UPDATE 1-Banks face tighter market conditions to raise loss-absorbing capital- EBA

Eurozone banks have not made enough progress in raising loss-absorbing capital and now may face more difficult market conditions due to higher volatility and widening spreads in sovereign yields, the bloc's banking watchdog said on Monday.

"Not enough progress has been made there," European Banking Authority's chair Andrea Enria told a banking conference in Brussels, warning that the problem concerned large and medium banks, but not the biggest systemic lenders, like Deutsche Bank or Unicredit, who are instead "very close to being fully compliant."

Under international and EU banking rules, large banks must issue a special loss-absorbing debt known as TLAC and MREL that can be converted to capital if a crisis burns through their core capital buffer.

Enria said investors have so far shown interest in buying this debt but warned that "window of opportunity is closing down".

"Funding markets are not going to be as open and available as they were until now," Enria said, citing increased volatility, external events, widening sovereign spreads and concerns on emerging markets as the main reasons for investors' lower appetite.