Out of a panel of 222 banks representing 80% of the assets covered by a bank resolution strategy, 105 banks were in compliance at the end of 2018 with their minimum requirements for own funds and eligible liabilities (MREL) that could be mobilised in the event of a bank resolution, while a total shortfall of €178 billion in MREL-eligible instruments was reported for the other banks in the panel.
These are the main findings of the first quantitative Report on compliance with the requirements on MREL-eligible instruments presented by the European Banking Authority on Monday 17 February.
According to the European authority, the banking industry has made "great progress" in implementing strategies to prepare for a resolution, but banks must also take advantage of favourable market conditions to issue MREL-eligible instruments.
EBA notes that 65 banks - among the 117 institutions that were not complying with their requirements at the end of 2018 - hold €67 billion of financial instruments whose nature is close to that of eligible instruments.
"This shows that some banks already have a ‘sophisticated’ investor base, likely to invest in long-term unsecured debt, such as MREL eligible instruments", the Authority said.
On a weighted average basis, MREL requirements in the EU range between 26.5% of risk-weighted assets for the global systemically important institutions (G-SIIs) and 19% for the banks with total assets below €1 billion.
Out of the panel of 222 banks analysed, 50 financial institutions are Danish, 33 Polish, 24 Austrian, 14 British, 12 Spanish, 9 German and 8 French or Italian.
See the EBA report: http://bit.ly/2HsnE4x (Original version in French by Mathieu Bion)