SRB published a dashboard on the minimum requirement for own funds and eligible liabilities (MREL) data for the third quarter of 2020. The dashboard offers a comprehensive overview of MREL across banks that are under the remit of SRB. The first section of the dashboard focuses on MREL targets, eligible liabilities, and shortfalls as of the third quarter of 2020 under the Bank Recovery Resolution Directive (BRRD) 1 framework. The second section highlights recent developments in the cost of funding.
The data show that the average BRRD1 MREL target, in percentage of the total risk exposure amount (TREA), rose by 0.6% from June to September, to 28.6% TREA in September 2020. The increase in MREL target was mostly driven by the growth in total liabilities and own funds after the significant ECB refinancing operations in the context of COVID-19 pandemic. After recording an increase in the second quarter of 2020, the average MREL shortfall reduced to 1.9% TREA in third quarter of 2020, as the increase in MREL eligible resources offset the growth of MREL targets. In the third quarter of 2020, MREL issuance amounted to EUR 50.9 billion, representing a reduction of 42% in comparison to the second quarter of 2020. Beyond seasonal effects, the availability of central bank funding available in the context of the COVID-19 crisis was among the factors responsible for the pronounced reduction. Cost of debt stabilized in the third quarter of 2020 and approached pre-pandemic levels in January 2021. Proforma BRRD2 targets and shortfalls were included in the previous issue of the dashboard—that is, MREL dashboard for second quarter of 2020.
Keywords: Europe, EU, Banking, Resolution Framework, MREL Dashboard, MREL, Regulatory Capital, Basel, BRRD, COVID-19, Cost of Funding, SRB
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