EU SRB Approaches Daisy Chain Act Changes with Tailored MREL Policy
Summary
- The SRB has outlined changes to its MREL policy related to the Daisy Chain Act, which took effect from November 2024.
- The act grants resolution authorities greater flexibility in setting internal minimum requirements for own funds and eligible liabilities in banking groups.
- The updates simplify MREL treatment for liquidation entities and associated prior permissions.
What Happened
The changes took effect from 14 November 2024, with the specific updates to Article 12d of the SRMR introduced by Article 2, points (1) and (2), of the Daisy Chain Act.
The Single Resolution Board (SRB) has outlined its approach to changes in its Minimum Requirement for Own Funds and Eligible Liabilities (MREL) policy related to the Daisy Chain Act. This act grants resolution authorities greater flexibility in setting internal minimum requirements for own funds and eligible liabilities in banking groups, ensuring sufficient loss-absorbing capacity. The amendments also simplify MREL treatment for liquidation entities and associated prior permissions.
The changes took effect from 14 November 2024, with the specific updates to Article 12d of the SRMR introduced by Article 2, points (1) and (2), of the Daisy Chain Act.
Legal Context
The Daisy Chain Act (Directive (EU) 2024/1174) is a key development in EU banking regulation, aimed at enhancing the resilience of banking groups. By allowing resolution authorities to set more tailored MREL requirements, the act seeks to improve the loss-absorbing capacity of these institutions. This flexibility is particularly important for banking groups with complex structures, where traditional MREL approaches may not be sufficient.
The SRB's updated MREL policy reflects this shift in approach, providing a framework for resolution authorities to set MREL requirements that are more closely aligned with the specific needs of each banking group.
Why It Matters
Lawyers and financial institutions should take note of the SRB's updated MREL policy, as it has significant implications for banking groups' loss-absorbing capacity. The changes that took effect from November 2024 require careful consideration and planning to ensure compliance with the new requirements.
As the EU continues to refine its banking regulation framework, the SRB's approach to the Daisy Chain Act demonstrates a commitment to enhancing the resilience of banking groups. This development is likely to have far-reaching implications for the financial sector as a whole.
Practical Implications
Lawyers should watch for the updated MREL policy and its implications on banking groups' loss-absorbing capacity, with changes taking effect from November 2024.
Source
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