Final MREL policy for publication in the first quarter of 2017
Press release 10 November 2016
The Swedish National Debt Office intends to publish its final policy on application of the Minimum Requirement of Eligible Liabilities (MREL) in the first quarter of 2017.
- The purpose of MREL is to ensure that it will be possible to manage a crisis stricken bank in an orderly manner and without any cost for the taxpayers, says Director General Hans Lindblad.
Parallel to the Debt Office’s work to finalize its MREL policy there is an ongoing process within the EU to implement the globally agreed TLAC framework. TLAC has more or less the same purpose as MREL and the EU Commission is expected to present a proposal before the end of 2016. It is uncertain what impact this proposal, and the following EU process, will have on the Swedish MREL policy. Therefore, the Debt Office will await the Commission proposal before any further information on the MREL policy is communicated.
The Debt Office expects to communicate its MREL policy in the first quarter of 2017, at the earliest. At that time the Debt Office also intends to provide information about the further process on a subordination requirement.
Once the MREL policy is communicated, the concerned firms will have sufficient information to calculate their requirements and thus make preparations in advance of the individual MREL decisions that the Debt Office will make during 2017.
In April 2016 The Debt Office published a consultation document on the application of the Minimum Requirement of Eligible Liabilities. The consultation included policy proposals on the calibration of the amount of MREL and on how institutions are expected to comply with the requirements. The Debt Office also announced that a subordination requirement will be introduced in due course.
Since February 1, 2016 Sweden has a new crisis management framework which means that that the Debt Office can take control over a crisis stricken bank by means of process known as resolution, if such action is required to preserve financial stability. In a resolution the shareholders and lenders will be exposed to the bank's losses, not taxpayers. The lenders’ liabilities will, in simple terms, be written down in the same way as in insolvency, albeit with certain exceptions. Debt write down (also known as “bail-in”) will therefore become the central tool for handling bank crises.
In order to execute a resolution, banks must always have a certain amount of own funds and liabilities which can be written down in order to cover losses or reinstate the bank’s capital base. The introduction of MREL is a key part of the EU Bank Recovery and Resolution Directive which was implemented in Sweden in the Resolution Act. The Debt Office, as designated Resolution Authority, will make decisions on the specificities of MREL.
Robert Sennerdal, Press Secretary +46 8 613 46 94