Resolution plans may envisage measures such as the sale of the business or the creation, through the segregation of certain assets and liabilities, of so-called bridge banks, which perform, after resolution, the bank’s critical functions with a significantly smaller balance sheet. Some of these resolution measures other than a bail-in might be potentially appropriate in the case of commercial banks pursuing a traditional business model. The bank resulting from a resolution process where these strategies are implemented will generally have lower capital requirements than the original institution and, therefore, a lower MREL might be required of it. I thus believe there is substantial leeway for adjusting MREL requirements on the basis of more accurate assessments of capital needs during the resolution process and, in particular, of the strategies foreseen in each bank’s resolution plans. 4 Transition  In light of the foregoing, even if the minimum volume of the loss-absorbing instruments that banks should have is revised downwards, the new MREL demands may undeniably only be assumed by a large number of banks if they have a sufficiently lengthy transition period to comply with the requirements. This transition period will, moreover, be necessary so that the market should not have to absorb a large number of issues over a limited period of time. Indeed, the European Commission’s recent proposal includes the possibility of setting for each bank a time margin for compliance with the MREL requirement, although this margin would be decided on a case-by-case basis by the resolution authority, i.e.
Further, measures have been set in place to mitigate the effects of banking crises, when they occur, on the public coffers and the economy in general. As regards solvency requirements, the reform agenda has practically concluded, while awaiting the Basel Committee’s final agreement on the so-called Basel III accord. Today I shall focus on the second objective of the international reform agenda, i.e. on the package of measures aimed at smoothing the management of bank crises while preserving financial stability and minimising the use of public funds. At the base of the regulatory reform in this area is the work of the Financial Stability Board (FSB) conducted at the behest of the G-20 following the Lehman Brothers debacle. In 2011 the FSB published the Key Attributes of Effective Resolution Regimes for Financial Institutions, which lay down the principles for ensuring an orderly resolution of banking institutions. Indeed, the Key Attributes specify the powers and tools the administrative authorities should have to see through the orderly resolution of non-viable banks, ensuring the maintenance of their core functions and their restructuring at the least possible cost to the taxpayer. The Key Attributes further envisage the availability of recovery and resolution plans for each institution that set out a roadmap ahead of a potential crisis situation. Lastly, they establish the principle whereby bank shareholders and creditors are those who should bear the bulk of the costs of the crisis.