I want to talk about three big themes: •  MREL and TLAC: how far are they the same or different? •  The relationship between the regulation of banks’ liability structures via TLAC and MREL and resolution planning. •  And why, if we are preparing firm specific resolution plans, have a TLAC standard at all? Starting with MREL and TLAC, much has been made of the differences between them. Let me set these out in turn: •  TLAC sets a global standard for G-SIBs 1 while MREL is for all EU banks and investment firms. •  TLAC describes a Pillar 1 minimum requirement, while MREL is set by the resolution authority, bank by bank on the basis of a resolution plan. •  The TLAC requirement is set in terms of risk weighted assets (RWAs) and leverage while MREL is formally set in relation to total liabilities and own funds. •  The FSB consultation specifies the quantum and quality of TLAC a G-SIB requires and sets out how TLAC should be distributed within groups. While BRRD provides for more flexibility, certainly on whether liabilities need to be subordinated to count as MREL. So much for the differences. But both are founded on the same principles and in the Key Attributes have the same DNA. Both are designed to achieve the twin objectives of: •  1  Maintaining critical economic functions in the event of failure; and  Global systemically important banks.
If, at failure, there is no obstacle to putting the firm into insolvency and paying out covered deposits using the relevant deposit guarantee scheme (DGS) then no MREL is required beyond capital requirements as a going concern. This goes too to the location of TLAC or MREL in groups. There needs to be externally issued MREL wherever, under the preferred resolution strategy, bail-in of external liabilities is likely to occur or where other resolution tools are to be applied. The plan under a single point of entry (SPE) strategy is that only the entity at the top of group is put into resolution on the basis that the interdependencies within a group are so extensive that resolving the different operating companies within a group separately is either impossible or not credible. By contrast where a group is organised in a more modular fashion with limited or no interlinkages between the parts, then the resolution can have multiple points of entry (MPE). It has been convenient for exposition to set up this dichotomy between SPE and MPE. But in practice, many SPE firms will have around the periphery subsidiaries that could be resolved separately or allowed to enter an insolvency without adverse consequences for the resolution of the firm. And many MPE banks are, in practice, collections of SPE strategies. They may be set up to be resolved jurisdiction by jurisdiction. But within jurisdictions the resolution is likely to involve keeping together in resolution the legal entities within that jurisdiction.