MREL requirement if resolution strategy is liquidation (no bail-in tool used)

Article 45(1) of Directive 2014/59/EU (BRRD) requires Member States to ensure that all institutions meet their minimum requirement for own funds and eligible liabilities (MREL). Article 45(6) clarifies that MREL for each institution shall be determined by the resolution authority, after consulting the competent authority.   Hence, resolution authorities shall set MREL for all institutions, including institutions that have liquidation under normal insolvency proceedings as their resolution strategy, except for institutions that are explicitly exempted from compliance with the requirement in accordance with Article 45(3) BRRD or that benefit from the waiver in accordance with Articles 45(11) or (12) BRRD.   A combined reading of Articles 45(1), 45c and 45f of Directive 2014/59/EU (BRRD), clarifies that MREL should be set even for institutions whose preferred strategy is liquidation. Article 45(1) provides that institutions and entities referred to in Article 1(1), points (b), (c) and (d) are to meet MREL at all times, where required by and in accordance with Articles 45 to 45i. In this respect, Article 45c(1) requires that the resolution authority set MREL for each institution, after consulting the competent authority and based on criteria that aim at tailoring MREL to the specific situation of the concerned institution. Furthermore, Article 45c(2), second subparagraph, prescribes the resolution authority to assess whether it is appropriate to limit MREL to an amount sufficient to absorb losses for entities whose preferred strategy is liquidation. Hence, resolution authorities are to set MREL for all institutions, including institutions that have liquidation under normal insolvency proceedings as their resolution strategy. The exception to this rule are the institutions that are explicitly exempted from compliance with the requirement in accordance with Article 45a or that benefit from a waiver in accordance with Articles 45f(3) or (4) and 45g BRRD. For the entities referred to in Article 1(1), points (b), (c) and (d) of Article 1(1), the setting of MREL is mandatory when they have been identified as resolution entities, pursuant to Article 45e, but discretionary when they are not resolution entities in accordance with the second subparagraph of Article 45f(1) – unless the exception in the third subparagraph of that provision applies.   Disclaimer:   The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.