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MREL and TLAC: The Path from Bail-out to Bail-in for Banks´ Creditors in the European Union

Dipl.-Volkswirt Stefan Best () and Prof. Dr. Oliver Read ()
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Dipl.-Volkswirt Stefan Best: Wiesbaden Business School, Hochschule RheinMain University of Applied Sciences, Bleichstraße 44, 65183 Wiesbaden, Germany
Prof. Dr. Oliver Read: Wiesbaden Business School, Hochschule RheinMain University of Applied Sciences, Bleichstraße 44, 65183 Wiesbaden, Germany

Credit and Capital Markets, 2017, vol. 50, issue 3, 337-362

Abstract: In the wake of the financial market crisis new rules on banking recovery and resolution of systemic banks have been enacted in order to facilitate the bail-in of banks´ creditors. Banks will be required to maintain sufficient amounts of own funds and bail-inable debt called Minimum Requirement for own funds and Eligible Liabilities (MREL) or Total Loss-Absorbing Capacity (TLAC) respectively. Hence even more competing norms exist in parallel most of which aim to correct the results of banks´ internal models which have often times underestimated risks. Because the multitude of new and existing rules overlap, reducing unnecessary complexity is needed and can be accomplished without changing capital and MREL requirements overall. A pro-forma analysis relating to a sample of 23 systemically important banks in the European Union support this view.

JEL-codes: G01 G21 G28 G33 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:kuk:journl:v:50:y:2017:i:3:p:337-362

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