More EU banks may come under scope of global bail-in rules

* New (KOSDAQ: 160550.KQ - news) rules require big banks to issue bonds to boost capital

* EU says TLAC rules may also apply to next tier banks

* Investors worry about duplication of EU and global rules (Adds Finance Watch comment)

By Huw Jones

LONDON, April 29 (Reuters) - New rules requiring the world's biggest banks to issue bonds that can be used to bolster capital in a crisis may be extended to the next tier of banks in the European Union, a senior EU official said on Friday.

The Group of 20 economies (G20) has approved so-called total loss-absorbency capacity rules, or TLAC, that require big banks such as Deutsche Bank (LSE: 0H7D.L - news) , HSBC and Morgan Stanley to issue debt that can be "bailed in" or written down to bolster depleting core capital.

The rules, due to be phased in from 2019, aim to strengthen the financial system and avoid taxpayer bailouts of lenders as seen during the 2007-08 financial crisis.

TLAC will apply to the world's 30 globally systemic banks. The next tier down would be domestically systemic banks which could include Britain's biggest mortgage lender Lloyds Banking (Xetra: 871784 - news) Group, Austria's Erste and Sweden's Swedbank .

Olivier Guersent, director-general of the European Commission's financial services unit, said he was working with EU states on how to combine TLAC with similar EU rules known as MREL, which are being applied to all lenders across the 28-country bloc.

The introduction of both TLAC and MREL has raised industry concerns over how the two sets of rules would mesh together to avoid duplication or confusion among investors who buy the bonds.

"There are a number of trade-offs that need to be decided," Guersent told a regulatory conference in Brussels.

"Do you want to limit the applicability of TLAC in Europe to the very top layer of biggest banks, or do you want to expand the applicability to smaller banks?" Guersent said.

"The decision has not been taken for the time being."

Big banks such as UBS (LSE: 0QNR.L - news) and Credit Suisse (LSE: 0QP5.L - news) have already started issuing TLAC-eligible bonds.

Brussels-based Finance Watch, which campaigns for the public interest in financial services rulemaking, has said that in some regards TLAC is a weaker standard than MREL.

"There is a danger that TLAC incorporation opens a discussion on how to de-fang MREL," said Christian Stiefmueller, senior policy analyst at Finance Watch.

There are also concerns that undermining MREL would weaken other EU rules that put strict limits on when regulators can use taxpayer money to bail out a bank, Stiefmueller said.

TLAC is based on risk-weighted assets, a more tailored approach than MREL, which is based on total assets.

Guersent said there was a need to avoid duplication of requirements for those lenders who end up being subjected to TLAC.

The EU would apply TLAC as drawn up by global regulators and change EU banking rules to make TLAC mandatory under the bloc's law like MREL, Guersent said.

TLAC was drawn up by the G20's Financial Stability Board, which has no binding powers.

Guersent also said that making no changes to MREL could lead to "inconsistencies" and additional requirements for lenders. (Editing by Susan Fenton)