Minimum Requirement for Own Capital and Eligible Liabilities

Marco Lamandini and David Ramos Muñoz
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Marco Lamandini: University of Bologna
David Ramos Muñoz: University of Bologna

Chapter 14 in The Palgrave Handbook of European Banking Union Law, 2019, pp 321-348 from Springer

Abstract: Abstract The Minimum Requirement of capital and Eligible Liabilities (MREL) concept ensures that a bank has enough capital and debt to ensure loss absorption and recapitalisation. It is fundamental, deceivingly simple and yet challenging to implement. First, since MREL depends on banks’ size, structure and business model, it may be a source of conflict between authorities’ powers and banks’ freedom of enterprise. Second, small banks have no easy access to capital markets to distribute MREL instruments, which may result in a disproportionate burden. Third, even if, from a resolution perspective, guaranteeing a smooth writing off of capital and debt instruments is essential, it may not seem such a good idea from investors’ standpoint. This chapter explores the MREL concept, its configuration and its potential for conflict.

Keywords: MREL; Bail-in; Bank resolution (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-13475-4_14

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DOI: 10.1007/978-3-030-13475-4_14

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