Recital 3

(3)The requirements for own funds and eligible liabilities in both Regulation (EU) No 575/2013 and Directive 2014/59/EU of the European Parliament and of the Council ⁴ share the same objective of ensuring that institutions have sufficient loss absorbing-capacity. For that reason, Directive (EU) 2019/879 of the European Parliament and of the Council ⁵ introduced into Directive 2014/59/EU Article 45b(1), which extended, for all resolution entities, the eligibility criteria for eligible liabilities instruments to liabilities eligible for meeting the minimum requirement for own funds and eligible liabilities (MREL), with the exception of the criterion referred to in Article 72b(2), point (d), of Regulation (EU) No 575/2013. In relation to resolution entities that are G-SIIs entities and Union material subsidiaries of non-EU G-SIIs, Directive (EU) 2019/879 introduced into Directive 2014/59/EU Article 45d. That provision provides in its paragraph 1, point (a), and in its paragraph 2, point (a), both read in conjunction with Article 45b(1), second subparagraph, that the eligibility of liabilities for meeting the minimum required level of MREL is conditional upon the compliance of those liabilities with the eligibility criteria for eligible liabilities instruments. Those criteria require, inter alia, that the liabilities are not funded directly or indirectly by the institution, that the liabilities cannot be reduced without prior permission of the resolution authority, and that the liabilities may not contain an incentive to redeem, except in the cases referred to in Article 72c(3) of Regulation (EU) No 575/2013. Similarly, in relation to entities that are not resolution entities, Directive (EU) 2019/879 introduced into Directive 2014/59/EU Article 45f. Paragraph 2, points (a)(ii) and (a)(v), of that Article made the eligibility of liabilities subject to compliance with certain eligibility criteria for eligible liabilities instruments and to the requirement that the acquisition of ownership of the liabilities is not funded directly or indirectly by the entity that is subject to that Article. It is therefore necessary to lay down that the provisions of Delegated Regulation (EU) No 241/2014 related to direct and indirect funding of eligible liabilities instruments, form and nature of incentives to redeem and prior permission to reduce such instruments should also be applied in a consistent manner for the purposes of Article 45b(1) and Article 45f(2), points (a)(ii) and (a)(v), of Directive 2014/59/EU. In order to ensure that consistency, the term ‘eligible liabilities instruments’ should also be understood as a reference to ‘eligible liabilities’ as referred to in Article 45b and Article 45f(2), point (a), of Directive 2014/59/EU, regardless of the residual maturity of those liabilities, and the term ‘institution’ should also apply to any entity subject to MREL in accordance with Article 45(1) of that Directive.