Question
Would an early redemption option exercisable by the holder of the instrument cause such instrument to be ineligible altogether or would it merely result in its maturity being deemed shortened in accordance with Article 72c(2)?
Background on the question
Article 72b(2)(h) provides that eligible liabilities shall not be redeemable by the holders of the instruments prior to their maturity, except in the cases referred to in Article 72c(2). Article 72b(2)(l), on the other hand, provides that the creditor of eligible liabilities shall not have the right to accelerate the future scheduled payment of interest or principal, other than in the case of the insolvency or liquidation of the resolution entity. Given that "acceleration" is just another term for "redemption prior to maturity", the said provisions appear to be in conflict with each other without any clear indication on which one shall prevail.
Answer
This question has been rejected because the issue it deals with is already explained or addressed in the regulatory framework. In particular, please see theEBA monitoring Report on minimum requirement for own funds and eligible liabilities (MREL) and total loss absorbing capacity (TLAC) instruments.For further information on the purpose of this tool and on how to submit questions, please see “Additional background and guidance for asking questions”.