Recital (8)

Deposits that meet the conditions to qualify as eligible liabilities can be used towards compliance with the MREL. However, given the specific nature of deposits, as well as the role they play in the real economy and in sustaining confidence in the banking system, the inclusion of deposits in the scope of liabilities used to meet the MREL should be subject to stricter requirements, as the MREL-eligible resources should be usable in their entirety to bear the losses and contribute to the recapitalisation of a credit institution in the case of its failure. First, as is the case under the current rules, it should not be possible for the deposits used for the MREL to be held by natural persons or by micro, small and medium-sized enterprises. Second, it should be clarified that deposits that confer upon its owner a right to early reimbursement cannot be eligible for the MREL, including in those cases where the contractual provisions provide that early reimbursement is subject to the payment of a penalty. Third, to ensure transparency and minimise the risks of inappropriate placement of such deposits, the relevant contractual provisions should expressly refer to the credit institution’s intention to use those deposits for the purpose of complying with the MREL, as well as to the fact that they do not qualify as eligible deposits and that, therefore, no part of that deposit will be repaid by the DGS in the event of unavailability. Fourth, the use of deposits in the MREL should, as a rule, not be allowed, unless the Board has previously authorised their inclusion in the MREL-eligible resources on the basis of an assessment that such deposits would not need to be shielded from bearing losses in the event of resolution and would not give rise to a substantive impediment to resolvability. The Board should be able to authorise the use of deposits to meet the MREL on a general basis for each resolution entity, without an individual assessment of each deposit, as well as limit the inclusion of deposits to meet the MREL to fixed amounts. Structured deposits, despite being liabilities with embedded derivatives, can also qualify as eligible liabilities of a credit institution, provided all other conditions are met.