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Total Assets’ versus ‘Risk Weighted Assets’

Does it matter for MREL requirements?

Unit Involved

Financial Markets and Institutions

01 May 2016 / 30 July 2016

The Bank Recovery and Resolution Directive (BRRD) foresees a minimum requirement for eligible liabilities and own funds (MREL) that banks need to comply with, to ensure the effectiveness of the bail-in tool. In the context of a discussion is on how MREL should be constructed in practice, this paper looked at alternative ways to compute the requirements, showing how the choice of the benchmark metric (between Risk Weighted Assets, Total Assets or Leverage Exposure) can change the allocation of requirements across banks. It also reviewed MREL in light of the global effort to ensure future resolvability of banks, highlighting some differences and inconsistencies with the FSB’s Total Loss-Absorption Capacity (TLAC) measure.

 

This project was awarded under the Framework Service Contract for the provision of external expertise in the field of banking resolution (IP/A/ECON-BU/FWC/2015-057/LOT2) with the European Parliament. The full list of CEPS’ Framework Contracts is available here.

CEPS Project

Project Details

Financial Markets and Institutions


Total Assets’ versus ‘Risk Weighted Assets’

Does it matter for MREL requirements?

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This project was funded by the European Parliament (DG for Internal Policies of the Union).
Contact
Willem Pieter De Groen Willem Pieter De Groen
Willem Pieter De Groen
+32 (0)2 229 39 57

Publications

Here are the publications published for this project