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Minimum Requirement for Own Capital and Eligible Liabilities

In: The Palgrave Handbook of European Banking Union Law

Author

Listed:
  • Marco Lamandini

    (University of Bologna)

  • David Ramos Muñoz

    (University of Bologna
    Universidad Carlos III Madrid)

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.

Suggested Citation

  • Marco Lamandini & David Ramos Muñoz, 2019. "Minimum Requirement for Own Capital and Eligible Liabilities," Springer Books, in: Mario P. Chiti & Vittorio Santoro (ed.), The Palgrave Handbook of European Banking Union Law, chapter 14, pages 321-348, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-13475-4_14
    DOI: 10.1007/978-3-030-13475-4_14
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    Keywords

    MREL; Bail-in; Bank resolution;
    All these keywords.

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