Response to EBA consultation on MREL

27 February 2015

Consultation response

Finance Watch response to EBA’s consultation on criteria for determining the minimum requirement for own funds and eligible liabilities (MREL) under Directive 2014/59/EU

Key points:

  • We strongly support the inclusion of leverage ratio as a metric determining the loss absorbency amount and the introduction of the floor to MREL for systemically important institutions. We suggest amending the wording of the draft regulatory technical standard to ensure that the leverage requirement is binding for MREL purposes.
  • For large complex and interconnected banks, a loss absorbency amount based on capital requirements will fail in an extreme crisis. Structural reform of such banks is therefore also needed.
  • To help address interconnectedness, the proposed floor to MREL for systemically important institutions should be maintained and supplemented with a measure which would take into account institution’s exposure to the distress of other institutions.