Minimum requirement for own funds and eligible liabilities (MREL)

Minimum requirement for own funds and eligible liabilities is new regulatory requirement introduced by the Bank Resolution Law, in order to ensure conditions for adequate implementation of resolution tools. Therefore, the banks are required to have adequate amount of own funds and eligible liabilities in order to enable coverage of the following two components:  (1) loss absorption amount and (2 recapitalization amount. The amount of these two components depend on the bank’s risk profile, its business model, critical functions it performs, as well as on the resolution strategy, that the National Bank determined as preferred resolution strategy for relevant bank (primarily on the resolution tool chosen). 

The amount of loss absorption is equal to the amount of own funds and eligible liabilities, which will enable the bank to absorb all losses after implementation of the adequate resolution tool. If it is a bank for which a bankruptcy proceeding is envisaged in case of termination of its operations, it means that the bank will cease operating, so in that case, MREL consists only of the loss absorption amount.

In cases where a bank is considered to be of public interest and its critical functions should continue to be performed after the application of the appropriate resolution tool, the bank should have own funds and eligible liabilities that will enable, in addition to loss absorption, to reach and maintain an adequate level of capital that will enable viability and fulfillment of the requirements prescribed by the Banking Law.  This is enabled through the amount of recapitalization, which is an integral component of MREL.

The National Bank will adopt the first decisions on the required level of own funds and eligible liabilities ratio for each bank within 12 months from the date of entering into force of the application of the Law, i.e. no later than 30.06.2027, and the deadline for meeting the required MREL level is 31.12.2032. Banks are obliged to submit the initial data and information to the National Bank as of 30.06.2026, no later than 30.09.2026.