Retail investors at risk from EU bail-in requirements

Author: Amélie Labbé | Published: 12 Oct 2017

Strengthening internal capital requirements is a key tool to making EU banks resolvable, but concerns are emerging over exactly what kind of investor buys loss-absorbing debt.

Speaking at the Single Resolution Board’s annual conference in September, Elke König, chair of the Single Resolution Board (SRB), said that the authority was working on a second round of resolution plans for banks, with a particular focus on determining suitable levels of bail-inable capital (so-called minimum requirement for own funds and eligible liabilities, or MREL). Another priority was also assessing what kind of qualitative requirements this capital would need to meet to be suitable for loss absorption. 

The FSB’s requirements when it comes to minimum amounts of total loss absorbency capacity (TLAC) to be held by global systemically important banks (G-Sibs) are partly based on a pillar 2 element, which varies from bank to bank depending on their specific risk profile...