The Clearing House (TCH) and SIFMA jointly submitted a comment letter on the Bank of England’s proposed approach for setting internal MREL requirements for third country banks, including U.S. banks, with operations in the UK.  MREL stands for “minimum eligible required liabilities,” and generally represents the minimum amount of bail-able liabilities that banks must maintain under the UK and EU regulatory frameworks. The BoE’s internal MREL requirement is the functional equivalent of the internal TLAC requirement applicable to GSIBs under the FSB’s TLAC framework. 

The comment letter offers broad support for many core aspects of the BoE’s approach, including, principally, its calibration of internal MREL based on a starting point of 75% of external MREL (which is on the low end of the FSB’s recommended 75-90% range). This approach is in contrast to the US and EU approach to internal TLAC, which sets a minimum requirement on the high end of the 75-90% range. The letter also lauds the BoE’s decision (again, in contrast to the US approach) not to impose a stand-alone TLAC or MREL debt requirement. The letter recommends ways the BoE could improve its approach, including by allowing for the use of qualified secured support agreements to meet certain elements of the overall internal MREL requirements. The letter also cautions the BoE to be mindful of various potential unintended (and adverse) tax consequences associated with the proposal.