EBA Publishes an Updated Quantitative Analysis on MREL

Based on the methodology and assumptions developed in the context of the MREL report published in December 2016, EBA updated its estimates of capacity and funding needs of a representative sample of European banks to meet MREL under alternative scenarios. In this exercise, EBA highlighted a modest improvement in the stack of MREL-eligible instruments in 2016. MREL is a requirement for a bank to hold a sufficient amount of own funds and debt instruments of a certain quality to absorb losses and recapitalize its critical functions in case of failure. The two scenarios considered in the report for the calibration of MREL are the loss-absorbing buffer (LA buffer) and the Buffer/8% scenarios. LA buffer scenario amounts to twice the capital requirements where combined buffer requirements are only included once for loss absorption purposes, while the Buffer/8% scenario is a more stringent calibration where banks must meet the higher of twice capital requirements and buffers, or 8% of total liabilities and own funds.

Related Link: Press Release

Keywords: Europe, EU, Banking, MREL, Quantitative Analysis, EBA