EBA shows good progress in the reduction of MREL shortfall for the largest banks

The European Banking Authority (EBA) published today its second quantitative Report on minimum requirements for own funds and eligible liabilities (MREL) under the new methodology. The Report shows that as of December 2019, the largest institutions have made good progress in reducing MREL shortfalls and that smaller institutions tend to lag behind.

This Report reflects existing MREL policies applicable as at December 2019 and estimates the impact of BRRD II only for global systemically important institutions (GSIIs) and top-tier banks via the subordination levels.

An estimated 80% of the EU’s domestic assets are covered by a strategy other than liquidation –stable compared to 80% last year on a comparable basis. the number of decision has increased, thus reflecting the continued progress by resolution authorities in agreeing on resolution strategies and setting MREL, but also highlights the fact that more than six years after the adoption of the Bank Recovery and Resolution Directive (BRRD), authorities are still in the process of rolling-out resolution strategies and MREL requirements.

As at December 2019, out of the 238 resolution groups captured in this Report, 111 EU resolution groups showed an MREL shortfall estimated at EUR 102 bn, down from EUR 172 bn as of December 2018. In terms of total assets, institutions with a shortfall represent about 28% of EU total domestic assets.

Note to the editors

• The Report is based on data as of 31 December 2019 provided by resolution authorities and covers the actual population of banks covered by an MREL decision, the actual level of this requirement and the level of resources effectively eligible in the relevant jurisdictions.
• BRRD II was adopted in July 2019 and resolution authorities have now started to take new decisions reflecting the revised framework. These decisions will be reported to the EBA starting as of 31 May 2021 and the EBA will update on the progress by year-end.
• The Report, which will be updated annually in line as mandate by BRRD Art 45l(1).