XXV Edition

1-2 December 2016"

Bridging Tlac and Mrel: Do Bank Business Models Matter?

Ayadi Rym, HEC Montreal
Ferri Giovanni, LUMSA University
Michel Keoula, HEC Montreal

In Europe, policy responses to the financial crisis of 2007-2009 that focused on ending bailouts of banks using taxpayers’ money, have emphasised the completion of Banking Union and the furthering of international cooperation fostered by the Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board (FSB). This paper delves into the debate on the Minimum Requirement on own fund and Eligible Liabilities (MREL) and the Total Loss Absorbency Capital (TLAC), provides estimates for both based on a broad set of 2500 European banks by business model (Using Ayadi et al (2016) framework), ownership structure and systemic footprint and explains MREL based on different metrics. The paper also assesses the determinants of MREL when estimated by the RWA and LRE.

Area: Financial Stability

Keywords: bank resolution, bank regulation, financial stability, bank business models

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