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Minimum requirement for own funds and eligible liabilities (MREL): General approach of the Czech National Bank

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  • Tomas Kahoun

Abstract

The crisis management framework represented in the EU by the Bank Recovery and Resolution Directive (BRRD) introduced a minimum requirement for own funds and eligible liabilities (MREL). This article describes the policy rationale behind the MREL and its nature and purpose in the context of the current legal and regulatory framework. The article also explains in detail the main principles of the CNB's general approach to setting the MREL, putting an emphasis on the factors that need to be taken into account when determining its level and structure. Finally, the article describes the specifics of the domestic banking sector and discusses the aggregate MREL-eligible liabilities shortfall - as estimated using the CNB's general approach - that would need to be gradually filled by banks in the coming years.

Suggested Citation

  • Tomas Kahoun, 2019. "Minimum requirement for own funds and eligible liabilities (MREL): General approach of the Czech National Bank," Occasional Publications - Chapters in Edited Volumes,, Czech National Bank.
    • Handle: RePEc:cnb:ocpubc:tafs2019/4
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    References listed on IDEAS

    as
    1. Mr. Luc Laeven & Mr. Fabian Valencia, 2010. "Resolution of Banking Crises: The Good, the Bad, and the Ugly," IMF Working Papers 2010/146, International Monetary Fund.
    2. Jihad Dagher & Giovanni Dell'Ariccia & Luc Laeven & Lev Ratnovski & Hui Tong, 2016. "Benefits and Costs of Bank Capital," IMF Staff Discussion Notes 16/04, International Monetary Fund.
    3. Honohan,Patrick & Laeven,Luc (ed.), 2012. "Systemic Financial Crises," Cambridge Books, Cambridge University Press, number 9781107407206.
    4. Jihad Dagher & Mr. Giovanni Dell'Ariccia & Mr. Luc Laeven & Mr. Lev Ratnovski & Mr. Hui Tong, 2016. "Benefits and Costs of Bank Capital," IMF Staff Discussion Notes 2016/004, International Monetary Fund.
    5. Mr. Fabian Valencia & Mr. Luc Laeven, 2012. "Systemic Banking Crises Database: An Update," IMF Working Papers 2012/163, International Monetary Fund.
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