This report assesses the impact of MREL requirements on EU institutions, markets, and funding structures for the 2022-2024 period. Most banks met their final MREL requirements by the January 1, 2024 deadline, with an increase in eligible debt issuances, particularly subordinated instruments. Although market access has improved, smaller banks continue to face structural challenges related to their size and investor…
This MREL impact report was published by the European Banking Authority (EBA) in March 2026. It is the second triennial edition, covering the 2022-2024 period, and the last under the current BRRD II framework. The document analyses the impact of the Minimum Requirement for own funds and Eligible Liabilities (MREL) on EU banking institutions, financial markets, funding structures, business models, profitability and banks’ issuance capacity. The scope covers 345 resolution entities representing 77% of EU banking assets, with data from sources such as MREL/TLAC reporting, Markit, Dealogic and FINREP (p. 1-8, 36).
The report responds to the mandate of Article 45l(2) of BRRD II, assessing the impact of MREL on European banks after the transitional phase, up to the compliance deadline of 1 January 2024. It shows that almost all banks have met their final requirements or benefit from transitional measures (p. 4-5). Total and subordinated requirements have increased for all bank categories, with an average MREL resource ratio of 34.7% of the Total Risk Exposure Amount (TREA) at end-2024, mainly due to growth in senior non-preferred (SNP), senior unsecured debt and CET1 capital (p. 5, 18-19). The issuance of eligible securities, notably SNP, has boosted market access for smaller banks and multiple point of entry (MPE) groups, while large banks maintained diversified issuance according to subordination levels (p. 5, 26-29). Own funds remain the main component of MREL (20.5% of TREA), eligible debt representing 13.6%, with an average subordinated share of 27.8% of TREA (p. 5, 23-24). Only 18 entities (0.9% of banking assets) reported a shortfall, all in transitional periods (p. 5, 31). Authorities found no significant impact of MREL on business models or legal structures, although deposit-oriented small banks bear higher compliance costs (p. 5, 33). Bank profitability improved between 2021 and 2024, with no evidence that building MREL buffers limited revenue generation (p. 34). The report highlights that lessons learned, notably challenges faced by small banks in diversifying subordinated funding, will inform future reflections on simplification and proportionality of the MREL/TLAC framework (p. 5).
The report is prepared pursuant to Article 45l(2) of Directive (EU) 2019/879 (BRRD II), which requires the EBA, in cooperation with competent authorities, to assess the impact of MREL requirements on several dimensions: financial markets, business models, profitability, institutions’ actions and issuance capacity (p. 6-7). It follows the first report published in 2023, covering the MREL build-up phase (2021-2023), and aims to analyse the impact after the transitional period, up to end-2024, the last edition under the current framework (p. 6). The scope includes 345 resolution groups covering 77% of EU banking assets, with data from multiple sources (MREL/TLAC reporting, Markit, Dealogic, FINREP) and a qualitative survey of resolution authorities (p. 6-8). The report focuses on MREL’s effects on funding structure, issuance capacity, composition of eligible resources, business models, profitability and any difficulties encountered, while acknowledging limitations related to data availability and regulatory framework complexity (p. 6-8).
Impact on financial markets:
- Since 2017, senior non-preferred (SNP) debt has experienced remarkable growth (+185%), surpassing other instruments such as AT1 (+77%) or Tier 2 (+4%) (p. 11).
- After BRRD II came into force in 2019, SNP continued to increase (+43% between 2019 and 2024), while more costly instruments (AT1, Tier 2) declined, reflecting a preference for less expensive subordinated instruments (p. 11-12).
- Despite rising interest rates since July 2022, SNP and senior unsecured issuances continued to grow (+22% and +20% respectively), indicating strong issuance capacity even in a costly environment (p. 12).
- Spreads between instruments show a stable perception of relative risk, with more volatility for Tier 2, notably during crises (COVID-19, rate hikes) (p. 13-14).
Bank funding structure:
- Between 2021 and 2024, banks increased funding through issued debt, offsetting deposit declines linked to TLTRO repayments, with a notable rise in repurchase agreements (repos) (+41%) (p. 15-16).
- Resolution banks have a liability structure characterised by a lower equity share and greater debt issuance capacity, notably via wholesale markets (p. 15).
- Funding strategies evolved, especially for small banks and MPE groups, which had to develop market access to issue MREL instruments, notably SNP (p. 16-17).
Composition and evolution of MREL resources:
- At end-2024, MREL resources represent on average 34.7% of TREA, up 2.2 points since 2022, with notable increases in SNP (+0.8% TREA), senior unsecured (+0.7%) and CET1 (+0.6%) (p. 18-20).
- Composition varies by bank size and category: large banks (G-SIIs, top tier) rely more on eligible debt (41% of MREL stock), while smaller banks favour own funds (70% of stock) (p. 22-24).
- Subordinated instruments (own funds + subordinated debt) reach 27.8% of TREA on average, SNP being the main subordinated instrument (p. 23).
Eligible debt market and 2024 issuances:
- In 2024, MREL issuances reached €371 billion, split among G-SIIs (30%), top tier (32%), fished banks (5%) and other banks (33%) (p. 25-26).
- Issuance is geographically concentrated (DE, FR, NL represent 52%), but concentration has decreased since 2021 (p. 26).
- Small banks have limited but growing market access, with only 14% of issuers having less than €10 billion in assets (p. 26-27).
- Issuances by instrument type show strong SNP growth (€139 billion in 2024, +90% since 2018), as well as AT1 (€33 billion) and Tier 2 (€46 billion) (p. 27-29).
- Issuances outside the EU remain marginal (2 to 11% depending on instrument), the majority being denominated in euro or US dollar (p. 29-30).
Issuance capacity and banks’ actions:
- Only 18 entities (0.9% of assets) show an MREL shortfall, all in transitional periods (p. 31).
- Issuance difficulties mainly concern small banks, linked to shallow domestic markets, limited investor base, small issuance sizes and volatile market conditions (p. 31-32).
- Banks mainly met their MREL requirements through debt issuance and retained earnings, with little external capital raising (p. 32).
Impact on business models and structures:
- No significant business model changes have been attributed to MREL; banks adjusted capital and funding without changing core activity (p. 33).
- Deposit-oriented small banks bear higher compliance costs and complexities, while large banks adapt more easily due to market access (p. 33).
- Legal and organisational structures of banking groups have not undergone major MREL-related changes; observed reorganisations were driven by resolvability or efficiency objectives (p. 33-34).
Impact on profitability:
- Between 2021 and 2024, return on equity (ROE) increased on average by 3.5%, with a similar rise in net interest income relative to equity (+5.3%) (p. 34-35).
- These developments suggest that building MREL buffers has not hindered banks’ ability to generate income, although other macroeconomic factors may influence these ratios (p. 34-35).
Findings:
- Almost all European banks have met their final MREL requirements or benefit from transitional periods (p. 5).
- MREL resources increased to reach on average 34.7% of TREA at end-2024, with strong growth in senior non-preferred debt (p. 18-20).
- MREL debt issuance increased, reaching €371 billion in 2024, with decreasing geographic and bank category concentration (p. 25-27).
- Only 18 banks (0.9% of assets) have an MREL shortfall, all in transitional periods (p. 31).
- Business models and legal structures have not been significantly modified due to MREL (p. 33-34).
Assumptions:
- Banks’ preference for less costly subordinated instruments (SNP) is linked to the desire to reduce MREL funding costs (p. 11-12).
- Issuance difficulties faced by small banks are due to external factors (market, investors) and internal factors (size, rating, issuance capacity) (p. 31-32).
Interpretations:
- MREL has strengthened market discipline by reducing moral hazard and improving banks’ financial resilience (p. 8).
- The absence of major impact on profitability suggests banks have successfully integrated MREL requirements without compromising financial performance (p. 34-35).
Uncertainties:
- Future market conditions and regulatory frameworks could influence banks’ ability, especially smaller ones, to maintain or diversify MREL resources.
- Long-term impact on business models remains to be monitored, notably in case of requirement changes or major economic shocks.
The report concludes that the MREL framework has been fully integrated by European banks, with effective build-up of eligible resources and adaptation of funding strategies, notably through increased senior non-preferred debt issuance. Small banks continue to face structural challenges accessing markets, although their situation is gradually improving. No major changes in business models or legal structures have been directly attributed to MREL, and overall bank profitability has improved despite buffer build-up. The EBA emphasises that these results will feed reflections on simplification and proportionality of the MREL/TLAC framework, notably to ease constraints for small banks and improve regulatory efficiency. The report does not make specific recommendations but indicates that lessons learned will be considered in future work, notably recommendation 9 of the report on regulatory and supervisory framework efficiency (p. 5, 33).
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