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Journal
2015 | 3 (60) | 37-53
Article title

MREL and TLAC i.e. How to Increase the Loss Absorption Capacity of Banks

Content
Title variants
Languages of publication
EN
Abstracts
EN
During the recent financial crises, the cost of the aid provided to banks was mostly borne by taxpayers. This resulted in increased budget deficits and bred moral hazard among banks. The latest reforms introduce regulatory requirements and legal provisions, which in the first place put the burden of the costs related to the bank crisis on institutional shareholders and creditors. The Financial Stability Board has proposed a standard for the total loss-absorbing capacity of banks (TLAC). In the European context, the equivalent of this requirement is the minimum relevant level of own funds and eligible liabilities (MREL). Both standards require that banks maintain an appropriate value of liabilities that, in the event of a crisis, can be converted into capital and used to cover losses. This article describes the new requirements, pointing out the similarities and differences between them. The paper also presents reflections on the practical aspects of the implementation of TLAC and MREL, with particular emphasis on the perspective of the domestic financial system.
Journal
Year
Issue
Pages
37-53
Physical description
Contributors
  • Narodowy Bank Polski
References
  • 1.Adamczyk G., Windisch B., State aid to European banks: returning to viability, Occasional Paper, European Commission, 2015.
  • 2.EBA, Draft Regulatory Technical Standards on criteria for determining the minimum requirement for own funds and eligible liabilities under Directive 2014/59/EU, Consultation Paper, 28 November 2014.
  • 3.FSB, Adequacy of loss-absorbing capacity of global systemically important banks in resolution, Consultative Document, FSB, 10 November 2014.
  • 4.FSB, Key Attributes of Effective Resolution Regimes for Financial Institutions, October 2011.
  • 5.K. Ueda, Weder di Mauro B., Quantifying Structural Subsidy Values for Systemically Important Financial Institutions, IMF Working Paper, WP/12/128, Washington, 2012, s. 4.
  • 6.Stern G., Feldman R., Too Big to Fail. The Hazards of Bank Bailouts, Brookings Institution Press, Washington, D.C., 2004.
  • 7.Szczepańska O., Dobrzańska A., Zdanowicz B., Resolution, czyli nowe podejście do banków zagrożonych upadłością, NBP Warszawa 2015.
  • 8.The European MREL: main characteristics and TLAC similarities and differences, Europe Regulation Watch, BBVA Research, 3 Dec. 2014.
  • 9.Total Loss-Absorbing Capacity (TLAC): making bail-in feasible and credible instead of bail-out, Europe Regulation Watch, BBVA Research, 11 Nov. 2014.
  • 10.Zhou J., Rutledge V, From bail-out to bail-in: Mandatory Debt Restructuring of Systemic Financial Institutions, IMF Staff Discussion Note, Washington D.C., 2012.
  • 11.Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/ EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council, Official Journal of the European Union, L 173/190.
Document Type
Publication order reference
Identifiers
YADDA identifier
bwmeta1.element.desklight-474ba087-e41a-402a-a895-3e2af3bdf1e7
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