What MREL is
The minimum requirement for own funds and eligible liabilities is the amount of loss-absorbing and recapitalisation capacity a bank must hold so that it can be resolved without public money. It is set by the resolution authority for each bank individually, under Articles 45 to 45m of the BRRD, and it is a resolution requirement rather than a supervisory one: capital requirements ask whether a bank can survive as a going concern, MREL asks whether it can be restructured once it has not.
The logic is straightforward. If a failing bank is to be recapitalised by bailing in its creditors, there must be enough bail-inable liabilities on the balance sheet at the moment of failure. MREL is the authority's answer to how much is enough, and it is binding.
How the requirement is calibrated
MREL is expressed as two parallel ratios, and a bank must meet both at all times:
- As a percentage of the total risk exposure amount (TREA).
- As a percentage of the leverage ratio exposure measure (LRE), the denominator of the leverage ratio.
Each is built from two components. The loss absorption amount is normally the bank's own capital requirement — Pillar 1 plus its Pillar 2 requirement. The recapitalisation amount is what the bank would need to restore the same requirement after resolution and retain market confidence, adjusted for any shrinkage the resolution strategy assumes. The combined buffer requirement sits on top of the TREA-based requirement rather than counting towards it, which is the detail most often missed: capital used to meet MREL cannot simultaneously meet the buffer.
For a bank whose plan is liquidation rather than resolution — a liquidation entity — the recapitalisation amount is generally zero, and MREL collapses back to the loss absorption amount alone.
Subordination, and why it matters
Bailing in a senior liability alongside operating liabilities of the same rank creates a no creditor worse off problem: the creditor could argue it would have fared better in insolvency. The framework's answer is subordination — requiring part of MREL to be met with instruments that rank below ordinary senior claims.
That requirement is what created senior non-preferred debt as an asset class: a statutory rank sitting below senior preferred but above Tier 2, designed for no purpose other than to be bail-inable cleanly. G-SIIs face a subordination floor derived from the TLAC standard, and authorities may impose one on other banks where the resolution strategy needs it. Groups that meet it through the structure of the issuing entity rather than the rank of the instrument rely on structural subordination instead.
Breaching MREL is not the same as breaching capital. It triggers the maximum distributable amount restriction in its M-MDA form, which constrains distributions, coupon payments on Additional Tier 1 and variable remuneration.
External and internal MREL
MREL applies at two levels, and conflating them is a common error.
External MREL is issued by the resolution entity — the entity to which resolution tools would actually be applied — into the market. It is the capacity that absorbs the group's losses from outside.
Internal MREL is held by material subsidiaries and subscribed by their parent within the resolution group. It never leaves the group. Its purpose is to move losses from a subsidiary up to the resolution entity without the subsidiary itself entering resolution — the mechanism that makes a single point of entry strategy work. A multiple point of entry group, by contrast, has several resolution entities, each with its own external requirement.
MREL and TLAC compared
TLAC is the Financial Stability Board's international standard for global systemically important banks; MREL is the EU requirement that applies to all banks in scope. Since BRRD II they are deliberately aligned, but they are not identical.
| TLAC | MREL | |
|---|---|---|
| Applies to | G-SIIs only | All institutions in scope, calibrated individually |
| Nature | A Pillar 1 minimum, the same for everyone | Bank-specific, set by the resolution authority |
| Legal home | CRR for EU G-SIIs | BRRD Arts. 45–45m and the SRMR |
| Eligibility | Broadly harmonised | Broadly the same, with EU-specific conditions |
In practice an EU G-SII computes both and complies with the binding one.
What counts as eligible
Eligible liabilities must be issued and fully paid up, must not be owed to or funded by the institution itself, and must have a remaining maturity of at least one year. Instruments with an embedded derivative, covered deposits, secured liabilities and the other categories that Article 44(2) shields from bail-in are excluded, as are most liabilities that would be operationally impossible to write down at speed. Where an instrument is governed by third-country law, contractual recognition of bail-in is required for it to count.
The one-year residual maturity condition is what drives the refinancing pattern visible across the market: an instrument stops counting towards MREL a year before it matures, not on the day it matures.
Seeing MREL in this database
MREL is where this reference carries data rather than description.
- The instruments explorer holds the MREL-eligible debt outstanding for the banks in scope, taken from ESMA FIRDS and classified by seniority. The subordinated layers have their own views: senior non-preferred, Tier 2 and Additional Tier 1.
- The maturity wall shows when that capacity rolls off — the practical constraint on issuance planning, given the one-year rule above.
- Each entity profile carries the bank's own disclosed MREL requirement and resources where it publishes them under Pillar 3, alongside its capital ratios.
- The requirement is reported to authorities through the templates described under MREL and TLAC reporting, with own funds and eligible liabilities broken down in Z 03.01 and the liability structure in Z 02.00.