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02 November 2015

Reuters: Europe to align bank capital buffers to global standard

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The euro zone's bank resolution authority will align its capital buffer demands with those being set separately for the world's largest banks, aiming to avoid duplication, SRB's Koenig said.

The euro zone's top lenders, such as France's BNP Paribas and Germany's Deutsche Bank, face two sets of capital buffer requirements: one set by the Single Resolution Board (SRB) for all large lenders in the currency bloc, and another laid out by the Swiss-based Financial Stability Board (FSB) for the world's largest banks.

While different from a legal point of view, both the SRB's minimum requirement for own funds and eligible liabilities (MREL), and the FSB's total loss-absorbing capacity (TLAC), are designed to absorb losses if a bank runs into trouble, thereby shielding tax payers from costly bailouts.

SRB chief Elke Koenig said the SRB would design MREL to be compatible with TLAC, meaning banks do not have to meet two different standards.

The SRB will decide from January how big a buffer of "bail-inable" instruments banks on its watch must hold on top of their core capital buffers to tap in a crisis.

Koenig added that, while MREL will almost certainly be at least 8 percent for all banks the SRB is monitoring, it may be higher for the bigger and more interconnected institutions.

The buffers will be set next year, when a European directive on banking resolution comes into full force.

Full article

© Reuters

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