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Minimum Requirement for Own Capital and Eligible Liabilities

  • Marco Lamandini
  • David Ramos Muñoz
Chapter

Abstract

The Minimum Requirement of capital and Eligible Liabilities (MREL) concept ensures that a bank has enough capital and debt to ensure loss absorption and recapitalisation. It is fundamental, deceivingly simple and yet challenging to implement. First, since MREL depends on banks’ size, structure and business model, it may be a source of conflict between authorities’ powers and banks’ freedom of enterprise. Second, small banks have no easy access to capital markets to distribute MREL instruments, which may result in a disproportionate burden. Third, even if, from a resolution perspective, guaranteeing a smooth writing off of capital and debt instruments is essential, it may not seem such a good idea from investors’ standpoint. This chapter explores the MREL concept, its configuration and its potential for conflict.

Keywords

MREL Bail-in Bank resolution 

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Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Marco Lamandini
    • 1
  • David Ramos Muñoz
    • 1
    • 2
  1. 1.University of BolognaBolognaItaly
  2. 2.Universidad Carlos III MadridGetafeSpain

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