Author(s): Pr. Rym Ayadi (HEC Montreal and IRCCF) and Pr. Giovanni Ferri (LUMSA)
Date: July 2016
Pages: 24

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Using a comprehensive sample of European banks by business model, ownership structure and systemic footprint, this paper calculates MREL requirements based on three hypotheses: i) 18% of RWA; ii) 6.75% of LRE; iii) EBA- RTS. The maximum of i) and ii) TLAC prescription – reveals different requirements across business models/ownership structures not in favour of traditional banking. Variations are reduced somewhat with EBA RTS and an 8% floor. Shocking banks in respect of tail risk events suggests that currently envisaged MREL levels might be insufficient for a smooth resolution for banks.