Eligibility Criteria for Bank Liabilities Under MREL

Summary

The document introduces eligible liabilities within the European bank resolution framework. It explains that these liabilities, together with a bank’s minimum capital, contribute to its minimum requirement for own funds and eligible liabilities, or MREL. The stated criteria require an instrument to be issued and fully paid, not owed to or guaranteed by the issuing institution, and not funded directly or indirectly by that institution. It must also have at least one year of remaining maturity and cannot arise from a derivative.

These conditions distinguish liabilities intended to absorb losses or support resolution from claims that could be self-funded, short-dated, or difficult to use in a resolution. The text is a question seeking a broader explanation of each criterion, rather than a full regulatory analysis. It provides no worked examples, jurisdictional comparisons, or discussion of how specific instruments qualify, so the listed tests should be treated as an introductory outline rather than comprehensive legal guidance.

Key ideas

• MREL combines minimum capital requirements with eligible liabilities for bank resolution planning.
• Eligible instruments must be issued and fully paid.
• The issuer cannot owe, guarantee, or directly or indirectly fund the liability.
• The liability must have at least one year remaining to maturity and cannot arise from a derivative.

Tags

# What are eligible liabilities?


# What are eligible liabilities?












Under Basel III, the minimum capital adequacy ratio that banks must maintain is 8 percent. However, in order to an effective resolution the bank muss hold not only to its capital, but also eligible liabilities, which together with minimum capital requirements are known as MREL. However, it is not very clear what defines eligible liabilities. Bank Recovery and Resolution Directive provided by European banking authority defines EL as: (a) the instrument is issued and fully paid up; (b) the liability is not owed to, secured by or guaranteed by the institution itself; (c) the purchase of the instrument was not funded directly or indirectly by the institution; (d) the liability has a remaining maturity of at least one year; (e) the liability does not arise from a derivative.

https://eba.europa.eu/regulation-and-policy/single-rulebook/interactive-single-rulebook/2930

Can anyone provide a broader comment/explanation on a-e?

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.