Banks have until 2020 to build up capital buffers

The European Union’s 7,000 banks must by 2020 hold a new buffer of bonds that can be written down to avoid taxpayer bailouts in a crisis, the bloc’s banking watchdog said yesterday.

The European Banking Authority (EBA) published draft rules for consultation that detail the so-called minimum requirement for own funds and eligible liabilities (MREL) that all banks must have under a new EU law on handling bank collapses.

It would comprise the core capital buffers banks already hold, topped up with similar capital, retained earnings or bonds that can be written down.