Minimum requirement for own funds and eligible liabilities (MREL): General approach of the Czech National Bank

Tomáš Kahoun

The crisis management framework represented in the EU by the Bank Recovery and Resolution Directive (BRRD) introduced a minimum requirement for own funds and eligible liabilities (MREL). This article describes the policy rationale behind the MREL and its nature and purpose in the context of the current legal and regulatory framework. The article also explains in detail the main principles of the CNB’s general approach to setting the MREL, putting an emphasis on the factors that need to be taken into account when determining its level and structure. Finally, the article describes the specifics of the domestic banking sector and discusses the aggregate MREL-eligible liabilities shortfall – as estimated using the CNB’s general approach – that would need to be gradually filled by banks in the coming years.

Issued: May 2019

Download: Thematic article on financial stability 4/2019 (pdf, 356 kB)