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