Total loss-absorbing capacity and minimum requirement for own funds and eligible liabilities: Impact of bail-in rules on balance sheet management and funding

Abstract

This paper looks at the impact of the new resolution regime, especially the bail-in tools, on balance sheet management and the implications for internal liquidity risk management as well as funding. Minimum Requirement for own funds and Eligible Liabilities (MREL) and total loss-absorbing capacity (TLAC) should be key indicators for total bank management. Due to costintensity, the paper advises optimising the balance sheet structure and the resolution strategy. A prudent funding strategy has to find a balance between the firm-specific funding capacity, continuous market access and limiting costs. The paper also looks at an efficient way to allocate the specific costs within the bank.