MRELief

8 November 2016 By Dominic Elliott

The Bank of England has given British lenders two more years to meet thresholds for holding bonds that absorb losses if they fail. EU regulators are going soft on banks in general. But BoE concerns about a spike in bank funding costs are reasonable.

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The Bank of England on Nov. 8 said it would give British lenders until 2022 to meet the full requirements of a new regime that requires them to hold bonds that can absorb losses.

The regulator said that globally systemic banks would by 2022 need to meet a minimum requirement for funds and eligible liabilities (MREL) of 6.75 percent of their leverage exposures or an equivalent measure based on their risk-weighted assets – whichever was tougher.

There would also be a requirement for domestically systemic institutions to hold MREL that equated to the more exacting of either twice their leverage ratio requirements or twice their so-called Pillar 1 and Pillar 2A requirements, which are calculated on their risk-weighted assets.

Previously, the BoE had said that banks would need to meet final thresholds by 2020.

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