Overlaps between minimum requirements and capital buffers: the usability of the combined buffer requirement for Italian banks

Overlaps between minimum requirements and capital buffers: the usability of the combined buffer requirement for Italian banks

Blog Article

The current EU capital regulation requires that banks Liquid Formulas comply with two main frameworks at the same time: one for prudential purposes, the other for resolution purposes.The first one includes both a risk-weighted requirement (RW) and a leverage ratio requirement (LR).Similarly, the resolution framework, which ensures that banks have enough loss-absorbing and recapitalization capacity through a Minimum Requirement of Eligible Liabilities (MREL), is based on two ratios that are to be met in parallel: the MREL as a percentage of risk weighted assets (MREL-RW) and the MREL as a Apparel percentage of the total exposure measure used for the purpose of the leverage ratio (MREL-LR).

According to the EU regulation, the CBR is only required on top of the two risk-weighted requirements (RW and MREL-RW).