Directive (EU) 2019/879

to revise the Minimum Requirement for own funds and Eligible Liabilities (MREL) and implement the total loss absorbing capacity (TLAC) for credit institutions and investment firms. PROPOSED ACT: Directive of the European Parliament and of the Council. ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure and on an equal footing with Council. BACKGROUND: Directive 2014/59/EU of the European Parliament and the Council on the Bank Recovery and Resolution Directive (BRRD) and Regulation (EU) 806/2014 of the European Parliament and of the Council establishing the Single Resolution Mechanism Regulation (SRMR) adopted in 2014 laid down the rules on the recovery and resolution of failing institutions and establish the Single Resolution Mechanism, respectively. This framework has mandated resolution authorities to set for each credit institution or investment firm a minimum requirement for own funds and eligible liabilities ('MREL'), which consist of highly bail-inable liabilities to be used to absorb losses and recapitalise institutions in case of failures. The Committee on Economic and Monetary Affairs adopted the report by Gunnar HÖKMARK (EPP, SE) on the proposal for a directive of the European Parliament and of the Council amending Directive 2014/59/EU on the loss-absorbing and recapitalisation capacity of credit institutions and investment firms and amending Directive 98/26/EC, Directive 2002/47/EC, Directive 2012/30/EU, Directive 2011/35/EU, Directive 2005/56/EC, Directive 2004/25/EC and Directive 2007/36/EC. The committee responsible recommended that the European Parliament’s position adopted at first reading under the ordinary legislative procedure should amend the Commission proposal as follows. Purpose : the proposal on bank recovery and resolution of bank defaults aims to implement the total loss absorption capacity (TLAC) standard and to integrate the TLAC requirement into the general MREL rules by avoiding duplication by applying two parallel requirements. Although TLAC and MREL pursue the same regulatory objective, there are, nevertheless, some differences between them in the way they are constructed. The scope of application of MREL covers not only G-SIIs, but the entire Union banking industry. In order to facilitate long-term planning and establish certainty with regards to the necessary buffers, the amended text stipulates that markets need timely clarity about the eligibility criteria required in order for instruments to be recognised as TLAC/MREL liabilities. Application and calculation of the minimum requirement for own funds and eligible liabilities : Members proposed to take account of the fact that institutions have a high level of own capital in the application and calculation of the MREL. Institutions should be able to meet the MREL requirements with Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments, so that the same requirements on the MREL apply to institutions with both a higher and a lower stock of own capital. The objective of a level playing field between institutions should also be pursued at the global level, in particular when…

Official title: Directive (EU) 2019/879 of the European Parliament and of the Council of 20 May 2019 amending Directive 2014/59/EU as regards the loss-absorbing and recapitalisation capacity of credit institutions and investment firms and Directive 98/26/EC

Summary extracted from the European Parliament's own per-stage procedure record. Data © European Union (Decision 2011/833/EU). Methodology.