EBA Recommends Changes To Banks' Minimum Loss Absorbing Capacity (MREL)

The European Banking Authority (EBA), on 19 July 2016, published its interim report on potential amendments to the current framework for the MREL (minimum requirement for own funds and eligible liabilities) under the EU rules on banking recovery and resolution. The interim report contains a number of provisional recommendations to amend the current MREL framework, which may be revised in the final report based on further analysis or feedback.

The EBA's provisional recommendations aim to address several known shortcomings in the current MREL framework and further align MREL with the global TLAC (total loss-absorbing capacity) standards finalised in November 2015 by the Financial Stability Board (FSB) for all banks designated as Global Systemically Important Banks (G-SIBs). The provisional recommendations also reduce complexity in the EU rules of banking regulation by aligning the MREL framework more with the capital requirements of the Capital Requirements Directive IV