This paper aims to assess the overall level of G-SIBs’ loss-absorbing capacity requirements in resolution in the US and the EU and to gauge their materiality.

The first part considers loss-absorbing capacity requirements in resolution in the broader context of the credibility of the bail-in tool. Starting with the TLAC international standard, we present the TLAC framework in the US and the MREL framework in the EU.

In the second part, we highlight that the main challenge of the cross-jurisdictional comparison is that the relative stringency of US TLAC and MREL requirements seems to differ across the risk-based and leverage-based dimensions. We address this issue of the comparability of MREL and US TLAC targets. We quantify the gap between the targets, showing that the average MREL binding requirements for EU G-SIBs are about 3.5 percentage points of risk-weighted assets higher than the average TLAC binding requirements applying to US G-SIBs.

In the third part, we show that the finalisation of Basel III may widen the gap between EU and US requirements in the coming years. We also argue that the difference in the level of MREL/US TLAC requirements seems difficult to justify, focusing on qualitative considerations pertaining to eligibility criteria and the extent to which the combination of higher MREL targets and higher funding costs in EU fragmented capital markets – compared to the deeper and more liquid US capital markets – may widen the existing profitability gap between US and EU G-SIBs.