The majority of leading EU Banks have “significantly increased” their loss-absorbing and recapitalisation resources, new research by a top EU banking watchdog has suggested.

The Single Resolution Board (SRB), which was established in Brussels in 2015 as part of a broader set of reforms known as the banking union, found that by the end of 2022, two thirds of banks it assessed had met their MREL targets.

SRB said the progress meant the majority of EU banks assessed would be positioned to ensure that severe losses and recapitalisation needs are “borne by shareholders and investors rather than by taxpayers”.

Conceived in light of 2008’s Global Financial Crisis, and pertinent as ever in 2023 following the rapid collapse of Silicon Valley Bank and Credit Suisse, MREL targets, which the SRB sets, force banks in the EU's banking union to meet minimum requirements for own funds and eligible liabilities.

In a crisis, accrued MREL debt is written down as a means of "bailing in" a bank and stopping it from becoming "too big to fail".

By the end of 2023, the regulator said banks are expected to close the main remaining gaps, “notably on liquidity and funding in resolution, separability and restructuring”.

SRB added that it would review whether material shortcomings remain and take remedial action where needed but noted that no signs intervention may be needed had emerged so far.

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