MEPs agree on changes improving resolution framework for EU banks

The Economic and Monetary Affairs Committee voted for targeted changes to the so-called “Daisy Chain” proposal ensuring proportionality and the level playing field between banks.

The text was adopted with 35 votes to 1 and 9 abstentions. The compromises agreed in ECON extended the definition of “liquidation entity”. Furthermore, the MEPs focused on how to frame the discretion of national resolution authorities (NRAs) to determine the internal MREL (minimum requirement for own funds and eligible liabilities) exceeding the own funds requirement for liquidation entities on an individual basis as well as on the discretion of NRAs to determine the MREL on a consolidated basis for specific subsidiaries in a resolution group.

As MREL serves to prevent a bank’s resolution from depending on the provision of public financial support, MEPs stressed that a consolidated basis solution could not be detrimental to the resolvability of the whole group or lead to a shortage of internal MREL eligible resources across the resolution group.

Jonás Fernández (S&D, ES), the lead MEP on the file, said: "With the adoption of this regulation, we are adjusting the rules to increase the level playing field among different banking structures in the EU, while ensuring that banks will remain safe and that, in the event of financial failure, loss absorption and recapitalisation will take place through private means and not through the use of public money as we have seen in recent years. This is a further step towards a proportionate application of the regulation while ensuring financial stability, the accountability of the financial institutions and the protection of their customers”.

Next steps

Once the EP mandate to start negotiations with the Council is announced in November II plenary, and the negotiations with the Council are expected to start.