EBA publishes second impact assessment report on MREL

The European Banking Authority (EBA) has published its second Impact Assessment Report on the minimum requirement for own funds and eligible liabilities (MREL). The report assesses the effects of the framework on EU institutions, markets, and funding structures.

The report indicates that EU banks have continued to build MREL resources from 2022 to 2024, with resolution entities holding an average of 34.7% of total risk exposure amount (TREA) in MREL-eligible instruments by the end of 2024.

Issuance of eligible liabilities has increased across all banks, with EUR 371 billion issued in 2024. Smaller banks and multiple point of entry (MPE) groups have developed market access, but structural challenges remain, especially for smaller institutions.

The composition of MREL resources shows a reliance on subordination requirements and different issuance capacities. Senior non-preferred (SNP) instruments are now the dominant form of eligible debt. Larger banks issue across various subordination layers, while smaller banks mainly use retained earnings and CET1 capital. Own funds account for 20.5% of TREA on average.

Authorities report no material changes to banks’ business models directly attributable to MREL. Smaller, deposit-funded institutions face higher compliance costs and increased complexity. Structural adjustments within banking groups are limited and driven more by resolvability considerations than MREL requirements alone.

Under Article 45l(2) of the BRRD, the EBA is mandated to produce a report every three years assessing MREL’s impact. This publication is the final report under the current mandate.

The EBA is also exploring ways to streamline the capital and TLAC/MREL framework, aligned with recommendations from its recent report on regulatory and supervisory efficiency.

MREL ensures EU institutions have sufficient loss-absorbing capacity to support resolution strategies. The BRRD set 1 January 2024 as the deadline for compliance, with some exceptions for recent resolution strategy changes or extensions under Article 45m BRRD.