The European Banking Authority (EBA) today published its Q2 2024 quarterly Dashboard on minimum requirement for own funds and eligible liabilities (MREL), which discloses aggregated statistical information for 339 banks earmarked for resolution across the European Union and for which EBA has received data about both decision and resources. For the first time, the Dashboard also includes the list of entities covered. All banks meet their MREL requirements in line with the Bank Recovery and Resolution Directive (BRRD) deadline of 1 January 2024, with the exception of 21 banks, still in their transition period that report a shortfall. The amount of instruments becoming ineligible over the next year for the sample reached EUR 220bn, which appears manageable.As of 30 June 2024, 318 banks out of a sample of 339 met their MREL target while 21 are still in their transition report a shortfall – this is down from 30 as at end 2024 on a comparable sample. Furter details on the provision of transition period are provided in the latest EBA European Resolution Examination report. Their combined outstanding shortfall reached EUR6.1bn or 2.6% of their combined risk-weighted assets.Banks in the sample reported EUR 220bn of MREL instruments that will become ineligible by the end of June 2025 due to their residual maturity falling below one year. These account for around 18.6% of MREL eligible instruments other than own funds which appears manageable.Transfer strategies continue to be the preferred option in terms of number of decisions (61%), while bail-in is the favoured option in terms of RWAs covered (94%). This reflects the fact that transfer strategies are favoured for smaller banks, while bail-in is the preferred option for the larger ones.More details on MREL roll over needs and the state of resolution planning will be included in the upcoming Autumn 2024 EBA Risk Assessment Report.Note to the editorsThis MREL dashboard also covers Q1in the statistical annex.The EBA is mandated by the BRRD to monitor the setting of MREL by authorities and the build-up of related resources by institutions.MREL is the requirement that ensures that relevant EU institutions have sufficient loss absorbing capacity to support the execution of the preferred resolution strategy in case of failure.Banks having completed their transition period must disclose their MREL requirement and resources, the Dashboard includes a list of these entities, a list of entities is included in the dashboard.The BRRD set 1 January 2024 as a deadline to meet MREL requirements except for those banks that recently changed resolution strategy, or those eligible for an extension in accordance with Art.45m of the BRRD.
Brief
"On 27/11/2024, the European Banking Authority (EBA) issued an update regarding EU banks continuing to meet their Minimum Requirement for Own Funds and Eligible Liabilities (MREL), with only 21 banks in their transition period reporting a shortfall. The amount of MREL instruments becoming ineligible over the next year reached EUR 220bn, which appears manageable as per EBA's estimates."
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Purpose:
The European Banking Authority (EBA) has published its Q2 2024 quarterly Dashboard on minimum requirement for own funds and eligible liabilities (MREL), providing aggregated statistical information for 339 banks across the European Union, which is a crucial tool for monitoring the setting of MREL by authorities and the build-up of related resources by institutions.
The purpose of this dashboard is to disclose the current status of MREL requirements among EU banks, ensuring that relevant institutions have sufficient loss-absorbing capacity in case of failure. This transparency is essential for maintaining market confidence and stability within the European financial system.
Effects on Industry:
The publication of the Q2 2024 Dashboard has immediate effects on the banking industry, as it provides a comprehensive overview of MREL compliance across Europe. The dashboard’s findings indicate that all banks meet their MREL requirements, except for 21 banks still in their transition period, which report a shortfall of EUR6.1bn or 2.6% of their combined risk-weighted assets.
This information will likely influence the strategic decisions of banking institutions, as they must reassess their MREL strategies to ensure compliance with regulatory requirements. Furthermore, this dashboard may impact market sentiment and investor confidence in European banks, particularly those still in their transition period.
Relevant Stakeholders:
The stakeholders affected by the Q2 2024 Dashboard include:
- Banking institutions across the European Union
- Regulators and authorities responsible for monitoring MREL compliance (e.g., EBA)
- Market participants, such as investors and analysts
- Consumers who rely on stable banking services
These stakeholders must take note of the dashboard’s findings and adjust their strategies accordingly. For instance, banks may need to reassess their capital planning, risk management, or transfer strategies in response to the MREL requirements.
Next Steps:
To comply with this update, relevant stakeholders should:
- Review the Q2 2024 Dashboard for detailed information on MREL compliance across Europe
- Assess their current MREL strategies and adjust them as necessary to meet regulatory requirements
- Ensure transparency in reporting MREL requirements and resources
The EBA will release further details on the provision of transition periods and resolution planning in its upcoming Autumn 2024 Risk Assessment Report.
Any Other Relevant Information:
Additional context surrounding this update includes:
- The BRRD deadline for meeting MREL requirements was set at 1 January 2024, with exceptions for banks in their transition period or eligible for an extension
- Transfer strategies are the preferred option in terms of number of decisions (61%), while bail-in is the favored option in terms of risk-weighted assets covered (94%)
- The amount of MREL instruments becoming ineligible over the next year reached EUR220bn, which appears manageable.
