These risks are not easy to measure, but available estimates put them broadly on a par with those associated with NPLs. The Single Supervisory Mechanism has recently adopted some initiatives aimed at defining the most appropriate interventions to take adequate account of these risks. These efforts must be intensified.
The increase in the cost of funding is the third area that should not be neglected. In the coming years all large banks will have to raise a significant amount of “bail-inable” liabilities in order to fulfil the new global and European regulation on total loss-absorbing capacity (TLAC) and the minimum requirement for own funds and eligible liabilities (MREL).