The Bank of England has today published a Policy Statement concluding the Bank’s review of its approach to setting a minimum requirement for own funds and eligible liabilities (MREL), accompanied by a revised MREL Statement of Policy.
These publications conclude the final stage of the Bank’s MREL Review and set out the Bank’s changes to its MREL framework. They follow on from the publication of a Consultation Paper in July 2021 and a Discussion Paper in December 2020. Responses to these publications, and the Bank’s subsequent engagement with respondents, have informed the Bank’s policy choices.
The Review has considered the resolution strategy thresholds, the calibration of MREL, instrument eligibility, and the application of MRELs within banking groups.
The Bank would like to thank all those who engaged throughout the Review.
The revised Statement of Policy will apply from 1 January 2022.
In addition, the Bank would like to hear ideas to support its work to improve depositor outcomes in the event of bank or building society insolvency (see related links).
Notes for editors
- The Bank of England, as the UK resolution authority, is responsible for taking action to manage the failure of certain financial institutions – including UK-headquartered banking groups and UK-incorporated banks and building societies (together, banks) – a process known as ‘resolution’. Resolution allows the shareholders and unsecured creditors of a failed bank to be fully exposed to any losses, while ensuring the critical functions of the bank can continue. Resolution reduces the risks to depositors, the financial system, and public funds that could arise in the event of a bank failure.
- The minimum requirement for own funds and eligible liabilities (MREL) is a minimum requirement for banks to maintain equity and eligible debt that could be used to absorb losses and recapitalise a failed bank in resolution, to support an orderly restructuring of its business. As a result, MREL is a critical element of an effective resolution regime.
- The Bank reaffirmed in June 2018 that it would review the calibration of MREL and the final compliance date, prior to setting end-state MRELs, having particular regard to any intervening changes in the UK regulatory framework as well as banks’ experience in issuing liabilities to meet their interim MRELs. The publication of this Policy Statement concludes the MREL Review.