Overlaps between minimum requirements and capital buffers: the usability of the combined buffer requirement for Italian banks
The current EU capital regulation requires that banks 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 fram...
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| Format: | Article |
| Language: | English |
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AIFIRM
2022-08-01
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| Series: | Risk Management Magazine |
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| Online Access: | https://www.aifirm.it/wp-content/uploads/2022/08/RMM-2022-02-Excerpt-1.pdf |
| Summary: | The current EU capital regulation requires that banks 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 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).
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| ISSN: | 2612-3665 2724-2153 |