While higher rates make it more expensive to replace maturing notes, banks will still need to meet a minimum requirement for securities such as AT1 bonds and subordinated debt, said Birgit Rodolphe, executive director for bank resolution at German regulator BaFin.
Germany’s top official for winding down failing banks said lenders must keep selling bonds that can absorb losses, despite the fact that higher rising interest rates makes issuing the securities costlier....
The introduction of such thresholds — known as MREL, or minimum requirement for eligible liabilities — was a key element in European authorities’ efforts to avoid a repeat of the taxpayer-funded bailouts of the 2008 financial crisis. Banks and regulators have also developed plans that would make them easier to wind down, and lenders are using that proof of preparation to lobby for their individual MREL requirements to be lowered, yet Rodolphe said that’s unlikely any time soon...
Rodolphe also called for US authorities to relax disclosure rules for such securities. That would help regulators to bail in the US notes of European banks and issue new paper over the course of a weekend when markets are closed, she said.
“If we don’t find a solution, one option that resolution authorities have is that we do not recognize issuances under US law as MREL eligible,” she said.
Bloomberg
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