Total loss-absorbing capacity and minimum requirement for own funds and eligible liabilities: Impact of bail-in rules on balance sheet management and funding

Christian Hasenclever
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Christian Hasenclever: Head of Strategic Asset and Liability Management in the Treasury department, German Landesbank NORD/LB, Germany

Journal of Risk Management in Financial Institutions, 2019, vol. 13, issue 1, 81-96

Abstract: This paper looks at the impact of the new resolution regime, especially the bail-in tools, on balance sheet management and the implications for internal liquidity risk management as well as funding. Minimum Requirement for own funds and Eligible Liabilities (MREL) and total loss-absorbing capacity (TLAC) should be key indicators for total bank management. Due to costintensity, the paper advises optimising the balance sheet structure and the resolution strategy. A prudent funding strategy has to find a balance between the firm-specific funding capacity, continuous market access and limiting costs. The paper also looks at an efficient way to allocate the specific costs within the bank.

Keywords: recovery; resolution (tools/strategy); bail-in; bail-out; too-big-to-fail; capital requirement; insolvency proceedings; loss-absorption; resolution authority; MREL; TLAC; internal target rate; funding strategy; risk appetite; consumption; specific funding costs (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2019:v:13:i:1:p:81-96

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