As part of the implementation of the Bank Recovery and Resolution Directive (BRRD), Denmark has introduced a minimum requirement for own funds and eligible liabilities (MREL).
The purpose of the MREL requirement is to ensure that should Nykredit Bank fail, it can be recapitalised and restructured through a principal write-down or conversion of capital and debt instruments if the bank fulfills the specific requirements for settlement.
Nykredit Bank fulfills the MREL requirements using the own funds and debt instruments of Nykredit Realkredit. However, in May 2020 the Danish FSA introduced a maximum limit to the subordination requirement, which means that a small part of the requirement can be covered by ordinary senior debt.
Bonds issued by Nykredit Realkredit may be included to meet the requirement, but they cannot at the same time count towards the debt buffer requirement.