, the srb has publicly voiced its inclination for a stringent approach, ensuring an extensive availability of loss - absorbing instruments on bank balance sheets. indeed, by way of indication, it has been advocated that the institution subject to resolution should have loss - absorbing capacity of a volume equivalent to its regulatory capital requirements ( the so - called loss - absorption component ) and the ability to restore immediately the minimum level required ( or recapitalisation component ). however, mrel requirements like those arising from the mechanistic formula indicated may entail very high needs in respect of the issuance of eligible instruments – such as subordinated debt or convertible bonds – for numerous banks, owing to the abovementioned reasons. further, these issuance requirements would be concentrated in the same period of time for all the institutions concerned, hampering market take - up. but, moreover, the cost for banks of issuing these instruments may, in many cases, prove most burdensome. by way of illustration we can consider the following example. let us take a bank financed only with capital and deposits and that comfortably meets – e. g. with a surplus of 2 pp – its regulatory capital requirement, which we will place in this example at 10 % of its risk - weighted assets ( rwas ). if the mrel stands at twice the regulatory capital, i. e. at 20 % of rwas, this bank, whose position would not differ greatly at present from that of a large number of banks with a traditional business model, would need to issue eligible instruments equivalent to 8 % of its rwas in order to meet the requirement set. assuming, somewhat optimistically at present, that the issuance cost were not greater than the return on equity ( roe ), the additional financial expense that compliance with the new mrel requirement would entail would account for almost half the bank ’ s profit after tax. this example illustrates that maintaining excessively demanding requirements would exert significant pressure on the profitability of a portion of the banking industry, calling into question the business model of a by no means negligible number of institutions. hence, it is worthwhile rigorously adjusting the mrel - setting policy so as to avoid a nondesirable impact on the viability of specific institutions or business models, without of course distorting the rationale behind this requirement. a reasonable approach would be to adjust the mrel requirement – in both its lossabsorbing and recapitalisation components – so

proportion of fixedrate mortgages, which accounted for 24. 9 % of the outstanding amount at december 2021. specifically it is estimated that the proportion of households with a high net interest burden28 would rise by 1. 2 pp, 2. 3 pp and 3. 9 pp if interbank rates were raised by 100 bp, 200 bp and 300 bp, respectively. these effects would be most pronounced among indebted households between the 20th and 40th percentiles of the income distribution. 29 low - income households would be most affected by rising energy prices, as energy expenditure accounts for a larger proportion of their consumption, 30 they are less likely to be able to absorb these higher prices by reducing their saving and their net interest burden is higher. the net interest burden is considered to be high when the ratio of ( debt service expenses - interest income from deposits ) to household income is over 40 %. these percentages should be considered as the lower bound of the total impact of the interest rate rise, as this would also reduce agents ’ income, through its negative impact on economic activity, and would curb the accumulation of wealth on account of the higher net interest burden. moreover, these were the households whose energy expenditure increased the most, as a proportion of their consumption, in 2020 and 2021. high debt levels also mean that public finances are more sensitive to interest rate movements. however, the low interest rate levels of recent years have led to a continuous decline in the interest burden as a percentage of gdp, while at the same time, longer average debt maturities have limited the short - term impact of higher issuance costs. under a scenario of gradual interest rate rises consistent with the latest projections, the debt burden is expected to stabilise as a percentage of gdp. under that same scenario, an additional 100 bp increase in short and long - term interest rates, with all other variables remaining constant, will drive up interest payments by 0. 4 pp of gdp by 2024. in the spanish banking industry stress tests, two potential stress scenarios – dubbed adverse and severe – were simulated for the period 2022 - 2023. the use of this type of extreme scenarios, which are plausible but have a relatively low probability of occurring, is an integral characteristic of the main international stress tests and is consistent with the goals of prudential regulation which require that banks have sufficient capital to absorb unexpected losses. the adverse scenario simulates a further increase in energy prices and a greater impact of bottlenecks on global trade.