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EU banks face €178B MREL deficit, regulator says

The European Banking Authority urged banks to issue more bonds that qualify for the minimum requirements for own funds and eligible liabilities, or MREL, noting that they are still facing a wide shortfall.

In a report, the regulator said that of 222 European banks covered by a resolution strategy other than liquidation, 105 have met the requirements but the rest still need to bridge a €178 billion MREL deficit. Although the 65 banks with shortfalls still need to meet the MREL threshold, the EBA said they already hold €67 billion of bonds that are close in nature to MREL.

"This shows that some banks already have a sophisticated investor base, likely to invest in long-term unsecured debt such as MREL eligible instruments," the regulator said.

The MREL requirements for banks, on a weighted average basis, range from 19% of risk-weighted assets for lenders with total assets below €1 billion and 26.5% of risk-weighted assets for global systemically important institutions.

Meanwhile, the report also said national authorities in the bloc have made strong progress in coming up with resolution strategies and imposing MREL requirements.