Contributions to Resolution Financing Arrangements - clarification regarding the use of the risk indicator of "Own funds and eligible liabilities held by institution in excess of MREL" in calculation of the contributions to resolution financing arrangements

How to determine the risk indicator "Own funds and eligible liabilities held by the institution in excess of MREL" referred to in Article 6 (2)(a) of the Commission delegated regulation (EU) 2015/63 within the calculation of the ex-ante annual contributions to resolution financing arrangements.

Problem Definition One of the compulsory 'Risk exposure' pillar indicators referred to in  the Article 6 (2)(a) of the Commission delegated regulation (EU) 2015/63 is "Own funds and eligible liabilities held by the institution in excess of MREL" referred to in Article 6 (2)(a) of the Commission delegated regulation (EU) 2015/63 ("Regulation"). The said indicator should have in line with the Article 7 (2)(a) of the Regulation relative weight of 25 % within the risk pillar "Risk exposure" with the highest weight among all the risk pillars used when assessing institution's risk profile - hence the indicator is quite material.  The Annex I of the Regulation then describes the indicator by referencing, inter alia, to the Directive 2014/59/EU (BRRD) for MREL and Eligible liabilities, and Regulation (EU) No 575/2013 (CRR) when it comes to the Own funds, Tier 1 and Tier 2 Capital.    (Own Funds and Eligible Liabilities/TLOF) - MREL Since the introduction of the Commission delegated regulation (EU) 2015/63 the legislative framework changed, as both the Directive 2014/59/EU (BRRD1) as well as Regulation (EU) No 575/2013 (CRR1) have been amended by Directive (EU) 2019/879 (BRRD2) and by Regulation (EU) 2019/876 (CRR2) respectively. This leads to the below-mentioned consequences, which need further clarification: 1.    Definition of eligible liabilities  Pursuant to the Regulation, the " eligible liabilities " are those liabilities and capital instruments referred to in Article 2(1)(71) BRRD1 as  "'eligible liabilities' means the liabilities and capital instruments that do not qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments of an institution or entity referred to in point (b), (c) or (d) of Article 1(1) that are not excluded from the scope of the bail-in tool by virtue of Article 44(2)". Under the current consolidated version of the directive (BRRD2), the Article 2(1)(71) covers the ' bail-inable liabilities ' meaning  "the liabilities and capital instruments that do not qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments of an institution or entity referred to in point (b), (c) or (d) of Article 1(1) and that are not excluded from the scope of the bail-in tool pursuant to Article 44(2)" Thus the same meaning as under BRRD1 but under different name; "eligible liabilities" (BRRD1) and "bailinable liabilities" (BRRD2). BRRD2 however defines " eligible liabilities " under the Article 2(1)(71a) as "bail-inable liabilities that fulfil, as applicable, the conditions of Article 45b or point (a) of Article 45f(2) of this Directive, and Tier 2 instruments that meet the conditions of point (b) of Article 72a(1) of Regulation (EU) No 575/2013". 2.    Total liabilities including own funds The "Total liabilities including own funds" does not serve as denominator in the MREL determination any more. Currently TREA and TEM are used instead.