What EU Bank Recovery and Resolution Directive 2014/59 -- Bail-In, MREL, and Resolution Planning requires
Directive 2014/59/EU (BRRD) establishes the EU framework for the recovery and resolution of credit institutions and investment firms. Institutions must prepare recovery plans with indicators and options for restoring viability (Articles 5-9), and resolution authorities prepare resolution plans including preferred resolution strategy and Minimum Requirement for Own Funds and Eligible Liabilities (MREL) targets (Articles 10-14 and 45). MREL is set institution-by-institution by the resolution authority; for Global Systemically Important Institutions (G-SIIs), the FSB Total Loss Absorbing Capacity (TLAC) standard requires 18 percent of Risk Weighted Assets (RWA) or 6.75 percent of total exposures by 1 January 2022 as implemented by BRRD2 Directive 2019/879. The four resolution tools are: sale of business (Article 38), bridge institution (Article 40), asset separation (Article 42), and bail-in (Articles 43-55). Bail-in allows the resolution authority to write down or convert eligible liabilities into equity; excluded liabilities include covered deposits (up to EUR 100,000 per depositor per institution), secured liabilities, short-term interbank claims of less than 7 days, employee wages due, and client assets. Before public funds from the Single Resolution Fund (SRF) can be used, losses equivalent to at least 8 percent of total liabilities including own funds must be absorbed by shareholders and eligible liability holders (Article 44(5)). The Single Resolution Board (SRB) under Regulation (EU) 806/2014 is the resolution authority for Eurozone significant institutions. The BRRD2 Directive 2019/879 enhanced MREL subordination requirements and introduced moratoria powers for resolution authorities.
Pillar: Banking & Global Finance · Authority: European Union - EUR-Lex Official Journal · Version: 2024.1.0 · Last updated:
Primary source: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014L0059
SHA-256 integrity: 906d30c79c2b84a6ddb149fb54f8ad2024d8eac071abdaee4c05a4e363a4d3dd
Primary Citations — 6 traced to source
- Articles 5-9 (recovery plans); Articles 10-14 (resolution plans); Article 17-18 (resolvability impediments removal); Articles 27-30 (early intervention measures including moratorium); Article 32 (resolution conditions test - FOLTF, no private alternative, public interest); Article 38 (sale of business tool); Article 40 (bridge institution tool); Article 42 (asset separation tool); Articles 43-55 (bail-in tool, eligible liabilities, excluded liabilities, NCWO safeguard, contractual recognition); Article 45-45i (MREL) — Directive 2014/59/EU -- Bank Recovery and Resolution Directive (BRRD)
- Articles 45-45i (enhanced MREL framework: loss absorption amount + recapitalisation amount; G-SII TLAC floor 18 percent RWA/6.75 percent leverage from 1 January 2022; subordination requirements for top-tier institutions; internal MREL for subsidiaries); Article 33a (moratorium powers for resolution authorities up to 5 business days); Article 55 amendments (contractual recognition of bail-in for third-country law contracts) — Directive (EU) 2019/879 -- BRRD2 amending BRRD (MREL, TLAC, Moratoria)
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