Bail-in level for eurozone banks to be set case-by-case: EU Commission

[BRUSSELS] The European Commission adopted on Monday a regulation clarifying that there will no harmonised minimum level of banks' assets that can be wiped out by regulators when a lender is wound down, a move that slightly softens requirements for banks.

The decision confirms what Reuters reported last week and relieves banks from the possible obligation of having to hold at least 8 per cent of their liabilities and own funds, as previously stated by the Single Resolution Board, the EU body in charge of winding down banks.

New EU rules on banking resolution, operational from the beginning of this year, oblige banks to hold assets that can be wiped out in case of a banking rescue.

This requirement, known as MREL (minimum requirement for eligible liabilities) is essential to allow the so-called bail-in, a procedure aimed at forcing banks' shareholders, bondholders and large depositors to pay for the rescue of a lender and possibly avoid taxpayers' money to be used.

The Commission refused to introduce a harmonised level for the MREL in the regulation adopted on Monday. The legislation will be automatically applicable if the EU Parliament and EU states do not raise objections in the next three months.

The SRB will be still able to impose an MREL of 8 per cent or more on banks, but only if it demonstrates a necessity. The body is currently drafting resolution plans for the some 140 banks under its watch.

In an interview with Reuters on Thursday, SRB chair Elke Koenig said that smaller banks may be exempt from bail-in requirements, while bigger lenders will likely need to hold more than 8 per cent.

The Commission said existing EU rules do not set a minimum level of MREL, and this cannot be decided with secondary legislation.

REUTERS