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No common minimum level of bail-in requirements for banks - EU Commission

(adds quotes, details)

By Francesco Guarascio

BRUSSELS, May 23 (Reuters) - Banks are to be let off having to hold at least 8 percent of their liabilities and own funds, the European Commission said in a regulation adopted on Monday.

The decision, confirming a Reuters report last week, means there will be no harmonised minimum level of banks' assets that can be wiped out by regulators when a lender is wound down, a move that slightly softens requirements for banks

The Single Resolution Board, the EU body in charge of winding down banks, had previously stated that 8 percent should be the minimum requirement, mirroring similar requests from the European Banking Authority.

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New EU rules on banking resolution, operational from the beginning of this year, oblige banks to hold assets that can be wiped out in case of a banking rescue.

This requirement, known as MREL (minimum requirement for eligible liabilities) is essential to allow the so-called bail-in, a procedure aimed at forcing banks' shareholders, bondholders and large depositors to pay for the rescue of a lender and possibly avoid taxpayers' money to be used.

"We need a well-functioning system where it's the banks' creditors, rather than taxpayers, who pay for problems in banks," the EU Financial Services Commissioner Jonathan Hill said in a statement.

The Commission refused to introduce a harmonised level for the MREL in the regulation adopted on Monday, saying that existing EU rules do not set a common minimum level of MREL, and this cannot be decided with secondary legislation.

The legislation will be automatically applicable if the EU Parliament and EU states do not raise objections in the next three months.

The SRB will decide case by case on banks' MREL. The body will still be able to impose an MREL of 8 percent or more on banks, but only if it demonstrates a necessity. The body is currently drafting precautionary resolution plans for the some 140 banks under its watch.

In an interview with Reuters on Thursday, SRB chair Elke Koenig said that smaller banks may be exempt from bail-in requirements, while bigger lenders will likely need to hold more than 8 percent. (Reporting by Francesco Guarascio; editing by Philip Blenkinsop/Jeremy Gaunt)