Introduction
In March 2026, the Single Resolution Board (SRB) set out its thinking on how to simplify the dense web of capital and resolution requirements that banks in the European Banking Union must navigate. The goal: a more efficient framework that reduces compliance cost without weakening financial stability. Three months later, the agenda produced its first concrete deliverable – a fast-track procedure for early redemptions of MREL instruments, effective 1 July 2026.
The Complexity Problem
Banks today operate under three overlapping families of requirements:
- Microprudential requirements, designed to keep banks sound as going concerns;
- Resolution requirements, meant to make failing institutions recapitalizable from within (bail-in); and
- Macroprudential buffers, addressing systemic risk and procyclicality.
Each family comes in multiple layers (P1, P2R, P2G, MREL, TLAC, CCyB, CCB), different quality components (CET1, AT1, T2, other MREL-eligible instruments), different scopes of application (consolidated versus solo) and different consequences of breach. The result is a framework that is hard to explain, costly to run and difficult to use in a crisis.
Why MREL Rises When Going-Concern Requirements Rise
A frequent complaint from banks is that MREL increases mechanically whenever going-concern capital requirements go up. The SRB’s answer is that this is intentional: MREL reflects both the own-funds requirements a bank must meet to absorb unexpected losses and the minimum capital position the market expects the bank to hold when it exits resolution. The ability to restore the capital position of the “Monday-morning bank” – the institution that opens for business the day after a resolution weekend – is what gives market participants the confidence to keep dealing with it.
Two Anchors for Any Simplification
The SRB stresses that simplification of the overall capital stack should follow from reforms to the going-concern regime, rather than from a standalone recalibration of MREL. Two criteria must be preserved:
- A credible interaction between gone-concern and going-concern requirements, so that the post-resolution bank is credibly solvent; and
- An effective total loss-absorbing capacity of at least 8% of total liabilities and own funds (TLOF), the threshold that conditions access to the Single Resolution Fund.
Proportionality for Smaller Banks
There is no public interest in resolving thousands of small institutions in the Banking Union, and most are already exempt from nearly all resolution requirements. For banks whose resolution strategy foresees market exit (for example transfer strategies), MREL is already calibrated lower and subordination requirements generally do not apply.
For these banks, the SRB argues, the most effective simplification may lie outside the capital debate altogether: better national insolvency regimes, faster sale processes and improved access to funding in insolvency would materially reduce the cost and complexity of managing a failure.
Specific Areas Flagged for Legislative Review
- Less frequent resolution-plan reviews, moving to a two- or three-year cycle;
- Review of the prior-permission regime for early redemptions of MREL instruments;
- More proportionate scope and requirements for smaller banks’ simplified obligations;
- Waiving part of the Single Resolution Fund data collection and certain reporting (for example on FMI);
- Reform of Article 55 BRRD (contractual recognition of bail-in) as part of the CMDI package – now published in the Official Journal of the EU (April 2026).
Update – June 2026: From Words to Action on Prior Permissions
On 29 June 2026 the SRB announced a new procedure, effective 1 July 2026, to speed up authorisations of early redemptions of eligible-liabilities instruments (“prior permissions”). Eligible applications will now be authorised within a maximum of one month. SRB Chair Dominique Laboureix called it “a good example of concrete and immediately useful simplification.”
The move implements one of the exact areas flagged in the March analysis, and the SRB has signalled – in its response to the European Commission’s consultation on the competitiveness of the EU banking sector – that it supports reviewing the relevant level-1 and level-2 regulations to go further.
For issuers, a predictable one-month turnaround materially improves liability-management flexibility: calls, tenders and refinancing of MREL instruments can be planned against a known regulatory clock rather than an open-ended approval queue.
Conclusion
Bank resolution may never be simple, but it can be made simpler with the right mix of caution, pragmatism and political will. The SRB’s framework-wide view – that no layer of the capital stack can be changed without considering how the others react – remains the right starting point. The fast-track prior-permission procedure shows the agenda is moving from analysis to delivery; the deeper legislative questions (resolution-plan cycles, proportionality, Article 55) now sit with the CMDI implementation and the EU legislator.
Sources: Single Resolution Board blog publications (March 2026); SRB press release, 29 June 2026; Official Journal of the EU (CMDI, April 2026).
