One key issue is the definition of the liabilities which can be used to comply with the MREL. Article
45.4 BRRD lists a number of conditions, including regular limitations as to the maturity (
remaining
maturity of at least one year), the holder (instrument issued and fully paid up, not owned, secured nor
guaranteed by the institution, and purchase of the instrument not funded directly or indirectly by the
institution) and the nature (the liability does not arise from a derivative or from a preferred deposit)
of the instruments. In addition, the resolution authority may exclude liabilities governed by the law
of a third country, if the resolution authority is not convinced that its decision would be effective
under that law. While instruments don't need to be subordinated to count towards MREL, the
resolution authority may require that part of the MREL be met with contractual bail-in instruments,
that is to say instruments subject to subordination and containing contractual terms providing for their
conversion or write down upon resolution.
It is also important to keep in mind that
instruments which are not eligible for MREL are not
necessarily excluded from bail-in. A number of instruments therefore will therefore absorb losses in
line with their ranking in the hierarchy of creditors albeit they do not count toward the MREL. A
detailed table on the eligibility of various classes of instruments under both the MREL framework
and the TLAC standard is presented in Annex A. It also indicates which instruments are bail-inable
and which instruments are excluded from bail-in.
Vedi l'allegato 402322