for which resolution authorities should not set MREL except where a higher amount is needed.
  • Resolution authorities, which gain discretion to set consolidated internal MREL and to determine higher MREL for liquidation entities.

Legal basis: Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union.