DUESSELDORF, Sept 15 (IFR) - UK lenders expect to be told
how much they need to raise to meet new loss absorbing
requirements by the end of October, according to an issuer
speaking on the sidelines of the annual Euromoney/ECBC Covered
Bond conference in Duesseldorf.
Financial institutions across Europe must comply with an
incoming requirement known as the minimum requirement for own
funds and eligible liabilities (MREL).
The rule requires that, from January 2020, banks hold
sufficient liabilities that can be written down to avoid
taxpayers carrying the burden of future bank failures.
UK lenders had expected to receive their MREL numbers in
July, but this was pushed back after the Bank of England
loosened capital requirements in the wake of the UK vote to
leave the EU.
The targets will give the UK banks, building societies and
investment firms subject to the MREL requirement a much clearer
picture on their issuance needs in the coming years.
The major UK banks have already made a start on issuing debt
out of their holding companies to boost their loss absorbing
buffers. Holdco debt would be written down ahead of operating
company liabilities in a crisis.
UK banks have issued £44bn-equivalent of holdco debt so far
in 2016, according to a note from BNP Paribas research analysts
published on Wednesday: £6bn of AT1, £4bn of Tier 2 and £34bn of
UK building societies do not have holding companies, and
will therefore likely meet their requirements with Tier 2 debt
issued out of the operating company. Their needs will be
considerably less than those of the major banks, however, and
bankers say they are under little pressure to issue.
The final MREL rules are expected to be published by the
Bank of England by the end of Q4 2016, the BNP Paribas analysts
(Reporting by Alice Gledhill, Editing by Helene Durand, Julian