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MREL taking shape

MREL taking shape

The Bank of England has published indicative data (risk-weighted ratios) for the likely MREL (minimum requirement for own funds and eligible liabilities) requirements for individual major UK banks, from January 2020 and from January 2022.

Michelle Adcock

Banking prudential, EMA FS Risk & Regulatory Insight Centre

KPMG in the UK


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The data provides an example of how one resolution authority is approaching the setting of MREL, and its disclosure of its requirements on individual banks.


MREL is a key element of a resolution strategy. It determines the minimum loss-absorbing capacity (regulatory capital and medium term bail-inable debt) that a bank must hold, to absorb losses (“going concern resources”) and to recapitalise a failing bank (“gone concern resources”).

As set out in policy guidelines by both the European Banking Authority (EBA) and the Bank of England, a major bank with a resolution plan involving the use of resolution tools will be required to hold MREL to cover both going- and gone-concern purposes. Some other banks may also be required to hold some gone concern resources, to support a part of their business that is judged to be of critical economic importance. But smaller banks would not be required to hold any gone concern resources, because if they failed they would be put into insolvency rather than resolution.

In addition, banks are expected to hold going-concern capital buffers on top of MREL requirements, including the capital conservation buffer, any counter-cyclical capital buffer, and buffers applied to systemically important banks.

However, the precise application of these guidelines is likely to differ across countries, even within Europe.

UK proposals

The UK indicative data are based on the Bank of England’s November 2016 paper on MREL requirements. For G-SIBs and D-SIBS, the (non-leverage ratio) part of the MREL calculation would be for each bank:

From January 2020, twice the Pillar 1 requirement (excluding buffers) of 8% of risk-weighted exposures, plus the bank’s Pillar 2A requirement.

From January 2022, twice the Pillar 1 requirement and twice the bank’s Pillar 2A requirement.

So for a SIB with a 4% Pillar 2A requirement, the MREL requirement would be 20% from January 2020, and 24% from January 2022. The size of the Pillar 2A requirements on major UK banks explains why these banks end up with a higher MREL requirement than the 18% (from 2022) FSB minimum TLAC requirement.

Then the Bank of England adds on the various buffer requirements, including the capital conservation buffer of 2.5%; any G-SIB surcharge; and the group-wide impact of imposing a 1% countercyclical buffer on the UK business of the bank. There is also the undisclosed Pillar 2B add-on.

So for the major UK banks:

  From January 2020
  Gone concern 
Going concern Interim MREL    Plus buffers (excluding Pillar 2B)   
HSBC 8% 11.80% 19.8% 22.9%
Barclays    8% 12.00% 20.0% 24.5%
Lloyds     8% 12.50% 20.5% 23.9%
RBS 8% 11.80% 19.8% 24.0%
Standard Chartered  8% 10.80% 18.8% 22.4%
Santander UK 8% 12.90% 20.9% 24.4%


  From January 2022
  Gone concern Going concern MREL Plus buffers (excluding Pillar 2B)
HSBC 11.8% 11.8% 23.6% 26.7%
Barclays 12.0% 12.0% 24.0% 28.5%
Lloyds 12.5% 12.5% 25.1% 28.4%
RBS 11.8% 11.8% 23.7% 27.8%
Standard Chartered 10.8% 10.8% 21.6% 25.2%
Santander UK 12.9% 12.9% 25.9% 29.3%

Source: Minimum requirements for eligible liabilities and own funds (MREL)


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