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From the Collaborative Bond and Money Market Data Portal

Minimum Requirement for Own Funds and Eligible Liabilities (MREL) is a regulatory requirement imposed on banks and financial institutions under the European Union's Bank Recovery and Resolution Directive (BRRD). The main purpose of MREL is to ensure that banks have sufficient loss-absorbing capacity to support their critical functions and avoid taxpayer-funded bailouts in the event of financial distress.

MREL is designed to:

1. Ensure banks maintain sufficient eligible instruments to facilitate the implementation of their preferred resolution strategy.
2. Help absorb losses and provide for recapitalization in case of a bank's failure.
3. Improve a bank's resolvability by building up and maintaining adequate MREL capacity in terms of quantity, quality, governing law, and appropriate location of MREL instruments.

The MREL requirement is calculated as the sum of two components:

1. Loss Absorption Amount (LAA): Derived from current capital requirements based on risk-weighted assets.
2. Recapitalization Amount (RCA): Determined based on how the institution would be managed in the event of a crisis.

MREL is similar to the Total Loss-Absorbing Capacity (TLAC) standard developed by the Financial Stability Board (FSB) for globally significant banks (G-SIBs). Both MREL and TLAC aim to ensure that banks have sufficient loss-absorbing and recapitalization capacity during resolution.

Resolution authorities, such as the Single Resolution Board (SRB) in the Eurozone or national resolution authorities in other EU member states, are responsible for setting individual MREL targets for banks. These targets are tailored to each bank's specific characteristics, including size, business model, funding model, and risk profile.