LONDON (Reuters) - A European Union banking watchdog has given euro zone lenders more time for issuing special debt that avoids taxpayers having to rescue failed banks, saying lenders should focus on helping customers through the coronavirus pandemic.
The Single Resolution Board (SRB) said banks in the bloc's banking union had made substantial progress in building up holdings of the debt, known as MREL, and were in a good position overall.
The debt can be written down in a crisis to "bail in" banks in trouble before they burn through core capital buffers.
"Nevertheless, during this challenging period, we are committed to ensuring that short-term MREL constraints do not prevent banks from lending to business and the real economy," SRB Chair Elke Koenig said in a blog on Wednesday.
The SRB intends to take a forward-looking approach to banks that may face difficulties meeting existing MREL targets during the crisis, Koenig said.
The SRB is in the middle of setting new targets that would be binding in 2022 and 2024.
"Our focus will be on the 2020 decisions and targets, and we ask banks to continue to make all efforts to provide the necessary data on MREL for the upcoming cycle," she said.
"We believe that this approach provides banks with the flexibility they may need in the coming months, as well as ensuring a level playing field."
Sweden's Debt Office said on Tuesday it would give banks until 2024 rather than January 2022 to reach minimum MREL levels.