The Debt Office decides on new application of the minimum requirement for own funds and eligible liabilities (MREL)

Press release 18 October 2021

Today, the Swedish National Debt Office is publishing its policy for how the minimum requirement for own funds and eligible liabilities (MREL) will be applied for banks and other institutions – the MREL policy.

The policy is unchanged from the proposal that was submitted for consultation on 2 July.The Debt Office’s considerations and policy positions are set out in a related decision memorandum.

“With the policy, the Debt Office continues to ensure that sufficient own funds and liabilities are in place that can be written down or converted in order to restore the viability of a failing bank. This is a way to safeguard financial stability,” comments Hans Lindblad, Director General of the Debt Office.

The MREL policy is based on new rules in the EU Bank Recovery and Resolution Directive 2014/59/EU (BRRD), which have been transposed in the Swedish Resolution Act (2015:1016). The Debt Office decides on MREL individually for each bank based on the rules laid down in the Resolution Act. The Act provides the Debt Office with the discretion to decide on certain aspects pertaining to the scope, size and fulfilment of the requirements.

The Debt Office’s policy positions have been taken based on a number of principles. These are that MREL shall ensure that there is sufficient capacity to recapitalise a failing bank, that application of MREL should be transparent and easily understood, that MREL should be risk-based and that MREL should be calculated and complied with in the same manner for banks with similar resolution strategies.

Based on its policy positions, the Debt Office intends to apply

• a market confidence charge in MREL. The amount equals the basic amount of the regulatory framework; that is, the combined buffer requirement, excluding the countercyclical buffer requirement, as well as the Pillar 2 guidance.
• the so-called alternative subordination requirement for all resolution entities (that is, the systemically important banks that the Debt Office plans to place in resolution in the event of their failure).
• internal MREL for subsidiaries of resolution entities.
• a linear phase-in of MREL and subordination requirements from the intermediate target level applying as of 1 January 2022 until the final level applying as of 1 January 2024.The MREL target level is based on existing requirements and the subordination target level is based on the minimum levels that come into effect on 1 January 2022.

The decision memorandum and the MREL policy replace the Debt Office’s previous policy positions on MREL. The MREL policy may be updated over time as necessary.

MREL policy: The minimum requirement for own funds and eligible liabilities (MREL), in Swedish.

Decision memorandum, in Swedish.

English versions of the decision memorandum and MREL-policy will be published at a later date.

Facts about MREL

The minimum requirement for own funds and eligible liabilities (MREL) ensures that banks and other institutions hold sufficient own funds and liabilities that can be written down or converted in the event that a failing institution needs to be placed resolution. The requirement is determined by the Debt Office, which is the Swedish resolution authority.

Contact

The Debt Office’s press function by phone: +46 (0) 8 613 47 01 or e-mail: press@riksgalden.se.