The EBA publishes its second MREL impact assessment Report

The European Banking Authority (EBA) today published its second Impact Assessment Report on the minimum requirement for own funds and eligible liabilities (MREL), assessing the effects of the framework on EU institutions, markets and funding structures. The Report shows that EU banks have continued to build up MREL resources, developing market access with limited impact on their business models. However, structural challenges remain for smaller banks.

EU banks have continued to build up MREL resources between 2022-2024 to meet final MREL targets applicable from 1 January 2024. By end-2024, resolution entities held MREL-eligible instruments amounting to 34.7% of total risk exposure amount (TREA) on average.

The analysis shows that the introduction of MREL requirements has prompted issuances of eligible liabilities from all banks. Most resolution entities recorded high levels of issuance, with EUR 371 billion in MREL-eligible instruments issued in 2024. Although the MREL framework has encouraged smaller banks and multiple point of entry (MPE) groups to develop market access, structural challenges persist, particularly for smaller institutions.

The composition of MREL resources reflects both subordination requirements and banks' different ability to issue in wholesale funding markets. Senior non-preferred (SNP) instruments have become the dominant form of eligible debt. Larger banks continue to issue across different subordination layers, whereas smaller banks largely rely on retained earnings and Common Equity Tier 1 (CET1) capital to meet their MREL requirements. Overall, own funds remain the largest MREL component, accounting for 20.5% of TREA on average.

Authorities report no material changes to banks' business models that can be directly attributed to MREL. However, smaller, deposit-funded institutions face higher compliance costs and greater complexity compared to larger banks already active in wholesale markets. Structural adjustments within banking groups remain limited and are primarily driven by broader resolvability considerations rather than by MREL requirements alone. 

Legal basis and background

The EBA is mandated under Article 45l(2) of the Bank Recovery and Resolution Directive (BRRD) to deliver to the European Commission every three years a report assessing the impact of the minimum requirement for own funds and eligible liabilities. This Report represents the final iteration of the report to be produced under the current mandate.

Alongside this monitoring exercise, the EBA is also reflecting on possible ways to streamline the capital and TLAC/MREL framework, in the context of the implementation of the recommendations set out in its Report on the efficiency of the regulatory and supervisory framework.

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 the event of failure.

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 Article 45m BRRD.

The report draws on quantitative data from MREL/TLAC reporting, FINREP, Dealogic, Markit, as well as on a qualitative survey of EU competent and resolution authorities.

MREL impact assessment report

(900.23 KB - PDF)