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Total loss-absorbing capacity and minimum requirement for own funds and eligible liabilities: Impact of bail-in rules on balance sheet management and funding

Author

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  • Hasenclever, Christian

    (Head of Strategic Asset and Liability Management in the Treasury department, German Landesbank NORD/LB, Germany)

Abstract

This paper looks at the impact of the new resolution regime, especially the bail-in tools, on balance sheet management and the implications for internal liquidity risk management as well as funding. Minimum Requirement for own funds and Eligible Liabilities (MREL) and total loss-absorbing capacity (TLAC) should be key indicators for total bank management. Due to costintensity, the paper advises optimising the balance sheet structure and the resolution strategy. A prudent funding strategy has to find a balance between the firm-specific funding capacity, continuous market access and limiting costs. The paper also looks at an efficient way to allocate the specific costs within the bank.

Suggested Citation

  • Hasenclever, Christian, 2019. "Total loss-absorbing capacity and minimum requirement for own funds and eligible liabilities: Impact of bail-in rules on balance sheet management and funding," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 13(1), pages 81-96, December.
    • Handle: RePEc:aza:rmfi00:y:2019:v:13:i:1:p:81-96
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    More about this item

    Keywords

    recovery; resolution (tools/strategy); bail-in; bail-out; too-big-to-fail; capital requirement; insolvency proceedings; loss-absorption; resolution authority; MREL; TLAC; internal target rate; funding strategy; risk appetite; consumption; specific funding costs;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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