The general resolution principle for SIFIs is that it should be possible to restructure them and send them back to the market with adequate capitalisation to ensure market confidence. In accordance with this principle, the MREL for SIFIs is expected to be set at two-times the total capital requirement. It is expected that the MREL will have to be met with convertible instruments (“contractual bail-in”).
Over the next few months the Danish FSA will have discussions with the industry on phase-in and more detailed requirements for the capital that can be applied to meet the MREL. The discussions will take into consideration international developments in the area.
The Danish FSA expects to approve resolution plans and set individual MRELs for SIFIs before the end of 2017.
Background information:
Work on resolution plans and the MREL is part of Danish implementation of the EU Bank Recovery and Resolution Directive (BRRD). The Danish FSA approves resolution plans for individual banks following recommendations from Finansiel Stabilitet and sets individual MRELs after consultation with Finansiel Stabilitet. There will also be a consultation with Danmarks Nationalbank (Central Bank of Denmark) on SIFIs.
Finansiel Stabilitet is a public limited company owned by the Danish State working to wind up the activities taken over from distressed banks as quickly as possible.