02013R0575 — EN — 28.06.2023 — 015.001
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REGULATION (EU) No 575/2013 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 June 2013 on prudential requirements for credit institutions and amending Regulation (EU) No 648/2012 (OJ L 176 27.6.2013, p. 1) |
Amended by:
Corrected by:
REGULATION (EU) No 575/2013 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
of 26 June 2013
on prudential requirements for credit institutions and amending Regulation (EU) No 648/2012
(Text with EEA relevance)
PART ONE
GENERAL PROVISIONS
TITLE I
SUBJECT MATTER, SCOPE AND DEFINITIONS
Article 1
Scope
This Regulation lays down uniform rules concerning general prudential requirements that institutions, financial holding companies and mixed financial holding companies supervised under Directive 2013/36/EU shall comply with in relation to the following items:
own funds requirements relating to entirely quantifiable, uniform and standardised elements of credit risk, market risk, operational risk, settlement risk and leverage;
requirements limiting large exposures;
liquidity requirements relating to entirely quantifiable, uniform and standardised elements of liquidity risk;
reporting requirements related to points (a), (b) and (c);
public disclosure requirements.
This Regulation lays down uniform rules concerning the own funds and eligible liabilities requirements that resolution entities that are global systemically important institutions (G-SIIs) or part of G-SIIs and material subsidiaries of non-EU G-SIIs shall comply with.
This Regulation does not govern publication requirements for competent authorities in the field of prudential regulation and supervision of institutions as set out in Directive 2013/36/EU.
Article 2
Supervisory powers
Article 3
Application of stricter requirements by institutions
This Regulation shall not prevent institutions from holding own funds and their components in excess of, or applying measures that are stricter than those required by this Regulation.
Article 4
Definitions
For the purposes of this Regulation, the following definitions shall apply:
‘credit institution’ means an undertaking the business of which consists of any of the following:
to take deposits or other repayable funds from the public and to grant credits for its own account;
to carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU of the European Parliament and of the Council ( 6 ), where one of the following applies, but the undertaking is not a commodity and emission allowance dealer, a collective investment undertaking or an insurance undertaking:
the total value of the consolidated assets of the undertaking is equal to or exceeds EUR 30 billion;
the total value of the assets of the undertaking is less than EUR 30 billion, and the undertaking is part of a group in which the total value of the consolidated assets of all undertakings in that group that individually have total assets of less than EUR 30 billion and that carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU is equal to or exceeds EUR 30 billion; or
the total value of the assets of the undertaking is less than EUR 30 billion, and the undertaking is part of a group in which the total value of the consolidated assets of all undertakings in the group that carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU is equal to or exceeds EUR 30 billion, where the consolidating supervisor, in consultation with the supervisory college, so decides in order to address potential risks of circumvention and potential risks for the financial stability of the Union;
for the purposes of points (b)(ii) and (b)(iii), where the undertaking is part of a third‐country group, the total assets of each branch of the third‐country group authorised in the Union shall be included in the combined total value of the assets of all undertakings in the group;
‘investment firm’ means an investment firm as defined in point (1) of Article 4(1) of Directive 2014/65/EU which is authorised under that Directive but excludes credit institutions;
‘institution’ means a credit institution authorised under Article 8 of Directive 2013/36/EU or an undertaking as referred to in Article 8a(3) thereof;
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‘insurance undertaking’ means insurance undertaking as defined in point (1) of Article 13 of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) ( 7 );
‘reinsurance undertaking’ means reinsurance undertaking as defined in point (4) of Article 13 of Directive 2009/138/EC;
‘collective investment undertaking’ or ‘CIU’ means a UCITS as defined in Article 1(2) of Directive 2009/65/EC of the European Parliament and of the Council ( 8 ) or an alternative investment fund (AIF) as defined in point (a) of Article 4(1) of Directive 2011/61/EU of the European Parliament and of the Council ( 9 );
‘public sector entity’ means a non-commercial administrative body responsible to central governments, regional governments or local authorities, or to authorities that exercise the same responsibilities as regional governments and local authorities, or a non-commercial undertaking that is owned by or set up and sponsored by central governments, regional governments or local authorities, and that has explicit guarantee arrangements, and may include self-administered bodies governed by law that are under public supervision;
‘management body’ means management body as defined in point (7) of Article 3(1) of Directive 2013/36/EU;
‘senior management’ means senior management as defined in point (9) of Article 3(1) of Directive 2013/36/EU;
‘systemic risk’ means systemic risk as defined in point (10) of Article 3(1) of Directive 2013/36/EU;
‘model risk’ means model risk as defined in point (11) of Article 3(1) of Directive 2013/36/EU;
‘originator’ means an originator as defined in point (3) of Article 2 of Regulation (EU) 2017/2402 ( 10 );
‘sponsor’ means a sponsor as defined in point (5) of Article 2 of Regulation (EU) 2017/2402;
‘original lender’ means an original lender as defined in point (20) of Article 2 of Regulation (EU) 2017/2402;
‘parent undertaking’ means:
a parent undertaking within the meaning of Articles 1 and 2 of Directive 83/349/EEC;
for the purposes of Section II of Chapters 3 and 4 of Title VII and Title VIII of Directive 2013/36/EU and Part Five of this Regulation, a parent undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking which effectively exercises a dominant influence over another undertaking;
‘subsidiary’ means:
a subsidiary undertaking within the meaning of Articles 1 and 2 of Directive 83/349/EEC;
a subsidiary undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking over which a parent undertaking effectively exercises a dominant influence.
Subsidiaries of subsidiaries shall also be considered to be subsidiaries of the undertaking that is their original parent undertaking;
‘branch’ means a place of business which forms a legally dependent part of an institution and which carries out directly all or some of the transactions inherent in the business of institutions;
‘ancillary services undertaking’ means an undertaking the principal activity of which consists of owning or managing property, managing data-processing services, or a similar activity which is ancillary to the principal activity of one or more institutions;
‘asset management company’ means an asset management company as defined in point (5) of Article 2 of Directive 2002/87/EC or an AIFM as defined in Article 4(1)(b) of Directive 2011/61/EU, including, unless otherwise provided, third-country entities that carry out similar activities and that are subject to the laws of a third country which applies supervisory and regulatory requirements at least equivalent to those applied in the Union;
‘financial holding company’ means a financial institution, the subsidiaries of which are exclusively or mainly institutions or financial institutions, and which is not a mixed financial holding company; the subsidiaries of a financial institution are mainly institutions or financial institutions where at least one of them is an institution and where more than 50 % of the financial institution's equity, consolidated assets, revenues, personnel or other indicator considered relevant by the competent authority are associated with subsidiaries that are institutions or financial institutions;
‘mixed financial holding company’ means mixed financial holding company as defined in point (15) of Article 2 of Directive 2002/87/EC;
‘mixed activity holding company’ means a parent undertaking, other than a financial holding company or an institution or a mixed financial holding company, the subsidiaries of which include at least one institution;
‘third-country insurance undertaking’ means third-country insurance undertaking as defined in point (3) of Article 13 of Directive 2009/138/EC;
‘third-country reinsurance undertaking’ means third-country reinsurance undertaking as defined in point (6) of Article 13 of Directive 2009/138/EC;
‘recognised third-country investment firm’ means a firm meeting all of the following conditions:
if it were established within the Union, it would be covered by the definition of an investment firm;
it is authorised in a third country;
it is subject to and complies with prudential rules considered by the competent authorities at least as stringent as those laid down in this Regulation or in Directive 2013/36/EU;
‘financial institution’ means an undertaking other than an institution and other than a pure industrial holding company, the principal activity of which is to acquire holdings or to pursue one or more of the activities listed in points 2 to 12 and point 15 of Annex I to Directive 2013/36/EU, including an investment firm, a financial holding company, a mixed financial holding company, an investment holding company, a payment institution within the meaning of Directive (EU) 2015/2366 of the European Parliament and of the Council ( 11 ), and an asset management company, but excluding insurance holding companies and mixed‐activity insurance holding companies as defined in points (f) and (g) of Article 212(1) of Directive 2009/138/EC;
‘financial sector entity’ means any of the following:
an institution;
a financial institution;
an ancillary services undertaking included in the consolidated financial situation of an institution;
an insurance undertaking;
a third-country insurance undertaking;
a reinsurance undertaking;
a third-country reinsurance undertaking;
an insurance holding company as defined in point (f) of Article 212(1) of Directive 2009/138/EC;
an undertaking excluded from the scope of Directive 2009/138/EC in accordance with Article 4 of that Directive;
a third-country undertaking with a main business comparable to any of the entities referred to in points (a) to (k);
‘parent institution in a Member State’ means an institution in a Member State which has an institution, a financial institution or an ancillary services undertaking as a subsidiary or which holds a participation in an institution, financial institution or ancillary services undertaking, and which is not itself a subsidiary of another institution authorised in the same Member State, or of a financial holding company or mixed financial holding company set up in the same Member State;
‘EU parent institution’ means a parent institution in a Member State which is not a subsidiary of another institution authorised in any Member State, or of a financial holding company or mixed financial holding company set up in any Member State;
‘parent investment firm in a Member State’ means a parent undertaking in a Member State that is an investment firm;
‘EU parent investment firm’ means an EU parent undertaking that is an investment firm;
‘parent credit institution in a Member State’ means a parent institution in a Member State that is a credit institution;
‘EU parent credit institution’ means an EU parent institution that is a credit institution;
‘parent financial holding company in a Member State’ means a financial holding company which is not itself a subsidiary of an institution authorised in the same Member State, or of a financial holding company or mixed financial holding company set up in the same Member State;
‘EU parent financial holding company’ means a parent financial holding company in a Member State which is not a subsidiary of an institution authorised in any Member State or of another financial holding company or mixed financial holding company set up in any Member State;
‘parent mixed financial holding company in a Member State’ means a mixed financial holding company which is not itself a subsidiary of an institution authorised in the same Member State, or of a financial holding company or mixed financial holding company set up in that same Member State;
‘EU parent mixed financial holding company’ means a parent mixed financial holding company in a Member State which is not a subsidiary of an institution authorised in any Member State or of another financial holding company or mixed financial holding company set up in any Member State;
‘central counterparty’ or ‘CCP’ means a CCP as defined in point (1) of Article 2 of Regulation (EU) No 648/2012;
‘participation’ means participation within the meaning of the first sentence of Article 17 of Fourth Council Directive 78/660/EEC of 25 July 1978 on the annual accounts of certain types of companies ( 12 ), or the ownership, direct or indirect, of 20 % or more of the voting rights or capital of an undertaking;
‘qualifying holding’ means a direct or indirect holding in an undertaking which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking;
‘control’ means the relationship between a parent undertaking and a subsidiary, as defined in Article 1 of Directive 83/349/EEC, or the accounting standards to which an institution is subject under Regulation (EC) No 1606/2002, or a similar relationship between any natural or legal person and an undertaking;
‘close links’ means a situation in which two or more natural or legal persons are linked in any of the following ways:
participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of an undertaking;
control;
a permanent link of both or all of them to the same third person by a control relationship;
‘group of connected clients’ means any of the following:
two or more natural or legal persons who, unless it is shown otherwise, constitute a single risk because one of them, directly or indirectly, has control over the other or others;
two or more natural or legal persons between whom there is no relationship of control as described in point (a) but who are to be regarded as constituting a single risk because they are so interconnected that, if one of them were to experience financial problems, in particular funding or repayment difficulties, the other or all of the others would also be likely to encounter funding or repayment difficulties.
Notwithstanding points (a) and (b), where a central government has direct control over or is directly interconnected with more than one natural or legal person, the set consisting of the central government and all of the natural or legal persons directly or indirectly controlled by it in accordance with point (a), or interconnected with it in accordance with point (b), may be considered as not constituting a group of connected clients. Instead the existence of a group of connected clients formed by the central government and other natural or legal persons may be assessed separately for each of the persons directly controlled by it in accordance with point (a), or directly interconnected with it in accordance with point (b), and all of the natural and legal persons which are controlled by that person according to point (a) or interconnected with that person in accordance with point (b), including the central government. The same applies in cases of regional governments or local authorities to which Article 115(2) applies.
Two or more natural or legal persons who fulfil the conditions set out in point (a) or (b) because of their direct exposure to the same CCP for clearing activities purposes are not considered as constituting a group of connected clients;
‘competent authority’ means a public authority or body officially recognised by national law, which is empowered by national law to supervise institutions as part of the supervisory system in operation in the Member State concerned;
‘consolidating supervisor’ means a competent authority responsible for the exercise of supervision on a consolidated basis in accordance with Article 111 of Directive 2013/36/EU;
‘authorisation’ means an instrument issued in any form by the authorities by which the right to carry out the business is granted;
‘home Member State’ means the Member State in which an institution has been granted authorisation;
‘host Member State’ means the Member State in which an institution has a branch or in which it provides services;
‘ESCB central banks’ means the national central banks that are members of the European System of Central Banks (ESCB), and the European Central Bank (ECB);
‘central banks’ means the ESCB central banks and the central banks of third countries;
‘consolidated situation’ means the situation that results from applying the requirements of this Regulation in accordance with Part One, Title II, Chapter 2 to an institution as if that institution formed, together with one or more other entities, a single institution;
‘consolidated basis’ means on the basis of the consolidated situation;
‘sub-consolidated basis’ means on the basis of the consolidated situation of a parent institution, financial holding company or mixed financial holding company, excluding a sub-group of entities, or on the basis of the consolidated situation of a parent institution, financial holding company or mixed financial holding company that is not the ultimate parent institution, financial holding company or mixed financial holding company;
‘financial instrument’ means any of the following:
a contract that gives rise to both a financial asset of one party and a financial liability or equity instrument of another party;
an instrument specified in Section C of Annex I to Directive 2004/39/EC;
a derivative financial instrument;
a primary financial instrument;
a cash instrument.
The instruments referred to in points (a), (b) and (c) are only financial instruments if their value is derived from the price of an underlying financial instrument or another underlying item, a rate, or an index;
‘initial capital’ means the amounts and types of own funds specified in Article 12 of Directive 2013/36/EU;
‘operational risk’ means the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, and includes legal risk;
‘dilution risk’ means the risk that an amount receivable is reduced through cash or non-cash credits to the obligor;
‘probability of default’ or ‘PD’ means the probability of default of a counterparty over a one-year period;
‘loss given default’ or ‘LGD’ means the ratio of the loss on an exposure due to the default of a counterparty to the amount outstanding at default;
‘conversion factor’ means the ratio of the currently undrawn amount of a commitment that could be drawn and that would therefore be outstanding at default to the currently undrawn amount of the commitment, the extent of the commitment being determined by the advised limit, unless the unadvised limit is higher;
‘credit risk mitigation’ means a technique used by an institution to reduce the credit risk associated with an exposure or exposures which that institution continues to hold;
‘funded credit protection’ means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of an institution derives from the right of that institution, in the event of the default of the counterparty or on the occurrence of other specified credit events relating to the counterparty, to liquidate, or to obtain transfer or appropriation of, or to retain certain assets or amounts, or to reduce the amount of the exposure to, or to replace it with, the amount of the difference between the amount of the exposure and the amount of a claim on the institution;
‘unfunded credit protection’ means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of an institution derives from the obligation of a third party to pay an amount in the event of the default of the borrower or the occurrence of other specified credit events;
‘cash assimilated instrument’ means a certificate of deposit, a bond, including a covered bond, or any other non‐subordinated instrument, which has been issued by an institution or an investment firm, for which the institution or investment firm has already received full payment and which is to be unconditionally reimbursed by the institution or investment firm at its nominal value;
‘securitisation’ means a securitisation as defined in point (1) of Article 2 of Regulation (EU) 2017/2402;
‘securitisation position’ means a securitisation position as defined in point (19) of Article 2 of Regulation (EU) 2017/2402;
‘resecuritisation’ means a resecuritisation as defined in point (4) of Article 2 of Regulation (EU) 2017/2402;
‘re-securitisation position’ means an exposure to a re-securitisation;
‘credit enhancement’ means a contractual arrangement whereby the credit quality of a position in a securitisation is improved in relation to what it would have been if the enhancement had not been provided, including the enhancement provided by more junior tranches in the securitisation and other types of credit protection;
‘securitisation special purpose entity’ or ‘SSPE’ means a securitisation special purpose entity or SSPE as defined in point (2) of Article 2 of Regulation (EU) 2017/2402;
‘tranche’ means a tranche as defined in point (6) of Article 2 of Regulation (EU) 2017/2402;
‘marking to market’ means the valuation of positions at readily available close out prices that are sourced independently, including exchange prices, screen prices or quotes from several independent reputable brokers;
‘marking to model’ means any valuation which has to be benchmarked, extrapolated or otherwise calculated from one or more market inputs;
‘independent price verification’ means a process by which market prices or marking to model inputs are regularly verified for accuracy and independence;
‘eligible capital’ means the following:
for the purposes of Title III of Part Two it means the sum of the following:
Tier 1 capital as referred to in Article 25, without applying the deduction in Article 36(1)(k)(i);
Tier 2 capital as referred to in Article 71 that is equal to or less than one third of Tier 1 capital as calculated pursuant to point (i) of this point;
‘recognised exchange’ means an exchange which meets all of the following conditions:
it is a regulated market or a third‐country market that is considered to be equivalent to a regulated market in accordance with the procedure set out in point (a) of Article 25(4) of Directive 2014/65/EU;
it has a clearing mechanism whereby contracts listed in Annex II are subject to daily margin requirements which, in the opinion of the competent authorities, provide appropriate protection;
‘discretionary pension benefits’ means enhanced pension benefits granted on a discretionary basis by an institution to an employee as part of that employee's variable remuneration package, which do not include accrued benefits granted to an employee under the terms of the company pension scheme;
‘mortgage lending value’ means the value of immovable property as determined by a prudent assessment of the future marketability of the property taking into account long-term sustainable aspects of the property, the normal and local market conditions, the current use and alternative appropriate uses of the property;
‘residential property’ means a residence which is occupied by the owner or the lessee of the residence, including the right to inhabit an apartment in housing cooperatives located in Sweden;
‘market value’ means, for the purposes of immovable property, the estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion;
‘applicable accounting framework’ means the accounting standards to which the institution is subject under Regulation (EC) No 1606/2002 or Directive 86/635/EEC;
‘one-year default rate’ means the ratio between the number of defaults occurred during a period that starts from one year prior to a date T and the number of obligors assigned to this grade or pool one year prior to that date;
‘speculative immovable property financing’ means loans for the purposes of the acquisition of or development or construction on land in relation to immovable property, or of and in relation to such property, with the intention of reselling for profit;
‘trade finance’ means financing, including guarantees, connected to the exchange of goods and services through financial products of fixed short-term maturity, generally of less than one year, without automatic rollover;
‘officially supported export credits’ means loans or credits to finance the export of goods and services for which an official export credit agency provides guarantees, insurance or direct financing;
‘repurchase agreement’ and ‘reverse repurchase agreement’ mean any agreement in which an institution or its counterparty transfers securities or commodities or guaranteed rights relating to title to securities or commodities where that guarantee is issued by a recognised exchange which holds the rights to the securities or commodities and the agreement does not allow an institution to transfer or pledge a particular security or commodity to more than one counterparty at one time, subject to a commitment to repurchase them, or substituted securities or commodities of the same description at a specified price on a future date specified, or to be specified, by the transferor, being a repurchase agreement for the institution selling the securities or commodities and a reverse repurchase agreement for the institution buying them;
‘repurchase transaction’ means any transaction governed by a repurchase agreement or a reverse repurchase agreement;
‘simple repurchase agreement’ means a repurchase transaction of a single asset, or of similar, non-complex assets, as opposed to a basket of assets;
‘positions held with trading intent’ means any of the following:
proprietary positions and positions arising from client servicing and market making;
positions intended to be resold short term;
positions intended to benefit from actual or expected short-term price differences between buying and selling prices or from other price or interest rate variations;
‘trading book’ means all positions in financial instruments and commodities held by an institution either with trading intent or to hedge positions held with trading intent in accordance with Article 104;
‘multilateral trading facility’ means multilateral trading facility as defined in point 15 of Article 4 of Directive 2004/39/EC;
‘qualifying central counterparty’ or ‘QCCP’ means a central counterparty that has been either authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation;
‘default fund’ means a fund established by a CCP in accordance with Article 42 of Regulation (EU) No 648/2012 and used in accordance with Article 45 of that Regulation;
‘pre-funded contribution to the default fund of a CCP’ means a contribution to the default fund of a CCP that is paid in by an institution;
‘trade exposure’ means a current exposure, including a variation margin due to the clearing member but not yet received, and any potential future exposure of a clearing member or a client, to a CCP arising from contracts and transactions listed in points (a), (b) and (c) of Article 301(1), as well as initial margin;
‘regulated market’ means regulated market as defined in point (14) of Article 4 of Directive 2004/39/EC;
‘leverage’ means the relative size of an institution's assets, off-balance sheet obligations and contingent obligations to pay or to deliver or to provide collateral, including obligations from received funding, made commitments, derivatives or repurchase agreements, but excluding obligations which can only be enforced during the liquidation of an institution, compared to that institution's own funds;
‘risk of excessive leverage’ means the risk resulting from an institution's vulnerability due to leverage or contingent leverage that may require unintended corrective measures to its business plan, including distressed selling of assets which might result in losses or in valuation adjustments to its remaining assets;
‘credit risk adjustment’ means the amount of specific and general loan loss provision for credit risks that has been recognised in the financial statements of the institution in accordance with the applicable accounting framework;
‘internal hedge’ means a position that materially offsets the component risk elements between a trading book position and one or more non-trading book positions or between two trading desks;
‘reference obligation’ means an obligation used for the purposes of determining the cash settlement value of a credit derivative;
‘external credit assessment institution’ or ‘ECAI’ means a credit rating agency that is registered or certified in accordance with Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies ( 13 ) or a central bank issuing credit ratings which are exempt from the application of Regulation (EC) No 1060/2009;
‘nominated ECAI’ means an ECAI nominated by an institution;
‘accumulated other comprehensive income’ has the same meaning as under International Accounting Standard (IAS) 1, as applicable under Regulation (EC) No 1606/2002;
‘basic own funds’ means basic own funds within the meaning of Article 88 of Directive 2009/138/EC;
‘Tier 1 own-fund insurance items’ means basic own-fund items of undertakings subject to the requirements of Directive 2009/138/EC where those items are classified in Tier 1 within the meaning of Directive 2009/138/EC in accordance with Article 94(1) of that Directive;
‘additional Tier 1 own-fund insurance items’ means basic own-fund items of undertakings subject to the requirements of Directive 2009/138/EC where those items are classified in Tier 1 within the meaning of Directive 2009/138/EC in accordance with Article 94(1) of that Directive and the inclusion of those items is limited by the delegated acts adopted in accordance with Article 99 of that Directive;
‘Tier 2 own-fund insurance items’ means basic own-fund items of undertakings subject to the requirements of Directive 2009/138/EC where those items are classified in Tier 2 within the meaning of Directive 2009/138/EC in accordance with Article 94(2) of that Directive;
‘Tier 3 own-fund insurance items’ means basic own-fund insurance items of undertakings subject to the requirements of Directive 2009/138/EC where those items are classified in Tier 3 within the meaning of Directive 2009/138/EC in accordance with Article 94(3) of that Directive;
‘deferred tax assets’ has the same meaning as under the applicable accounting framework;
‘deferred tax assets that rely on future profitability’ means deferred tax assets the future value of which may be realised only in the event the institution generates taxable profit in the future;
‘deferred tax liabilities’ has the same meaning as under the applicable accounting framework;
‘defined benefit pension fund assets’ means the assets of a defined pension fund or plan, as applicable, calculated after they have been reduced by the amount of obligations under the same fund or plan;
‘distributions’ means the payment of dividends or interest in any form;
‘financial undertaking’ has the same meaning as under points (25)(b) and (d) of Article 13 of Directive 2009/138/EC;
‘funds for general banking risk’ has the same meaning as under Article 38 of Directive 86/635/EEC;
‘goodwill’ has the same meaning as under the applicable accounting framework;
‘indirect holding’ means any exposure to an intermediate entity that has an exposure to capital instruments issued by a financial sector entity where, in the event the capital instruments issued by the financial sector entity were permanently written off, the loss that the institution would incur as a result would not be materially different from the loss the institution would incur from a direct holding of those capital instruments issued by the financial sector entity;
‘intangible assets’ has the same meaning as under the applicable accounting framework and includes goodwill;
‘other capital instruments’ means capital instruments issued by financial sector entities that do not qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments or Tier 1 own-fund insurance items, additional Tier 1 own-fund insurance items, Tier 2 own-fund insurance items or Tier 3 own-fund insurance items;
‘other reserves’ means reserves within the meaning of the applicable accounting framework that are required to be disclosed under the applicable accounting standard, excluding any amounts already included in accumulated other comprehensive income or retained earnings;
‘own funds’ means the sum of Tier 1 capital and Tier 2 capital;
‘own funds instruments’ means capital instruments issued by the institution that qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments;
‘minority interest’ means the amount of Common Equity Tier 1 capital of a subsidiary of an institution that is attributable to natural or legal persons other than those included in the prudential scope of consolidation of the institution;
‘profit’ has the same meaning as under the applicable accounting framework;
‘reciprocal cross holding’ means a holding by an institution of the own funds instruments or other capital instruments issued by financial sector entities where those entities also hold own funds instruments issued by the institution;
‘retained earnings’ means profits and losses brought forward as a result of the final application of profit or loss under the applicable accounting framework;
‘share premium account’ has the same meaning as under the applicable accounting framework;
‘temporary differences’ has the same meaning as under the applicable accounting framework;
‘synthetic holding’ means an investment by an institution in a financial instrument the value of which is directly linked to the value of the capital instruments issued by a financial sector entity;
‘cross-guarantee scheme’ means a scheme that meets all the following conditions:
the institutions fall within the same institutional protection scheme as referred to in Article 113(7) or are permanently affiliated with a network to a central body;
the institutions are fully consolidated in accordance with Article 1(1)(b), (c) or (d) or Article 1(2) of Directive 83/349/EEC and are included in the supervision on a consolidated basis of an institution which is a parent institution in a Member State in accordance with Part One, Title II, Chapter 2 of this Regulation and subject to own funds requirements;
the parent institution in a Member State and the subsidiaries are established in the same Member State and are subject to authorisation and supervision by the same competent authority;
the parent institution in a Member State and the subsidiaries have entered into a contractual or statutory liability arrangement which protects those institutions and in particular ensures their liquidity and solvency, in order to avoid bankruptcy in the case that it becomes necessary;
arrangements are in place to ensure the prompt provision of financial means in terms of capital and liquidity if required under the contractual or statutory liability arrangement referred to in point (d);
the adequacy of the arrangements referred to in points (d) and (e) is monitored on a regular basis by the competent authority;
the minimum period of notice for a voluntary exit of a subsidiary from the liability arrangement is 10 years;
the competent authority is empowered to prohibit a voluntary exit of a subsidiary from the liability arrangement;
‘distributable items’ means the amount of the profits at the end of the last financial year plus any profits brought forward and reserves available for that purpose, before distributions to holders of own funds instruments, less any losses brought forward, any profits which are non-distributable pursuant to Union or national law or the institution's by-laws and any sums placed in non-distributable reserves in accordance with national law or the statutes of the institution, in each case with respect to the specific category of own funds instruments to which Union or national law, institutions' by-laws, or statutes relate; such profits, losses and reserves being determined on the basis of the individual accounts of the institution and not on the basis of the consolidated accounts;
‘servicer’ means a servicer as defined in point (13) of Article 2 of Regulation (EU) 2017/2402;
‘resolution authority’ means a resolution authority as defined in point (18) of Article 2(1) of Directive 2014/59/EU;
‘relevant third-country authority’ means a third-country authority as defined in Article 2(1), point (90), of Directive 2014/59/EU;
‘resolution entity’ means a resolution entity as defined in point (83a) of Article 2(1) of Directive 2014/59/EU;
‘resolution group’ means a resolution group as defined in point (83b) of Article 2(1) of Directive 2014/59/EU;
‘global systemically important institution’ or ‘G-SII’ means a G-SII that has been identified in accordance with Article 131(1) and (2) of Directive 2013/36/EU;
‘non-EU global systemically important institution’ or ‘non-EU G-SII’ means a global systemically important banking group or a bank (G-SIBs) that is not a G-SII and that is included in the list of G-SIBs published by the Financial Stability Board, as regularly updated;
‘material subsidiary’ means a subsidiary that on an individual or consolidated basis meets any of the following conditions:
the subsidiary holds more than 5 % of the consolidated risk-weighted assets of its original parent undertaking;
the subsidiary generates more than 5 % of the total operating income of its original parent undertaking;
the total exposure measure, referred to in Article 429(4) of this Regulation, of the subsidiary is more than 5 % of the consolidated total exposure measure of its original parent undertaking;
for the purpose of determining the material subsidiary, where Article 21b(2) of Directive 2013/36/EU applies, the two intermediate EU parent undertakings shall count as a single subsidiary on the basis of their consolidated situation;
‘G-SII entity’ means an entity with legal personality that is a G-SII or is part of a G-SII or of a non-EU G-SII;
‘bail-in tool’ means a bail-in tool as defined in point (57) of Article 2(1) of Directive 2014/59/EU;
‘group’ means a group of undertakings of which at least one is an institution and which consists of a parent undertaking and its subsidiaries, or of undertakings that are related to each other as set out in Article 22 of Directive 2013/34/EU of the European Parliament and of the Council ( 14 );
‘securities financing transaction’ means a repurchase transaction, a securities or commodities lending or borrowing transaction, or a margin lending transaction;
‘initial margin’ or ‘IM’ means any collateral, other than variation margin, collected from or posted to an entity to cover the current and potential future exposure of a transaction or of a portfolio of transactions in the period needed to liquidate those transactions, or to re-hedge their market risk, following the default of the counterparty to the transaction or portfolio of transactions;
‘market risk’ means the risk of losses arising from movements in market prices, including in foreign exchange rates or commodity prices;
‘foreign exchange risk’ means the risk of losses arising from movements in foreign exchange rates;
‘commodity risk’ means the risk of losses arising from movements in commodity prices;
‘trading desk’ means a well-identified group of dealers set up by the institution to jointly manage a portfolio of trading book positions in accordance with a well-defined and consistent business strategy and operating under the same risk management structure;
‘small and non-complex institution’ means an institution that meets all the following conditions:
it is not a large institution;
the total value of its assets on an individual basis or, where applicable, on a consolidated basis in accordance with this Regulation and Directive 2013/36/EU is on average equal to or less than the threshold of EUR 5 billion over the four-year period immediately preceding the current annual reporting period; Member States may lower that threshold;
it is not subject to any obligations, or is subject to simplified obligations, in relation to recovery and resolution planning in accordance with Article 4 of Directive 2014/59/EU;
its trading book business is classified as small within the meaning of Article 94(1);
the total value of its derivative positions held with trading intent does not exceed 2 % of its total on- and off-balance-sheet assets and the total value of its overall derivative positions does not exceed 5 %, both calculated in accordance with Article 273a(3);
more than 75 % of both the institution's consolidated total assets and liabilities, excluding in both cases the intragroup exposures, relate to activities with counterparties located in the European Economic Area;
the institution does not use internal models to meet the prudential requirements in accordance with this Regulation except for subsidiaries using internal models developed at the group level, provided that the group is subject to the disclosure requirements laid down in Article 433a or 433c on a consolidated basis;
the institution has not communicated to the competent authority an objection to being classified as a small and non-complex institution;
the competent authority has not decided that the institution is not to be considered a small and non-complex institution on the basis of an analysis of its size, interconnectedness, complexity or risk profile;
‘large institution’ means an institution that meets any of the following conditions:
it is a G-SII;
it has been identified as an other systemically important institution (O-SII) in accordance with Article 131(1) and (3) of Directive 2013/36/EU;
it is, in the Member State in which it is established, one of the three largest institutions in terms of total value of assets;
the total value of its assets on an individual basis or, where applicable, on the basis of its consolidated situation in accordance with this Regulation and Directive 2013/36/EU is equal to or greater than EUR 30 billion;
‘large subsidiary’ means a subsidiary that qualifies as a large institution;
‘non-listed institution’ means an institution that has not issued securities that are admitted to trading on a regulated market of any Member State, within the meaning of point (21) of Article 4(1) of Directive 2014/65/EU;
‘financial report’ means, for the purposes of Part Eight, a financial report within the meaning of Articles 4 and 5 of Directive 2004/109/EC of the European Parliament and of the Council ( 15 );
‘commodity and emission allowance dealer’ means an undertaking the main business of which consists exclusively of the provision of investment services or activities in relation to commodity derivatives or commodity derivative contracts referred to in points (5), (6), (7), (9) and (10), derivatives of emission allowances referred to in point (4), or emission allowances referred to in point (11) of Section C of Annex I to Directive 2014/65/EU.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 5
Definitions specific to capital requirements for credit risk
For the purposes of Part Three, Title II, the following definitions shall apply:
‘exposure’ means an asset or off-balance sheet item;
‘loss’ means economic loss, including material discount effects, and material direct and indirect costs associated with collecting on the instrument;
‘expected loss’ or ‘EL’ means the ratio of the amount expected to be lost on an exposure from a potential default of a counterparty or dilution over a one-year period to the amount outstanding at default.
TITLE II
LEVEL OF APPLICATION OF REQUIREMENTS
CHAPTER 1
Application of requirements on an individual basis
Article 6
General principles
Material subsidiaries of a non-EU G-SII shall comply with Article 92b on an individual basis, where they meet all the following conditions:
they are not resolution entities;
they do not have subsidiaries;
they are not the subsidiaries of an EU parent institution.
By way of derogation from the first subparagraph of this paragraph, the institutions referred to in paragraph 1a of this Article shall comply with Article 437a and point (h) of Article 447 on an individual basis.
Institutions shall comply with the obligations laid down in Part Six and in point (d) of Article 430(1) of this Regulation on an individual basis.
The following institutions shall not be required to comply with Article 413(1) and the associated liquidity reporting requirements laid down in Part Seven A of this Regulation:
institutions which are also authorised in accordance with Article 14 of Regulation (EU) No 648/2012;
institutions which are also authorised in accordance with Article 16 and point (a) of Article 54(2) of Regulation (EU) No 909/2014 of the European Parliament and of the Council ( 16 ), provided that they do not perform any significant maturity transformations; and
institutions which are designated in accordance with point (b) of Article 54(2) of Regulation (EU) No 909/2014, provided that:
their activities are limited to offering banking‐type services, as referred to in Section C of the Annex to that Regulation, to central securities depositories authorised in accordance with Article 16 of that Regulation; and
they do not perform any significant maturity transformations.
Article 7
Derogation from the application of prudential requirements on an individual basis
Competent authorities may waive the application of Article 6(1) to any subsidiary of an institution, where both the subsidiary and the institution are subject to authorisation and supervision by the Member State concerned, and the subsidiary is included in the supervision on a consolidated basis of the institution which is the parent undertaking, and all of the following conditions are satisfied, in order to ensure that own funds are distributed adequately between the parent undertaking and the subsidiary:
there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities by its parent undertaking;
either the parent undertaking satisfies the competent authority regarding the prudent management of the subsidiary and has declared, with the permission of the competent authority, that it guarantees the commitments entered into by the subsidiary, or the risks in the subsidiary are of negligible interest;
the risk evaluation, measurement and control procedures of the parent undertaking cover the subsidiary;
the parent undertaking holds more than 50 % of the voting rights attached to shares in the capital of the subsidiary or has the right to appoint or remove a majority of the members of the management body of the subsidiary.
Competent authorities may waive the application of Article 6(1) to a parent institution in a Member State where that institution is subject to authorisation and supervision by the Member State concerned, and it is included in the supervision on a consolidated basis, and all the following conditions are satisfied, in order to ensure that own funds are distributed adequately among the parent undertaking and the subsidiaries:
there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities to the parent institution in a Member State;
the risk evaluation, measurement and control procedures relevant for consolidated supervision cover the parent institution in a Member State.
The competent authority which makes use of this paragraph shall inform the competent authorities of all other Member States.
Article 8
Derogation from the application of liquidity requirements on an individual basis
The competent authorities may waive in full or in part the application of Part Six to an institution and to all or some of its subsidiaries in the Union and supervise them as a single liquidity sub-group so long as they fulfil all of the following conditions:
the parent institution on a consolidated basis or a subsidiary institution on a sub-consolidated basis complies with the obligations laid down in Part Six;
the parent institution on a consolidated basis or the subsidiary institution on a sub-consolidated basis monitors and has oversight at all times over the liquidity positions of all institutions within the group or sub-group, that are subject to the waiver, monitors and has oversight at all times over the funding positions of all institutions within the group or sub-group where the net stable funding ratio (NSFR) requirement set out in Title IV of Part Six is waived, and ensures a sufficient level of liquidity, and of stable funding where the NSFR requirement set out in Title IV of Part Six is waived, for all of those institutions;
the institutions have entered into contracts that, to the satisfaction of the competent authorities, provide for the free movement of funds between them to enable them to meet their individual and joint obligations as they become due;
there is no current or foreseen material practical or legal impediment to the fulfilment of the contracts referred to in (c).
By 1 January 2014, the Commission shall report to the European Parliament and the Council on any legal obstacles which are capable of rendering impossible the application of point (c) of the first subparagraph and is invited to make a legislative proposal, if appropriate, by 31 December 2015, on which of those obstacles should be removed.
Where institutions of the single liquidity sub-group are authorised in several Member States, paragraph 1 shall only be applied after following the procedure laid down in Article 21 and only to the institutions whose competent authorities agree about the following elements:
their assessment of the compliance of the organisation and of the treatment of liquidity risk with the conditions set out in Article 86 of Directive 2013/36/EU across the single liquidity sub-group;
the distribution of amounts, location and ownership of the required liquid assets to be held within the single liquidity sub-group, where the liquidity coverage ratio (LCR) requirement as laid down in the delegated act referred to in Article 460(1) is waived, and the distribution of amounts and location of available stable funding within the single liquidity sub-group, where the NSFR requirement set out in Title IV of Part Six is waived;
the determination of minimum amounts of liquid assets to be held by institutions for which the application of the LCR requirement as laid down in the delegated act referred to in Article 460(1) is waived and the determination of minimum amounts of available stable funding to be held by institutions for which the application of the NSFR requirement set out in Title IV of Part Six is waived;
the need for stricter parameters than those set out in Part Six;
unrestricted sharing of complete information between the competent authorities;
a full understanding of the implications of such a waiver.
Article 9
Individual consolidation method
Article 10
Waiver for credit institutions permanently affiliated to a central body
Competent authorities may, in accordance with national law, partially or fully waive the application of the requirements set out in Parts Two to Eight of this Regulation and Chapter 2 of Regulation (EU) 2017/2402 to one or more credit institutions situated in the same Member State and which are permanently affiliated to a central body which supervises them and which is established in the same Member State, if the following conditions are met:
the commitments of the central body and affiliated institutions are joint and several liabilities or the commitments of its affiliated institutions are entirely guaranteed by the central body;
the solvency and liquidity of the central body and of all the affiliated institutions are monitored as a whole on the basis of consolidated accounts of these institutions;
the management of the central body is empowered to issue instructions to the management of the affiliated institutions.
Member States may maintain and make use of existing national legislation regarding the application of the waiver referred to in the first subparagraph as long as it does not conflict with this Regulation or Directive 2013/36/EU.
CHAPTER 2
Prudential consolidation
Section 1
Application of requirements on a consolidated basis
Article 10a
Application of prudential requirements on a consolidated basis where investment firms are parent undertakings
For the purposes of the application of this Chapter, investment firms shall be considered to be parent financial holding companies in a Member State or Union parent financial holding companies where such investment firms are parent undertakings of an institution or of an investment firm subject to this Regulation that is referred to in Article 1(2) or (5) of Regulation (EU) 2019/2033.
Article 11
General treatment
For the purpose of ensuring that the requirements of this Regulation are applied on a consolidated basis, the terms ‘institution’, ‘parent institution in a Member State’, ‘EU parent institution’ and ‘parent undertaking’, as the case may be, shall also refer to:
a financial holding company or mixed financial holding company approved in accordance with Article 21a of Directive 2013/36/EU;
a designated institution controlled by a parent financial holding company or parent mixed financial holding company where such a parent is not subject to approval in accordance with Article 21a(4) of Directive 2013/36/EU;
a financial holding company, mixed financial holding company or institution designated in accordance with point (d) of Article 21a(6) of Directive 2013/36/EU.
The consolidated situation of an undertaking referred to in point (b) of the first subparagraph of this paragraph shall be the consolidated situation of the parent financial holding company or the parent mixed financial holding company that is not subject to approval in accordance with Article 21a(4) of Directive 2013/36/EU. The consolidated situation of an undertaking referred to in point (c) of the first subparagraph of this paragraph shall be the consolidated situation of its parent financial holding company or parent mixed financial holding company.
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Only EU parent undertakings that are a material subsidiary of a non-EU G-SII and are not resolution entities shall comply with Article 92b of this Regulation on a consolidated basis to the extent and in the manner set out in Article 18 of this Regulation. Where Article 21b(2) of Directive 2013/36/EU applies, the two intermediate EU parent undertakings jointly identified as a material subsidiary shall each comply with Article 92b of this Regulation on the basis of their consolidated situation.
EU parent institutions shall comply with Part Six and point (d) of Article 430(1) of this Regulation on the basis of their consolidated situation where the group comprises one or more credit institutions or investment firms that are authorised to provide the investment services and activities listed in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU.
Where a waiver has been granted under Article 8(1) to (5), the institutions and, where applicable, the financial holding companies or mixed financial holding companies that are part of a liquidity sub‐group shall comply with Part Six and point (d) of Article 430(1) of this Regulation on a consolidated basis or on the sub‐consolidated basis of the liquidity sub‐group.
The application of the approach set out in the first subparagraph shall be without prejudice to effective supervision on a consolidated basis and shall neither entail disproportionate adverse effects on the whole or parts of the financial system in other Member States or in the Union as a whole nor form or create an obstacle to the functioning of the internal market.
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Article 12a
Consolidated calculation for G-SIIs with multiple resolution entities
Where at least two G-SII entities that are part of the same G-SII are resolution entities or third-country entities that would be resolution entities if they were established in the Union, the EU parent institution of that G-SII shall calculate the amount of own funds and eligible liabilities referred to in Article 92a(1), point (a):
for each resolution entity or third-country entity that would be a resolution entity if it were established in the Union;
for the EU parent institution as if it were the only resolution entity of the G-SII.
The calculation referred to in point (b) of the first subparagraph shall be undertaken on the basis of the consolidated situation of the EU parent institution.
Resolution authorities shall act in accordance with Article 45d(4) and Article 45h(2) of Directive 2014/59/EU.
Article 13
Application of disclosure requirements on a consolidated basis
Large subsidiaries of EU parent institutions shall disclose the information specified in Articles 437, 438, 440, 442, 450, 451, 451a and 453 on an individual basis or, where applicable in accordance with this Regulation and Directive 2013/36/EU, on a sub-consolidated basis.
The second subparagraph of paragraph 1 shall apply to subsidiaries of parent undertakings established in a third country where those subsidiaries qualify as large subsidiaries.
Article 14
Application of requirements of Article 5 of Regulation (EU) 2017/2402 on a consolidated basis
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Section 2
Methods for prudential consolidation
Article 18
Methods of prudential consolidation
For the purposes of Article 11(3a), institutions that are required to comply with the requirements referred to in Article 92a or 92b on a consolidated basis shall carry out a full consolidation of all institutions and financial institutions that are their subsidiaries in the relevant resolution groups.
Competent authorities shall determine whether and how consolidation is to be carried out in the following cases:
where, in the opinion of the competent authorities, an institution exercises a significant influence over one or more institutions or financial institutions, but without holding a participation or other capital ties in those institutions; and
where two or more institutions or financial institutions are placed under single management other than pursuant to a contract, clauses of their memoranda or articles of association.
In particular, competent authorities may permit or require the use of the method provided for in Article 22(7), (8) and (9) of Directive 2013/34/EU. That method shall not, however, constitute inclusion of the undertakings concerned in consolidated supervision.
By way of derogation from the first subparagraph, competent authorities may allow or require institutions to apply a different method to such subsidiaries or participations, including the method required by the applicable accounting framework, provided that:
the institution does not already apply the equity method on 28 December 2020;
it would be unduly burdensome to apply the equity method or the equity method does not adequately reflect the risks that the undertaking referred to in the first subparagraph poses to the institution; and
the method applied does not result in full or proportional consolidation of that undertaking.
Competent authorities may require full or proportional consolidation of a subsidiary or an undertaking in which an institution holds a participation where that subsidiary or undertaking is not an institution, financial institution or ancillary services undertaking and where all the following conditions are met:
the undertaking is not an insurance undertaking, a third-country insurance undertaking, a reinsurance undertaking, a third-country reinsurance undertaking, an insurance holding company or an undertaking excluded from the scope of Directive 2009/138/EC in accordance with Article 4 of that Directive;
there is a substantial risk that the institution decides to provide financial support to that undertaking in stressed conditions, in the absence of, or in excess of any contractual obligations to provide such support.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Section 3
Scope of prudential consolidation
Article 19
Entities excluded from the scope of prudential consolidation
An institution, a financial institution or an ancillary services undertaking which is a subsidiary or an undertaking in which a participation is held, need not to be included in the consolidation where the total amount of assets and off-balance sheet items of the undertaking concerned is less than the smaller of the following two amounts:
EUR 10 million;
1 % of the total amount of assets and off-balance sheet items of the parent undertaking or the undertaking that holds the participation.
The competent authorities responsible for exercising supervision on a consolidated basis pursuant to Article 111 of Directive 2013/36/EU may on a case-by-case basis decide in the following cases that an institution, financial institution or ancillary services undertaking which is a subsidiary or in which a participation is held need not be included in the consolidation:
where the undertaking concerned is situated in a third country where there are legal impediments to the transfer of the necessary information;
where the undertaking concerned is of negligible interest only with respect to the objectives of monitoring institutions;
where, in the opinion of the competent authorities responsible for exercising supervision on a consolidated basis, the consolidation of the financial situation of the undertaking concerned would be inappropriate or misleading as far as the objectives of the supervision of institutions are concerned.
Article 20
Joint decisions on prudential requirements
The competent authorities shall work together, in full consultation:
in the case of applications for the permissions referred to in Article 143(1), Article 151(4) and (9), Article 283, Article 312(2) and Article363 respectively submitted by an EU parent institution and its subsidiaries, or jointly by the subsidiaries of an EU parent financial holding company or EU parent mixed financial holding company, to decide whether or not to grant the permission sought and to determine the terms and conditions, if any, to which such permission should be subject;
for the purposes of determining whether the criteria for a specific intragroup treatment as referred to in Article 422(9) and Article 425(5) complemented by the EBA regulatory technical standards referred to in Article 422(10) and Article 425(6) are met.
Applications shall be submitted only to the consolidating supervisor.
The application referred to in Article 312(2), shall include a description of the methodology used for allocating operational risk capital between the different entities of the group. The application shall indicate whether and how diversification effects are intended to be factored in the risk measurement system.
The competent authorities shall do everything within their power to reach a joint decision within six months on:
the application referred to in point (a) of paragraph 1;
the assessment of the criteria and the determination of the specific treatment referred to in point (b) of paragraph 1.
This joint decision shall be set out in a document containing the fully reasoned decision which shall be provided to the applicant by the competent authority referred to in paragraph 1.
The period referred to in paragraph 2 shall begin:
on the date of receipt of the complete application referred to in point (a) of paragraph 1 by the consolidating supervisor. The consolidating supervisor shall forward the complete application to the other competent authorities without delay;
on the date of receipt by competent authorities of a report prepared by the consolidating supervisor analysing intragroup commitments within the group.
The decision shall be set out in a document containing the fully reasoned decision and shall take into account the views and reservations of the other competent authorities expressed during the six months period.
The decision shall be provided to the EU parent institution, the EU parent financial holding company or to the EU parent mixed financial holding company and the other competent authorities by the consolidating supervisor.
If, at the end of the six-month period, any of the competent authorities concerned has referred the matter to EBA in accordance with Article 19 of Regulation (EU) No 1093/2010, the consolidating supervisor shall defer its decision on point (a) of paragraph 1 of this Article and await any decision that EBA may take in accordance with Article 19(3) of that Regulation on its decision, and shall take its decision in conformity with the decision of EBA. The six-month period shall be deemed the conciliation period within the meaning of that Regulation. EBA shall take its decision within one month. The matter shall not be referred to EBA after the end of the six-month period or after a joint decision has been reached.
The decision shall be set out in a document containing the fully reasoned decision and shall take into account the views and reservations of the other competent authorities expressed during the six-month period.
The decision shall be provided to the consolidating supervisor that informs the EU parent institution, the EU parent financial holding company or the EU parent mixed financial holding company.
If, at the end of the six-month period, the consolidating supervisor has referred the matter to EBA in accordance with Article 19 of Regulation (EU) No 1093/2010, the competent authority responsible for the supervision of the subsidiary on an individual basis shall defer its decision on point (b) of paragraph 1 of this Article and await any decision that EBA may take in accordance with Article 19(3) of that Regulation on its decision, and shall take its decision in conformity with the decision of EBA. The six-month period shall be deemed the conciliation period within the meaning of that Regulation. EBA shall take its decision within one month. The matter shall not be referred to EBA after the end of the six-month period or after a joint decision has been reached.
EBA shall submit those draft implementing technical standards to the Commission by 31 December 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Article 21
Joint decisions on the level of application of liquidity requirements
The joint decision shall be reached within six months after submission by the consolidating supervisor of a report identifying single liquidity sub-groups on the basis of the criteria laid down in Article 8. In the event of disagreement during the six-month period, the consolidating supervisor shall consult EBA at the request of any of the other competent authorities concerned. The consolidating supervisor may consult EBA on its own initiative.
The joint decision may also impose constraints on the location and ownership of liquid assets and require minimum amounts of liquid assets to be held by institutions that are exempt from the application of Part Six.
The joint decision shall be set out in a document containing the fully reasoned decision which shall be submitted to the parent institution of the liquidity subgroup by the consolidating supervisor.
However, any competent authority may during the six-month period refer to EBA the question whether the conditions in points (a) to (d) of Article 8(1) are met. In that case, EBA may carry out its non-binding mediation in accordance with Article 31(c) of Regulation (EU) No 1093/2010 and all the competent authorities involved shall defer their decisions pending the conclusion of the non-binding mediation. Where, during the mediation, no agreement has been reached by the competent authorities within three months, each competent authority responsible for supervision on an individual basis shall take its own decision taking into account the proportionality of benefits and risks at the level of the Member State of the parent institution and the proportionality of benefits and risks at the level of the Member State of the subsidiary. The matter shall not be referred to EBA after the end of the six-month period or after a joint decision has been reached.
The joint decision referred to in paragraph 1 and the decisions referred to in the second subparagraph of this paragraph shall be binding.
Article 22
Sub-consolidation in case of entities in third countries
Article 23
Undertakings in third countries
For the purposes of applying supervision on a consolidated basis in accordance with this Chapter, the terms ‘investment firm’, ‘credit institution’, financial institution', and ‘institution’ shall also apply to undertakings established in third countries, which, were they established in the Union, would fulfil the definitions of those terms in Article 4.
Article 24
Valuation of assets and off-balance sheet items
PART TWO
OWN FUNDS AND ELIGIBLE LIABILITIES
TITLE I
ELEMENTS OF OWN FUNDS
CHAPTER 1
Tier 1 capital
Article 25
Tier 1 capital
The Tier 1 capital of an institution consists of the sum of the Common Equity Tier 1 capital and Additional Tier 1 capital of the institution.
CHAPTER 2
Common Equity Tier 1 capital
Section 1
Common Equity Tier 1 items and instruments
Article 26
Common Equity Tier 1 items
Common Equity Tier 1 items of institutions consist of the following:
capital instruments, provided that the conditions laid down in Article 28 or, where applicable, Article 29 are met;
share premium accounts related to the instruments referred to in point (a);
retained earnings;
accumulated other comprehensive income;
other reserves;
funds for general banking risk.
The items referred to in points (c) to (f) shall be recognised as Common Equity Tier 1 only where they are available to the institution for unrestricted and immediate use to cover risks or losses as soon as these occur.
For the purposes of point (c) of paragraph 1, institutions may include interim or year-end profits in Common Equity Tier 1 capital before the institution has taken a formal decision confirming the final profit or loss of the institution for the year only with the prior permission of the competent authority. The competent authority shall grant permission where the following conditions are met:
those profits have been verified by persons independent of the institution that are responsible for the auditing of the accounts of that institution;
the institution has demonstrated to the satisfaction of the competent authority that any foreseeable charge or dividend has been deducted from the amount of those profits.
A verification of the interim or year-end profits of the institution shall provide an adequate level of assurance that those profits have been evaluated in accordance with the principles set out in the applicable accounting framework.
By way of derogation from the first subparagraph, institutions may classify as Common Equity Tier 1 instruments subsequent issuances of a form of Common Equity Tier 1 instruments for which they have already received that permission, provided that both of the following conditions are met:
the provisions governing those subsequent issuances are substantially the same as the provisions governing those issuances for which the institutions have already received permission;
institutions have notified those subsequent issuances to the competent authorities sufficiently in advance of their classification as Common Equity Tier 1 instruments.
Competent authorities shall consult EBA before granting permission for new forms of capital instruments to be classified as Common Equity Tier 1 instruments. Competent authorities shall have due regard to EBA's opinion and, where they decide to deviate from it, shall write to EBA within three months from the date of receipt of EBA's opinion setting out the rationale for deviating from the relevant opinion. This subparagraph does not apply to the capital instruments referred to in Article 31.
On the basis of information collected from competent authorities, EBA shall establish, maintain and publish a list of all forms of capital instruments in each Member State that qualify as Common Equity Tier 1 instruments. In accordance with Article 35 of Regulation (EU) No 1093/2010, EBA may collect any information in connection with Common Equity Tier 1 instruments that it considers necessary to establish compliance with the criteria set out in Article 28 or, where applicable, Article 29 of this Regulation and for the purpose of maintaining and updating the list referred to in this subparagraph.
Following the review process set out in Article 80 and where there is sufficient evidence that the relevant capital instruments do not meet or have ceased to meet the criteria set out in Article 28 or, where applicable, Article 29, EBA may decide not to add those instruments to the list referred to in the fourth subparagraph or remove them from that list, as the case may be. EBA shall make an announcement to that effect that shall also refer to the relevant competent authority's position on the matter. This subparagraph does not apply to the capital instruments referred to in Article 31.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 27
Capital instruments of mutuals, cooperative societies, savings institutions or similar institutions in Common Equity Tier 1 items
Common Equity Tier 1 items shall include any capital instrument issued by an institution under its statutory terms provided that the following conditions are met:
the institution is of a type that is defined under applicable national law and which competent authorities consider to qualify as any of the following:
a mutual;
a cooperative society;
a savings institution;
a similar institution;
a credit institution which is wholly owned by one of the institutions referred to in points (i) to (iv) and has approval from the relevant competent authority to make use of the provisions in this Article, provided that, and for as long as, 100 % of the ordinary shares in issue in the credit institution are held directly or indirectly by an institution referred to in those points;
the conditions laid down in Articles 28 or, where applicable, Article 29, are met.
Those mutuals, cooperative societies or savings institutions recognised as such under applicable national law prior to 31 December 2012 shall continue to be classified as such for the purposes of this Part, provided that they continue to meet the criteria that determined such recognition.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 28
Common Equity Tier 1 instruments
Capital instruments shall qualify as Common Equity Tier 1 instruments only if all the following conditions are met:
the instruments are issued directly by the institution with the prior approval of the owners of the institution or, where permitted under applicable national law, the management body of the institution;
the instruments are fully paid up and the acquisition of ownership of those instruments is not funded directly or indirectly by the institution;
the instruments meet all the following conditions as regards their classification:
they qualify as capital within the meaning of Article 22 of Directive 86/635/EEC;
they are classified as equity within the meaning of the applicable accounting framework;
they are classified as equity capital for the purposes of determining balance sheet insolvency, where applicable under national insolvency law;
the instruments are clearly and separately disclosed on the balance sheet in the financial statements of the institution;
the instruments are perpetual;
the principal amount of the instruments may not be reduced or repaid, except in either of the following cases:
the liquidation of the institution;
discretionary repurchases of the instruments or other discretionary means of reducing capital, where the institution has received the prior permission of the competent authority in accordance with Article 77;
the provisions governing the instruments do not indicate expressly or implicitly that the principal amount of the instruments would or might be reduced or repaid other than in the liquidation of the institution, and the institution does not otherwise provide such an indication prior to or at issuance of the instruments, except in the case of instruments referred to in Article 27 where the refusal by the institution to redeem such instruments is prohibited under applicable national law;
the instruments meet the following conditions as regards distributions:
there is no preferential distribution treatment regarding the order of distribution payments, including in relation to other Common Equity Tier 1 instruments, and the terms governing the instruments do not provide preferential rights to payment of distributions;
distributions to holders of the instruments may be paid only out of distributable items;
the conditions governing the instruments do not include a cap or other restriction on the maximum level of distributions, except in the case of the instruments referred to in Article 27;
the level of distributions is not determined on the basis of the amount for which the instruments were purchased at issuance, except in the case of the instruments referred to in Article 27;
the conditions governing the instruments do not include any obligation for the institution to make distributions to their holders and the institution is not otherwise subject to such an obligation;
non-payment of distributions does not constitute an event of default of the institution;
the cancellation of distributions imposes no restrictions on the institution;
compared to all the capital instruments issued by the institution, the instruments absorb the first and proportionately greatest share of losses as they occur, and each instrument absorbs losses to the same degree as all other Common Equity Tier 1 instruments;
the instruments rank below all other claims in the event of insolvency or liquidation of the institution;
the instruments entitle their owners to a claim on the residual assets of the institution, which, in the event of its liquidation and after the payment of all senior claims, is proportionate to the amount of such instruments issued and is not fixed or subject to a cap, except in the case of the capital instruments referred to in Article 27;
the instruments are neither secured nor subject to a guarantee that enhances the seniority of the claim by any of the following:
the institution or its subsidiaries;
the parent undertaking of the institution or its subsidiaries;
the parent financial holding company or its subsidiaries;
the mixed activity holding company or its subsidiaries;
the mixed financial holding company and its subsidiaries;
any undertaking that has close links with the entities referred to in points (i) to (v);
the instruments are not subject to any arrangement, contractual or otherwise, that enhances the seniority of claims under the instruments in insolvency or liquidation.
The condition set out in point (j) of the first subparagraph shall be deemed to be met, notwithstanding the instruments are included in Additional Tier 1 or Tier 2 by virtue of Article 484(3), provided that they rank pari passu.
For the purposes of point (b) of the first subparagraph, only the part of a capital instrument that is fully paid up shall be eligible to qualify as a Common Equity Tier 1 instrument.
The condition laid down in point (f) of paragraph 1 shall be deemed to be met notwithstanding the reduction of the principal amount of the capital instrument within a resolution procedure or as a consequence of a write down of capital instruments required by the resolution authority responsible for the institution.
The condition laid down in point (g) of paragraph 1 shall be deemed to be met notwithstanding the provisions governing the capital instrument indicating expressly or implicitly that the principal amount of the instrument would or might be reduced within a resolution procedure or as a consequence of a write down of capital instruments required by the resolution authority responsible for the institution.
The condition set out in point (h)(v) of the first subparagraph of paragraph 1 shall be considered to be met notwithstanding a subsidiary being subject to a profit and loss transfer agreement with its parent undertaking, according to which the subsidiary is obliged to transfer, following the preparation of its annual financial statements, its annual result to the parent undertaking, where all the following conditions are met:
the parent undertaking owns 90 % or more of the voting rights and capital of the subsidiary;
the parent undertaking and the subsidiary are located in the same Member State;
the agreement was concluded for legitimate taxation purposes;
in preparing the annual financial statement, the subsidiary has discretion to decrease the amount of distributions by allocating a part or all of its profits to its own reserves or funds for general banking risk before making any payment to its parent undertaking;
the parent undertaking is obliged under the agreement to fully compensate the subsidiary for all losses of the subsidiary;
the agreement is subject to a notice period according to which the agreement can be terminated only by the end of an accounting year, with such termination taking effect no earlier than the beginning of the following accounting year, leaving the parent undertaking's obligation to fully compensate the subsidiary for all losses incurred during the current accounting year unchanged.
Where an institution has entered into a profit and loss transfer agreement, it shall notify the competent authority without delay and provide the competent authority with a copy of the agreement. The institution shall also notify the competent authority without delay of any changes to the profit and loss transfer agreement and the termination thereof. An institution shall not enter into more than one profit and loss transfer agreement.
EBA shall develop draft regulatory technical standards to specify the following:
the applicable forms and nature of indirect funding of own funds instruments;
whether and when multiple distributions would constitute a disproportionate drag on own funds;
the meaning of preferential distributions.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 29
Capital instruments issued by mutuals, cooperative societies, savings institutions and similar institutions
The following conditions shall be met as regards redemption of the capital instruments:
except where prohibited under applicable national law, the institution shall be able to refuse the redemption of the instruments;
where the refusal by the institution of the redemption of instruments is prohibited under applicable national law, the provisions governing the instruments shall give the institution the ability to limit their redemption;
refusal to redeem the instruments, or the limitation of the redemption of the instruments where applicable, may not constitute an event of default of the institution.
The condition laid down in the first subparagraph is without prejudice to the possibility for a mutual, cooperative society, savings institution or a similar institution to recognise within Common Equity Tier 1 instruments that do not afford voting rights to the holder and that meet all the following conditions:
the claim of the holders of the non-voting instruments in the insolvency or liquidation of the institution is proportionate to the share of the total Common Equity Tier 1 instruments that those non-voting instruments represent;
the instruments otherwise qualify as Common Equity Tier 1 instruments.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 30
Consequences of the conditions for Common Equity Tier 1 instruments ceasing to be met
The following shall apply where, in the case of a Common Equity Tier 1 instrument, the conditions laid down in Article 28 or, where applicable, Article 29 cease to be met:
that instrument shall immediately cease to qualify as a Common Equity Tier 1 instrument;
the share premium accounts that relate to that instrument shall immediately cease to qualify as Common Equity Tier 1 items.
Article 31
Capital instruments subscribed by public authorities in emergency situations
In emergency situations, competent authorities may permit institutions to include in Common Equity Tier 1 capital instruments that comply at least with the conditions laid down in points (b) to (e) of Article 28(1) where all the following conditions are met:
the capital instruments are issued after 1 January 2014;
the capital instruments are considered State aid by the Commission;
the capital instruments are issued within the context of recapitalisation measures pursuant to State aid- rules existing at the time;
the capital instruments are fully subscribed and held by the State or a relevant public authority or public-owned entity;
the capital instruments are able to absorb losses;
except for the capital instruments referred to in Article 27, in the event of liquidation, the capital instruments entitle their owners to a claim on the residual assets of the institution after the payment of all senior claims;
there are adequate exit mechanisms of the State or, where applicable, a relevant public authority or public-owned entity;
the competent authority has granted its prior permission and has published its decision together with an explanation of that decision.
Section 2
Prudential filters
Article 32
Securitised assets
An institution shall exclude from any element of own funds any increase in its equity under the applicable accounting framework that results from securitised assets, including the following:
such an increase associated with future margin income that results in a gain on sale for the institution;
where the institution is the originator of a securitisation, net gains that arise from the capitalisation of future income from the securitised assets that provide credit enhancement to positions in the securitisation.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 33
Cash flow hedges and changes in the value of own liabilities
Institutions shall not include the following items in any element of own funds:
the fair value reserves related to gains or losses on cash flow hedges of financial instruments that are not valued at fair value, including projected cash flows;
gains or losses on liabilities of the institution that are valued at fair value that result from changes in the own credit standing of the institution;
fair value gains and losses on derivative liabilities of the institution that result from changes in the own credit risk of the institution.
Without prejudice to point (b) of paragraph 1, institutions may include the amount of gains and losses on their liabilities in own funds where all the following conditions are met:
the liabilities are in the form of bonds as referred to in Article 52(4) of Directive 2009/65/EC;
the changes in the value of the institution's assets and liabilities are due to the same changes in the institution's own credit standing;
there is a close correspondence between the value of the bonds referred to in point (a) and the value of the institution's assets;
it is possible to redeem the mortgage loans by buying back the bonds financing the mortgage loans at market or nominal value.
EBA shall submit those draft regulatory technical standards to the Commission by 30 September 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 34
Additional value adjustments
Institutions shall apply the requirements of Article 105 to all their assets measured at fair value when calculating the amount of their own funds and shall deduct from Common Equity Tier 1 capital the amount of any additional value adjustments necessary.
Article 35
Unrealised gains and losses measured at fair value
Except in the case of the items referred to in Article 33, institutions shall not make adjustments to remove from their own funds unrealised gains or losses on their assets or liabilities measured at fair value.
Section 3
Deductions from Common Equity Tier 1 items, exemptions and alternatives
Sub-Section 1
Deductions from Common Equity Tier 1 items
Article 36
Deductions from Common Equity Tier 1 items
Institutions shall deduct the following from Common Equity Tier 1 items:
losses for the current financial year;
intangible assets with the exception of prudently valued software assets the value of which is not negatively affected by resolution, insolvency or liquidation of the institution;
deferred tax assets that rely on future profitability;
for institutions calculating risk-weighted exposure amounts using the Internal Ratings Based Approach (the IRB Approach), negative amounts resulting from the calculation of expected loss amounts laid down in Articles 158 and 159;
defined benefit pension fund assets on the balance sheet of the institution;
direct, indirect and synthetic holdings by an institution of own Common Equity Tier 1 instruments, including own Common Equity Tier 1 instruments that an institution is under an actual or contingent obligation to purchase by virtue of an existing contractual obligation;
direct, indirect and synthetic holdings of the Common Equity Tier 1 instruments of financial sector entities where those entities have a reciprocal cross holding with the institution that the competent authority considers to have been designed to inflate artificially the own funds of the institution;
the applicable amount of direct, indirect and synthetic holdings by the institution of Common Equity Tier 1 instruments of financial sector entities where the institution does not have a significant investment in those entities;
the applicable amount of direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1 instruments of financial sector entities where the institution has a significant investment in those entities;
the amount of items required to be deducted from Additional Tier 1 items pursuant to Article 56 that exceeds the Additional Tier 1 items of the institution;
the exposure amount of the following items which qualify for a risk weight of 1 250 %, where the institution deducts that exposure amount from the amount of Common Equity Tier 1 items as an alternative to applying a risk weight of 1 250 %:
qualifying holdings outside the financial sector;
securitisation positions, in accordance with point (b) of Article 244(1), point (b) of Article 245(1) and Article 253;
free deliveries, in accordance with Article 379(3);
positions in a basket for which an institution cannot determine the risk weight under the IRB Approach, in accordance with Article 153(8);
equity exposures under an internal models approach, in accordance with Article 155(4).
any tax charge relating to Common Equity Tier 1 items foreseeable at the moment of its calculation, except where the institution suitably adjusts the amount of Common Equity Tier 1 items insofar as such tax charges reduce the amount up to which those items may be used to cover risks or losses;
the applicable amount of insufficient coverage for non-performing exposures;
for a minimum value commitment referred to in Article 132c(2), any amount by which the current market value of the units or shares in CIUs underlying the minimum value commitment falls short of the present value of the minimum value commitment and for which the institution has not already recognised a reduction of Common Equity Tier 1 items.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
EBA shall develop draft regulatory technical standards to specify the types of capital instruments of financial institutions and, in consultation with the European Supervisory Authority (European Insurance and Occupational Pensions Authority) (EIOPA) established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 ( 17 ), of third country insurance and reinsurance undertakings, and of undertakings excluded from the scope of Directive 2009/138/EC in accordance with Article 4 of that Directive that shall be deducted from the following elements of own funds:
Common Equity Tier 1 items;
Additional Tier 1 items;
Tier 2 items.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 37
Deduction of intangible assets
Institutions shall determine the amount of intangible assets to be deducted in accordance with the following:
the amount to be deducted shall be reduced by the amount of associated deferred tax liabilities that would be extinguished if the intangible assets became impaired or were derecognised under the applicable accounting framework;
the amount to be deducted shall include goodwill included in the valuation of significant investments of the institution;
the amount to be deducted shall be reduced by the amount of the accounting revaluation of the subsidiaries' intangible assets derived from the consolidation of subsidiaries attributable to persons other than the undertakings included in the consolidation pursuant to Chapter 2 of Title II of Part One.
Article 38
Deduction of deferred tax assets that rely on future profitability
The amount of deferred tax assets that rely on future profitability may be reduced by the amount of the associated deferred tax liabilities of the institution, provided the following conditions are met:
the entity has a legally enforceable right under applicable national law to set off those current tax assets against current tax liabilities;
the deferred tax assets and the deferred tax liabilities relate to taxes levied by the same tax authority and on the same taxable entity.
The amount of associated deferred tax liabilities referred to in paragraph 4 shall be allocated between the following:
deferred tax assets that rely on future profitability and arise from temporary differences that are not deducted in accordance with Article 48(1);
all other deferred tax assets that rely on future profitability.
Institutions shall allocate the associated deferred tax liabilities according to the proportion of deferred tax assets that rely on future profitability that the items referred to in points (a) and (b) represent.
Article 39
Tax overpayments, tax loss carry backs and deferred tax assets that do not rely on future profitability
The following items shall not be deducted from own funds and shall be subject to a risk weight in accordance with Chapter 2 or 3 of Title II of Part Three, as applicable:
overpayments of tax by the institution for the current year;
current year tax losses of the institution carried back to previous years that give rise to a claim on, or a receivable from, a central government, regional government or local tax authority.
►M8 Deferred tax assets that do not rely on future profitability shall be limited to deferred tax assets which were created before 23 November 2016 and which arise from temporary differences, where all the following conditions are met: ◄
they are automatically and mandatorily replaced without delay with a tax credit in the event that the institution reports a loss when the annual financial statements of the institution are formally approved, or in the event of liquidation or insolvency of the institution;
an institution is able under the applicable national tax law to offset a tax credit referred to in point (a) against any tax liability of the institution or any other undertaking included in the same consolidation as the institution for tax purposes under that law or any other undertaking subject to the supervision on a consolidated basis in accordance with Chapter 2 of Title II of Part One;
where the amount of tax credits referred to in point (b) exceeds the tax liabilities referred to in that point, any such excess is replaced without delay with a direct claim on the central government of the Member State in which the institution is incorporated.
Institutions shall apply a risk weight of 100 % to deferred tax assets where the conditions laid down in points (a), (b) and (c) are met.
Article 40
Deduction of negative amounts resulting from the calculation of expected loss amounts
The amount to be deducted in accordance with point (d) of Article 36(1) shall not be reduced by a rise in the level of deferred tax assets that rely on future profitability, or other additional tax effects, that could occur if provisions were to rise to the level of expected losses referred to in Section 3 of Chapter 3 of Title II of Part Three.
Article 41
Deduction of defined benefit pension fund assets
For the purposes of point (e) of Article 36(1), the amount of defined benefit pension fund assets to be deducted shall be reduced by the following:
the amount of any associated deferred tax liability which could be extinguished if the assets became impaired or were derecognised under the applicable accounting framework;
the amount of assets in the defined benefit pension fund which the institution has an unrestricted ability to use, provided that the institution has received the prior permission of the competent authority.
Those assets used to reduce the amount to be deducted shall receive a risk weight in accordance with Chapter 2 or 3 of Title II of Part Three, as applicable.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 42
Deduction of holdings of own Common Equity Tier 1 instruments
For the purposes of point (f) of Article 36(1), institutions shall calculate holdings of own Common Equity Tier 1 instruments on the basis of gross long positions subject to the following exceptions:
institutions may calculate the amount of holdings of own Common Equity Tier 1 instruments on the basis of the net long position provided that both the following conditions are met:
the long and short positions are in the same underlying exposure and the short positions involve no counterparty risk;
either both the long and the short positions are held in the trading book or both are held in the non-trading book;
institutions shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to own Common Equity Tier 1 instruments included in those indices;
institutions may net gross long positions in own Common Equity Tier 1 instruments resulting from holdings of index securities against short positions in own Common Equity Tier 1 instruments resulting from short positions in the underlying indices, including where those short positions involve counterparty risk, provided that both the following conditions are met:
the long and short positions are in the same underlying indices;
either both the long and the short positions are held in the trading book or both are held in the non-trading book.
Article 43
Significant investment in a financial sector entity
For the purposes of deduction, a significant investment of an institution in a financial sector entity shall arise where any of the following conditions is met:
the institution owns more than 10 % of the Common Equity Tier 1 instruments issued by that entity;
the institution has close links with that entity and owns Common Equity Tier 1 instruments issued by that entity;
the institution owns Common Equity Tier 1 instruments issued by that entity and the entity is not included in consolidation pursuant to Chapter 2 of Title II of Part One but is included in the same accounting consolidation as the institution for the purposes of financial reporting under the applicable accounting framework.
Article 44
Deduction of holdings of Common Equity Tier 1 instruments of financial sector entities and where an institution has a reciprocal cross holding designed artificially to inflate own funds
Institutions shall make the deductions referred to in points (g), (h) and (i) of Article 36(1) in accordance with the following:
holdings of Common Equity Tier 1 instruments and other capital instruments of financial sector entities shall be calculated on the basis of the gross long positions;
Tier 1 own-fund insurance items shall be treated as holdings of Common Equity Tier 1 instruments for the purposes of deduction.
Article 45
Deduction of holdings of Common Equity Tier 1 instruments of financial sector entities
Institutions shall make the deductions required by points (h) and (i) of Article 36(1) in accordance with the following provisions:
they may calculate direct, indirect and synthetic holdings of Common Equity Tier 1 instruments of the financial sector entities on the basis of the net long position in the same underlying exposure provided that both the following conditions are met:
the maturity date of the short position is either the same as, or later than the maturity date of the long position or the residual maturity of the short position is at least one year;
either both the long position and the short position are held in the trading book or both are held in the non-trading book;
they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to the capital instruments of the financial sector entities in those indices.
Article 46
Deduction of holdings of Common Equity Tier 1 instruments where an institution does not have a significant investment in a financial sector entity
For the purposes of point (h) of Article 36(1), institutions shall calculate the applicable amount to be deducted by multiplying the amount referred to in point (a) of this paragraph by the factor derived from the calculation referred to in point (b) of this paragraph:
the aggregate amount by which the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of financial sector entities in which the institution does not have a significant investment exceeds 10 % of the aggregate amount of Common Equity Tier 1 items of the institution calculated after applying the following to Common Equity Tier 1 items:
Articles 32 to 35;
the deductions referred to in points (a) to (g), points (k)(ii) to (v) and point (l) of Article 36(1), excluding the amount to be deducted for deferred tax assets that rely on future profitability and arise from temporary differences;
Articles 44 and 45;
the amount of direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1 instruments of those financial sector entities in which the institution does not have a significant investment divided by the aggregate amount of direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of those financial sector entities.
The amount to be deducted pursuant to paragraph 1 shall be apportioned across all Common Equity Tier 1 instruments held. Institutions shall determine the amount of each Common Equity Tier 1 instrument that is deducted pursuant to paragraph 1 by multiplying the amount specified in point (a) of this paragraph by the proportion specified in point (b) of this paragraph:
the amount of holdings required to be deducted pursuant to paragraph 1;
the proportion of the aggregate amount of direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1 instruments of financial sector entities in which the institution does not have a significant investment represented by each Common Equity Tier 1 instrument held.
Institutions shall determine the amount of each Common Equity Tier 1 instrument that is risk weighted pursuant to paragraph 4 by multiplying the amount specified in point (a) of this paragraph by the amount specified in point (b) of this paragraph:
the amount of holdings required to be risk weighted pursuant to paragraph 4;
the proportion resulting from the calculation in point (b) of paragraph 3.
Article 47
Deduction of holdings of Common Equity Tier 1 instruments where an institution has a significant investment in a financial sector entity
For the purposes of point (i) of Article 36(1), the applicable amount to be deducted from Common Equity Tier 1 items shall exclude underwriting positions held for five working days or fewer and shall be determined in accordance with Articles 44 and 45 and Sub-section 2.
Article 47a
Non-performing exposures
For the purposes of point (m) of Article 36(1), exposure shall include any of the following items, provided they are not included in the trading book of the institution:
a debt instrument, including a debt security, a loan, an advance and a demand deposit;
a loan commitment given, a financial guarantee given or any other commitment given, irrespective of whether it is revocable or irrevocable, with the exception of undrawn credit facilities that may be cancelled unconditionally at any time and without notice, or that effectively provide for automatic cancellation due to deterioration in the borrower's creditworthiness.
For the purposes of point (m) of Article 36(1), the exposure value of a debt instrument that was purchased at a price lower than the amount owed by the debtor shall include the difference between the purchase price and the amount owed by the debtor.
For the purposes of point (m) of Article 36(1), the exposure value of a loan commitment given, a financial guarantee given or any other commitment given as referred to in point (b) of paragraph 1 of this Article shall be its nominal value, which shall represent the institution's maximum exposure to credit risk without taking account of any funded or unfunded credit protection. The nominal value of a loan commitment given shall be the undrawn amount that the institution has committed to lend and the nominal value of a financial guarantee given shall be the maximum amount the entity could have to pay if the guarantee is called on.
The nominal value referred to in the third subparagraph of this paragraph shall not take into account any specific credit risk adjustment, additional value adjustments in accordance with Articles 34 and 105, amounts deducted in accordance with point (m) of Article 36(1) or other own funds reductions related to the exposure.
For the purposes of point (m) of Article 36(1), the following exposures shall be classified as non-performing:
an exposure in respect of which a default is considered to have occurred in accordance with Article 178;
an exposure which is considered to be impaired in accordance with the applicable accounting framework;
an exposure under probation pursuant to paragraph 7, where additional forbearance measures are granted or where the exposure becomes more than 30 days past due;
an exposure in the form of a commitment that, were it drawn down or otherwise used, would likely not be paid back in full without realisation of collateral;
an exposure in form of a financial guarantee that is likely to be called by the guaranteed party, including where the underlying guaranteed exposure meets the criteria to be considered as non-performing.
For the purposes of point (a), where an institution has on-balance-sheet exposures to an obligor that are past due by more than 90 days and that represent more than 20 % of all on-balance-sheet exposures to that obligor, all on- and off-balance-sheet exposures to that obligor shall be considered to be non-performing.
Exposures that have not been subject to a forbearance measure shall cease to be classified as non-performing for the purposes of point (m) of Article 36(1) where all the following conditions are met:
the exposure meets the exit criteria applied by the institution for the discontinuation of the classification as impaired in accordance with the applicable accounting framework and of the classification as defaulted in accordance with Article 178;
the situation of the obligor has improved to the extent that the institution is satisfied that full and timely repayment is likely to be made;
the obligor does not have any amount past due by more than 90 days.
Non-performing exposures subject to forbearance measures shall cease to be classified as non-performing for the purposes of point (m) of Article 36(1) where all the following conditions are met:
the exposures have ceased to be in a situation that would lead to their classification as non-performing under paragraph 3;
at least one year has passed since the date on which the forbearance measures were granted and the date on which the exposures were classified as non-performing, whichever is later;
there is no past-due amount following the forbearance measures and the institution, on the basis of the analysis of the obligor's financial situation, is satisfied about the likelihood of the full and timely repayment of the exposure.
Full and timely repayment may be considered likely where the obligor has executed regular and timely payments of amounts equal to either of the following:
the amount that was past due before the forbearance measure was granted, where there were amounts past due;
the amount that has been written-off under the forbearance measures granted, where there were no amounts past due.
Where a non-performing exposure has ceased to be classified as non-performing pursuant to paragraph 6, such exposure shall be under probation until all the following conditions are met:
at least two years have passed since the date on which the exposure subject to forbearance measures was re-classified as performing;
regular and timely payments have been made during at least half of the period that the exposure would be under probation, leading to the payment of a substantial aggregate amount of principal or interest;
none of the exposures to the obligor is more than 30 days past due.
Article 47b
Forbearance measures
Forbearance measure is a concession by an institution towards an obligor that is experiencing or is likely to experience difficulties in meeting its financial commitments. A concession may entail a loss for the lender and shall refer to either of the following actions:
a modification of the terms and conditions of a debt obligation, where such modification would not have been granted had the obligor not experienced difficulties in meeting its financial commitments;
a total or partial refinancing of a debt obligation, where such refinancing would not have been granted had the obligor not experienced difficulties in meeting its financial commitments.
At least the following situations shall be considered forbearance measures:
new contract terms are more favourable to the obligor than the previous contract terms, where the obligor is experiencing or is likely to experience difficulties in meeting its financial commitments;
new contract terms are more favourable to the obligor than contract terms offered by the same institution to obligors with a similar risk profile at that time, where the obligor is experiencing or is likely to experience difficulties in meeting its financial commitments;
the exposure under the initial contract terms was classified as non-performing before the modification to the contract terms or would have been classified as non-performing in the absence of modification to the contract terms;
the measure results in a total or partial cancellation of the debt obligation;
the institution approves the exercise of clauses that enable the obligor to modify the terms of the contract and the exposure was classified as non-performing before the exercise of those clauses, or would be classified as non-performing were those clauses not exercised;
at or close to the time of the granting of debt, the obligor made payments of principal or interest on another debt obligation with the same institution, which was classified as a non-performing exposure or would have been classified as non-performing in the absence of those payments;
the modification to the contract terms involves repayments made by taking possession of collateral, where such modification constitutes a concession.
The following circumstances are indicators that forbearance measures may have been adopted:
the initial contract was past due by more than 30 days at least once during the three months prior to its modification or would be more than 30 days past due without modification;
at or close to the time of concluding the credit agreement, the obligor made payments of principal or interest on another debt obligation with the same institution that was past due by 30 days at least once during the three months prior to the granting of new debt;
the institution approves the exercise of clauses that enable the obligor to change the terms of the contract, and the exposure is 30 days past due or would be 30 days past due were those clauses not exercised.
Article 47c
Deduction for non-performing exposures
For the purposes of point (m) of Article 36(1), institutions shall determine the applicable amount of insufficient coverage separately for each non-performing exposure to be deducted from Common Equity Tier 1 items by subtracting the amount determined in point (b) of this paragraph from the amount determined in point (a) of this paragraph, where the amount referred to in point (a) exceeds the amount referred to in point (b):
the sum of:
the unsecured part of each non-performing exposure, if any, multiplied by the applicable factor referred to in paragraph 2;
the secured part of each non-performing exposure, if any, multiplied by the applicable factor referred to in paragraph 3;
the sum of the following items provided they relate to the same non-performing exposure:
specific credit risk adjustments;
additional value adjustments in accordance with Articles 34 and 105;
other own funds reductions;
for institutions calculating risk-weighted exposure amounts using the Internal Ratings Based Approach, the absolute value of the amounts deducted pursuant to point (d) of Article 36(1) which relate to non-performing exposures, where the absolute value attributable to each non-performing exposure is determined by multiplying the amounts deducted pursuant to point (d) of Article 36(1) by the contribution of the expected loss amount for the non-performing exposure to total expected loss amounts for defaulted or non-defaulted exposures, as applicable;
where a non-performing exposure is purchased at a price lower than the amount owed by the debtor, the difference between the purchase price and the amount owed by the debtor;
amounts written-off by the institution since the exposure was classified as non-performing.
The secured part of a non-performing exposure is that part of the exposure which, for the purpose of calculating own funds requirements pursuant to Title II of Part Three, is considered to be covered by a funded credit protection or unfunded credit protection or fully and completely secured by mortgages.
The unsecured part of a non-performing exposure corresponds to the difference, if any, between the value of the exposure as referred to in Article 47a(1) and the secured part of the exposure, if any.
For the purposes of point (a)(i) of paragraph 1, the following factors shall apply:
0,35 for the unsecured part of a non-performing exposure to be applied during the period between the first and the last day of the third year following its classification as non-performing;
1 for the unsecured part of a non-performing exposure to be applied as of the first day of the fourth year following its classification as non-performing.
For the purposes of point (a)(ii) of paragraph 1, the following factors shall apply:
0,25 for the secured part of a non-performing exposure to be applied during the period between the first and the last day of the fourth year following its classification as non-performing;
0,35 for the secured part of a non-performing exposure to be applied during the period between the first and the last day of the fifth year following its classification as non-performing;
0,55 for the secured part of a non-performing exposure to be applied during the period between the first and the last day of the sixth year following its classification as non-performing;
0,70 for the part of a non-performing exposure secured by immovable property pursuant to Title II of Part Three or that is a residential loan guaranteed by an eligible protection provider as referred to in Article 201, to be applied during the period between the first and the last day of the seventh year following its classification as non-performing;
0,80 for the part of a non-performing exposure secured by other funded or unfunded credit protection pursuant to Title II of Part Three to be applied during the period between the first and the last day of the seventh year following its classification as non-performing;
0,80 for the part of a non-performing exposure secured by immovable property pursuant to Title II of Part Three or that is a residential loan guaranteed by an eligible protection provider as referred to in Article 201, to be applied during the period between the first and the last day of the eighth year following its classification as non-performing;
1 for the part of a non-performing exposure secured by other funded or unfunded credit protection pursuant to Title II of Part Three to be applied as of the first day of the eighth year following its classification as non-performing;
0,85 for the part of a non-performing exposure secured by immovable property pursuant to Title II of Part Three or that is a residential loan guaranteed by an eligible protection provider as referred to in Article 201, to be applied during the period between the first and the last day of the ninth year following its classification as non-performing;
1 for the part of a non-performing exposure secured by immovable property pursuant to Title II of Part Three or that is a residential loan guaranteed by an eligible protection provider as referred to in Article 201, to be applied as of the first day of the tenth year following its classification as non-performing.
By way of derogation from paragraph 3 of this Article, the following factors shall apply to the part of the non-performing exposure guaranteed or insured by an official export credit agency or guaranteed or counter-guaranteed by an eligible protection provider referred to in points (a) to (e) of Article 201(1), unsecured exposures to which would be assigned a risk weight of 0 % under Chapter 2 of Title II of Part Three:
0 for the secured part of the non-performing exposure to be applied during the period between one year and seven years following its classification as non-performing; and
1 for the secured part of the non-performing exposure to be applied as of the first day of the eighth year following its classification as non-performing.
Those guidelines shall be issued in accordance with Article 16 of Regulation (EU) No 1093/2010.
By way of derogation from paragraph 3, where an exposure has, between two and six years following its classification as non-performing, been granted a forbearance measure, the factor applicable in accordance with paragraph 3 on the date on which the forbearance measure is granted shall be applicable for an additional period of one year.
This paragraph shall only apply in relation to the first forbearance measure that has been granted since the classification of the exposure as non-performing.
Sub-Section 2
Exemptions from and alternatives to deduction from Common Equity Tier 1 items
Article 48
Threshold exemptions from deduction from Common Equity Tier 1 items
In making the deductions required pursuant to points (c) and (i) of Article 36(1), institutions are not required to deduct the amounts of the items listed in points (a) and (b) of this paragraph which in aggregate are equal to or less than the threshold amount referred to in paragraph 2:
deferred tax assets that are dependent on future profitability and arise from temporary differences, and in aggregate are equal to or less than 10 % of the Common Equity Tier 1 items of the institution calculated after applying the following:
Articles 32 to 35;
points (a) to (h), points (k)(ii) to (v) and point (l) of Article 36(1), excluding deferred tax assets that rely on future profitability and arise from temporary differences.
where an institution has a significant investment in a financial sector entity, the direct, indirect and synthetic holdings of that institution of the Common Equity Tier 1 instruments of those entities that in aggregate are equal to or less than 10 % of the Common Equity Tier 1 items of the institution calculated after applying the following:
Article 32 to 35;
points (a) to (h), points (k)(ii) to (v) and point (l), of Article 36(1) excluding deferred tax assets that rely on future profitability and arise from temporary differences.
For the purposes of paragraph 1, the threshold amount shall be equal to the amount referred to in point (a) of this paragraph multiplied by the percentage referred to in point (b) of this paragraph:
the residual amount of Common Equity Tier 1 items after applying the adjustments and deductions in Articles 32 to 36 in full and without applying the threshold exemptions specified in this Article;
17,65 %.
For the purposes of paragraph 1, an institution shall determine the portion of deferred tax assets in the total amount of items that is not required to be deducted by dividing the amount specified in point (a) of this paragraph by the amount specified in point (b) of this paragraph:
the amount of deferred tax assets that are dependent on future profitability and arise from temporary differences, and in aggregate are equal to or less than 10 % of the Common Equity Tier 1 items of the institution;
the sum of the following:
the amount referred to in point (a);
the amount of direct, indirect and synthetic holdings by the institution of the own funds instruments of financial sector entities in which the institution has a significant investment, and in aggregate are equal to or less than 10 % of the Common Equity Tier 1 items of the institution.
The proportion of significant investments in the total amount of items that is not required to be deducted is equal to one minus the proportion referred to in the first subparagraph.
Article 49
Requirement for deduction where consolidation, supplementary supervision or institutional protection schemes are applied
For the purposes of calculating own funds on an individual basis, a sub-consolidated basis and a consolidated basis, where the competent authorities require or permit institutions to apply method 1, 2 or 3 of Annex I to Directive 2002/87/EC, the competent authorities may permit institutions not to deduct the holdings of own funds instruments of a financial sector entity in which the parent institution, parent financial holding company or parent mixed financial holding company or institution has a significant investment, provided that the conditions laid down in points (a) to (e) of this paragraph are met:
the financial sector entity is an insurance undertaking, a re-insurance undertaking or an insurance holding company;
that insurance undertaking, re-insurance undertaking or insurance holding company is included in the same supplementary supervision under Directive 2002/87/EC as the parent institution, parent financial holding company or parent mixed financial holding company or institution that has the holding;
the institution has received the prior permission of the competent authorities;
prior to granting the permission referred to in point (c), and on a continuing basis, the competent authorities are satisfied that the level of integrated management, risk management and internal control regarding the entities that would be included in the scope of consolidation under method 1, 2 or 3 is adequate;
the holdings in the entity belong to one of the following:
the parent credit institution;
the parent financial holding company;
the parent mixed financial holding company;
the institution;
a subsidiary of one of the entities referred to in points (i) to (iv) that is included in the scope of consolidation pursuant to Chapter 2 of Title II of Part One.
The method chosen shall be applied in a consistent manner over time.
Applying the approach referred to in the first subparagraph shall not entail disproportionate adverse effects on the whole or parts of the financial system in other Member States or in the Union as a whole forming or creating an obstacle to the functioning of the internal market.
This paragraph shall not apply when calculating own funds for the purposes of the requirements laid down in Articles 92a and 92b, which shall be calculated in accordance with the deduction framework set out in Article 72e(4).
Competent authorities may, for the purposes of calculating own funds on an individual or sub-consolidated basis permit institutions not to deduct holdings of own funds instruments in the following cases:
where an institution has a holding in another institution and the conditions referred to in points (i) to (v) are met:
the institutions fall within the same institutional protection scheme referred to in Article 113(7);
the competent authorities have granted the permission referred to in Article 113(7);
the conditions laid down in Article 113(7) are satisfied;
the institutional protection scheme draws up a consolidated balance sheet referred to in point (e) of Article 113(7) or, where it is not required to draw up consolidated accounts, an extended aggregated calculation that is, to the satisfaction of the competent authorities, equivalent to the provisions of Directive 86/635/EEC, which incorporates certain adaptations of the provisions of Directive 83/349/EEC or of Regulation (EC) No 1606/2002, governing the consolidated accounts of groups of credit institutions. The equivalence of that extended aggregated calculation shall be verified by an external auditor and in particular that the multiple use of elements eligible for the calculation of own funds as well as any inappropriate creation of own funds between the members of the institutional protection scheme is eliminated in the calculation. ►M8 The consolidated balance sheet or the extended aggregated calculation shall be reported to the competent authorities with the frequency set out in the implementing technical standards referred to in Article 430(7) ◄ ;
the institutions included in an institutional protection scheme meet together on a consolidated or extended aggregated basis the requirements laid down in Article 92 and carry out reporting of compliance with those requirements in accordance with Article 430. ◄ Within an institutional protection scheme the deduction of the interest owned by co-operative members or legal entities, which are not members of the institutional protection scheme, is not required, provided that the multiple use of elements eligible for the calculation of own funds as well as any inappropriate creation of own funds between the members of the institutional protection scheme and the minority shareholder, when it is an institution, is eliminated.
where a regional credit institution has a holding in its central or another regional credit institution and the conditions laid down in points (a)(i) to (v) are met.
EBA, EIOPA and ESMA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively.
Section 4
Common Equity Tier 1 capital
Article 50
Common Equity Tier 1 capital
The Common Equity Tier 1 capital of an institution shall consist of Common Equity Tier 1 items after the application of the adjustments required by Articles 32 to 35, the deductions pursuant to Article 36 and the exemptions and alternatives laid down in Articles 48, 49 and 79.
CHAPTER 3
Additional Tier 1 capital
Section 1
Additional Tier 1 items and instruments
Article 51
Additional Tier 1 items
Additional Tier 1 items shall consist of the following:
capital instruments, where the conditions laid down in Article 52(1) are met;
the share premium accounts related to the instruments referred to in point (a).
Instruments included under point (a) shall not qualify as Common Equity Tier 1 or Tier 2 items.
Article 52
Additional Tier 1 instruments
Capital instruments shall qualify as Additional Tier 1 instruments only if the following conditions are met:
the instruments are directly issued by an institution and fully paid up;
the instruments are not owned by any of the following:
the institution or its subsidiaries;
an undertaking in which the institution has a participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of that undertaking;
the acquisition of ownership of the instruments is not funded directly or indirectly by the institution;
the instruments rank below Tier 2 instruments in the event of the insolvency of the institution;
the instruments are neither secured nor subject to a guarantee that enhances the seniority of the claims by any of the following:
the institution or its subsidiaries;
the parent undertaking of the institution or its subsidiaries;
the parent financial holding company or its subsidiaries;
the mixed activity holding company or its subsidiaries;
the mixed financial holding company or its subsidiaries;
any undertaking that has close links with entities referred to in points (i) to (v);
the instruments are not subject to any arrangement, contractual or otherwise, that enhances the seniority of the claim under the instruments in insolvency or liquidation;
the instruments are perpetual and the provisions governing them include no incentive for the institution to redeem them;
where the instruments include one or more early redemption options including call options, the options are exercisable at the sole discretion of the issuer;
the instruments may be called, redeemed or repurchased only where the conditions laid down in Article 77 are met, and not before five years after the date of issuance except where the conditions laid down in Article 78(4) are met;
the provisions governing the instruments do not indicate explicitly or implicitly that the instruments would be called, redeemed or repurchased, as applicable, by the institution other than in the case of the insolvency or liquidation of the institution and the institution does not otherwise provide such an indication;
the institution does not indicate explicitly or implicitly that the competent authority would consent to a request to call, redeem or repurchase the instruments;
distributions under the instruments meet the following conditions:
they are paid out of distributable items;
the level of distributions made on the instruments will not be amended on the basis of the credit standing of the institution or its parent undertaking;
the provisions governing the instruments give the institution full discretion at all times to cancel the distributions on the instruments for an unlimited period and on a non-cumulative basis, and the institution may use such cancelled payments without restriction to meet its obligations as they fall due;
cancellation of distributions does not constitute an event of default of the institution;
the cancellation of distributions imposes no restrictions on the institution;
the instruments do not contribute to a determination that the liabilities of an institution exceed its assets, where such a determination constitutes a test of insolvency under applicable national law;
the provisions governing the instruments require that, upon the occurrence of a trigger event, the principal amount of the instruments be written down on a permanent or temporary basis or the instruments be converted to Common Equity Tier 1 instruments;
the provisions governing the instruments include no feature that could hinder the recapitalisation of the institution;
where the issuer is established in a third country and has been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union or where the issuer is established in a Member State, the law or contractual provisions governing the instruments require that, upon a decision by the resolution authority to exercise the write-down and conversion powers referred to in Article 59 of that Directive, the principal amount of the instruments is to be written down on a permanent basis or the instruments are to be converted to Common Equity Tier 1 instruments;
where the issuer is established in a third country and has not been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union, the law or contractual provisions governing the instruments require that, upon a decision by the relevant third-country authority, the principal amount of the instruments is to be written down on a permanent basis or the instruments are to be converted into Common Equity Tier 1 instruments;
where the issuer is established in a third country and has been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union or where the issuer is established in a Member State, the instruments may only be issued under, or be otherwise subject to the laws of a third country where, under those laws, the exercise of the write-down and conversion powers referred to in Article 59 of that Directive is effective and enforceable on the basis of statutory provisions or legally enforceable contractual provisions that recognise resolution or other write-down or conversion actions;
the instruments are not subject to set-off or netting arrangements that would undermine their capacity to absorb losses.
The condition set out in point (d) of the first subparagraph shall be deemed to be met notwithstanding the fact that the instruments are included in Additional Tier 1 or Tier 2 by virtue of Article 484(3), provided that they rank pari passu.
For the purposes of point (a) of the first subparagraph, only the part of a capital instrument that is fully paid up shall be eligible to qualify as an Additional Tier 1 instrument.
EBA shall develop draft regulatory technical standards to specify all the following:
the form and nature of incentives to redeem;
the nature of any write up of the principal amount of an Additional Tier 1 instrument following a write down of its principal amount on a temporary basis;
the procedures and timing for the following:
determining that a trigger event has occurred;
writing up the principal amount of an Additional Tier 1 instrument following a write down of its principal amount on a temporary basis;
features of instruments that could hinder the recapitalisation of the institution;
the use of special purpose entities for indirect issuance of own funds instruments.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 53
Restrictions on the cancellation of distributions on Additional Tier 1 instruments and features that could hinder the recapitalisation of the institution
For the purposes of points (l)(v) and (o) of Article 52(1), the provisions governing Additional Tier 1 instruments shall, in particular, not include the following:
a requirement for distributions on the instruments to be made in the event of a distribution being made on an instrument issued by the institution that ranks to the same degree as, or more junior than, an Additional Tier 1 instrument, including a Common Equity Tier 1 instrument;
a requirement for the payment of distributions on Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments to be cancelled in the event that distributions are not made on those Additional Tier 1 instruments;
an obligation to substitute the payment of interest or dividend by a payment in any other form. The institution shall not otherwise be subject to such an obligation.
Article 54
Write down or conversion of Additional Tier 1 instruments
For the purposes of point (n) of Article 52(1), the following provisions shall apply to Additional Tier 1 instruments:
a trigger event occurs when the Common Equity Tier 1 capital ratio of the institution referred to in point (a) of Article 92(1) falls below either of the following:
5,125 %;
a level higher than 5,125 %, where determined by the institution and specified in the provisions governing the instrument;
institutions may specify in the provisions governing the instrument one or more trigger events in addition to that referred to in point (a);
where the provisions governing the instruments require them to be converted into Common Equity Tier 1 instruments upon the occurrence of a trigger event, those provisions shall specify either of the following:
the rate of such conversion and a limit on the permitted amount of conversion;
a range within which the instruments will convert into Common Equity Tier 1 instruments;
where the provisions governing the instruments require their principal amount to be written down upon the occurrence of a trigger event, the write down shall reduce all the following:
the claim of the holder of the instrument in the insolvency or liquidation of the institution;
the amount required to be paid in the event of the call or redemption of the instrument;
the distributions made on the instrument;
where the Additional Tier 1 instruments have been issued by a subsidiary undertaking established in a third country, the 5,125 % or higher trigger referred to in point (a) shall be calculated in accordance with the national law of that third country or contractual provisions governing the instruments, provided that the competent authority, after consulting EBA, is satisfied that those provisions are at least equivalent to the requirements set out in this Article.
The aggregate amount of Additional Tier 1 instruments that is required to be written down or converted upon the occurrence of a trigger event shall be no less than the lower of the following:
the amount required to restore fully the Common Equity Tier 1 ratio of the institution to 5,125 %;
the full principal amount of the instrument.
When a trigger event occurs institutions shall do the following:
immediately inform the competent authorities;
inform the holders of the Additional Tier 1 instruments;
write down the principal amount of the instruments, or convert the instruments into Common Equity Tier 1 instruments without delay, but no later than within one month, in accordance with the requirement laid down in this Article.
Article 55
Consequences of the conditions for Additional Tier 1 instruments ceasing to be met
The following shall apply where, in the case of an Additional Tier 1 instrument, the conditions laid down in Article 52(1) cease to be met:
that instrument shall immediately cease to qualify as an Additional Tier 1 instrument;
the part of the share premium accounts that relates to that instrument shall immediately cease to qualify as an Additional Tier 1 item.
Section 2
Deductions from Additional Tier 1 items
Article 56
Deductions from Additional Tier 1 items
Institutions shall deduct the following from Additional Tier 1 items:
direct, indirect and synthetic holdings by an institution of own Additional Tier 1 instruments, including own Additional Tier 1 instruments that an institution could be obliged to purchase as a result of existing contractual obligations;
direct, indirect and synthetic holdings of the Additional Tier 1 instruments of financial sector entities with which the institution has reciprocal cross holdings that the competent authority considers to have been designed to inflate artificially the own funds of the institution;
the applicable amount determined in accordance with Article 60 of direct, indirect and synthetic holdings of the Additional Tier 1 instruments of financial sector entities, where an institution does not have a significant investment in those entities;
direct, indirect and synthetic holdings by the institution of the Additional Tier 1 instruments of financial sector entities where the institution has a significant investment in those entities, excluding underwriting positions held for five working days or fewer;
the amount of items required to be deducted from Tier 2 items pursuant to Article 66 that exceeds the Tier 2 items of the institution;
any tax charge relating to Additional Tier 1 items foreseeable at the moment of its calculation, except where the institution suitably adjusts the amount of Additional Tier 1 items insofar as such tax charges reduce the amount up to which those items may be applied to cover risks or losses.
Article 57
Deductions of holdings of own Additional Tier 1 instruments
For the purposes of point (a) of Article 56, institutions shall calculate holdings of own Additional Tier 1 instruments on the basis of gross long positions subject to the following exceptions:
institutions may calculate the amount of holdings of own Additional Tier 1 instruments on the basis of the net long position provided that both the following conditions are met:
the long and short positions are in the same underlying exposure and the short positions involve no counterparty risk;
either both the long and the short positions are held in the trading book or both are held in the non-trading book;
institutions shall determine the amount to be deducted for direct, indirect or synthetic holdings of index securities by calculating the underlying exposure to own Additional Tier 1 instruments in those indices;
institutions may net gross long positions in own Additional Tier 1 instruments resulting from holdings of index securities against short positions in own Additional Tier 1 instruments resulting from short positions in the underlying indices, including where those short positions involve counterparty risk, provided that both the following conditions are met:
the long and short positions are in the same underlying indices;
either both the long and the short positions are held in the trading book or both are held in the non-trading book;
Article 58
Deduction of holdings of Additional Tier 1 instruments of financial sector entities and where an institution has a reciprocal cross holding designed artificially to inflate own funds
Institutions shall make the deductions required by points (b), (c) and (d) of Article 56 in accordance with the following:
holdings of Additional Tier 1 instruments shall be calculated on the basis of the gross long positions;
Additional Tier 1 own-fund insurance items shall be treated as holdings of Additional Tier 1 instruments for the purposes of deduction.
Article 59
Deduction of holdings of Additional Tier 1 instruments of financial sector entities
Institutions shall make the deductions required by points (c) and (d) of Article 56 in accordance with the following:
they may calculate direct, indirect and synthetic holdings of Additional Tier 1 instruments of the financial sector entities on the basis of the net long position in the same underlying exposure provided that both the following conditions are met:
the maturity date of the short position is either the same as, or later than the maturity date of the long position or the residual maturity of the short position is at least one year;
either both the short position and the long position are held in the trading book or both are held in the non-trading book.
they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to the capital instruments of the financial sector entities in those indices.
Article 60
Deduction of holdings of Additional Tier 1 instruments where an institution does not have a significant investment in a financial sector entity
For the purposes of point (c) of Article 56, institutions shall calculate the applicable amount to be deducted by multiplying the amount referred to in point (a) of this paragraph by the factor derived from the calculation referred to in point (b) of this paragraph:
the aggregate amount by which the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of financial sector entities in which the institution does not have a significant investment exceeds 10 % of the Common Equity Tier 1 items of the institution calculated after applying the following:
Article 32 to 35;
points (a) to (g), points (k)(ii) to (v) and point (l) of Article 36(1), excluding deferred tax assets that rely on future profitability and arise from temporary differences;
Articles 44 and 45;
the amount of direct, indirect and synthetic holdings by the institution of the Additional Tier 1 instruments of those financial sector entities in which the institution does not have a significant investment divided by the aggregate amount of all direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of those financial sector entities.
The amount to be deducted pursuant to paragraph 1 shall be apportioned across all Additional Tier 1 instruments held. Institutions shall determine the amount of each Additional Tier 1 instrument to be deducted pursuant to paragraph 1 by multiplying the amount specified in point (a) of this paragraph by the proportion specified in point (b) of this paragraph:
the amount of holdings required to be deducted pursuant to paragraph 1;
the proportion of the aggregate amount of direct, indirect and synthetic holdings by the institution of the Additional Tier 1 instruments of financial sector entities in which the institution does not have a significant investment represented by each Additional Tier 1 instrument held.
Institutions shall determine the amount of each Additional Tier 1 instrument that is risk weighted pursuant to paragraph 4 by multiplying the amount specified in point (a) of this paragraph by the amount specified in point (b) of this paragraph:
the amount of holdings required to be risk weighted pursuant to paragraph 4;
the proportion resulting from the calculation in point (b) of paragraph 3.
Section 3
Additional Tier 1 capital
Article 61
Additional Tier 1 capital
The Additional Tier 1 capital of an institution shall consist of Additional Tier 1 items after the deduction of the items referred to in Article 56 and the application of Article 79.
CHAPTER 4
Tier 2 capital
Section 1
Tier 2 items and instruments
Article 62
Tier 2 items
Tier 2 items shall consist of the following:
capital instruments where the conditions set out in Article 63 are met, and to the extent specified in Article 64;
the share premium accounts related to instruments referred to in point (a);
for institutions calculating risk-weighted exposure amounts in accordance with Chapter 2 of Title II of Part Three, general credit risk adjustments, gross of tax effects, of up to 1,25 % of risk-weighted exposure amounts calculated in accordance with Chapter 2 of Title II of Part Three;
for institutions calculating risk-weighted exposure amounts under Chapter 3 of Title II of Part Three, positive amounts, gross of tax effects, resulting from the calculation laid down in Articles 158 and 159 up to 0,6 % of risk-weighted exposure amounts calculated under Chapter 3 of Title II of Part Three.
Items included under point (a) shall not qualify as Common Equity Tier 1 or Additional Tier 1 items.
Article 63
Tier 2 instruments
Capital instruments shall qualify as Tier 2 instruments, provided that the following conditions are met:
the instruments are directly issued by an institution and fully paid up;
the instruments are not owned by any of the following:
the institution or its subsidiaries;
an undertaking in which the institution has participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of that undertaking;
the acquisition of ownership of the instruments is not funded directly or indirectly by the institution;
the claim on the principal amount of the instruments under the provisions governing the instruments ranks below any claim from eligible liabilities instruments;
the instruments are not secured or are not subject to a guarantee that enhances the seniority of the claim by any of the following:
the institution or its subsidiaries;
the parent undertaking of the institution or its subsidiaries;
the parent financial holding company or its subsidiaries;
the mixed activity holding company or its subsidiaries;
the mixed financial holding company or its subsidiaries;
any undertaking that has close links with entities referred to in points (i) to (v);
the instruments are not subject to any arrangement that otherwise enhances the seniority of the claim under the instruments;
the instruments have an original maturity of at least five years;
the provisions governing the instruments do not include any incentive for their principal amount to be redeemed or repaid, as applicable by the institution prior to their maturity;
where the instruments include one or more early repayment options, including call options, the options are exercisable at the sole discretion of the issuer;
the instruments may be called, redeemed, repaid or repurchased early only where the conditions set out in Article 77 are met, and not before five years after the date of issuance, except where the conditions set out in Article 78(4) are met;
the provisions governing the instruments do not indicate explicitly or implicitly that the instruments would be called, redeemed, repaid or repurchased early, as applicable, by the institution other than in the case of the insolvency or liquidation of the institution and the institution does not otherwise provide such an indication;
the provisions governing the instruments do not give the holder the right to accelerate the future scheduled payment of interest or principal, other than in the case of the insolvency or liquidation of the institution;
the level of interest or dividends payments, as applicable, due on the instruments will not be amended on the basis of the credit standing of the institution or its parent undertaking;
where the issuer is established in a third country and has been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union or where the issuer is established in a Member State, the law or contractual provisions governing the instruments require that, upon a decision by the resolution authority to exercise the write-down and conversion powers referred to in Article 59 of that Directive, the principal amount of the instruments is to be written down on a permanent basis or the instruments are to be converted to Common Equity Tier 1 instruments;
where the issuer is established in a third country and has not been designated in accordance with Article 12 of Directive 2014/59/EU as a part of a resolution group the resolution entity of which is established in the Union, the law or contractual provisions governing the instruments require that, upon a decision by the relevant third-country authority, the principal amount of the instruments is to be written down on a permanent basis or the instruments are to be converted into Common Equity Tier 1 instruments;
where the issuer is established in a third country and has been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union or where the issuer is established in a Member State, the instruments may only be issued under, or be otherwise subject to the laws of a third country where, under those laws, the exercise of the write-down and conversion powers referred to in Article 59 of that Directive is effective and enforceable on the basis of statutory provisions or legally enforceable contractual provisions that recognise resolution or other write-down or conversion actions;
the instruments are not subject to set-off or netting arrangements that would undermine their capacity to absorb losses.
For the purposes of point (a) of the first paragraph, only the part of the capital instrument that is fully paid up shall be eligible to qualify as a Tier 2 instrument.
Article 64
Amortisation of Tier 2 instruments
The extent to which Tier 2 instruments qualify as Tier 2 items during the final five years of maturity of the instruments is calculated by multiplying the result derived from the calculation referred to in point (a) by the amount referred to in point (b) as follows:
the carrying amount of the instruments on the first day of the final five-year period of their contractual maturity divided by the number of days in that period;
the number of remaining days of contractual maturity of the instruments.
Article 65
Consequences of the conditions for Tier 2 instruments ceasing to be met
Where in the case of a Tier 2 instrument the conditions laid down in Article 63 cease to be met, the following shall apply:
that instrument shall immediately cease to qualify as a Tier 2 instrument;
the part of the share premium accounts that relate to that instrument shall immediately cease to qualify as Tier 2 items.
Section 2
Deductions from Tier 2 items
Article 66
Deductions from Tier 2 items
The following shall be deducted from Tier 2 items:
direct, indirect and synthetic holdings by an institution of own Tier 2 instruments, including own Tier 2 instruments that an institution could be obliged to purchase as a result of existing contractual obligations;
direct, indirect and synthetic holdings of the Tier 2 instruments of financial sector entities with which the institution has reciprocal cross holdings that the competent authority considers to have been designed to inflate artificially the own funds of the institution;
the applicable amount determined in accordance with Article 70 of direct, indirect and synthetic holdings of the Tier 2 instruments of financial sector entities, where an institution does not have a significant investment in those entities;
direct, indirect and synthetic holdings by the institution of the Tier 2 instruments of financial sector entities where the institution has a significant investment in those entities, excluding underwriting positions held for fewer than five working days;
the amount of items required to be deducted from eligible liabilities items pursuant to Article 72e that exceeds the eligible liabilities items of the institution.
Article 67
Deductions of holdings of own Tier 2 instruments
For the purposes of point (a) of Article 66, institutions shall calculate holdings on the basis of the gross long positions subject to the following exceptions:
institutions may calculate the amount of holdings on the basis of the net long position provided that both the following conditions are met:
the long and short positions are in the same underlying exposure and the short positions involve no counterparty risk;
either both the long and the short positions are held in the trading book or both are held in the non-trading book;
institutions shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to own Tier 2 instruments in those indices;
institutions may net gross long positions in own Tier 2 instruments resulting from holdings of index securities against short positions in own Tier 2 instruments resulting from short positions in the underlying indices, including where those short positions involve counterparty risk, provided that both the following conditions are met:
the long and short positions are in the same underlying indices;
either both the long and the short positions are held in the trading book or both are held in the non-trading book.
Article 68
Deduction of holdings of Tier 2 instruments of financial sector entities and where an institution has a reciprocal cross holding designed artificially to inflate own funds
Institutions shall make the deductions required by points (b), (c) and (d) of Article 66 in accordance with the following provisions:
holdings of Tier 2 instruments shall be calculated on the basis of the gross long positions;
holdings of Tier 2 own-fund insurance items and Tier 3 own-fund insurance items shall be treated as holdings of Tier 2 instruments for the purposes of deduction.
Article 69
Deduction of holdings of Tier 2 instruments of financial sector entities
Institutions shall make the deductions required by points (c) and (d) of Article 66 in accordance with the following:
they may calculate direct, indirect and synthetic holdings of Tier 2 instruments of the financial sector entities on the basis of the net long position in the same underlying exposure provided that both the following conditions are met:
the maturity date of the short position is either the same as, or later than the maturity date of the long position or the residual maturity of the short position is at least one year;
either both the long position and the short position are held in the trading book or both are held in the non-trading book;
they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by looking through to the underlying exposure to the capital instruments of the financial sector entities in those indices.
Article 70
Deduction of Tier 2 instruments where an institution does not have a significant investment in a relevant entity
For the purposes of point (c) of Article 66, institutions shall calculate the applicable amount to be deducted by multiplying the amount referred to in point (a) of this paragraph by the factor derived from the calculation referred to in point (b) of this paragraph:
the aggregate amount by which the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of financial sector entities in which the institution does not have a significant investment exceeds 10 % of the Common Equity Tier 1 items of the institution calculated after applying the following:
Articles 32 to 35;
points (a) to (g), points (k)(ii) to (v) and point (l) of Article 36(1), excluding the amount to be deducted for deferred tax assets that rely on future profitability and arise from temporary differences;
Articles 44 and 45;
the amount of direct, indirect and synthetic holdings by the institution of the Tier 2 instruments of financial sector entities in which the institution does not have a significant investment divided by the aggregate amount of all direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of those financial sector entities.
The amount to be deducted pursuant to paragraph 1 shall be apportioned across each Tier 2 instrument held. Institutions shall determine the amount to be deducted from each Tier 2 instrument that is deducted pursuant to paragraph 1 by multiplying the amount specified in point (a) of this paragraph by the proportion specified in point (b) of this paragraph:
the total amount of holdings required to be deducted pursuant to paragraph 1;
the proportion of the aggregate amount of direct, indirect and synthetic holdings by the institution of the Tier 2 instruments of financial sector entities in which the institution does not have a significant investment represented by each Tier 2 instrument held.
Institutions shall determine the amount of each Tier 2 instrument that is risk weighted pursuant to paragraph 4 by multiplying the amount specified in point (a) of this paragraph by the amount specified in point (b) of this paragraph:
the amount of holdings required to be risk weighted pursuant to paragraph 4;
the proportion resulting from the calculation in point (b) of paragraph 3.
Section 3
Tier 2 capital
Article 71
Tier 2 capital
The Tier 2 capital of an institution shall consist of the Tier 2 items of the institution after the deductions referred to in Article 66 and the application of Article 79.
CHAPTER 5
Own funds
Article 72
Own funds
The own funds of an institution shall consist of the sum of its Tier 1 capital and Tier 2 capital.
CHAPTER 5a
Eligible liabilities
Article 72a
Eligible liabilities items
Eligible liabilities items shall consist of the following, unless they fall into any of the categories of excluded liabilities laid down in paragraph 2 of this Article, and to the extent specified in Article 72c:
eligible liabilities instruments where the conditions set out in Article 72b are met, to the extent that they do not qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 items;
Tier 2 instruments with a residual maturity of at least one year, to the extent that they do not qualify as Tier 2 items in accordance with Article 64.
The following liabilities shall be excluded from eligible liabilities items:
covered deposits;
sight deposits and short term deposits with an original maturity of less than one year;
the part of eligible deposits from natural persons and micro, small and medium-sized enterprises which exceeds the coverage level referred to in Article 6 of Directive 2014/49/EU of the European Parliament and of the Council ( 19 );
deposits that would be eligible deposits from natural persons, micro, small and medium–sized enterprises if they were not made through branches located outside the Union of institutions established in the Union;
secured liabilities, including covered bonds and liabilities in the form of financial instruments used for hedging purposes that form an integral part of the cover pool and that in accordance with national law are secured in a manner similar to covered bonds, provided that all secured assets relating to a covered bond cover pool remain unaffected, segregated and with enough funding and excluding any part of a secured liability or a liability for which collateral has been pledged that exceeds the value of the assets, pledge, lien or collateral against which it is secured;
any liability that arises by virtue of the holding of client assets or client money including client assets or client money held on behalf of collective investment undertakings, provided that such a client is protected under the applicable insolvency law;
any liability that arises by virtue of a fiduciary relationship between the resolution entity or any of its subsidiaries (as fiduciary) and another person (as beneficiary), provided that such a beneficiary is protected under the applicable insolvency or civil law;
liabilities to institutions, excluding liabilities to entities that are part of the same group, with an original maturity of less than seven days;
liabilities with a remaining maturity of less than seven days, owed to:
systems or system operators designated in accordance with Directive 98/26/EC of the European Parliament and of the Council ( 20 );
participants in a system designated in accordance with Directive 98/26/EC and arising from the participation in such a system; or
third-country CCPs recognised in accordance with Article 25 of Regulation (EU) No 648/2012;
a liability to any of the following:
an employee in relation to accrued salary, pension benefits or other fixed remuneration, except for the variable component of the remuneration that is not regulated by a collective bargaining agreement, and except for the variable component of the remuneration of material risk takers as referred to in Article 92(2) of Directive 2013/36/EU;
a commercial or trade creditor where the liability arises from the provision to the institution or the parent undertaking of goods or services that are critical to the daily functioning of the institution's or parent undertaking's operations, including IT services, utilities and the rental, servicing and upkeep of premises;
tax and social security authorities, provided that those liabilities are preferred under the applicable law;
deposit guarantee schemes where the liability arises from contributions due in accordance with Directive 2014/49/EU;
liabilities arising from derivatives;
liabilities arising from debt instruments with embedded derivatives.
For the purposes of point (l) of the first subparagraph, debt instruments containing early redemption options exercisable at the discretion of the issuer or of the holder, and debt instruments with variable interests derived from a broadly used reference rate such as Euribor or Libor, shall not be considered as debt instruments with embedded derivatives solely because of such features.
Article 72b
Eligible liabilities instruments
Liabilities shall qualify as eligible liabilities instruments, provided that all the following conditions are met:
the liabilities are directly issued or raised, as applicable, by an institution and are fully paid up;
the liabilities are not owned by any of the following:
the institution or an entity included in the same resolution group;
an undertaking in which the institution has a direct or indirect participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of that undertaking;
the acquisition of ownership of the liabilities is not funded directly or indirectly by the resolution entity;
the claim on the principal amount of the liabilities under the provisions governing the instruments is wholly subordinated to claims arising from the excluded liabilities referred to in Article 72a(2); that subordination requirement shall be considered to be met in any of the following situations:
the contractual provisions governing the liabilities specify that in the event of normal insolvency proceedings as defined in point (47) of Article 2(1) of Directive 2014/59/EU, the claim on the principal amount of the instruments ranks below claims arising from any of the excluded liabilities referred to in Article 72a(2) of this Regulation;
the applicable law specifies that in the event of normal insolvency proceedings as defined in point (47) of Article 2(1) of Directive 2014/59/EU, the claim on the principal amount of the instruments ranks below claims arising from any of the excluded liabilities referred to in Article 72a(2) of this Regulation;
the instruments are issued by a resolution entity which does not have on its balance sheet any excluded liabilities as referred to in Article 72a(2) of this Regulation that rank pari passu or junior to eligible liabilities instruments;
the liabilities are neither secured, nor subject to a guarantee or any other arrangement that enhances the seniority of the claim by any of the following:
the institution or its subsidiaries;
the parent undertaking of the institution or its subsidiaries;
any undertaking that has close links with entities referred to in points (i) and (ii);
the liabilities are not subject to set-off or netting arrangements that would undermine their capacity to absorb losses in resolution;
the provisions governing the liabilities do not include any incentive for their principal amount to be called, redeemed or repurchased prior to their maturity or repaid early by the institution, as applicable, except in the cases referred to in Article 72c(3);
the liabilities are not redeemable by the holders of the instruments prior to their maturity, except in the cases referred to in Article 72c(2);
subject to Article 72c(3) and (4), where the liabilities include one or more early repayment options, including call options, the options are exercisable at the sole discretion of the issuer, except in the cases referred to in Article 72c(2);
the liabilities may only be called, redeemed, repaid or repurchased early where the conditions set out in Articles 77 and 78a are met;
the provisions governing the liabilities do not indicate explicitly or implicitly that the liabilities would be called, redeemed, repaid or repurchased early, as applicable by the resolution entity other than in the case of the insolvency or liquidation of the institution and the institution does not otherwise provide such an indication;
the provisions governing the liabilities do not give the holder 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;
the level of interest or dividend payments, as applicable, due on the liabilities is not amended on the basis of the credit standing of the resolution entity or its parent undertaking;
for instruments issued after 28 June 2021 the relevant contractual documentation and, where applicable, the prospectus related to the issuance explicitly refer to the possible exercise of the write-down and conversion powers in accordance with Article 48 of Directive 2014/59/EU.
For the purposes of point (a) of the first subparagraph, only the parts of liabilities that are fully paid up shall be eligible to qualify as eligible liabilities instruments.
For the purposes of point (d) of the first subparagraph of this Article, where some of the excluded liabilities referred to in Article 72a(2) are subordinated to ordinary unsecured claims under national insolvency law, inter alia, due to being held by a creditor who has close links with the debtor, by being or having been a shareholder, in a control or group relationship, a member of the management body or related to any of those persons, subordination shall not be assessed by reference to claims arising from such excluded liabilities.
For the purposes of Article 92b, references to the resolution entity in points (c), (k), (l) and (m) of the first subparagraph of this paragraph shall also be understood as references to an institution that is a material subsidiary of a non-EU G-SII.
In addition to the liabilities referred to in paragraph 2 of this Article, the resolution authority may permit liabilities to qualify as eligible liabilities instruments up to an aggregate amount that does not exceed 3,5 % of the total risk exposure amount calculated in accordance with Article 92(3) and (4), provided that:
all the conditions set out in paragraph 2 except for the condition set out in point (d) of the first subparagraph of paragraph 2 are met;
the liabilities rank pari passu with the lowest ranking excluded liabilities referred to in Article 72a(2) with the exception of the excluded liabilities that are subordinated to ordinary unsecured claims under national insolvency law referred to in the third subparagraph of paragraph 2 of this Article; and
the inclusion of those liabilities in eligible liabilities items would not give rise to a material risk of a successful legal challenge or of valid compensation claims as assessed by the resolution authority in relation to the principles referred to in point (g) of Article 34(1) and Article 75 of Directive 2014/59/EU.
The resolution authority may permit liabilities to qualify as eligible liabilities instruments in addition to the liabilities referred to in paragraph 2, provided that:
the institution is not permitted to include in eligible liabilities items liabilities referred to in paragraph 3;
all the conditions set out in paragraph 2, except for the condition set out in point (d) of the first subparagraph of paragraph 2, are met;
the liabilities rank pari passu or are senior to the lowest ranking excluded liabilities referred to in Article 72a(2), with the exception of the excluded liabilities subordinated to ordinary unsecured claims under national insolvency law referred to in the third subparagraph of paragraph 2 of this Article;
on the balance sheet of the institution, the amount of the excluded liabilities referred to in Article 72a(2) which rank pari passu or below those liabilities in insolvency does not exceed 5 % of the amount of the own funds and eligible liabilities of the institution;
the inclusion of those liabilities in eligible liabilities items would not give rise to a material risk of a successful legal challenge or of valid compensation claims as assessed by the resolution authority in relation to the principles referred to in point (g) of Article 34(1) and Article 75 of Directive 2014/59/EU.
EBA shall develop draft regulatory technical standards to specify:
the applicable forms and nature of indirect funding of eligible liabilities instruments;
the form and nature of incentives to redeem for the purposes of the condition set out in point (g) of the first subparagraph of paragraph 2 of this Article and Article 72c(3).
Those draft regulatory technical standards shall be fully aligned with the delegated act referred to in point (a) of Article 28(5) and in point (a) of Article 52(2).
EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 72c
Amortisation of eligible liabilities instruments
Eligible liabilities instruments with a residual maturity of less than one year shall not qualify as eligible liabilities items.
Article 72d
Consequences of the eligibility conditions ceasing to be met
Where, in the case of an eligible liabilities instrument, the applicable conditions set out in Article 72b cease to be met, the liabilities shall immediately cease to qualify as eligible liabilities instruments.
Liabilities referred to in Article 72b(2) may continue to count as eligible liabilities instruments as long as they qualify as eligible liabilities instruments under Article 72b(3) or (4).
Article 72e
Deductions from eligible liabilities items
Institutions that are subject to Article 92a shall deduct the following from eligible liabilities items:
direct, indirect and synthetic holdings by the institution of own eligible liabilities instruments, including own liabilities that that institution could be obliged to purchase as a result of existing contractual obligations;
direct, indirect and synthetic holdings by the institution of eligible liabilities instruments of G-SII entities with which the institution has reciprocal cross holdings that the competent authority considers to have been designed to artificially inflate the loss absorption and recapitalisation capacity of the resolution entity;
the applicable amount determined in accordance with Article 72i of direct, indirect and synthetic holdings of eligible liabilities instruments of G-SII entities, where the institution does not have a significant investment in those entities;
direct, indirect and synthetic holdings by the institution of eligible liabilities instruments of G-SII entities, where the institution has a significant investment in those entities, excluding underwriting positions held for five business days or fewer.
For the purposes of this Section, institutions may calculate the amount of holdings of the eligible liabilities instruments referred to in Article 72b(3) as follows:
where:
h |
= |
the amount of holdings of the eligible liabilities instruments referred to in Article 72b(3); |
i |
= |
the index denoting the issuing institution; |
Hi |
= |
the total amount of holdings of eligible liabilities of the issuing institution i referred to in Article 72b(3); |
li |
= |
the amount of liabilities included in eligible liabilities items by the issuing institution i within the limits specified in Article 72b(3) according to the latest disclosures by the issuing institution; and |
Li |
= |
the total amount of the outstanding liabilities of the issuing institution i referred to in Article 72b(3) according to the latest disclosures by the issuer. |
Where an EU parent institution or a parent institution in a Member State that is subject to Article 92a has direct, indirect or synthetic holdings of own funds instruments or eligible liabilities instruments of one or more subsidiaries which do not belong to the same resolution group as that parent institution, the resolution authority of that parent institution, after duly considering the opinion of the resolution authorities or relevant third-country authorities of any subsidiaries concerned, may permit the parent institution to deduct such holdings by deducting a lower amount specified by the resolution authority of that parent institution. That adjusted amount shall be at least equal to the amount (m) calculated as follows:
where:
i |
= |
the index denoting the subsidiary; |
OPi |
= |
the amount of own funds instruments issued by subsidiary i and held by the parent institution; |
LPi |
= |
the amount of eligible liabilities instruments issued by subsidiary i and held by the parent institution; |
β |
= |
percentage of own funds instruments and eligible liabilities instruments issued by subsidiary i and held by the parent undertaking, calculated as follows:
|
Oi |
= |
the amount of own funds of subsidiary i, not taking into account the deduction calculated in accordance with this paragraph; |
Li |
= |
the amount of eligible liabilities of subsidiary i, not taking into account the deduction calculated in accordance with this paragraph; |
ri |
= |
the ratio applicable to subsidiary i at the level of its resolution group in accordance with Article 92a(1), point (a), of this Regulation and Article 45c(3), first subparagraph, point (a), of Directive 2014/59/EU or, for third-country subsidiaries, an equivalent resolution requirement applicable to subsidiary i in the third country where it has its head office, insofar as that requirement is met with instruments that would be considered own funds or eligible liabilities under this Regulation; |
aRWAi |
= |
the total risk exposure amount of the G-SII entity i calculated in accordance with Article 92(3), taking into account the adjustments set out in Article 12a or, for third-country subsidiaries, calculated in accordance with the applicable local regulations; |
wi |
= |
the ratio applicable to subsidiary i at the level of its resolution group in accordance with Article 92a(1), point (b), of this Regulation and of Article 45c(3), first subparagraph, point (b), of Directive 2014/59/EU or, for third-country subsidiaries, an equivalent resolution requirement applicable to subsidiary i in the third country where it has its head office, insofar as that requirement is met with instruments that would be considered own funds or eligible liabilities under this Regulation; |
aLREi |
= |
the total exposure measure of the G-SII entity i calculated in accordance with Article 429(4) or, for third-country subsidiaries, calculated in accordance with the applicable local regulations. |
Where the parent institution is allowed to deduct the adjusted amount in accordance with the first subparagraph, the difference between the amount of holdings of own funds instruments and eligible liabilities instruments referred to in the first subparagraph and that adjusted amount shall be deducted by the subsidiary.
Article 72f
Deduction of holdings of own eligible liabilities instruments
For the purposes of point (a) of Article 72e(1), institutions shall calculate holdings on the basis of the gross long positions subject to the following exceptions:
institutions may calculate the amount of holdings on the basis of the net long position, provided that both the following conditions are met:
the long and short positions are in the same underlying exposure and the short positions involve no counterparty risk;
either both the long and the short positions are held in the trading book or both are held in the non-trading book;
institutions shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to own eligible liabilities instruments in those indices;
institutions may net gross long positions in own eligible liabilities instruments resulting from holdings of index securities against short positions in own eligible liabilities instruments resulting from short positions in underlying indices, including where those short positions involve counterparty risk, provided that both the following conditions are met:
the long and short positions are in the same underlying indices;
either both the long and the short positions are held in the trading book or both are held in the non-trading book.
Article 72g
Deduction base for eligible liabilities items
For the purposes of points (b), (c) and (d) of Article 72e(1), institutions shall deduct the gross long positions subject to the exceptions laid down in Articles 72h and 72i.
Article 72h
Deduction of holdings of eligible liabilities of other G-SII entities
Institutions not making use of the exception set out in Article 72j shall make the deductions referred to in points (c) and (d) of Article 72e(1) in accordance with the following:
they may calculate direct, indirect and synthetic holdings of eligible liabilities instruments on the basis of the net long position in the same underlying exposure, provided that both the following conditions are met:
the maturity date of the short position is either the same as, or later than the maturity date of the long position or the residual maturity of the short position is at least one year;
either both the long position and the short position are held in the trading book or both are held in the non-trading book;
they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by looking through to the underlying exposure to the eligible liabilities instruments in those indices.
Article 72i
Deduction of eligible liabilities where the institution does not have a significant investment in G-SII entities
For the purposes of point (c) of Article 72e(1), institutions shall calculate the applicable amount to be deducted by multiplying the amount referred to in point (a) of this paragraph by the factor derived from the calculation referred to in point (b) of this paragraph:
the aggregate amount by which the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1, Tier 2 instruments of financial sector entities and eligible liabilities instruments of G-SII entities in none of which the institution has a significant investment exceeds 10 % of the Common Equity Tier 1 items of the institution after applying the following:
Articles 32 to 35;
points (a) to (g), points (k)(ii) to (k)(v) and point (l) of Article 36(1), excluding the amount to be deducted for deferred tax assets that rely on future profitability and arise from temporary differences;
Articles 44 and 45;
the amount of direct, indirect and synthetic holdings by the institution of the eligible liabilities instruments of G-SII entities in which the institution does not have a significant investment divided by the aggregate amount of the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1, Tier 2 instruments of financial sector entities and eligible liabilities instruments of G-SII entities in none of which the resolution entity has a significant investment.
The amount to be deducted pursuant to paragraph 1 shall be apportioned across each eligible liabilities instrument of a G-SII entity held by the institution. Institutions shall determine the amount of each eligible liabilities instrument that is deducted pursuant to paragraph 1 by multiplying the amount specified in point (a) of this paragraph by the proportion specified in point (b) of this paragraph:
the amount of holdings required to be deducted pursuant to paragraph 1;
the proportion of the aggregate amount of direct, indirect and synthetic holdings by the institution of the eligible liabilities instruments of G-SII entities in which the institution does not have a significant investment represented by each eligible liabilities instrument held by the institution.
Article 72j
Trading book exception from deductions from eligible liabilities items
Institutions may decide not to deduct a designated part of their direct, indirect and synthetic holdings of eligible liabilities instruments, that in aggregate and measured on a gross long basis is equal to or less than 5 % of the Common Equity Tier 1 items of the institution after applying Articles 32 to 36, provided that all the following conditions are met:
the holdings are in the trading book;
the eligible liabilities instruments are held for no longer than 30 business days.
Article 72k
Eligible liabilities
The eligible liabilities of an institution shall consist of the eligible liabilities items of the institution after the deductions referred to in Article 72e.
Article 72l
Own funds and eligible liabilities
The own funds and eligible liabilities of an institution shall consist of the sum of its own funds and its eligible liabilities.
CHAPTER 6
General requirements for own funds and eligible liabilities
Article 73
Distributions on instruments
Competent authorities shall grant the prior permission referred to in paragraph 1 only where they consider all the following conditions to be met:
the ability of the institution to cancel payments under the instrument would not be adversely affected by the discretion referred to in paragraph 1, or by the form in which distributions could be made;
the ability of the capital instrument or of the liability to absorb losses would not be adversely affected by the discretion referred to in paragraph 1, or by the form in which distributions could be made;
the quality of the capital instrument or liability would not otherwise be reduced by the discretion referred to in paragraph 1, or by the form in which distributions could be made.
The competent authority shall consult the resolution authority regarding an institution's compliance with those conditions before granting the prior permission referred to in paragraph 1.
Paragraph 4 shall not apply where the institution is a reference entity in that broad market index unless both the following conditions are met:
the institution considers movements in that broad market index not to be significantly correlated to the credit standing of the institution, its parent institution or parent financial holding company or parent mixed financial holding company or parent mixed activity holding company;
the competent authority has not reached a different determination from that referred to in point (a).
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 74
Holdings of capital instruments issued by regulated financial sector entities that do not qualify as regulatory capital
Institutions shall not deduct from any element of own funds direct, indirect or synthetic holdings of capital instruments issued by a regulated financial sector entity that do not qualify as regulatory capital of that entity. Institutions shall apply risk weights to such holdings in accordance with Chapter 2 or 3 of Title II of Part Three, as applicable.
Article 75
Deduction and maturity requirements for short positions
The maturity requirements for short positions referred to in point (a) of Article 45, point (a) of Article 59, point (a) of Article 69 and point (a) of Article 72h shall be considered to be met in respect of positions held where all the following conditions are met:
the institution has the contractual right to sell on a specific future date to the counterparty providing the hedge the long position that is being hedged;
the counterparty providing the hedge to the institution is contractually obliged to purchase from the institution on that specific future date the long position referred to in point (a).
Article 76
Index holdings of capital instruments and of liabilities
For the purposes of point (a) of Article 42, point (a) of Article 45, point (a) of Article 57, point (a) of Article 59, point (a) of Article 67, point (a) of Article 69, point (a) of Article 72f and point (a) of Article 72h, institutions may reduce the amount of a long position in a capital instrument or in a liability by the portion of an index that is made up of the same underlying exposure that is being hedged, provided that all the following conditions are met:
either both the long position being hedged and the short position in an index used to hedge that long position are held in the trading book or both are held in the non-trading book;
the positions referred to in point (a) are held at fair value on the balance sheet of the institution;
the short position referred to in point (a) qualifies as an effective hedge under the internal control processes of the institution;
the competent authorities assess the adequacy of the internal control processes referred to in point (c) on at least an annual basis and are satisfied with their continuing appropriateness.
Where the competent authority has granted its prior permission, an institution may use a conservative estimate of the underlying exposure of the institution to capital instruments or to liabilities included in indices as an alternative to an institution calculating its exposure to the items referred to in one or more of the following points:
own Common Equity Tier 1, Additional Tier 1, Tier 2 and eligible liabilities instruments included in indices;
Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of financial sector entities, included in indices;
eligible liabilities instruments of institutions, included in indices.
EBA shall develop draft regulatory technical standards to specify:
when an estimate used as an alternative to the calculation of underlying exposure referred to in paragraph 2 is sufficiently conservative;
the meaning of operationally burdensome for the purposes of paragraph 3.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 77
Conditions for reducing own funds and eligible liabilities
An institution shall obtain the prior permission of the competent authority to do any of the following:
reduce, redeem or repurchase Common Equity Tier 1 instruments issued by the institution in a manner that is permitted under applicable national law;
reduce, distribute or reclassify as another own funds item the share premium accounts related to own funds instruments;
effect the call, redemption, repayment or repurchase of Additional Tier 1 or Tier 2 instruments prior to the date of their contractual maturity.
Article 78
Supervisory permission to reduce own funds
The competent authority shall grant permission for an institution to reduce, call, redeem, repay or repurchase Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments, or to reduce, distribute or reclassify related share premium accounts, where either of the following conditions is met:
before or at the same time as any of the actions referred to in Article 77(1), the institution replaces the instruments or the related share premium accounts referred to in Article 77(1) with own funds instruments of equal or higher quality at terms that are sustainable for the income capacity of the institution;
the institution has demonstrated to the satisfaction of the competent authority that the own funds and eligible liabilities of the institution would, following the action referred to in Article 77(1) of this Regulation, exceed the requirements laid down in this Regulation and in Directives 2013/36/EU and 2014/59/EU by a margin that the competent authority considers necessary.
Where an institution provides sufficient safeguards as to its capacity to operate with own funds above the amounts required in this Regulation and in Directive 2013/36/EU, the competent authority may grant that institution a general prior permission to take any of the actions set out in Article 77(1) of this Regulation, subject to criteria that ensure that any such future action will be in accordance with the conditions set out in points (a) and (b) of this paragraph. That general prior permission shall be granted only for a specified period, which shall not exceed one year, after which it may be renewed. The general prior permission shall be granted for a certain predetermined amount, which shall be set by the competent authority. ►C7 In the case of Common Equity Tier 1 instruments, that predetermined amount shall not exceed 3 % of the relevant issue and shall not exceed 10 % of the amount by which Common Equity Tier 1 capital exceeds the sum of the Common Equity Tier 1 capital requirements laid down in this Regulation, in Directives 2013/36/EU and 2014/59/EU and a margin that the competent authority considers necessary. ◄ In the case of Additional Tier 1 or Tier 2 instruments, that predetermined amount shall not exceed 10 % of the relevant issue and shall not exceed 3 % of the total amount of outstanding Additional Tier 1 or Tier 2 instruments, as applicable.
Competent authorities shall withdraw the general prior permission where an institution breaches any of the criteria provided for the purposes of that permission.
Competent authorities may permit institutions to call, redeem, repay or repurchase Additional Tier 1 or Tier 2 instruments or related share premium accounts during the five years following their date of issuance where the conditions set out in paragraph 1 and one of the following conditions is met:
there is a change in the regulatory classification of those instruments that would be likely to result in their exclusion from own funds or reclassification as own funds of lower quality, and both the following conditions are met:
the competent authority considers such a change to be sufficiently certain;
the institution demonstrates to the satisfaction of the competent authority that the regulatory reclassification of those instruments was not reasonably foreseeable at the time of their issuance;
there is a change in the applicable tax treatment of those instruments which the institution demonstrates to the satisfaction of the competent authority is material and was not reasonably foreseeable at the time of their issuance;
the instruments and related share premium accounts are grandfathered under Article 494b;
before or at the same time as the action referred to in Article 77(1), the institution replaces the instruments or related share premium accounts referred to in Article 77(1) with own funds instruments of equal or higher quality at terms that are sustainable for the income capacity of the institution and the competent authority has permitted that action on the basis of the determination that it would be beneficial from a prudential point of view and justified by exceptional circumstances;
the Additional Tier 1 or Tier 2 instruments are repurchased for market making purposes.
EBA shall develop draft regulatory technical standards to specify the following:
the meaning of ‘sustainable for the income capacity of the institution’;
the appropriate bases of limitation of redemption referred to in paragraph 3;
the process including the limits and procedures for granting approval in advance by competent authorities for an action listed in Article 77(1), and data requirements for an application by an institution for the permission of the competent authority to carry out an action listed therein, including the process to be applied in the case of redemption of shares issued to members of cooperative societies, and the time period for processing such an application.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 78a
Permission to reduce eligible liabilities instruments
The resolution authority shall grant permission for an institution to call, redeem, repay or repurchase eligible liabilities instruments where one of the following conditions is met:
before or at the same time as any of the actions referred to in Article 77(2), the institution replaces the eligible liabilities instruments with own funds or eligible liabilities instruments of equal or higher quality at terms that are sustainable for the income capacity of the institution;
the institution has demonstrated to the satisfaction of the resolution authority that the own funds and eligible liabilities of the institution would, following the action referred to in Article 77(2) of this Regulation, exceed the requirements for own funds and eligible liabilities laid down in this Regulation and in Directives 2013/36/EU and 2014/59/EU by a margin that the resolution authority, in agreement with the competent authority, considers necessary;
the institution has demonstrated to the satisfaction of the resolution authority that the partial or full replacement of the eligible liabilities with own funds instruments is necessary to ensure compliance with the own funds requirements laid down in this Regulation and in Directive 2013/36/EU for continuing authorisation.
Where an institution provides sufficient safeguards as to its capacity to operate with own funds and eligible liabilities above the amount of the requirements laid down in this Regulation and in Directives 2013/36/EU and 2014/59/EU, the resolution authority, after consulting the competent authority, may grant that institution a general prior permission to effect calls, redemptions, repayments or repurchases of eligible liabilities instruments, subject to criteria that ensure that any such future action will be in accordance with the conditions set out in points (a) and (b) of this paragraph. That general prior permission shall be granted only for a specified period, which shall not exceed one year, after which it may be renewed. The general prior permission shall be granted for a certain predetermined amount, which shall be set by the resolution authority. Resolution authorities shall inform the competent authorities about any general prior permission granted.
The resolution authority shall withdraw the general prior permission where an institution breaches any of the criteria provided for the purposes of that permission.
EBA shall develop draft regulatory technical standards to specify the following:
the process of cooperation between the competent authority and the resolution authority;
the procedure, including the time limits and information requirements, for granting the permission in accordance with the first subparagraph of paragraph 1;
the procedure, including the time limits and information requirements, for granting the general prior permission in accordance with the second subparagraph of paragraph 1;
the meaning of ‘sustainable for the income capacity of the institution’.
For the purposes of point (d) of the first subparagraph of this paragraph, the draft regulatory technical standards shall be fully aligned with the delegated act referred to in Article 78.
EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 79
Temporary waiver from deduction from own funds and eligible liabilities
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 79a
Assessment of compliance with the conditions for own funds and eligible liabilities instruments
Institutions shall have regard to the substantial features of instruments and not only their legal form when assessing compliance with the requirements laid down in Part Two. The assessment of the substantial features of an instrument shall take into account all arrangements related to the instruments, even where those are not explicitly set out in the terms and conditions of the instruments themselves, for the purpose of determining that the combined economic effects of such arrangements are compliant with the objective of the relevant provisions.
Article 80
Continuing review of the quality of own funds and eligible liabilities instruments
Competent authorities shall, without delay and upon request by EBA, forward all information to EBA that EBA considers relevant concerning new capital instruments or new types of liabilities issued in order to enable EBA to monitor the quality of own funds and eligible liabilities instruments issued by institutions across the Union.
A notification shall include the following:
a detailed explanation of the nature and extent of the shortfall identified;
technical advice on the action by the Commission that EBA considers to be necessary;
significant developments in the methodology of EBA for stress testing the solvency of institutions.
EBA shall provide technical advice to the Commission on any significant changes it considers to be required to the definition of own funds and eligible liabilities as a result of any of the following:
relevant developments in market standards or practice;
changes in relevant legal or accounting standards;
significant developments in the methodology of EBA for stress testing the solvency of institutions.
TITLE II
MINORITY INTEREST AND ADDITIONAL TIER 1 AND TIER 2 INSTRUMENTS ISSUED BY SUBSIDIARIES
Article 81
Minority interests that qualify for inclusion in consolidated Common Equity Tier 1 capital
Minority interests shall comprise the sum of Common Equity Tier 1 items of a subsidiary where the following conditions are met:
the subsidiary is one of the following:
an institution;
an undertaking that is subject by virtue of applicable national law to the requirements of this Regulation and of Directive 2013/36/EU;
an intermediate financial holding company or intermediate mixed financial holding company that is subject to the requirements of this Regulation on a sub‐consolidated basis, or an intermediate investment holding company that is subject to the requirements of Regulation (EU) 2019/2033 on a consolidated basis;
an investment firm;
an intermediate financial holding company in a third country, provided that that intermediate financial holding company is subject to prudential requirements as stringent as those applied to credit institutions of that third country and provided that the Commission has adopted a decision in accordance with Article 107(4) determining that those prudential requirements are at least equivalent to those of this Regulation;
the subsidiary is included fully in the consolidation pursuant to Chapter 2 of Title II of Part One;
the Common Equity Tier 1 items, referred to in the introductory part of this paragraph, are owned by persons other than the undertakings included in the consolidation pursuant to Chapter 2 of Title II of Part One.
Article 82
Qualifying Additional Tier 1, Tier 1, Tier 2 capital and qualifying own funds
Qualifying Additional Tier 1, Tier 1, Tier 2 capital and qualifying own funds shall comprise the minority interest, Additional Tier 1 or Tier 2 instruments, as applicable, plus the related share premium accounts, of a subsidiary where the following conditions are met:
the subsidiary is one of the following:
an institution;
an undertaking that is subject by virtue of applicable national law to the requirements of this Regulation and of Directive 2013/36/EU;
an intermediate financial holding company or intermediate mixed financial holding company that is subject to the requirements of this Regulation on a sub‐consolidated basis, or an intermediate investment holding company that is subject to the requirements of Regulation (EU) 2019/2033 on a consolidated basis;
an investment firm;
an intermediate financial holding company in a third country, provided that that intermediate financial holding company is subject to prudential requirements as stringent as those applied to credit institutions of that third country and provided that the Commission has adopted a decision in accordance with Article 107(4) determining that those prudential requirements are at least equivalent to those of this Regulation;
the subsidiary is included fully in the scope of consolidation pursuant to Chapter 2 of Title II of Part One;
the Common Equity Tier 1 items, Additional Tier 1 items and Tier 2 items referred to in the introductory part of this paragraph, are owned by persons other than the undertakings included in the consolidation pursuant to Chapter 2 of Title II of Part One.
Article 83
Qualifying Additional Tier 1 and Tier 2 capital issued by a special purpose entity
Additional Tier 1 and Tier 2 instruments issued by a special purpose entity, and the related share premium accounts, are included until 31 December 2021 in qualifying Additional Tier 1, Tier 1 or Tier 2 capital or qualifying own funds, as applicable, only where the following conditions are met:
the special purpose entity issuing those instruments is included fully in the consolidation pursuant to Chapter 2 of Title II of Part One;
the instruments, and the related share premium accounts, are included in qualifying Additional Tier 1 capital only where the conditions laid down in Article 52(1) are satisfied;
the instruments, and the related share premium accounts, are included in qualifying Tier 2 capital only where the conditions laid down in Article 63 are satisfied;
the only asset of the special purpose entity is its investment in the own funds of the parent undertaking or a subsidiary thereof that is included fully in the consolidation pursuant to Chapter 2 of Title II of Part One, the form of which satisfies the relevant conditions laid down in Articles 52(1) or 63, as applicable.
Where the competent authority considers the assets of a special purpose entity other than its investment in the own funds of the parent undertaking or a subsidiary thereof that is included in the scope of consolidation pursuant to Chapter 2 of Title II of Part One, to be minimal and insignificant for such an entity, the competent authority may waive the condition specified in point (d) of the first subparagraph.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 84
Minority interests included in consolidated Common Equity Tier 1 capital
Institutions shall determine the amount of minority interests of a subsidiary that is included in consolidated Common Equity Tier 1 capital by subtracting from the minority interests of that undertaking the result of multiplying the amount referred to in point (a) by the percentage referred to in point (b) as follows:
the Common Equity Tier 1 capital of the subsidiary minus the lower of the following:
the amount of Common Equity Tier 1 capital of that subsidiary required to meet the following:
the amount of consolidated Common Equity Tier 1 capital that relates to that subsidiary that is required on a consolidated basis to meet the sum of the requirement laid down in point (a) of Article 92(1) of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, the combined buffer requirement defined in point (6) of Article 128 of that Directive, and any additional local supervisory regulations in third countries insofar as those requirements are to be met by Common Equity Tier 1 capital;
the minority interests of the subsidiary expressed as a percentage of all Common Equity Tier 1 items of that undertaking.
An institution may choose not to undertake this calculation for a subsidiary referred to in Article 81(1). Where an institution takes such a decision, the minority interest of that subsidiary may not be included in consolidated Common Equity Tier 1 capital.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Competent authorities may grant a waiver from the application of this Article to a parent financial holding company that satisfies all the following conditions:
its principal activity is to acquire holdings;
it is subject to prudential supervision on a consolidated basis;
it consolidates a subsidiary institution in which it has only a minority holding by virtue of the control relationship defined in Article 1 of Directive 83/349/EEC;
more than 90 % of the consolidated required Common Equity Tier 1 capital arises from the subsidiary institution referred to in point c) calculated on a sub-consolidated basis.
Where, after 28 June 2013, a parent financial holding company that meets the conditions laid down in the first subparagraph becomes a parent mixed financial holding company, competent authorities may grant the waiver referred to in the first subparagraph to that parent mixed financial holding company provided that it meets the conditions laid down in that subparagraph.
Article 85
Qualifying Tier 1 instruments included in consolidated Tier 1 capital
Institutions shall determine the amount of qualifying Tier 1 capital of a subsidiary that is included in consolidated own funds by subtracting from the qualifying Tier 1 capital of that undertaking the result of multiplying the amount referred to in point (a) by the percentage referred to in point (b) as follows:
the Tier 1 capital of the subsidiary minus the lower of the following:
the amount of Tier 1 capital of the subsidiary required to meet the following:
the amount of consolidated Tier 1 capital that relates to the subsidiary that is required on a consolidated basis to meet the sum of the requirement laid down in point (b) of Article 92(1) of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, the combined buffer requirement defined in point (6) of Article 128 of that Directive, and any additional local supervisory regulations in third countries insofar as those requirements are to be met by Tier 1 Capital;
the qualifying Tier 1 capital of the subsidiary expressed as a percentage of all Common Equity Tier 1 and Additional Tier 1 items of that undertaking.
An institution may choose not to undertake this calculation for a subsidiary referred to in Article 81(1). Where an institution takes such a decision, the qualifying Tier 1 capital of that subsidiary may not be included in consolidated Tier 1 capital.
Article 86
Qualifying Tier 1 capital included in consolidated Additional Tier 1 capital
Without prejudice to Article 84 (5) or (6), institutions shall determine the amount of qualifying Tier 1 capital of a subsidiary that is included in consolidated Additional Tier 1 capital by subtracting from the qualifying Tier 1 capital of that undertaking included in consolidated Tier 1 capital the minority interests of that undertaking that are included in consolidated Common Equity Tier 1 capital.
Article 87
Qualifying own funds included in consolidated own funds
Institutions shall determine the amount of qualifying own funds of a subsidiary that is included in consolidated own funds by subtracting from the qualifying own funds of that undertaking the result of multiplying the amount referred to in point (a) by the percentage referred to in point (b) as follows:
the own funds of the subsidiary minus the lower of the following:
the amount of own funds of the subsidiary required to meet the following:
the amount of own funds that relates to the subsidiary that is required on a consolidated basis to meet the sum of the requirement laid down in point (c) of Article 92(1) of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, the combined buffer requirement defined in point (6) of Article 128 of that Directive, and any additional local supervisory own funds requirement in third countries;
the qualifying own funds of the undertaking, expressed as a percentage of the sum of all the Common Equity Tier 1 items, Additional Tier 1 items and Tier 2 items, excluding the amounts referred to in points (c) and (d) of Article 62, of that undertaking.
An institution may choose not to undertake this calculation for a subsidiary referred to in Article 81(1). Where an institution takes such a decision, the qualifying own funds of that subsidiary may not be included in consolidated own funds.
Article 88
Qualifying own funds instruments included in consolidated Tier 2 capital
Without prejudice to Article 84(5) or (6), institutions shall determine the amount of qualifying own funds of a subsidiary that is included in consolidated Tier 2 capital by subtracting from the qualifying own funds of that undertaking that are included in consolidated own funds the qualifying Tier 1 capital of that undertaking that is included in consolidated Tier 1 capital.
Article 88a
Qualifying eligible liabilities instruments
Liabilities issued by a subsidiary established in the Union that belongs to the same resolution group as the resolution entity shall qualify for inclusion in the consolidated eligible liabilities instruments of an institution subject to Article 92a, provided that all the following conditions are met:
they are issued in accordance with point (a) of Article 45f(2) of Directive 2014/59/EU;
they are bought by an existing shareholder that is not part of the same resolution group as long as the exercise of the write-down or conversion powers in accordance with Articles 59 to 62 of Directive 2014/59/EU does not affect the control of the subsidiary by the resolution entity;
they do not exceed the amount determined by subtracting the amount referred to in point (i) from the amount referred to in point (ii):
the sum of the liabilities issued to and bought by the resolution entity either directly or indirectly through other entities in the same resolution group and the amount of own funds instruments issued in accordance with point (b) of Article 45f(2) of Directive 2014/59/EU;
the amount required in accordance with Article 45f(1) of Directive 2014/59/EU.
TITLE III
QUALIFYING HOLDINGS OUTSIDE THE FINANCIAL SECTOR
Article 89
Risk weighting and prohibition of qualifying holdings outside the financial sector
A qualifying holding, the amount of which exceeds 15 % of the eligible capital of the institution, in an undertaking which is not one of the following shall be subject to the provisions laid down in paragraph 3:
a financial sector entity;
an undertaking, that is not a financial sector entity, carrying on activities which the competent authority considers to be any of the following:
a direct extension of banking;
ancillary to banking;
leasing, factoring, the management of unit trusts, the management of data processing services or any other similar activity.
Competent authorities shall apply the requirements laid down in point (a) or (b) to qualifying holdings of institutions referred to in paragraphs 1 and 2:
for the purpose of calculating the capital requirement in accordance with Part Three, institutions shall apply a risk weight of 1 250 % to the greater of the following:
the amount of qualifying holdings referred to in paragraph 1 in excess of 15 % of eligible capital;
the total amount of qualifying holdings referred to in paragraph 2 that exceed 60 % of the eligible capital of the institution;
the competent authorities shall prohibit institutions from having qualifying holdings referred to in paragraphs 1 and 2 the amount of which exceeds the percentages of eligible capital laid down in those paragraphs.
Competent authorities shall publish their choice of (a) or (b).
For the purposes of point (b) of paragraph 1, EBA shall issue guidelines specifying the following concepts:
activities that are a direct extension of banking;
activities ancillary to banking;
similar activities.
Those guidelines shall be adopted in accordance with Article 16 of Regulation (EU) No 1093/2010.
Article 90
Alternative to 1 250 % risk weight
As an alternative to applying a 1 250 % risk weight to the amounts in excess of the limits specified in Article 89(1) and (2), institutions may deduct those amounts from Common Equity Tier 1 items in accordance with point (k) of Article 36(1).
Article 91
Exceptions
Shares of undertakings not referred to in points (a) and (b) of Article 89(1) shall not be included in calculating the eligible capital limits specified in that Article where any of the following conditions is met:
those shares are held temporarily during a financial assistance operation as referred to in Article 79;
the holding of those shares is an underwriting position held for five working days or fewer;
those shares are held in the own name of the institution and on behalf of others.
PART THREE
CAPITAL REQUIREMENTS
TITLE I
GENERAL REQUIREMENTS, VALUATION AND REPORTING
CHAPTER 1
Required level of own funds
Section 1
Own funds requirements for institutions
Article 92
Own funds requirements
Subject to Articles 93 and 94, institutions shall at all times satisfy the following own funds requirements:
a Common Equity Tier 1 capital ratio of 4,5 %;
a Tier 1 capital ratio of 6 %;
a total capital ratio of 8 %;
a leverage ratio of 3 %.
A G-SII shall meet the leverage ratio buffer requirement with Tier 1 capital only. Tier 1 capital that is used to meet the leverage ratio buffer requirement shall not be used towards meeting any of the leverage based requirements set out in this Regulation and in Directive 2013/36/EU, unless explicitly otherwise provided therein.
Where a G-SII does not meet the leverage ratio buffer requirement, it shall be subject to the capital conservation requirement in accordance with Article 141b of Directive 2013/36/EU.
Where a G-SII does not meet at the same time the leverage ratio buffer requirement and the combined buffer requirement as defined in point (6) of Article 128 of Directive 2013/36/EU, it shall be subject to the higher of the capital conservation requirements in accordance with Articles 141 and 141b of that Directive.
Institutions shall calculate their capital ratios as follows:
the Common Equity Tier 1 capital ratio is the Common Equity Tier 1 capital of the institution expressed as a percentage of the total risk exposure amount;
the Tier 1 capital ratio is the Tier 1 capital of the institution expressed as a percentage of the total risk exposure amount;
the total capital ratio is the own funds of the institution expressed as a percentage of the total risk exposure amount.
Total risk exposure amount shall be calculated as the sum of points (a) to (f) of this paragraph after taking into account the provisions laid down in paragraph 4:
the risk-weighted exposure amounts for credit risk and dilution risk, calculated in accordance with Title II and Article 379, in respect of all the business activities of an institution, excluding risk-weighted exposure amounts from the trading book business of the institution;
the own funds requirements for the trading-book business of an institution for the following:
market risk as determined in accordance with Title IV of this Part, excluding the approaches set out in Chapters 1a and 1b of that Title;
large exposures exceeding the limits specified in Articles 395 to 401, to the extent that an institution is permitted to exceed those limits, as determined in accordance with Part Four;
the own funds requirements for market risk as determined in Title IV of this Part, excluding the approaches set out in Chapters 1a and 1b of that Title, for all business activities that are subject to foreign exchange risk or commodity risk;
the own funds requirements calculated in accordance with Title V of this Part, with the exception of Article 379 for settlement risk;
the own funds requirements calculated in accordance with Title VI for credit valuation adjustment risk of OTC derivative instruments other than credit derivatives recognised to reduce risk-weighted exposure amounts for credit risk;
the own funds requirements determined in accordance with Title III for operational risk;
the risk-weighted exposure amounts determined in accordance with Title II for counterparty risk arising from the trading book business of the institution for the following types of transactions and agreements:
contracts listed in Annex II and credit derivatives;
repurchase transactions, securities or commodities lending or borrowing transactions based on securities or commodities;
margin lending transactions based on securities or commodities;
long settlement transactions.
The following provisions shall apply in the calculation of the total risk exposure amount referred to in paragraph 3:
the own funds requirements referred to in points (c), (d) and (e) of that paragraph shall include those arising from all the business activities of an institution;
institutions shall multiply the own funds requirements set out in points (b) to (e) of that paragraph by 12,5.
Article 92a
Requirements for own funds and eligible liabilities for G-SIIs
Subject to Articles 93 and 94 and to the exceptions set out in paragraph 2 of this Article, institutions identified as resolution entities and that are G-SII entities shall at all times satisfy the following requirements for own funds and eligible liabilities:
a risk-based ratio of 18 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total risk exposure amount calculated in accordance with Article 92(3) and (4);
a non-risk-based ratio of 6,75 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total exposure measure referred to in Article 429(4).
The requirements laid down in paragraph 1 shall not apply in the following cases:
within the three years following the date on which the institution or the group of which the institution is part has been identified as a G-SII;
within the two years following the date on which the resolution authority has applied the bail-in tool in accordance with Directive 2014/59/EU;
within the two years following the date on which the resolution entity has put in place an alternative private sector measure referred to in point (b) of Article 32(1) of Directive 2014/59/EU by which capital instruments and other liabilities have been written down or converted into Common Equity Tier 1 items in order to recapitalise the resolution entity without the application of resolution tools.
▼M15 —————
Article 92b
Requirement for own funds and eligible liabilities for non-EU G-SIIs
An eligible liabilities instrument shall only be taken into account for the purpose of complying with paragraph 1 where it fulfils all the following additional conditions:
in the event of normal insolvency proceedings as defined in point (47) of Article 2(1) of Directive 2014/59/EU, the claim resulting from the liability ranks below claims resulting from liabilities that do not fulfil the conditions set out in paragraph 2 of this Article and that do not qualify as own funds;
it is subject to the write-down or conversion powers in accordance with Articles 59 to 62 of Directive 2014/59/EU.
Article 93
Initial capital requirement on going concern
▼M9 —————
Article 94
Derogation for small trading book business
By way of derogation from point (b) of Article 92(3), institutions may calculate the own funds requirement for their trading-book business in accordance with paragraph 2 of this Article, provided that the size of the institutions' on- and off-balance-sheet trading-book business is equal to or less than both of the following thresholds on the basis of an assessment carried out on a monthly basis using the data as of the last day of the month:
5 % of the institution's total assets;
EUR 50 million.
Where both conditions set out in points (a) and (b) of paragraph 1 are met, institutions may calculate the own funds requirement for their trading-book business as follows:
for the contracts listed in point 1 of Annex II, contracts relating to equities which are referred to in point 3 of that Annex and credit derivatives, institutions may exempt those positions from the own funds requirement referred to in point (b) of Article 92(3);
for trading book positions other than those referred to in point (a) of this paragraph, institutions may replace the own funds requirement referred to in point (b) of Article 92(3) with the requirement calculated in accordance with point (a) of Article 92(3).
Institutions shall calculate the size of their on- and off-balance-sheet trading book business on the basis of data as of the last day of each month for the purposes of paragraph 1 in accordance with the following requirements:
all the positions assigned to the trading book in accordance with Article 104 shall be included in the calculation except for the following:
positions concerning foreign exchange and commodities;
positions in credit derivatives that are recognised as internal hedges against non-trading book credit risk exposures or counterparty risk exposures and the credit derivate transactions that perfectly offset the market risk of those internal hedges as referred to in Article 106(3);
all positions included in the calculation in accordance with point (a) shall be valued at their market value on that given date; where the market value of a position is not available on a given date, institutions shall take a fair value for the position on that date; where the market value and fair value of a position are not available on a given date, institutions shall take the most recent of the market value or fair value for that position;
the absolute value of long positions shall be summed with the absolute value of short positions.
An institution shall cease to calculate the own funds requirements of its trading-book business in accordance with paragraph 2 within three months of one of the following occurring:
the institution does not meet the conditions set out in point (a) or (b) of paragraph 1 for three consecutive months;
the institution does not meet the conditions set out in point (a) or (b) of paragraph 1 during more than 6 out of the last 12 months.
Section 2
Own funds requirements for investment firms with limited authorisation to provide investment services
Article 95
Own funds requirements for investment firms with limited authorisation to provide investment services
Investment firms referred to in paragraph 1 of this Article and firms referred to in point (2)(c) of Article 4(1) that provide the investment services and activities listed in points (2) and (4) of Section A of Annex I to Directive 2004/39/EC shall calculate the total risk exposure amount as the higher of the following:
the sum of the items referred to in points (a) to (d) and (f) of Article 92(3) after applying Article 92(4);
12,5 multiplied by the amount specified in Article 97.
Firms referred to in point (2)(c) of Article 4(1) that provide the investment services and activities listed in points (2) and (4) of Section A of Annex I to Directive 2004/39/EC shall meet the requirements in Article 92(1) and (2) based on the total risk exposure amount referred to in the first subparagraph.
Competent authorities may set the own funds requirements for firms referred to in point (2)(c) of Article 4(1) that provide the investment services and activities listed in points (2) and (4) of Section A of Annex I to Directive 2004/39/EC as the own funds requirements that would be binding on those firms according to the national transposition measures in force on 31 December 2013 for Directives 2006/49/EC and 2006/48/EC.
Article 96
Own funds requirements for investment firms which hold initial capital as laid down in Article 28(2) of Directive 2013/36/EU
For the purposes of Article 92(3), the following categories of investment firm which hold initial capital in accordance with Article 28(2) of Directive 2013/36/EU shall use the calculation of the total risk exposure amount specified in paragraph 2 of this Article:
investment firms that deal on own account only for the purpose of fulfilling or executing a client order or for the purpose of gaining entrance to a clearing and settlement system or a recognised exchange when acting in an agency capacity or executing a client order;
investment firms that meet all the following conditions:
they do not hold client money or securities;
they undertake only dealing on own account;
they have no external customers;
their execution and settlement transactions take place under the responsibility of a clearing institution and are guaranteed by that clearing institution.
For investment firms referred to in paragraph 1, total risk exposure amount shall be calculated as the sum of the following:
points (a) to (d) and (f) of Article 92(3) after applying Article 92(4);
the amount referred to in Article 97 multiplied by 12,5.
Article 97
Own Funds based on Fixed Overheads
EBA in consultation with ESMA shall develop draft regulatory technical standards to specify in greater detail the following:
the calculation of the requirement to hold eligible capital of at least one quarter of the fixed overheads of the previous year;
the conditions for the adjustment by the competent authority of the requirement to hold eligible capital of at least one quarter of the fixed overheads of the previous year;
the calculation of projected fixed overheads in the case of an investment firm that has not completed business for one year.
EBA shall submit those draft regulatory technical standards to the Commission by 1 March 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 98
Own funds for investment firms on a consolidated basis
In the case of the investment firms referred to in Article 95(1) in a group, where that group does not include credit institutions, a parent investment firm in a Member State shall apply Article 92 at a consolidated level as follows:
using the calculation of total risk exposure amount specified in Article 95(2);
own funds calculated on the basis of the consolidated situation of the parent investment firm or that of the financial holding company or mixed financial holding company, as applicable.
In the case of investment firms referred to in Article 96(1) in a group, where that group does not include credit institutions, a parent investment firm in a Member State and an investment firm controlled by a financial holding company or mixed financial holding company shall apply Article 92 on a consolidated basis as follows:
it shall use the calculation of total risk exposure amount specified in Article 96(2);
it shall use own funds calculated on the basis of the consolidated situation of the parent investment firm or that of the financial holding company or mixed financial holding company, as applicable, and in compliance with Chapter 2 of Title II of Part One.
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CHAPTER 3
Trading book
Article 102
Requirements for the trading book
Article 103
Management of the trading book
Institutions shall have in place clearly defined policies and procedures for the overall management of the trading book. Those policies and procedures shall at least address:
the activities which the institution considers to be trading business and as constituting part of the trading book for own funds requirement purposes;
the extent to which a position can be marked-to-market daily by reference to an active, liquid two-way market;
for positions that are marked-to-model, the extent to which the institution can:
identify all material risks of the position;
hedge all material risks of the position with instruments for which an active, liquid two-way market exists;
derive reliable estimates for the key assumptions and parameters used in the model;
the extent to which the institution can, and is required to, generate valuations for the position that can be validated externally in a consistent manner;
the extent to which legal restrictions or other operational requirements would impede the institution's ability to effect a liquidation or hedge of the position in the short term;
the extent to which the institution can, and is required to, actively manage the risks of positions within its trading operation;
the extent to which the institution may reclassify risk or positions between the non-trading and trading books and the requirements for such reclassifications as referred to in Article 104a.
In managing its positions or portfolios of positions in the trading book, the institution shall comply with all the following requirements:
the institution shall have in place a clearly documented trading strategy for the position or portfolios in the trading book, which shall be approved by senior management and include the expected holding period;
the institution shall have in place clearly defined policies and procedures for the active management of positions or portfolios in the trading book; those policies and procedures shall include the following:
which positions or portfolios of positions may be entered into by each trading desk or, as the case may be, by designated dealers;
the setting of position limits and monitoring them for appropriateness;
ensuring that dealers have the autonomy to enter into and manage the position within agreed limits and according to the approved strategy;
ensuring that positions are reported to senior management as an integral part of the institution's risk management process;
ensuring that positions are actively monitored with reference to market information sources and an assessment is made of the marketability or hedgeability of the position or its component risks, including the assessment, the quality and availability of market inputs to the valuation process, level of market turnover, sizes of positions traded in the market;
active anti-fraud procedures and controls;
the institution shall have in place clearly defined policies and procedures to monitor the positions against the institution's trading strategy, including the monitoring of turnover and positions for which the originally intended holding period has been exceeded.
Article 104
Inclusion in the trading book
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Article 104a
Reclassification of a position
EBA shall monitor the range of supervisory practices and shall issue guidelines in accordance with Article 16 of Regulation (EU) No 1093/2010 by 28 June 2024 on the meaning of exceptional circumstances for the purposes of the first subparagraph of this paragraph. Until EBA issues those guidelines, competent authorities shall notify EBA of, and shall provide a rationale for, their decisions on whether or not to permit an institution to reclassify a position as referred to in paragraph 2 of this Article.
The decision referred to in the first subparagraph shall be approved by the management body.
Where the competent authority has granted permission for the reclassification of a position in accordance with paragraph 2, the institution which received that permission shall:
publicly disclose, without delay,
information that its position has been reclassified, and
where the effect of that reclassification is a reduction in the institution's own funds requirements, the size of that reduction; and
where the effect of that reclassification is a reduction in the institution's own funds requirements, not recognise that effect until the position matures, unless the institution's competent authority permits it to recognise that effect at an earlier date.
Article 104b
Requirements for trading desk
Institutions' trading desks shall at all times meet all the following requirements:
each trading desk shall have a clear and distinctive business strategy and a risk management structure that is adequate for its business strategy;
each trading desk shall have a clear organisational structure; positions in a given trading desk shall be managed by designated dealers within the institution; each dealer shall have dedicated functions in the trading desk; each dealer shall be assigned to one trading desk only;
position limits shall be set within each trading desk according to the business strategy of that trading desk;
reports on the activities, profitability, risk management and regulatory requirements at the trading desk level shall be produced at least on a weekly basis and communicated to the management body on a regular basis;
each trading desk shall have a clear annual business plan including a well-defined remuneration policy on the basis of sound criteria used for performance measurement;
reports on maturing positions, intra-day trading limit breaches, daily trading limit breaches and actions taken by the institution to address those breaches, as well as assessments of market liquidity, shall be prepared for each trading desk on a monthly basis and made available to the competent authorities.
Article 105
Requirements for prudent valuation
Institutions shall establish and maintain systems and controls sufficient to provide prudent and reliable valuation estimates. Those systems and controls shall include at least the following elements:
documented policies and procedures for the process of valuation, including clearly defined responsibilities of the various areas involved in the determination of the valuation, sources of market information and review of their appropriateness, guidelines for the use of unobservable inputs reflecting the institution's assumptions of what market participants would use in pricing the position, frequency of independent valuation, timing of closing prices, procedures for adjusting valuations, month end and ad-hoc verification procedures;
reporting lines for the department accountable for the valuation process that are clear and independent of the front office, which shall ultimately be to the management body.
Institutions shall comply with the following requirements when marking to model:
senior management shall be aware of the elements of the trading book or of other fair-valued positions which are subject to mark to model and shall understand the materiality of the uncertainty thereby created in the reporting of the risk/performance of the business;
institutions shall source market inputs, where possible, in line with market prices, and shall assess the appropriateness of the market inputs of the particular position being valued and the parameters of the model on a frequent basis;
where available, institutions shall use valuation methodologies which are accepted market practice for particular financial instruments or commodities;
where the model is developed by the institution itself, it shall be based on appropriate assumptions, which have been assessed and challenged by suitably qualified parties independent of the development process;
institutions shall have in place formal change control procedures and shall hold a secure copy of the model and use it periodically to check valuations;
risk management shall be aware of the weaknesses of the models used and how best to reflect those in the valuation output; and
institutions' models shall be subject to periodic review to determine the accuracy of their performance, which shall include assessing the continued appropriateness of assumptions, analysis of profit and loss versus risk factors, and comparison of actual close out values to model outputs.
For the purposes of point (d) of the first subparagraph, the model shall be developed or approved independently of the trading desks and shall be independently tested, including validation of the mathematics, assumptions and software implementation.
Institutions shall establish and maintain procedures for calculating an adjustment to the current valuation of any less liquid positions, which can in particular arise from market events or institution-related situations such as concentrated positions and/or positions for which the originally intended holding period has been exceeded. Institutions shall, where necessary, make such adjustments in addition to any changes to the value of the position required for financial reporting purposes and shall design such adjustments to reflect the illiquidity of the position. Under those procedures, institutions shall consider several factors when determining whether a valuation adjustment is necessary for less liquid positions. Those factors include the following:
the additional amount of time it would take to hedge out the position or the risks within the position beyond the liquidity horizons that have been assigned to the risk factors of the position in accordance with Article 325bd;
the volatility and average of bid/offer spreads;
the availability of market quotes (number and identity of market makers) and the volatility and average of trading volumes including trading volumes during periods of market stress;
market concentrations;
the ageing of positions;
the extent to which valuation relies on marking-to-model;
the impact of other model risks.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 106
Internal Hedges
An internal hedge shall in particular meet the following requirements:
it shall not be primarily intended to avoid or reduce own funds requirements;
it shall be properly documented and subject to particular internal approval and audit procedures;
it shall be dealt with at market conditions;
the market risk that is generated by the internal hedge shall be dynamically managed in the trading book within the authorised limits;
it shall be carefully monitored in accordance with adequate procedures.
Both an internal hedge recognised in accordance with the first subparagraph and the credit derivative entered into with the third party shall be included in the trading book for the purpose of calculating the own funds requirements for market risk.
Both an internal hedge recognised in accordance with the first subparagraph and the equity derivative entered into with the eligible third party protection provider shall be included in the trading book for the purpose of calculating the own funds requirements for market risk.
Where an institution hedges non-trading book interest rate risk exposures using an interest rate risk position booked in its trading book, that interest rate risk position shall be considered to be an internal hedge for the purpose of assessing the interest rate risk arising from non-trading positions in accordance with Articles 84 and 98 of Directive 2013/36/EU where the following conditions are met:
the position has been assigned to a separate portfolio from the other trading book position, the business strategy of which is solely dedicated to manage and mitigate the market risk of internal hedges of interest rate risk exposure; for that purpose, the institution may assign to that portfolio other interest rate risk positions entered into with third parties, or its own trading book as long as the institution perfectly offsets the market risk of those interest rate risk positions entered into with its own trading book by entering into opposite interest rate risk positions with third parties;
for the purposes of the reporting requirements set out in Article 430b(3), the position has been assigned to a trading desk established in accordance with Article 104b the business strategy of which is solely dedicated to manage and mitigate the market risk of internal hedges of interest rate risk exposure; for that purpose, that trading desk may enter into other interest rate risk positions with third parties or other trading desks of the institution, as long as those other trading desks perfectly offset the market risk of those other interest rate risk positions by entering into opposite interest rate risk positions with third parties;
the institution has fully documented how the position mitigates the interest rate risk arising from non-trading book positions for the purposes of the requirements laid down in Articles 84 and 98 of Directive 2013/36/EU.
TITLE II
CAPITAL REQUIREMENTS FOR CREDIT RISK
CHAPTER 1
General principles
Article 107
Approaches to credit risk
For trade exposures and for default fund contributions to a central counterparty, institutions shall apply the treatment set out in Chapter 6, Section 9 to calculate their risk-weighted exposure amounts for the purposes of points (a) and (f) of Article 92(3). For all other types of exposures to a central counterparty, institutions shall treat those exposures as follows:
as exposures to an institution for other types of exposures to a qualifying CCP;
as exposures to a corporate for other types of exposures to a non-qualifying CCP.
Article 108
Use of credit risk mitigation technique under the Standardised Approach and the IRB Approach
Article 109
Treatment of securitisation positions
Institutions shall calculate the risk-weighted exposure amount for a position they hold in a securitisation in accordance with Chapter 5.
Article 110
Treatment of credit risk adjustment
For the purposes of this Article and Chapters 2 and 3, general and specific credit risk adjustments shall exclude funds for general banking risk.
Institutions using the IRB Approach that apply the Standardised Approach for a part of their exposures on consolidated or individual basis, in accordance with Articles 148 and 150 shall determine the part of general credit risk adjustment that shall be assigned to the treatment of general credit risk adjustment under the Standardised Approach and to the treatment of general credit risk adjustment under the IRB Approach as follows:
where applicable, when an institution included in the consolidation exclusively applies the IRB Approach, general credit risk adjustments of this institution shall be assigned to the treatment set out in paragraph 2;
where applicable, when an institution included in the consolidation exclusively applies the Standardised Approach, general credit risk adjustment of this institution shall be assigned to the treatment set out in paragraph 1;
the remainder of credit risk adjustment shall be assigned on a pro rata basis according to the proportion of risk weighted exposure amounts subject to the Standardised Approach and subject to the IRB Approach.
EBA shall develop draft regulatory technical standards to specify the calculation of specific credit risk adjustments and general credit risk adjustments under the applicable accounting framework for the following:
exposure value under the Standardised Approach referred to in Article 111;
exposure value under the IRB Approach referred to in Articles 166 to 168;
treatment of expected loss amounts referred to in Article 159;
exposure value for the calculation of the risk-weighted exposure amounts for securitisation position referred to in Articles 246 and 266;
the determination of default under Article 178.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
CHAPTER 2
Standardised approach
Section 1
General principles
Article 111
Exposure value
The exposure value of an asset item shall be its accounting value remaining after specific credit risk adjustments in accordance with Article 110, additional value adjustments in accordance with Articles 34 and 105, amounts deducted in accordance with point (m) Article 36(1) and other own funds reductions related to the asset item have been applied. The exposure value of an off-balance sheet item listed in Annex I shall be the following percentage of its nominal value after reduction of specific credit risk adjustments and amounts deducted in accordance with point (m) Article 36(1):
100 % if it is a full-risk item;
50 % if it is a medium-risk item;
20 % if it is a medium/low-risk item;
0 % if it is a low-risk item.
The off-balance sheet items referred to in the second sentence of the first subparagraph shall be assigned to risk categories as indicated in Annex I.
When an institution is using the Financial Collateral Comprehensive Method under Article 223, the exposure value of securities or commodities sold, posted or lent under a repurchase transaction or under a securities or commodities lending or borrowing transaction, and margin lending transactions shall be increased by the volatility adjustment appropriate to such securities or commodities as prescribed in Articles 223 to 225.
Article 112
Exposure classes
Each exposure shall be assigned to one of the following exposure classes:
exposures to central governments or central banks;
exposures to regional governments or local authorities;
exposures to public sector entities;
exposures to multilateral development banks;
exposures to international organisations;
exposures to institutions;
exposures to corporates;
retail exposures;
exposures secured by mortgages on immovable property;
exposures in default;
exposures associated with particularly high risk;
exposures in the form of covered bonds;
items representing securitisation positions;
exposures to institutions and corporates with a short-term credit assessment;
exposures in the form of units or shares in collective investment undertakings (‘CIUs’);
equity exposures;
other items.
Article 113
Calculation of risk-weighted exposure amounts
With the exception of exposures giving rise to Common Equity Tier 1, Additional Tier 1 or Tier 2 items, an institution may, subject to the prior approval of the competent authorities, decide not to apply the requirements of paragraph 1 of this Article to the exposures of that institution to a counterparty which is its parent undertaking, its subsidiary, a subsidiary of its parent undertaking or an undertaking linked by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC. Competent authorities are empowered to grant approval if the following conditions are fulfilled:
the counterparty is an institution, a financial institution or an ancillary services undertaking subject to appropriate prudential requirements;
the counterparty is included in the same consolidation as the institution on a full basis;
the counterparty is subject to the same risk evaluation, measurement and control procedures as the institution;
the counterparty is established in the same Member State as the institution;
there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities from the counterparty to the institution.
Where the institution, in accordance with this paragraph, is authorised not to apply the requirements of paragraph 1, it may assign a risk weight of 0 %.
With the exception of exposures giving rise to Common Equity Tier 1, Additional Tier 1 and Tier 2 items, institutions may, subject to the prior permission of the competent authorities, not apply the requirements of paragraph 1 of this Article to exposures to counterparties with which the institution has entered into an institutional protection scheme that is a contractual or statutory liability arrangement which protects those institutions and in particular ensures their liquidity and solvency to avoid bankruptcy where necessary. Competent authorities are empowered to grant permission if the following conditions are fulfilled:
the requirements set out in points (a), (d) and (e) of paragraph 6 are met;
the arrangements ensure that the institutional protection scheme is able to grant support necessary under its commitment from funds readily available to it;
the institutional protection scheme disposes of suitable and uniformly stipulated systems for the monitoring and classification of risk, which gives a complete overview of the risk situations of all the individual members and the institutional protection scheme as a whole, with corresponding possibilities to take influence; those systems shall suitably monitor defaulted exposures in accordance with Article 178(1);
the institutional protection scheme conducts its own risk review which is communicated to the individual members;
the institutional protection scheme draws up and publishes on an annual basis, a consolidated report comprising the balance sheet, the profit-and-loss account, the situation report and the risk report, concerning the institutional protection scheme as a whole, or a report comprising the aggregated balance sheet, the aggregated profit-and-loss account, the situation report and the risk report, concerning the institutional protection scheme as a whole;
members of the institutional protection scheme are obliged to give advance notice of at least 24 months if they wish to end the institutional protection scheme;
the multiple use of elements eligible for the calculation of own funds (hereinafter referred to as ‘multiple gearing’) as well as any inappropriate creation of own funds between the members of the institutional protection scheme shall be eliminated;
the institutional protection scheme shall be based on a broad membership of credit institutions of a predominantly homogeneous business profile;
the adequacy of the systems referred to in points (c) and (d) is approved and monitored at regular intervals by the relevant competent authorities.
Where the institution, in accordance with this paragraph, decides not to apply the requirements of paragraph 1, it may assign a risk weight of 0 %.
Section 2
Risk weights
Article 114
Exposures to central governments or central banks
Exposures to central governments and central banks for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight in accordance with Table 1 which corresponds to the credit assessment of the ECAI in accordance with Article 136.
Table 1
Credit quality step |
1 |
2 |
3 |
4 |
5 |
6 |
Risk weight |
0 % |
20 % |
50 % |
100 % |
100 % |
150 % |
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For the purposes of this paragraph, the Commission may adopt, by way of implementing acts, and subject to the examination procedure referred to in Article 464(2), a decision as to whether a third country applies supervisory and regulatory arrangements at least equivalent to those applied in the Union. In the absence of such a decision, until 1 January 2015, institutions may continue to apply the treatment set out in this paragraph to the exposures to the central government or central bank of the third country where the relevant competent authorities had approved the third country as eligible for that treatment before 1 January 2014.
Article 115
Exposures to regional governments or local authorities
EBA shall maintain a publicly available database of all regional governments and local authorities within the Union which relevant competent authorities treat as exposures to their central governments.
For the purposes of this paragraph, the Commission may adopt, by way of implementing acts, and subject to the examination procedure referred to in Article 464(2), a decision as to whether a third country applies supervisory and regulatory arrangements at least equivalent to those applied in the Union. In the absence of such a decision, until 1 January 2015, institutions may continue to apply the treatment set out in this paragraph to the third country where the relevant competent authorities had approved the third country as eligible for that treatment before 1 January 2014.
Article 116
Exposures to public sector entities
Exposures to public sector entities for which a credit assessment by a nominated ECAI is not available shall be assigned a risk weight in accordance with the credit quality step to which exposures to the central government of the jurisdiction in which the public sector entity is incorporated are assigned in accordance with the following Table 2:
Table 2
Credit quality step to which central government is assigned |
1 |
2 |
3 |
4 |
5 |
6 |
Risk weight |
20 % |
50 % |
100 % |
100 % |
100 % |
150 % |
For exposures to public sector entities incorporated in countries where the central government is unrated, the risk weight shall be 100 %.
For the purposes of this paragraph, the Commission may adopt, by way of implementing acts, and subject to the examination procedure referred to in Article 464(2), a decision as to whether a third country applies supervisory and regulatory arrangements at least equivalent to those applied in the Union. In the absence of such a decision, until 1 January 2015, institutions may continue to apply the treatment set out in this paragraph to the third country where the relevant competent authorities had approved the third country as eligible for that treatment before 1 January 2014.
Article 117
Exposures to multilateral development banks
The Inter-American Investment Corporation, the Black Sea Trade and Development Bank, the Central American Bank for Economic Integration and the CAF-Development Bank of Latin America shall be considered multilateral development banks.
Exposures to the following multilateral development banks shall be assigned a 0 % risk weight:
the International Bank for Reconstruction and Development;
the International Finance Corporation;
the Inter-American Development Bank;
the Asian Development Bank;
the African Development Bank;
the Council of Europe Development Bank;
the Nordic Investment Bank;
the Caribbean Development Bank;
the European Bank for Reconstruction and Development;
the European Investment Bank;
the European Investment Fund;
the Multilateral Investment Guarantee Agency;
the International Finance Facility for Immunisation;
the Islamic Development Bank;
the International Development Association;
the Asian Infrastructure Investment Bank.
The Commission is empowered to amend this Regulation by adopting delegated acts in accordance with Article 462 amending, in accordance with international standards, the list of multilateral development banks referred to in the first subparagraph.
Article 118
Exposures to international organisations
Exposures to the following international organisations shall be assigned a 0 % risk weight:
the European Union and the European Atomic Energy Community;
the International Monetary Fund;
the Bank for International Settlements;
the European Financial Stability Facility;
the European Stability Mechanism;
an international financial institution established by two or more Member States, which has the purpose to mobilise funding and provide financial assistance to the benefit of its members that are experiencing or threatened by severe financing problems.
Article 119
Exposures to institutions
Exposure to an institution in the form of minimum reserves required by the ECB or by the central bank of a Member State to be held by an institution may be risk-weighted as exposures to the central bank of the Member State in question provided:
the reserves are held in accordance with Regulation (EC) No 1745/2003 of the European Central Bank of 12 September 2003 on the application of minimum reserves ( 21 ) or in accordance with national requirements in all material respects equivalent to that Regulation;
in the event of the bankruptcy or insolvency of the institution where the reserves are held, the reserves are fully repaid to the institution in a timely manner and are not made available to meet other liabilities of the institution.
Exposures to financial institutions authorised and supervised by the competent authorities and subject to prudential requirements comparable to those applied to institutions in terms of robustness shall be treated as exposures to institutions.
For the purposes of this paragraph, the prudential requirements laid down in Regulation (EU) 2019/2033 shall be considered to be comparable to those applied to institutions in terms of robustness.
Article 120
Exposures to rated institutions
Exposures to institutions with a residual maturity of more than three months for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight in accordance with Table 3 which corresponds to the credit assessment of the ECAI in accordance with Article 136.
Table 3
Credit quality step |
1 |
2 |
3 |
4 |
5 |
6 |
Risk weight |
20 % |
50 % |
50 % |
100 % |
100 % |
150 % |
Exposures to an institution of up to three months residual maturity for which a credit assessment by a nominated ECAI is available shall be assigned a risk-weight in accordance with Table 4 which corresponds to the credit assessment of the ECAI in accordance with Article 136:
Table 4
Credit quality step |
1 |
2 |
3 |
4 |
5 |
6 |
Risk weight |
20 % |
20 % |
20 % |
50 % |
50 % |
150 % |
The interaction between the treatment of short term credit assessment under Article 131 and the general preferential treatment for short term exposures set out in paragraph 2 shall be as follows:
If there is no short-term exposure assessment, the general preferential treatment for short-term exposures as specified in paragraph 2 shall apply to all exposures to institutions of up to three months residual maturity;
If there is a short-term assessment and such an assessment determines the application of a more favourable or identical risk weight than the use of the general preferential treatment for short-term exposures, as specified in paragraph 2, then the short-term assessment shall be used for that specific exposure only. Other short-term exposures shall follow the general preferential treatment for short-term exposures, as specified in paragraph 2;
If there is a short-term assessment and such an assessment determines a less favourable risk weight than the use of the general preferential treatment for short-term exposures, as specified in paragraph 2, then the general preferential treatment for short-term exposures shall not be used and all unrated short-term claims shall be assigned the same risk weight as that applied by the specific short-term assessment.
Article 121
Exposures to unrated institutions
Exposures to institutions for which a credit assessment by a nominated ECAI is not available shall be assigned a risk weight in accordance with the credit quality step to which exposures to the central government of the jurisdiction in which the institution is incorporated are assigned in accordance with Table 5.
Table 5
Credit quality step to which central government is assigned |
1 |
2 |
3 |
4 |
5 |
6 |
Risk weight of exposure |
20 % |
50 % |
100 % |
100 % |
100 % |
150 % |
Article 122
Exposures to corporates
Exposures for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight in accordance with Table 6 which corresponds to the credit assessment of the ECAI in accordance with Article 136.
Table 6
Credit quality step |
1 |
2 |
3 |
4 |
5 |
6 |
Risk weight |
20 % |
50 % |
100 % |
100 % |
150 % |
150 % |
Article 123
Retail exposures
Exposures that comply with the following criteria shall be assigned a risk weight of 75 %:
the exposure shall be either to a natural person or persons, or to a small or medium-sized enterprise (SME);
the exposure shall be one of a significant number of exposures with similar characteristics such that the risks associated with such lending are substantially reduced;
the total amount owed to the institution and parent undertakings and its subsidiaries, including any exposure in default, by the obligor client or group of connected clients, but excluding exposures fully and completely secured on residential property collateral that have been assigned to the exposure class laid down in point (i) of Article 112, shall not, to the knowledge of the institution, exceed EUR 1 million. The institution shall take reasonable steps to acquire this knowledge.
Securities shall not be eligible for the retail exposure class.
Exposures that do not comply with the criteria referred to in points (a) to (c) of the first subparagraph shall not be eligible for the retail exposures class.
The present value of retail minimum lease payments is eligible for the retail exposure class.
Exposures due to loans granted by a credit institution to pensioners or employees with a permanent contract against the unconditional transfer of part of the borrower's pension or salary to that credit institution shall be assigned a risk weight of 35 %, provided that all the following conditions are met:
in order to repay the loan, the borrower unconditionally authorises the pension fund or employer to make direct payments to the credit institution by deducting the monthly payments on the loan from the borrower's monthly pension or salary;
the risks of death, inability to work, unemployment or reduction of the net monthly pension or salary of the borrower are properly covered through an insurance policy underwritten by the borrower to the benefit of the credit institution;
the monthly payments to be made by the borrower on all loans that meet the conditions set out in points (a) and (b) do not in aggregate exceed 20 % of the borrower's net monthly pension or salary;
the maximum original maturity of the loan is equal to or less than ten years.
Article 124
Exposures secured by mortgages on immovable property
The part of an exposure that is treated as fully secured by immovable property shall not be greater than the pledged amount of the market value or in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions, the mortgage lending value of the immovable property in question.
Where the authority designated by the Member State for the application of this Article is the competent authority, it shall ensure that the relevant national bodies and authorities which have a macroprudential mandate are duly informed of the competent authority's intention to make use of this Article, and are appropriately involved in the assessment of financial stability concerns in its Member State in accordance with paragraph 2.
Where the authority designated by the Member State for the application of this Article is different from the competent authority, the Member State shall adopt the necessary provisions to ensure proper coordination and exchange of information between the competent authority and the designated authority for the proper application of this Article. In particular, authorities shall be required to cooperate closely and to share all the information that may be necessary for the adequate performance of the duties imposed upon the designated authority pursuant to this Article. That cooperation shall aim at avoiding any form of duplicative or inconsistent action between the competent authority and the designated authority, as well as ensuring that the interaction with other measures, in particular measures taken under Article 458 of this Regulation and Article 133 of Directive 2013/36/EU, is duly taken into account.
Based on the data collected under Article 430a and on any other relevant indicators, the authority designated in accordance with paragraph 1a of this Article shall periodically, and at least annually, assess whether the risk weight of 35 % for exposures to one or more property segments secured by mortgages on residential property referred to in Article 125 located in one or more parts of the territory of the Member State of the relevant authority and the risk weight of 50 % for exposures secured by mortgages on commercial immovable property referred to in Article 126 located in one or more parts of the territory of the Member State of the relevant authority are appropriately based on:
the loss experience of exposures secured by immovable property;
forward-looking immovable property markets developments.
Where, on the basis of the assessment referred to in the first subparagraph of this paragraph, the authority designated in accordance with paragraph 1a of this Article concludes that the risk weights set out in Article 125(2) or 126(2) do not adequately reflect the actual risks related to exposures to one or more property segments fully secured by mortgages on residential property or on commercial immovable property located in one or more parts of the territory of the Member State of the relevant authority, and if it considers that the inadequacy of the risk weights could adversely affect current or future financial stability in its Member State, it may increase the risk weights applicable to those exposures within the ranges determined in the fourth subparagraph of this paragraph or impose stricter criteria than those set out in Article 125(2) or 126(2).
The authority designated in accordance with paragraph 1a of this Article shall notify EBA and the ESRB of any adjustments to risk weights and criteria applied pursuant to this paragraph. Within one month of receipt of that notification, EBA and the ESRB shall provide their opinion to the Member State concerned. EBA and the ESRB shall publish the risk weights and criteria for exposures referred to in Articles 125, 126 and point (a) of Article 199(1) as implemented by the relevant authority.
For the purposes of the second subparagraph of this paragraph, the authority designated in accordance with paragraph 1a may set the risk weights within the following ranges:
35 % to 150 % for exposures secured by mortgages on residential property;
50 % to 150 % for exposures secured by mortgages on commercial immovable property.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2019.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
The ESRB may, by means of recommendations in accordance with Article 16 of Regulation (EU) No 1092/2010, and in close cooperation with EBA, give guidance to authorities designated in accordance with paragraph 1a of this Article on the following:
factors which could ‘adversely affect current or future financial stability’ referred to in the second subparagraph of paragraph 2; and
indicative benchmarks that the authority designated in accordance with paragraph 1a is to take into account when determining higher risk weights.
Article 125
Exposures fully and completely secured by mortgages on residential property
Unless otherwise decided by the competent authorities in accordance with Article 124(2), exposures fully and completely secured by mortgages on residential property shall be treated as follows:
exposures or any part of an exposure fully and completely secured by mortgages on residential property which is or shall be occupied or let by the owner, or the beneficial owner in the case of personal investment companies, shall be assigned a risk weight of 35 %;
exposures to a tenant under a property leasing transaction concerning residential property under which the institution is the lessor and the tenant has an option to purchase, shall be assigned a risk weight of 35 % provided that the exposure of the institution is fully and completely secured by its ownership of the property.
Institutions shall consider an exposure or any part of an exposure as fully and completely secured for the purposes of paragraph 1 only if the following conditions are met:
the value of the property shall not materially depend upon the credit quality of the borrower. Institutions may exclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower from their determination of the materiality of such dependence;
the risk of the borrower shall not materially depend upon the performance of the underlying property or project, but on the underlying capacity of the borrower to repay the debt from other sources, and as a consequence, the repayment of the facility shall not materially depend on any cash flow generated by the underlying property serving as collateral. For those other sources, institutions shall determine maximum loan-to-income ratios as part of their lending policy and obtain suitable evidence of the relevant income when granting the loan;
the requirements set out in Article 208 and the valuation rules set out in Article 229(1) are met;
unless otherwise determined under Article 124(2), the part of the loan to which the 35 % risk weight is assigned does not exceed 80 % of the market value of the property in question or 80 % of the mortgage lending value of the property in question in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions.
Institutions may derogate from point (b) of paragraph 2 for exposures fully and completely secured by mortgages on residential property which is situated within the territory of a Member State, where the competent authority of that Member State has published evidence showing that a well-developed and long-established residential property market is present in that territory with loss rates which do not exceed the following limits:
losses stemming from lending collateralised by residential property up to 80 % of the market value or 80 % of the mortgage lending value, unless otherwise decided under Article 124(2), do not exceed 0,3 % of the outstanding loans collateralised by residential property in any given year;
overall losses stemming from lending collateralised by residential property do not exceed 0,5 % of the outstanding loans collateralised by residential property in any given year.
Article 126
Exposures fully and completely secured by mortgages on commercial immovable property
Unless otherwise decided by the competent authorities in accordance with Article 124(2), exposures fully and completely secured by mortgages on commercial immovable property shall be treated as follows:
exposures or any part of an exposure fully and completely secured by mortgages on offices or other commercial premises may be assigned a risk weight of 50 %;
exposures related to property leasing transactions concerning offices or other commercial premises under which the institution is the lessor and the tenant has an option to purchase may be assigned a risk weight of 50 % provided that the exposure of the institution is fully and completely secured by its ownership of the property.
Institutions shall consider an exposure or any part of an exposure as fully and completely secured for the purposes of paragraph 1 only if the following conditions are met:
the value of the property shall not materially depend upon the credit quality of the borrower. Institutions may exclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower from their determination of the materiality of such dependence;
the risk of the borrower shall not materially depend upon the performance of the underlying property or project, but on the underlying capacity of the borrower to repay the debt from other sources, and as a consequence, the repayment of the facility shall not materially depend on any cash flow generated by the underlying property serving as collateral;
the requirements set out in Article 208 and the valuation rules set out in Article 229(1) are met;
the 50 % risk weight unless otherwise provided under Article 124(2) shall be assigned to the part of the loan that does not exceed 50 % of the market value of the property or 60 % of the mortgage lending value unless otherwise provided under Article 124(2) of the property in question in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions.
Institutions may derogate from point (b) of paragraph 2 for exposures fully and completely secured by mortgages on commercial immovable property which is situated within the territory of a Member State, where the competent authority of that Member State has published evidence showing that a well-developed and long-established commercial immovable property market is present in that territory with loss rates which do not exceed the following limits:
losses stemming from lending collateralised by commercial immovable property up to 50 % of the market value or 60 % of the mortgage lending value, unless otherwise determined under Article 124(2), do not exceed 0,3 % of the outstanding loans collateralised by commercial immovable property;
overall losses stemming from lending collateralised by commercial immovable property do not exceed 0,5 % of the outstanding loans collateralised by commercial immovable property.
Article 127
Exposures in default
The unsecured part of any item where the obligor has defaulted in accordance with Article 178, or in the case of retail exposures, the unsecured part of any credit facility which has defaulted in accordance with Article 178 shall be assigned a risk weight of:
150 %, where the sum of specific credit risk adjustments and of the amounts deducted in accordance with point (m) Article 36(1) is less than 20 % of the unsecured part of the exposure value if those specific credit risk adjustments and deductions were not applied;
100 %, where the sum of the specific credit risk adjustments and of the amounts deducted in accordance with point (m) Article 36(1) is no less than 20 % of the unsecured part of the exposure value if those specific credit risk adjustments and deductions were not applied.
Article 128
Items associated with particular high risk
For the purposes of this Article, institutions shall treat any of the following exposures as exposures associated with particularly high risks:
investments in venture capital firms, except where those investments are treated in accordance with Article 132;
investments in private equity, except where those investments are treated in accordance with Article 132;
speculative immovable property financing.
When assessing whether an exposure other than exposures referred to in paragraph 2 is associated with particularly high risks, institutions shall take into account the following risk characteristics:
there is a high risk of loss as a result of a default of the obligor;
it is impossible to assess adequately whether the exposure falls under point (a).
EBA shall issue guidelines specifying which types of exposures are associated with particularly high risk and under which circumstances.
Those guidelines shall be adopted in accordance with Article 16 of Regulation (EU) No 1093/2010.
Article 129
Exposures in the form of covered bonds
►M10 To be eligible for the preferential treatment set out in paragraphs 4 and 5 of this Article, covered bonds as defined in point (1) of Article 3 of Directive (EU) 2019/2162 of the European Parliament and of the Council ( 22 ) shall meet the requirements set out in paragraphs 3, 3a and 3b of this Article and shall be collateralised by any of the following eligible assets: ◄
exposures to or guaranteed by central governments, the ESCB central banks, public sector entities, regional governments or local authorities in the Union;
exposures to or guaranteed by third country central governments, third-country central banks, multilateral development banks, international organisations that qualify for the credit quality step 1 as set out in this Chapter, and exposures to or guaranteed by third-country public sector entities, third-country regional governments or third-country local authorities that are risk weighted as exposures to institutions or central governments and central banks in accordance with Article 115(1) or (2), or Article 116(1), (2) or (4) respectively and that qualify for the credit quality step 1 as set out in this Chapter, and exposures within the meaning of this point that qualify as a minimum for the credit quality step 2 as set out in this Chapter, provided that they do not exceed 20 % of the nominal amount of outstanding covered bonds of the issuing institutions;
exposures to credit institutions that qualify for credit quality step 1 or credit quality step 2, or exposures to credit institutions that qualify for credit quality step 3 where those exposures are in the form of:
short‐term deposits with an original maturity not exceeding 100 days, where used to meet the cover pool liquidity buffer requirement of Article 16 of Directive (EU) 2019/2162; or
derivative contracts that meet the requirements of Article 11(1) of that Directive, where permitted by the competent authorities;
loans secured by residential property up to the lesser of the principal amount of the liens that are combined with any prior liens and 80 % of the value of the pledged properties;
residential loans fully guaranteed by an eligible protection provider referred to in Article 201 qualifying for the credit quality step 2 or above as set out in this Chapter, where the portion of each of the loans that is used to meet the requirement set out in this paragraph for collateralisation of the covered bond does not represent more than 80 % of the value of the corresponding residential property located in France, and where a loan-to-income ratio respects at most 33 % when the loan has been granted. There shall be no mortgage liens on the residential property when the loan is granted, and for the loans granted from 1 January 2014 the borrower shall be contractually committed not to grant such liens without the consent of the credit institution that granted the loan. The loan-to-income ratio represents the share of the gross income of the borrower that covers the reimbursement of the loan, including the interests. The protection provider shall be either a financial institution authorised and supervised by the competent authorities and subject to prudential requirements comparable to those applied to institutions in terms of robustness or an institution or an insurance undertaking. It shall establish a mutual guarantee fund or equivalent protection for insurance undertakings to absorb credit risk losses, whose calibration shall be periodically reviewed by the competent authorities. Both the credit institution and the protection provider shall carry out a creditworthiness assessment of the borrower;
loans secured by commercial immovable property up to the lesser of the principal amount of the liens that are combined with any prior liens and 60 % of the value of the pledged properties. Loans secured by commercial immovable property are eligible where the loan‐to‐value ratio of 60 % is exceeded up to a maximum level of 70 % if the value of the total assets pledged as collateral for the covered bonds exceed the nominal amount outstanding on the covered bond by at least 10 %, and the bondholders’ claim meets the legal certainty requirements set out in Chapter 4. The bondholders’ claim shall take priority over all other claims on the collateral;
loans secured by maritime liens on ships up to the difference between 60 % of the value of the pledged ship and the value of any prior maritime liens.
For the purposes of paragraph 1a, exposures caused by the transmission and management of the payments of the obligors of loans secured by pledged properties of debt securities or by the transmission and management of liquidation proceeds in respect of such loans shall not be comprised in calculating the limits referred to in that paragraph.
▼M10 —————
For the purposes of point (c) of the first subparagraph of paragraph 1, the following shall apply:
for exposures to credit institutions that qualify for credit quality step 1, the exposure shall not exceed 15 % of the nominal amount of outstanding covered bonds of the issuing credit institution;
for exposures to credit institutions that qualify for credit quality step 2, the exposure shall not exceed 10 % of the nominal amount of outstanding covered bonds of the issuing credit institution;
for exposures to credit institutions that qualify for credit quality step 3 that take the form of short‐term deposits, as referred to in point (c)(i) of the first subparagraph of paragraph 1 of this Article, or the form of derivative contracts, as referred to in point (c)(ii) of the first subparagraph of paragraph 1 of this Article, the total exposure shall not exceed 8 % of the nominal amount of outstanding covered bonds of the issuing credit institution; the competent authorities designated pursuant to Article 18(2) of Directive (EU) 2019/2162 may, after consulting EBA, allow exposures to credit institutions that qualify for credit quality step 3 in the form of derivative contracts, provided that significant potential concentration problems in the Member States concerned due to the application of credit quality step 1 and 2 requirements referred to in this paragraph can be documented;
the total exposure to credit institutions that qualify for credit quality step 1, 2 or 3 shall not exceed 15 % of the nominal amount of outstanding covered bonds of the issuing credit institution and the total exposure to credit institutions that qualify for credit quality step 2 or 3 shall not exceed 10 % of the nominal amount of outstanding covered bonds of the issuing credit institution.
In addition to being collateralised by the eligible assets listed in paragraph 1 of this Article, covered bonds shall be subject to a minimum level of 5 % of overcollateralisation as defined in point (14) of Article 3 of Directive (EU) 2019/2162.
For the purposes of the first subparagraph of this paragraph, the total nominal amount of all cover assets as defined in point (4) of Article 3 of that Directive shall be at least of the same value as the total nominal amount of outstanding covered bonds (‘nominal principle’), and shall consist of eligible assets as set out in paragraph 1 of this Article.
Member States may set a lower minimum level of overcollateralisation for covered bonds or authorise their competent authorities to set such a level, provided that:
either the calculation of overcollateralisation is based on a formal approach where the underlying risk of the assets is taken into account, or the valuation of the assets is subject to the mortgage lending value; and
the minimum level of overcollateralisation is not lower than 2 %, based on the nominal principle referred to in Article 15(6) and (7) of Directive (EU) 2019/2162.
The assets contributing to a minimum level of overcollateralisation shall not be subject to the limits on exposure size set out in paragraph 1a and shall not count towards those limits.
Covered bonds for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight in accordance with Table 6a which corresponds to the credit assessment of the ECAI in accordance with Article 136.
Table 6a
Credit quality step |
1 |
2 |
3 |
4 |
5 |
6 |
Risk weight |
10 % |
20 % |
20 % |
50 % |
50 % |
100 % |
Covered bonds for which a credit assessment by a nominated ECAI is not available shall be assigned a risk weight on the basis of the risk weight assigned to senior unsecured exposures to the institution which issues them. The following correspondence between risk weights shall apply:
if the exposures to the institution are assigned a risk weight of 20 %, the covered bond shall be assigned a risk weight of 10 %;
if the exposures to the institution are assigned a risk weight of 50 %, the covered bond shall be assigned a risk weight of 20 %;
if the exposures to the institution are assigned a risk weight of 100 %, the covered bond shall be assigned a risk weight of 50 %;
if the exposures to the institution are assigned a risk weight of 150 %, the covered bond shall be assigned a risk weight of 100 %.
Article 130
Items representing securitisation positions
Risk-weighted exposure amounts for securitisation positions shall be determined in accordance with Chapter 5.
Article 131
Exposures to institutions and corporates with a short-term credit assessment
Exposures to institutions and exposures to corporates for which a short-term credit assessment by a nominated ECAI is available shall be assigned a risk weight in accordance with Table 7 which corresponds to the credit assessment of the ECAI in accordance with Article 136.
Table 7
Credit Quality Step |
1 |
2 |
3 |
4 |
5 |
6 |
Risk weight |
20 % |
50 % |
100 % |
150 % |
150 % |
150 % |
Article 132
Own funds requirements for exposures in the form of units or shares in CIUs
Subject to Article 132b(2), institutions that do not apply the look-through approach or the mandate-based approach shall assign a risk weight of 1 250 % (‘fall-back approach’) to their exposures in the form of units or shares in a CIU.
Institutions may calculate the risk-weighted exposure amount for their exposures in the form of units or shares in a CIU by using a combination of the approaches referred to in this paragraph, provided that the conditions for using those approaches are met.
Institutions may determine the risk-weighted exposure amount of a CIU's exposures in accordance with the approaches set out in Article 132a where all the following conditions are met:
the CIU is one of the following:
an undertaking for collective investment in transferable securities (UCITS), governed by Directive 2009/65/EC;
an AIF managed by an EU AIFM registered under Article 3(3) of Directive 2011/61/EU;
an AIF managed by an EU AIFM authorised under Article 6 of Directive 2011/61/EU;
an AIF managed by a non-EU AIFM authorised under Article 37 of Directive 2011/61/EU;
a non-EU AIF managed by a non-EU AIFM and marketed in accordance with Article 42 of Directive 2011/61/EU;
a non-EU AIF not marketed in the Union and managed by a non-EU AIFM established in a third country that is covered by a delegated act referred to in Article 67(6) of Directive 2011/61/EU;
the CIU's prospectus or equivalent document includes the following:
the categories of assets in which the CIU is authorised to invest;
where investment limits apply, the relative limits and the methodologies to calculate them;
reporting by the CIU or the CIU management company to the institution complies with the following requirements:
the exposures of the CIU are reported at least as frequently as those of the institution;
the granularity of the financial information is sufficient to allow the institution to calculate the CIU's risk -weighted exposure amount in accordance with the approach chosen by the institution;
where the institution applies the look-through approach, information about the underlying exposures is verified by an independent third party.
By way of derogation from point (a) of the first subparagraph of this paragraph, multilateral and bilateral development banks and other institutions that co-invest in a CIU with multilateral or bilateral development banks may determine the risk-weighted exposure amount of that CIU's exposures in accordance with the approaches set out in Article 132a, provided that the conditions set out in points (b) and (c) of the first subparagraph of this paragraph are met and that the CIU's investment mandate limits the types of assets that the CIU can invest in to assets that promote sustainable development in developing countries.
Institutions shall notify their competent authority of the CIUs to which they apply the treatment referred to in the second subparagraph.
By way of derogation from point (c)(i) of the first subparagraph, where the institution determines the risk-weighted exposure amount of a CIU's exposures in accordance with the mandate-based approach, the reporting by the CIU or the CIU management company to the institution may be limited to the investment mandate of the CIU and any changes thereof and may be done only when the institution incurs the exposure to the CIU for the first time and when there is a change in the investment mandate of the CIU.
Institutions that do not have adequate data or information to calculate the risk-weighted exposure amount of a CIU's exposures in accordance with the approaches set out in Article 132a may rely on the calculations of a third party, provided that all the following conditions are met:
the third party is one of the following:
the depository institution or the depository financial institution of the CIU, provided that the CIU exclusively invests in securities and deposits all securities at that depository institution or depository financial institution;
for CIUs not covered by point (i) of this point, the CIU management company, provided that the company meets the condition set out in point (a) of paragraph 3;
the third party carries out the calculation in accordance with the approaches set out in Article 132a(1), (2) or (3), as applicable;
an external auditor has confirmed the correctness of the third party's calculation.
Institutions that rely on third-party calculations shall multiply the risk-weighted exposure amount of a CIU's exposures resulting from those calculations by a factor of 1,2.
By way of derogation from the second subparagraph, where the institution has unrestricted access to the detailed calculations carried out by the third party, the factor of 1,2 shall not apply. The institution shall provide those calculations to its competent authority upon request.
the institutions measure the value of their holdings of units or shares in a CIU at historical cost but measure the value of the underlying assets of the CIU at fair value if they apply the look-through approach;
a change in the market value of the units or shares for which institutions measure the value at historical cost changes neither the amount of own funds of those institutions nor the exposure value associated with those holdings.
Article 132a
Approaches for calculating risk-weighted exposure amounts of CIUs
Institutions shall carry out the calculations referred to in the first subparagraph under the assumption that the CIU first incurs exposures to the maximum extent allowed under its mandate or relevant law in the exposures attracting the highest own funds requirement and then continues incurring exposures in descending order until the maximum total exposure limit is reached, and that the CIU applies leverage to the maximum extent allowed under its mandate or relevant law, where applicable.
Institutions shall carry out the calculations referred to in the first subparagraph in accordance with the methods set out in this Chapter, in Chapter 5, and in Section 3, 4 or 5 of Chapter 6 of this Title.
By way of derogation from the first subparagraph, an institution may exclude from the calculation of the own funds requirement for credit valuation adjustment risk derivative exposures which would not be subject to that requirement if they were incurred directly by the institution.
EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 132b
Exclusions from the approaches for calculating risk-weighted exposure amounts of CIUs
Article 132c
Treatment of off-balance-sheet exposures to CIUs
Institutions shall calculate the risk-weighted exposure amount for their off-balance-sheet items with the potential to be converted into exposures in the form of units or shares in a CIU by multiplying the exposure values of those exposures calculated in accordance with Article 111, with the following risk weight:
for all exposures for which institutions use one of the approaches set out in Article 132a:
where:
|
= |
the risk weight; |
i |
= |
the index denoting the CIU: |
RWAEi |
= |
the amount calculated in accordance with Article 132a for a CIUi; |
|
= |
the exposure value of the exposures of CIUi; |
Ai |
= |
the accounting value of assets of CIUi; and |
EQi |
= |
the accounting value of the equity of CIUi. |
Institutions shall calculate the risk-weighted exposure amount for off-balance-sheet exposures arising from minimum value commitments that meet all the conditions set out in paragraph 3 of this Article by multiplying the exposure value of those exposures by a conversion factor of 20 % and the risk weight derived under Article 132 or 152.
Institutions shall determine the risk-weighted exposure amount for off-balance-sheet exposures arising from minimum value commitments in accordance with paragraph 2 where all the following conditions are met:
the off-balance-sheet exposure of the institution is a minimum value commitment for an investment into units or shares of one or more CIUs under which the institution is only obliged to pay out under the minimum value commitment where the market value of the underlying exposures of the CIU or CIUs is below a predetermined threshold at one or more points in time, as specified in the contract;
the CIU is any of the following:
a UCITS as defined in Directive 2009/65/EC; or
an AIF as defined in point (a) of Article 4(1) of Directive 2011/61/EU which solely invests in transferable securities or in other liquid financial assets referred to in Article 50(1) of Directive 2009/65/EC, where the mandate of the AIF does not allow a leverage higher than that allowed under Article 51(3) of Directive 2009/65/EC;
the current market value of the underlying exposures of the CIU underlying the minimum value commitment without considering the effect of the off-balance-sheet minimum value commitments covers or exceeds the present value of the threshold specified in the minimum value commitment;
when the excess of the market value of the underlying exposures of the CIU or CIUs over the present value of the minimum value commitment declines, the institution, or another undertaking in so far as it is covered by the supervision on a consolidated basis to which the institution itself is subject in accordance with this Regulation and Directive 2013/36/EU or Directive 2002/87/EC, can influence the composition of the underlying exposures of the CIU or CIUs or limit the potential for a further reduction of the excess in other ways;
the ultimate direct or indirect beneficiary of the minimum value commitment is typically a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU.;
Article 133
Equity exposures
The following exposures shall be considered equity exposures:
non-debt exposures conveying a subordinated, residual claim on the assets or income of the issuer;
debt exposures and other securities, partnerships, derivatives, or other vehicles, the economic substance of which is similar to the exposures specified in point (a).
Article 134
Other items
Section 3
Recognition and mapping of credit risk assessment
Sub-Section 1
Recognition of ECAIs
Article 135
Use of credit assessments by ECAIs
Sub-Section 2
Mapping of ECAI's credit assessments
Article 136
Mapping of ECAI's credit assessments
EBA, EIOPA and ESMA shall submit those draft implementing technical standards to the Commission by 1 July 2014 and shall submit revised draft implementing technical standards where necessary.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively.
When determining the mapping of credit assessments, EBA, EIOPA and ESMA shall comply with the following requirements:
in order to differentiate between the relative degrees of risk expressed by each credit assessment, EBA, EIOPA and ESMA shall consider quantitative factors such as the long-term default rate associated with all items assigned the same credit assessment. For recently established ECAIs and for those that have compiled only a short record of default data, EBA, EIOPA and ESMA shall ask the ECAI what it believes to be the long-term default rate associated with all items assigned the same credit assessment;
in order to differentiate between the relative degrees of risk expressed by each credit assessment, EBA, EIOPA and ESMA shall consider qualitative factors such as the pool of issuers that the ECAI covers, the range of credit assessments that the ECAI assigns, each credit assessment meaning and the ECAI's definition of default;
EBA, EIOPA and ESMA shall compare default rates experienced for each credit assessment of a particular ECAI and compare them with a benchmark built on the basis of default rates experienced by other ECAIs on a population of issuers that present an equivalent level of credit risk;
where the default rates experienced for the credit assessment of a particular ECAI are materially and systematically higher then the benchmark, EBA, EIOPA and ESMA shall assign a higher credit quality step in the credit quality assessment scale to the ECAI credit assessment;
where EBA, EIOPA and ESMA have increased the associated risk weight for a specific credit assessment of a particular ECAI, and where default rates experienced for that ECAI's credit assessment are no longer materially and systematically higher than the benchmark, EBA, EIOPA and ESMA may restore the original credit quality step in the credit quality assessment scale for the ECAI credit assessment.
EBA, EIOPA and ESMA shall submit those draft implementing technical standards to the Commission by 1 July 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively.
Sub-Section 3
Use of credit assessments by Export Credit Agencies
Article 137
Use of credit assessments by export credit agencies
For the purpose of Article 114, institutions may use credit assessments of an Export Credit Agency that the institution has nominated, if either of the following conditions is met:
it is a consensus risk score from export credit agencies participating in the OECD ‘Arrangement on Guidelines for Officially Supported Export Credits’;
the Export Credit Agency publishes its credit assessments, and the Export Credit Agency subscribes to the OECD agreed methodology, and the credit assessment is associated with one of the eight minimum export insurance premiums that the OECD agreed methodology establishes. An institution may revoke its nomination of an Export Credit Agency. An institution shall substantiate the revocation if there are concrete indications that the intention underlying the revocation is to reduce the capital adequacy requirements.
Exposures for which a credit assessment by an Export Credit Agency is recognised for risk weighting purposes shall be assigned a risk weight in accordance with Table 9.
Table 9
MEIP |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
Risk weight |
0 % |
0 % |
20 % |
50 % |
100 % |
100 % |
100 % |
150 % |
Section 4
Use of the ECAI credit assessments for the determination of risk weights
Article 138
General requirements
An institution may nominate one or more ECAIs to be used for the determination of risk weights to be assigned to assets and off-balance sheet items. An institution may revoke its nomination of an ECAI. An institution shall substantiate the revocation if there are concrete indications that the intention underlying the revocation is to reduce the capital adequacy requirements. Credit assessments shall not be used selectively. An institution shall use solicited credit assessments. However it may use unsolicited credit assessments if EBA has confirmed that unsolicited credit assessments of an ECAI do not differ in quality from solicited credit assessments of this ECAI. EBA shall refuse or revoke this confirmation in particular if the ECAI has used an unsolicited credit assessment to put pressure on the rated entity to place an order for a credit assessment or other services. In using credit assessment, institutions shall comply with the following requirements:
an institution which decides to use the credit assessments produced by an ECAI for a certain class of items shall use those credit assessments consistently for all exposures belonging to that class;
an institution which decides to use the credit assessments produced by an ECAI shall use them in a continuous and consistent way over time;
an institution shall only use ECAIs credit assessments that take into account all amounts both in principal and in interest owed to it;
where only one credit assessment is available from a nominated ECAI for a rated item, that credit assessment shall be used to determine the risk weight for that item;
where two credit assessments are available from nominated ECAIs and the two correspond to different risk weights for a rated item, the higher risk weight shall be assigned;
where more than two credit assessments are available from nominated ECAIs for a rated item, the two assessments generating the two lowest risk weights shall be referred to. If the two lowest risk weights are different, the higher risk weight shall be assigned. If the two lowest risk weights are the same, that risk weight shall be assigned.
Article 139
Issuer and issue credit assessment
Where no directly applicable credit assessment exists for a certain item, but a credit assessment exists for a specific issuing programme or facility to which the item constituting the exposure does not belong or a general credit assessment exists for the issuer, then that credit assessment shall be used in either of the following cases:
it produces a higher risk weight than would otherwise be the case and the exposure in question ranks pari passu or junior in all respects to the specific issuing program or facility or to senior unsecured exposures of that issuer, as relevant;
it produces a lower risk weight and the exposure in question ranks pari passu or senior in all respects to the specific issuing programme or facility or to senior unsecured exposures of that issuer, as relevant.
In all other cases, the exposure shall be treated as unrated.
Article 140
Long-term and short-term credit assessments
Any short-term credit assessment shall only apply to the item the short-term credit assessment refers to, and it shall not be used to derive risk weights for any other item, except in the following cases:
if a short-term rated facility is assigned a 150 % risk weight, then all unrated unsecured exposures on that obligor whether short-term or long-term shall also be assigned a 150 % risk weight;
if a short-term rated facility is assigned a 50 % risk-weight, no unrated short-term exposure shall be assigned a risk weight lower than 100 %.
Article 141
Domestic and foreign currency items
A credit assessment that refers to an item denominated in the obligor's domestic currency cannot be used to derive a risk weight for another exposure on that same obligor that is denominated in a foreign currency.
When an exposure arises through an institution's participation in a loan that has been extended by a multilateral development bank whose preferred creditor status is recognised in the market, the credit assessment on the obligors' domestic currency item may be used for risk weighting purposes.
CHAPTER 3
Internal Ratings Based Approach
Section 1
Permission by competent authorities to use the IRB approach
Article 142
Definitions
For the purposes of this Chapter, the following definitions shall apply:
‘rating system’ means all of the methods, processes, controls, data collection and IT systems that support the assessment of credit risk, the assignment of exposures to rating grades or pools, and the quantification of default and loss estimates that have been developed for a certain type of exposures;
‘type of exposures’ means a group of homogeneously managed exposures which are formed by a certain type of facilities and which may be limited to a single entity or a single sub-set of entities within a group provided that the same type of exposures is managed differently in other entities of the group;
‘business unit’ means any separate organisational or legal entities, business lines, geographical locations;
‘large financial sector entity’ means any financial sector entity which meets the following conditions:
its total assets, calculated on an individual or consolidated basis, are greater than or equal to a EUR 70 billion threshold, using the most recent audited financial statement or consolidated financial statement in order to determine asset size; and
it is, or one of its subsidiaries is, subject to prudential regulation in the Union or to the laws of a third country which applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union;
‘unregulated financial sector entity’ means an entity that is not a regulated financial sector entity but that performs, as its main business, one or more of the activities listed in Annex I to Directive 2013/36/EU or in Annex I to Directive 2004/39/EC;
‘obligor grade’ means a risk category within the obligor rating scale of a rating system, to which obligors are assigned on the basis of a specified and distinct set of rating criteria, from which estimates of probability of default (PD) are derived;
‘facility grade’ means a risk category within a rating system's facility scale, to which exposures are assigned on the basis of a specified and distinct set of rating criteria, from which own estimates of LGD are derived.
▼M5 —————
Article 143
Permission to use the IRB Approach
Institutions shall obtain the prior permission of the competent authorities for the following:
material changes to the range of application of a rating system or an internal models approach to equity exposures that the institution has received permission to use;
material changes to a rating system or an internal models approach to equity exposures that the institution has received permission to use.
The range of application of a rating system shall comprise all exposures of the relevant type of exposure for which that rating system was developed.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 144
Competent authorities' assessment of an application to use an IRB Approach
The competent authority shall grant permission pursuant to Article 143 for an institution to use the IRB Approach, including to use own estimates of LGD and conversion factors, only if the competent authority is satisfied that requirements laid down in this Chapter are met, in particular those laid down in Section 6, and that the systems of the institution for the management and rating of credit risk exposures are sound and implemented with integrity and, in particular, that the institution has demonstrated to the satisfaction of the competent authority that the following standards are met:
the institution's rating systems provide for a meaningful assessment of obligor and transaction characteristics, a meaningful differentiation of risk and accurate and consistent quantitative estimates of risk;
internal ratings and default and loss estimates used in the calculation of own funds requirements and associated systems and processes play an essential role in the risk management and decision-making process, and in the credit approval, internal capital allocation and corporate governance functions of the institution;
the institution has a credit risk control unit responsible for its rating systems that is appropriately independent and free from undue influence;
the institution collects and stores all relevant data to provide effective support to its credit risk measurement and management process;
the institution documents its rating systems and the rationale for their design and validates its rating systems;
the institution has validated each rating system and each internal models approach for equity exposures during an appropriate time period prior to the permission to use this rating system or internal models approach to equity exposures, has assessed during this time period whether the rating system or internal models approaches for equity exposures are suited to the range of application of the rating system or internal models approach for equity exposures, and has made necessary changes to these rating systems or internal models approaches for equity exposures following from its assessment;
the institution has calculated under the IRB Approach the own funds requirements resulting from its risk parameters estimates and is able to submit the reporting as required by Article 430;
the institution has assigned and continues with assigning each exposure in the range of application of a rating system to a rating grade or pool of this rating system; the institution has assigned and continues with assigning each exposure in the range of application of an approach for equity exposures to this internal models approach.
The requirements to use an IRB Approach, including own estimates of LGD and conversion factors, apply also where an institution has implemented a rating system, or model used within a rating system, that it has purchased from a third-party vendor.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 145
Prior experience of using IRB approaches
Article 146
Measures to be taken where the requirements of this Chapter cease to be met
Where an institution ceases to comply with the requirements laid down in this Chapter, it shall notify the competent authority and do one of the following:
present to the satisfaction of the competent authority a plan for a timely return to compliance and realise this plan within a period agreed with the competent authority;
demonstrate to the satisfaction of the competent authorities that the effect of non-compliance is immaterial.
Article 147
Methodology to assign exposures to exposure classes
Each exposure shall be assigned to one of the following exposure classes:
exposures to central governments and central banks;
exposures to institutions;
exposures to corporates;
retail exposures;
equity exposures;
items representing securitisation positions;
other non credit-obligation assets.
The following exposures shall be assigned to the class laid down in point (a) of paragraph 2:
exposures to regional governments, local authorities or public sector entities which are treated as exposures to central governments under Articles 115 and 116;
exposures to multilateral development banks referred to in Article 117(2);
exposures to International Organisations which attract a risk weight of 0 % under Article 118.
The following exposures shall be assigned to the class laid down in point (b) of paragraph 2:
exposures to regional governments and local authorities which are not treated as exposures to central governments in accordance with Article 115(2) and (4);
exposures to public sector entities which are not treated as exposures to central governments in accordance with Article 116(4);
exposures to multilateral development banks which are not assigned a 0 % risk weight under Article 117; and
exposures to financial institutions which are treated as exposures to institutions in accordance with Article 119(5).
To be eligible for the retail exposure class laid down in point (d) of paragraph 2, exposures shall meet the following criteria:
they shall be one of the following:
exposures to one or more natural persons;
exposures to an SME, provided in that case that the total amount owed to the institution and parent undertakings and its subsidiaries, including any past due exposure, by the obligor client or group of connected clients, but excluding exposures secured on residential property collateral, shall not, to the knowledge of the institution, which shall have taken reasonable steps to confirm the situation, exceed EUR 1 million;
they are treated by the institution in its risk management consistently over time and in a similar manner;
they are not managed just as individually as exposures in the corporate exposure class;
they each represent one of a significant number of similarly managed exposures.
In addition to the exposures listed in the first subparagraph, the present value of retail minimum lease payments shall be included in the retail exposure class.
The following exposures shall be assigned to the equity exposure class laid down in point (e) of paragraph 2:
non-debt exposures conveying a subordinated, residual claim on the assets or income of the issuer;
debt exposures and other securities, partnerships, derivatives, or other vehicles, the economic substance of which is similar to the exposures specified in point (a).
Within the corporate exposure class laid down in point (c) of paragraph 2, institutions shall separately identify as specialised lending exposures, exposures which possess the following characteristics:
the exposure is to an entity which was created specifically to finance or operate physical assets or is an economically comparable exposure;
the contractual arrangements give the lender a substantial degree of control over the assets and the income that they generate;
the primary source of repayment of the obligation is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise.
Article 148
Conditions for implementing the IRB Approach across different classes of exposure and business units
Subject to the prior permission of the competent authorities, implementation may be carried out sequentially across the different exposure classes referred to in Article 147 within the same business unit, across different business units in the same group or for the use of own estimates of LGDs or conversion factors for the calculation of risk weights for exposures to corporates, institutions, and central governments and central banks.
In the case of the retail exposure class referred to in Article 147(5), implementation may be carried out sequentially across the categories of exposures to which the different correlations in Article 154 correspond.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 149
Conditions to revert to the use of less sophisticated approaches
An institution that uses the IRB Approach for a particular exposure class or type of exposure shall not stop using that approach and use instead the Standardised Approach for the calculation of risk-weighted exposure amounts unless the following conditions are met:
the institution has demonstrated to the satisfaction of the competent authority that the use of the Standardised Approach is not proposed in order to reduce the own funds requirement of the institution, is necessary on the basis of nature and complexity of the institution's total exposures of this type and would not have a material adverse impact on the solvency of the institution or its ability to manage risk effectively;
the institution has received the prior permission of the competent authority.
Institutions which have obtained permission under Article 151(9) to use own estimates of LGDs and conversion factors, shall not revert to the use of LGD values and conversion factors referred to in Article 151(8) unless the following conditions are met:
the institution has demonstrated to the satisfaction of the competent authority that the use of LGDs and conversion factors laid down in Article 151(8) for a certain exposure class or type of exposure is not proposed in order to reduce the own funds requirement of the institution, is necessary on the basis of nature and complexity of the institution's total exposures of this type and would not have a material adverse impact on the solvency of the institution or its ability to manage risk effectively;
the institution has received the prior permission of the competent authority.
Article 150
Conditions for permanent partial use
Where institutions have received the prior permission of the competent authorities, institutions permitted to use the IRB Approach in the calculation of risk-weighted exposure amounts and expected loss amounts for one or more exposure classes may apply the Standardised Approach for the following exposures:
the exposure class laid down in Article 147(2)(a), where the number of material counterparties is limited and it would be unduly burdensome for the institution to implement a rating system for these counterparties;
the exposure class laid down in Article 147(2)(b), where the number of material counterparties is limited and it would be unduly burdensome for the institution to implement a rating system for these counterparties;
exposures in non-significant business units as well as exposure classes or types of exposures that are immaterial in terms of size and perceived risk profile;
exposures to central governments and central banks of the Member States and their regional governments, local authorities, administrative bodies and public sector entities provided that:
there is no difference in risk between the exposures to that central government and central bank and those other exposures because of specific public arrangements; and
exposures to central governments and central banks are assigned a 0 % risk weight under Article 114(2) or (4);
exposures of an institution to a counterparty which is its parent undertaking, its subsidiary or a subsidiary of its parent undertaking provided that the counterparty is an institution or a financial holding company, mixed financial holding company, financial institution, asset management company or ancillary services undertaking subject to appropriate prudential requirements or an undertaking linked by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC;
exposures between institutions which meet the requirements set out in Article 113(7);
equity exposures to entities whose credit obligations are assigned a 0 % risk weight under Chapter 2 including those publicly sponsored entities where a 0 % risk weight can be applied;
equity exposures incurred under legislative programmes to promote specified sectors of the economy that provide significant subsidies for the investment to the institution and involve some form of government oversight and restrictions on the equity investments where such exposures may in aggregate be excluded from the IRB Approach only up to a limit of 10 % of own funds;
the exposures identified in Article 119(4) meeting the conditions specified therein;
State and State-reinsured guarantees referred to in Article 215(2).
The competent authorities shall permit the application of Standardised Approach for equity exposures referred to in points (g) and (h) of the first subparagraph which have been permitted for that treatment in other Member States. EBA shall publish on its website and regularly update a list of the exposures referred to in those points to be treated according to the Standardised Approach.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Those guidelines shall be adopted in accordance with Article 16 of Regulation (EU) No 1093/2010.
Section 2
Calculation of risk-weighted exposure amounts
Sub-Section 1
Treatment by type of exposure class
Article 151
Treatment by exposure class
Article 152
Treatment of exposures in the form of units or shares in CIUs
By way of derogation from the first subparagraph, an institution may exclude from the calculation of the own funds requirement for credit valuation adjustment risk derivative exposures which would not be subject to that requirement if they were incurred directly by the institution.
Institutions that apply the look-through approach in accordance with paragraphs 2 and 3 of this Article and that meet the conditions for permanent partial use in accordance with Article 150, or that do not meet the conditions for using the methods set out in this Chapter or one or more of the methods set out in Chapter 5 for all or parts of the underlying exposures of the CIU, shall calculate risk-weighted exposure amounts and expected loss amounts in accordance with the following principles:
for exposures assigned to the equity exposure class referred to in point (e) of Article 147(2), institutions shall apply the simple risk-weight approach set out in Article 155(2);
for exposures assigned to the items representing securitisation positions referred to in point (f) of Article 147(2), institutions shall apply the treatment set out in Article 254 as if those exposures were directly held by those institutions;
for all other underlying exposures, institutions shall apply the Standardised Approach laid down in Chapter 2 of this Title.
For the purposes of point (a) of the first subparagraph, where the institution is unable to differentiate between private equity exposures, exchange-traded exposures and other equity exposures, it shall treat the exposures concerned as other equity exposures.
Institutions that do not have adequate data or information to calculate the risk-weighted amount of a CIU in accordance with the approaches set out in paragraphs 2, 3, 4 and 5 may rely on the calculations of a third party, provided that all the following conditions are met:
the third party is one of the following:
the depository institution or the depository financial institution of the CIU, provided that the CIU exclusively invests in securities and deposits all securities at that depository institution or depository financial institution;
for CIUs not covered by point (i) of this point, the CIU management company, provided that the CIU management company meets the criteria set out in point (a) of Article 132(3);
for exposures other than those listed in points (a), (b) and (c) of paragraph 4 of this Article, the third party carries out the calculation in accordance with the look-through approach set out in Article 132a(1);
for exposures listed in points (a), (b) and (c) of paragraph 4, the third party carries out the calculation in accordance with the approaches set out therein;
an external auditor has confirmed the correctness of the third party's calculation.
Institutions that rely on third-party calculations shall multiply the risk weighted exposure amounts of a CIU's exposures resulting from those calculations by a factor of 1,2.
By way of derogation from the second subparagraph, where the institution has unrestricted access to the detailed calculations carried out by the third party, the 1,2 factor shall not apply. The institution shall provide those calculations to its competent authority upon request.
Sub-Section 2
Calculation of risk-weighted exposure amounts for credit risk
Article 153
Risk-weighted exposure amounts for exposures to corporates, institutions and central governments and central banks
Subject to the application of the specific treatments laid down in paragraphs 2, 3 and 4, the risk-weighted exposure amounts for exposures to corporates, institutions and central governments and central banks shall be calculated according to the following formulae:
Risk – weighted exposure amount = RW · exposure value
where the risk weight RW is defined as
if PD = 0, RW shall be 0;
if PD = 1, i.e., for defaulted exposures:
where the expected loss best estimate (hereinafter referred to as ‘ELBE’) shall be the institution's best estimate of expected loss for the defaulted exposure in accordance with Article 181(1)(h);
if 0 < PD < 1
where:
N(x) |
= |
the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x); |
G(Z) |
= |
denotes the inverse cumulative distribution function for a standard normal random variable (i.e. the value x such that N(x) = z) |
R |
= |
denotes the coefficient of correlation, is defined as
|
b |
= |
the maturity adjustment factor, which is defined as
|
The risk-weighted exposure amount for each exposure which meets the requirements set out in Articles 202 and 217 may be adjusted in accordance with the following formula:
Risk – weighted exposure amount = RW · exposure value · (0.15 + 160 · PDpp )
where:
PDpp |
= |
PD of the protection provider. |
RW shall be calculated using the relevant risk weight formula set out in point 1 for the exposure, the PD of the obligor and the LGD of a comparable direct exposure to the protection provider. The maturity factor (b) shall be calculated using the lower of the PD of the protection provider and the PD of the obligor.
For exposures to companies where the total annual sales for the consolidated group of which the firm is a part is less than EUR 50 million, institutions may use the following correlation formula in paragraph 1 (iii) for the calculation of risk weights for corporate exposures. In this formula S is expressed as total annual sales in millions of euro with EUR 5 million ≤ S ≤ EUR 50 million. Reported sales of less than EUR 5 million shall be treated as if they were equivalent to EUR 5 million. For purchased receivables the total annual sales shall be the weighted average by individual exposures of the pool.
Institutions shall substitute total assets of the consolidated group for total annual sales when total annual sales are not a meaningful indicator of firm size and total assets are a more meaningful indicator than total annual sales.
For specialised lending exposures in respect of which an institution is not able to estimate PDs or the institutions' PD estimates do not meet the requirements set out in Section 6, the institution shall assign risk weights to these exposures in accordance with Table 1, as follows:
Table 1
Remaining Maturity |
Category 1 |
Category 2 |
Category 3 |
Category 4 |
Category 5 |
Less than 2,5 years |
50 % |
70 % |
115 % |
250 % |
0 % |
Equal or more than 2,5 years |
70 % |
90 % |
115 % |
250 % |
0 % |
In assigning risk weights to specialised lending exposures institutions shall take into account the following factors: financial strength, political and legal environment, transaction and/or asset characteristics, strength of the sponsor and developer, including any public private partnership income stream, and security package.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 154
Risk-weighted exposure amounts for retail exposures
The risk-weighted exposure amounts for retail exposures shall be calculated in accordance with the following formulae:
Risk – weighted exposure amount = RW · exposure value
where the risk weight RW is defined as follows:
if PD = 1, i.e., for defaulted exposures, RW shall be
where ELBE shall be the institution's best estimate of expected loss for the defaulted exposure in accordance with Article 181(1)(h);
if 0 < PD < 1, i.e., for any possible value for PD other than under (i)
where:
N(x) |
= |
the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x); |
G(Z) |
= |
the inverse cumulative distribution function for a standard normal random variable (i.e. the value x such that N(x) = z); |
R |
= |
the coefficient of correlation defined as
|
Exposures shall qualify as qualifying revolving retail exposures if they meet the following conditions:
the exposures are to individuals;
the exposures are revolving, unsecured, and to the extent they are not drawn immediately and unconditionally, cancellable by the institution. In this context revolving exposures are defined as those where customers' outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to a limit established by the institution. Undrawn commitments may be considered as unconditionally cancellable if the terms permit the institution to cancel them to the full extent allowable under consumer protection and related legislation;
the maximum exposure to a single individual in the sub-portfolio is EUR 100 000 or less;
the use of the correlation of this paragraph is limited to portfolios that have exhibited low volatility of loss rates, relative to their average level of loss rates, especially within the low PD bands;
the treatment as a qualifying revolving retail exposure shall be consistent with the underlying risk characteristics of the sub-portfolio.
By way of derogation from point (b), the requirement to be unsecured does not apply in respect of collateralised credit facilities linked to a wage account. In this case amounts recovered from the collateral shall not be taken into account in the LGD estimate.
Competent authorities shall review the relative volatility of loss rates across the qualifying revolving retail sub-portfolios, as well the aggregate qualifying revolving retail portfolio, and shall share information on the typical characteristics of qualifying revolving retail loss rates across Member States.
To be eligible for the retail treatment, purchased receivables shall comply with the requirements set out in Article 184 and the following conditions:
the institution has purchased the receivables from unrelated third party sellers, and its exposure to the obligor of the receivable does not include any exposures that are directly or indirectly originated by the institution itself;
the purchased receivables shall be generated on an arm's-length basis between the seller and the obligor. As such, inter-company accounts receivables and receivables subject to contra-accounts between firms that buy and sell to each other are ineligible;
the purchasing institution has a claim on all proceeds from the purchased receivables or a pro-rata interest in the proceeds; and
the portfolio of purchased receivables is sufficiently diversified.
Article 155
Risk-weighted exposure amounts for equity exposures
Institutions may treat equity exposures to ancillary services undertakings in accordance with the treatment of other non credit- obligation assets.
Under the simple risk weight approach, the risk-weighted exposure amount shall be calculated in accordance with the formula:
Risk – weighted exposure amount = RW * exposure value,
where:
Risk weight (RW) = 190 % for private equity exposures in sufficiently diversified portfolios.
Risk weight (RW) = 290 % for exchange traded equity exposures.
Risk weight (RW) = 370 % for all other equity exposures.
Short cash positions and derivative instruments held in the non-trading book are permitted to offset long positions in the same individual stocks provided that these instruments have been explicitly designated as hedges of specific equity exposures and that they provide a hedge for at least another year. Other short positions are to be treated as if they are long positions with the relevant risk weight assigned to the absolute value of each position. In the context of maturity mismatched positions, the method is that for corporate exposures as set out in Article 162(5).
Institutions may recognise unfunded credit protection obtained on an equity exposure in accordance with the methods set out in Chapter 4.
At the individual exposure level the sum of the expected loss amount multiplied by 12,5 and the risk-weighted exposure amount shall not exceed the exposure value multiplied by 12,5.
Institutions may recognise unfunded credit protection obtained on an equity exposure in accordance with the methods set out in Chapter 4. This shall be subject to an LGD of 90 % on the exposure to the provider of the hedge. For private equity exposures in sufficiently diversified portfolios an LGD of 65 % may be used. For these purposes M shall be five years.
Under the internal models approach, the risk-weighted exposure amount shall be the potential loss on the institution's equity exposures as derived using internal value-at-risk models subject to the 99th percentile, one-tailed confidence interval of the difference between quarterly returns and an appropriate risk-free rate computed over a long-term sample period, multiplied by 12,5. The risk-weighted exposure amounts at the equity portfolio level shall not be less than the total of the sums of the following:
the risk-weighted exposure amounts required under the PD/LGD Approach; and
the corresponding expected loss amounts multiplied by 12,5.
The amounts referred to in point (a) and (b) shall be calculated on the basis of the PD values set out in Article 165(1) and the corresponding LGD values set out in Article 165(2).
Institutions may recognise unfunded credit protection obtained on an equity position.
Article 156
Risk-weighted exposure amounts for other non credit-obligation assets
The risk-weighted exposure amounts for other non credit-obligation assets shall be calculated in accordance with the following formula:
Risk – weighted exposure amount = 100 % · exposure value,
except for:
cash in hand and equivalent cash items as well as gold bullion held in own vault or on an allocated basis to the extent backed by bullion liabilities, in which case a 0 % risk-weight shall be assigned;
when the exposure is a residual value of leased assets in which case it shall be calculated as follows:
where t is the greater of 1 and the nearest number of whole years of the lease remaining.
Sub-Section 3
Calculation of risk-weighted exposure amounts for dilution risk of purchased receivables
Article 157
Risk-weighted exposure amounts for dilution risk of purchased receivables
Section 3
Expected loss amounts
Article 158
Treatment by exposure type
The expected loss (EL) and expected loss amounts for exposures to corporates, institutions, central governments and central banks and retail exposures shall be calculated in accordance with the following formulae:
Expected loss (EL) = PD * LGD
Expected loss amount |
= |
EL [multiplied by] exposure value. |
For defaulted exposures (PD = 100 %) where institutions use own estimates of LGDs, EL shall be ELBE, the institution's best estimate of expected loss for the defaulted exposure in accordance with Article 181(1)(h).
For exposures subject to the treatment set out in Article 153(3), EL shall be 0 %.
The EL values for specialised lending exposures where institutions use the methods set out in Article 153(5) for assigning risk weights shall be assigned in accordance with Table 2.
Table 2
Remaining Maturity |
Category 1 |
Category 2 |
Category 3 |
Category 4 |
Category 5 |
Less than 2,5 years |
0 % |
0,4 % |
2,8 % |
8 % |
50 % |
Equal to or more than 2,5 years |
0,4 % |
0,8 % |
2,8 % |
8 % |
50 % |
The expected loss amounts for equity exposures where the risk-weighted exposure amounts are calculated in accordance with the simple risk weight approach shall be calculated in accordance with the following formula:
Expected loss amount = EL · exposure value
The EL values shall be the following:
Expected loss (EL) = 0,8 % for private equity exposures in sufficiently diversified portfolios
Expected loss (EL) = 0,8 % for exchange traded equity exposures
Expected loss (EL) = 2,4 % for all other equity exposures.
The expected loss and expected loss amounts for equity exposures where the risk-weighted exposure amounts are calculated in accordance with the PD/LGD approach shall be calculated in accordance with the following formula:
Expected loss (EL) = PD · LGD
Expected loss amount = EL · exposure value
The expected loss amounts for dilution risk of purchased receivables shall be calculated in accordance with the following formula:
Expected loss (EL) = PD · LGD
Expected loss amount = EL · exposure value
Article 159
Treatment of expected loss amounts
Institutions shall subtract the expected loss amounts calculated in accordance with Article 158(5), (6) and (10) from the general and specific credit risk adjustments in accordance with Article 110, additional value adjustments in accordance with Articles 34 and 105 and other own funds reductions related to those exposures except for the deductions made in accordance with point (m) Article 36(1). Discounts on balance sheet exposures purchased when in default in accordance with Article 166(1) shall be treated in the same manner as specific credit risk adjustments. Specific credit risk adjustments on exposures in default shall not be used to cover expected loss amounts on other exposures. Expected loss amounts for securitised exposures and general and specific credit risk adjustments related to those exposures shall not be included in that calculation.
Section 4
PD, LGD and maturity
Sub-Section 1
Exposures to corporates, institutions and central governments and central banks
Article 160
Probability of default (PD)
For purchased corporate receivables in respect of which an institution is not able to estimate PDs or an institution's PD estimates do not meet the requirements set out in Section 6, the PDs for these exposures shall be determined in accordance with the following methods:
for senior claims on purchased corporate receivables PD shall be the institutions estimate of EL divided by LGD for these receivables;
for subordinated claims on purchased corporate receivables PD shall be the institution's estimate of EL;
an institution that has received the permission of the competent authority to use own LGD estimates for corporate exposures pursuant to Article 143 and that can decompose its EL estimates for purchased corporate receivables into PDs and LGDs in a manner that the competent authority considers to be reliable, may use the PD estimate that results from this decomposition.
Institutions may take into account unfunded credit protection in the PD in accordance with the provisions of Chapter 4. For dilution risk, in addition to the protection providers referred to in Article 201(1)(g) the seller of the purchased receivables is eligible if the following conditions are met:
the corporate entity has a credit assessment by an ECAI which has been determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Chapter 2;
the corporate entity, in the case of institutions calculating risk-weighted exposure amounts and expected loss amounts under the IRB Approach, does not have a credit assessment by a recognised ECAI and is internally rated as having a PD equivalent to that associated with the credit assessments of ECAIs determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Chapter 2.
An institution that has received the permission of the competent authority pursuant to Article 143 to use own LGD estimates for dilution risk of purchased corporate receivables, may recognise unfunded credit protection by adjusting PDs subject to Article 161(3).
Article 161
Loss Given Default (LGD)
Institutions shall use the following LGD values:
senior exposures without eligible collateral: 45 %;
subordinated exposures without eligible collateral: 75 %;
institutions may recognise funded and unfunded credit protection in the LGD in accordance with Chapter 4;
covered bonds eligible for the treatment set out in Article 129(4) or (5) may be assigned an LGD value of 11,25 %;
for senior purchased corporate receivables exposures where an institution is not able to estimate PDs or the institution's PD estimates do not meet the requirements set out in Section 6: 45 %;
for subordinated purchased corporate receivables exposures where an institution is not able to estimate PDs or the institution's PD estimates do not meet the requirements set out in Section 6: 100 %;
for dilution risk of purchased corporate receivables: 75 %.
Article 162
Maturity
Alternatively, as part of the permission referred to in Article 143, the competent authorities shall decide on whether the institution shall use maturity (M) for each exposure as set out under paragraph 2.
Institutions that have received the permission of the competent authority to use own LGDs and own conversion factors for exposures to corporates, institutions or central governments and central banks pursuant to Article 143 shall calculate M for each of these exposures as set out in points (a) to (e) of this paragraph and subject to paragraphs 3 to 5 of this Article. M shall be no greater than five years except in the cases specified in Article 384(1) where M as specified there shall be used:
for an instrument subject to a cash flow schedule, M shall be calculated in accordance with the following formula:
where CFt denotes the cash flows (principal, interest payments and fees) contractually payable by the obligor in period t;
for derivatives subject to a master netting agreement, M shall be the weighted average remaining maturity of the exposure, where M shall be at least 1 year, and the notional amount of each exposure shall be used for weighting the maturity;
for exposures arising from fully or nearly-fully collateralised derivative instruments listed in Annex II and fully or nearly-fully collateralised margin lending transactions which are subject to a master netting agreement, M shall be the weighted average remaining maturity of the transactions where M shall be at least 10 days;
for repurchase transactions or securities or commodities lending or borrowing transactions which are subject to a master netting agreement, M shall be the weighted average remaining maturity of the transactions where M shall be at least five days. The notional amount of each transaction shall be used for weighting the maturity;
an institution that has received the permission of the competent authority pursuant to Article 143 to use own PD estimates for purchased corporate receivables, for drawn amounts M shall equal the purchased receivables exposure weighted average maturity, where M shall be at least 90 days. This same value of M shall also be used for undrawn amounts under a committed purchase facility provided that the facility contains effective covenants, early amortisation triggers, or other features that protect the purchasing institution against a significant deterioration in the quality of the future receivables it is required to purchase over the facility's term. Absent such effective protections, M for undrawn amounts shall be calculated as the sum of the longest-dated potential receivable under the purchase agreement and the remaining maturity of the purchase facility, where M shall be at least 90 days;
for any instrument other than those referred to in this paragraph or when an institution is not in a position to calculate M as set out in point (a), M shall be the maximum remaining time (in years) that the obligor is permitted to take to fully discharge its contractual obligations, where M shall be at least one year;
for institutions using the Internal Model Method set out in Section 6 of Chapter 6 to calculate the exposure values, M shall be calculated for exposures to which they apply this method and for which the maturity of the longest-dated contract contained in the netting set is greater than one year in accordance with the following formula:
where:
|
= |
a dummy variable whose value at future period tk is equal to 0 if tk > 1 year and to 1 if tk ≤ 1; |
|
= |
the expected exposure at the future period tk; |
|
= |
the effective expected exposure at the future period tk; |
|
= |
the risk-free discount factor for future time period tk; |
an institution that uses an internal model to calculate a one-sided credit valuation adjustment (CVA) may use, subject to the permission of the competent authorities, the effective credit duration estimated by the internal model as M.
Subject to paragraph 2, for netting sets in which all contracts have an original maturity of less than one year the formula in point (a) shall apply;
for institutions using the Internal Model Method set out in Section 6 of Chapter 6, to calculate the exposure values and having an internal model permission for specific risk associated with traded debt positions in accordance with Part Three, Title IV, Chapter 5, M shall be set to 1 in the formula laid out in Article 153(1), provided that an institution can demonstrate to the competent authorities that its internal model for Specific risk associated with traded debt positions applied in Article 383 contains effects of rating migrations;
for the purposes of Article 153(3), M shall be the effective maturity of the credit protection but at least 1 year.
Where the documentation requires daily re-margining and daily revaluation and includes provisions that allow for the prompt liquidation or set off of collateral in the event of default or failure to remargin, M shall be at least one-day for:
fully or nearly-fully collateralised derivative instruments listed in Annex II;
fully or nearly-fully collateralised margin lending transactions;
repurchase transactions, securities or commodities lending or borrowing transactions.
In addition, for qualifying short-term exposures which are not part of the institution's ongoing financing of the obligor, M shall be at least one-day. Qualifying short term exposures shall include the following:
exposures to institutions or investment firms arising from the settlement of foreign exchange obligations;
self-liquidating short-term trade finance transactions connected to the exchange of goods or services with a residual maturity of up to one year as referred to in point (80) of Article 4(1);
exposures arising from settlement of securities purchases and sales within the usual delivery period or two business days;
exposures arising from cash settlements by wire transfer and settlements of electronic payment transactions and prepaid cost, including overdrafts arising from failed transactions that do not exceed a short, fixed agreed number of business days.
Sub-Section 2
Retail exposures
Article 163
Probability of default (PD)
Article 164
Loss Given Default (LGD)
The exposure-weighted average LGD for all retail exposures secured by commercial immovable property and not benefiting from guarantees from central governments shall not be lower than 15 %.
Where the authority designated by the Member State for the application of this Article is the competent authority, it shall ensure that the relevant national bodies and authorities which have a macroprudential mandate are duly informed of the competent authority's intention to make use of this Article, and are appropriately involved in the assessment of financial stability concerns in its Member State in accordance with paragraph 6.
Where the authority designated by the Member State for the application of this Article is different from the competent authority, the Member State shall adopt the necessary provisions to ensure proper coordination and exchange of information between the competent authority and the designated authority for the proper application of this Article. In particular, authorities shall be required to cooperate closely and to share all the information that may be necessary for the adequate performance of the duties imposed upon the designated authority pursuant to this Article. That cooperation shall aim at avoiding any form of duplicative or inconsistent action between the competent authority and the designated authority, as well as ensuring that the interaction with other measures, in particular measures taken under Article 458 of this Regulation and Article 133 of Directive 2013/36/EU, is duly taken into account.
Where, on the basis of the assessment referred to in the first subparagraph of this paragraph, the authority designated in accordance with paragraph 5 concludes that the minimum LGD values referred to in paragraph 4 are not adequate, and if it considers that the inadequacy of LGD values could adversely affect current or future financial stability in its Member State, it may set higher minimum LGD values for those exposures located in one or more parts of the territory of the Member State of the relevant authority. Those higher minimum values may also be applied at the level of one or more property segments of such exposures.
The authority designated in accordance with paragraph 5 shall notify EBA and the ESRB before making the decision referred to in this paragraph. Within one month of receipt of that notification EBA and the ESRB shall provide their opinion to the Member State concerned. EBA and the ESRB shall publish those LGD values.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2019.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
The ESRB may, by means of recommendations in accordance with Article 16 of Regulation (EU) No 1092/2010, and in close cooperation with EBA, give guidance to authorities designated in accordance with paragraph 5 of this Article on the following:
factors which could ‘adversely affect current or future financial stability’ referred to in paragraph 6; and
indicative benchmarks that the authority designated in accordance with paragraph 5 is to take into account when determining higher minimum LGD values.
Sub-Section 3
Equity exposures subject to PD/LGD method
Article 165
Equity exposures subject to the PD/LGD method
The following minimum PDs shall apply:
0,09 % for exchange traded equity exposures where the investment is part of a long-term customer relationship;
0,09 % for non-exchange traded equity exposures where the returns on the investment are based on regular and periodic cash flows not derived from capital gains;
0,40 % for exchange traded equity exposures including other short positions as set out in Article 155(2);
1,25 % for all other equity exposures including other short positions as set out in Article 155(2).
Section 5
Exposure value
Article 166
Exposures to corporates, institutions, central governments and central banks and retail exposures
This rule also applies to assets purchased at a price different than the amount owed.
For purchased assets, the difference between the amount owed and the accounting value remaining after specific credit risk adjustments have been applied that has been recorded on the balance-sheet of the institutions when purchasing the asset is denoted discount if the amount owed is larger, and premium if it is smaller.
The exposure value for the following items shall be calculated as the committed but undrawn amount multiplied by a conversion factor. Institutions shall use the following conversion factors in accordance with Article 151(8) for exposures to corporates, institutions, central governments and central banks:
for credit lines that are unconditionally cancellable at any time by the institution without prior notice, or that effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness, a conversion factor of 0 % shall apply. To apply a conversion factor of 0 %, institutions shall actively monitor the financial condition of the obligor, and their internal control systems shall enable them to immediately detect deterioration in the credit quality of the obligor. Undrawn credit lines may be considered as unconditionally cancellable if the terms permit the institution to cancel them to the full extent allowable under consumer protection and related legislation;
for short-term letters of credit arising from the movement of goods, a conversion factor of 20 % shall apply for both the issuing and confirming institutions;
for undrawn purchase commitments for revolving purchased receivables that are able to be unconditionally cancelled or that effectively provide for automatic cancellation at any time by the institution without prior notice, a conversion factor of 0 % shall apply. To apply a conversion factor of 0 %, institutions shall actively monitor the financial condition of the obligor, and their internal control systems shall enable them to immediately detect a deterioration in the credit quality of the obligor;
for other credit lines, note issuance facilities (NIFs), and revolving underwriting facilities (RUFs), a conversion factor of 75 % shall apply.
Institutions which meet the requirements for the use of own estimates of conversion factors as specified in Section 6 may use their own estimates of conversion factors across different product types as mentioned in points (a) to (d), subject to permission of the competent authorities.
For all off-balance sheet items other than those mentioned in paragraphs 1 to 8, the exposure value shall be the following percentage of its value:
100 % if it is a full risk item;
50 % if it is a medium-risk item;
20 % if it is a medium/low-risk item;
0 % if it is a low-risk item.
For the purposes of this paragraph the off-balance sheet items shall be assigned to risk categories as indicated in Annex I.
Article 167
Equity exposures
Article 168
Other non credit-obligation assets
The exposure value of other non credit-obligation assets shall be the accounting value remaining after specific credit risk adjustment have been applied
Section 6
Requirements for the IRB approach
Sub-Section 1
Rating systems
Article 169
General principles
Article 170
Structure of rating systems
The structure of rating systems for exposures to corporates, institutions and central governments and central banks shall comply with the following requirements:
a rating system shall take into account obligor and transaction risk characteristics;
a rating system shall have an obligor rating scale which reflects exclusively quantification of the risk of obligor default. The obligor rating scale shall have a minimum of 7 grades for non-defaulted obligors and one for defaulted obligors;
an institution shall document the relationship between obligor grades in terms of the level of default risk each grade implies and the criteria used to distinguish that level of default risk;
institutions with portfolios concentrated in a particular market segment and range of default risk shall have enough obligor grades within that range to avoid undue concentrations of obligors in a particular grade. Significant concentrations within a single grade shall be supported by convincing empirical evidence that the obligor grade covers a reasonably narrow PD band and that the default risk posed by all obligors in the grade falls within that band;
to be permitted by the competent authority to use own estimates of LGDs for own funds requirement calculation, a rating system shall incorporate a distinct facility rating scale which exclusively reflects LGD related transaction characteristics. The facility grade definition shall include both a description of how exposures are assigned to the grade and of the criteria used to distinguish the level of risk across grades;
significant concentrations within a single facility grade shall be supported by convincing empirical evidence that the facility grade covers a reasonably narrow LGD band, respectively, and that the risk posed by all exposures in the grade falls within that band.
The structure of rating systems for retail exposures shall comply with the following requirements:
rating systems shall reflect both obligor and transaction risk, and shall capture all relevant obligor and transaction characteristics;
the level of risk differentiation shall ensure that the number of exposures in a given grade or pool is sufficient to allow for meaningful quantification and validation of the loss characteristics at the grade or pool level. The distribution of exposures and obligors across grades or pools shall be such as to avoid excessive concentrations;
the process of assigning exposures to grades or pools shall provide for a meaningful differentiation of risk, for a grouping of sufficiently homogenous exposures, and shall allow for accurate and consistent estimation of loss characteristics at grade or pool level. For purchased receivables the grouping shall reflect the seller's underwriting practices and the heterogeneity of its customers.
Institutions shall consider the following risk drivers when assigning exposures to grades or pools:
obligor risk characteristics;
transaction risk characteristics, including product or collateral types or both. Institutions shall explicitly address cases where several exposures benefit from the same collateral;
delinquency, except where an institution demonstrates to the satisfaction of its competent authority that delinquency is not a material driver of risk for the exposure.
Article 171
Assignment to grades or pools
An institution shall have specific definitions, processes and criteria for assigning exposures to grades or pools within a rating system that comply with the following requirements:
the grade or pool definitions and criteria shall be sufficiently detailed to allow those charged with assigning ratings to consistently assign obligors or facilities posing similar risk to the same grade or pool. This consistency shall exist across lines of business, departments and geographic locations;
the documentation of the rating process shall allow third parties to understand the assignments of exposures to grades or pools, to replicate grade and pool assignments and to evaluate the appropriateness of the assignments to a grade or a pool;
the criteria shall also be consistent with the institution's internal lending standards and its policies for handling troubled obligors and facilities.
Article 172
Assignment of exposures
For exposures to corporates, institutions and central governments and central banks, and for equity exposures where an institution uses the PD/LGD approach set out in Article 155(3), assignment of exposures shall be carried out in accordance with the following criteria:
each obligor shall be assigned to an obligor grade as part of the credit approval process;
for those exposures for which an institution has received the permission of the competent authority to use own estimates of LGDs and conversion factors pursuant to Article 143, each exposure shall also be assigned to a facility grade as part of the credit approval process;
institutions using the methods set out in Article 153(5) for assigning risk weights for specialised lending exposures shall assign each of these exposures to a grade in accordance with Article 170(2);
each separate legal entity to which the institution is exposed shall be separately rated. An institution shall have appropriate policies regarding the treatment of individual obligor clients and groups of connected clients;
separate exposures to the same obligor shall be assigned to the same obligor grade, irrespective of any differences in the nature of each specific transaction. However, where separate exposures are allowed to result in multiple grades for the same obligor, the following shall apply:
country transfer risk, this being dependent on whether the exposures are denominated in local or foreign currency;
the treatment of associated guarantees to an exposure may be reflected in an adjusted assignment to an obligor grade;
consumer protection, bank secrecy or other legislation prohibit the exchange of client data.
Article 173
Integrity of assignment process
For exposures to corporates, institutions and central governments and central banks, and for equity exposures where an institution uses the PD/LGD approach set out in Article 155(3), the assignment process shall meet the following requirements of integrity:
Assignments and periodic reviews of assignments shall be completed or approved by an independent party that does not directly benefit from decisions to extend the credit;
Institutions shall review assignments at least annually and adjust the assignment where the result of the review does not justify carrying forward the current assignment. High risk obligors and problem exposures shall be subject to more frequent review. Institutions shall undertake a new assignment if material information on the obligor or exposure becomes available;
An institution shall have an effective process to obtain and update relevant information on obligor characteristics that affect PDs, and on transaction characteristics that affect LGDs or conversion factors.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 174
Use of models
If an institution uses statistical models and other mechanical methods to assign exposures to obligors or facilities grades or pools, the following requirements shall be met:
the model shall have good predictive power and capital requirements shall not be distorted as a result of its use. The input variables shall form a reasonable and effective basis for the resulting predictions. The model shall not have material biases;
the institution shall have in place a process for vetting data inputs into the model, which includes an assessment of the accuracy, completeness and appropriateness of the data;
the data used to build the model shall be representative of the population of the institution's actual obligors or exposures;
the institution shall have a regular cycle of model validation that includes monitoring of model performance and stability; review of model specification; and testing of model outputs against outcomes;
the institution shall complement the statistical model by human judgement and human oversight to review model-based assignments and to ensure that the models are used appropriately. Review procedures shall aim at finding and limiting errors associated with model weaknesses. Human judgements shall take into account all relevant information not considered by the model. The institution shall document how human judgement and model results are to be combined.
Article 175
Documentation of rating systems
Where the institution employs statistical models in the rating process, the institution shall document their methodologies. This material shall:
provide a detailed outline of the theory, assumptions and mathematical and empirical basis of the assignment of estimates to grades, individual obligors, exposures, or pools, and the data source(s) used to estimate the model;
establish a rigorous statistical process including out-of-time and out-of-sample performance tests for validating the model;
indicate any circumstances under which the model does not work effectively.
Article 176
Data maintenance
For exposures to corporates, institutions and central governments and central banks, and for equity exposures where an institution uses the PD/LGD approach set out in Article 155(3), institutions shall collect and store:
complete rating histories on obligors and recognised guarantors;
the dates the ratings were assigned;
the key data and methodology used to derive the rating;
the person responsible for the rating assignment;
the identity of obligors and exposures that defaulted;
the date and circumstances of such defaults;
data on the PDs and realised default rates associated with rating grades and ratings migration.
Institutions using own estimates of LGDs and conversion factors shall collect and store:
complete histories of data on the facility ratings and LGD and conversion factor estimates associated with each rating scale;
the dates on which the ratings were assigned and the estimates were made;
the key data and methodology used to derive the facility ratings and LGD and conversion factor estimates;
the person who assigned the facility rating and the person who provided LGD and conversion factor estimates;
data on the estimated and realised LGDs and conversion factors associated with each defaulted exposure;
data on the LGD of the exposure before and after evaluation of the effects of a guarantee/or credit derivative, for those institutions that reflect the credit risk mitigating effects of guarantees or credit derivatives through LGD;
data on the components of loss for each defaulted exposure.
For retail exposures, institutions shall collect and store:
data used in the process of allocating exposures to grades or pools;
data on the estimated PDs, LGDs and conversion factors associated with grades or pools of exposures;
the identity of obligors and exposures that defaulted;
for defaulted exposures, data on the grades or pools to which the exposure was assigned over the year prior to default and the realised outcomes on LGD and conversion factor;
data on loss rates for qualifying revolving retail exposures.
Article 177
Stress tests used in assessment of capital adequacy
Sub-Section 2
Risk quantification
Article 178
Default of an obligor
A default shall be considered to have occurred with regard to a particular obligor when either or both of the following have taken place:
the institution considers that the obligor is unlikely to pay its credit obligations to the institution, the parent undertaking or any of its subsidiaries in full, without recourse by the institution to actions such as realising security;
the obligor is more than 90 days past due on any material credit obligation to the institution, the parent undertaking or any of its subsidiaries. Competent authorities may replace the 90 days with 180 days for exposures secured by residential property or SME commercial immovable property in the retail exposure class, as well as exposures to public sector entities. The 180 days shall not apply for the purposes of point (m) Article 36(1) or Article 127.
In the case of retail exposures, institutions may apply the definition of default laid down in points (a) and (b) of the first subparagraph at the level of an individual credit facility rather than in relation to the total obligations of a borrower.
The following shall apply for the purposes of point (b) of paragraph 1:
for overdrafts, days past due commence once an obligor has breached an advised limit, has been advised a limit smaller than current outstandings, or has drawn credit without authorisation and the underlying amount is material;
for the purposes of point (a), an advised limit comprises any credit limit determined by the institution and about which the obligor has been informed by the institution;
days past due for credit cards commence on the minimum payment due date;
materiality of a credit obligation past due shall be assessed against a threshold, defined by the competent authorities. This threshold shall reflect a level of risk that the competent authority considers to be reasonable;
institutions shall have documented policies in respect of the counting of days past due, in particular in respect of the re-ageing of the facilities and the granting of extensions, amendments or deferrals, renewals, and netting of existing accounts. These policies shall be applied consistently over time, and shall be in line with the internal risk management and decision processes of the institution.
For the purpose of point (a) of paragraph 1, elements to be taken as indications of unlikeliness to pay shall include the following:
the institution puts the credit obligation on non-accrued status;
the institution recognises a specific credit adjustment resulting from a significant perceived decline in credit quality subsequent to the institution taking on the exposure;
the institution sells the credit obligation at a material credit-related economic loss;
the institution consents to a distressed restructuring of the credit obligation where this is likely to result in a diminished financial obligation caused by the material forgiveness, or postponement, of principal, interest or, where relevant fees. This includes, in the case of equity exposures assessed under a PD/LGD Approach, distressed restructuring of the equity itself;
the institution has filed for the obligor's bankruptcy or a similar order in respect of an obligor's credit obligation to the institution, the parent undertaking or any of its subsidiaries;
the obligor has sought or has been placed in bankruptcy or similar protection where this would avoid or delay repayment of a credit obligation to the institution, the parent undertaking or any of its subsidiaries.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 179
Overall requirements for estimation
In quantifying the risk parameters to be associated with rating grades or pools, institutions shall apply the following requirements:
an institution's own estimates of the risk parameters PD, LGD, conversion factor and EL shall incorporate all relevant data, information and methods. The estimates shall be derived using both historical experience and empirical evidence, and not based purely on judgemental considerations. The estimates shall be plausible and intuitive and shall be based on the material drivers of the respective risk parameters. The less data an institution has, the more conservative it shall be in its estimation;
an institution shall be able to provide a breakdown of its loss experience in terms of default frequency, LGD, conversion factor, or loss where EL estimates are used, by the factors it sees as the drivers of the respective risk parameters. The institution's estimates shall be representative of long run experience;
any changes in lending practice or the process for pursuing recoveries over the observation periods referred to in Article 180(1)(h) and (2)(e), Article 181(1)(j) and (2), and Article 182(2) and (3) shall be taken into account. An institution's estimates shall reflect the implications of technical advances and new data and other information, as it becomes available. Institutions shall review their estimates when new information comes to light but at least on an annual basis;
the population of exposures represented in the data used for estimation, the lending standards used when the data was generated and other relevant characteristics shall be comparable with those of the institution's exposures and standards. The economic or market conditions that underlie the data shall be relevant to current and foreseeable conditions. The number of exposures in the sample and the data period used for quantification shall be sufficient to provide the institution with confidence in the accuracy and robustness of its estimates;
for purchased receivables the estimates shall reflect all relevant information available to the purchasing institution regarding the quality of the underlying receivables, including data for similar pools provided by the seller, by the purchasing institution, or by external sources. The purchasing institution shall evaluate any data relied upon which is provided by the seller;
an institution shall add to its estimates a margin of conservatism that is related to the expected range of estimation errors. Where methods and data are considered to be less satisfactory, the expected range of errors is larger, the margin of conservatism shall be larger.
Where institutions use different estimates for the calculation of risk weights and for internal purposes, it shall be documented and be reasonable. If institutions can demonstrate to their competent authorities that for data that have been collected prior to 1 January 2007 appropriate adjustments have been made to achieve broad equivalence with the definition of default laid down in Article 178 or with loss, competent authorities may permit the institutions some flexibility in the application of the required standards for data.
Where an institution uses data that is pooled across institutions it shall meet the following requirements:
the rating systems and criteria of other institutions in the pool are similar to its own;
the pool is representative of the portfolio for which the pooled data is used;
the pooled data is used consistently over time by the institution for its estimates;
the institution shall remain responsible for the integrity of its rating systems;
the institution shall maintain sufficient in-house understanding of its rating systems, including the ability to effectively monitor and audit the rating process.
Article 180
Requirements specific to PD estimation
In quantifying the risk parameters to be associated with rating grades or pools, institutions shall apply the following requirements specific to PD estimation to exposures to corporates, institutions and central governments and central banks and for equity exposures where an institution uses the PD/LGD approach set out in Article 155(3):
institutions shall estimate PDs by obligor grade from long run averages of one-year default rates. PD estimates for obligors that are highly leveraged or for obligors whose assets are predominantly traded assets shall reflect the performance of the underlying assets based on periods of stressed volatilities;
for purchased corporate receivables institutions may estimate the EL by obligor grade from long run averages of one-year realised default rates;
if an institution derives long run average estimates of PDs and LGDs for purchased corporate receivables from an estimate of EL, and an appropriate estimate of PD or LGD, the process for estimating total losses shall meet the overall standards for estimation of PD and LGD set out in this part, and the outcome shall be consistent with the concept of LGD as set out in Article 181(1)(a);
institutions shall use PD estimation techniques only with supporting analysis. Institutions shall recognise the importance of judgmental considerations in combining results of techniques and in making adjustments for limitations of techniques and information;
to the extent that an institution uses data on internal default experience for the estimation of PDs, the estimates shall be reflective of underwriting standards and of any differences in the rating system that generated the data and the current rating system. Where underwriting standards or rating systems have changed, the institution shall add a greater margin of conservatism in its estimate of PD;
to the extent that an institution associates or maps its internal grades to the scale used by an ECAI or similar organisations and then attributes the default rate observed for the external organisation's grades to the institution's grades, mappings shall be based on a comparison of internal rating criteria to the criteria used by the external organisation and on a comparison of the internal and external ratings of any common obligors. Biases or inconsistencies in the mapping approach or underlying data shall be avoided. The criteria of the external organisation underlying the data used for quantification shall be oriented to default risk only and not reflect transaction characteristics. The analysis undertaken by the institution shall include a comparison of the default definitions used, subject to the requirements in Article 178. The institution shall document the basis for the mapping;
to the extent that an institution uses statistical default prediction models it is allowed to estimate PDs as the simple average of default-probability estimates for individual obligors in a given grade. The institution's use of default probability models for this purpose shall meet the standards specified in Article 174;
irrespective of whether an institution is using external, internal, or pooled data sources, or a combination of the three, for its PD estimation, the length of the underlying historical observation period used shall be at least five years for at least one source. If the available observation period spans a longer period for any source, and this data is relevant, this longer period shall be used. This point also applies to the PD/LGD Approach to equity. Subject to the permission of competent authorities, institutions which have not received the permission of the competent authority pursuant to Article 143 to use own estimates of LGDs or conversion factors may use, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years.
For retail exposures, the following requirements shall apply:
institutions shall estimate PDs by obligor grade or pool from long run averages of one-year default rates;
PD estimates may also be derived from an estimate of total losses and appropriate estimates of LGDs;
institutions shall regard internal data for assigning exposures to grades or pools as the primary source of information for estimating loss characteristics. Institutions may use external data (including pooled data) or statistical models for quantification provided that the following strong links both exist:
between the institution's process of assigning exposures to grades or pools and the process used by the external data source; and
between the institution's internal risk profile and the composition of the external data;
if an institution derives long run average estimates of PD and LGD for retail exposures from an estimate of total losses and an appropriate estimate of PD or LGD, the process for estimating total losses shall meet the overall standards for estimation of PD and LGD set out in this part, and the outcome shall be consistent with the concept of LGD as set out in point (a) of Article 181(1);
irrespective of whether an institution is using external, internal or pooled data sources or a combination of the three, for their estimation of loss characteristics, the length of the underlying historical observation period used shall be at least five years for at least one source. If the available observation spans a longer period for any source, and these data are relevant, this longer period shall be used. An institution need not give equal importance to historic data if more recent data is a better predictor of loss rates. Subject to the permission of the competent authorities, institutions may use, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years;
institutions shall identify and analyse expected changes of risk parameters over the life of credit exposures (seasoning effects).
For purchased retail receivables, institutions may use external and internal reference data. Institutions shall use all relevant data sources as points of comparison.
EBA shall develop draft regulatory technical standards to specify the following:
the conditions according to which competent authorities may grant the permissions referred to in point (h) of paragraph 1 and point (e) of paragraph 2;
the methodologies according to which competent authorities shall assess the methodology of an institution for estimating PD pursuant to Article 143.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 181
Requirements specific to own-LGD estimates
In quantifying the risk parameters to be associated with rating grades or pools, institutions shall apply the following requirements specific to own-LGD estimates:
institutions shall estimate LGDs by facility grade or pool on the basis of the average realised LGDs by facility grade or pool using all observed defaults within the data sources (default weighted average);
institutions shall use LGD estimates that are appropriate for an economic downturn if those are more conservative than the long-run average. To the extent a rating system is expected to deliver realised LGDs at a constant level by grade or pool over time, institutions shall make adjustments to their estimates of risk parameters by grade or pool to limit the capital impact of an economic downturn;
an institution shall consider the extent of any dependence between the risk of the obligor and that of the collateral or collateral provider. Cases where there is a significant degree of dependence shall be addressed in a conservative manner;
currency mismatches between the underlying obligation and the collateral shall be treated conservatively in the institution's assessment of LGD;
to the extent that LGD estimates take into account the existence of collateral, these estimates shall not solely be based on the collateral's estimated market value. LGD estimates shall take into account the effect of the potential inability of institutions to expeditiously gain control of their collateral and liquidate it;
to the extent that LGD estimates take into account the existence of collateral, institutions shall establish internal requirements for collateral management, legal certainty and risk management that are generally consistent with those set out in Chapter 4, Section 3;
to the extent that an institution recognises collateral for determining the exposure value for counterparty credit risk in accordance with Chapter 6, Section 5 or 6, any amount expected to be recovered from the collateral shall not be taken into account in the LGD estimates;
for the specific case of exposures already in default, the institution shall use the sum of its best estimate of expected loss for each exposure given current economic circumstances and exposure status and its estimate of the increase of loss rate caused by possible additional unexpected losses during the recovery period, i.e. between date of default and final liquidation of the exposure;
to the extent that unpaid late fees have been capitalised in the institution's income statement, they shall be added to the institution's measure of exposure and loss;
for exposures to corporates, institutions and central governments and central banks, estimates of LGD shall be based on data over a minimum of five years, increasing by one year each year after implementation until a minimum of seven years is reached, for at least one data source. If the available observation period spans a longer period for any source, and the data is relevant, this longer period shall be used.
For retail exposures, institutions may do the following:
derive LGD estimates from realised losses and appropriate estimates of PDs;
reflect future drawings either in their conversion factors or in their LGD estimates;
For purchased retail receivables use external and internal reference data to estimate LGDs.
For retail exposures, estimates of LGD shall be based on data over a minimum of five years. An institution need not give equal importance to historic data if more recent data is a better predictor of loss rates. Subject to the permission of the competent authorities, institutions may use, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years.
EBA shall develop draft regulatory technical standards to specify the following:
the nature, severity and duration of an economic downturn referred to in paragraph 1;
the conditions according to which a competent authority may permit an institution pursuant to paragraph 2 to use relevant data covering a period of two years when the institution implements the IRB Approach.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 182
Requirements specific to own-conversion factor estimates
In quantifying the risk parameters to be associated with rating grades or pools, institutions shall apply the following requirements specific to own-conversion factor estimates:
institutions shall estimate conversion factors by facility grade or pool on the basis of the average realised conversion factors by facility grade or pool using the default weighted average resulting from all observed defaults within the data sources;
institutions shall use conversion factor estimates that are appropriate for an economic downturn if those are more conservative than the long-run average. To the extent a rating system is expected to deliver realised conversion factors at a constant level by grade or pool over time, institutions shall make adjustments to their estimates of risk parameters by grade or pool to limit the capital impact of an economic downturn;
institutions' estimates of conversion factors shall reflect the possibility of additional drawings by the obligor up to and after the time a default event is triggered. The conversion factor estimate shall incorporate a larger margin of conservatism where a stronger positive correlation can reasonably be expected between the default frequency and the magnitude of conversion factor;
in arriving at estimates of conversion factors institutions shall consider their specific policies and strategies adopted in respect of account monitoring and payment processing. Institutions shall also consider their ability and willingness to prevent further drawings in circumstances short of payment default, such as covenant violations or other technical default events;
institutions shall have adequate systems and procedures in place to monitor facility amounts, current outstandings against committed lines and changes in outstandings per obligor and per grade. The institution shall be able to monitor outstanding balances on a daily basis;
if institutions use different estimates of conversion factors for the calculation of risk-weighted exposure amounts and internal purposes it shall be documented and be reasonable.
For retail exposures, estimates of conversion factors shall be based on data over a minimum of five years. By way of derogation from point (a) of paragraph 1, an institution need not give equal importance to historic data if more recent data is a better predictor of draw downs. Subject to the permission of competent authorities, institutions may use, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years.
EBA shall develop draft regulatory technical standards to specify the following:
the nature, severity and duration of an economic downturn referred to in paragraph 1;
conditions according to which a competent authority may permit and institution to use relevant data covering a period of two years at the time an institution first implements the IRB Approach.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 183
Requirements for assessing the effect of guarantees and credit derivatives for exposures to corporates, institutions and central governments and central banks where own estimates of LGD are used and for retail exposures
The following requirements shall apply in relation to eligible guarantors and guarantees:
institutions shall have clearly specified criteria for the types of guarantors they recognise for the calculation of risk-weighted exposure amounts;
for recognised guarantors the same rules as for obligors as set out in Articles 171, 172 and 173 shall apply;
the guarantee shall be evidenced in writing, non-cancellable on the part of the guarantor, in force until the obligation is satisfied in full (to the extent of the amount and tenor of the guarantee) and legally enforceable against the guarantor in a jurisdiction where the guarantor has assets to attach and enforce a judgement. Conditional guarantees prescribing conditions under which the guarantor may not be obliged to perform may be recognised subject to permission of the competent authorities. The assignment criteria shall adequately address any potential reduction in the risk mitigation effect.
The criteria shall be plausible and intuitive. They shall address the guarantor's ability and willingness to perform under the guarantee, the likely timing of any payments from the guarantor, the degree to which the guarantor's ability to perform under the guarantee is correlated with the obligor's ability to repay, and the extent to which residual risk to the obligor remains.
The criteria shall address the payout structure of the credit derivative and conservatively assess the impact this has on the level and timing of recoveries. The institution shall consider the extent to which other forms of residual risk remain.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 184
Requirements for purchased receivables
The institution shall monitor both the quality of the purchased receivables and the financial condition of the seller and servicer. The following shall apply:
the institution shall assess the correlation among the quality of the purchased receivables and the financial condition of both the seller and servicer, and have in place internal policies and procedures that provide adequate safeguards to protect against any contingencies, including the assignment of an internal risk rating for each seller and servicer;
the institution shall have clear and effective policies and procedures for determining seller and servicer eligibility. The institution or its agent shall conduct periodic reviews of sellers and servicers in order to verify the accuracy of reports from the seller or servicer, detect fraud or operational weaknesses, and verify the quality of the seller's credit policies and servicer's collection policies and procedures. The findings of these reviews shall be documented;
the institution shall assess the characteristics of the purchased receivables pools, including over-advances; history of the seller's arrears, bad debts, and bad debt allowances; payment terms, and potential contra accounts;
the institution shall have effective policies and procedures for monitoring on an aggregate basis single-obligor concentrations both within and across purchased receivables pools;
the institution shall ensure that it receives from the servicer timely and sufficiently detailed reports of receivables ageings and dilutions to ensure compliance with the institution's eligibility criteria and advancing policies governing purchased receivables, and provide an effective means with which to monitor and confirm the seller's terms of sale and dilution.
Sub-Section 3
Validation of internal estimates
Article 185
Validation of internal estimates
Institutions shall validate their internal estimates subject to the following requirements:
institutions shall have robust systems in place to validate the accuracy and consistency of rating systems, processes, and the estimation of all relevant risk parameters. The internal validation process shall enable the institution to assess the performance of internal rating and risk estimation systems consistently and meaningfully;
institutions shall regularly compare realised default rates with estimated PDs for each grade and, where realised default rates are outside the expected range for that grade, institutions shall specifically analyse the reasons for the deviation. Institutions using own estimates of LGDs and conversion factors shall also perform analogous analysis for these estimates. Such comparisons shall make use of historical data that cover as long a period as possible. The institution shall document the methods and data used in such comparisons. This analysis and documentation shall be updated at least annually;
institutions shall also use other quantitative validation tools and comparisons with relevant external data sources. The analysis shall be based on data that are appropriate to the portfolio, are updated regularly, and cover a relevant observation period. Institutions' internal assessments of the performance of their rating systems shall be based on as long a period as possible;
the methods and data used for quantitative validation shall be consistent through time. Changes in estimation and validation methods and data (both data sources and periods covered) shall be documented;
institutions shall have sound internal standards for situations where deviations in realised PDs, LGDs, conversion factors and total losses, where EL is used, from expectations, become significant enough to call the validity of the estimates into question. These standards shall take account of business cycles and similar systematic variability in default experience. Where realised values continue to be higher than expected values, institutions shall revise estimates upward to reflect their default and loss experience;
Sub-Section 4
Requirements for equity exposures under the internal models approach
Article 186
Own funds requirement and risk quantification
For the purpose of calculating own funds requirements institutions shall meet the following standards:
the estimate of potential loss shall be robust to adverse market movements relevant to the long-term risk profile of the institution's specific holdings. The data used to represent return distributions shall reflect the longest sample period for which data is available and meaningful in representing the risk profile of the institution's specific equity exposures. The data used shall be sufficient to provide conservative, statistically reliable and robust loss estimates that are not based purely on subjective or judgmental considerations. The shock employed shall provide a conservative estimate of potential losses over a relevant long-term market or business cycle. The institution shall combine empirical analysis of available data with adjustments based on a variety of factors in order to attain model outputs that achieve appropriate realism and conservatism. In constructing value at risk (VaR) models estimating potential quarterly losses, institutions may use quarterly data or convert shorter horizon period data to a quarterly equivalent using an analytically appropriate method supported by empirical evidence and through a well-developed and documented thought process and analysis. Such an approach shall be applied conservatively and consistently over time. Where only limited relevant data is available the institution shall add appropriate margins of conservatism;
the models used shall capture adequately all of the material risks embodied in equity returns including both the general market risk and specific risk exposure of the institution's equity portfolio. The internal models shall adequately explain historical price variation, capture both the magnitude and changes in the composition of potential concentrations, and be robust to adverse market environments. The population of risk exposures represented in the data used for estimation shall be closely matched to or at least comparable with those of the institution's equity exposures;
the internal model shall be appropriate for the risk profile and complexity of an institution's equity portfolio. Where an institution has material holdings with values that are highly non-linear in nature the internal models shall be designed to capture appropriately the risks associated with such instruments;
mapping of individual positions to proxies, market indices, and risk factors shall be plausible, intuitive, and conceptually sound;
institutions shall demonstrate through empirical analyses the appropriateness of risk factors, including their ability to cover both general and specific risk;
the estimates of the return volatility of equity exposures shall incorporate relevant and available data, information, and methods. Independently reviewed internal data or data from external sources including pooled data shall be used;
a rigorous and comprehensive stress-testing programme shall be in place.
Article 187
Risk management process and controls
With regard to the development and use of internal models for own funds requirement purposes, institutions shall establish policies, procedures, and controls to ensure the integrity of the model and modelling process. These policies, procedures, and controls shall include the following:
full integration of the internal model into the overall management information systems of the institution and in the management of the non-trading book equity portfolio. Internal models shall be fully integrated into the institution's risk management infrastructure if they are particularly used in measuring and assessing equity portfolio performance including the risk-adjusted performance, allocating economic capital to equity exposures and evaluating overall capital adequacy and the investment management process;
established management systems, procedures, and control functions for ensuring the periodic and independent review of all elements of the internal modelling process, including approval of model revisions, vetting of model inputs, and review of model results, such as direct verification of risk computations. These reviews shall assess the accuracy, completeness, and appropriateness of model inputs and results and focus on both finding and limiting potential errors associated with known weaknesses and identifying unknown model weaknesses. Such reviews may be conducted by an internal independent unit, or by an independent external third party;
adequate systems and procedures for monitoring investment limits and the risk exposures of equity exposures;
the units responsible for the design and application of the model shall be functionally independent from the units responsible for managing individual investments;
parties responsible for any aspect of the modelling process shall be adequately qualified. Management shall allocate sufficient skilled and competent resources to the modelling function.
Article 188
Validation and documentation
Institutions shall have robust systems in place to validate the accuracy and consistency of their internal models and modelling processes. All material elements of the internal models and the modelling process and validation shall be documented.
The validation and documentation of institutions' internal models and modelling processes shall be subject to the following requirements:
institutions shall use the internal validation process to assess the performance of its internal models and processes in a consistent and meaningful way;
the methods and data used for quantitative validation shall be consistent over time. Changes in estimation and validation methods and changes to data sources and periods covered, shall be documented;
institutions shall regularly compare actual equity returns computed using realised and unrealised gains and losses with modelled estimates. Such comparisons shall make use of historical data that cover as long a period as possible. The institution shall document the methods and data used in such comparisons. This analysis and documentation shall be updated at least annually;
institutions shall make use of other quantitative validation tools and comparisons with external data sources. The analysis shall be based on data that are appropriate to the portfolio, are updated regularly, and cover a relevant observation period. Institutions' internal assessments of the performance of their models shall be based on as long a period as possible;
institutions shall have sound internal standards for addressing situations where comparison of actual equity returns with the models estimates calls the validity of the estimates or of the models as such into question. These standards shall take account of business cycles and similar systematic variability in equity returns. All adjustments made to internal models in response to model reviews shall be documented and consistent with the institution's model review standards;
the internal model and the modelling process shall be documented, including the responsibilities of parties involved in the modelling, and the model approval and model review processes.
Sub-Section 5
Internal governance and oversight
Article 189
Corporate Governance
Senior management shall be subject to the following requirements:
they shall provide notice to the management body or a designated committee thereof of material changes or exceptions from established policies that will materially impact the operations of the institution's rating systems;
they shall have a good understanding of the rating systems designs and operations;
they shall ensure, on an ongoing basis that the rating systems are operating properly.
Senior management shall be regularly informed by the credit risk control units about the performance of the rating process, areas needing improvement, and the status of efforts to improve previously identified deficiencies.
Article 190
Credit risk control
The areas of responsibility for the credit risk control unit or units shall include:
testing and monitoring grades and pools;
production and analysis of summary reports of the institution's rating systems;
implementing procedures to verify that grade and pool definitions are consistently applied across departments and geographic areas;
reviewing and documenting any changes to the rating process, including the reasons for the changes;
reviewing the rating criteria to evaluate if they remain predictive of risk. Changes to the rating process, criteria or individual rating parameters shall be documented and retained;
active participation in the design or selection, implementation and validation of models used in the rating process;
oversight and supervision of models used in the rating process;
ongoing review and alterations to models used in the rating process.
Institutions using pooled data in accordance with Article 179(2) may outsource the following tasks:
production of information relevant to testing and monitoring grades and pools;
production of summary reports of the institution's rating systems;
production of information relevant to a review of the rating criteria to evaluate if they remain predictive of risk;
documentation of changes to the rating process, criteria or individual rating parameters;
production of information relevant to ongoing review and alterations to models used in the rating process.
Article 191
Internal Audit
Internal audit or another comparable independent auditing unit shall review at least annually the institution's rating systems and its operations, including the operations of the credit function and the estimation of PDs, LGDs, ELs and conversion factors. Areas of review shall include adherence to all applicable requirements.
CHAPTER 4
Credit risk mitigation
Section 1
Definitions and general requirements
Article 192
Definitions
For the purposes of this Chapter, the following definitions shall apply:
‘lending institution’ means the institution which has the exposure in question;
‘secured lending transaction’ means any transaction giving rise to an exposure secured by collateral which does not include a provision conferring upon the institution the right to receive margin at least daily;
‘capital market-driven transaction’ means any transaction giving rise to an exposure secured by collateral which includes a provision conferring upon the institution the right to receive margin at least daily;
‘underlying CIU’ means a CIU in the shares or units of which another CIU has invested.
Article 193
Principles for recognising the effect of credit risk mitigation techniques
Where an institution calculating risk-weighted exposure amounts under the Standardised Approach has more than one form of credit risk mitigation covering a single exposure it shall do both of the following:
subdivide the exposure into parts covered by each type of credit risk mitigation tool;
calculate the risk-weighted exposure amount for each part obtained in point (a) separately in accordance with the provisions of Chapter 2 and this Chapter.
When an institution calculating risk-weighted exposure amounts under the Standardised Approach covers a single exposure with credit protection provided by a single protection provider and that protection has differing maturities, it shall do both of the following:
subdivide the exposure into parts covered by each credit risk mitigation tool;
calculate the risk-weighted exposure amount for each part obtained in point (a) separately in accordance with the provisions of Chapter 2 and this Chapter.
Article 194
Principles governing the eligibility of credit risk mitigation techniques
The lending institution shall provide, upon request of the competent authority, the most recent version of the independent, written and reasoned legal opinion or opinions that it used to establish whether its credit protection arrangement or arrangements meet the condition laid down in the first subparagraph.
Institutions may recognise funded credit protection in the calculation of the effect of credit risk mitigation only where the assets relied upon for protection meet both of the following conditions:
they are included in the list of eligible assets set out in Articles 197 to 200, as applicable;
they are sufficiently liquid and their value over time sufficiently stable to provide appropriate certainty as to the credit protection achieved having regard to the approach used to calculate risk-weighted exposure amounts and to the degree of recognition allowed.
In the case of unfunded credit protection, a protection agreement shall qualify as an eligible protection agreement only where it meets both the following conditions:
it is included in the list of eligible protection agreements set out in Articles 203 and 204(1);
it is legally effective and enforceable in the relevant jurisdictions, to provide appropriate certainty as to the credit protection achieved having regard to the approach used to calculate risk-weighted exposure amounts and to the degree of recognition allowed;
the protection provider meets the criteria laid down in paragraph 5.
EBA shall submit those draft regulatory technical standards to the Commission by 30 September 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Section 2
Eligible forms of credit risk mitigation
Sub-Section 1
Funded credit protection
Article 195
On-balance sheet netting
An institution may use on-balance sheet netting of mutual claims between itself and its counterparty as an eligible form of credit risk mitigation.
Without prejudice to Article 196, eligibility is limited to reciprocal cash balances between the institution and the counterparty. Institutions may amend risk-weighted exposure amounts and, as relevant, expected loss amounts only for loans and deposits that they have received themselves and that are subject to an on-balance sheet netting agreement.
Article 196
Master netting agreements covering repurchase transactions or securities or commodities lending or borrowing transactions or other capital market-driven transactions
Institutions adopting the Financial Collateral Comprehensive Method set out in Article 223 may take into account the effects of bilateral netting contracts covering repurchase transactions, securities or commodities lending or borrowing transactions, or other capital market-driven transactions with a counterparty. Without prejudice to Article 299, the collateral taken and securities or commodities borrowed within such agreements or transactions shall comply with the eligibility requirements for collateral set out in Articles 197 and 198.
Article 197
Eligibility of collateral under all approaches and methods
Institutions may use the following items as eligible collateral under all approaches and methods:
cash on deposit with, or cash assimilated instruments held by, the lending institution;
debt securities issued by central governments or central banks, which securities have a credit assessment by an ECAI or export credit agency recognised as eligible for the purposes of Chapter 2 which has been determined by EBA to be associated with credit quality step 4 or above under the rules for the risk weighting of exposures to central governments and central banks under Chapter 2;
debt securities issued by institutions or investment firms, which securities have a credit assessment by an ECAI which has been determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to institutions under Chapter 2;
debt securities issued by other entities which securities have a credit assessment by an ECAI which has been determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Chapter 2;
debt securities with a short-term credit assessment by an ECAI which has been determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of short term exposures under Chapter 2;
equities or convertible bonds that are included in a main index;
gold;
securitisation positions that are not resecuritisation positions and which are subject to a 100 % risk weight or lower in accordance with Article 261 to Article 264.
For the purposes of point (b) of paragraph 1, ‘debt securities issued by central governments or central banks’ shall include all the following:
debt securities issued by regional governments or local authorities, exposures to which are treated as exposures to the central government in whose jurisdiction they are established under Article 115(2);
debt securities issued by public sector entities which are treated as exposures to central governments in accordance with Article 116(4);
debt securities issued by multilateral development banks to which a 0 % risk weight is assigned under Article 117(2);
debt securities issued by international organisations which are assigned a 0 % risk weight under Article 118.
For the purposes of point (c) of paragraph 1, ‘debt securities issued by institutions’ shall include all the following:
debt securities issued by regional governments or local authorities other than those debt securities referred to in point (a) of paragraph 2;
debt securities issued by public sector entities, exposures to which are treated in accordance with Article 116(1) and (2);
debt securities issued by multilateral development banks other than those to which a 0 % risk weight is assigned under Article 117(2).
An institution may use debt securities that are issued by other institutions or investment firms and that do not have a credit assessment by an ECAI as eligible collateral where those debt securities fulfil all the following criteria:
they are listed on a recognised exchange;
they qualify as senior debt;
all other rated issues by the issuing institution of the same seniority have a credit assessment by an ECAI which has been determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to institutions or short term exposures under Chapter 2;
the lending institution has no information to suggest that the issue would justify a credit assessment below that indicated in point (c);
the market liquidity of the instrument is sufficient for these purposes.
Institutions may use units or shares in CIUs as eligible collateral where all the following conditions are satisfied:
the units or shares have a daily public price quote;
the CIUs are limited to investing in instruments that are eligible for recognition under paragraphs 1 and 4;
the CIUs meet the conditions laid down in Article 132(3).
Where a CIU invests in shares or units of another CIU, conditions laid down in points (a) to (c) of the first subparagraph shall apply equally to any such underlying CIU.
The use by a CIU of derivative instruments to hedge permitted investments shall not prevent units or shares in that undertaking from being eligible as collateral.
Where any underlying CIU has underlying CIUs of its own, institutions may use units or shares in the original CIU as eligible collateral provided that they apply the methodology laid down in the first subparagraph.
Where non-eligible assets can have a negative value due to liabilities or contingent liabilities resulting from ownership, institutions shall do both of the following:
calculate the total value of the non-eligible assets;
where the amount obtained under point (a) is negative, subtract the absolute value of that amount from the total value of the eligible assets.
ESMA shall develop draft implementing technical standards to specify the following:
the main indices referred to in point (f) of paragraph 1 of this Article, in point (a) of Article 198(1), in Article 224(1) and (4), and in point (e) of Article 299(2);
the recognised exchanges referred to in point (a) of paragraph 4 of this Article, in point (a) of Article 198(1), in Article 224(1) and (4), in point (e) of Article 299(2), in point (k) of Article 400(2), in point (e) of Article 416(3), in point (c) of Article 428(1), and in point 12 of Annex III in accordance with the conditions laid down in point (72) of Article 4(1).
ESMA shall submit those draft implementing technical standards to the Commission by 31 December 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
Article 198
Additional eligibility of collateral under the Financial Collateral Comprehensive Method
In addition to the collateral established in Article 197, where an institution uses the Financial Collateral Comprehensive Method set out in Article 223, that institution may use the following items as eligible collateral:
equities or convertible bonds not included in a main index but traded on a recognised exchange;
units or shares in CIUs where both the following conditions are met:
the units or shares have a daily public price quote;
the CIU is limited to investing in instruments that are eligible for recognition under Article 197(1) and (4) and the items mentioned in point (a) of this subparagraph.
In the case a CIU invests in units or shares of another CIU, conditions (a) and (b) of this paragraph equally apply to any such underlying CIU.
The use by a CIU of derivative instruments to hedge permitted investments shall not prevent units or shares in that undertaking from being eligible as collateral.
Where non-eligible assets can have a negative value due to liabilities or contingent liabilities resulting from ownership, institutions shall do both of the following:
calculate the total value of the non-eligible assets;
where the amount obtained under point (a) is negative, subtract the absolute value of that amount from the total value of the eligible assets.
Article 199
Additional eligibility for collateral under the IRB Approach
In addition to the collateral referred to in Articles 197 and 198, institutions that calculate risk-weighted exposure amounts and expected loss amounts under the IRB Approach may also use the following forms of collateral:
immovable property collateral in accordance with paragraphs 2, 3 and 4;
receivables in accordance with paragraph 5;
other physical collateral in accordance with paragraphs 6 and 8;
leasing in accordance with paragraph 7.
Unless otherwise specified under Article 124(2), institutions may use as eligible collateral residential property which is or will be occupied or let by the owner, or the beneficial owner in the case of personal investment companies, and commercial immovable property, including offices and other commercial premises, where both the following conditions are met:
the value of the property does not materially depend upon the credit quality of the obligor. Institutions may exclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower from their determination of the materiality of such dependence;
the risk of the borrower does not materially depend upon the performance of the underlying property or project, but on the underlying capacity of the borrower to repay the debt from other sources, and as a consequence the repayment of the facility does not materially depend on any cash flow generated by the underlying property serving as collateral.
Institutions may derogate from point (b) of paragraph 2 for exposures secured by residential property situated within the territory of a Member State, where the competent authority of that Member State has published evidence showing that a well-developed and long-established residential property market is present in that territory with loss rates that do not exceed any of the following limits:
losses stemming from loans collateralised by residential property up to 80 % of the market value or 80 % of the mortgage lending value, unless ◄ otherwise provided under Article 124(2), do not exceed 0,3 % of the outstanding loans collateralised by residential property in any given year;
overall losses stemming from loans collateralised by residential property do not exceed 0,5 % of the outstanding loans collateralised by residential property in any given year.
Where either of the conditions in points (a) and (b) of the first subparagraph is not met in a given year, institutions shall not use the treatment set out in that subparagraph until both conditions are satisfied in a subsequent year.
Institutions may derogate from point (b) of paragraph 2 for commercial immovable property situated within the territory of a Member State, where the competent authority of that Member State has published evidence showing that a well-developed and long-established commercial immovable property market is present in that territory with loss rates that do not exceed any of the following limits:
losses stemming from loans collateralised by commercial immovable property up to 50 % of the market value or 60 % of the mortgage lending value do not exceed ◄ 0,3 % of the outstanding loans collateralised by commercial immovable property in any given year;
overall losses stemming from loans collateralised by commercial immovable property do not exceed 0,5 % of the outstanding loans collateralised by commercial immovable property in any given year.
Where either of the conditions in points (a) and (b) of the first subparagraph is not met in a given year, institutions shall not use the treatment set out in that subparagraph until both conditions are satisfied in a subsequent year.
Competent authorities shall permit an institution to use as eligible collateral physical collateral of a type other than those indicated in paragraphs 2, 3 and 4 where all the following conditions are met:
there are liquid markets, evidenced by frequent transactions taking into account the asset type, for the disposal of the collateral in an expeditious and economically efficient manner. Institutions shall carry out the assessment of this condition periodically and where information indicates material changes in the market;
there are well-established, publicly available market prices for the collateral. Institutions may consider market prices as well-established where they come from reliable sources of information such as public indices and reflect the price of the transactions under normal conditions. Institutions may consider market prices as publicly available, where these prices are disclosed, easily accessible, and obtainable regularly and without any undue administrative or financial burden;
the institution analyses the market prices, time and costs required to realise the collateral and the realised proceeds from the collateral;
the institution demonstrates that the realised proceeds from the collateral are not below 70 % of the collateral value in more than 10 % of all liquidations for a given type of collateral. Where there is material volatility in the market prices, the institution demonstrates to the satisfaction of the competent authorities that its valuation of the collateral is sufficiently conservative.
Institutions shall document the fulfilment of the conditions specified in points (a) to (d) of the first subparagraph and those specified in Article 210.
Article 200
Other funded credit protection
Institutions may use the following other funded credit protection as eligible collateral:
cash on deposit with, or cash assimilated instruments held by, a third party institution in a non-custodial arrangement and pledged to the lending institution;
life insurance policies pledged to the lending institution;
instruments issued by a third‐party institution or by an investment firm which are to be repurchased by that institution or by that investment firm on request.
Sub-Section 2
Unfunded credit protection
Article 201
Eligibility of protection providers under all approaches
Institutions may use the following parties as eligible providers of unfunded credit protection:
central governments and central banks;
regional governments or local authorities;
multilateral development banks;
international organisations exposures to which a 0 % risk weight under Article 117 is assigned;
public sector entities, claims on which are treated in accordance with Article 116;
institutions, and financial institutions for which exposures to the financial institution are treated as exposures to institutions in accordance with Article 119(5);
other corporate entities, including parent undertakings, subsidiaries and affiliated corporate entities of the institution, where either of the following conditions is met:
those other corporate entities have a credit assessment by an ECAI;
in the case of institutions calculating risk-weighted exposure amounts and expected loss amounts under the IRB Approach, those other corporate entities do not have a credit assessment by a recognised ECAI and are internally rated by the institution;
qualifying central counterparties.
Competent authorities shall publish and maintain the list of those financial institutions that are eligible providers of unfunded credit protection under point (f) of paragraph 1, or the guiding criteria for identifying such eligible providers of unfunded credit protection, together with a description of the applicable prudential requirements, and share their list with other competent authorities in accordance with Article 117 of Directive 2013/36/EU.
Article 202
Eligibility of protection providers under the IRB Approach which qualify for the treatment set out in Article 153(3)
An institution may use institutions, investment firms, insurance and reinsurance undertakings and export credit agencies as eligible providers of unfunded credit protection which qualify for the treatment set out in Article 153(3) where they meet all the following conditions:
they have sufficient expertise in providing unfunded credit protection;
they are regulated in a manner equivalent to the rules laid down in this Regulation, or had, at the time the credit protection was provided, a credit assessment by a recognised ECAI which had been determined by EBA to be associated with credit quality step 3 or above in accordance with the rules for the risk weighting of exposures to corporates set out in Chapter 2;
they had, at the time the credit protection was provided, or for any period of time thereafter, an internal rating with a PD equivalent to or lower than that associated with credit quality step 2 or above in accordance with the rules for the risk weighting of exposures to corporates set out in Chapter 2;
they have an internal rating with a PD equivalent to or lower than that associated with credit quality step 3 or above in accordance with the rules for the risk weighting of exposures to corporates set out in Chapter 2.
For the purpose of this Article, credit protection provided by export credit agencies shall not benefit from any explicit central government counter-guarantee.
Article 203
Eligibility of guarantees as unfunded credit protection
Institutions may use guarantees as eligible unfunded credit protection.
Sub-Section 3
Types of derivatives
Article 204
Eligible types of credit derivatives
Institutions may use the following types of credit derivatives, and instruments that may be composed of such credit derivatives or that are economically effectively similar, as eligible credit protection:
credit default swaps;
total return swaps;
credit linked notes to the extent of their cash funding.
Where an institution buys credit protection through a total return swap and records the net payments received on the swap as net income, but does not record the offsetting deterioration in the value of the asset that is protected either through reductions in fair value or by an addition to reserves, that credit protection does not qualify as eligible credit protection.
Where an internal hedge has been conducted in accordance with the first subparagraph and the requirements in this Chapter have been met, institutions shall apply the rules set out in Sections 4 to 6 for the calculation of risk-weighted exposure amounts and expected loss amounts where they acquire unfunded credit protection.
Article 204a
Eligible types of equity derivatives
Where an institution buys credit protection through a total return swap and records the net payments received on the swap as net income, but does not record the offsetting deterioration in the value of the asset that is protected either through reductions in fair value or by an addition to reserves, that credit protection shall not qualify as eligible credit protection.
Where an internal hedge has been conducted in accordance with the first subparagraph and the requirements in this Chapter have been met, institutions shall apply the rules set out in Sections 4 to 6 of this Chapter for the calculation of risk-weighted exposure amounts and expected loss amounts where they acquire unfunded credit protection.
Section 3
Requirements
Sub-Section 1
Funded credit protection
Article 205
Requirements for on-balance sheet netting agreements other than master netting agreements referred to in Article 206
On-balance sheet netting agreements other than master netting agreements referred to in Article 206 shall qualify as an eligible form of credit risk mitigation where all the following conditions are met:
those agreements are legally effective and enforceable in all relevant jurisdictions, including in the event of the insolvency or bankruptcy of a counterparty;
institutions are able to determine at any time the assets and liabilities that are subject to those agreements;
institutions monitor and control the risks associated with the termination of the credit protection on an ongoing basis;
institutions monitor and control the relevant exposures on a net basis and do so on an ongoing basis.
Article 206
Requirements for master netting agreements covering repurchase transactions or securities or commodities lending or borrowing transactions or other capital market driven transactions
Master netting agreements covering repurchase transactions, securities or commodities lending or borrowing transactions or other capital market driven transactions shall qualify as an eligible form of credit risk mitigation where the collateral provided under those agreements meets all the requirements laid down in Article 207(2) to (4) and where all the following conditions are met:
they are legally effective and enforceable in all relevant jurisdictions, including in the event of the bankruptcy or insolvency of the counterparty;
they give the non-defaulting party the right to terminate and close-out in a timely manner all transactions under the agreement upon the event of default, including in the event of the bankruptcy or insolvency of the counterparty;
they provide for the netting of gains and losses on transactions closed out under an agreement so that a single net amount is owed by one party to the other.
Article 207
Requirements for financial collateral
Securities issued by the obligor, or any related group entity, shall not qualify as eligible collateral. This notwithstanding, the obligor's own issues of covered bonds falling within the terms of Article 129 qualify as eligible collateral when they are posted as collateral for a repurchase transaction, provided that they comply with the condition set out in the first subparagraph.
Institutions shall have conducted sufficient legal review confirming the enforceability of the collateral arrangements in all relevant jurisdictions. They shall re-conduct such review as necessary to ensure continuing enforceability.
Institutions shall fulfil all the following operational requirements:
they shall properly document the collateral arrangements and have in place clear and robust procedures for the timely liquidation of collateral;
they shall use robust procedures and processes to control risks arising from the use of collateral, including risks of failed or reduced credit protection, valuation risks, risks associated with the termination of the credit protection, concentration risk arising from the use of collateral and the interaction with the institution's overall risk profile;
they shall have in place documented policies and practices concerning the types and amounts of collateral accepted;
they shall calculate the market value of the collateral, and revalue it accordingly, at least once every six months and whenever they have reason to believe that a significant decrease in the market value of the collateral has occurred;
where the collateral is held by a third party, they shall take reasonable steps to ensure that the third party segregates the collateral from its own assets;
they shall ensure that they devote sufficient resources to the orderly operation of margin agreements with OTC derivatives and securities-financing counterparties, as measured by the timeliness and accuracy of their outgoing margin calls and response time to incoming margin calls;
they shall have in place collateral management policies to control, monitor and report the following:
the risks to which margin agreements expose them;
the concentration risk to particular types of collateral assets;
the reuse of collateral including the potential liquidity shortfalls resulting from the reuse of collateral received from counterparties;
the surrender of rights on collateral posted to counterparties.
Article 208
Requirements for immovable property collateral
The following requirements on legal certainly shall be met:
a mortgage or charge is enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement and shall be properly filed on a timely basis;
all legal requirements for establishing the pledge have been fulfilled;
the protection agreement and the legal process underpinning it enable the institution to realise the value of the protection within a reasonable timeframe.
The following requirements on monitoring of property values and on property valuation shall be met:
institutions monitor the value of the property on a frequent basis and at a minimum once every year for commercial immovable property and once every three years for residential property. Institutions carry out more frequent monitoring where the market is subject to significant changes in conditions;
the property valuation is reviewed when information available to institutions indicates that the value of the property may have declined materially relative to general market prices and that review is carried out by a valuer who possesses the necessary qualifications, ability and experience to execute a valuation and who is independent from the credit decision process. For loans exceeding EUR 3 million or 5 % of the own funds of an institution, the property valuation shall be reviewed by such valuer at least every three years.
Institutions may use statistical methods to monitor the value of the immovable property and to identify immovable property that needs revaluation.
Article 209
Requirements for receivables
The following requirements on legal certainty shall be met:
the legal mechanism by which the collateral is provided to a lending institution shall be robust and effective and ensure that that institution has clear rights over the collateral including the right to the proceeds from the sale of the collateral;
institutions shall take all steps necessary to fulfil local requirements in respect of the enforceability of security interest. Lending institutions shall have a first priority claim over the collateral although such claims may still be subject to the claims of preferential creditors provided for in legislative provisions;
institutions shall have conducted sufficient legal review confirming the enforceability of the collateral arrangements in all relevant jurisdictions;
institutions shall properly document their collateral arrangements and shall have in place clear and robust procedures for the timely collection of collateral;
institutions shall have in place procedures that ensure that any legal conditions required for declaring the default of a borrower and timely collection of collateral are observed;
in the event of a borrower's financial distress or default, institutions shall have legal authority to sell or assign the receivables to other parties without consent of the receivables obligors.
The following requirements on risk management shall be met:
an institution shall have in place a sound process for determining the credit risk associated with the receivables. Such a process shall include analyses of a borrower's business and industry and the types of customers with whom that borrower does business. Where the institution relies on its borrowers to ascertain the credit risk of the customers, the institution shall review the borrowers' credit practices to ascertain their soundness and credibility;
the difference between the amount of the exposure and the value of the receivables shall reflect all appropriate factors, including the cost of collection, concentration within the receivables pool pledged by an individual borrower, and potential concentration risk within the institution's total exposures beyond that controlled by the institution's general methodology. Institutions shall maintain a continuous monitoring process appropriate to the receivables. They shall also review, on a regular basis, compliance with loan covenants, environmental restrictions, and other legal requirements;
receivables pledged by a borrower shall be diversified and not be unduly correlated with that borrower. Where there is material positive correlation, institutions shall take into account the attendant risks in the setting of margins for the collateral pool as a whole;
institutions shall not use receivables from affiliates of a borrower, including subsidiaries and employees, as eligible credit protection;
institution shall have in place a documented process for collecting receivable payments in distressed situations. Institutions shall have in place the requisite facilities for collection even when they normally rely on their borrowers for collections.
Article 210
Requirements for other physical collateral
Physical collateral other than immovable property collateral shall qualify as eligible collateral under the IRB Approach where all the following conditions are met:
the collateral arrangement under which the physical collateral is provided to an institution shall be legally effective and enforceable in all relevant jurisdictions and shall enable that institution to realise the value of the collateral within a reasonable timeframe;
with the sole exception of permissible first priority claims referred to in Article 209(2)(b), only first liens on, or charges over, collateral shall qualify as eligible collateral and an institution shall have priority over all other lenders to the realised proceeds of the collateral;
institutions shall monitor the value of the collateral on a frequent basis and at least once every year. Institutions shall carry out more frequent monitoring where the market is subject to significant changes in conditions;
the loan agreement shall include detailed descriptions of the collateral as well as detailed specifications of the manner and frequency of revaluation;
institutions shall clearly document in internal credit policies and procedures available for examination the types of physical collateral they accept and the policies and practices they have in place in respect of the appropriate amount of each type of collateral relative to the exposure amount;
institutions' credit policies with regard to the transaction structure shall address the following:
appropriate collateral requirements relative to the exposure amount;
the ability to liquidate the collateral readily;
the ability to establish objectively a price or market value;
the frequency with which the value can readily be obtained, including a professional appraisal or valuation;
the volatility or a proxy of the volatility of the value of the collateral.
when conducting valuation and revaluation, institutions shall take fully into account any deterioration or obsolescence of the collateral, paying particular attention to the effects of the passage of time on fashion- or date-sensitive collateral;
institutions shall have the right to physically inspect the collateral. They shall also have in place policies and procedures addressing their exercise of the right to physical inspection;
the collateral taken as protection shall be adequately insured against the risk of damage and institutions shall have in place procedures to monitor this.
Article 211
Requirements for treating lease exposures as collateralised
Institutions shall treat exposures arising from leasing transactions as collateralised by the type of property leased, where all the following conditions are met:
the conditions set out in Article 208 or 210, as applicable, for the type of property leased to qualify as eligible collateral are met;
the lessor has in place robust risk management with respect to the use to which the leased asset is put, its location, its age and the planned duration of its use, including appropriate monitoring of the value of the security;
the lessor has legal ownership of the asset and is able to exercise its rights as owner in a timely fashion;
where this has not already been ascertained in calculating the LGD level, the difference between the value of the unamortised amount and the market value of the security is not so large as to overstate the credit risk mitigation attributed to the leased assets.
Article 212
Requirements for other funded credit protection
Cash on deposit with, or cash assimilated instruments held by, a third party institution shall be eligible for the treatment set out in Article 232(1), where all the following conditions are met:
the borrower's claim against the third party institution is openly pledged or assigned to the lending institution and such pledge or assignment is legally effective and enforceable in all relevant jurisdictions and is unconditional and irrevocable;
the third party institution is notified of the pledge or assignment;
as a result of the notification, the third party institution is able to make payments solely to the lending institution or to other parties only with the lending institution's prior consent.
Life insurance policies pledged to the lending institution shall qualify as eligible collateral where all the following conditions are met:
the life insurance policy is openly pledged or assigned to the lending institution;
the company providing the life insurance is notified of the pledge or assignment and, as a result of the notification, may not pay amounts payable under the contract without the prior consent of the lending institution;
the lending institution has the right to cancel the policy and receive the surrender value in the event of the default of the borrower;
the lending institution is informed of any non-payments under the policy by the policy-holder;
the credit protection is provided for the maturity of the loan. Where this is not possible because the insurance relationship ends before the loan relationship expires, the institution shall ensure that the amount deriving from the insurance contract serves the institution as security until the end of the duration of the credit agreement;
the pledge or assignment is legally effective and enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement;
the surrender value is declared by the company providing the life insurance and is non-reducible;
the surrender value is to be paid by the company providing the life insurance in a timely manner upon request;
the surrender value shall not be requested without the prior consent of the institution;
the company providing the life insurance is subject to Directive 2009/138/EC or is subject to supervision by a competent authority of a third country which applies supervisory and regulatory arrangements at least equivalent to those applied in the Union.
Sub-Section 2
Unfunded credit protection and credit linked notes
Article 213
Requirements common to guarantees and credit derivatives
Subject to Article 214(1), credit protection deriving from a guarantee or credit derivative shall qualify as eligible unfunded credit protection where all the following conditions are met:
the credit protection is direct;
the extent of the credit protection is clearly defined and incontrovertible;
the credit protection contract does not contain any clause, the fulfilment of which is outside the direct control of the lender, that:
would allow the protection provider to cancel the protection unilaterally;
would increase the effective cost of protection as a result of a deterioration in the credit quality of the protected exposure;
could prevent the protection provider from being obliged to pay out in a timely manner in the event that the original obligor fails to make any payments due, or when the leasing contract has expired for the purposes of recognising guaranteed residual value under Articles 134(7) and 166(4);
could allow the maturity of the credit protection to be reduced by the protection provider;
the credit protection contract is legally effective and enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement.
An institution shall have conducted sufficient legal review confirming the enforceability of the unfunded credit protection in all relevant jurisdictions. It shall repeat such review as necessary to ensure continuing enforceability.
Article 214
Sovereign and other public sector counter-guarantees
Institutions may treat the exposures referred to in paragraph 2 as protected by a guarantee provided by the entities listed in that paragraph, provided that all the following conditions are satisfied:
the counter-guarantee covers all credit risk elements of the claim;
both the original guarantee and the counter-guarantee meet the requirements for guarantees set out in Articles 213 and 215(1), except that the counter-guarantee need not be direct;
the cover is robust and nothing in the historical evidence suggests that the coverage of the counter-guarantee is less than effectively equivalent to that of a direct guarantee by the entity in question.
The treatment set out in paragraph 1 shall apply to exposures protected by a guarantee which is counter-guaranteed by any of the following entities:
a central government or a central bank;
a regional government or a local authority;
a public sector entity, claims on which are treated as claims on the central government in accordance with Article 116(4);
a multilateral development bank or an international organisation, to which a 0 % risk weight is assigned under or by virtue of Articles 117(2) and 118 respectively;
a public sector entity, claims on which are treated in accordance with Article 116(1) and (2).
Article 215
Additional requirements for guarantees
Guarantees shall qualify as eligible unfunded credit protection where all the conditions in Article 213 and all the following conditions are met:
on the qualifying default of or non-payment by the counterparty, the lending institution has the right to pursue, in a timely manner, the guarantor for any monies due under the claim in respect of which the protection is provided and the payment by the guarantor shall not be subject to the lending institution first having to pursue the obligor;
In the case of unfunded credit protection covering residential mortgage loans, the requirements in Article 213(1)(c)(iii) and in the first subparagraph of this point have only to be satisfied within 24 months;
the guarantee is an explicitly documented obligation assumed by the guarantor;
either of the following conditions is met:
the guarantee covers all types of payments the obligor is expected to make in respect of the claim;
where certain types of payment are excluded from the guarantee, the lending institution has adjusted the value of the guarantee to reflect the limited coverage.
In the case of guarantees provided in the context of mutual guarantee schemes or provided by or counter-guaranteed by entities listed in Article 214(2), the requirements in point (a) of paragraph 1 of this Article shall be considered to be satisfied where either of the following conditions is met:
the lending institution has the right to obtain in a timely manner a provisional payment by the guarantor that meets both the following conditions:
it represents a robust estimate of the amount of the loss, including losses resulting from the non-payment of interest and other types of payment which the borrower is obliged to make, that the lending institution is likely to incur;
it is proportional to the coverage of the guarantee;
the lending institution can demonstrate to the satisfaction of the competent authorities that the effects of the guarantee, which shall also cover losses resulting from the non-payment of interest and other types of payments which the borrower is obliged to make, justify such treatment.
Article 216
Additional requirements for credit derivatives
Credit derivatives shall qualify as eligible unfunded credit protection where all the conditions in Article 213 and all the following conditions are met:
the credit events specified in the credit derivative contract include:
the failure to pay the amounts due under the terms of the underlying obligation that are in effect at the time of such failure, with a grace period that is equal to or shorter than the grace period in the underlying obligation;
the bankruptcy, insolvency or inability of the obligor to pay its debts, or its failure or admission in writing of its inability generally to pay its debts as they become due, and analogous events;
the restructuring of the underlying obligation involving forgiveness or postponement of principal, interest or fees that results in a credit loss event;
where credit derivatives allow for cash settlement:
institutions have in place a robust valuation process in order to estimate loss reliably;
there is a clearly specified period for obtaining post-credit-event valuations of the underlying obligation;
where the protection purchaser's right and ability to transfer the underlying obligation to the protection provider is required for settlement, the terms of the underlying obligation provide that any required consent to such transfer shall not be unreasonably withheld;
the identity of the parties responsible for determining whether a credit event has occurred is clearly defined;
the determination of the credit event is not the sole responsibility of the protection provider;
the protection buyer has the right or ability to inform the protection provider of the occurrence of a credit event.
Where the credit events do not include restructuring of the underlying obligation as described in point (a)(iii), the credit protection may nonetheless be eligible subject to a reduction in the value as specified in Article 233(2);
A mismatch between the underlying obligation and the reference obligation under the credit derivative or between the underlying obligation and the obligation used for purposes of determining whether a credit event has occurred is permissible only where both the following conditions are met:
the reference obligation or the obligation used for the purpose of determining whether a credit event has occurred, as the case may be, ranks pari passu with or is junior to the underlying obligation;
the underlying obligation and the reference obligation or the obligation used for the purpose of determining whether a credit event has occurred, as the case may be, share the same obligor and legally enforceable cross-default or cross-acceleration clauses are in place.
Article 217
Requirements to qualify for the treatment set out in Article 153(3)
To be eligible for the treatment set out in Article 153(3), credit protection deriving from a guarantee or credit derivative shall meet the following conditions:
the underlying obligation is to one of the following exposures:
a corporate exposure as referred to in Article 147, excluding insurance and reinsurance undertakings;
an exposure to a regional government, local authority or public sector entity which is not treated as an exposure to a central government or a central bank in accordance with Article 147;
an exposure to an SME, classified as a retail exposure in accordance with Article 147(5);
the underlying obligors are not members of the same group as the protection provider;
the exposure is hedged by one of the following instruments:
single-name unfunded credit derivatives or single-name guarantees;
first-to-default basket products;
nth-to-default basket products;
the credit protection meets the requirements set out in Articles 213, 215 and 216, as applicable;
the risk weight that is associated with the exposure prior to the application of the treatment set out in Article 153(3), does not already factor in any aspect of the credit protection;
an institution has the right and expectation to receive payment from the protection provider without having to take legal action in order to pursue the counterparty for payment. To the extent possible, the institution shall take steps to satisfy itself that the protection provider is willing to pay promptly should a credit event occur;
the purchased credit protection absorbs all credit losses incurred on the hedged portion of an exposure that arise due to the occurrence of credit events outlined in the contract;
where the payout structure of the credit protection provides for physical settlement, there is legal certainty with respect to the deliverability of a loan, bond, or contingent liability;
where an institution intends to deliver an obligation other than the underlying exposure, it shall ensure that the deliverable obligation is sufficiently liquid so that the institution would have the ability to purchase it for delivery in accordance with the contract;
the terms and conditions of credit protection arrangements are legally confirmed in writing by both the protection provider and the institution;
institutions have in place a process to detect excessive correlation between the creditworthiness of a protection provider and the obligor of the underlying exposure due to their performance being dependent on common factors beyond the systematic risk factor;
in the case of protection against dilution risk, the seller of purchased receivables is not a member of the same group as the protection provider.
Section 4
Calculating the effects of credit risk mitigation
Sub-Section 1
Funded credit protection
Article 218
Credit linked notes
Investments in credit linked notes issued by the lending institution may be treated as cash collateral for the purpose of calculating the effect of funded credit protection in accordance with this Sub-section, provided that the credit default swap embedded in the credit linked note qualifies as eligible unfunded credit protection. For the purpose of determining whether the credit default swap embedded in a credit linked note qualifies as eligible unfunded credit protection, the institution may consider the condition in point (c) of Article 194(6) to be met.
Article 219
On-balance sheet netting
Loans to and deposits with the lending institution subject to on-balance sheet netting are to be treated by that institution as cash collateral for the purpose of calculating the effect of funded credit protection for those loans and deposits of the lending institution subject to on-balance sheet netting which are denominated in the same currency.
Article 220
Using the Supervisory Volatility Adjustments Approach or the Own Estimates Volatility Adjustments Approach for master netting agreements
The use of the Own Estimates Approach shall be subject to the same conditions and requirements as apply under the Financial Collateral Comprehensive Method.
For the purpose of calculating E*, institutions shall:
calculate the net position in each group of securities or in each type of commodity by subtracting the amount in point (ii) from the amount in point (i):
the total value of a group of securities or of commodities of the same type lent, sold or provided under the master netting agreement;
the total value of a group of securities or of commodities of the same type borrowed, purchased or received under the master netting agreement;
calculate the net position in each currency, other than the settlement currency of the master netting agreement, by subtracting the amount in point (ii) from the amount in point (i):
the sum of the total value of securities denominated in that currency lent, sold or provided under the master netting agreement and the amount of cash in that currency lent or transferred under that agreement;
the sum of the total value of securities denominated in that currency borrowed, purchased or received under the master netting agreement and the amount of cash in that currency borrowed or received under that agreement;
apply the volatility adjustment appropriate to a given group of securities or to a cash position to the absolute value of the positive or negative net position in the securities in that group;
apply the foreign exchange risk (fx) volatility adjustment to the net positive or negative position in each currency other than the settlement currency of the master netting agreement.
Institutions shall calculate E* in accordance with the following formula:
where:
Ei |
= |
the exposure value for each separate exposure i under the agreement that would apply in the absence of the credit protection, where institutions calculate risk-weighted exposure amounts under the Standardised Approach or where they calculate the risk-weighted exposure amounts and expected loss amounts under the IRB Approach; |
Ci |
= |
the value of securities in each group or commodities of the same type borrowed, purchased or received or the cash borrowed or received in respect of each exposure i; |
|
= |
the net position (positive or negative) in a given group of securities j; |
|
= |
the net position (positive or negative) in a given currency k other than the settlement currency of the agreement as calculated under point (b) of paragraph 2; |
|
= |
the volatility adjustment appropriate to a particular group of securities j; |
|
= |
the foreign exchange volatility adjustment for currency k. |
Article 221
Using the internal models approach for master netting agreements
Institutions that have received permission for an internal risk-measurement model under Title IV, Chapter 5 may use the internal models approach. Where an institution has not received such permission, it may still apply for permission to the competent authorities to use an internal models approach for the purposes of this Article.
Competent authorities shall permit an institution to use an internal models approach only where they are satisfied that the institution's system for managing the risks arising from the transactions covered by the master netting agreement is conceptually sound and implemented with integrity and where the following qualitative standards are met:
the internal risk-measurement model used for calculating the potential price volatility for the transactions is closely integrated into the daily risk-management process of the institution and serves as the basis for reporting risk exposures to the senior management of the institution;
the institution has a risk control unit that meets all the following requirements:
it is independent from business trading units and reports directly to senior management;
it is responsible for designing and implementing the institution's risk-management system;
it produces and analyses daily reports on the output of the risk-measurement model and on the appropriate measures to be taken in terms of position limits;
the daily reports produced by the risk-control unit are reviewed by a level of management with sufficient authority to enforce reductions of positions taken and of overall risk exposure;
the institution has sufficient staff skilled in the use of sophisticated models in the risk control unit;
the institution has established procedures for monitoring and ensuring compliance with a documented set of internal policies and controls concerning the overall operation of the risk-measurement system;
the institution's models have a proven track record of reasonable accuracy in measuring risks demonstrated through the back-testing of its output using at least one year of data;
the institution frequently conducts a rigorous programme of stress testing and the results of these tests are reviewed by senior management and reflected in the policies and limits it sets;
the institution conducts, as part of its regular internal auditing process, an independent review of its risk-measurement system. This review shall include both the activities of the business trading units and of the independent risk-control unit;
at least once a year, the institution conducts a review of its risk-management system;
the internal model meets the requirements set out in Article 292(8) and (9) and in Article 294.
An institution may use empirical correlations within risk categories and across risk categories where its system for measuring correlations is sound and implemented with integrity.
Institutions using the internal models approach shall calculate E* in accordance with the following formula:
where:
Ei |
= |
the exposure value for each separate exposure i under the agreement that would apply in the absence of the credit protection, where institutions calculate the risk-weighted exposure amounts under the Standardised Approach or where they calculate risk-weighted exposure amounts and expected loss amounts under the IRB Approach; |
Ci |
= |
the value of the securities borrowed, purchased or received or the cash borrowed or received in respect of each such exposure i. |
When calculating risk-weighted exposure amounts using internal models, institutions shall use the previous business day's model output.
The calculation of the potential change in value referred to in paragraph 6 shall be subject to all the following standards:
it shall be carried out at least daily;
it shall be based on a 99th percentile, one-tailed confidence interval;
it shall be based on a 5-day equivalent liquidation period, except in the case of transactions other than securities repurchase transactions or securities lending or borrowing transactions where a 10-day equivalent liquidation period shall be used;
it shall be based on an effective historical observation period of at least one year except where a shorter observation period is justified by a significant upsurge in price volatility;
the data set used in the calculation shall be updated every three months.
Where an institution has a repurchase transaction, a securities or commodities lending or borrowing transaction and margin lending or similar transaction or netting set which meets the criteria set out in Article 285(2), (3) and (4), the minimum holding period shall be brought in line with the margin period of risk that would apply under those paragraphs, in combination with Article 285(5).
EBA shall develop draft regulatory technical standards to specify the following:
what constitutes an immaterial portfolio for the purpose of paragraph 3;
the criteria for determining whether an internal model is sound and implemented with integrity for the purpose of paragraphs 4 and 5 and master netting agreements.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2015.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 222
Financial Collateral Simple Method
The risk weight of the collateralised portion shall be at least 20 % except as specified in paragraphs 4 to 6. Institutions shall apply to the remainder of the exposure value the risk weight that they would assign to an unsecured exposure to the counterparty under Chapter 2.
Institutions shall assign a risk weight of 10 %, to the extent of the collateralisation, to the exposure values of such transactions collateralised by debt securities issued by central governments or central banks which are assigned a 0 % risk weight under Chapter 2.
For transactions other than those referred to in paragraphs 4 and 5, institutions may assign a 0 % risk weight where the exposure and the collateral are denominated in the same currency, and either of the following conditions is met:
the collateral is cash on deposit or a cash assimilated instrument;
the collateral is in the form of debt securities issued by central governments or central banks eligible for a 0 % risk weight under Article 114, and its market value has been discounted by 20 %.
For the purpose of paragraphs 5 and 6 debt securities issued by central governments or central banks shall include:
debt securities issued by regional governments or local authorities exposures to which are treated as exposures to the central government in whose jurisdiction they are established under Article 115;
debt securities issued by multilateral development banks to which a 0 % risk weight is assigned under or by virtue of Article 117(2);
debt securities issued by international organisations which are assigned a 0 % risk weight under Article 118;
debt securities issued by public sector entities which are treated as exposures to central governments in accordance with Article 116(4).
Article 223
Financial Collateral Comprehensive Method
Where collateral is denominated in a currency that differs from the currency in which the underlying exposure is denominated, institutions shall add an adjustment reflecting currency volatility to the volatility adjustment appropriate to the collateral as set out in Articles 224 to 227.
In the case of OTC derivatives transactions covered by netting agreements recognised by the competent authorities under Chapter 6, institutions shall apply a volatility adjustment reflecting currency volatility when there is a mismatch between the collateral currency and the settlement currency. Even where multiple currencies are involved in the transactions covered by the netting agreement, institutions shall apply a single volatility adjustment.
Institutions shall calculate the volatility-adjusted value of the collateral (CVA) they need to take into account as follows:
where:
C |
= |
the value of the collateral; |
HC |
= |
the volatility adjustment appropriate to the collateral, as calculated under Articles 224 and 227; |
Hfx |
= |
the volatility adjustment appropriate to currency mismatch, as calculated under Articles 224 and 227. |
Institutions shall use the formula in this paragraph when calculating the volatility-adjusted value of the collateral for all transactions except for those transactions subject to recognised master netting agreements to which the provisions set out in Articles 220 and 221 apply.
Institutions shall calculate the volatility-adjusted value of the exposure (EVA) they need to take into account as follows:
where:
E |
= |
the exposure value as would be determined under Chapter 2 or Chapter 3, as applicable, where the exposure was not collateralised; |
HE |
= |
the volatility adjustment appropriate to the exposure, as calculated under Articles 224 and 227. |
In the case of OTC derivative transactions, institutions using the method laid down in Section 6 of Chapter 6 shall calculate EVA as follows:
For the purpose of calculating E in paragraph 3, the following shall apply:
for institutions calculating risk-weighted exposure amounts under the Standardised Approach, the exposure value of an off-balance sheet item listed in Annex I shall be 100 % of that item's value rather than the exposure value indicated in Article 111(1);
for institutions calculating risk-weighted exposure amounts under the IRB Approach, they shall calculate the exposure value of the items listed in Article 166(8) to (10) by using a conversion factor of 100 % rather than the conversion factors or percentages indicated in those paragraphs.
Institutions shall calculate the fully adjusted value of the exposure (E*), taking into account both volatility and the risk-mitigating effects of collateral as follows:
where:
EVA |
= |
the volatility adjusted value of the exposure as calculated in paragraph 3; |
CVAM |
= |
CVA further adjusted for any maturity mismatch in accordance with the provisions of Section 5; |
In the case of OTC derivative transactions, institutions using the methods laid down in Sections 3, 4 and 5 of Chapter 6 shall take into account the risk-mitigating effects of collateral in accordance with the provisions laid down in Sections 3, 4 and 5 of Chapter 6, as applicable.
An institution may choose to use the Supervisory Volatility Adjustments Approach or the Own Estimates Approach independently of the choice it has made between the Standardised Approach and the IRB Approach for the calculation of risk-weighted exposure amounts.
However, where an institution uses the Own Estimates Approach, it shall do so for the full range of instrument types, excluding immaterial portfolios where it may use the Supervisory Volatility Adjustments Approach.
Where the collateral consists of a number of eligible items, institutions shall calculate the volatility adjustment (H) as follows:
where:
ai |
= |
the proportion of the value of an eligible item i in the total value of collateral; |
Hi |
= |
the volatility adjustment applicable to eligible item i. |
Article 224
Supervisory volatility adjustment under the Financial Collateral Comprehensive Method
The volatility adjustments to be applied by institutions under the Supervisory Volatility Adjustments Approach, assuming daily revaluation, shall be those set out in Tables 1 to 4 of this paragraph.
VOLATILITY ADJUSTMENTS
Table 1
Credit quality step with which the credit assessment of the debt security is associated |
Residual Maturity |
Volatility adjustments for debt securities issued by entities described in Article 197(1)(b) |
Volatility adjustments for debt securities issued by entities described in Article 197(1) (c) and (d) |
Volatility adjustments for securitisation positions and meeting the criteria in Article 197(1) (h) |
||||||
|
|
20-day liquidation period (%) |
10-day liquidation period (%) |
5-day liquidation period (%) |
20-day liquidation period (%) |
10-day liquidation period (%) |
5-day liquidation period (%) |
20-day liquidation period (%) |
10-day liquidation period (%) |
5-day liquidation period (%) |
1 |
≤ 1 year |
0,707 |
0,5 |
0,354 |
1,414 |
1 |
0,707 |
2,829 |
2 |
1,414 |
|
>1 ≤ 5 years |
2,828 |
2 |
1,414 |
5,657 |
4 |
2,828 |
11,314 |
8 |
5,657 |
|
> 5 years |
5,657 |
4 |
2,828 |
11,314 |
8 |
5,657 |
22,628 |
16 |
11,313 |
2-3 |
≤ 1 year |
1,414 |
1 |
0,707 |
2,828 |
2 |
1,414 |
5,657 |
4 |
2,828 |
|
>1 ≤ 5 years |
4,243 |
3 |
2,121 |
8,485 |
6 |
4,243 |
16,971 |
12 |
8,485 |
|
> 5 years |
8,485 |
6 |
4,243 |
16,971 |
12 |
8,485 |
33,942 |
24 |
16,970 |
4 |
≤ 1 year |
21,213 |
15 |
10,607 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
|
>1 ≤ 5 years |
21,213 |
15 |
10,607 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
|
> 5 years |
21,213 |
15 |
10,607 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
Table 2
Credit quality step with which the credit assessment of a short term debt security is associated |
Volatility adjustments for debt securities issued by entities described in Article 197(1)(b) with short-term credit assessments |
Volatility adjustments for debt securities issued by entities described in Article 197(1) (c) and (d) with short-term credit assessments |
Volatility adjustments for securitisation positions and meeting the criteria in Article 197(1)(h) |
||||||
|
20-day liquidation period (%) |
10-day liquidation period (%) |
5-day liquidation period (%) |
20-day liquidation period (%) |
10-day liquidation period (%) |
5-day liquidation period (%) |
20-day liquidation period (%) |
10-day liquidation period (%) |
5-day liquidation period (%) |
1 |
0,707 |
0,5 |
0,354 |
1,414 |
1 |
0,707 |
2,829 |
2 |
1,414 |
2-3 |
1,414 |
1 |
0,707 |
2,828 |
2 |
1,414 |
5,657 |
4 |
2,828 |
Table 3
Other collateral or exposure types
|
20-day liquidation period (%) |
10-day liquidation period (%) |
5-day liquidation period (%) |
Main Index Equities, Main Index Convertible Bonds |
21,213 |
15 |
10,607 |
Other Equities or Convertible Bonds listed on a recognised exchange |
35,355 |
25 |
17,678 |
Cash |
0 |
0 |
0 |
Gold |
21,213 |
15 |
10,607 |
Table 4
Volatility adjustment for currency mismatch
20-day liquidation period (%) |
10-day liquidation period (%) |
5-day liquidation period %) |
11,314 |
8 |
5,657 |
The calculation of volatility adjustments in accordance with paragraph 1 shall be subject to the following conditions:
for secured lending transactions the liquidation period shall be 20 business days;
for repurchase transactions, except insofar as such transactions involve the transfer of commodities or guaranteed rights relating to title to commodities, and securities lending or borrowing transactions the liquidation period shall be 5 business days;
for other capital market driven transactions, the liquidation period shall be 10 business days.
Where an institution has a transaction or netting set which meets the criteria set out in Article 285(2), (3) and (4), the minimum holding period shall be brought in line with the margin period of risk that would apply under those paragraphs.
For the purpose of determining the credit quality step with which a credit assessment of the debt security is associated referred to in the first subparagraph, Article 197(7) also applies.
Where the assets in which the fund has invested are not known to the institution, the volatility adjustment is the highest volatility adjustment that would apply to any of the assets in which the fund has the right to invest.
Article 225
Own estimates of volatility adjustments under the Financial Collateral Comprehensive Method
For debt securities that have a credit assessment from an ECAI equivalent to investment grade or better, institutions may calculate a volatility estimate for each category of security.
For debt securities that have a credit assessment from an ECAI equivalent to below investment grade, and for other eligible collateral, institutions shall calculate the volatility adjustments for each individual item.
Institutions using the Own Estimates Approach shall estimate volatility of the collateral or foreign exchange mismatch without taking into account any correlations between the unsecured exposure, collateral or exchange rates.
In determining relevant categories, institutions shall take into account the type of issuer of the security, the external credit assessment of the securities, their residual maturity, and their modified duration. Volatility estimates shall be representative of the securities included in the category by the institution.
The calculation of the volatility adjustments shall be subject to all the following criteria:
institutions shall base the calculation on a 99th percentile, one-tailed confidence interval;
institutions shall base the calculation on the following liquidation periods:
20 business days for secured lending transactions;
5 business days for repurchase transactions, except insofar as such transactions involve the transfer of commodities or guaranteed rights relating to title to commodities and securities lending or borrowing transactions;
10 business days for other capital market driven transactions;
institutions may use volatility adjustment numbers calculated in accordance with shorter or longer liquidation periods, scaled up or down to the liquidation period set out in point (b) for the type of transaction in question, using the square root of time formula:
where:
TM |
= |
the relevant liquidation period; |
HM |
= |
the volatility adjustment based on the liquidation period TM; |
HN |
= |
the volatility adjustment based on the liquidation period TN. |
institutions shall take into account the illiquidity of lower-quality assets. They shall adjust the liquidation period upwards in cases where there is doubt concerning the liquidity of the collateral. They shall also identify where historical data may understate potential volatility. Such cases shall be dealt with by means of a stress scenario;
the length of the historical observation period institutions use for calculating volatility adjustments shall be at least one year. For institutions that use a weighting scheme or other methods for the historical observation period, the length of the effective observation period shall be at least one year. The competent authorities may also require an institution to calculate its volatility adjustments using a shorter observation period where, in the competent authorities' judgement, this is justified by a significant upsurge in price volatility;
institutions shall update their data sets and calculate volatility adjustments at least once every three months. They shall also reassess their data sets whenever market prices are subject to material changes.
The estimation of volatility adjustments shall meet all the following qualitative criteria:
an institutions shall use the volatility estimates in the day-to-day risk management process including in relation to its internal exposure limits;
where the liquidation period used by an institution in its day-to-day risk management process is longer than that set out in this Section for the type of transaction in question, that institution shall scale up its volatility adjustments in accordance with the square root of time formula set out in point (c) of paragraph 2;
an institution shall have in place established procedures for monitoring and ensuring compliance with a documented set of policies and controls for the operation of its system for the estimation of volatility adjustments and for the integration of such estimations into its risk management process;
an independent review of the institution's system for the estimation of volatility adjustments shall be carried out regularly within the institution's own internal auditing process. A review of the overall system for the estimation of volatility adjustments and for the integration of those adjustments into the institution's risk management process shall take place at least once a year. The subject of that review shall include at least the following:
the integration of estimated volatility adjustments into daily risk management;
the validation of any significant change in the process for the estimation of volatility adjustments;
the verification of the consistency, timeliness and reliability of data sources used to run the system for the estimation of volatility adjustments, including the independence of such data sources;
the accuracy and appropriateness of the volatility assumptions.
Article 226
Scaling up of volatility adjustment under the Financial Collateral Comprehensive Method
The volatility adjustments set out in Article 224 are the volatility adjustments an institution shall apply where there is daily revaluation. Similarly, where an institution uses its own estimates of the volatility adjustments in accordance with Article 225, it shall calculate them in the first instance on the basis of daily revaluation. Where the frequency of revaluation is less than daily, institutions shall apply larger volatility adjustments. Institutions shall calculate them by scaling up the daily revaluation volatility adjustments, using the following square-root-of-time formula:
where:
H |
= |
the volatility adjustment to be applied; |
HM |
= |
the volatility adjustment where there is daily revaluation; |
NR |
= |
the actual number of business days between revaluations; |
TM |
= |
the liquidation period for the type of transaction in question. |
Article 227
Conditions for applying a 0 % volatility adjustment under the Financial Collateral Comprehensive Method
Institutions may apply a 0 % volatility adjustment where all the following conditions are met:
both the exposure and the collateral are cash or debt securities issued by central governments or central banks within the meaning of Article 197(1)(b) and eligible for a 0 % risk weight under Chapter 2;
both the exposure and the collateral are denominated in the same currency;
either the maturity of the transaction is no more than one day or both the exposure and the collateral are subject to daily marking-to-market or daily re-margining;
the time between the last marking-to-market before a failure to re-margin by the counterparty and the liquidation of the collateral is no more than four business days;
the transaction is settled in a settlement system proven for that type of transaction;
the documentation covering the agreement or transaction is standard market documentation for repurchase transactions or securities lending or borrowing transactions in the securities concerned;
the transaction is governed by documentation specifying that where the counterparty fails to satisfy an obligation to deliver cash or securities or to deliver margin or otherwise defaults, then the transaction is immediately terminable;
the counterparty is considered a core market participant by the competent authorities.
The core market participants referred to in point (h) of paragraph 2 shall include the following entities:
the entities mentioned in Article 197(1)(b) exposures to which are assigned a 0 % risk weight under Chapter 2;
institutions;
investment firms;
other financial undertakings within the meaning of points (25)(b) and (d) of Article 13 of Directive 2009/138/EC exposures to which are assigned a 20 % risk weight under the Standardised Approach or which, in the case of institutions calculating risk-weighted exposure amounts and expected loss amounts under the IRB Approach, do not have a credit assessment by a recognised ECAI and are internally rated by the institution;
regulated CIUs that are subject to capital or leverage requirements;
regulated pension funds;
recognised clearing organisations.
Article 228
Calculating risk-weighted exposure amounts and expected loss amounts under the Financial Collateral Comprehensive method
Under the IRB Approach, institutions shall use the effective LGD (LGD*) as the LGD for the purposes of Chapter 3. Institutions shall calculate LGD* as follows:
where:
LGD |
= |
the LGD that would apply to the exposure under Chapter 3 where the exposure was not collateralised; |
E |
= |
the exposure value in accordance with Article 223(3); |
E* |
= |
the fully adjusted exposure value in accordance with Article 223(5). |
Article 229
Valuation principles for other eligible collateral under the IRB Approach
In those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions the immovable property may instead be valued by an independent valuer at or at less than the mortgage lending value. Institutions shall require the independent valuer not to take into account speculative elements in the assessment of the mortgage lending value and to document that value in a transparent and clear manner.
The value of the collateral shall be the market value or mortgage lending value reduced as appropriate to reflect the results of the monitoring required under Article 208(3) and to take account of any prior claims on the immovable property.
Article 230
Calculating risk-weighted exposure amounts and expected loss amounts for other eligible collateral under the IRB Approach
Where the ratio of the value of the collateral (C) to the exposure value (E) is below the required minimum collateralisation level of the exposure (C*) as laid down in Table 5, LGD* shall be the LGD laid down in Chapter 3 for uncollateralised exposures to the counterparty. For this purpose, institutions shall calculate the exposure value of the items listed in Article 166(8) to (10) by using a conversion factor or percentage of 100 % rather than the conversion factors or percentages indicated in those paragraphs.
Where the ratio of the value of the collateral to the exposure value exceeds a second, higher threshold level of C** as laid down in Table 5, LGD* shall be that prescribed in Table 5.
Where the required level of collateralisation C** is not achieved in respect of the exposure as a whole, institutions shall consider the exposure to be two exposures — one corresponding to the part in respect of which the required level of collateralisation C** is achieved and one corresponding to the remainder.
The applicable LGD* and required collateralisation levels for the secured parts of exposures are set out in Table 5 of this paragraph.
Table 5
Minimum LGD for secured parts of exposures
|
LGD* for senior exposure |
LGD* for subordinated exposures |
Required minimum collateralisation level of the exposure (C*) |
Required minimum collateralisation level of the exposure (C**) |
Receivables |
35 % |
65 % |
0 % |
125 % |
Residential property/commercial immovable property |
35 % |
65 % |
30 % |
140 % |
Other collateral |
40 % |
70 % |
30 % |
140 % |
Article 231
Calculating risk-weighted exposure amounts and expected loss amounts in the case of mixed pools of collateral
An institution shall calculate the value of LGD* that it shall use as the LGD for the purposes of Chapter 3 in accordance with paragraphs 2 and 3 where both the following conditions are met:
the institution uses the IRB Approach to calculate risk-weighted exposure amounts and expected loss amounts;
an exposure is collateralised by both financial collateral and other eligible collateral.
Article 232
Other funded credit protection
Where the conditions set out in Article 212(2) are met, institutions shall subject the portion of the exposure collateralised by the current surrender value of life insurance policies pledged to the lending institution to the following treatment:
where the exposure is subject to the Standardised Approach, it shall be risk-weighted by using the risk weights specified in paragraph 3;
where the exposure is subject to the IRB Approach but not subject to the institution's own estimates of LGD, it shall be assigned an LGD of 40 %.
In the event of a currency mismatch, institutions shall reduce the current surrender value in accordance with Article 233(3), the value of the credit protection being the current surrender value of the life insurance policy.
For the purposes of point (a) of paragraph 2, institutions shall assign the following risk weights on the basis of the risk weight assigned to a senior unsecured exposure to the undertaking providing the life insurance:
a risk weight of 20 %, where the senior unsecured exposure to the undertaking providing the life insurance is assigned a risk weight of 20 %;
a risk weight of 35 %, where the senior unsecured exposure to the undertaking providing the life insurance is assigned a risk weight of 50 %;
a risk weight of 70 %, where the senior unsecured exposure to the undertaking providing the life insurance is assigned a risk weight of 100 %;
a risk weight of 150 %, where the senior unsecured exposure to the undertaking providing the life insurance is assigned a risk weight of 150 %.
Institutions may treat instruments repurchased on request that are eligible under Article 200(c) as a guarantee by the issuing institution. The value of the eligible credit protection shall be the following:
where the instrument will be repurchased at its face value, the value of the protection shall be that amount;
where the instrument will be repurchased at market price, the value of the protection shall be the value of the instrument valued in the same way as the debt securities that meet the conditions in Article 197(4).
Sub-Section 2
Unfunded credit protection
Article 233
Valuation
In the case of credit derivatives which do not include as a credit event restructuring of the underlying obligation involving forgiveness or postponement of principal, interest or fees that result in a credit loss event the following shall apply:
where the amount that the protection provider has undertaken to pay is not higher than the exposure value, institutions shall reduce the value of the credit protection calculated under paragraph 1 by 40 %;
where the amount that the protection provider has undertaken to pay is higher than the exposure value, the value of the credit protection shall be no higher than 60 % of the exposure value.
Where unfunded credit protection is denominated in a currency different from that in which the exposure is denominated, institutions shall reduce the value of the credit protection by the application of a volatility adjustment as follows:
where:
G* |
= |
the amount of credit protection adjusted for foreign exchange risk, |
G |
= |
the nominal amount of the credit protection; |
Hfx |
= |
the volatility adjustment for any currency mismatch between the credit protection and the underlying obligation determined in accordance with paragraph 4. |
Where there is no currency mismatch Hfx is equal to zero.
Article 234
Calculating risk-weighted exposure amounts and expected loss amounts in the event of partial protection and tranching
Where an institution transfers a part of the risk of a loan in one or more tranches, the rules set out in Chapter 5 shall apply. Institutions may consider materiality thresholds on payments below which no payment shall be made in the event of loss to be equivalent to retained first loss positions and to give rise to a tranched transfer of risk.
Article 235
Calculating risk-weighted exposure amounts under the Standardised Approach
For the purposes of Article 113(3) institutions shall calculate the risk-weighted exposure amounts in accordance with the following formula:
where:
E |
= |
the exposure value in accordance with Article 111; for this purpose, the exposure value of an off-balance sheet item listed in Annex I shall be 100 % of its value rather than the exposure value indicated in Article 111(1); |
GA |
= |
the amount of credit risk protection as calculated under Article 233(3) (G*) further adjusted for any maturity mismatch as laid down in Section 5; |
r |
= |
the risk weight of exposures to the obligor as specified under Chapter 2; |
g |
= |
the risk weight of exposures to the protection provider as specified under Chapter 2. |
Article 236
Calculating risk-weighted exposure amounts and expected loss amounts under the IRB Approach
Section 5
Maturity mismatches
Article 237
Maturity mismatch
Where there is a maturity mismatch the credit protection shall not qualify as eligible where either of the following conditions is met:
the original maturity of the protection is less than one year;
the exposure is a short term exposure specified by the competent authorities as being subject to a one-day floor rather than a one-year floor in respect of the maturity value (M) under Article 162(3).
Article 238
Maturity of credit protection
Article 239
Valuation of protection
For transactions subject to funded credit protection under the Financial Collateral Comprehensive Method, institutions shall reflect the maturity of the credit protection and of the exposure in the adjusted value of the collateral in accordance with the following formula:
where:
CVA |
= |
the volatility adjusted value of the collateral as specified in Article 223(2) or the amount of the exposure, whichever is lower; |
t |
= |
the number of years remaining to the maturity date of the credit protection calculated in accordance with Article 238, or the value of T, whichever is lower; |
T |
= |
the number of years remaining to the maturity date of the exposure calculated in accordance with Article 238, or five years, whichever is lower; |
t* |
= |
0,25. |
Institutions shall use CVAM as CVA further adjusted for maturity mismatch in the formula for the calculation of the fully adjusted value of the exposure (E*) set out in Article 223(5).
For transactions subject to unfunded credit protection, institutions shall reflect the maturity of the credit protection and of the exposure in the adjusted value of the credit protection in accordance with the following formula:
where:
GA |
= |
G* adjusted for any maturity mismatch; |
G* |
= |
the amount of the protection adjusted for any currency mismatch; |
t |
= |
is the number of years remaining to the maturity date of the credit protection calculated in accordance with Article 238, or the value of T, whichever is lower; |
T |
= |
is the number of years remaining to the maturity date of the exposure calculated in accordance with Article 238, or five years, whichever is lower; |
t* |
= |
0,25. |
Institutions shall use GA as the value of the protection for the purposes of Articles 233 to 236.
Section 6
Basket CRM techniques
Article 240
First-to-default credit derivatives
Where an institution obtains credit protection for a number of exposures under terms that the first default among the exposures shall trigger payment and that this credit event shall terminate the contract, the institution may amend the calculation of the risk-weighted exposure amount and, as relevant, the expected loss amount of the exposure which would, in the absence of the credit protection, produce the lowest risk-weighted exposure amount in accordance with this Chapter:
for institutions using the Standardised Approach, the risk-weighted exposure amount shall be that calculated under the Standardised Approach;
for institutions using the IRB Approach, the risk-weighted exposure amount shall be the sum of the risk-weighted exposure amount calculated under the IRB Approach and 12,5 times the expected loss amount.
The treatment set out in this Article applies only where the exposure value is less than or equal to the value of the credit protection.
Article 241
Nth-to-default credit derivatives
Where the nth default among the exposures triggers payment under the credit protection, the institution purchasing the protection may only recognise the protection for the calculation of risk-weighted exposure amounts and, as applicable, expected loss amounts where protection has also been obtained for defaults 1 to n-1 or when n-1 defaults have already occurred. In such cases, the institution may amend the calculation of the risk-weighted exposure amount and, as applicable, the expected loss amount of the exposure which would, in the absence of the credit protection, produce the n-th lowest risk-weighted exposure amount in accordance with this Chapter. Institutions shall calculate the nth lowest amount as specified in points (a) and (b) of Article 240.
The treatment set out in this Article applies only where the exposure value is less than or equal to the value of the credit protection.
All exposures in the basket shall meet the requirements laid down in Article 204(2) and Article 216(1)(d).
CHAPTER 5
Securitisation
Article 242
Definitions
For the purposes of this Chapter, the following definitions apply:
‘clean-up call option’ means a contractual option that entitles the originator to call the securitisation positions before all of the securitised exposures have been repaid, either by repurchasing the underlying exposures remaining in the pool in the case of traditional securitisations or by terminating the credit protection in the case of synthetic securitisations, in both cases when the amount of outstanding underlying exposures falls to or below certain pre-specified level;
‘credit-enhancing interest-only strip’ means an on-balance sheet asset that represents a valuation of cash flows related to future margin income and is a subordinated tranche in the securitisation;
‘liquidity facility’ means a liquidity facility as defined in point (14) of Article 2 of Regulation (EU) 2017/2402;
‘unrated position’ means a securitisation position which does not have an eligible credit assessment in accordance with Section 4;
‘rated position’ means a securitisation position which has an eligible credit assessment in accordance with Section 4;
‘senior securitisation position’ means a position backed or secured by a first claim on the whole of the underlying exposures, disregarding for these purposes amounts due under interest rate or currency derivative contracts, fees or other similar payments, and irrespective of any difference in maturity with one or more other senior tranches with which that position shares losses on a pro-rata basis;
‘IRB pool’ means a pool of underlying exposures of a type in relation to which the institution has permission to use the IRB Approach and is able to calculate risk- weighted exposure amounts in accordance with Chapter 3 for all of these exposures;
‘mixed pool’ means a pool of underlying exposures of a type in relation to which the institution has permission to use the IRB Approach and is able to calculate risk- weighted exposure amounts in accordance with Chapter 3 for some, but not all, of the exposures;
‘overcollateralisation’ means any form of credit enhancement by virtue of which underlying exposures are posted in value which is higher than the value of the securitisation positions;
‘simple, transparent and standardised securitisation’ or ‘STS securitisation’ means a securitisation that meets the requirements set out in Article 18 of Regulation (EU) 2017/2402;
‘asset-backed commercial paper programme’ or ‘ABCP programme’ means an asset backed commercial paper programme or ABCP programme as defined in point (7) of Article 2 of Regulation (EU) 2017/2402;
‘asset-backed commercial paper transaction’ or ‘ABCP transaction’ means an asset-backed commercial paper transaction or ABCP transaction as defined in point (8) of Article 2 of Regulation (EU) 2017/2402;
‘traditional securitisation’ means a traditional securitisation as defined in point (9) of Article 2 of Regulation (EU) 2017/2402;
‘synthetic securitisation’ means a synthetic securitisation as defined in point (10) of Article 2 of Regulation (EU) 2017/2402;
‘revolving exposure’ means a revolving exposure as defined in point (15) of Article 2 of Regulation (EU) 2017/2402;
‘early amortisation provision’ means an early amortisation provision as defined in point (17) of Article 2 of Regulation (EU) 2017/2402;
‘first loss tranche’ means a first loss tranche as defined in point (18) of Article 2 of Regulation (EU) 2017/2402;
‘mezzanine securitisation position’ means a position in the securitisation which is subordinated to the senior securitisation position and more senior than the first loss tranche, and which is subject to a risk weight lower than 1 250 % and higher than 25 % in accordance with Subsections 2 and 3 of Section 3;
‘promotional entity’ means any undertaking or entity established by a Member State’s central, regional or local government, which grants promotional loans or grants promotional guarantees, whose primary goal is not to make profit or maximise market share but to promote that government’s public policy objectives, provided that, subject to State aid rules, that government has an obligation to protect the economic basis of the undertaking or entity and maintain its viability throughout its lifetime, or that at least 90 % of its original capital or funding or the promotional loan it grants is directly or indirectly guaranteed by the Member State’s central, regional or local government;
‘synthetic excess spread’ means a synthetic excess spread as defined in point (29) of Article 2 of Regulation (EU) 2017/2402.
Article 243
Criteria for STS securitisations qualifying for differentiated capital treatment
Positions in an ABCP programme or ABCP transaction that qualify as positions in an STS securitisation shall be eligible for the treatment set out in Articles 260, 262 and 264 where the following requirements are met:
the underlying exposures meet, at the time of their inclusion in the ABCP programme, to the best knowledge of the originator or the original lender, the conditions for being assigned, under the Standardised Approach and taking into account any eligible credit risk mitigation, a risk weight equal to or smaller than 75 % on an individual exposure basis where the exposure is a retail exposure or 100 % for any other exposures; and
the aggregate exposure value of all exposures to a single obligor at ABCP programme level does not exceed 2 % of the aggregate exposure value of all exposures within the ABCP programme at the time the exposures were added to the ABCP programme. For the purposes of this calculation, loans or leases to a group of connected clients, to the best knowledge of the sponsor, shall be considered as exposures to a single obligor.
In the case of trade receivables, point (b) of the first subparagraph shall not apply where the credit risk of those trade receivables is fully covered by eligible credit protection in accordance with Chapter 4, provided that in that case the protection provider is an institution, an investment firm, an insurance undertaking or a reinsurance undertaking.
In the case of securitised residual leasing values, point (b) of the first subparagraph shall not apply where those values are not exposed to refinancing or resell risk due to a legally enforceable commitment to repurchase or refinance the exposure at a pre-determined amount by a third party eligible under Article 201(1).
By way of derogation from point (a) of the first subparagraph, where an institution applies Article 248(3) or has been granted permission to apply the Internal Assessment Approach in accordance with Article 265, the risk weight that institution would assign to a liquidity facility that completely covers the ABCP issued under the programme is equal to or smaller than 100 %.
Positions in a securitisation, other than an ABCP programme or ABCP transaction, that qualify as positions in an STS securitisation, shall be eligible for the treatment set out in Articles 260, 262 and 264 where the following requirements are met:
at the time of inclusion in the securitisation, the aggregate exposure value of all exposures to a single obligor in the pool does not exceed 2 % of the exposure values of the aggregate outstanding exposure values of the pool of underlying exposures. For the purposes of this calculation, loans or leases to a group of connected clients shall be considered as exposures to a single obligor.
In the case of securitised residual leasing values, the first subparagraph of this point shall not apply where those values are not exposed to refinancing or resell risk due to a legally enforceable commitment to repurchase or refinance the exposure at a pre-determined amount by a third party eligible under Article 201(1);
at the time of their inclusion in the securitisation, the underlying exposures meet the conditions for being assigned, under the Standardised Approach and taking into account any eligible credit risk mitigation, a risk weight equal to or smaller than:
40 % on an exposure value-weighted average basis for the portfolio where the exposures are loans secured by residential mortgages or fully guaranteed residential loans, as referred to in point (e) of Article 129(1);
50 % on an individual exposure basis where the exposure is a loan secured by a commercial mortgage;
75 % on an individual exposure basis where the exposure is a retail exposure;
for any other exposures, 100 % on an individual exposure basis;
where points (b)(i) and (b)(ii) apply, the loans secured by lower ranking security rights on a given asset shall only be included in the securitisation where all loans secured by prior ranking security rights on that asset are also included in the securitisation;
where point (b)(i) of this paragraph applies, no loan in the pool of underlying exposures shall have a loan-to-value ratio higher than 100 %, at the time of inclusion in the securitisation, measured in accordance with point (d)(i) of Article 129(1) and Article 229(1).
Article 244
Traditional securitisation
The originator institution of a traditional securitisation may exclude underlying exposures from its calculation of risk-weighted exposure amounts and, where relevant, expected loss amounts if either of the following conditions is fulfilled:
significant credit risk associated with the underlying exposures has been transferred to third parties;
the originator institution applies a 1 250 % risk weight to all securitisation positions it holds in the securitisation or deducts these securitisation positions from Common Equity Tier 1 items in accordance with point (k) of Article 36(1).
Significant credit risk shall be considered as transferred in either of the following cases:
the risk-weighted exposure amounts of the mezzanine securitisation positions held by the originator institution in the securitisation do not exceed 50 % of the risk-weighted exposure amounts of all mezzanine securitisation positions existing in this securitisation;
the originator institution does not hold more than 20 % of the exposure value of the first loss tranche in the securitisation, provided that both of the following conditions are met:
the originator can demonstrate that the exposure value of the first loss tranche exceeds a reasoned estimate of the expected loss on the underlying exposures by a substantial margin;
there are no mezzanine securitisation positions.
Where the possible reduction in risk-weighted exposure amounts, which the originator institution would achieve by the securitisation under points (a) or (b), is not justified by a commensurate transfer of credit risk to third parties, competent authorities may decide on a case-by-case basis that significant credit risk shall not be considered as transferred to third parties.
By way of derogation from paragraph 2, competent authorities may allow originator institutions to recognise significant credit risk transfer in relation to a securitisation where the originator institution demonstrates in each case that the reduction in own funds requirements which the originator achieves by the securitisation is justified by a commensurate transfer of credit risk to third parties. Permission may only be granted where the institution meets both of the following conditions:
the institution has adequate internal risk management policies and methodologies to assess the transfer of credit risk;
the institution has also recognised the transfer of credit risk to third parties in each case for the purposes of the institution’s internal risk management and its internal capital allocation.
In addition to the requirements set out in paragraphs 1, 2 and 3, all of the following conditions shall be met:
the transaction documentation reflects the economic substance of the securitisation;
the securitisation positions do not constitute payment obligations of the originator institution;
the underlying exposures are placed beyond the reach of the originator institution and its creditors in a manner that meets the requirement set out in Article 20(1) of Regulation (EU) 2017/2402;
the originator institution does not retain control over the underlying exposures. It shall be considered that control is retained over the underlying exposures where the originator has the right to repurchase from the transferee the previously transferred exposures in order to realise their benefits or if it is otherwise required to re-assume transferred risk. The originator institution’s retention of servicing rights or obligations in respect of the underlying exposures shall not of itself constitute control of the exposures;
the securitisation documentation does not contain terms or conditions that:
require the originator institution to alter the underlying exposures to improve the average quality of the pool; or
increase the yield payable to holders of positions or otherwise enhance the positions in the securitisation in response to a deterioration in the credit quality of the underlying exposures;
where applicable, the transaction documentation makes it clear that the originator or the sponsor may only purchase or repurchase securitisation positions or repurchase, restructure or substitute the underlying exposures beyond their contractual obligations where such arrangements are executed in accordance with prevailing market conditions and the parties to them act in their own interest as free and independent parties (arm’s length);
where there is a clean-up call option, that option shall also meet all of the following conditions:
it can be exercised at the discretion of the originator institution;
it may only be exercised when 10 % or less of the original value of the underlying exposures remains unamortised;
it is not structured to avoid allocating losses to credit enhancement positions or other positions held by investors in the securitisation and is not otherwise structured to provide credit enhancement;
the originator institution has received an opinion from a qualified legal counsel confirming that the securitisation complies with the conditions set out in point (c) of this paragraph.
The EBA shall monitor the range of supervisory practices in relation to the recognition of significant risk transfer in traditional securitisations in accordance with this Article. In particular, the EBA shall review:
the conditions for the transfer of significant credit risk to third parties in accordance with paragraphs 2, 3 and 4;
the interpretation of ‘commensurate transfer of credit risk to third parties’ for the purposes of the competent authorities’ assessment provided for in the second subparagraph of paragraph 2 and in paragraph 3;
the requirements for the competent authorities’ assessment of securitisation transactions in relation to which the originator seeks recognition of significant credit risk transfer to third parties in accordance with paragraph 2 or 3.
The EBA shall report its findings to the Commission by 2 January 2021. The Commission may, having taken into account the report from the EBA, adopt a delegated act in accordance with Article 462, to supplement this Regulation by further specifying the items listed in points (a), (b) and (c) of this paragraph.
Article 245
Synthetic securitisation
The originator institution of a synthetic securitisation may calculate risk-weighted exposure amounts, and, where relevant, expected loss amounts with respect to the underlying exposures in accordance with Articles 251 and 252, where either of the following conditions is met:
significant credit risk has been transferred to third parties either through funded or unfunded credit protection;
the originator institution applies a 1 250 % risk weight to all securitisation positions that it retains in the securitisation or deducts these securitisation positions from Common Equity Tier 1 items in accordance with point (k) of Article 36(1).
Significant credit risk shall be considered as transferred in either of the following cases:
the risk-weighted exposure amounts of the mezzanine securitisation positions held by the originator institution in the securitisation do not exceed 50 % of the risk-weighted exposure amounts of all mezzanine securitisation positions existing in this securitisation;
the originator institution does not hold more than 20 % of the exposure value of the first loss tranche in the securitisation, provided that both of the following conditions are met:
the originator can demonstrate that the exposure value of the first loss tranche exceeds a reasoned estimate of the expected loss on the underlying exposures by a substantial margin;
there are no mezzanine securitisation positions.
Where the possible reduction in risk-weighted exposure amounts, which the originator institution would achieve by the securitisation, is not justified by a commensurate transfer of credit risk to third parties, competent authorities may decide on a case-by-case basis that significant credit risk shall not be considered as transferred to third parties.
By way of derogation from paragraph 2, competent authorities may allow originator institutions to recognise significant credit risk transfer in relation to a securitisation where the originator institution demonstrates in each case that the reduction in own funds requirements which the originator achieves by the securitisation is justified by a commensurate transfer of credit risk to third parties. Permission may only be granted where the institution meets both of the following conditions:
the institution has adequate internal risk-management policies and methodologies to assess the transfer of risk;
the institution has also recognised the transfer of credit risk to third parties in each case for the purposes of the institution’s internal risk management and its internal capital allocation.
In addition to the requirements set out in paragraphs 1, 2 and 3, all of the following conditions shall be met:
the transaction documentation reflects the economic substance of the securitisation;
the credit protection by virtue of which credit risk is transferred complies with Article 249;
the securitisation documentation does not contain terms or conditions that:
impose significant materiality thresholds below which credit protection is deemed not to be triggered if a credit event occurs;
allow for the termination of the protection due to deterioration of the credit quality of the underlying exposures;
require the originator institution to alter the composition of the underlying exposures to improve the average quality of the pool; or
increase the institution’s cost of credit protection or the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool;
the credit protection is enforceable in all relevant jurisdictions;
where applicable, the transaction documentation makes it clear that the originator or the sponsor may only purchase or repurchase securitisation positions or repurchase, restructure or substitute the underlying exposures beyond their contractual obligations where such arrangements are executed in accordance with prevailing market conditions and the parties to them act in their own interest as free and independent parties (arm’s length);
where there is a clean-up call option, that option meets all the following conditions:
it may be exercised at the discretion of the originator institution;
it may only be exercised when 10 % or less of the original value of the underlying exposures remains unamortised;
it is not structured to avoid allocating losses to credit enhancement positions or other positions held by investors in the securitisation and is not otherwise structured to provide credit enhancement;
the originator institution has received an opinion from a qualified legal counsel confirming that the securitisation complies with the conditions set out in point (d) of this paragraph;
The EBA shall monitor the range of supervisory practices in relation to the recognition of significant risk transfer in synthetic securitisations in accordance with this Article. In particular, the EBA shall review:
the conditions for the transfer of significant credit risk to third parties in accordance with paragraphs 2, 3 and 4;
the interpretation of ‘commensurate transfer of credit risk to third parties’ for the purposes of the competent authorities’ assessment provided for in the second subparagraph of paragraph 2 and in paragraph 3; and
the requirements for the competent authorities’ assessment of securitisation transactions in relation to which the originator seeks recognition of significant credit risk transfer to third parties in accordance with paragraph 2 or 3.
The EBA shall report its findings to the Commission by 2 January 2021. The Commission may, having taken into account the report from the EBA, adopt a delegated act in accordance with Article 462, to supplement this Regulation by further specifying the items listed in points (a), (b) and (c) of this paragraph.
Article 246
Operational requirements for early amortisation provisions
Where the securitisation includes revolving exposures and early amortisation provisions or similar provisions, significant credit risk shall only be considered transferred by the originator institution where the requirements laid down in Articles 244 and 245 are met and the early amortisation provision, once triggered, does not:
subordinate the institution’s senior or pari passu claim on the underlying exposures to the other investors’ claims;
subordinate further the institution’s claim on the underlying exposures relative to other parties’ claims; or
otherwise increase the institution’s exposure to losses associated with the underlying revolving exposures.
Article 247
Calculation of risk-weighted exposure amounts
Where an originator institution has transferred significant credit risk associated with the underlying exposures of the securitisation in accordance with Section 2, that institution may:
in the case of a traditional securitisation, exclude the underlying exposures from its calculation of risk-weighted exposure amounts, and, as relevant, expected loss amounts;
in the case of a synthetic securitisation, calculate risk-weighted exposure amounts, and, where relevant, expected loss amounts, with respect to the underlying exposures in accordance with Articles 251 and 252.
Where the originator institution has not transferred significant credit risk or has decided not to apply paragraph 1, it shall not be required to calculate risk-weighted exposure amounts for any position it may have in the securitisation but shall continue including the underlying exposures in its calculation of risk-weighted exposure amounts and, where relevant, expected loss amounts as if they had not been securitised.
Article 248
Exposure value
The exposure value of a securitisation position shall be calculated as follows:
the exposure value of an on-balance sheet securitisation position shall be its accounting value remaining after any relevant specific credit risk adjustments on the securitisation position have been applied in accordance with Article 110;
the exposure value of an off-balance sheet securitisation position shall be its nominal value less any relevant specific credit risk adjustments on the securitisation position in accordance with Article 110, multiplied by the relevant conversion factor as set out in this point. The conversion factor shall be 100 %, except in the case of cash advance facilities. To determine the exposure value of the undrawn portion of the cash advance facilities, a conversion factor of 0 % may be applied to the nominal amount of a liquidity facility that is unconditionally cancellable provided that repayment of draws on the facility are senior to any other claims on the cash flows arising from the underlying exposures and the institution has demonstrated to the satisfaction of the competent authority that it is applying an appropriately conservative method for measuring the amount of the undrawn portion;
the exposure value for the counterparty credit risk of a securitisation position that results from a derivative instrument listed in Annex II, shall be determined in accordance with Chapter 6;
an originator institution may deduct from the exposure value of a securitisation position which is assigned 1 250 % risk weight in accordance with Subsection 3 or deducted from Common Equity Tier 1 in accordance with point (k) of Article 36(1), the amount of the specific credit risk adjustments on the underlying exposures in accordance with Article 110, and any non-refundable purchase price discounts connected with such underlying exposures to the extent that such discounts have caused the reduction of own funds;
the exposure value of a synthetic excess spread shall include, as applicable, the following:
any income from the securitised exposures already recognised by the originator institution in its income statement under the applicable accounting framework that the originator institution has contractually designated to the transaction as synthetic excess spread and that is still available to absorb losses;
any synthetic excess spread that is contractually designated by the originator institution in any previous periods and that is still available to absorb losses;
any synthetic excess spread that is contractually designated by the originator institution for the current period and that is still available to absorb losses;
any synthetic excess spread contractually designated by the originator institution for future periods.
For the purposes of this point, any amount that is provided as collateral or credit enhancement in relation to the synthetic securitisation and that is already subject to an own funds requirement in accordance with this Chapter shall not be included in the exposure value.
The EBA shall develop draft regulatory technical standards to specify what constitutes an appropriately conservative method for measuring the amount of the undrawn portion referred to in point (b) of the first subparagraph.
The EBA shall submit those draft regulatory technical standards to the Commission by 18 January 2019.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the third subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Where the positions partially overlap, the institution may split the position into two parts and recognise the overlap in relation to one part only in accordance with the first subparagraph. Alternatively, the institution may treat the positions as if they were fully overlapping by expanding for capital calculation purposes the position that produces the higher risk-weighted exposure amounts.
The institution may also recognise an overlap between the specific risk own funds requirements for positions in the trading book and the own funds requirements for securitisation positions in the non-trading book, provided that the institution is able to calculate and compare the own funds requirements for the relevant positions.
For the purposes of this paragraph, two positions shall be deemed to be overlapping where they are mutually offsetting in such a manner that the institution is able to preclude the losses arising from one position by performing the obligations required under the other position.
EBA shall submit those draft regulatory technical standards to the Commission by 10 October 2021.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 249
Recognition of credit risk mitigation for securitisation positions
Eligible unfunded credit protection and unfunded credit protection providers shall be limited to those which are eligible in accordance with Chapter 4 and recognition of credit risk mitigation shall be subject to compliance with the relevant requirements as laid down under Chapter 4.
Institutions which are allowed to apply the IRB Approach to a direct exposure to the protection provider may assess eligibility in accordance with the first subparagraph based on the equivalence of the PD for the protection provider to the PD associated with the credit quality steps referred to in Article 136.
By way of derogation from paragraph 2, SSPEs shall be eligible protection providers where all of the following conditions are met:
the SSPE owns assets that qualify as eligible financial collateral in accordance with Chapter 4;
the assets referred to in point (a) are not subject to claims or contingent claims ranking ahead or pari passu with the claim or contingent claim of the institution receiving unfunded credit protection; and
all the requirements for the recognition of financial collateral set out in Chapter 4 are met.
Where a securitisation position benefits from full credit protection or a partial credit protection on a pro-rata basis, the following requirements shall apply:
the institution providing credit protection shall calculate risk-weighted exposure amounts for the portion of the securitisation position benefiting from credit protection in accordance with Subsection 3 as if it held that portion of the position directly;
the institution buying credit protection shall calculate risk-weighted exposure amounts in accordance with Chapter 4 for the protected portion.
In all cases not covered by paragraph 6, the following requirements shall apply:
the institution providing credit protection shall treat the portion of the position benefiting from credit protection as a securitisation position and shall calculate risk-weighted exposure amounts as if it held that position directly in accordance with Subsection 3, subject to paragraphs 8, 9 and 10;
the institution buying credit protection shall calculate risk-weighted exposure amounts for the protected portion of the position referred to in point (a) in accordance with Chapter 4. The institution shall treat the portion of the securitisation position not benefiting from credit protection as a separate securitisation position and shall calculate risk-weighted exposure amounts in accordance with Subsection 3, subject to paragraphs 8, 9 and 10.
Institutions using the Securitisation External Ratings Based Approach (SEC-ERBA) under Subsection 3 for the original securitisation position shall calculate risk-weighted exposure amounts for the positions derived in accordance with paragraph 7 as follows:
where the derived position has the higher seniority, it shall be assigned the risk weight of the original securitisation position;
where the derived position has the lower seniority, it may be assigned an inferred rating in accordance with Article 263(7). In that case, thickness input T shall only be computed on the basis of the derived position. Where a rating may not be inferred, the institution shall apply the higher of the risk weight resulting from either:
applying the SEC-SA in accordance with paragraph 8 and Subsection 3; or
the risk weight of the original securitisation position under the SEC-ERBA.
Article 250
Implicit support
A transaction shall not be considered as support for the purposes of paragraph 1 where the transaction has been duly taken into account in the assessment of significant credit risk transfer and both parties have executed the transaction acting in their own interest as free and independent parties (arm’s length). For these purposes, the institution shall undertake a full credit review of the transaction and, at a minimum, take into account all of the following items:
the repurchase price;
the institution’s capital and liquidity position before and after repurchase;
the performance of the underlying exposures;
the performance of the securitisation positions;
the impact of support on the losses expected to be incurred by the originator relative to investors.
If an originator institution or a sponsor institution fails to comply with paragraph 1 in respect of a securitisation, the institution shall include all of the underlying exposures of that securitisation in its calculation of risk-weighted exposure amounts as if they had not been securitised and disclose:
that it has provided support to the securitisation in breach of paragraph 1; and
the impact of the support provided in terms of own funds requirements.
Article 251
Originator institutions’ calculation of risk-weighted exposure amounts securitised in a synthetic securitisation
Article 252
Treatment of maturity mismatches in synthetic securitisations
For the purposes of calculating risk-weighted exposure amounts in accordance with Article 251, any maturity mismatch between the credit protection by which the transfer of risk is achieved and the underlying exposures shall be calculated as follows:
the maturity of the underlying exposures shall be taken to be the longest maturity of any of those exposures subject to a maximum of 5 years. The maturity of the credit protection shall be determined in accordance with Chapter 4;
an originator institution shall ignore any maturity mismatch in calculating risk-weighted exposure amounts for securitisation positions subject to a risk weight of 1 250 % in accordance with this Section. For all other positions, the maturity mismatch treatment set out in Chapter 4 shall be applied in accordance with the following formula:
where:
RW* |
= |
risk-weighted exposure amounts for the purposes of point (a) of Article 92(3); |
RWAss |
= |
risk-weighted exposure amounts for the underlying exposures as if they had not been securitised, calculated on a pro-rata basis; |
RWSP |
= |
risk-weighted exposure amounts calculated under Article 251 as if there was no maturity mismatch; |
T |
= |
maturity of the underlying exposures, expressed in years; |
t |
= |
maturity of credit protection, expressed in years; |
t* |
= |
0,25 |
Article 253
Reduction in risk-weighted exposure amounts
Article 254
Hierarchy of methods
Institutions shall use one of the methods set out in Subsection 3 to calculate risk-weighted exposure amounts in accordance with the following hierarchy:
where the conditions set out in Article 258 are met, an institution shall use the SEC-IRBA in accordance with Articles 259 and 260;
where the SEC-IRBA may not be used, an institution shall use the SEC-SA in accordance with Articles 261 and 262;
where the SEC-SA may not be used, an institution shall use the SEC-ERBA in accordance with Articles 263 and 264 for rated positions or positions in respect of which an inferred rating may be used.
For rated positions or positions in respect of which an inferred rating may be used, an institution shall use the SEC-ERBA instead of the SEC-SA in each of the following cases:
where the application of the SEC-SA would result in a risk weight higher than 25 % for positions qualifying as positions in an STS securitisation;
where the application of the SEC-SA would result in a risk weight higher than 25 % or the application of the SEC-ERBA would result in a risk weight higher than 75 % for positions not qualifying as positions in an STS securitisation;
for securitisation transactions backed by pools of auto loans, auto leases and equipment leases.
For the purposes of the first subparagraph, an institution shall notify its decision to the competent authority no later than 17 November 2018.
Any subsequent decision to further change the approach applied to all of its rated securitisation positions shall be notified by the institution to its competent authority before the 15th November immediately following that decision.
In the absence of any objection by the competent authority by 15 December immediately following the deadline referred to in the second or third subparagraph, as appropriate, the decision notified by the institution shall take effect from 1 January of the following year and shall be valid until a subsequently notified decision comes into effect. An institution shall not use different approaches in the course of the same year.
Article 255
Determination of KIRB and KSA
For KIRB calculation purposes, the risk-weighted exposure amounts that would be calculated under Chapter 3 in respect of the underlying exposures shall include:
the amount of expected losses associated with all the underlying exposures of the securitisation including defaulted underlying exposures that are still part of the pool in accordance with Chapter 3; and
the amount of unexpected losses associated with all the underlying exposures including defaulted underlying exposures in the pool in accordance with Chapter 3.
Where losses from dilution and credit risks are treated in an aggregate manner in the securitisation, institutions shall combine the respective KIRB for dilution and credit risk into a single KIRB for the purposes of Subsection 3. The presence of a single reserve fund or overcollateralisation available to cover losses from either credit or dilution risk may be regarded as an indication that these risks are treated in an aggregate manner.
Where dilution and credit risk are not treated in an aggregate manner in the securitisation, institutions shall modify the treatment set out in the second subparagraph to combine the respective KIRB for dilution and credit risk in a prudent manner.
For the purposes of this paragraph, institutions shall calculate the exposure value of the underlying exposures without netting any specific credit risk adjustments and additional value adjustments in accordance with Articles 34 and 110 and other own funds reductions.
In the case of funded synthetic securitisations, any material proceeds from the issuance of credit-linked notes or other funded obligations of the SSPE that serve as collateral for the repayment of the securitisation positions shall be included in the calculation of KIRB or KSA if the credit risk of the collateral is subject to the tranched loss allocation.
The EBA shall develop draft regulatory technical standards to further specify the conditions to allow institutions to calculate KIRB for the pools of underlying exposures in accordance with paragraph 4, in particular with regard to:
internal credit policy and models for calculating KIRB for securitisations;
use of different risk factors relating to the pool of underlying exposures and, where sufficient accurate or reliable data on that pool are not available, of proxy data to estimate PD and LGD; and
due diligence requirements to monitor the actions and policies of sellers of receivables or other originators.
The EBA shall submit those draft regulatory technical standards to the Commission by 18 January 2019.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the second subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 256
Determination of attachment point (A) and detachment point (D)
The attachment point (A) shall be expressed as a decimal value between zero and one and shall be equal to the greater of zero and the ratio of the outstanding balance of the pool of underlying exposures in the securitisation minus the outstanding balance of all tranches that rank senior or pari passu to the tranche containing the relevant securitisation position including the exposure itself to the outstanding balance of all the underlying exposures in the securitisation.
The detachment point (D) shall be expressed as a decimal value between zero and one and shall be equal to the greater of zero and the ratio of the outstanding balance of the pool of underlying exposures in the securitisation minus the outstanding balance of all tranches that rank senior to the tranche containing the relevant securitisation position to the outstanding balance of all the underlying exposures in the securitisation.
Article 257
Determination of tranche maturity (MT)
For the purposes of Subsection 3 and subject to paragraph 2, institutions may measure the maturity of a tranche (MT) as either:
the weighted average maturity of the contractual payments due under the tranche in accordance with the following formula:
where CFt denotes all contractual payments (principal, interests and fees) payable by the borrower during period t; or
the final legal maturity of the tranche in accordance with the following formula:
where ML is the final legal maturity of the tranche.
Article 258
Conditions for the use of the Internal Ratings Based Approach (SEC-IRBA)
Institutions shall use the SEC-IRBA to calculate risk-weighted exposure amounts in relation to a securitisation position where the following conditions are met:
the position is backed by an IRB pool or a mixed pool, provided that, in the latter case, the institution is able to calculate KIRB in accordance with Section 3 on a minimum of 95 % of the underlying exposure amount;
there is sufficient information available in relation to the underlying exposures of the securitisation for the institution to be able to calculate KIRB; and
the institution has not been precluded from using the SEC-IRBA in relation to a specified securitisation position in accordance with paragraph 2.
Competent authorities may on a case-by-case basis preclude the use of the SEC-IRBA where securitisations have highly complex or risky features. For these purposes, the following may be regarded as highly complex or risky features:
credit enhancement that can be eroded for reasons other than portfolio losses;
pools of underlying exposures with a high degree of internal correlation as a result of concentrated exposures to single sectors or geographical areas;
transactions where the repayment of the securitisation positions is highly dependent on risk drivers not reflected in KIRB; or
highly complex loss allocations between tranches.
Article 259
Calculation of risk-weighted exposure amounts under the SEC-IRBA
Under the SEC-IRBA, the risk-weighted exposure amount for a securitisation position shall be calculated by multiplying the exposure value of the position calculated in accordance with Article 248 by the applicable risk weight determined as follows, in all cases subject to a floor of 15 %:
RW = 1 250 % |
when D ≤ KIRB |
|
when A ≥ KIRB |
|
when A < KIRB < D |
where:
KIRB |
is the capital charge of the pool of underlying exposures as defined in Article 255 |
D |
is the detachment point as determined in accordance with Article 256 |
A |
is the attachment point as determined in accordance with Article 256 |
where:
a |
= |
– (1/(p * KIRB)) |
u |
= |
D – KIRB |
l |
= |
max (A – KIRB; 0) |
where:
where:
N |
is the effective number of exposures in the pool of underlying exposures, calculated in accordance with paragraph 4; |
LGD |
is the exposure-weighted average loss-given-default of the pool of underlying exposures, calculated in accordance with paragraph 5; |
MT |
is the maturity of the tranche as determined in accordance with Article 257. |
The parameters A, B, C, D, and E shall be determined according to the following look-up table:
|
A |
B |
C |
D |
E |
|
Non-retail |
Senior, granular (N ≥ 25) |
0 |
3,56 |
-1,85 |
0,55 |
0,07 |
Senior, non-granular (N < 25) |
0,11 |
2,61 |
-2,91 |
0,68 |
0,07 |
|
Non-senior, granular (N ≥ 25) |
0,16 |
2,87 |
-1,03 |
0,21 |
0,07 |
|
Non-senior, non-granular (N < 25) |
0,22 |
2,35 |
-2,46 |
0,48 |
0,07 |
|
Retail |
Senior |
0 |
0 |
-7,48 |
0,71 |
0,24 |
Non-senior |
0 |
0 |
-5,78 |
0,55 |
0,27 |
The effective number of exposures (N) shall be calculated as follows:
where EADi represents the exposure value associated with the ith exposure in the pool.
Multiple exposures to the same obligor shall be consolidated and treated as a single exposure.
The exposure-weighted average LGD shall be calculated as follows:
where LGDi represents the average LGD associated with all exposures to the ith obligor.
Where credit and dilution risks for purchased receivables are managed in an aggregate manner in a securitisation, the LGD input shall be construed as a weighted average of the LGD for credit risk and 100 % LGD for dilution risk. The weights shall be the stand-alone IRB Approach capital requirements for credit risk and dilution risk, respectively. For these purposes, the presence of a single reserve fund or overcollateralisation available to cover losses from either credit or dilution risk may be regarded as an indication that these risks are managed in an aggregate manner.
Where the share of the largest underlying exposure in the pool (C1) is no more than 3 %, institutions may use the following simplified method to calculate N and the exposure-weighted average LGDs:
LGD = 0,50
where
Cm |
denotes the share of the pool corresponding to the sum of the largest m exposures; and |
m |
is set by the institution. |
If only C1 is available and this amount is no more than 0,03, then the institution may set LGD as 0,50 and N as 1/C1.
Where the position is backed by a mixed pool and the institution is able to calculate KIRB on at least 95 % of the underlying exposure amounts in accordance with point (a) of Article 258(1), the institution shall calculate the capital charge for the pool of underlying exposures as:
where
d is the share of the exposure amount of underlying exposures for which the institution can calculate KIRB over the exposure amount of all underlying exposures.
For the purposes of the first subparagraph, the reference position shall be the position that is pari passu in all respects to the derivative or, in the absence of such pari passu position, the position that is immediately subordinate to the derivative.
Article 260
Treatment of STS securitisations under the SEC-IRBA
Under the SEC-IRBA, the risk weight for a position in an STS securitisation shall be calculated in accordance with Article 259, subject to the following modifications:
risk-weight floor for senior securitisation positions = 10 %
Article 261
Calculation of risk-weighted exposure amounts under the Standardised Approach (SEC-SA)
Under the SEC-SA, the risk-weighted exposure amount for a position in a securitisation shall be calculated by multiplying the exposure value of the position as calculated in accordance with Article 248 by the applicable risk weight determined as follows, in all cases subject to a floor of 15 %:
RW = 1 250 % |
when D ≤ KA |
|
when A ≥ KA |
|
when A < KA < D |
where:
D |
is the detachment point as determined in accordance with Article 256; |
A |
is the attachment point as determined in accordance with Article 256; |
KA |
is a parameter calculated in accordance with paragraph 2; |
where:
a |
= |
– (1/(p · KA)) |
u |
= |
D – KA |
l |
= |
max (A – KA; 0) |
p |
= |
1 for a securitisation exposure that is not a re-securitisation exposure |
For the purposes of paragraph 1, KA shall be calculated as follows:
where:
KSA is the capital charge of the underlying pool as defined in Article 255;
W = ratio of:
the sum of the nominal amount of underlying exposures in default, to
the sum of the nominal amount of all underlying exposures.
For these purposes, an exposure in default shall mean an underlying exposure which is either: (i) 90 days or more past due; (ii) subject to bankruptcy or insolvency proceedings; (iii) subject to foreclosure or similar proceeding; or (iv) in default in accordance with the securitisation documentation.
Where an institution does not know the delinquency status for 5 % or less of underlying exposures in the pool, the institution may use the SEC-SA subject to the following adjustment in the calculation KA:
Where the institution does not know the delinquency status for more than 5 % of underlying exposures in the pool, the position in the securitisation must be risk-weighted at 1 250 %.
For the purposes of this paragraph, the reference position shall be the position that is pari passu in all respects to the derivative or, in the absence of such pari passu position, the position that is immediately subordinate to the derivative.
Article 262
Treatment of STS securitisations under the SEC-SA
Under the SEC-SA the risk weight for a position in an STS securitisation shall be calculated in accordance with Article 261, subject to the following modifications:
Article 263
Calculation of risk-weighted exposure amounts under the External Ratings Based Approach (SEC-ERBA)
For exposures with short-term credit assessments or when a rating based on a short-term credit assessment may be inferred in accordance with paragraph 7, the following risk weights shall apply:
Table 1
Credit Quality Step |
1 |
2 |
3 |
All other ratings |
Risk weight |
15 % |
50 % |
100 % |
1 250 % |
For exposures with long-term credit assessments or when a rating based on a long-term credit assessment may be inferred in accordance with paragraph 7 of this Article, the risk weights set out in Table 2 shall apply, adjusted as applicable for tranche maturity (MT) in accordance with Article 257 and paragraph 4 of this Article and for tranche thickness for non-senior tranches in accordance with paragraph 5 of this Article:
Table 2
Credit Quality Step |
Senior tranche |
Non-senior (thin) tranche |
||
Tranche maturity (MT) |
Tranche maturity (MT) |
|||
1 year |
5 years |
1 year |
5 years |
|
1 |
15 % |
20 % |
15 % |
70 % |
2 |
15 % |
30 % |
15 % |
90 % |
3 |
25 % |
40 % |
30 % |
120 % |
4 |
30 % |
45 % |
40 % |
140 % |
5 |
40 % |
50 % |
60 % |
160 % |
6 |
50 % |
65 % |
80 % |
180 % |
7 |
60 % |
70 % |
120 % |
210 % |
8 |
75 % |
90 % |
170 % |
260 % |
9 |
90 % |
105 % |
220 % |
310 % |
10 |
120 % |
140 % |
330 % |
420 % |
11 |
140 % |
160 % |
470 % |
580 % |
12 |
160 % |
180 % |
620 % |
760 % |
13 |
200 % |
225 % |
750 % |
860 % |
14 |
250 % |
280 % |
900 % |
950 % |
15 |
310 % |
340 % |
1 050 % |
1 050 % |
16 |
380 % |
420 % |
1 130 % |
1 130 % |
17 |
460 % |
505 % |
1 250 % |
1 250 % |
All other |
1 250 % |
1 250 % |
1 250 % |
1 250 % |
In order to account for tranche thickness, institutions shall calculate the risk weight for non-senior tranches as follows:
where
T = tranche thickness measured as D – A
where
D |
is the detachment point as determined in accordance with Article 256 |
A |
is the attachment point as determined in accordance with Article 256 |
For the purposes of using inferred ratings, institutions shall attribute to an unrated position an inferred rating equivalent to the credit assessment of a rated reference position which meets all of the following conditions:
the reference position ranks pari passu in all respects to the unrated securitisation position or, in the absence of a pari passu ranking position, the reference position is immediately subordinate to the unrated position;
the reference position does not benefit from any third-party guarantees or other credit enhancements that are not available to the unrated position;
the maturity of the reference position shall be equal to or longer than that of the unrated position in question;
on an ongoing basis, any inferred rating shall be updated to reflect any changes in the credit assessment of the reference position.
For the purposes of the first subparagraph, the reference position shall be the position that is pari passu in all respects to the derivative or, in the absence of such pari passu position, the position that is immediately subordinate to the derivative.
Article 264
Treatment of STS securitisations under the SEC-ERBA
For exposures with short-term credit assessments or when a rating based on a short-term credit assessment may be inferred in accordance with Article 263(7), the following risk weights shall apply:
Table 3
Credit Quality Step |
1 |
2 |
3 |
All other ratings |
Risk weight |
10 % |
30 % |
60 % |
1 250 % |
For exposures with long-term credit assessments or when a rating based on a long-term credit assessment may be inferred in accordance with Article 263(7), risk weights shall be determined in accordance with Table 4, adjusted for tranche maturity (MT) in accordance with Article 257 and Article 263(4) and for tranche thickness for non-senior tranches in accordance with Article 263(5):
Table 4
Credit Quality Step |
Senior tranche |
Non-senior (thin) tranche |
||
Tranche maturity (MT) |
Tranche maturity (MT) |
|||
1 year |
5 years |
1 year |
5 years |
|
1 |
10 % |
10 % |
15 % |
40 % |
2 |
10 % |
15 % |
15 % |
55 % |
3 |
15 % |
20 % |
15 % |
70 % |
4 |
15 % |
25 % |
25 % |
80 % |
5 |
20 % |
30 % |
35 % |
95 % |
6 |
30 % |
40 % |
60 % |
135 % |
7 |
35 % |
40 % |
95 % |
170 % |
8 |
45 % |
55 % |
150 % |
225 % |
9 |
55 % |
65 % |
180 % |
255 % |
10 |
70 % |
85 % |
270 % |
345 % |
11 |
120 % |
135 % |
405 % |
500 % |
12 |
135 % |
155 % |
535 % |
655 % |
13 |
170 % |
195 % |
645 % |
740 % |
14 |
225 % |
250 % |
810 % |
855 % |
15 |
280 % |
305 % |
945 % |
945 % |
16 |
340 % |
380 % |
1 015 % |
1 015 % |
17 |
415 % |
455 % |
1 250 % |
1 250 % |
All other |
1 250 % |
1 250 % |
1 250 % |
1 250 % |
Article 265
Scope and operational requirements for the Internal Assessment Approach
Where an institution has received permission to apply the Internal Assessment Approach in accordance with paragraph 2 of this Article, and a specific position in an ABCP programme or ABCP transaction falls within the scope of application covered by such permission, the institution shall apply that approach to calculate the risk-weighted exposure amount of that position.
The competent authorities shall grant institutions permission to apply the Internal Assessment Approach within a clearly defined scope of application where all of the following conditions are met:
all positions in the commercial paper issued from the ABCP programme are rated positions;
the internal assessment of the credit quality of the position reflects the publicly available assessment methodology of one or more ECAIs for the rating of securitisation positions backed by underlying exposures of the type securitised;
the commercial paper issued from the ABCP programme is predominantly issued to third-party investors;
the institution’s internal assessment process is at least as conservative as the publicly available assessments of those ECAIs which have provided an external rating for the commercial paper issued from the ABCP programme, in particular with regard to stress factors and other relevant quantitative elements;
the institution’s internal assessment methodology takes into account all relevant publicly available rating methodologies of the ECAIs that rate the commercial paper of the ABCP programme and includes rating grades corresponding to the credit assessments of ECAIs. The institution shall document in its internal records an explanatory statement describing how the requirements set out in this point have been met and shall update such statement on a regular basis;
the institution uses the internal assessment methodology for internal risk management purposes, including in its decision-making, management information and internal capital allocation processes;
internal or external auditors, an ECAI, or the institution’s internal credit review or risk management function perform regular reviews of the internal assessment process and the quality of the internal assessments of the credit quality of the institution’s exposures to an ABCP programme or ABCP transaction;
the institution tracks the performance of its internal ratings over time to evaluate the performance of its internal assessment methodology and makes adjustments, as necessary, to that methodology when the performance of the exposures routinely diverges from that indicated by the internal ratings;
the ABCP programme includes underwriting and liability management standards in the form of guidelines to the programme administrator on, at least:
the asset eligibility criteria, subject to point (j);
the types and monetary value of the exposures arising from the provision of liquidity facilities and credit enhancements;
the loss distribution between the securitisation positions in the ABCP programme or ABCP transaction;
the legal and economic isolation of the transferred assets from the entity selling the assets;
the asset eligibility criteria in the ABCP programme provide for, at least:
exclusion of the purchase of assets that are significantly past due or defaulted;
limitation of excessive concentration to individual obligor or geographic area; and
limitation of the tenor of the assets to be purchased;
an analysis of the asset seller’s credit risk and business profile is performed including, at least, an assessment of the seller’s:
past and expected future financial performance;
current market position and expected future competitiveness;
leverage, cash flow, interest coverage and debt rating; and
underwriting standards, servicing capabilities, and collection processes;
the ABCP programme has collection policies and processes that take into account the operational capability and credit quality of the servicer and comprises features that mitigate performance-related risks of the seller and the servicer. For the purposes of this point, performance-related risks may be mitigated through triggers based on the seller or servicer’s current credit quality to prevent commingling of funds in the event of the seller’s or servicer’s default;
the aggregated estimate of loss on an asset pool that may be purchased under the ABCP programme takes into account all sources of potential risk, such as credit and dilution risk;
where the seller-provided credit enhancement is sized based only on credit-related losses and dilution risk is material for the particular asset pool, the ABCP programme comprises a separate reserve for dilution risk;
the size of the required enhancement level in the ABCP programme is calculated taking into account several years of historical information, including losses, delinquencies, dilutions, and the turnover rate of the receivables;
the ABCP programme comprises structural features in the purchase of exposures in order to mitigate potential credit deterioration of the underlying portfolio. Such features may include wind-down triggers specific to a pool of exposures;
the institution evaluates the characteristics of the underlying asset pool, such as its weighted-average credit score, and identifies any concentrations to an individual obligor or geographic area and the granularity of the asset pool.
Institutions which have received permission to apply the Internal Assessment Approach shall not revert to the use of other methods for positions that fall within scope of application of the Internal Assessment Approach unless both of the following conditions are met:
the institution has demonstrated to the satisfaction of the competent authority that the institution has good cause to do so;
the institution has received the prior permission of the competent authority.
Article 266
Calculation of risk-weighted exposure amounts under the Internal Assessment Approach
Article 267
Maximum risk weight for senior securitisation positions: look-through approach
In the case of mixed pools the maximum risk weight shall be calculated as follows:
where the institution applies the SEC-IRBA, the Standardised Approach portion and the IRB Approach portion of the underlying pool shall each be assigned the corresponding Standardised Approach risk weight and IRB Approach risk weight respectively;
where the institution applies the SEC-SA or the SEC-ERBA, the maximum risk weight for senior securitisation positions shall be equal to the Standardised Approach weighted-average risk weight of the underlying exposures.
For the purposes of this Article, the risk weight that would be applicable under the IRB Approach in accordance with Chapter 3 shall include the ratio of:
expected losses multiplied by 12,5 to
the exposure value of the underlying exposures.
Article 268
Maximum capital requirements
The maximum capital requirement shall be the result of multiplying the amount calculated in accordance with paragraphs 1 or 2 by the largest proportion of interest that the institution holds in the relevant tranches (V), expressed as a percentage and calculated as follows:
for an institution that has one or more securitisation positions in a single tranche, V shall be equal to the ratio of the nominal amount of the securitisation positions that the institution holds in that given tranche to the nominal amount of the tranche;
for an institution that has securitisation positions in different tranches, V shall be equal to the maximum proportion of interest across tranches. For these purposes, the proportion of interest for each of the different tranches shall be calculated as set out in point (a).
Article 269
Re-securitisations
For a position in a re-securitisation, institutions shall apply the SEC-SA in accordance with Article 261, with the following changes:
W = 0 for any exposure to a securitisation tranche within the pool of underlying exposures;
p = 1,5;
the resulting risk weight shall be subject to a risk-weight floor of 100 %.
Article 269a
Treatment of non-performing exposures (NPE) securitisations
For the purposes of this Article:
‘NPE securitisation’ means an NPE securitisation as defined in point (25) of Article 2 of Regulation (EU) 2017/2402;
‘qualifying traditional NPE securitisation’ means a traditional NPE securitisation where the non-refundable purchase price discount is at least 50 % of the outstanding amount of the underlying exposures at the time they were transferred to the SSPE.
Institutions shall perform the calculation in accordance with the following formula:
where:
CRmax |
= |
the maximum capital requirement in the case of a qualifying traditional NPE securitisation; |
RWEAIRB |
= |
the sum of risk-weighted exposure amounts of the underlying exposures subject to the IRB Approach; |
ELIRB |
= |
the sum of expected loss amounts of the underlying exposures subject to the IRB Approach; |
NRPPD |
= |
the non-refundable purchase price discount; |
EVIRB |
= |
the sum of exposure values of the underlying exposures that are subject to the IRB Approach; |
EVPool |
= |
the sum of exposure values of all underlying exposures in the pool; |
SCRAIRB |
= |
for originator institutions, the specific credit risk adjustments made by the institution with respect to those underlying exposures subject to the IRB Approach only if and to the extent these adjustments exceed the NRPPD; for investor institutions the amount is zero; |
RWEASA |
= |
the sum of risk-weighted exposure amounts of the underlying exposures subject to the Standardised Approach. |
For the purposes of the first subparagraph, originator institutions that apply the SEC-IRBA to a position and that are permitted to use own estimates of LGD and conversion factors for all underlying exposures subject to the IRB Approach in accordance with Chapter 3, shall deduct the non-refundable purchase price discount and, where applicable, any additional specific credit risk adjustments from the expected losses and exposure values of the underlying exposures associated with a senior position in a qualifying traditional NPE securitisation, in accordance with the following formula:
where:
RWmax |
= |
the risk weight, before applying the floor, applicable to a senior position in a qualifying traditional NPE securitisation when the look-through approach is used; |
RWEAIRB |
= |
the sum of risk-weighted exposure amounts of the underlying exposures subject to the IRB Approach; |
RWEASA |
= |
the sum of risk-weighted exposure amounts of the underlying exposures subject to the Standardised Approach; |
ELIRB |
= |
the sum of expected loss amounts of the underlying exposures subject to the IRB Approach; |
NRPPD |
= |
the non-refundable purchase price discount; |
EVIRB |
= |
the sum of exposure values of the underlying exposures that are subject to the IRB Approach; |
EVpool |
= |
the sum of exposure values of all underlying exposures in the pool; |
EVSA |
= |
the sum of exposure values of the underlying exposures that are subject to the Standardised Approach; |
SCRAIRB |
= |
the specific credit risk adjustments made by the originator institution with respect to the underlying exposures subject to the IRB Approach only if and to the extent these adjustments exceed the NRPPD. |
For the purposes of this Article, the non-refundable purchase price discount shall be calculated by subtracting the amount referred to in point (b) from the amount referred to in point (a):
the outstanding amount of the underlying exposures of the NPE securitisation at the time those exposures were transferred to the SSPE;
the sum of the following:
the initial sale price of the tranches or, where applicable, parts of the tranches of the NPE securitisation sold to third party investors; and
the outstanding amount, at the time the underlying exposures were transferred to the SSPE, of the tranches or, where applicable, parts of tranches of that securitisation held by the originator.
For the purposes of paragraphs 5 and 6, throughout the life of the transaction, the calculation of the non-refundable purchase price discount shall be adjusted downwards taking into account the realised losses. Any reduction in the outstanding amount of the underlying exposures resulting from realised losses shall reduce the non-refundable purchase price discount, subject to a floor of zero.
Where a discount is structured in such a way that it can be refunded in whole or in part to the originator, such discount shall not count as a non-refundable purchase price discount for the purposes of this Article.
Article 270
Senior positions in STS on-balance sheet securitisations
An originator institution may calculate the risk-weighted exposure amounts of a securitisation position in an STS on-balance sheet securitisation as referred to in Article 26a(1) of Regulation (EU) 2017/2402 in accordance with Article 260, 262 or 264 of this Regulation, as applicable, where that position meets both of the following conditions:
the securitisation meets the requirements set out in Article 243(2);
the position qualifies as the senior securitisation position.
EBA shall monitor the application of paragraph 1 in particular with regard to:
the market volume and market share of STS on-balance sheet securitisations in respect of which the originator institution applies paragraph 1, across different asset classes;
the observed allocation of losses to the senior tranche and to other tranches of STS on-balance sheet securitisations, where the originator institution applies paragraph 1 in respect of the senior position held in such securitisations;
the impact of the application of paragraph 1 on the leverage of institutions;
the impact of the use of STS on-balance sheet securitisations in respect of which the originator institution applies paragraph 1 on the issuance of capital instruments by the respective originator institutions.
Article 270a
Additional risk weight
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph of this paragraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Article 270b
Use of credit assessments by ECAIs
Institutions may use only credit assessments to determine the risk weight of a securitisation position in accordance with this Chapter where the credit assessment has been issued or has been endorsed by an ECAI in accordance with Regulation (EC) No 1060/2009.
Article 270c
Requirements to be met by the credit assessments of ECAIs
For the purposes of calculating risk-weighted exposure amounts in accordance with Section 3, institutions shall only use a credit assessment of an ECAI where all of the following conditions are met:
there is no mismatch between the types of payments reflected in the credit assessment and the types of payments to which the institution is entitled under the contract giving rise to the securitisation position in question;
the ECAI publishes the credit assessments and information on loss and cash-flow analysis, sensitivity of ratings to changes in the underlying ratings assumptions, including the performance of underlying exposures, and on the procedures, methodologies, assumptions, and key elements underpinning the credit assessments in accordance with Regulation (EC) No 1060/2009. For the purposes of this point, information shall be considered as publicly available where it is published in accessible format. Information that is made available only to a limited number of entities shall not be considered as publicly available;
the credit assessments are included in the ECAI’s transition matrix;
the credit assessments are not based or partly based on unfunded support provided by the institution itself. Where a position is based or partly based on unfunded support, the institution shall consider that position as if it were unrated for the purposes of calculating risk-weighted exposure amounts for this position in accordance with Section 3;
the ECAI has committed to publishing explanations on how the performance of underlying exposures affects the credit assessment.
Article 270d
Use of credit assessments
An institution shall use the credit assessments of its securitisation positions in a consistent and non-selective manner and, for these purposes, shall comply with the following requirements:
an institution shall not use an ECAI’s credit assessments for its positions in some tranches and another ECAI’s credit assessments for its positions in other tranches within the same securitisation that may or may not be rated by the first ECAI;
where a position has two credit assessments by nominated ECAIs, the institution shall use the less favourable credit assessment;
where a position has three or more credit assessments by nominated ECAIs, the two most favourable credit assessments shall be used. Where the two most favourable assessments are different, the less favourable of the two shall be used;
an institution shall not actively solicit the withdrawal of less favourable ratings.
Article 270e
Securitisation mapping
The EBA shall develop draft implementing technical standards to map in an objective and consistent manner the credit quality steps set out in this Chapter relative to the relevant credit assessments of all ECAIs. For the purposes of this Article, the EBA shall in particular:
differentiate between the relative degrees of risk expressed by each assessment;
consider quantitative factors, such as default or loss rates and the historical performance of credit assessments of each ECAI across different asset classes;
consider qualitative factors such as the range of transactions assessed by the ECAI, its methodology and the meaning of its credit assessments in particular whether such assessments take into account expected loss or first Euro loss, and timely payment of interests or ultimate payment of interests;
seek to ensure that securitisation positions to which the same risk weight is applied on the basis of the credit assessments of ECAIs are subject to equivalent degrees of credit risk.
The EBA shall submit those draft implementing technical standards to the Commission by 1 July 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph of this paragraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
CHAPTER 6
Counterparty credit risk
Section 1
Definitions
Article 271
Determination of the exposure value
Article 272
Definitions
For the purposes of this Chapter and of Title VI of this Part, the following definitions shall apply:
‘counterparty credit risk’ or ‘CCR’ means the risk that the counterparty to a transaction could default before the final settlement of the transaction's cash flows;
‘long settlement transactions’ means transactions where a counterparty undertakes to deliver a security, a commodity, or a foreign exchange amount against cash, other financial instruments, or commodities, or vice versa, at a settlement or delivery date specified by contract that is later than the market standard for this particular type of transaction or five business days after the date on which the institution enters into the transaction, whichever is earlier;
‘margin lending transactions’ means transactions in which an institution extends credit in connection with the purchase, sale, carrying or trading of securities. Margin lending transactions do not include other loans that are secured by collateral in the form of securities;
‘netting set’ means a group of transactions between an institution and a single counterparty that is subject to a legally enforceable bilateral netting arrangement that is recognised under Section 7 and Chapter 4.
Each transaction that is not subject to a legally enforceable bilateral netting arrangement which is recognised under Section 7 shall be treated as its own netting set for the purposes of this Chapter.
Under the Internal Model Method set out in Section 6, all netting sets with a single counterparty may be treated as a single netting set if negative simulated market values of the individual netting sets are set to 0 in the estimation of expected exposure (hereinafter referred to as ‘EE’);
‘risk position’ means a risk number that is assigned to a transaction under the Standardised Method set out in Section5 following a predetermined algorithm;
‘hedging set’ means a group of transactions within a single netting set for which full or partial offsetting is allowed for determining the potential future exposure under the methods set out in Section 3 or 4 of this Chapter;
‘margin agreement’ means an agreement or provisions of an agreement under which one counterparty must supply collateral to a second counterparty when an exposure of that second counterparty to the first counterparty exceeds a specified level;
‘one way margin agreement’ means a margin agreement under which an institution is required to post variation margin to a counterparty but is not entitled to receive variation margin from that counterparty or vice-versa;
‘margin threshold’ means the largest amount of an exposure that remains outstanding before one party has the right to call for collateral;
‘margin period of risk’ means the time period from the most recent exchange of collateral covering a netting set of transactions with a defaulting counterparty until the transactions are closed out and the resulting market risk is re-hedged;
‘effective maturity’ under the Internal Model Method for a netting set with maturity greater than one year means the ratio of the sum of expected exposure over the life of the transactions in the netting set discounted at the risk-free rate of return, divided by the sum of expected exposure over one year in the netting set discounted at the risk-free rate.
This effective maturity may be adjusted to reflect rollover risk by replacing expected exposure with effective expected exposure for forecasting horizons under one year;
‘cross-product netting’ means the inclusion of transactions of different product categories within the same netting set pursuant to the cross-product netting rules set out in this Chapter;
‘current market value’ or ‘CMV’ means the net market value of all the transactions within a netting set gross of any collateral held or posted where positive and negative market values are netted in computing the CMV;
‘net independent collateral amount’ or ‘NICA’ means the sum of the volatility-adjusted value of net collateral received or posted, as applicable, to the netting set other than variation margin;
‘distribution of market values’ means the forecast of the probability distribution of net market values of transactions within a netting set for a future date (the forecasting horizon), given the realised market value of those transactions at the date of the forecast;
‘distribution of exposures’ means the forecast of the probability distribution of market values that is generated by setting forecast instances of negative net market values equal to zero;
‘risk-neutral distribution’ means a distribution of market values or exposures over a future time period where the distribution is calculated using market implied values such as implied volatilities;
‘actual distribution’ means a distribution of market values or exposures at a future time period where the distribution is calculated using historic or realised values such as volatilities calculated using past price or rate changes;
‘current exposure’ means the larger of zero and the market value of a transaction or portfolio of transactions within a netting set with a counterparty that would be lost upon the default of the counterparty, assuming no recovery on the value of those transactions in insolvency or liquidation;
‘peak exposure’ means a high percentile of the distribution of exposures at particular future date before the maturity date of the longest transaction in the netting set;
‘expected exposure’ (hereinafter referred to as ‘EE’) means the average of the distribution of exposures at a particular future date before the longest maturity transaction in the netting set matures;
‘effective expected exposure at a specific date’ (hereinafter referred to as ‘Effective EE’) means the maximum expected exposure that occurs at that date or any prior date. Alternatively, it may be defined for a specific date as the greater of the expected exposure at that date or the effective expected exposure at any prior date;
‘expected positive exposure’ (hereinafter referred to as ‘EPE’) means the weighted average over time of expected exposures, where the weights are the proportion of the entire time period that an individual expected exposure represents.
When calculating the own funds requirement, institutions shall take the average over the first year or, if all the contracts within the netting set mature within less than one year, over the time period until the contract with the longest maturity in the netting set has matured;
‘effective expected positive exposure’ (hereinafter referred to as ‘Effective EPE’) means the weighted average of effective expected exposure over the first year of a netting set or, if all the contracts within the netting set mature within less than one year, over the time period of the longest maturity contract in the netting set, where the weights are the proportion of the entire time period that an individual expected exposure represents;
‘rollover risk’ means the amount by which EPE is understated when future transactions with a counterparty are expected to be conducted on an ongoing basis.
The additional exposure generated by those future transactions is not included in calculation of EPE;
‘counterparty’ for the purposes of Section 7 means any legal or natural person that enters into a netting agreement, and has the contractual capacity to do so;
‘contractual cross product netting agreement’ means a bilateral contractual agreement between an institution and a counterparty which creates a single legal obligation (based on netting of covered transactions) covering all bilateral master agreements and transactions belonging to different product categories that are included within the agreement;
For the purposes of this definition, ‘different product categories’ means:
repurchase transactions, securities and commodities lending and borrowing transactions;
margin lending transactions;
the contracts listed in Annex II;
‘payment leg’ means the payment agreed in an OTC derivative transaction with a linear risk profile which stipulates the exchange of a financial instrument for a payment.
In the case of transactions that stipulate the exchange of payment against payment, those two payment legs shall consist of the contractually agreed gross payments, including the notional amount of the transaction.
Section 2
Methods for calculating the exposure value
Article 273
Methods for calculating the exposure value
An institution which does not meet the conditions set out in Article 273a(1) shall not use the method set out in Section 4. An institution which does not meet the conditions set out in Article 273a(2) shall not use the method set out in Section 5.
Institutions may use in combination the methods set out in Sections 3 to 6 on a permanent basis within a group. A single institution shall not use in combination the methods set out in Sections 3 to 6 on a permanent basis.
Where permitted by the competent authorities in accordance with Article 283(1) and (2), an institution may determine the exposure value for the following items using the Internal Model Method set out in Section 6:
the contracts listed in Annex II;
repurchase transactions;
securities or commodities lending or borrowing transactions;
margin lending transactions;
long settlement transactions.
When an institution purchases protection through a credit derivative against a non-trading book exposure or against a counterparty risk exposure, it may calculate its own funds requirement for the hedged exposure in accordance with either of the following:
Articles 233 to 236;
in accordance with Article 153(3), or Article 183, where permission has been granted in accordance with Article 143.
The exposure value for CCR for those credit derivatives shall be zero, unless an institution applies the approach in point (h)(ii) of Article 299(2).
By way of derogation from the first subparagraph, where one margin agreement applies to multiple netting sets with that counterparty and the institution is using one of the methods set out in Sections 3 to 6 to calculate the exposure value of those netting sets, the exposure value shall be calculated in accordance with the relevant Section.
For a given counterparty, the exposure value for a given netting set of OTC derivative instruments listed in Annex II calculated in accordance with this Chapter shall be the greater of zero and the difference between the sum of exposure values across all netting sets with the counterparty and the sum of credit valuation adjustments for that counterparty being recognised by the institution as an incurred write-down. The credit valuation adjustments shall be calculated without taking into account any offsetting debit value adjustment attributed to the own credit risk of the firm that has been already excluded from own funds in accordance with point (c) of Article 33(1).
For the purposes of the first subparagraph, two OTC derivative contracts are perfectly matching when they meet all the following conditions:
their risk positions are opposite;
their features, with the exception of the trade date, are identical;
their cash flows fully offset each other.
Article 273a
Conditions for using simplified methods for calculating the exposure value
An institution may calculate the exposure value of its derivative positions in accordance with the method set out in Section 4, provided that the size of its on- and off-balance-sheet derivative business is equal to or less than both of the following thresholds on the basis of an assessment carried out on a monthly basis using the data as of the last day of the month:
10 % of the institution's total assets;
EUR 300 million.
An institution may calculate the exposure value of its derivative positions in accordance with the method set out in Section 5, provided that the size of its on- and off-balance-sheet derivative business is equal to or less than both of the following thresholds on the basis of an assessment carried out on a monthly basis using the data as of the last day of the month:
5 % of the institution's total assets;
EUR 100 million.
For the purposes of paragraphs 1 and 2, institutions shall calculate the size of their on- and off-balance-sheet derivative business on the basis of data as of the last day of each month in accordance with the following requirements:
derivative positions shall be valued at their market values on that given date; where the market value of a position is not available on a given date, institutions shall take a fair value for the position on that date; where the market value and fair value of a position are not available on a given date, institutions shall take the most recent of the market value or fair value for that position;
the absolute value of long derivative positions shall be summed with the absolute value of short derivative positions;
all derivative positions shall be included, except credit derivatives that are recognised as internal hedges against non-trading book credit risk exposures.
Article 273b
Non-compliance with the conditions for using simplified methods for calculating the exposure value of derivatives
An institution shall cease to calculate the exposure values of its derivative positions in accordance with Section 4 or 5, as applicable, within three months of one of the following occurring:
the institution does not meet the conditions set out in point (a) of Article 273a(1) or (2), as applicable, or the conditions set out in point (b) of Article 273a(1) or (2), as applicable, for three consecutive months;
the institution does not meet the conditions set out in point (a) of Article 273a(1) or (2), as applicable, or the conditions set out in point (b) of Article 273a(1) or (2), as applicable, for more than six of the preceding 12 months.
Article 274
Exposure value
An institution may calculate a single exposure value at netting set level for all the transactions covered by a contractual netting agreement where all the following conditions are met:
the netting agreement belongs to one of the types of contractual netting agreements referred to in Article 295;
the netting agreement has been recognised by competent authorities in accordance with Article 296;
the institution has fulfilled the obligations laid down in Article 297 in respect of the netting agreement.
Where any of the conditions set out in the first subparagraph are not met, the institution shall treat each transaction as if it was its own netting set.
Institutions shall calculate the exposure value of a netting set under the standardised approach for counterparty credit risk as follows:
RC |
= |
the replacement cost calculated in accordance with Article 275; and |
PFE |
= |
the potential future exposure calculated in accordance with Article 278; |
α |
= |
1,4. |
Institutions may set to zero the exposure value of a netting set that satisfies all the following conditions:
the netting set is solely composed of sold options;
the current market value of the netting set is at all times negative;
the premium of all the options included in the netting set has been received upfront by the institution to guarantee the performance of the contracts;
the netting set is not subject to any margin agreement.
Article 275
Replacement cost
Institutions shall calculate the replacement cost RC for netting sets that are not subject to a margin agreement, in accordance with the following formula:
Institutions shall calculate the replacement cost for single netting sets that are subject to a margin agreement in accordance with the following formula:
RC |
= |
the replacement cost; |
VM |
= |
the volatility-adjusted value of the net variation margin received or posted, as applicable, to the netting set on a regular basis to mitigate changes in the netting set's CMV; |
TH |
= |
the margin threshold applicable to the netting set under the margin agreement below which the institution cannot call for collateral; and |
MTA |
= |
the minimum transfer amount applicable to the netting set under the margin agreement. |
Institutions shall calculate the replacement cost for multiple netting sets that are subject to the same margin agreement in accordance with the following formula:
where:
RC |
= |
the replacement cost; |
i |
= |
the index that denotes the netting sets that are subject to the single margin agreement; |
CMVi |
= |
the CMV of netting set i; |
VMMA |
= |
the sum of the volatility-adjusted value of collateral received or posted, as applicable, to multiple netting sets on a regular basis to mitigate changes in their CMV; and |
NICAMA |
= |
the sum of the volatility-adjusted value of collateral received or posted, as applicable, to multiple netting sets other than VMMA. |
For the purposes of the first subparagraph, NICAMA may be calculated at trade level, at netting set level or at the level of all the netting sets to which the margin agreement applies depending on the level at which the margin agreement applies.
Article 276
Recognition and treatment of collateral
For the purposes of this Section, institutions shall calculate the collateral amounts of VM, VMMA, NICA and NICAMA, by applying all the following requirements:
where all the transactions included in a netting set belong to the trading book, only collateral that is eligible under Articles 197 and 299 shall be recognised;
where a netting set contains at least one transaction that belongs to the non-trading book, only collateral that is eligible under Article 197 shall be recognised;
collateral received from a counterparty shall be recognised with a positive sign and collateral posted to a counterparty shall be recognised with a negative sign;
the volatility-adjusted value of any type of collateral received or posted shall be calculated in accordance with Article 223; for the purposes of that calculation, institutions shall not use the method set out in Article 225;
the same collateral item shall not be included in both VM and NICA at the same time;
the same collateral item shall not be included in both VMMA and NICAMA at the same time;
any collateral posted to the counterparty that is segregated from the assets of that counterparty and, as a result of that segregation, is bankruptcy remote in the event of the default or insolvency of that counterparty shall not be recognised in the calculation of NICA and NICAMA.
For the calculation of the volatility-adjusted value of collateral posted referred to in point (d) of paragraph 1 of this Article, institutions shall replace the formula set out in Article 223(2) with the following formula:
For the purposes of point (d) of paragraph 1, institutions shall set the liquidation period relevant for the calculation of the volatility-adjusted value of any collateral received or posted in accordance with one of the following time horizons:
one year for the netting sets referred to in Article 275(1);
the margin period of risk determined in accordance with point (b) of Article 279c(1) for the netting sets referred to in Article 275(2) and (3).
Article 277
Mapping of transactions to risk categories
Institutions shall map each transaction of a netting set to one of the following risk categories to determine the potential future exposure of the netting set referred to in Article 278:
interest rate risk;
foreign exchange risk;
credit risk;
equity risk;
commodity risk;
other risks.
Notwithstanding paragraphs 1, 2 and 3, when mapping transactions to the risk categories listed in paragraph 1, institutions shall apply the following requirements:
where the primary risk driver of a transaction, or the most material risk driver in a given risk category for transactions referred to in paragraph 3, is an inflation variable, institutions shall map the transaction to the interest rate risk category;
where the primary risk driver of a transaction, or the most material risk driver in a given risk category for transactions referred to in paragraph 3, is a climatic conditions variable, institutions shall map the transaction to the commodity risk category.
EBA shall develop draft regulatory technical standards to specify:
the method for identifying transactions with only one material risk driver;
the method for identifying transactions with more than one material risk driver and for identifying the most material of those risk drivers for the purposes of paragraph 3.
EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 277a
Hedging sets
Institutions shall establish the relevant hedging sets for each risk category of a netting set and assign each transaction to those hedging sets as follows:
transactions mapped to the interest rate risk category shall be assigned to the same hedging set only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is denominated in the same currency;
transactions mapped to the foreign exchange risk category shall be assigned to the same hedging set only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is based on the same currency pair;
all the transactions mapped to the credit risk category shall be assigned to the same hedging set;
all the transactions mapped to the equity risk category shall be assigned to the same hedging set;
transactions mapped to the commodity risk category shall be assigned to one of the following hedging sets on the basis of the nature of their primary risk driver or the most material risk driver in the given risk category for transactions referred to in Article 277(3):
energy;
metals;
agricultural goods;
other commodities;
climatic conditions;
transactions mapped to the other risks category shall be assigned to the same hedging set only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is identical.
For the purposes of point (a) of the first subparagraph of this paragraph, transactions mapped to the interest rate risk category that have an inflation variable as the primary risk driver shall be assigned to separate hedging sets, other than the hedging sets established for transactions mapped to the interest rate risk category that do not have an inflation variable as the primary risk driver. Those transactions shall be assigned to the same hedging set only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is denominated in the same currency.
By way of derogation from paragraph 1 of this Article, institutions shall establish separate individual hedging sets in each risk category for the following transactions:
transactions for which the primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is either the market implied volatility or the realised volatility of a risk driver or the correlation between two risk drivers;
transactions for which the primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is the difference between two risk drivers mapped to the same risk category or transactions that consist of two payment legs denominated in the same currency and for which a risk driver from the same risk category of the primary risk driver is contained in the other payment leg than the one containing the primary risk driver.
For the purposes of point (a) of the first subparagraph of this paragraph, institutions shall assign transactions to the same hedging set of the relevant risk category only where their primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), is identical.
For the purposes of point (b) of the first subparagraph, institutions shall assign transactions to the same hedging set of the relevant risk category only where the pair of risk drivers in those transactions as referred to therein is identical and the two risk drivers contained in this pair are positively correlated. Otherwise, institutions shall assign transactions referred to in point (b) of the first subparagraph to one of the hedging sets established in accordance with paragraph 1, on the basis of only one of the two risk drivers referred to in point (b) of the first subparagraph.
Article 278
Potential future exposure
Institutions shall calculate the potential future exposure of a netting set as follows:
where:
PFE |
= |
the potential future exposure; |
a |
= |
the index that denotes the risk categories included in the calculation of the potential future exposure of the netting set; |
AddOn(a) |
= |
the add-on for risk category a calculated in accordance with Articles 280a to 280f, as applicable; and |
multiplier |
= |
the multiplication factor calculated in accordance with the formula referred to in paragraph 3. |
For the purpose of this calculation, institutions shall include the add-on of a given risk category in the calculation of the potential future exposure of a netting set where at least one transaction of the netting set has been mapped to that risk category.
For the purposes of paragraph 1, the multiplier shall be calculated as follows:
multiplier = |
|
1 if z ≥ 0 |
|
|
where:
z = |
|
CMV – NICA for the netting sets referred to in Article 275(1) |
|
CMV – VM – NICA for the netting sets referred to in Article 275(2) |
|||
CMVi – NICAi for the netting sets referred to in Article 275(3) |
NICAi |
= |
the net independent collateral amount calculated only for transactions that are included in netting set i. NICAi shall be calculated at trade level or at netting set level depending on the margin agreement. |
Article 279
Calculation of the risk position
For the purpose of calculating the risk category add-ons referred to in Articles 280a to 280f, institutions shall calculate the risk position of each transaction of a netting set as follows:
δ |
= |
the supervisory delta of the transaction calculated in accordance with the formula laid down in Article 279a; |
AdjNot |
= |
the adjusted notional amount of the transaction calculated in accordance with Article 279b; and |
MF |
= |
the maturity factor of the transaction calculated in accordance with the formula laid down in Article 279c. |
Article 279a
Supervisory delta
Institutions shall calculate the supervisory delta as follows:
for call and put options that entitle the option buyer to purchase or sell an underlying instrument at a positive price on a single or multiple dates in the future, except where those options are mapped to the interest rate risk category, institutions shall use the following formula:
where:
δ |
= |
the supervisory delta; |
sign |
= |
– 1 where the transaction is a sold call option or a bought put option; |
sign |
= |
+ 1 where the transaction is a bought call option or sold put option; |
type |
= |
– 1 where the transaction is a put option; |
type |
= |
+ 1 where the transaction is a call option; |
N(x) |
= |
the cumulative distribution function for a standard normal random variable meaning the probability that a normal random variable with mean zero and variance of one is less than or equal to x; |
P |
= |
the spot or forward price of the underlying instrument of the option; for options the cash flows of which depend on an average value of the price of the underlying instrument, P shall be equal to the average value at the calculation date; |
K |
= |
the strike price of the option; |
T |
= |
the period between the expiry date of the option (Texp) and the reporting date; for options which can be exercised at one future date only, Texp is equal to that date; for options which can be exercised at multiple future dates, Texp is equal to the latest of those dates; T shall be expressed in years using the relevant business day convention; and |
σ |
= |
the supervisory volatility of the option determined in accordance with Table 1 on the basis of the risk category of the transaction and the nature of the underlying instrument of the option. |
Table 1
Risk category |
Underlying instrument |
Supervisory volatility |
Foreign exchange |
All |
15 % |
Credit |
Single-name instrument |
100 % |
Multiple-names instrument |
80 % |
|
Equity |
Single-name instrument |
120 % |
Multiple-names instrument |
75 % |
|
Commodity |
Electricity |
150 % |
Other commodities (excluding electricity) |
70 % |
|
Others |
All |
150 % |
Institutions using the forward price of the underlying instrument of an option shall ensure that:
the forward price is consistent with the characteristics of the option;
the forward price is calculated using a relevant interest rate prevailing at the reporting date;
the forward price integrates the expected cash flows of the underlying instrument before the expiry of the option;
for tranches of a synthetic securitisation and a nth-to-default credit derivative, institutions shall use the following formula:
where:
sign = |
|
+ 1 where credit protection has been obtained through the transaction |
|
– 1 where credit protection has been provided through the transaction |
A |
= |
the attachment point of the tranche; for a nth-to-default credit derivative transaction based on reference entities k, A = (n – 1)/k; and |
D |
= |
the detachment point of the tranche; for a nth-to-default credit derivative transaction based on reference entities k, D = n/k; |
for transactions not referred to in point (a) or (b), institutions shall use the following supervisory delta:
δ = |
|
+ 1 if the transaction is a long position in the primary risk driver or in the most material risk driver in the given risk category |
|
– 1 if the transaction is a short position in the primary risk driver or in the most material risk driver in the given risk category |
EBA shall develop draft regulatory technical standards to specify:
in accordance with international regulatory developments, the formula that institutions shall use to calculate the supervisory delta of call and put options mapped to the interest rate risk category compatible with market conditions in which interest rates may be negative as well as the supervisory volatility that is suitable for that formula;
the method for determining whether a transaction is a long or short position in the primary risk driver or in the most material risk driver in the given risk category for transactions referred to in Article 277(3).
EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 279b
Adjusted notional amount
Institutions shall calculate the adjusted notional amount as follows:
for transactions mapped to the interest rate risk category or the credit risk category, institutions shall calculate the adjusted notional amount as the product of the notional amount of the derivative contract and the supervisory duration factor, which shall be calculated as follows:
where:
R |
= |
the supervisory discount rate; R = 5 %; |
S |
= |
the period between the start date of a transaction and the reporting date, which shall be expressed in years using the relevant business day convention; |
E |
= |
the period between the end date of a transaction and the reporting date, which shall be expressed in years using the relevant business day convention; and OneBusinessYear = one year expressed in business days using the relevant business day convention. |
The start date of a transaction is the earliest date at which at least a contractual payment under the transaction, to or from the institution, is either fixed or exchanged, other than payments related to the exchange of collateral in a margin agreement. Where the transaction has already been fixing or making payments at the reporting date, the start date of a transaction shall be equal to 0.
Where a transaction involves one or more contractual future dates on which the institution or the counterparty may decide to terminate the transaction prior to its contractual maturity, the start date of a transaction shall be equal to the earliest of the following:
the date or the earliest of the multiple future dates at which the institution or the counterparty may decide to terminate the transaction earlier than its contractual maturity;
the date at which a transaction starts fixing or making payments, other than payments related to the exchange of collateral in a margin agreement.
Where a transaction has a financial instrument as the underlying instrument that may give rise to contractual obligations additional to those of the transaction, the start date of a transaction shall be determined on the basis of the earliest date at which the underlying instrument starts fixing or making payments.
The end date of a transaction is the latest date at which a contractual payment under the transaction, to or from the institution, is or may be exchanged.
Where a transaction has a financial instrument as an underlying instrument that may give rise to contractual obligations additional to those of the transaction, the end date of a transaction shall be determined on the basis of the last contractual payment of the underlying instrument of the transaction.
Where a transaction is structured to settle an outstanding exposure following specified payment dates and where the terms are reset so that the market value of the transaction is zero on those specified dates, the settlement of the outstanding exposure at those specified dates is considered a contractual payment under the same transaction;
for transactions mapped to the foreign exchange risk category, institutions shall calculate the adjusted notional amount as follows:
where the transaction consists of one payment leg, the adjusted notional amount shall be the notional amount of the derivative contract;
where the transaction consists of two payment legs and the notional amount of one payment leg is denominated in the institution's reporting currency, the adjusted notional amount shall be the notional amount of the other payment leg;
where the transaction consists of two payment legs and the notional amount of each payment leg is denominated in a currency other than the institution's reporting currency, the adjusted notional amount shall be the largest of the notional amounts of the two payment legs after those amounts have been converted into the institution's reporting currency at the prevailing spot exchange rate;
for transactions mapped to the equity risk category or commodity risk category, institutions shall calculate the adjusted notional amount as the product of the market price of one unit of the underlying instrument of the transaction and the number of units in the underlying instrument referenced by the transaction;
where a transaction mapped to the equity risk category or commodity risk category is contractually expressed as a notional amount, institutions shall use the notional amount of the transaction rather than the number of units in the underlying instrument as the adjusted notional amount;
for transactions mapped to the other risks category, institutions shall calculate the adjusted notional amount on the basis of the most appropriate method among the methods set out in points (a), (b) and (c), depending on the nature and characteristics of the underlying instrument of the transaction.
Institutions shall determine the notional amount or number of units of the underlying instrument for the purpose of calculating the adjusted notional amount of a transaction referred to in paragraph 1 as follows:
where the notional amount or the number of units of the underlying instrument of a transaction is not fixed until its contractual maturity:
for deterministic notional amounts and numbers of units of the underlying instrument, the notional amount shall be the weighted average of all the deterministic values of notional amounts or number of units of the underlying instrument, as applicable, until the contractual maturity of the transaction, where the weights are the proportion of the time period during which each value of notional amount applies;
for stochastic notional amounts and numbers of units of the underlying instrument, the notional amount shall be the amount determined by fixing current market values within the formula for calculating the future market values;
for contracts with multiple exchanges of the notional amount, the notional amount shall be multiplied by the number of remaining payments still to be made in accordance with the contracts;
for contracts that provide for a multiplication of the cash-flow payments or a multiplication of the underlying of the derivative contract, the notional amount shall be adjusted by an institution to take into account the effects of the multiplication on the risk structure of those contracts.
Article 279c
Maturity Factor
Institutions shall calculate the maturity factor as follows:
for transactions included in the netting sets referred to in Article 275(1), institutions shall use the following formula:
where:
MF |
= |
the maturity factor; |
M |
= |
the remaining maturity of the transaction which is equal to the period of time needed for the termination of all contractual obligations of the transaction; for that purpose, any optionality of a derivative contract shall be considered to be a contractual obligation; the remaining maturity shall be expressed in years using the relevant business day convention; where a transaction has another derivative contract as underlying instrument that may give rise to additional contractual obligations beyond the contractual obligations of the transaction, the remaining maturity of the transaction shall be equal to the period of time needed for the termination of all contractual obligations of the underlying instrument; where a transaction is structured to settle outstanding exposure following specified payment dates and where the terms are reset so that the market value of the transaction is zero on those specified dates, the remaining maturity of the transaction shall be equal to the time until the next reset date; and |
OneBusinessYear |
= |
one year expressed in business days using the relevant business day convention; |
for transactions included in the netting sets referred to in Article 275(2) and (3), the maturity factor is defined as:
where:
MF |
= |
the maturity factor; |
MPOR |
= |
the margin period of risk of the netting set determined in accordance with Article 285(2) to (5); and |
OneBusinessYear |
= |
one year expressed in business days using the relevant business day convention. |
When determining the margin period of risk for transactions between a client and a clearing member, an institution acting either as the client or as the clearing member shall replace the minimum period set out in point (b) of Article 285(2) with five business days.
Article 280
Hedging set supervisory factor coefficient
For the purpose of calculating the add-on of a hedging set as referred to in Articles 280a to 280f, the hedging set supervisory factor coefficient ‘є’ shall be the following:
є = |
|
1 for the hedging sets established in accordance with Article 277a(1) |
|
5 for the hedging sets established in accordance with point (a) of Article 277a(2) |
|||
0,5 for the hedging sets established in accordance with point (b) of Article 277a(2) |
Article 280a
Interest rate risk category add-on
For the purposes of Article 278, institutions shall calculate the interest rate risk category add-on for a given netting set as follows:
where:
AddOnIR |
= |
the interest rate risk category add-on; |
j |
= |
the index that denotes all the interest rate risk hedging sets established in accordance with point (a) of Article 277a(1) and with Article 277a(2) for the netting set; and |
|
= |
the interest rate risk category add-on for hedging set j calculated in accordance with paragraph 2. |
Institutions shall calculate the interest rate risk category add-on for hedging set j as follows:
where:
єj |
= |
the hedging set supervisory factor coefficient of hedging set j determined in accordance with the applicable value specified in Article 280; |
SFIR |
= |
the supervisory factor for the interest rate risk category with a value equal to 0,5 %; and |
|
= |
the effective notional amount of hedging set j calculated in accordance with paragraph 3. |
For the purpose of calculating the effective notional amount of hedging set j, institutions shall first map each transaction of the hedging set to the appropriate bucket in Table 2. They shall do so on the basis of the end date of each transaction as determined under point (a) of Article 279b(1):
Table 2
Bucket |
End date (in years) |
1 |
> 0 and <= 1 |
2 |
> 1 and <= 5 |
3 |
> 5 |
Institutions shall then calculate the effective notional amount of hedging set j in accordance with the following formula:
where:
|
= |
the effective notional amount of hedging set j; and |
Dj,k |
= |
the effective notional amount of bucket k of hedging set j calculated as follows:
|
where:
l |
= |
the index that denotes the risk position. |
Article 280b
Foreign exchange risk category add-on
For the purposes of Article 278, institutions shall calculate the foreign exchange risk category add-on for a given netting set as follows:
where:
AddOnFX |
= |
the foreign exchange risk category add on; |
j |
= |
the index that denotes the foreign exchange risk hedging sets established in accordance with point (b) of Article 277a(1) and with Article 277a(2) for the netting set; and |
|
= |
the foreign exchange risk category add-on for hedging set j calculated in accordance with paragraph 2. |
Institutions shall calculate the foreign exchange risk category add-on for hedging set j as follows:
where:
єj |
= |
the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280; |
SFFX |
= |
the supervisory factor for the foreign exchange risk category with a value equal to 4 %; |
|
= |
the effective notional amount of hedging set j calculated as follows: |
where:
l |
= |
the index that denotes the risk position. |
Article 280c
Credit risk category add-on
For the purposes of paragraph 2, institutions shall establish the relevant credit reference entities of the netting set in accordance with the following:
there shall be one credit reference entity for each issuer of a reference debt instrument that underlies a single-name transaction allocated to the credit risk category; single-name transactions shall be assigned to the same credit reference entity only where the underlying reference debt instrument of those transactions is issued by the same issuer;
there shall be one credit reference entity for each group of reference debt instruments or single-name credit derivatives that underlie a multi-name transaction allocated to the credit risk category; multi-names transactions shall be assigned to the same credit reference entity only where the group of underlying reference debt instruments or single-name credit derivatives of those transactions have the same constituents.
For the purposes of Article 278, institution shall calculate the credit risk category add-on for a given netting set as follows:
where:
AddOnCredit |
= |
credit risk category add-on; |
j |
= |
the index that denotes all the credit risk hedging sets established in accordance with point (c) of Article 277a(1) and with Article 277a(2) for the netting set; and |
|
= |
the credit risk category add-on for hedging set j calculated in accordance with paragraph 3. |
Institutions shall calculate the credit risk category add-on for hedging set j as follows:
where:
|
= |
the credit risk category add-on for hedging set j; |
єj |
= |
the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280; |
k |
= |
the index that denotes the credit reference entities of the netting set established in accordance with paragraph 1; |
|
= |
the correlation factor of the credit reference entity k; where the credit reference entity k has been established in accordance with point (a) of paragraph 1,
|
AddOn(Entityk) |
= |
the add-on for the credit reference entity k determined in accordance with paragraph 4. |
Institutions shall calculate the add-on for the credit reference entity k as follows:
where:
|
= |
the effective notional amount of the credit reference entity k calculated as follows:
where:
|
Institutions shall calculate the supervisory factor applicable to the credit reference entity k as follows:
an institution using the approach referred to in Chapter 3 shall map the internal rating of the individual issuer to one of the external credit assessments;
for the credit reference entity k established in accordance with point (b) of paragraph 1:
Table 3
Credit quality step |
Supervisory factor for single-name transactions |
1 |
0,38 % |
2 |
0,42 % |
3 |
0,54 % |
4 |
1,06 % |
5 |
1,6 % |
6 |
6,0 % |
Table 4
Dominant credit quality |
Supervisory factor for quoted indices |
Investment grade |
0,38 % |
Non-investment grade |
1,06 % |
Article 280d
Equity risk category add-on
For the purposes of paragraph 2, institutions shall establish the relevant equity reference entities of the netting set in accordance with the following:
there shall be one equity reference entity for each issuer of a reference equity instrument that underlies a single-name transaction allocated to the equity risk category; single-name transactions shall be assigned to the same equity reference entity only where the underlying reference equity instrument of those transactions is issued by the same issuer;
there shall be one equity reference entity for each group of reference equity instruments or single-name equity derivatives that underlie a multi-name transaction allocated to the equity risk category; multi-names transactions shall be assigned to the same equity reference entity only where the group of underlying reference equity instruments or single-name equity derivatives of those transactions, as applicable, has the same constituents.
For the purposes of Article 278, institutions shall calculate the equity risk category add-on for a given netting set as follows:
where:
AddOnEquity |
= |
the equity risk category add-on; |
j |
= |
the index that denotes all the equity risk hedging sets established in accordance with point (d) of Article 277a(1) and Article 277a(2) for the netting set; and |
|
= |
the equity risk category add-on for hedging set j calculated in accordance with paragraph 3. |
Institutions shall calculate the equity risk category add-on for hedging set j as follows:
where:
|
= |
the equity risk category add-on for hedging set j; |
єj |
= |
the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280; |
k |
= |
the index that denotes the equity reference entities of the netting set established in accordance with paragraph 1; |
|
= |
the correlation factor of the equity reference entity k; where the equity reference entity k has been established in accordance with point (a) of paragraph 1,
|
AddOn(Entityk) |
= |
the add-on for the equity reference entity k determined in accordance with paragraph 4. |
Institutions shall calculate the add-on for the equity reference entity k as follows:
where:
AddOn(Entityk) |
= |
the add-on for the equity reference entity k; |
|
= |
the supervisory factor applicable to the equity reference entity k; where the equity reference entity k has been established in accordance with point (a) of paragraph 1,
|
|
= |
the effective notional amount of the equity reference entity k calculated as follows:
where:
|
Article 280e
Commodity risk category add-on
For the purposes of Article 278, institutions shall calculate the commodity risk category add-on for a given netting set as follows:
where:
AddOnCom |
= |
the commodity risk category add-on; |
j |
= |
the index that denotes the commodity hedging sets established in accordance with point (e) of Article 277a(1) and with Article 277a(2) for the netting set; and |
|
= |
the commodity risk category add-on for hedging set j calculated in accordance with paragraph 4. |
Institutions shall calculate the commodity risk category add-on for hedging set j as follows:
where:
|
= |
the commodity risk category add-on for hedging set j; |
єj |
= |
the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280; |
ρCom |
= |
the correlation factor of the commodity risk category with a value equal to 40 %; |
k |
= |
the index that denotes the commodity reference types of the netting set established in accordance with paragraph 2; and |
|
= |
the add-on for the commodity reference type k calculated in accordance with paragraph 5. |
Institutions shall calculate the add-on for the commodity reference type k as follows:
where:
|
= |
the add-on for the commodity reference type k; |
|
= |
the supervisory factor applicable to the commodity reference type k; where the commodity reference type k corresponds to transactions allocated to the hedging set referred to in point (e) of Article 277a(1), excluding transactions concerning electricity, |
|
= |
the effective notional amount of the commodity reference type k calculated as follows:
where:
|
Article 280f
Other risks category add-on
For the purposes of Article 278, institutions shall calculate the other risks category add-on for a given netting set as follows:
where:
AddOnOther |
= |
the other risks category add-on; |
єj |
= |
the index that denotes the other risk hedging sets established in accordance with point (f) of Article 277a(1) and Article 277a(2) for the netting set; and |
|
= |
the other risks category add-on for hedging set j calculated in accordance with paragraph 2. |
Institutions shall calculate the other risks category add-on for hedging set j as follows:
where:
|
= |
the other risks category add-on for hedging set j; |
єj |
= |
the hedging set supervisory factor coefficient of hedging set j determined in accordance with Article 280; and |
SFOther |
= |
the supervisory factor for the other risk category with a value equal to 8 %; |
|
= |
the effective notional amount of hedging set j calculated as follows:
where:
|
Article 281
Calculation of the exposure value
The exposure value of a netting set shall be calculated in accordance with the following requirements:
institutions shall not apply the treatment referred to in Article 274(6);
by way of derogation from Article 275(1), for netting sets that are not referred to in Article 275(2), institutions shall calculate the replacement cost in accordance with the following formula:
RC = max{CMV, 0}
where:
RC |
= |
the replacement cost; and |
CMV |
= |
the current market value. |
by way of derogation from Article 275(2) of this Regulation, for netting sets of transactions: that are traded on a recognised exchange; that are centrally cleared by a central counterparty authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation; or for which collateral is exchanged bilaterally with the counterparty in accordance with Article 11 of Regulation (EU) No 648/2012, institutions shall calculate the replacement cost in accordance with the following formula:
RC = TH + MTA
where:
RC |
= |
the replacement cost; |
TH |
= |
the margin threshold applicable to the netting set under the margin agreement below which the institution cannot call for collateral; and |
MTA |
= |
the minimum transfer amount applicable to the netting set under the margin agreement; |
by way of derogation from Article 275(3), for multiple netting sets that are subject to a margin agreement, institutions shall calculate the replacement cost as the sum of the replacement cost of each individual netting set, calculated in accordance with paragraph 1 as if they were not margined;
all hedging sets shall be established in accordance with Article 277a(1);
institutions shall set to 1 the multiplier in the formula that is used to calculate the potential future exposure in Article 278(1), as follows:
where:
PFE |
= |
the potential future exposure; and |
AddOn(a) |
= |
the add-on for risk category a; |
by way of derogation from Article 279a(1), for all transactions, institutions shall calculate the supervisory delta as follows:
δ = |
|
+ 1 where the transaction is a long position in the primary risk driver |
|
– 1 where the transaction is a short position in the primary risk driver |
where:
δ |
= |
the supervisory delta; |
the formula referred to in point (a) of Article 279b(1) that is used to compute the supervisory duration factor shall read as follows:
supervisory duration factor = E – S
where:
E |
= |
the period between the end date of a transaction and the reporting date; and |
S |
= |
the period between the start date of a transaction and the reporting date; |
the maturity factor referred to in Article 279c(1) shall be calculated as follows:
for transactions included in netting sets referred to in Article 275(1), MF = 1;
for transactions included in netting sets referred to in Article 275(2) and (3), MF = 0,42;
the formula referred to in Article 280a(3) that is used to calculate the effective notional amount of hedging set j shall read as follows:
where:
|
= |
the effective notional amount of hedging set j; and |
Dj,k |
= |
the effective notional amount of bucket k of hedging set j; |
the formula referred to in Article 280c(3) that is used to calculate the credit risk category add-on for hedging set j shall read as follows:
where:
|
= |
the credit risk category add-on for hedging set j; and |
AddOn(Entityk) |
= |
the add-on for the credit reference entity k; |
the formula referred to in Article 280d(3) that is used to calculate the equity risk category add-on for hedging set j shall read as follows:
where:
|
= |
the equity risk category add-on for hedging set j; and |
AddOn(Entityk) |
= |
the add-on for the credit reference entity k; |
the formula referred to in Article 280e(4) that is used to calculate the commodity risk category add-on for hedging set j shall read as follows:
where:
|
= |
the commodity risk category add-on for hedging set j; and |
|
= |
the add-on for the commodity reference type k. |
Article 282
Calculation of the exposure value
The current replacement cost referred to in paragraph 2 shall be calculated as follows:
for netting sets of transactions: that are traded on a recognised exchange; centrally cleared by a central counterparty authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation; or for which collateral is exchanged bilaterally with the counterparty in accordance with Article 11 of Regulation (EU) No 648/2012, institutions shall use the following formula:
RC = TH + MTA
where:
RC |
= |
the replacement cost; |
TH |
= |
the margin threshold applicable to the netting set under the margin agreement below which the institution cannot call for collateral; and |
MTA |
= |
the minimum transfer amount applicable to the netting set under the margin agreement; |
for all other netting sets or individual transactions, institutions shall use the following formula:
RC = max{CMV, 0}
where:
RC |
= |
the replacement cost; and |
CMV |
= |
the current market value. |
In order to calculate the current replacement cost, institutions shall update current market values at least monthly.
Institutions shall calculate the potential future exposure referred to in paragraph 2 as follows:
the potential future exposure of a netting set is the sum of the potential future exposure of all the transactions included in the netting set, calculated in accordance with point (b);
the potential future exposure of a single transaction is its notional amount multiplied by:
the product of 0,5 % and the residual maturity of the transaction expressed in years for interest-rate derivative contracts;
the product of 6 % and the residual maturity of the transaction expressed in years for credit derivative contracts;
4 % for foreign-exchange derivatives;
18 % for gold and commodity derivatives other than electricity derivatives;
40 % for electricity derivatives;
32 % for equity derivatives;
the notional amount referred to in point (b) of this paragraph shall be determined in accordance with Article 279b(2) and (3) for all derivatives listed in that point; in addition, the notional amount of the derivatives referred to in points (b)(iii) to (b)(vi) of this paragraph shall be determined in accordance with points (b) and (c) of Article 279b(1);
the potential future exposure of netting sets referred to in point (a) of paragraph 3 shall be multiplied by 0,42.
For calculating the potential exposure of interest-rate derivatives and credit derivatives in accordance with points b(i) and (b)(ii), an institution may choose to use the original maturity instead of the residual maturity of the contracts.
Section 6
Internal Model Method
Article 283
Permission to use the Internal Model Method
Provided that the competent authorities are satisfied that the requirement in paragraph 2 have been met by an institution, they shall permit that institution to use the Internal Model Method (IMM) to calculate the exposure value for any of the following transactions:
transactions in Article 273(2)(a);
transactions in Article 273(2)(b), (c) and (d);
transactions in Article 273(2)(a) to (d),
Where an institution is permitted to use the IMM to calculate exposure value for any of the transactions mentioned in points (a) to (c) of the first subparagraph, it may also use the IMM for the transactions in Article 273(2)(e).
Notwithstanding the third subparagraph of Article 273(1), an institution may choose not to apply this method to exposures that are immaterial in size and risk. In such case, an institution shall apply one of the methods set out in Sections 3 to 5 to these exposures where the relevant requirements for each approach are met.
If an institution ceases to comply with the requirements laid down in this Section, it shall notify the competent authority and do one of the following:
present to the competent authority a plan for a timely return to compliance;
demonstrate to the satisfaction of the competent authority that the effect of non-compliance is immaterial.
Article 284
Exposure value
The model used by the institution for that purpose shall:
specify the forecasting distribution for changes in the market value of the netting set attributable to joint changes in relevant market variables, such as interest rates, foreign exchange rates;
calculate the exposure value for the netting set at each of the future dates on the basis of the joint changes in the market variables.
The own funds requirement for counterparty credit risk with respect to the CCR exposures to which an institution applies the IMM, shall be the higher of the following:
the own funds requirement for those exposures calculated on the basis of Effective EPE using current market data;
the own funds requirement for those exposures calculated on the basis of Effective EPE using a single consistent stress calibration for all CCR exposures to which they apply the IMM.
Except for counterparties identified as having Specific Wrong-Way risk that fall within the scope of Article 291(4) and (5), institutions shall calculate the exposure value as the product of alpha (α) times Effective EPE, as follows:
Exposure value = α · Effective EPE
where:
α |
= |
1.4, unless competent authorities require a higher α or permit institutions to use their own estimates in accordance with paragraph 9; |
Effective EPE shall be calculated by estimating expected exposure (EEt) as the average exposure at future date t, where the average is taken across possible future values of relevant market risk factors.
The model shall estimate EE at a series of future dates t1, t2, t3, etc.
Effective EE shall be calculated recursively as:
where:
Effective EPE is the average Effective EE during the first year of future exposure. If all contracts in the netting set mature within less than one year, EPE shall be the average of EE until all contracts in the netting set mature. Effective EPE shall be calculated as a weighted average of Effective EE:
Notwithstanding paragraph 4, competent authorities may permit institutions to use their own estimates of alpha, where:
alpha shall equal the ratio of internal capital from a full simulation of CCR exposure across counterparties (numerator) and internal capital based on EPE (denominator);
in the denominator, EPE shall be used as if it were a fixed outstanding amount.
When estimated in accordance with this paragraph, alpha shall be no lower than 1,2.
Article 285
Exposure value for netting sets subject to a margin agreement
If the netting set is subject to a margin agreement and daily mark-to-market valuation, the institution shall calculate Effective EPE as set out in this paragraph. If the model captures the effects of margining when estimating EE, the institution may, subject to the permission of the competent authority, use the model's EE measure directly in the equation in Article 284(5). Competent authorities shall grant such permission only if they verify that the model properly captures the effects of margining when estimating EE. An institution that has not received such permission shall use one of the following Effective EPE measures:
Effective EPE, calculated without taking into account any collateral held or posted by way of margin plus any collateral that has been posted to the counterparty independent of the daily valuation and margining process or current exposure;
Effective EPE, calculated as the potential increase in exposure over the margin period of risk, plus the larger of:
the current exposure including all collateral currently held or posted, other than collateral called or in dispute;
the largest net exposure, including collateral under the margin agreement, that would not trigger a collateral call. This amount shall reflect all applicable thresholds, minimum transfer amounts, independent amounts and initial margins under the margin agreement.
For the purposes of point (b), institutions shall calculate the add-on as the expected positive change of the mark-to-market value of the transactions during the margin period of risk. Changes in the value of collateral shall be reflected using the Supervisory Volatility Adjustments Approach in accordance with Section 4 of Chapter 4 or the own estimates of volatility adjustments of the Financial Collateral Comprehensive Method, but no collateral payments shall be assumed during the margin period of risk. The margin period of risk is subject to the minimum periods set out in paragraphs 2 to 5.
For transactions subject to daily re-margining and mark-to-market valuation, the margin period of risk used for the purpose of modelling the exposure value with margin agreements shall not be less than:
5 business days for netting sets consisting only of repurchase transactions, securities or commodities lending or borrowing transactions and margin lending transactions;
10 business days for all other netting sets.
Points (a) and (b) of paragraph 2 shall be subject to the following exceptions:
for all netting sets where the number of trades exceeds 5 000 at any point during a quarter, the margin period of risk for the following quarter shall not be less than 20 business days. This exception shall not apply to institutions' trade exposures;
for netting sets containing one or more trades involving either illiquid collateral, or an OTC derivative that cannot be easily replaced, the margin period of risk shall not be less than 20 business days.
An institution shall determine whether collateral is illiquid or whether OTC derivatives cannot be easily replaced in the context of stressed market conditions, characterised by the absence of continuously active markets where a counterparty would, within two days or fewer, obtain multiple price quotations that would not move the market or represent a price reflecting a market discount (in the case of collateral) or premium (in the case of an OTC derivative).
An institution shall consider whether trades or securities it holds as collateral are concentrated in a particular counterparty and if that counterparty exited the market precipitously whether the institution would be able to replace those trades or securities.
For re-margining with a periodicity of N days, the margin period of risk shall be at least equal to the period specified in paragraphs 2 and 3, F, plus N days minus one day. That is:
Margin Period of Risk = F + N – 1
Article 286
Management of CCR — Policies, processes and systems
An institution shall establish and maintain a CCR management framework, consisting of:
policies, processes and systems to ensure the identification, measurement, management, approval and internal reporting of CCR;
procedures for ensuring that those policies, processes and systems are complied with.
Those policies, processes and systems shall be conceptually sound, implemented with integrity and documented. The documentation shall include an explanation of the empirical techniques used to measure CCR.
The CCR management framework required by paragraph 1 shall take account of market, liquidity, and legal and operational risks that are associated with CCR. In particular, the framework shall ensure that the institution complies with the following principles:
it does not undertake business with a counterparty without assessing its creditworthiness;
it takes due account of settlement and pre-settlement credit risk;
it manages such risks as comprehensively as practicable at the counterparty level by aggregating CCR exposures with other credit exposures and at the firm-wide level.
An institution using the IMM shall ensure that its CCR management framework accounts to the satisfaction of the competent authority for the liquidity risks of all of the following:
potential incoming margin calls in the context of exchanges of variation margin or other margin types, such as initial or independent margin, under adverse market shocks;
potential incoming calls for the return of excess collateral posted by counterparties;
calls resulting from a potential downgrade of its own external credit quality assessment.
An institution shall ensure that the nature and horizon of collateral re-use is consistent with its liquidity needs and does not jeopardise its ability to post or return collateral in a timely manner.
Article 287
Organisation structures for CCR management
An institution using the IMM shall establish and maintain:
a risk control unit that complies with paragraph 2;
a collateral management unit that complies with paragraph 3.
The risk control unit shall be responsible for the design and implementation of its CCR management, including the initial and on-going validation of the model, and shall carry out the following functions and meet the following requirements:
it shall be responsible for the design and implementation of the CCR management system of the institution;
it shall produce daily reports on and analyse the output of the institution's risk measurement model. That analysis shall include an evaluation of the relationship between measures of CCR exposure values and trading limits;
it shall control input data integrity and produce and analyse reports on the output of the institution's risk measurement model, including an evaluation of the relationship between measures of risk exposure and credit and trading limits;
it shall be independent from units responsible for originating, renewing or trading exposures and free from undue influence;
it shall be adequately staffed;
it shall report directly to the senior management of the institution;
its work shall be closely integrated into the day-to-day credit risk management process of the institution;
its output shall be an integral part of the process of planning, monitoring and controlling the institution's credit and overall risk profile.
The collateral management unit shall carry out the following tasks and functions:
calculating and making margin calls, managing margin call disputes and reporting levels of independent amounts, initial margins and variation margins accurately on a daily basis;
controlling the integrity of the data used to make margin calls, and ensuring that it is consistent and reconciled regularly with all relevant sources of data within the institution;
tracking the extent of re-use of collateral and any amendment of the rights of the institution to or in connection with the collateral that it posts;
reporting to the appropriate level of management the types of collateral assets that are reused, and the terms of such reuse including instrument, credit quality and maturity;
tracking concentration to individual types of collateral assets accepted by the institution;
reporting collateral management information on a regular basis, but at least quarterly, to senior management, including information on the type of collateral received and posted, the size, aging and cause for margin call disputes. That internal reporting shall also reflect trends in these figures.
Article 288
Review of CCR management system
An institution shall regularly conduct an independent review of its CCR management system through its internal auditing process. That review shall include both the activities of the control and collateral management units required by Article 287 and shall specifically address, as a minimum:
the adequacy of the documentation of the CCR management system and process required by Article 286;
the organisation of the CCR control unit required by Article 287(1)(a);
the organisation of the collateral management unit required by Article 287(1)(b);
the integration of CCR measures into daily risk management;
the approval process for risk pricing models and valuation systems used by front and back-office personnel;
the validation of any significant change in the CCR measurement process;
the scope of CCR captured by the risk measurement model;
the integrity of the management information system;
the accuracy and completeness of CCR data;
the accurate reflection of legal terms in collateral and netting agreements into exposure value measurements;
the verification of the consistency, timeliness and reliability of data sources used to run models, including the independence of such data sources;
the accuracy and appropriateness of volatility and correlation assumptions;
the accuracy of valuation and risk transformation calculations;
the verification of the model's accuracy through frequent back-testing as set out in points (b) to (e) of Article 293(1);
the compliance of the CCR control unit and collateral management unit with the relevant regulatory requirements.
Article 289
Use test
Article 290
Stress testing
It shall apply at least quarterly multifactor stress testing scenarios and assess material non-directional risks including yield curve exposure and basis risks. Multiple-factor stress tests shall, at a minimum, address the following scenarios in which the following occurs:
severe economic or market events have occurred;
broad market liquidity has decreased significantly;
a large financial intermediary is liquidating positions.
Article 291
Wrong-Way Risk
For the purposes of this Article:
‘General Wrong-Way risk’ arises when the likelihood of default by counterparties is positively correlated with general market risk factors;
‘Specific Wrong-Way risk’ arises when future exposure to a specific counterparty is positively correlated with the counterparty's PD due to the nature of the transactions with the counterparty. An institution shall be considered to be exposed to Specific Wrong-Way risk if the future exposure to a specific counterparty is expected to be high when the counterparty's probability of a default is also high.
Institutions shall calculate the own funds requirements for CCR in relation to transactions where Specific Wrong-Way risk has been identified and where there exists a legal connection between the counterparty and the issuer of the underlying of the OTC derivative or the underlying of the transactions referred to in points (b), (c) and (d) of Article 273(2)), in accordance with the following principles:
the instruments where Specific Wrong-Way risk exists shall not be included in the same netting set as other transactions with the counterparty, and shall each be treated as a separate netting set;
within any such separate netting set, for single-name credit default swaps the exposure value equals the full expected loss in the value of the remaining fair value of the underlying instruments based on the assumption that the underlying issuer is in liquidation;
LGD for an institution using the approach set out in Chapter 3 shall be 100 % for such swap transactions;
for an institution using the approach set out in Chapter 2, the applicable risk weight shall be that of an unsecured transaction;
for all other transactions referencing a single name in any such separate netting set, the calculation of the exposure value shall be consistent with the assumption of a jump-to-default of those underlying obligations where the issuer is legally connected with the counterparty. For transactions referencing a basket of names or index, the jump-to-default of the respective underlying obligations where the issuer is legally connected with the counterparty, shall be applied, if material;
to the extent that this uses existing market risk calculations for own funds requirements for incremental default and migration risk as set out in Title IV, Chapter 5, Section 4 that already contain an LGD assumption, the LGD in the formula used shall be 100 %.
Article 292
Integrity of the modelling process
An institution shall ensure the integrity of modelling process as set out in Article 284 by adopting at least the following measures:
the model shall reflect transaction terms and specifications in a timely, complete, and conservative fashion;
those terms shall include at least contract notional amounts, maturity, reference assets, margining arrangements and netting arrangements;
those terms and specifications shall be maintained in a database that is subject to formal and periodic audit;
a process for recognising netting arrangements that requires legal staff to verify that netting under those arrangements is legally enforceable;
the verification required under point (d) shall be entered into the database mentioned in point (c) by an independent unit;
the transmission of transaction terms and specification data to the EPE model shall be subject to internal audit;
there shall be processes for formal reconciliation between the model and source data systems to verify on an ongoing basis that transaction terms and specifications are being reflected in EPE correctly or at least conservatively.
To calculate the Effective EPE using a stress calibration, an institution shall calibrate Effective EPE using either three years of data that includes a period of stress to the credit default spreads of its counterparties or market implied data from such a period of stress.
The requirements in paragraphs 3, 4 and 5 shall be applied by the institution for that purpose.
The competent authorities shall require an institution to adjust the stress calibration if the exposures of those benchmark portfolios deviate substantially from each other.
An institution shall subject the model to a validation process that is clearly articulated in the institutions' policies and procedures. That validation process shall:
specify the kind of testing needed to ensure model integrity and identify conditions under which the assumptions underlying the model are inappropriate and may therefore result in an understatement of EPE;
include a review of the comprehensiveness of the model.
An institution shall monitor the relevant risks and have processes in place to adjust its estimation of Effective EPE when those risks become significant. In complying with this paragraph, the institution shall:
identify and manage its exposures to Specific Wrong-Way risk arising as specified in Article 291(1)(b) and exposures to General Wrong-Way risk arising as specified in Article 291(1)(a);
for exposures with a rising risk profile after one year, compare on a regular basis the estimate of a relevant measure of exposure over one year with the same exposure measure over the life of the exposure;
for exposures with a residual maturity below one year, compare on a regular basis the replacement cost (current exposure) and the realised exposure profile, and store data that would allow such a comparison.
Article 293
Requirements for the risk management system
An institution shall comply with the following requirements:
it shall meet the qualitative requirements set out in Part Three, Title IV, Chapter 5;
it shall conduct a regular programme of back-testing, comparing the risk measures generated by the model with realised risk measures, and hypothetical changes based on static positions with realised measures;
it shall carry out an initial validation and an on-going periodic review of its CCR exposure model and the risk measures generated by it. The validation and review shall be independent of the model development;
the management body and senior management shall be involved in the risk control process and shall ensure that adequate resources are devoted to credit and counterparty credit risk control. In this regard, the daily reports prepared by the independent risk control unit established in accordance Article 287(1)(a) shall be reviewed by a level of management with sufficient seniority and authority to enforce both reductions of positions taken by individual traders and reductions in the overall risk exposure of the institution;
the internal risk measurement exposure model shall be integrated into the day-to-day risk management process of the institution;
the risk measurement system shall be used in conjunction with internal trading and exposure limits. In this regard, exposure limits shall be related to the institution's risk measurement model in a manner that is consistent over time and that is well understood by traders, the credit function and senior management;
an institution shall ensure that its risk management system is well documented. In particular, it shall maintain a documented set of internal policies, controls and procedures concerning the operation of the risk measurement system, and arrangements to ensure that those policies are complied with;
an independent review of the risk measurement system shall be carried out regularly in the institution's own internal auditing process. This review shall include both the activities of the business trading units and of the independent risk control unit. A review of the overall risk management process shall take place at regular intervals (and no less than once a year) and shall specifically address, as a minimum, all items referred to in Article 288;
the on-going validation of counterparty credit risk models, including back-testing, shall be reviewed periodically by a level of management with sufficient authority to decide the action that will be taken to address weaknesses in the models.
Article 294
Validation requirements
As part of the initial and on-going validation of its CCR exposure model and its risk measures, an institution shall ensure that the following requirements are met:
the institution shall carry out back-testing using historical data on movements in market risk factors prior to the permission by the competent authorities in accordance with Article 283(1). That back-testing shall consider a number of distinct prediction time horizons out to at least one year, over a range of various initialisation dates and covering a wide range of market conditions;
the institution using the approach set out in Article 285(1)(b) shall regularly validate its model to test whether realised current exposures are consistent with prediction over all margin periods within one year. If some of the trades in the netting set have a maturity of less than one year, and the netting set has higher risk factor sensitivities without these trades, the validation shall take this into account;
it shall back-test the performance of its CCR exposure model and the model's relevant risk measures as well as the market risk factor predictions. For collateralised trades, the prediction time horizons considered shall include those reflecting typical margin periods of risk applied in collateralised or margined trading;
if the model validation indicates that Effective EPE is underestimated, the institution shall take the action necessary to address the inaccuracy of the model;
it shall test the pricing models used to calculate CCR exposure for a given scenario of future shocks to market risk factors as part of the initial and on-going model validation process. Pricing models for options shall account for the nonlinearity of option value with respect to market risk factors;
the CCR exposure model shall capture the transaction-specific information necessary to be able to aggregate exposures at the level of the netting set. An institution shall verify that transactions are assigned to the appropriate netting set within the model;
the CCR exposure model shall include transaction-specific information to capture the effects of margining. It shall take into account both the current amount of margin and margin that would be passed between counterparties in the future. Such a model shall account for the nature of margin agreements that are unilateral or bilateral, the frequency of margin calls, the margin period of risk, the minimum threshold of un-margined exposure the institution is willing to accept, and the minimum transfer amount. Such a model shall either estimate the mark-to-market change in the value of collateral posted or apply the rules set out in Chapter 4;
the model validation process shall include static, historical back-testing on representative counterparty portfolios. An institution shall conduct such back-testing on a number of representative counterparty portfolios that are actual or hypothetical at regular intervals. Those representative portfolios shall be chosen on the basis of their sensitivity to the material risk factors and combinations of risk factors to which the institution is exposed;
an institution shall conduct back-testing that is designed to test the key assumptions of the CCR exposure model and the relevant risk measures, including the modelled relationship between tenors of the same risk factor, and the modelled relationships between risk factors;
the performance of CCR exposure models and its risk measures shall be subject to appropriate back-testing practice. The back testing programme shall be capable of identifying poor performance in an EPE model's risk measures;
an institution shall validate its CCR exposure models and all risk measures out to time horizons commensurate with the maturity of trades for which exposure is calculated using IMM in accordance to the Article 283;
an institution shall regularly test the pricing models used to calculate counterparty exposure against appropriate independent benchmarks as part of the on-going model validation process;
the on-going validation of an institution's CCR exposure model and the relevant risk measures shall include an assessment of the adequacy of the recent performance;
the frequency with which the parameters of an CCR exposure model are updated shall be assessed by an institution as part of the initial and on-going validation process;
the initial and on-going validation of CCR exposure models shall assess whether or not the counterparty level and netting set exposure calculations of exposure are appropriate.
Section 7
Contractual netting
Article 295
Recognition of contractual netting as risk-reducing
Institutions may treat as risk reducing in accordance with Article 298 only the following types of contractual netting agreements where the netting agreement has been recognised by competent authorities in accordance with Article 296 and where the institution meets the requirements set out in Article 297:
bilateral contracts for novation between an institution and its counterparty under which mutual claims and obligations are automatically amalgamated in such a way that the novation fixes one single net amount each time it applies so as to create a single new contract that replaces all former contracts and all obligations between parties pursuant to those contracts and is binding on the parties;
other bilateral agreements between an institution and its counterparty;
contractual cross-product netting agreements for institutions that have received the approval to use the method set out in Section 6 for transactions falling under the scope of that method. Competent authorities shall report to EBA a list of the contractual cross-product netting agreements approved.
Netting across transactions entered into by different legal entities of a group shall not be recognised for the purposes of calculating the own funds requirements.
Article 296
Recognition of contractual netting agreements
The following conditions shall be fulfilled by all contractual netting agreements used by an institution for the purposes of determining exposure value in this Part:
the institution has concluded a contractual netting agreement with its counterparty which creates a single legal obligation, covering all included transactions, such that, in the event of default by the counterparty it would be entitled to receive or obliged to pay only the net sum of the positive and negative mark-to-market values of included individual transactions;
the institution has made available to the competent authorities written and reasoned legal opinions to the effect that, in the event of a legal challenge of the netting agreement, the institution's claims and obligations would not exceed those referred to in point (a). The legal opinion shall refer to the applicable law:
the jurisdiction in which the counterparty is incorporated;
if a branch of an undertaking is involved, which is located in a country other than that where the undertaking is incorporated, the jurisdiction in which the branch is located;
the jurisdiction whose law governs the individual transactions included in the netting agreement;
the jurisdiction whose law governs any contract or agreement necessary to effect the contractual netting;
credit risk to each counterparty is aggregated to arrive at a single legal exposure across transactions with each counterparty. This aggregation shall be factored into credit limit purposes and internal capital purposes;
the contract shall not contain any clause which, in the event of default of a counterparty, permits a non-defaulting counterparty to make limited payments only, or no payments at all, to the estate of the defaulting party, even if the defaulting party is a net creditor (i.e. walk-away clause).
If any of the competent authorities are not satisfied that the contractual netting is legally valid and enforceable under the law of each of the jurisdictions referred to in point (b) the contractual netting agreement shall not be recognised as risk-reducing for either of the counterparties. Competent authorities shall inform each other accordingly.
The legal opinions referred to in point (b) may be drawn up by reference to types of contractual netting. The following additional conditions shall be fulfilled by contractual cross-product netting agreements:
the net sum referred to in point (a) of paragraph 2 is the net sum of the positive and negative close out values of any included individual bilateral master agreement and of the positive and negative mark-to-market value of the individual transactions (the ‘cross-product net amount’);
the legal opinions referred to in point (b) of paragraph 2 shall address the validity and enforceability of the entire contractual cross-product netting agreement under its terms and the impact of the netting arrangement on the material provisions of any included individual bilateral master agreement.
Article 297
Obligations of institutions
Taking into account the contractual cross-product netting agreement, the institution shall continue to comply with the requirements for the recognition of bilateral netting and the requirements of Chapter 4 for the recognition of credit risk mitigation, as applicable, with respect to each included individual bilateral master agreement and transaction.
Article 298
Effects of recognition of netting as risk-reducing
Netting for the purposes of Sections 3 to 6 shall be recognised as set out in those Sections.
Section 8
Items in the trading book
Article 299
Items in the trading book
When calculating risk-weighted exposure amounts for counterparty risk of items in the trading book, institutions shall comply with the following principles:
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institutions shall not use the Financial Collateral Simple Method set out in Article 222 for the recognition of the effects of financial collateral;
in the case of repurchase transactions and securities or commodities lending or borrowing transactions booked in the trading book, institutions may recognise as eligible collateral all financial instruments and commodities that are eligible to be included in the trading book;
for exposures arising from OTC derivative instruments booked in the trading book, institutions may recognise commodities that are eligible to be included in the trading book as eligible collateral;
for the purposes of calculating volatility adjustments where such financial instruments or commodities which are not eligible under Chapter 4 are lent, sold or provided, or borrowed, purchased or received by way of collateral or otherwise under such a transaction, and an institution is using the Supervisory Volatility Adjustments Approach under Section 3 of Chapter 4, institutions shall treat such instruments and commodities in the same way as non-main index equities listed on a recognised exchange;
where an institution is using the Own Estimates of Volatility adjustments Approach under Section 3 of Chapter 4 in respect of financial instruments or commodities which are not eligible under Chapter 4, it shall calculate volatility adjustments for each individual item. Where an institution has obtained the approval to use the internal models approach defined in Chapter 4, it may also apply that approach in the trading book;
in relation to the recognition of master netting agreements covering repurchase transactions, securities or commodities lending or borrowing transactions, or other capital market-driven transactions, institutions shall only recognise netting across positions in the trading book and the non-trading book when the netted transactions fulfil the following conditions:
all transactions are marked to market daily;
any items borrowed, purchased or received under the transactions may be recognised as eligible financial collateral under Chapter 4 without the application of points (c) to (f) of this paragraph;
where a credit derivative included in the trading book forms part of an internal hedge and the credit protection is recognised under this Regulation in accordance with Article 204, institutions shall apply one of the following approaches:
treat it as if there were no counterparty risk arising from the position in that credit derivative;
consistently include for the purpose of calculating the own funds requirements for counterparty credit risk all credit derivatives in the trading book forming part of internal hedges or purchased as protection against a CCR exposure where the credit protection is recognised as eligible under Chapter 4.
Section 9
Own funds requirements for exposures to a central counterparty
Article 300
Definitions
For the purposes of this Section and of Part Seven, the following definitions apply:
‘bankruptcy remote’, in relation to client assets, means that effective arrangements exist which ensure that those assets will not be available to the creditors of a CCP or of a clearing member in the event of the insolvency of that CCP or clearing member respectively, or that the assets will not be available to the clearing member to cover losses it incurred following the default of a client or clients other than those that provided those assets;
‘CCP-related transaction’ means a contract or a transaction listed in Article 301(1) between a client and a clearing member that is directly related to a contract or a transaction listed in that paragraph between that clearing member and a CCP;
‘clearing member’ means a clearing member as defined in point (14) of Article 2 of Regulation (EU) No 648/2012;
‘client’ means a client as defined in point (15) of Article 2 of Regulation (EU) No 648/2012 or an undertaking that has established indirect clearing arrangements with a clearing member in accordance with Article 4(3) of that Regulation;
‘cash transaction’ means a transaction in cash, debt instruments or equities, a spot foreign exchange transaction or a spot commodities transaction; however, repurchase transactions, securities or commodities lending transactions, and securities or commodities borrowing transactions, are not cash transactions;
‘indirect clearing arrangement’ means an arrangement that meets the conditions set out in the second subparagraph of Article 4(3) of Regulation (EU) No 648/2012;
‘higher-level client’ means an entity providing clearing services to a lower-level client;
‘lower-level client’ means an entity accessing the services of a CCP through a higher-level client;
‘multi-level client structure’ means an indirect clearing arrangement under which clearing services are provided to an institution by an entity which is not a clearing member, but is itself a client of a clearing member or of a higher-level client;
‘unfunded contribution to a default fund’ means a contribution that an institution that acts as a clearing member has contractually committed to provide to a CCP after the CCP has depleted its default fund to cover the losses it incurred following the default of one or more of its clearing members;
‘fully guaranteed deposit lending or borrowing transaction’ means a fully collateralised money market transaction in which two counterparties exchange deposits and a CCP interposes itself between them to ensure the performance of those counterparties' payment obligations.
Article 301
Material scope
This Section applies to the following contracts and transactions, for as long as they are outstanding with a CCP:
the derivative contracts listed in Annex II and credit derivatives;
securities financing transactions and fully guaranteed deposit lending or borrowing transactions; and
long settlement transactions.
This Section does not apply to exposures arising from the settlement of cash transactions. Institutions shall apply the treatment laid down in Title V to trade exposures arising from those transactions and a 0 % risk weight to default fund contributions covering only those transactions. Institutions shall apply the treatment set out in Article 307 to default fund contributions that cover any of the contracts listed in the first subparagraph of this paragraph in addition to cash transactions.
For the purposes of this Section, the following requirements shall apply:
the initial margin shall not include contributions to a CCP for mutualised loss sharing arrangements;
the initial margin shall include collateral deposited by an institution acting as a clearing member or by a client in excess of the minimum amount required respectively by the CCP or by the institution acting as a clearing member, provided the CCP or the institution acting as a clearing member may, in appropriate cases, prevent the institution acting as a clearing member or the client from withdrawing such excess collateral;
where a CCP uses the initial margin to mutualise losses among its clearing members, institutions that act as clearing members shall treat that initial margin as a default fund contribution.
Article 302
Monitoring of exposures to CCPs
Article 303
Treatment of clearing members' exposures to CCPs
An institution that acts as a clearing member, either for its own purposes or as a financial intermediary between a client and a CCP, shall calculate the own funds requirements for its exposures to a CCP as follows:
it shall apply the treatment set out in Article 306 to its trade exposures with the CCP;
it shall apply the treatment set out in Article 307 to its default fund contributions to the CCP.
Article 304
Treatment of clearing members' exposures to clients
Where an institution that acts as a clearing member uses the methods set out in Section 3 or 6 of this Chapter to calculate the own funds requirement for its exposures, the following provisions shall apply:
by way of derogation from Article 285(2), the institution may use a margin period of risk of at least five business days for its exposures to a client;
the institution shall apply a margin period of risk of at least 10 business days for its exposures to a CCP;
by way of derogation from Article 285(3), where a netting set included in the calculation meets the condition set out in point (a) of that paragraph, the institution may disregard the limit set out in that point, provided that the netting set does not meet the condition set out in point (b) of that paragraph and does not contain disputed trades or exotic options;
where a CCP retains variation margin against a transaction, and the institution's collateral is not protected against the insolvency of the CCP, the institution shall apply a margin period of risk that is the lower of one year and the remaining maturity of the transaction, with a floor of 10 business days.
In the case of a multi-level client structure, the treatment set out in the first subparagraph may be applied at each level of that structure.
Article 305
Treatment of clients' exposures
Without prejudice to the approach specified in paragraph 1, where an institution is a client, it may calculate the own funds requirements for its trade exposures for CCP-related transactions with its clearing member in accordance with Article 306 provided that all the following conditions are met:
the positions and assets of that institution related to those transactions are distinguished and segregated, at the level of both the clearing member and the CCP, from the positions and assets of both the clearing member and the other clients of that clearing member and as a result of that distinction and segregation those positions and assets are bankruptcy remote in the event of the default or insolvency of the clearing member or one or more of its other clients;
laws, regulations, rules and contractual arrangements applicable to or binding that institution or the CCP facilitate the transfer of the client's positions relating to those contracts and transactions and of the corresponding collateral to another clearing member within the applicable margin period of risk in the event of default or insolvency of the original clearing member. In such circumstance, the client's positions and the collateral shall be transferred at market value unless the client requests to close out the position at market value;
the client has conducted a sufficiently thorough legal review, which it has kept up to date, that substantiates that the arrangements that ensure that the condition set out in point (b) is met are legal, valid, binding and enforceable under the relevant laws of the relevant jurisdiction or jurisdictions;
the CCP is a QCCP.
When assessing its compliance with the condition set out in point (b) of the first subparagraph, an institution may take into account any clear precedents of transfers of client positions and of corresponding collateral at a CCP, and any industry intent to continue with that practice.
Article 306
Own funds requirements for trade exposures
An institution shall apply the following treatment to its trade exposures with CCPs:
it shall apply a risk weight of 2 % to the exposure values of all its trade exposures with QCCPs;
it shall apply the risk weight used for the Standardised Approach to credit risk as set out in Article 107(2)(b) to all its trade exposures with non-qualifying CCPs;
where an institution acts as a financial intermediary between a client and a CCP, and the terms of the CCP-related transaction stipulate that the institution is not required to reimburse the client for any losses suffered due to changes in the value of that transaction in the event that the CCP defaults, that institution may set the exposure value of the trade exposure with the CCP that corresponds to that CCP-related transaction to zero;
where an institution acts as a financial intermediary between a client and a CCP, and the terms of the CCP-related transaction stipulate that the institution is required to reimburse the client for any losses suffered due to changes in the value of that transaction in the event that the CCP defaults, that institution shall apply the treatment in point (a) or (b), as applicable, to the trade exposure with the CCP that corresponds to that CCP-related transaction.
Article 307
Own funds requirements for contributions to the default fund of a CCP
An institution that acts as a clearing member shall apply the following treatment to its exposures arising from its contributions to the default fund of a CCP:
it shall calculate the own funds requirement for its pre-funded contributions to the default fund of a QCCP in accordance with the approach set out in Article 308;
it shall calculate the own funds requirement for its pre-funded and unfunded contributions to the default fund of a non-qualifying CCP in accordance with the approach set out in Article 309;
it shall calculate the own funds requirement for its unfunded contributions to the default fund of a QCCP in accordance with the treatment set out in Article 310.
Article 308
Own funds requirements for pre-funded contributions to the default fund of a QCCP
An institution shall calculate the own funds requirement to cover the exposure arising from its pre-funded contribution as follows:
where:
Ki |
= |
the own funds requirement; |
i |
= |
the index denoting the clearing member; |
KCCP |
= |
the hypothetical capital of the QCCP communicated to the institution by the QCCP in accordance with Article 50c of Regulation (EU) No 648/2012; |
DFi |
= |
the pre-funded contribution; |
DFCCP |
= |
the pre-funded financial resources of the CCP communicated to the institution by the CCP in accordance with Article 50c of Regulation (EU) No 648/2012; and |
DFCM |
= |
the sum of pre-funded contributions of all clearing members of the QCCP communicated to the institution by the QCCP in accordance with Article 50c of Regulation (EU) No 648/2012. |
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Article 309
Own funds requirements for pre-funded contributions to the default fund of a non-qualifying CCP and for unfunded contributions to a non-qualifying CCP
An institution shall apply the following formula to calculate the own funds requirement for the exposures arising from its pre-funded contributions to the default fund of a non-qualifying CCP and from unfunded contributions to such CCP:
K |
= |
the own funds requirement; |
DF |
= |
the pre-funded contributions to the default fund of a non-qualifying CCP; and |
UC |
= |
the unfunded contributions to the default fund of a non-qualifying CCP. |
Article 310
Own funds requirements for unfunded contributions to the default fund of a QCCP
An institution shall apply a 0 % risk weight to its unfunded contributions to the default fund of a QCCP.
Article 311
Own funds requirements for exposures to CCPs that cease to meet certain conditions
Where the condition set out in paragraph 1 is met, institutions shall, within three months of becoming aware of the circumstance referred to therein, or at an earlier time if the competent authorities of those institutions so require, do the following with respect to their exposures to that CCP:
apply the treatment set out in point (b) of Article 306(1) to their trade exposures to that CCP;
apply the treatment set out in Article 309 to their pre-funded contributions to the default fund of that CCP and to its unfunded contributions to that CCP;
treat their exposures to that CCP, other than the exposures listed in points (a) and (b) of this paragraph, as exposures to a corporate in accordance with the Standardised Approach for credit risk set out in Chapter 2.
TITLE III
OWN FUNDS REQUIREMENTS FOR OPERATIONAL RISK
CHAPTER 1
General principles governing the use of the different approaches
Article 312
Permission and notification
Competent authorities shall permit institutions to use an alternative relevant indicator for the business lines of retail banking and commercial banking where the conditions set out in Articles 319(2) and 320 are met.
Institutions shall also apply for permission from their competent authorities where they want to implement material extensions and changes to those Advanced Measurement Approaches. Competent authorities shall grant the permission only where institutions would continue to meet the standards specified in the first subparagraph following those material extensions and changes.
EBA shall develop draft regulatory technical standards to specify the following:
the assessment methodology under which the competent authorities permit institutions to use Advanced Measurement Approaches;
the conditions for assessing the materiality of extensions and changes to the Advanced Measurement Approaches;
the modalities of the notification required in paragraph 3.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 313
Reverting to the use of less sophisticated approaches
An institution may only revert to the use of a less sophisticated approach for operational risk where both the following conditions are met:
the institution has demonstrated to the satisfaction of the competent authority that the use of a less sophisticated approach is not proposed in order to reduce the operational risk related own funds requirements of the institution, is necessary on the basis of nature and complexity of the institution and would not have a material adverse impact on the solvency of the institution or its ability to manage operational risk effectively;
the institution has received the prior permission of the competent authority.
Article 314
Combined use of different approaches
An institution may use an Advanced Measurement Approach in combination with either the Basic Indicator Approach or the Standardised Approach, where both of the following conditions are met:
the combination of Approaches used by the institution captures all its operational risks and competent authorities are satisfied with the methodology used by the institution to cover different activities, geographical locations, legal structures or other relevant divisions determined on an internal basis;
the criteria set out in Article 320 and the standards set out in Articles 321 and 322 are fulfilled for the part of activities covered by the Standardised Approach and the Advanced Measurement Approaches respectively.
For institutions that want to use an Advanced Measurement Approach in combination with either the Basic Indicator Approach or the Standardised Approach competent authorities shall impose the following additional conditions for granting permission:
on the date of implementation of an Advanced Measurement Approach, a significant part of the institution's operational risks are captured by that Approach;
the institution takes a commitment to apply the Advanced Measurement Approach across a material part of its operations within a time schedule that was submitted to and approved by its competent authorities.
A competent authority shall grant such permission only where the institution has committed to apply the Standardised Approach within a time schedule that was submitted to and approved by the competent authority.
EBA shall develop draft regulatory technical standards to specify the following:
the conditions that competent authorities shall use when assessing the methodology referred to in point (a) of paragraph 2;
the conditions that the competent authorities shall use when deciding whether to impose the additional conditions referred to in paragraph 3.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2016.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
CHAPTER 2
Basic Indicator Approach
Article 315
Own funds requirement
Institutions shall calculate the average over three years of the relevant indicator on the basis of the last three twelve-monthly observations at the end of the financial year. When audited figures are not available, institutions may use business estimates.
Article 316
Relevant indicator
For institutions applying accounting standards established by Directive 86/635/EEC, based on the accounting categories for the profit and loss account of institutions under Article 27 of that Directive, the relevant indicator is the sum of the elements listed in Table 1 of this paragraph. Institutions shall include each element in the sum with its positive or negative sign.
Table 1
1 Interest receivable and similar income
2 Interest payable and similar charges
3 Income from shares and other variable/fixed-yield securities
4 Commissions/fees receivable
5 Commissions/fees payable
6 Net profit or net loss on financial operations
7 Other operating income
Institutions shall adjust these elements to reflect the following qualifications:
institutions shall calculate the relevant indicator before the deduction of any provisions and operating expenses. Institutions shall include in operating expenses fees paid for outsourcing services rendered by third parties which are not a parent or subsidiary of the institution or a subsidiary of a parent which is also the parent of the institution. Institutions may use expenditure on the outsourcing of services rendered by third parties to reduce the relevant indicator where the expenditure is incurred from an undertaking subject to rules under, or equivalent to, this Regulation;
institutions shall not use the following elements in the calculation of the relevant indicator:
realised profits/losses from the sale of non-trading book items;
income from extraordinary or irregular items;
income derived from insurance.
when revaluation of trading items is part of the profit and loss statement, institutions may include revaluation. When institutions apply Article 36(2) of Directive 86/635/EEC, they shall include revaluation booked in the profit and loss account.
By way of derogation from the first subparagraph of this paragraph, institutions may choose not to apply the accounting categories for the profit and loss account under Article 27 of Directive 86/635/EEC to financial and operating leases for the purpose of calculating the relevant indicator, and may instead:
include interest income from financial and operating leases and profits from leased assets in the category referred to in point 1 of Table 1;
include interest expense from financial and operating leases, losses, depreciation and impairment of operating leased assets in the category referred to in point 2 of Table 1.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2017.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
CHAPTER 3
Standardised Approach
Article 317
Own funds requirement
Where an institution can prove to its competent authority that, due to a merger, an acquisition or a disposal of entities or activities, using a three year average to calculate the relevant indicator would lead to a biased estimation for the own funds requirement for operational risk, the competent authority may permit institutions to amend the calculation in a way that would take into account such events and shall duly inform EBA thereof. In such circumstances, the competent authority may, on its own initiative, also require an institution to amend the calculation.
Where an institution has been in operation for less than three years it may use forward-looking business estimates in calculating the relevant indicator, provided that it starts using historical data as soon as it is available.
Table 2
Business line |
List of activities |
Percentage (beta factor) |
Corporate finance |
Underwriting of financial instruments or placing of financial instruments on a firm commitment basis Services related to underwriting Investment advice Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to the mergers and the purchase of undertakings Investment research and financial analysis and other forms of general recommendation relating to transactions in financial instruments |
18 % |
Trading and sales |
Dealing on own account Money broking Reception and transmission of orders in relation to one or more financial instruments Execution of orders on behalf of clients Placing of financial instruments without a firm commitment basis Operation of Multilateral Trading Facilities |
18 % |
Retail brokerage (Activities with natural persons or with SMEs meeting the criteria set out in Article 123 for the retail exposure class) |
Reception and transmission of orders in relation to one or more financial instruments Execution of orders on behalf of clients Placing of financial instruments without a firm commitment basis |
12 % |
Commercial banking |
Acceptance of deposits and other repayable funds Lending Financial leasing Guarantees and commitments |
15 % |
Retail banking (Activities with natural persons or with SMEs meeting the criteria set out in Article 123 for the retail exposure class) |
Acceptance of deposits and other repayable funds Lending Financial leasing Guarantees and commitments |
12 % |
Payment and settlement |
Money transmission services, Issuing and administering means of payment |
18 % |
Agency services |
Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management |
15 % |
Asset management |
Portfolio management Managing of UCITS Other forms of asset management |
12 % |
Article 318
Principles for business line mapping
Institutions shall apply the following principles for business line mapping:
institutions shall map all activities into the business lines in a mutually exclusive and jointly exhaustive manner;
institutions shall allocate any activity which cannot be readily mapped into the business line framework, but which represents an ancillary activity to an activity included in the framework, to the business line it supports. Where more than one business line is supported through the ancillary activity, institutions shall use an objective-mapping criterion;
where an activity cannot be mapped into a particular business line then institutions shall use the business line yielding the highest percentage. The same business line equally applies to any ancillary activity associated with that activity;
institutions may use internal pricing methods to allocate the relevant indicator between business lines. Costs generated in one business line which are imputable to a different business line may be reallocated to the business line to which they pertain;
the mapping of activities into business lines for operational risk capital purposes shall be consistent with the categories institutions use for credit and market risks;
senior management shall be responsible for the mapping policy under the control of the management body of the institution;
institutions shall subject the mapping process to business lines to independent review.
EBA shall submit those draft implementing technical standards to the Commission by 31 December 2017.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Article 319
Alternative Standardised Approach
Under the Alternative Standardised Approach, for the business lines ‘retail banking’ and ‘commercial banking’, institutions shall apply the following:
the relevant indicator is a normalised income indicator equal to the nominal amount of loans and advances multiplied by 0,035;
the loans and advances consist of the total drawn amounts in the corresponding credit portfolios. For the ‘commercial banking’ business line, institutions shall also include securities held in the non trading book in the nominal amount of loans and advances.
To be permitted to use the Alternative Standardised Approach, an institution shall meet all the following conditions:
its retail or commercial banking activities shall account for at least 90 % of its income;
a significant proportion of its retail or commercial banking activities shall comprise loans associated with a high PD;
the Alternative Standardised Approach provides an appropriate basis for calculating its own funds requirement for operational risk.
Article 320
Criteria for the Standardised Approach
The criteria referred to in the first subparagraph of Article 312(1) are the following:
an institution shall have in place a well-documented assessment and management system for operational risk with clear responsibilities assigned for this system. It shall identify its exposures to operational risk and track relevant operational risk data, including material loss data. This system shall be subject to regular independent review carried out by an internal or external party possessing the necessary knowledge to carry out such review;
an institution's operational risk assessment system shall be closely integrated into the risk management processes of the institution. Its output shall be an integral part of the process of monitoring and controlling the institution's operational risk profile;
an institution shall implement a system of reporting to senior management that provides operational risk reports to relevant functions within the institution. An institution shall have in place procedures for taking appropriate action according to the information within the reports to management.
CHAPTER 4
Advanced measurement approaches
Article 321
Qualitative standards
The qualitative standards referred to in Article 312(2) are the following:
an institution's internal operational risk measurement system shall be closely integrated into its day-to-day risk management processes;
an institution shall have an independent risk management function for operational risk;
an institution shall have in place regular reporting of operational risk exposures and loss experience and shall have in place procedures for taking appropriate corrective action;
an institution's risk management system shall be well documented. An institution shall have in place routines for ensuring compliance and policies for the treatment of non-compliance;
an institution shall subject its operational risk management processes and measurement systems to regular reviews performed by internal or external auditors;
an institution's internal validation processes shall operate in a sound and effective manner;
data flows and processes associated with an institution's risk measurement system shall be transparent and accessible.
Article 322
Quantitative Standards
The standards relating to process are the following:
an institution shall calculate its own funds requirement as comprising both expected loss and unexpected loss, unless expected loss is adequately captured in its internal business practices. The operational risk measure shall capture potentially severe tail events, achieving a soundness standard comparable to a 99,9 % confidence interval over a one year period;
an institution's operational risk measurement system shall include the use of internal data, external data, scenario analysis and factors reflecting the business environment and internal control systems as set out in paragraphs 3 to 6. An institution shall have in place a well documented approach for weighting the use of these four elements in its overall operational risk measurement system;
an institution's risk measurement system shall capture the major drivers of risk affecting the shape of the tail of the estimated distribution of losses;
an institution may recognise correlations in operational risk losses across individual operational risk estimates only where its systems for measuring correlations are sound, implemented with integrity, and take into account the uncertainty surrounding any such correlation estimates, particularly in periods of stress. An institution shall validate its correlation assumptions using appropriate quantitative and qualitative techniques;
an institution's risk measurement system shall be internally consistent and shall avoid the multiple counting of qualitative assessments or risk mitigation techniques recognised in other areas of this Regulation.
The standards relating to internal data are the following:
an institution shall base its internally generated operational risk measures on a minimum historical observation period of five years. When an institution first moves to an Advanced Measurement Approach, it may use a three-year historical observation period;
an institution shall be able to map their historical internal loss data into the business lines defined in Article 317 and into the event types defined in Article 324, and to provide these data to competent authorities upon request. In exceptional circumstances, an institution may allocate loss events which affect the entire institution to an additional business line ‘corporate items’. An institution shall have in place documented, objective criteria for allocating losses to the specified business lines and event types. An institution shall record the operational risk losses that are related to credit risk and that the institution has historically included in the internal credit risk databases in the operational risk databases and shall identify them separately. Such losses shall not be subject to the operational risk charge, provided that the institution is required to continue to treat them as credit risk for the purposes of calculating own funds requirements. An institution shall include operational risk losses that are related to market risks in the scope of the own funds requirement for operational risk;
an institution's internal loss data shall be comprehensive in that it captures all material activities and exposures from all appropriate sub-systems and geographic locations. An institution shall be able to justify that any excluded activities or exposures, both individually and in combination, would not have a material impact on the overall risk estimates. An institution shall define appropriate minimum loss thresholds for internal loss data collection;
aside from information on gross loss amounts, an institution shall collect information about the date of the loss event, any recoveries of gross loss amounts, as well as descriptive information about the drivers or causes of the loss event;
an institution shall have in place specific criteria for assigning loss data arising from a loss event in a centralised function or an activity that spans more than one business line, as well as from related loss events over time;
an institution shall have in place documented procedures for assessing the on-going relevance of historical loss data, including those situations in which judgement overrides, scaling, or other adjustments may be used, to what extent they may be used and who is authorised to make such decisions.
The qualifying standards relating to external data are the following:
an institution's operational risk measurement system shall use relevant external data, especially when there is reason to believe that the institution is exposed to infrequent, yet potentially severe, losses. An institution shall have a systematic process for determining the situations for which external data shall be used and the methodologies used to incorporate the data in its measurement system;
an institution shall regularly review the conditions and practices for external data and shall document them and subject them to periodic independent review.
The qualifying standards relating to business environment and internal control factors are the following:
an institution's firm-wide risk assessment methodology shall capture key business environment and internal control factors that can change the institutions operational risk profile;
an institution shall justify the choice of each factor as a meaningful driver of risk, based on experience and involving the expert judgment of the affected business areas;
an institution shall be able to justify to competent authorities the sensitivity of risk estimates to changes in the factors and the relative weighting of the various factors. In addition to capturing changes in risk due to improvements in risk controls, an institution's risk measurement framework shall also capture potential increases in risk due to greater complexity of activities or increased business volume;
an institution shall document its risk measurement framework and shall subject it to independent review within the institution and by competent authorities. Over time, an institution shall validate and reassess the process and the outcomes through comparison to actual internal loss experience and relevant external data.
Article 323
Impact of insurance and other risk transfer mechanisms
The insurance and the institutions' insurance framework shall meet all the following conditions:
the insurance policy has an initial term of no less than one year. For policies with a residual term of less than one year, an institution shall make appropriate haircuts reflecting the declining residual term of the policy, up to a full 100 % haircut for policies with a residual term of 90 days or less;
the insurance policy has a minimum notice period for cancellation of the contract of 90 days;
the insurance policy has no exclusions or limitations triggered by supervisory actions or, in the case of a failed institution, that preclude the institution's receiver or liquidator from recovering the damages suffered or expenses incurred by the institution, except in respect of events occurring after the initiation of receivership or liquidation proceedings in respect of the institution. However, the insurance policy may exclude any fine, penalty, or punitive damages resulting from actions by the competent authorities;
the risk mitigation calculations shall reflect the insurance coverage in a manner that is transparent in its relationship to, and consistent with, the actual likelihood and impact of loss used in the overall determination of operational risk capital;
the insurance is provided by a third party entity. In the case of insurance through captives and affiliates, the exposure has to be laid off to an independent third party entity that meets the eligibility criteria set out in paragraph 2;
the framework for recognising insurance is well reasoned and documented.
The methodology for recognising insurance shall capture all the following elements through discounts or haircuts in the amount of insurance recognition:
the residual term of the insurance policy, where less than one year;
the policy's cancellation terms, where less than one year;
the uncertainty of payment as well as mismatches in coverage of insurance policies.
Article 324
Loss event type classification
The loss events types referred to in point (b) of Article 322(3) are the following:
Table 3
Event-Type Category |
Definition |
Internal fraud |
Losses due to acts of a type intended to defraud, misappropriate property or circumvent regulations, the law or company policy, excluding diversity/discrimination events, which involves at least one internal party |
External fraud |
Losses due to acts of a type intended to defraud, misappropriate property or circumvent the law, by a third party |
Employment Practices and Workplace Safety |
Losses arising from acts inconsistent with employment, health or safety laws or agreements, from payment of personal injury claims, or from diversity/discrimination events |
Clients, Products & Business Practices |
Losses arising from an unintentional or negligent failure to meet a professional obligation to specific clients (including fiduciary and suitability requirements), or from the nature or design of a product |
Damage to Physical Assets |
Losses arising from loss or damage to physical assets from natural disaster or other events |
Business disruption and system failures |
Losses arising from disruption of business or system failures |
Execution, Delivery & Process Management |
Losses from failed transaction processing or process management, from relations with trade counterparties and vendors |
TITLE IV
OWN FUNDS REQUIREMENTS FOR MARKET RISK
CHAPTER 1
General provisions
Article 325
Approaches for calculating the own funds requirements for market risk
An institution shall calculate the own funds requirements for market risk of all trading book positions and non-trading book positions that are subject to foreign exchange risk or commodity risk in accordance with the following approaches:
the standardised approach referred to in paragraph 2;
the internal model approach set out in Chapter 5 of this Title for those risk categories for which the institution has been granted permission in accordance with Article 363 to use that approach.
The own funds requirements for market risk calculated in accordance with the standardised approach referred to in point (a) of paragraph 1 shall mean the sum of the following own funds requirements, as applicable:
the own funds requirements for position risk referred to in Chapter 2;
the own funds requirements for foreign exchange risk referred to in Chapter 3;
the own funds requirements for commodity risk referred to in Chapter 4.
An institution that is not exempted from the reporting requirements set out in Article 430b in accordance with Article 325a shall report the calculation in accordance with Article 430b for all trading book positions and non-trading book positions that are subject to foreign exchange risk or commodity risk in accordance with the following approaches:
the alternative standardised approach set out in Chapter 1a;
the alternative internal model approach set out in Chapter 1b.
Securitisation positions and nth-to-default credit derivatives that meet all the following criteria shall be included in the ACTP:
the positions are neither re-securitisation positions, nor options on a securitisation tranche, nor any other derivatives of securitisation exposures that do not provide a pro-rata share in the proceeds of a securitisation tranche;
all their underlying instruments are:
single-name instruments, including single-name credit derivatives, for which a liquid two-way market exists;
commonly-traded indices based on the instruments referred to in point (i).
A two-way market is considered to exist where there are independent bona fide offers to buy and sell, so that a price that is reasonably related to the last sales price or current bona fide competitive bid and offer quotations can be determined within one day and settled at that price within a relatively short time conforming to trade custom.
Positions with any of the following underlying instruments shall not be included in the ACTP:
underlying instruments that are assigned to the exposure classes referred to in point (h) or (i) of Article 112;
a claim on a special purpose entity, collateralised, directly or indirectly, by a position that, in accordance with paragraph 6, would itself not be eligible for inclusion in the ACTP.
EBA shall submit those draft regulatory technical standards to the Commission by 28 September 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 325a
Exemptions from specific reporting requirements for market risk
An institution shall be exempted from the reporting requirement set out in Article 430b, provided that the size of the institution's on- and off-balance-sheet business that is subject to market risk is equal to or less than each of the following thresholds, on the basis of an assessment carried out on a monthly basis using data as of the last day of the month:
10 % of the institution's total assets;
EUR 500 million.
Institutions shall calculate the size of their on- and off-balance-sheet business that is subject to market risk using data as of the last day of each month in accordance with the following requirements:
all the positions assigned to the trading book shall be included, except credit derivatives that are recognised as internal hedges against non-trading book credit risk exposures and the credit derivative transactions that perfectly offset the market risk of the internal hedges as referred to in Article 106(3);
all non-trading book positions that are subject to foreign exchange risk or commodity risk shall be included;
all positions shall be valued at their market values on that date, except for positions referred to in point (b); where the market value of a trading book position is not available on a given date, institutions shall take a fair value for the trading book position on that date; where the fair value and market value of a trading book position are not available on a given date, institutions shall take the most recent market value or fair value for that position;
all non-trading book positions that are subject to foreign exchange risk shall be considered as an overall net foreign exchange position and valued in accordance with Article 352;
all the non-trading book positions that are subject to commodity risk shall be valued in accordance with Articles 357 and 358;
the absolute value of long positions shall be added to the absolute value of short positions.
The exemption from the reporting requirements laid down in Article 430b shall cease to apply within three months of either of the following cases:
the institution does not meet the condition set out in point (a) or (b) of paragraph 1 for three consecutive months; or
the institution does not meet the condition set out in point (a) or (b) of paragraph 1 during more than 6 out of the last 12 months.
Article 325b
Permission for consolidated requirements
Institutions may apply paragraph 1 only with the permission of the competent authorities which shall be granted if all the following conditions are met:
there is a satisfactory allocation of own funds within the group;
the regulatory, legal or contractual framework in which the institutions operate guarantees mutual financial support within the group.
Where there are undertakings located in third countries, all the following conditions shall be met in addition to those set out in paragraph 2:
such undertakings have been authorised in a third country and either satisfy the definition of a credit institution or are recognised third-country investment firms;
on an individual basis, such undertakings comply with own funds requirements equivalent to those laid down in this Regulation;
no regulations exist in the third countries in question which might significantly affect the transfer of funds within the group.
CHAPTER 1a
Alternative standardised approach
Article 325c
Scope and structure of the alternative standardised approach
Institutions shall calculate the own funds requirements for market risk in accordance with the alternative standardised approach for a portfolio of trading book positions or non-trading book positions that are subject to foreign exchange or commodity risk as the sum of the following three components:
the own funds requirement under the sensitivities-based method set out in Section 2;
the own funds requirement for the default risk set out in Section 5 which is only applicable to the trading book positions referred to in that Section;
the own funds requirement for residual risks set out in Section 4 which is only applicable to the trading book positions referred to in that Section.
Article 325d
Definitions
For the purposes of this Chapter, the following definitions apply:
‘risk class’ means one of the following seven categories:
general interest rate risk;
credit spread risk (CSR) for non-securitisation;
credit spread risk for securitisation not included in the alternative correlation trading portfolio (non-ACTP CSR);
credit spread risk for securitisation included in the alternative correlation trading portfolio (ACTP CSR);
equity risk;
commodity risk;
foreign exchange risk;
‘sensitivity’ means the relative change in the value of a position, as a result of a change in the value of one of the relevant risk factors of the position, calculated with the institution's pricing model in accordance with Subsection 2 of Section 3;
‘bucket’ means a sub-category of positions within one risk class with a similar risk profile to which a risk weight as defined in Subsection 1 of Section 3 is assigned.
Article 325e
Components of the sensitivities-based method
Institutions shall calculate the own funds requirement for market risk under the sensitivities-based method by aggregating the following three own funds requirements in accordance with Article 325h:
own funds requirements for delta risk which capture the risk of changes in the value of an instrument due to movements in its non-volatility related risk factors;
own funds requirements for vega risk which capture the risk of changes in the value of an instrument due to movements in its volatility-related risk factors;
own funds requirements for curvature risk which capture the risk of changes in the value of an instrument due to movements in the main non-volatility related risk factors not captured by the own funds requirements for delta risk.
For the purpose of the calculation referred to in paragraph 1,
all the positions of instruments with optionality shall be subject to the own funds requirements referred to in points (a), (b) and (c) of paragraph 1 for the risks other than exotic underlyings of the instruments as referred to in point (a) of Article 325u(2);
all the positions of instruments without optionality shall be subject to the own funds requirements referred to in point (a) of paragraph 1 for the risks other than exotic underlyings of the instruments as referred to in point (a) of Article 325u(2).
For the purposes of this Chapter, instruments with optionality include, among others: calls, puts, caps, floors, swap options, barrier options and exotic options. Embedded options, such as prepayment or behavioural options, shall be considered to be stand-alone positions in options for the purpose of calculating the own funds requirements for market risk.
For the purposes of this Chapter, instruments whose cash flows can be written as a linear function of the underlying's notional amount shall be considered to be instruments without optionality.
An institution that chooses to use the approach set out in the first subparagraph shall notify its competent authority thereof at least three months before the first use. After those three months have elapsed and provided that the competent authority has not objected, the institution may use that approach until the competent authority informs the institution that it is no longer permitted to do so.
An institution that wishes to stop using the approach set out in the first subparagraph shall notify its competent authority thereof at least three months before stopping that use. The institution may stop applying that approach, unless the competent authority has objected within that three-month period.
Article 325f
Own funds requirements for delta and vega risks
The net sensitivities to each risk factor within each bucket shall be multiplied by the corresponding risk weights set out in Section 6, giving rise to weighted sensitivities to each risk factor within that bucket in accordance with the following formula:
WSk |
= |
the weighted sensitivities; |
RWk |
= |
the risk weights; and |
sk |
= |
the risk factor. |
The weighted sensitivities to the different risk factors within each bucket shall be aggregated in accordance with the formula below, where the quantity within the square root function is floored at zero, giving rise to the bucket-specific sensitivity. The corresponding correlations for weighted sensitivities within the same bucket (ρkl), set out in Section 6, shall be used.
Kb |
= |
the bucket-specific sensitivity; and |
WS |
= |
the weighted sensitivities. |
The bucket-specific sensitivity shall be calculated for each bucket within a risk class in accordance with paragraphs 5, 6 and 7. Once the bucket-specific sensitivity has been calculated for all buckets, weighted sensitivities to all risk factors across buckets shall be aggregated in accordance with the formula below, using the corresponding correlations γbc for weighted sensitivities in different buckets set out in Section 6, giving rise to the risk-class specific own funds requirement for delta or vega risk:
where:
Sb |
= |
Σk WSk for all risk factors in bucket b and Sc = Σk WSk in bucket c; where those values for Sb and Sc produce a negative number for the overall sum of |
Sb |
= |
max [min (Σk WSk, Kb), – Kb] for all risk factors in bucket b and |
Sc |
= |
max [min (Σk WSk, Kc), – Kc] for all risk factors in bucket c. |
The risk-class specific own funds requirements for delta or vega risk shall be calculated for each risk class in accordance with paragraphs 1 to 8.
Article 325g
Own funds requirements for curvature risk
For a given risk factor, institutions shall perform those calculations on a net basis across all the positions of the instruments subject to the own funds requirement for curvature risk that contain that risk factor.
where:
i |
= |
the index that denotes all the positions of instruments referred to in paragraph 1 and including risk factor k; |
xk |
= |
the current value of risk factor k; |
Vi (xk ) |
= |
the value of instrument i as estimated by the pricing model of the institution based on the current value of risk factor k; |
|
= |
the value of instrument i as estimated by the pricing model of the institution based on an upward shift of the value of risk factor k; |
|
= |
the value of instrument i as estimated by the pricing model of the institution based on a downward shift of the value of risk factor k; |
|
= |
the risk weight applicable to risk factor k determined in accordance with Section 6; |
sik |
= |
the delta sensitivity of instrument i with respect to risk factor k, calculated in accordance with Article 325r. |
For the purposes of the calculation referred to in paragraph 2, where xk is a curve of risk factors allocated to the GIRR, CSR and commodity risk classes, sik shall be the sum of the delta sensitivities to the risk factor of the curve across all tenors of the curve.
where:
b |
= |
the index that denotes a bucket of a given risk class; |
Kb |
= |
own funds requirements for curvature risk for bucket b; |
;
;
;
pkl |
= |
the intra-bucket correlations between risk factors k and l as prescribed in Section 6; |
k, l |
= |
the indices that denote all the risk factors of instruments referred to in paragraph 1 that are assigned to bucket b; |
( |
= |
the upward net curvature risk position; |
( |
= |
the downward net curvature risk position. |
where:
b, c |
= |
the indices that denote all the buckets of a given risk class that corresponds to instruments referred to in paragraph 1; |
Kb |
= |
own funds requirements for curvature risk for bucket b; |
;
;
γbc |
= |
the inter-bucket correlations between buckets b and c as set out in Section 6. |
Article 325h
Aggregation of risk-class specific own funds requirements for delta, vega and curvature risks
The process to calculate the risk-class specific own funds requirements for delta, vega and curvature risks described in Articles 325f and 325g shall be performed three times per risk class, each time using a different set of correlation parameters ρkl (correlation between risk factors within a bucket) and γbc (correlation between buckets within a risk class). Each of those three sets shall correspond to a different scenario, as follows:
the medium correlations scenario, whereby the correlation parameters ρkl and γbc remain unchanged from those specified in Section 6;
the high correlations scenario, whereby the correlation parameters ρkl and γbc that are specified in Section 6 shall be uniformly multiplied by 1,25, with ρkl and γbc subject to a cap at 100 %;
the ‘low correlations’ scenario, whereby the correlation parameters ρkl and γbc that are specified in Section 6 shall be replaced by and
, respectively.
Article 325i
Treatment of index instruments and other multi-underlying instruments
Institutions shall use a look-through approach for index and other multi-underlying instruments in accordance with the following:
for the purposes of calculating the own funds requirements for delta and curvature risk, institutions shall consider that they hold individual positions directly in the underlying constituents of the index or other multi-underlying instruments, except for a position in an index included in the ACTP for which they shall calculate a single sensitivity to the index;
institutions are allowed to net the sensitivities to a risk factor of a given constituent of an index instrument or other multi-underlying instrument with the sensitivities to the same risk factor of the same constituent of single name instruments, except for positions included in the ACTP;
for the purposes of calculating the own funds requirements for vega risk, institutions may either consider that they directly hold individual positions in the underlying constituents of the index or other multi-underlying instrument, or calculate a single sensitivity to the underlying of that instrument. In the latter case, institutions shall assign the single sensitivity to the relevant bucket as set out in Subsection 1 of Section 6 as follows:
where, taking into account the weightings of that index, more than 75 % of constituents in that index would be mapped to the same bucket, institutions shall assign the sensitivity to that bucket and treat it as a single-name sensitivity in that bucket;
in all other cases, institutions shall assign the sensitivity to the relevant index bucket.
By way of derogation from point (a) of paragraph 1, institutions may calculate a single sensitivity to a position in a listed equity or credit index for the purposes of calculating the own funds requirements for delta and curvature risks provided the listed equity or credit index meets the conditions set out in paragraph 3. In that case, institutions shall assign the single sensitivity to the relevant bucket as set out in Subsection 1 of Section 6 as follows:
where, taking into account the weightings of that listed index, more than 75 % of constituents in that listed index would be mapped to the same bucket, that sensitivity shall be assigned to that bucket and treated as a single-name sensitivity in that bucket;
in all other cases, institutions shall assign the sensitivity to the relevant listed index bucket.
Institutions may use the approach set out in paragraph 2 for instruments referencing a listed equity or credit index where all of the following conditions are met:
the constituents of the listed index and their respective weightings in that index are known;
the listed index contains at least 20 constituents;
no single constituent contained within the listed index represents more than 25 % of the total market capitalisation of that index;
no set comprising one tenth of the total number of constituents of the listed index, rounded up to the next integer, represents more than 60 % of the total market capitalisation of that index;
the total market capitalisation of all the constituents of the listed index is no less than EUR 40 billion.
Article 325j
Treatment of collective investment undertakings
An institution shall calculate the own funds requirements for market risk of a position in a CIU using one of the following approaches:
where an institution is able to obtain sufficient information about the individual underlying exposures of the CIU, the institution shall calculate the own funds requirements for market risk of that CIU position by looking through to the underlying positions of the CIU as if those positions were directly held by the institution;
where the institution is not able to obtain sufficient information about the individual underlying exposures of the CIU, but the institution has knowledge of the content the mandate of the CIU and daily price quotes for the CIU can be obtained, the institution shall calculate the own funds requirements for market risk of that CIU position by using one of the following approaches:
the institution may consider the position in the CIU as a single equity position allocated to the bucket ‘other sector’ in Table 8 of Article 325ap(1);
upon permission from its competent authority, an institution may calculate the own funds requirements for market risk of the CIU in accordance with the limits set in the CIU’s mandate and relevant law;
where the institution meets neither the conditions in point (a) nor (b), the institution shall allocate the CIU to the non-trading book.
An institution that uses one of the approaches set out in point (b) shall apply the own funds requirement for the default risk set out in Section 5 of this Chapter and the residual risk add-on set out in Section 4 of this Chapter where the mandate of the CIU implies that some exposures in the CIU shall be subject to those own funds requirements.
An institution that uses the approach set out in point (ii) of point (b) may calculate the own funds requirements for counterparty credit risk and own funds requirements for credit valuation adjustment risk of derivative positions of the CIU, using the simplified approach set out in paragraph 3 of Article 132a.
However, where data for the last 12 months are not fully available, an institution may, subject to permission from the institution’s competent authority, use an annualised return difference from a period shorter than 12 months.
For the purposes of point (b) of paragraph 1, an institution shall carry out the calculations under the following provisions:
for the purposes of calculating the own funds requirement under the sensitivities-based method set out in Section 2 of this Chapter, the CIU shall first take position to the maximum extent allowed under its mandate or relevant law in the exposures attracting the highest own funds requirements set out under that Section and shall then continue taking positions in descending order until the maximum total loss limit is reached;
for the purposes of the own fund requirements for the default risk set out in Section 5 of this Chapter, the CIU shall first take position to the maximum extent allowed under its mandate or relevant law in the exposures attracting the highest own funds requirements set out under that Section and shall then continue taking positions in descending order until the maximum total loss limit is reached;
the CIU shall apply leverage to the maximum extent allowed under its mandate or relevant law, where applicable.
The own funds requirements for all positions in the same CIU for which the calculations referred to in the first subparagraph are used shall be calculated on a stand-alone basis as a separate portfolio using the approach set out in this Chapter.
Article 325k
Underwriting positions
Institutions shall apply one of the appropriate multiplying factors listed in Table 1 to the net sensitivities of all the underwriting positions in each individual issuer, excluding the underwriting positions which are subscribed or sub-underwritten by third parties on the basis of formal agreements, and calculate the own funds requirements for market risk in accordance with the approach set out in this Chapter on the basis of the adjusted net sensitivities.
Table 1
Business day 0 |
0 % |
Business day 1 |
10 % |
Business days 2 and 3 |
25 % |
Business day 4 |
50 % |
Business day 5 |
75 % |
After business day 5 |
100 % |
For the purposes of this Article, ‘business day 0’ means the business day on which the institution becomes unconditionally committed to accepting a known quantity of securities at an agreed price.
Article 325l
General interest rate risk factors
The delta general interest rate risk factors applicable to interest rate-sensitive instruments shall be the relevant risk-free rates per currency and per each of the following maturities: 0,25 years, 0,5 years, 1 year, 2 years, 3 years, 5 years, 10 years, 15 years, 20 years, 30 years. Institutions shall assign risk factors to the specified vertices by linear interpolation or by using a method that is most consistent with the pricing functions used by the independent risk control function of the institution to report market risk or profits and losses to senior management.
Where the data on market-implied swap curves described in paragraph 2 and the first subparagraph of this paragraph are insufficient, the risk-free rates may be derived from the most appropriate sovereign bond curve for a given currency.
Where institutions use the general interest rate risk factors derived in accordance with the procedure set out in the second subparagraph of this paragraph for sovereign debt instruments, the sovereign debt instrument shall not be exempted from the own funds requirements for credit spread risk. In those cases, where it is not possible to disentangle the risk-free rate from the credit spread component, the sensitivity to the risk factor shall be allocated both to the general interest rate risk and to credit spread risk classes.
Institutions shall apply additional risk factors for inflation risk to debt instruments whose cash flows are functionally dependent on inflation rates. Those additional risk factors shall consist of one vector of market-implied inflation rates of different maturities per currency. For each instrument, the vector shall contain as many components as there are inflation rates used as variables by the institution's pricing model for that instrument.
Each cross-currency basis risk factor shall consist of one vector of cross-currency basis of different maturities per currency. For each debt instrument, the vector shall contain as many components as there are cross-currency bases used as variables by the institution's pricing model for that instrument. Each currency shall constitute a different bucket.
Institutions shall calculate the sensitivity of the instrument to the cross-currency basis risk factor as the change in the value of the instrument, according to its pricing model, as a result of a 1 basis point shift in each of the components of the vector. Each currency shall constitute a separate bucket. Within each bucket there shall be two possible distinct risk factors: basis over euro and basis over US dollar, regardless of the number of components there are in each cross-currency basis vector. The maximum number of net sensitivities per bucket shall be two.
For netting purposes, institutions shall consider implied volatilities linked to the same risk-free rates and mapped to the same maturities to constitute the same risk factor.
Where institutions map implied volatilities to the maturities as referred to in this paragraph, the following requirements shall apply:
where the maturity of the option is aligned with the maturity of the underlying, a single risk factor shall be considered, which shall be mapped to that maturity;
where the maturity of the option is shorter than the maturity of the underlying, the following risk factors shall be considered as follows:
the first risk factor shall be mapped to the maturity of the option;
the second risk factor shall be mapped to the residual maturity of the underlying of the option at the expiry date of the option.
There shall be no curvature risk own funds requirements for inflation and cross currency basis risks.
Article 325m
Credit spread risk factors for non-securitisation
Article 325n
Credit spread risk factors for securitisation
Institutions shall apply the credit spread risk factors referred to in paragraph 5 to securitisation positions that are not included in the ACTP, as referred to in Article 325(6), (7) and (8).
The buckets applicable to the credit spread risk for securitisations that are not included in the ACTP shall be specific to that risk-class category, as referred to in Section 6.
The credit spread risk factors to be applied by institutions to securitisation positions that are included in the ACTP are the following:
the delta risk factors shall be all the relevant credit spread rates of the issuers of the underlying exposures of the securitisation position, inferred from the relevant debt instruments and credit default swaps, and for each of the following maturities: 0,5 years, 1 year, 3 years, 5 years, 10 years.
the vega risk factors applicable to options with securitisation positions that are included in the ACTP as underlyings shall be the implied volatilities of the credit spreads of the issuers of the underlying exposures of the securitisation position, inferred as described in point (a) of this paragraph, which shall be mapped to the following maturities in accordance with the maturity of the corresponding option subject to own funds requirements: 0,5 years, 1 year, 3 years, 5 years, 10 years.
the curvature risk factors shall be the relevant credit spread yield curves of the issuers of the underlying exposures of the securitisation position expressed as a vector of credit spread rates for different maturities, inferred as indicated in point (a) of this paragraph; for each instrument, the vector shall contain as many components as there are different maturities of credit spread rates that are used as variables by the institution's pricing model for that instrument.
The credit spread risk factors to be applied by institutions to securitisation positions that are not included in the ACTP shall refer to the spread of the tranche rather than the spread of the underlying instruments and shall be the following:
the delta risk factors shall be the relevant tranche credit spread rates, mapped to the following maturities, in accordance with the maturity of the tranche: 0,5 years, 1 year, 3 years, 5 years, 10 years;
the vega risk factors applicable to options with securitisation positions that are not included in the ACTP as underlyings shall be the implied volatilities of the credit spreads of the tranches, each of them mapped to the following maturities in accordance with the maturity of the option subject to own funds requirements: 0,5 years, 1 year, 3 years, 5 years, 10 years;
the curvature risk factors shall be the same as those described in point (a) of this paragraph; to all those risk factors, a common risk weight shall be applied, as referred to in Section 6.
Article 325o
Equity risk factors
For the purposes of equity risk, a specific equity repo curve shall constitute a single risk factor, which is expressed as a vector of repo rates for different maturities. For each instrument, the vector shall contain as many components as there are different maturities of repo rates that are used as variables by the institution's pricing model for that instrument.
Institutions shall calculate the sensitivity of an instrument to an equity risk factor as the change in the value of the instrument, according to its pricing model, as a result of a 1 basis point shift in each of the components of the vector. Institutions shall offset sensitivities to the repo rate risk factor of the same equity security, regardless of the number of components of each vector.
Article 325p
Commodity risk factors
The sensitivity of the instrument to each risk factor used in the curvature risk formula shall be calculated as specified in Article 325g. For the purposes of curvature risk, institutions shall consider vectors having a different number of components to constitute the same risk factor, provided that those vectors correspond to the same commodity type.
Article 325q
Foreign exchange risk factors
By way of derogation from paragraphs 1 and 3, an institution may replace, subject to permission from its competent authority, its reporting currency by another currency (“the base currency”) in all the spot exchange rates to express the delta and curvature foreign exchange risk factors where all of the following conditions are met:
the institution uses only one base currency;
the institution applies the base currency consistently to all its trading book and non-trading book positions;
the institution has demonstrated to the satisfaction of its competent authority that:
using the chosen base currency provides an appropriate risk representation for the institution’s positions subject to foreign exchange risks;
the choice of base currency is compatible with the manner in which the institution manages those foreign exchange risks internally;
the choice of base currency is not driven primarily by the desire to reduce the institution’s own funds requirements;
the institution takes into account the translation risk between the reporting currency and the base currency.
An institution that has been permitted to use a base currency as set out in the first subparagraph shall convert the resulting own funds requirements for foreign exchange risk into the reporting currency using the prevailing spot exchange rate between the base currency and the reporting currency.
Article 325r
Delta risk sensitivities
Institutions shall calculate delta general interest rate risk (GIRR) sensitivities as follows:
the sensitivities to risk factors consisting of risk-free rates shall be calculated as follows:
where:
|
= |
the sensitivities to risk factors consisting of risk-free rates; |
rkt |
= |
the rate of a risk-free curve k with maturity t; |
Vi (.) |
= |
the pricing function of instrument i; and |
x,y |
= |
risk factors other than rkt in the pricing function Vi; |
the sensitivities to risk factors consisting of inflation risk and cross-currency basis shall be calculated as follows:
where:
|
= |
the sensitivities to risk factors consisting of inflation risk and cross-currency basis; |
|
= |
a vector of m components representing the implied inflation curve or the cross-currency basis curve for a given currency j with m being equal to the number of inflation or cross-currency related variables used in the pricing model of instrument i; |
|
= |
the unity matrix of dimension (1 × m); |
Vi (.) |
= |
the pricing function of the instrument i; and |
y, z |
= |
other variables in the pricing model. |
Institutions shall calculate the delta credit spread risk sensitivities for all securitisation and non-securitisation positions as follows:
where:
|
= |
the delta credit spread risk sensitivities for all securitisation and non-securitisation positions; |
cskt |
= |
the value of the credit spread rate of an issuer j at maturity t; |
Vi (.) |
= |
the pricing function of instrument i; and |
x,y |
= |
risk factors other than cskt in the pricing function Vi. |
Institutions shall calculate delta equity risk sensitivities as follows:
the sensitivities to risk factors consisting of equity spot prices shall be calculated as follows:
where:
sk |
= |
the sensitivities to risk factors consisting of equity spot prices; |
k |
= |
a specific equity security; |
EQk |
= |
the value of the spot price of that equity security; |
Vi (.) |
= |
the pricing function of instrument i; and |
x,y |
= |
risk factors other than EQk in the pricing function Vi; |
the sensitivities to risk factors consisting of equity repo rates shall be calculated as follows:
where:
|
= |
the sensitivities to risk factors consisting of equity repo rates; |
k |
= |
the index that denotes the equity; |
|
= |
a vector of m components representing the repo term structure for a specific equity k with m being equal to the number of repo rates corresponding to different maturities used in the pricing model of instrument i; |
|
= |
the unity matrix of dimension (1 · m); |
Vi (.) |
= |
the pricing function of the instrument i; and |
y,z |
= |
risk factors other than |
Institutions shall calculate the delta commodity risk sensitivities to each risk factor k as follows:
where:
sk |
= |
the delta commodity risk sensitivities; |
k |
= |
a given commodity risk factor; |
CTYk |
= |
the value of risk factor k; |
Vi (.) |
= |
the pricing function of instrument i; and |
y, z |
= |
risk factors other than CTYk in the pricing model of instrument i. |
Institutions shall calculate the delta foreign exchange risk sensitivities to each foreign exchange risk factor k as follows:
where:
sk |
= |
the delta foreign exchange risk sensitivities; |
k |
= |
a given foreign exchange risk factor; |
FXk |
= |
the value of the risk factor; |
Vi (.) |
= |
the pricing function of instrument i; and |
y, z |
= |
risk factors other than FXk in the pricing model of instrument i. |
Article 325s
Vega risk sensitivities
Institutions shall calculate the vega risk sensitivity of an option to a given risk factor k as follows:
where:
sk |
= |
the vega risk sensitivity of an option; |
k |
= |
a specific vega risk factor, consisting of an implied volatility; |
volk |
= |
the value of that risk factor, which should be expressed as a percentage; and |
x,y |
= |
risk factors other than volk in the pricing function Vi. |
Article 325t
Requirements on sensitivity computations
By way of derogation from the first subparagraph, competent authorities may require an institution that has been granted permission to use the alternative internal model approach set out in Chapter 1b to use the pricing functions of the risk-measurement system of their internal model approach in the calculation of sensitivities under this Chapter for the calculation and reporting of the own funds requirements for market risk in accordance with Article 430b(3).
When calculating vega risk sensitivities of instruments with optionality as referred to in point (b) of Article 325e(2), the following requirements shall apply:
for general interest rate risk and credit spread risk, institutions shall assume, for each currency, that the underlying of the volatility risk factors for which vega risk is calculated follows either a lognormal or normal distribution in the pricing models used for those instruments;
for equity risk, commodity risk and foreign exchange risk, institutions shall assume that the underlying of the volatility risk factors for which vega risk is calculated follows a lognormal distribution in the pricing models used for those instruments.
By way of derogation from paragraph 1, subject to the permission of the competent authorities, an institution may use alternative definitions of delta risk sensitivities in the calculation of the own funds requirements of a trading book position under this Chapter, provided that the institution meets all the following conditions:
those alternative definitions are used for internal risk management purposes and for the reporting of profits and losses to senior management by an independent risk control unit within the institution;
the institution demonstrates that those alternative definitions are more appropriate for capturing the sensitivities for the position than are the formulas set out in this Subsection, and that the resulting sensitivities do not materially differ from those formulas.
By way of derogation from paragraph 1, subject to the permission of the competent authorities, an institution may calculate vega sensitivities on the basis of a linear transformation of alternative definitions of sensitivities in the calculation of the own funds requirements of a trading book position under this Chapter, provided that the institution meets both the following conditions:
those alternative definitions are used for internal risk management purposes and for the reporting of profits and losses to senior management by an independent risk control unit within the institution;
the institution demonstrates that those alternative definitions are more appropriate for capturing the sensitivities for the position than are the formulas set out in this Subsection, and that the linear transformation referred to in the first subparagraph reflects a vega risk sensitivity.
Article 325u
Own funds requirements for residual risks
Instruments are considered to be exposed to residual risks where they meet any of the following conditions:
the instrument references an exotic underlying, which, for the purposes of this Chapter, means a trading book instrument referencing an underlying exposure that is not in the scope of the delta, vega or curvature risk treatments under the sensitivities-based method laid down in Section 2 or the own funds requirements for the default risk set out in Section 5;
the instrument is an instrument bearing other residual risks, which, for the purposes of this Chapter, means any of the following instruments:
instruments that are subject to the own funds requirements for vega and curvature risk under the sensitivities-based method set out in Section 2 and that generate pay-offs that cannot be replicated as a finite linear combination of plain-vanilla options with a single underlying equity price, commodity price, exchange rate, bond price, credit default swap price or interest rate swap;
instruments that are positions that are included in the ACTP referred to in Article 325(6); hedges that are included in that ACTP, as referred to in Article 325(8), shall not be considered.
Institutions shall calculate the additional own funds requirements referred to in paragraph 1 as the sum of gross notional amounts of the instruments referred to in paragraph 2, multiplied by the following risk weights:
1,0 % in the case of instruments referred to in point (a) of paragraph 2;
0,1 % in the case of instruments referred to in point (b) of paragraph 2.
By way of derogation from paragraph 1, institution shall not apply the own funds requirement for residual risks to an instrument that meets any of the following conditions:
the instrument is listed on a recognised exchange;
the instrument is eligible for central clearing in accordance with Regulation (EU) No 648/2012;
the instrument perfectly offsets the market risk of another position in the trading book, in which case the two perfectly matching trading book positions shall be exempted from the own funds requirement for residual risks.
When developing those draft regulatory technical standards, EBA shall examine whether longevity risk, weather, natural disasters and future realised volatility should be considered as exotic underlyings.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2021.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 325v
Definitions and general provisions
For the purposes of this Section, the following definitions apply:
‘short exposure’ means that the default of an issuer or group of issuers leads to a gain for the institution, regardless of the type of instrument or transaction creating the exposure;
‘long exposure’ means that the default of an issuer or group of issuers leads to a loss for the institution, regardless of the type of instrument or transaction creating the exposure;
‘gross jump-to-default (gross JTD) amount’ means the estimated size of the loss or gain that the default of the obligor would produce for a specific exposure;
‘net jump-to-default (net JTD) amount’ means the estimated size of the loss or gain that an institution would incur due to the default of an obligor, after offsetting between gross JTD amounts has taken place,
‘loss given default’ or ‘LGD’ means the loss given default of the obligor on an instrument issued by that obligor expressed as a share of the notional amount of the instrument;
‘default risk weight’ means the percentage representing the estimated probability of the default of each obligor, according to the creditworthiness of that obligor.
Article 325w
Gross jump-to-default amounts
Institutions shall calculate the gross JTD amounts for each long exposure to debt instruments as follows:
JTDlong |
= |
the gross JTD amount for the long exposure; |
Vnotional |
= |
the notional amount of the instrument from which the exposure arises; |
P&Llong |
= |
a term which adjusts for gains or losses already accounted for by the institution due to changes in the fair value of the instrument creating the long exposure; gains shall enter into the formula with a positive sign and losses shall enter into the formula with a negative sign; and |
Adjustmentlong |
= |
where the instrument from which the exposure arises is a derivative instrument, the amount by which, due to the structure of the derivative instrument, the institution's loss in the event of default would be increased or reduced relative to the full loss on the underlying instrument; increases shall enter into the formula with a positive sign and decreases shall enter into the formula with a negative sign. |
Institutions shall calculate the gross JTD amounts for each short exposure to debt instruments as follows:
JTDshort |
= |
the gross JTD amount for the short exposure; |
Vnotional |
= |
the notional amount of the instrument from which the exposure arises that shall enter into the formula with a negative sign; |
P&Lshort |
= |
a term which adjusts for gains or losses already accounted for by the institution due to changes in the fair value of the instrument creating the short exposure; gains shall enter into the formula with a positive sign and losses shall enter into the formula with a negative sign; and |
Adjustmentshort |
= |
where the instrument from which the exposure arises is a derivative instrument, the amount by which, due to the structure of the derivative instrument, the institution's gain in the event of default would be increased or reduced relative to the full loss on the underlying instrument; decreases shall enter into the formula with a positive sign and increases shall enter into the formula with a negative sign. |
For the purposes of the calculation set out in paragraphs 1 and 2, the LGD for debt instruments to be applied by institutions shall be the following:
exposures to non-senior debt instruments shall be assigned an LGD of 100 %;
exposures to senior debt instruments shall be assigned an LGD of 75 %;
exposures to covered bonds, as referred to in Article 129, shall be assigned an LGD of 25 %.
in the case of a bond, the notional amount is the face value of the bond;
in the case of a sold put option on a bond, the notional amount is the notional amount of the option; in the case of a bought call option on a bond, the notional amount is 0.
For exposures to equity instruments, institutions shall calculate the gross JTD amounts as follows:
where:
JTDlong |
= |
the gross JTD amount for the long exposure; |
Vnotional |
= |
the notional amount of the instrument from which the exposure arises; the notional amount is the fair value of the equity for cash equity instruments; for the JTDshort formula, the notional amount of the instrument shall enter into the formula with a negative sign; |
P&Llong |
= |
a term which adjusts for gains or losses already accounted for by the institution due to changes in the fair value of the instrument creating the long exposure; gains shall enter into the formula with a positive sign and losses shall enter into the formula with a negative sign; |
Adjustmentlong |
= |
the amount by which, due to the structure of the derivative instrument, the institution's loss in the event of default would be increased or reduced relative to the full loss on the underlying instrument; increases shall enter into the formula with a positive sign and decreases shall enter into the formula with a negative sign; |
JTDshort |
= |
the gross JTD amount for the short exposure; |
P&Lshort |
= |
a term which adjusts for gains or losses already accounted for by the institution due to changes in the fair value of the instrument creating the short exposure; gains shall enter into the formula with a positive sign and losses shall enter into the formula with a negative sign; and |
Adjustmentshort |
= |
the amount by which, due to the structure of the derivative instrument, the institution's gain in the event of default would be increased or reduced relative to the full loss on the underlying instrument; decreases shall enter into the formula with a positive sign and increases shall enter into the formula with a negative sign. |
EBA shall develop draft regulatory technical standards to specify:
how institutions are to determine the components P&Llong, P&Lshort, Adjustmentlong and Adjustmentshort when calculating the JTD amounts for different types of instruments in accordance with this Article;
which alternative methodologies institutions are to use for the purposes of the estimation of gross JTD amounts referred to in paragraph 7.
the notional amounts of instruments other than the ones referred to in points (a) and (b) of paragraph 4.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2021.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 325x
Net jump-to-default amounts
Offsetting shall be either full or partial, depending on the maturities of the offsetting exposures:
offsetting shall be full where all offsetting exposures have maturities of one year or more;
offsetting shall be partial where at least one of the offsetting exposures has a maturity of less than one year, in which case the size of the JTD amount of each exposure with a maturity of less than one year shall be multiplied by the ratio of the exposure's maturity relative to one year.
Article 325y
Calculation of the own funds requirements for the default risk
Net JTD amounts, irrespective of the type of counterparty, shall be multiplied by the default risk weights that correspond to their credit quality, as specified in Table 2:
Table 2
Credit quality category |
Default risk weight |
Credit quality step 1 |
0,5 % |
Credit quality step 2 |
3 % |
Credit quality step 3 |
6 % |
Credit quality step 4 |
15 % |
Credit quality step 5 |
30 % |
Credit quality step 6 |
50 % |
Unrated |
15 % |
Defaulted |
100 % |
Weighted net JTD amounts shall be aggregated within each bucket, in accordance with the following formula:
DRCb |
= |
the own funds requirement for the default risk for bucket b; |
i |
= |
the index that denotes an instrument belonging to bucket b; |
RWi |
= |
the risk weight; and |
WtS |
= |
a ratio recognising a benefit for hedging relationships within a bucket, which shall be calculated as follows:
|
For the purposes of calculating the DRCb and the WtS, the long positions and short positions shall be aggregated for all positions within a bucket, regardless of the credit quality step to which those positions are allocated, to produce the bucket-specific own funds requirements for the default risk.
Article 325z
Jump-to-default amounts
Article 325aa
Calculation of the own funds requirement for the default risk for securitisations
Risk-weighted net JTD amounts shall be assigned to the following buckets:
one common bucket for all corporates, regardless of the region;
44 different buckets corresponding to one bucket per region for each of the 11 asset classes defined in the second subparagraph.
For the purposes of the first subparagraph, the 11 asset classes are ABCP, auto loans/leases, residential mortgage-backed securities (RMBS), credit cards, commercial mortgage-backed securities (CMBS), collateralised loan obligations, collateralised debt obligations squared (CDO-squared), small and medium-sized enterprises (SMEs), student loans, other retail, other wholesale. The four regions are Asia, Europe, North America, and rest of the world.
Article 325ab
Scope
Article 325ac
Jump-to-default amounts for the ACTP
For the purposes of this Article, the following definitions apply:
‘decomposition with a valuation model’ means that a single name constituent of a securitisation is valued as the difference between the unconditional value of the securitisation and the conditional value of the securitisation assuming that single name defaults with an LGD of 100 %;
‘replication’ means that the combination of individual securitisation index tranches are combined to replicate another tranche of the same index series, or to replicate an untranched position in the index series;
‘decomposition’ means replicating an index by a securitisation of which the underlying exposures in the pool are identical to the single name exposures that compose the index.
Nth-to-default products shall be treated as tranched products with the following attachment and detachment points:
attachment point = (N – 1) / Total Names;
detachment point = N / Total Names;
where ‘Total Names’ shall be the total number of names in the underlying basket or pool.
Net JTD amounts shall be determined by offsetting long gross JTD amounts and short gross JTD amounts. Offsetting shall only be possible between exposures that are otherwise identical except for maturity. Offsetting shall only be possible as follows:
for indices, index tranches and bespoke tranches, offsetting shall be possible across maturities within the same index family, series and tranche, subject to the provisions on exposures of less than one year laid down in Article 325x; long gross JTD amounts and short gross JTD amounts that perfectly replicate each other may be offset through decomposition into single name equivalent exposures using a valuation model; in such cases, the sum of the gross JTD amounts of the single name equivalent exposures obtained through decomposition shall be equal to the gross JTD amount of the undecomposed exposure;
offsetting through decomposition as set out is point (a) shall not be allowed for resecuritisations or derivatives on securitisation;
for indices and index tranches, offsetting shall be possible across maturities within the same index family, series and tranche by replication or by decomposition; where the long exposures and short exposures are otherwise equivalent, apart from one residual component, offsetting shall be allowed and the net JTD amount shall reflect the residual exposure;
different tranches of the same index series, different series of the same index and different index families may not be used to offset each other.
Article 325ad
Calculation of the own funds requirements for the default risk for the ACTP
Net JTD amounts shall be multiplied by:
for tranched products, the default risk weights corresponding to their credit quality as specified in Article 325y(1) and (2);
for non-tranched products, the default risk weights referred to in Article 325aa(1).
Weighted net JTD amounts shall be aggregated within each bucket in accordance with the following formula:
DRCb |
= |
the own funds requirement for the default risk for bucket b; |
i |
= |
an instrument belonging to bucket b; and |
WtSACTP |
= |
the ratio recognising a benefit for hedging relationships within a bucket, which shall be calculated in accordance with the WtS formula set out in Article 325y(4), but using long positions and short positions across the entire ACTP and not just the positions in the particular bucket. |
Institutions shall calculate the own funds requirements for the default risk for the ACTP by using the following formula:
where:
DRCACTP |
= |
the own funds requirement for the default risk for the ACTP; and |
DRCb |
= |
the own funds requirement for the default risk for bucket b. |
Article 325ae
Risk weights for general interest rate risk
For currencies not included in the most liquid currency sub-category as referred to in point (b) Article 325bd(7), the risk weights of the sensitivities to the risk-free rate risk factors shall be the following:
Table 3
Bucket |
Maturity |
Risk Weight |
1 |
0,25 years |
1,7 % |
2 |
0,5 years |
1,7 % |
3 |
1 year |
1,6 % |
4 |
2 years |
1,3 % |
5 |
3 years |
1,2 % |
6 |
5 years |
1,1 % |
7 |
10 years |
1,1 % |
8 |
15 years |
1,1 % |
9 |
20 years |
1,1 % |
10 |
30 years |
1,1 % |
Article 325af
Intra bucket correlations for general interest rate risk
Between two weighted sensitivities of general interest rate risk factors WSk and WSl within the same bucket, corresponding to the same curve, but having different maturities, correlation shall be set in accordance with the following formula:
where:
Tk (respectivelyTl) |
= |
the maturity that relates to the risk free rate; |
θ |
= |
3 % |
Article 325ag
Correlations across buckets for general interest rate risk
Article 325ah
Risk weights for credit spread risk for non-securitisations
Risk weights for the sensitivities to credit spread risk factors for non-securitisations shall be the same for all maturities (0,5 years, 1 year, 3 years, 5 years, 10 years) within each bucket in Table 4:
Table 4
Bucket number |
Credit quality |
Sector |
Risk weight |
1 |
All |
Central government, including central banks, of Member States |
0,5 % |
2 |
Credit quality step 1 to 3 |
Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 |
0,5 % |
3 |
Regional or local authority and public sector entities |
1,0 % |
|
4 |
Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders |
5,0 % |
|
5 |
Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying |
3,0 % |
|
6 |
Consumer goods and services, transportation and storage, administrative and support service activities |
3,0 % |
|
7 |
Technology, telecommunications |
2,0 % |
|
8 |
Health care, utilities, professional and technical activities |
1,5 % |
|
9 |
|
Covered bonds issued by credit institutions established in Member States |
1,0 % |
10 |
Credit quality step 1 |
Covered bonds issued by credit institutions in third countries |
1,5 % |
Credit quality steps 2 to 3 |
2,5 % |
||
11 |
Credit quality step 4 to 6 and unrated |
Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 |
2 % |
12 |
Regional or local authority and public sector entities |
4,0 % |
|
13 |
Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders |
12,0 % |
|
14 |
Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying |
7,0 % |
|
15 |
Consumer goods and services, transportation and storage, administrative and support service activities |
8,5 % |
|
16 |
Technology, telecommunications |
5,5 % |
|
17 |
Health care, utilities, professional and technical activities |
5,0 % |
|
18 |
Other sector |
12,0 % |
|
19 |
Listed credit indices with a majority of its individual constituents being investment grade |
1,5 % |
|
20 |
Listed credit indices with a majority of its individual constituents being non-investment grade or unrated |
5 % |
Article 325ai
Intra-bucket correlations for credit spread risk for non-securitisations
The correlation parameter ρk l between two sensitivities WS k and WS l within the same bucket shall be set as follows:
The correlation parameters referred to in paragraph 1 of this Article shall not apply to bucket 18 in Table 4 of Article 325ah(1). The capital requirement for the delta risk aggregation formula within bucket 18 shall be equal to the sum of the absolute values of the net weighted sensitivities allocated to that bucket:
Article 325aj
Correlations across buckets for credit spread risk for non-securitisations
The correlation parameter γbc that applies to the aggregation of sensitivities between different buckets shall be set as follows:
Table 5
Bucket |
1, 2 and 11 |
3 and 12 |
4 and 13 |
5 and 14 |
6 and 15 |
7 and 16 |
8 and 17 |
9 and 10 |
18 |
19 |
20 |
1, 2 and 11 |
|
75 % |
10 % |
20 % |
25 % |
20 % |
15 % |
10 % |
0 % |
45 % |
45 % |
3 and 12 |
|
|
5 % |
15 % |
20 % |
15 % |
10 % |
10 % |
0 % |
45 % |
45 % |
4 and 13 |
|
|
|
5 % |
15 % |
20 % |
5 % |
20 % |
0 % |
45 % |
45 % |
5 and 14 |
|
|
|
|
20 % |
25 % |
5 % |
5 % |
0 % |
45 % |
45 % |
6 and 15 |
|
|
|
|
|
25 % |
5 % |
15 % |
0 % |
45 % |
45 % |
7 and 16 |
|
|
|
|
|
|
5 % |
20 % |
0 % |
45 % |
45 % |
8 and 17 |
|
|
|
|
|
|
|
5 % |
0 % |
45 % |
45 % |
9 and 10 |
|
|
|
|
|
|
|
|
0 % |
45 % |
45 % |
18 |
|
|
|
|
|
|
|
|
|
0 % |
0 % |
19 |
|
|
|
|
|
|
|
|
|
|
75 % |
20 |
|
|
|
|
|
|
|
|
|
|
|
Article 325ak
Risk weights for credit spread risk for securitisations included in the ACTP
Risk weights for the sensitivities to credit spread risk factors for securitisations included in the ACTP risk factors shall be the same for all maturities (0,5 years, 1 year, 3 years, 5 years, 10 years) within each bucket and shall be specified for each bucket in Table 6 pursuant to the delegated act referred to in Article 461a:
Table 6
Bucket number |
Credit quality |
Sector |
Risk weight |
1 |
All |
Central government, including central banks, of Member States |
4,0 % |
2 |
Credit quality step 1 to 3 |
Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 |
4,0 % |
3 |
Regional or local authority and public sector entities |
4,0 % |
|
4 |
Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders |
8,0 % |
|
5 |
Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying |
5,0 % |
|
6 |
Consumer goods and services, transportation and storage, administrative and support service activities |
4,0 % |
|
7 |
Technology, telecommunications |
3,0 % |
|
8 |
Health care, utilities, professional and technical activities |
2,0 % |
|
9 |
Covered bonds issued by credit institutions established in Member States |
3,0 % |
|
10 |
Covered bonds issued by credit institutions in third countries |
6,0 % |
|
11 |
Credit quality step 4 to 6 and unrated |
Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 |
13,0 % |
12 |
Regional or local authority and public sector entities |
13,0 % |
|
13 |
Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders |
16,0 % |
|
14 |
Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying |
10,0 % |
|
15 |
Consumer goods and services, transportation and storage, administrative and support service activities |
12,0 % |
|
16 |
Technology, telecommunications |
12,0 % |
|
17 |
Health care, utilities, professional and technical activities |
12,0 % |
|
18 |
Other sector |
13,0 % |
Article 325al
Correlations for credit spread risk for securitisations included in the ACTP
Article 325am
Risk weights for credit spread risk for securitisations not included in the ACTP
Risk weights for the sensitivities to credit spread risk factors for securitisation not included in the ACTP shall be the same for all maturities (0,5 years, 1 year, 3 years, 5 years, 10 years) within each bucket in Table 7 and shall be specified for each bucket in Table 7 pursuant to the delegated act referred to in Article 461a:
Table 7
Bucket number |
Credit quality |
Sector |
Risk weight |
1 |
Senior and Credit quality step 1 to 3 |
RMBS — Prime |
0,9 % |
2 |
RMBS — Mid-Prime |
1,5 % |
|
3 |
RMBS — Sub-Prime |
2,0 % |
|
4 |
CMBS |
2,0 % |
|
5 |
Asset backed securities (ABS) — Student loans |
0,8 % |
|
6 |
ABS — Credit cards |
1,2 % |
|
7 |
ABS — Auto |
1,2 % |
|
8 |
Collateralised loan obligations (CLO) non-ACTP |
1,4 % |
|
9 |
Non-senior and credit quality step 1 to 3 |
RMBS — Prime |
1,125 % |
10 |
RMBS — Mid-Prime |
1,875 % |
|
11 |
RMBS — Sub-Prime |
2,5 % |
|
12 |
CMBS |
2,5 % |
|
13 |
ABS — Student loans |
1 % |
|
14 |
ABS — Credit cards |
1,5 % |
|
15 |
ABS — Auto |
1,5 % |
|
16 |
CLO non-ACTP |
1,75 % |
|
17 |
Credit quality step 4 to 6 and unrated |
RMBS — Prime |
1,575 % |
18 |
RMBS — Mid-Prime |
2,625 % |
|
19 |
RMBS — Sub-Prime |
3,5 % |
|
20 |
CMBS |
3,5 % |
|
21 |
ABS — Student loans |
1,4 % |
|
22 |
ABS — Credit cards |
2,1 % |
|
23 |
ABS — Auto |
2,1 % |
|
24 |
CLO non-ACTP |
2,45 % |
|
25 |
Other sector |
3,5 % |
Article 325an
Intra-bucket correlations for credit spread risk for securitisations not included in the ACTP
Between two sensitivities WS k and WS l within the same bucket, the correlation parameter ρk l shall be set as follows:
The correlation parameters referred to in paragraph 1 shall not apply to bucket 25 in Table 7 of Article 325am(1). The own funds requirement for the delta risk aggregation formula within bucket 25 shall be equal to the sum of the absolute values of the net weighted sensitivities allocated to that bucket:
Article 325ao
Correlations across buckets for credit spread risk for securitisations not included in the ACTP
Article 325ap
Risk weights for equity risk
Risk weights for the sensitivities to equity and equity repo rate risk factors shall be specified for each bucket in Table 8 pursuant to the delegated act referred to in Article 461a:
Table 8
Bucket number |
Market capitali-sation |
Economy |
Sector |
Risk weight for equity spot price |
Risk weight for equity repo rate |
1 |
Large |
Emerging market economy |
Consumer goods and services, transportation and storage, administrative and support service activities, healthcare, utilities |
55 % |
0,55 % |
2 |
Telecommunications, industrials |
60 % |
0,60 % |
||
3 |
Basic materials, energy, agriculture, manufacturing, mining and quarrying |
45 % |
0,45 % |
||
4 |
Financials including government-backed financials, real estate activities, technology |
55 % |
0,55 % |
||
5 |
Advanced economy |
Consumer goods and services, transportation and storage, administrative and support service activities, healthcare, utilities |
30 % |
0,30 % |
|
6 |
Telecommunications, industrials |
35 % |
0,35 % |
||
7 |
Basic materials, energy, agriculture, manufacturing, mining and quarrying |
40 % |
0,40 % |
||
8 |
Financials including government-backed financials, real estate activities, technology |
50 % |
0,50 % |
||
9 |
Small |
Emerging market economy |
All sectors described under bucket numbers 1, 2, 3 and 4 |
70 % |
0,70 % |
10 |
Advanced economy |
All sectors described under bucket numbers 5, 6, 7 and 8 |
50 % |
0,50 % |
|
11 |
Other sector |
70 % |
0,70 % |
||
12 |
Large market cap, advanced economy indices |
15 % |
0,15 % |
||
13 |
Other indices |
25 % |
0,25 % |
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2021.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 325aq
Intra-bucket correlations for equity risk
In other cases than the cases referred to in paragraph 1, the correlation parameter ρkl between two sensitivities WS k and WS l to equity spot price within the same bucket shall be set as follows:
15 % between two sensitivities within the same bucket that fall under the category large market capitalisation, emerging market economy (bucket number 1, 2, 3 or 4);
25 % between two sensitivities within the same bucket that fall under the category large market capitalisation, advanced economy (bucket number 5, 6, 7 or 8);
7,5 % between two sensitivities within the same bucket that fall under the category small market capitalisation, emerging market economy (bucket number 9);
12,5 % between two sensitivities within the same bucket that fall under the category small market capitalisation, advanced economy (bucket number 10);
80 % between two sensitivities within the same bucket that fall under either index bucket (bucket number 12 or 13).
The correlation parameters specified in paragraphs 1 to 4 shall not apply to bucket 11. The capital requirement for the delta risk aggregation formula within bucket 11 shall be equal to the sum of the absolute values of the net weighted sensitivities allocated to that bucket:
Article 325ar
Correlations across buckets for equity risk
The correlation parameter γbc shall apply to the aggregation of sensitivities between different buckets.
It shall be set in relation to the buckets of Table 8 in Article 325ap as follows:
15 % where the two buckets fall within bucket numbers 1 to 10;
0 % where either of the two buckets fall within bucket number 11;
75 % where the two buckets fall within bucket number 12 and 13;
45 % otherwise.
Article 325as
Risk weights for commodity risk
Risk weights for sensitivities to commodity risk factors shall be the following:
Table 9
Bucket number |
Bucket name |
Risk weight |
1 |
Energy — solid combustibles |
30 % |
2 |
Energy — liquid combustibles |
35 % |
3 |
Energy — electricity and carbon trading |
60 % |
4 |
Freight |
80 % |
5 |
Metals — non-precious |
40 % |
6 |
Gaseous combustibles |
45 % |
7 |
Precious metals (including gold) |
20 % |
8 |
Grains and oilseed |
35 % |
9 |
Livestock and dairy |
25 % |
10 |
Softs and other agricultural commodities |
35 % |
11 |
Other commodities |
50 % |
Article 325at
Intra-bucket correlations for commodity risk
The correlation parameter ρk l between two sensitivities WS k and WS l within the same bucket shall be set as follows:
The intra-bucket correlations ρkl (commodity) are:
Table 10
Bucket number |
Bucket name |
Correlation ρkl (commodity) |
1 |
Energy - solid combustibles |
55 % |
2 |
Energy - liquid combustibles |
95 % |
3 |
Energy - electricity and carbon trading |
40 % |
4 |
Freight |
80 % |
5 |
Metals – non-precious |
60 % |
6 |
Gaseous combustibles |
65 % |
7 |
Precious metals (including gold) |
55 % |
8 |
Grains and oilseed |
45 % |
9 |
Livestock and dairy |
15 % |
10 |
Softs and other agricultural commodities |
40 % |
11 |
Other commodity |
15 % |
Notwithstanding paragraph 1, the following provisions apply:
two risk factors that are allocated to bucket 3 in Table 10 and that concern electricity which is generated in different regions or is delivered at different periods under the contractual agreement shall be considered distinct commodity risk factors;
two risk factors that are allocated to bucket 4 in Table 10 and that concern freight where the freight route or week of delivery differ shall be considered distinct commodity risk factors.
Article 325au
Correlations across buckets for commodity risk
The correlation parameter γb c applying to the aggregation of sensitivities between different buckets shall be set at:
20 % where the two buckets fall within bucket numbers 1 to 10;
0 % where either of the two buckets is bucket number 11.
Article 325av
Risk weights for foreign exchange risk
The risk weight of the foreign exchange risk factors concerning currency pairs which are composed of the euro and the currency of a Member State participating in the second stage of the economic and monetary union (ERM II) shall be one of the following:
the risk weight referred to in paragraph 1, divided by 3;
the maximum fluctuation within the fluctuation band formally agreed by the Member State and the European Central Bank, if that fluctuation band is narrower than the fluctuation band defined under ERM II.
Article 325aw
Correlations for foreign exchange risk
A uniform correlation parameter γb c equal to 60 % shall apply to the aggregation of sensitivities to foreign exchange risk factors.
Article 325ax
Vega and curvature risk weights
The share referred to in paragraph 2 shall be made dependent on the presumed liquidity of each type of risk factor in accordance with the following formula:
where:
Table 11
Risk class |
LHrisk class |
Risk weights |
GIRR |
60 |
100 % |
CSR non-securitisations |
120 |
100 % |
CSR securitisations (ACTP) |
120 |
100 % |
CSR securitisations (non-ACTP) |
120 |
100 % |
Equity (large cap and indices) |
20 |
77,78 % |
Equity (small cap and other sector) |
60 |
100 % |
Commodity |
120 |
100 % |
Foreign exchange |
40 |
100 % |
Article 325ay
Vega and curvature risk correlations
Between vega risk sensitivities within the same bucket of the general interest rate risk (GIRR) class, the correlation parameter ρkl shall be set as follows:.
where:
Between vega risk sensitivities within a bucket of the other risk classes, the correlation parameter ρkl shall be set as follows:
where:
CHAPTER 1b
Alternative internal model approach
Article 325az
Alternative internal model approach and permission to use alternative internal models
After having verified institutions' compliance with the requirements set out in Articles 325bh, 325bi and 325bj, competent authorities shall grant permission to those institutions to calculate their own funds requirements for the portfolio of all positions assigned to trading desks by using their alternative internal models in accordance with Article 325ba, provided that all the following requirements are met:
the trading desks were established in accordance with Article 104b;
the institution has provided to the competent authority a rationale for the inclusion of the trading desks in the scope of the alternative internal model approach;
the trading desks have met the back-testing requirements referred to in Article 325bf(3) for the preceding year;
the institution has reported to its competent authorities the results of the profit and loss attribution (‘P&L attribution’) requirement for the trading desks set out in Article 325bg;
for trading desks that have been assigned at least one of those trading book positions referred to in Article 325bl, the trading desks fulfil the requirements set out in Article 325bm for the internal default risk model;
no securitisation or re-securitisation positions have been assigned to the trading desks.
For the purposes of point (b) of the first subparagraph of this paragraph, not including a trading desk in the scope of the alternative internal model approach shall not be motivated by the fact that the own funds requirement calculated under the alternative standardised approach set out in point (a) of Article 325(3) would be lower than the own funds requirement calculated under the alternative internal model approach.
Institutions shall notify the competent authorities of all other extensions and changes to the use of the alternative internal models for which the institution has received permission.
EBA shall develop draft regulatory technical standards to specify:
the conditions for assessing the materiality of extensions and changes to the use of alternative internal models and changes to the subset of the modellable risk factors referred to in Article 325bc;
the assessment methodology under which competent authorities verify an institution's compliance with the requirements set out in Articles 325bh, 325bi, 325bn, 325bo and 325bp.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2024.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
EBA shall develop draft regulatory technical standards to specify the extraordinary circumstances under which competent authorities may permit an institution:
to continue using its alternative internal models for the purpose of calculating the own funds requirements for the market risk of a trading desk that no longer meets the conditions referred to in point (c) of paragraph 2 of this Article and in Article 325bg(1);
to limit the add-on to the one resulting from overshootings under back-testing hypothetical changes.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2024.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 325ba
Own funds requirements when using alternative internal models
An institution using an alternative internal model shall calculate the own funds requirements for the portfolio of all positions assigned to the trading desks for which the institution has been granted permission as referred to in Article 325az(2) as the higher of the following:
the sum of the following values:
the institution's previous day's expected shortfall risk measure, calculated in accordance with Article 325bb (ESt-1), and
the institution's previous day's stress scenario risk measure, calculated in accordance with Section 5 (SSt-1); or
the sum of the following values:
the average of the institution's daily expected shortfall risk measure, calculated in accordance with Article 325bb for each of the preceding sixty business days (ESavg), multiplied by the multiplication factor (mc); and
the average of the institution's daily stress scenario risk measure, calculated in accordance with Section 5 for each of the preceding sixty business days (SSavg).
Institutions holding positions in traded debt and equity instruments that are included in the scope of the internal default risk model and assigned to the trading desks referred to in paragraph 1 shall fulfil an additional own funds requirement, expressed as the higher of the following values:
the most recent own funds requirement for default risk, calculated in accordance with Section 3;
the average of the amount referred to in point (a) over the preceding 12 weeks.
Article 325bb
Expected shortfall risk measure
Institutions shall calculate the expected shortfall risk measure referred to in point (a) of Article 325ba(1) for any given date ‘t’ and for any given portfolio of trading book positions and non-trading book positions that are subject to foreign exchange or commodity risk as follows:
where:
ESt |
= |
the expected shortfall risk measure; |
i |
= |
the index that denotes the five broad categories of risk factors listed in the first column of Table 2 of Article 325bd; |
UESt |
= |
the unconstrained expected shortfall measure calculated as follows:
|
|
= |
the unconstrained expected shortfall measure for broad risk factor category i and calculated as follows:
|
|
= |
the partial expected shortfall measure for broad risk factor category i that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(2); |
|
= |
the partial expected shortfall measure for broad risk factor category i that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(3); and |
|
= |
the partial expected shortfall measure for broad risk factor category i that shall be calculated for all the positions in the portfolio in accordance with of Article 325bc(4). |
Article 325bc
Partial expected shortfall calculations
Institutions shall calculate all the partial expected shortfall measures referred to in Article 325bb(1) as follows:
daily calculations of the partial expected shortfall measures;
at 97,5th percentile, one tailed confidence interval;
for a given portfolio of trading book positions and non-trading book positions that are subject to foreign exchange or commodity risk, institutions shall calculate the partial expected shortfall measure at time ‘t’ in accordance with the following formula:
where:
PESt |
= |
the partial expected shortfall measure at time t; |
j |
= |
the index that denotes the five liquidity horizons listed in the first column of Table 1; |
LHj |
= |
the length of liquidity horizons j as expressed in days in Table 1; |
T |
= |
the base time horizon, where T = 10 days; |
PESt(T) |
= |
the partial expected shortfall measure that is determined by applying scenarios of future shocks with a 10-day time horizon only to the specific set of modellable risk factors of the positions in the portfolio set out in paragraphs 2, 3 and 4 for each partial expected shortfall measure referred to in Article 325bb(1); and |
PESt(T, j) |
= |
the partial expected shortfall measure that is determined by applying scenarios of future shocks with a 10-day time horizon only to the specific set of modellable risk factors of the positions in the portfolio set out in paragraphs 2, 3 and 4 for each partial expected shortfall measure referred to in Article 325bb(1) and of which the effective liquidity horizon, as determined in accordance with Article 325bd(2), is equal or longer than LHj.
Table 1
|
An institution that no longer meets the requirement referred to in the first paragraph of this point shall immediately notify the competent authorities thereof and shall update the subset of the modellable risk factors within two weeks in order to meet that requirement; where, after two weeks, that institution has failed to meet that requirement, the institution shall revert to the approach set out in Chapter 1a to calculate the own funds requirements for market risk for some trading desks, until that institution is able to demonstrate to the competent authority that it is meeting the requirement set out in the first subparagraph of this point;
the data inputs used to determine the scenarios of future shocks applied to the modellable risk factors referred to in points (a) and (b) of this paragraph shall be calibrated to historical data referred to in point (c) of paragraph 4; those data shall be updated on at least a monthly basis.
the data inputs used to determine the scenarios of future shocks applied to the modellable risk factors referred to in points (a) and (b) shall be calibrated to historical data from the preceding 12-month period; where there is a significant upsurge in the price volatility of a material number of modellable risks factors of an institution's portfolio which are not in the subset of the risk factors referred to in point (a) of paragraph 2, competent authorities may require an institution to use historical data for a period shorter than the preceding 12-months, but such a shorter period shall not be shorter than the preceding six-months; competent authorities shall notify EBA of any decision to require an institution to use historical data from a shorter period than 12 months and shall substantiate that decision.
Article 325bd
Liquidity horizons
An institution shall notify the competent authorities of the trading desks and the broad sub-categories of risk factors to which it decides to apply the treatment referred to in the first subparagraph.
For the purpose of calculating the partial expected shortfall measures in accordance with point (c) of Article 325bc(1), the effective liquidity horizon of a given modellable risk factor of a given trading book position or a non-trading book position that is subject to foreign exchange or commodity risk shall be calculated as follows:
EffectiveLH = |
|
SubCatLH if Mat > LH5 |
|
min (SubCatLH, minj{LHj/LHj ≥ Mat}) if LH1 ≤ Mat ≤ LH5 |
|||
LH1 if Mat < LH1 |
where:
EffectiveLH |
= |
the effective liquidity horizon; |
Mat |
= |
the maturity of the trading book position; |
SubCatLH |
= |
the length of liquidity horizon of the modellable risk factor determined in accordance with paragraph 1; and |
minj {LHj/LHj ≥ Mat} |
= |
the length of one of the liquidity horizons listed in Table 1 of Article 325bc which is the nearest liquidity horizon above the maturity of the trading book position. |
EBA shall develop draft regulatory technical standards to specify:
how institutions are to map the risk factors of the positions referred to in paragraph 1 to broad categories of risk factors and broad sub-categories of risk factors for the purposes of paragraph 1;
which currencies constitute the most liquid currencies sub-category of the broad category of interest rate risk factor of Table 2;
which currency pairs constitute the most liquid currency pairs sub-category of the broad category of foreign exchange risk factor of Table 2;
the definitions of small market capitalisation and large market capitalisation for the purposes of the equity price and volatility sub-category of the broad category of equity risk factor of Table 2.
EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Table 2
Broad categories of risk factors |
Broad sub-categories of risk factors |
Liquidity horizons |
Length of the liquidity horizon (in days) |
Interest rate |
Most liquid currencies and domestic currency |
1 |
10 |
Other currencies (excluding most liquid currencies) |
2 |
20 |
|
Volatility |
4 |
60 |
|
Other types |
4 |
60 |
|
Credit spread |
Central government, including central banks, of Member States |
2 |
20 |
Covered bonds issued by credit institutions in Member States (Investment Grade) |
2 |
20 |
|
Sovereign (Investment grade) |
2 |
20 |
|
Sovereign (High yield) |
3 |
40 |
|
Corporate (Investment grade) |
3 |
40 |
|
Corporate (High yield) |
4 |
60 |
|
Volatility |
5 |
120 |
|
Other types |
5 |
120 |
|
Equity |
Equity price (Large market capitalisation) |
1 |
10 |
Equity price (Small market capitalisation) |
2 |
20 |
|
Volatility (Large market capitalisation) |
2 |
20 |
|
Volatility (Small market capitalisation) |
4 |
60 |
|
Other types |
4 |
60 |
|
Foreign exchange |
Most liquid currency pairs |
1 |
10 |
Other currency pairs (excluding most liquid currency pairs) |
2 |
20 |
|
Volatility |
3 |
40 |
|
Other types |
3 |
40 |
|
Commodity |
Energy price and carbon emissions price |
2 |
20 |
Precious metal price and non-ferrous metal price |
2 |
20 |
|
Other commodity prices (excluding energy price, carbon emissions price, precious metal price and non-ferrous metal price) |
4 |
60 |
|
Energy volatility and carbon emissions volatility |
4 |
60 |
|
Precious metal volatility and non-ferrous metal volatility |
4 |
60 |
|
Other commodity volatilities (excluding energy volatility, carbon emissions volatility, precious metal volatility and non-ferrous metal volatility) |
5 |
120 |
|
Other types |
5 |
120 |
Article 325be
Assessment of the modellability of risk factors
EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 325bf
Regulatory back-testing requirements and multiplication factors
For the purposes of this Article, an ‘overshooting’ means a one-day change in the value of a portfolio composed of all the positions assigned to the trading desk that exceeds the related value-at-risk number calculated on the basis of the institution's alternative internal model in accordance with the following requirements:
the calculation of the value at risk shall be subject to a one-day holding period;
scenarios of future shocks shall apply to the risk factors of the trading desk's positions referred to in Article 325bg(3) and which are considered modellable in accordance with Article 325be;
data inputs used to determine the scenarios of future shocks applied to the modellable risk factors shall be calibrated to historical data referred to in point (c) of Article 325bc(4);
unless stated otherwise in this Article, the institution's alternative internal model shall be based on the same modelling assumptions as those used for the calculation of the expected shortfall risk measure referred to in point (a) of Article 325ba(1).
An institution's trading desk shall be deemed to meet the back-testing requirements where the number of overshootings for that trading desk that occurred over the most recent 250 business days does not exceed any of the following:
12 overshootings for the value-at-risk number, calculated at a 99th percentile one tailed-confidence interval on the basis of back-testing of the hypothetical changes in the value of the portfolio;
12 overshootings for the value-at-risk number, calculated at a 99th percentile one tailed-confidence interval on the basis of back-testing of the actual changes in the value of the portfolio;
30 overshootings for the value-at-risk number, calculated at a 97,5th percentile one tailed-confidence interval on the basis of back-testing of the hypothetical changes in the value of the portfolio;
30 overshootings for the value-at-risk number, calculated at a 97,5th percentile one tailed-confidence interval on the basis of back-testing of the actual changes in the value of the portfolio.
Institutions shall count daily overshootings in accordance with the following:
the back-testing of hypothetical changes in the value of the portfolio shall be based on a comparison between the end-of-day value of the portfolio and, assuming unchanged positions, the value of the portfolio at the end of the subsequent day;
the back-testing of actual changes in the value of the portfolio shall be based on a comparison between the end-of-day value of the portfolio and its actual value at the end of the subsequent day, excluding fees and commissions;
an overshooting shall be counted for each business day for which the institution is not able to assess the value of the portfolio or is not able to calculate the value-at-risk number referred to in paragraph 3.
The multiplication factor (mc) shall be the sum of the value of 1,5 and an add-on between 0 and 0,5 in accordance with Table 3. For the portfolio referred to in paragraph 5, that add-on shall be calculated on the basis of the number of overshootings that occurred over the most recent 250 business days as evidenced by the institution's back-testing of the value-at-risk number calculated in accordance with point (a) of this subparagraph. The calculation of the add-on shall be subject to the following requirements:
an overshooting shall be a one-day change in the portfolio's value that exceeds the related value-at-risk number calculated by the institution's internal model in accordance with the following:
a one-day holding period;
a 99th percentile, one tailed confidence interval;
scenarios of future shocks shall apply to the risk factors of the trading desks' positions referred to in Article 325bg(3) and which are considered modellable in accordance with Article 325be;
the data inputs used to determine the scenarios of future shocks applied to the modellable risk factors shall be calibrated to historical data referred to in point (c) of Article 325bc(4);
unless stated otherwise in this Article, the institution's internal model shall be based on the same modelling assumptions as those used for the calculation of the expected shortfall risk measure referred to in point (a) of Article 325ba(1);
the number of overshootings shall be equal to the greater of the number of overshootings under hypothetical and the actual changes in the value of the portfolio.
Table 3
Number of overshootings |
Add-on |
Fewer than 5 |
0,00 |
5 |
0,20 |
6 |
0,26 |
7 |
0,33 |
8 |
0,38 |
9 |
0,42 |
More than 9 |
0,50 |
In extraordinary circumstances, competent authorities may limit the add-on to that resulting from overshootings under back-testing hypothetical changes where the number of overshootings under back-testing actual changes does not result from deficiencies in the internal model.
EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 325bg
Profit and loss attribution requirement
EBA shall develop draft regulatory technical standards to specify:
the criteria necessary to ensure that the theoretical changes in the value of a trading desk's portfolio is sufficiently close to the hypothetical changes in the value of a trading desk's portfolio for the purposes of paragraph 2, taking into account international regulatory developments;
the consequences for an institution where the theoretical changes in the value of a trading desk's portfolio are not sufficiently close to the hypothetical changes in the value of a trading desk's portfolio for the purposes of paragraph 2;
the frequency at which the P&L attribution is to be performed by an institution;
the technical elements to be included in the theoretical and hypothetical changes in the value of a trading desk's portfolio for the purposes of this Article;
the manner in which institutions that use the internal model are to aggregate the total own funds requirement for market risk for all their trading book positions and non-trading book positions that are subject to foreign exchange risk or commodity risk, taking into account the consequences referred to in point (b).
EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 325bh
Requirements on risk measurement
Institutions using an internal risk-measurement model that is used to calculate the own funds requirements for market risk as referred to in Article 325ba shall ensure that that model meets all the following requirements:
the internal risk-measurement model shall capture a sufficient number of risk factors, which shall include at least the risk factors referred to in Subsection 1 of Section 3 of Chapter 1a unless the institution demonstrates to the competent authorities that the omission of those risk factors does not have a material impact on the results of the P&L attribution requirement referred to in Article 325bg; an institution shall be able to explain to the competent authorities why it has incorporated a risk factor in its pricing model but not in its internal risk-measurement model;
the internal risk-measurement model shall capture nonlinearities for options and other products as well as correlation risk and basis risk;
the internal risk-measurement model shall incorporate a set of risk factors that correspond to the interest rates in each currency in which the institution has interest rate sensitive on- or off-balance-sheet positions; the institution shall model the yield curves using one of the generally accepted approaches; the yield curve shall be divided into various maturity segments to capture the variations of volatility of rates along the yield curve; for material exposures to interest-rate risk in the major currencies and markets, the yield curve shall be modelled using a minimum of six maturity segments, and the number of risk factors used to model the yield curve shall be proportionate to the nature and complexity of the institution's trading strategies, the model shall also capture the risk spread of less than perfectly correlated movements between different yield curves or different financial instruments on the same underlying issuer;
the internal risk-measurement model shall incorporate risk factors corresponding to gold and to the individual foreign currencies in which the institution's positions are denominated; for CIUs, the actual foreign exchange positions of the CIU shall be taken into account; institutions may rely on third-party reporting of the foreign exchange position of the CIU, provided that the correctness of that report is adequately ensured; foreign exchange positions of a CIU of which an institution is not aware of shall be carved out from the internal models approach and treated in accordance with Chapter 1a;
the sophistication of the modelling technique shall be proportionate to the materiality of the institutions' activities in the equity markets; the internal risk-measurement model shall use a separate risk factor at least for each of the equity markets in which the institution holds significant positions and at least one risk factor that captures systemic movements in equity prices and the dependency of that risk factor on the individual risk factors for each equity market;
the internal risk-measurement model shall use a separate risk factor at least for each commodity in which the institution holds significant positions, unless the institution has a small aggregate commodity position compared to all its trading activities, in which case it may use a separate risk factor for each broad commodity type; for material exposures to commodity markets, the model shall capture the risk of less than perfectly correlated movements between commodities that are similar, but not identical, the exposure to changes in forward prices arising from maturity mismatches, and the convenience yield between derivative and cash positions;
the proxies used shall show a good track record for the actual position held, shall be appropriately conservative, and shall be used only where the available data are insufficient, such as during the period of stress referred to in point (c) of Article 325bc(2);
for material exposures to volatility risks in instruments with optionality, the internal risk-measurement model shall capture the dependency of implied volatilities across strike prices and options' maturities.
Article 325bi
Qualitative requirements
Any internal risk-measurement model used for the purposes of this Chapter shall be conceptually sound, shall be calculated and implemented with integrity, and shall comply with all the following qualitative requirements:
any internal risk-measurement model used to calculate capital requirements for market risk shall be closely integrated into the daily risk management process of the institution and shall serve as the basis for reporting risk exposures to senior management;
an institution shall have a risk control unit that is independent from business trading units and that reports directly to senior management; that unit shall be responsible for designing and implementing any internal risk-measurement model; that unit shall conduct the initial and on-going validation of any internal model used for the purposes of this Chapter and shall be responsible for the overall risk management system; that unit shall produce and analyse daily reports on the output of any internal model used to calculate capital requirements for market risk, as well as reports on the appropriateness of measures to be taken in terms of trading limits;
the management body and senior management shall be actively involved in the risk-control process, and the daily reports produced by the risk control unit shall be reviewed at a level of management with sufficient authority to require the reduction of positions taken by individual traders and to require the reduction of the institution's overall risk exposure;
the institution shall have a sufficient number of staff with a level of skills that is appropriate to the sophistication of the internal risk-measurement models, and a sufficient number of staff with skills in the trading, risk control, audit and back-office areas;
the institution shall have in place a documented set of internal policies, procedures and controls for monitoring and ensuring compliance with the overall operation of its internal risk-measurement models;
any internal risk-measurement model, including any pricing model, shall have a proven track record of being reasonably accurate in measuring risks, and shall not differ significantly from the models that the institution uses for its internal risk management;
the institution shall frequently conduct rigorous programmes of stress testing, including reverse stress tests, which shall encompass any internal risk-measurement model; the results of those stress tests shall be reviewed by senior management at least on a monthly basis and shall comply with the policies and limits approved by the management body; the institution shall take appropriate actions where the results of those stress tests show excessive losses arising from the trading's business of the institution under certain circumstances;
the institution shall conduct an independent review of its internal risk-measurement models, either as part of its regular internal auditing process, or by mandating a third-party undertaking to conduct that review, which shall be conducted to the satisfaction of the competent authorities.
For the purposes of point (h) of the first subparagraph, a third-party undertaking means an undertaking that provides auditing or consulting services to institutions and that has staff who have sufficient skills in the area of market risk in trading activities.
The review referred to in point (h) of paragraph 1 shall include both the activities of the business trading units and the independent risk control unit. The institution shall conduct a review of its overall risk management process at least once a year. That review shall assess the following:
the adequacy of the documentation of the risk management system and process and the organisation of the risk control unit;
the integration of risk measures into daily risk management and the integrity of the management information system;
the processes the institution employs for approving the risk-pricing models and valuation systems that are used by front and back-office personnel;
the scope of risks captured by the model, the accuracy and appropriateness of the risk-measurement system, and the validation of any significant changes to the internal risk-measurement model;
the accuracy and completeness of position data, the accuracy and appropriateness of volatility and correlation assumptions, the accuracy of valuation and risk sensitivity calculations, and the accuracy and appropriateness for generating data proxies where the available data are insufficient to meet the requirement set out in this Chapter;
the verification process that the institution employs to evaluate the consistency, timeliness and reliability of the data sources used to run any of its internal risk-measurement models, including the independence of those data sources;
the verification process that the institution employs to evaluate back-testing requirements and P&L attribution requirements that are conducted in order to assess the accuracy of its internal risk-measurement models;
where the review is performed by a third-party undertaking in accordance with point (h) of paragraph 1 of this Article, the verification that the internal validation process set out in Article 325bj fulfils its objectives.
Article 325bj
Internal validation
Institutions shall conduct the validation referred to in paragraph 1 in the following circumstances:
when any internal risk-measurement model is initially developed and when any significant changes are made to that model;
on a periodic basis, and where there have been significant structural changes in the market or changes to the composition of the portfolio which might lead to the internal risk-measurement model no longer being adequate.
The validation of the internal risk-measurement models of an institution shall not be limited to back-testing and P&L attribution requirements, but shall, at a minimum, include the following:
tests to verify whether the assumptions made in the internal model are appropriate and do not underestimate or overestimate the risk;
own internal model validation tests, including back-testing in addition to the regulatory back-testing programmes, in relation to the risks and structures of their portfolios;
the use of hypothetical portfolios to ensure that the internal risk-measurement model is able to account for particular structural features that may arise, for example, material basis risks and concentration risk, or the risks associated with the use of proxies.
Article 325bk
Calculation of stress scenario risk measure
EBA shall develop draft regulatory technical standards to specify:
how institutions are to develop extreme scenarios of future shock applicable to non-modellable risk factors and how they are to apply those extreme scenarios of future shock to those risk factors;
a regulatory extreme scenario of future shock for each broad sub-category of risk factors listed in Table 2 of Article 325bd, which institutions may use when they are unable to develop an extreme scenario of future shock in accordance with point (a) of this subparagraph, or which competent authorities may require that institution apply if those authorities are not satisfied with the extreme scenario of future shock developed by the institution;
the circumstances under which institutions may calculate a stress scenario risk measure for more than one non-modellable risk factor;
how institutions are to aggregate the stress scenario risk measures of all non-modellable risk factors included in their trading book positions and non-trading book positions that are subject to foreign exchange risk or commodity risk.
In developing those draft regulatory technical standards, EBA shall take into consideration the requirement that the level of own funds requirements for market risk of a non-modellable risk factor as set out in this Article shall be as high as the level of own funds requirements for market risk that would have been calculated under this Chapter if that risk factor were modellable.
EBA shall submit those draft regulatory technical standards to the Commission by 28 September 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 325bl
Scope of the internal default risk model
Article 325bm
Permission to use an internal default risk model
Article 325bn
Own funds requirements for default risk using an internal default risk model
Institutions shall calculate the own funds requirements for default risk using an internal default risk model for the portfolio of all trading book positions as referred to in Article 325bl as follows:
the own funds requirements shall be equal to a value-at-risk number measuring potential losses in the market value of the portfolio caused by the default of issuers related to those positions at the 99,9 % confidence interval over a one-year time horizon;
the potential loss referred to in point (a) means a direct or indirect loss in the market value of a position which was caused by the default of the issuers and which is incremental to any losses already taken into account in the current valuation of the position; the default of the issuers of equity positions shall be represented by the value for the issuers' equity prices being set to zero;
institutions shall determine default correlations between different issuers on the basis of a conceptually sound methodology, using objective historical data on market credit spreads or equity prices that cover at least a 10 year period that includes the stress period identified by the institution in accordance with Article 325bc(2); the calculation of default correlations between different issuers shall be calibrated to a one-year time horizon;
the internal default risk model shall be based on a one-year constant position assumption.
Article 325bo
Recognition of hedges in an internal default risk model
Article 325bp
Particular requirements for an internal default risk model
To simulate the default of issuers in the internal default risk model, the institution's estimates of default probabilities shall meet the following requirements:
the default probabilities shall be floored at 0,03 %;
the default probabilities shall be based on a one-year time horizon, unless stated otherwise in this Section;
the default probabilities shall be measured using, solely or in combination with current market prices, data observed during a historical period of at least five years of actual past defaults and extreme declines in market prices equivalent to default events; default probabilities shall not be inferred solely from current market prices;
an institution that has been granted permission to estimate default probabilities in accordance with Section 1 of Chapter 3 of Title II shall use the methodology set out therein to calculate default probabilities;
an institution that has not been granted permission to estimate default probabilities in accordance with Section 1 of Chapter 3 of Title II shall develop an internal methodology or use external sources to estimate default probabilities; in both situations, the estimates of default probabilities shall be consistent with the requirements set out in this Article.
To simulate the default of issuers in the internal default risk model, the institution's estimates of loss given default shall meet the following requirements:
the loss given default estimates are floored at 0 %;
the loss given default estimates shall reflect the seniority of each position;
an institution that has been granted permission to estimate loss given default in accordance with Section 1 of Chapter 3 of Title II shall use the methodology set out therein to calculate loss given default estimates;
an institution that has not been granted permission to estimate loss given default in accordance with Section 1 of Chapter 3 of Title II shall develop an internal methodology or use external sources to estimate loss given default; in both situations, the estimates of loss given default shall be consistent with the requirements set out in this Article.
As part of the independent review and validation of the internal models that they use for the purposes of this Chapter, including for the risk-measurement system, institutions shall:
verify that their approach for the modelling of correlations and price changes is appropriate for their portfolio, including the choice and weights of the systematic risk factors in the model;
perform a variety of stress tests, including sensitivity analyses and scenario analyses, to assess the qualitative and quantitative reasonableness of the internal default risk model, in particular with regard to the treatment of concentrations; and
apply appropriate quantitative validation including relevant internal modelling benchmarks.
The tests referred to in point (b) shall not be limited to the range of past events experienced.
EBA shall submit those draft regulatory technical standards to the Commission by 28 September 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
CHAPTER 2
Own funds requirements for position risk
Section 1
General provisions and specific instruments
Article 326
Own funds requirements for position risk
The institution's own funds requirement for position risk shall be the sum of the own funds requirements for the general and specific risk of its positions in debt and equity instruments. Securitisation positions in the trading book shall be treated as debt instruments.
Article 327
Netting
Article 328
Interest rate futures and forwards
Article 329
Options and warrants
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 330
Swaps
Swaps shall be treated for interest-rate risk purposes on the same basis as on-balance-sheet instruments. Thus, an interest-rate swap under which an institution receives floating-rate interest and pays fixed-rate interest shall be treated as equivalent to a long position in a floating-rate instrument of maturity equivalent to the period until the next interest fixing and a short position in a fixed-rate instrument with the same maturity as the swap itself.
Article 331
Interest rate risk on derivative instruments
Institutions which do not use models under paragraph 1 may, treat as fully offsetting any positions in derivative instruments covered in Articles 328 to 330 which meet the following conditions at least:
the positions are of the same value and denominated in the same currency;
the reference rate (for floating-rate positions) or coupon (for fixed-rate positions) is closely matched;
the next interest-fixing date or, for fixed coupon positions, residual maturity corresponds with the following limits:
less than one month hence: same day;
between one month and one year hence: within seven days;
over one year hence: within 30 days.
Article 332
Credit Derivatives
When calculating the own funds requirement for general and specific risk of the party who assumes the credit risk (the ‘protection seller’), unless specified differently, the notional amount of the credit derivative contract shall be used. Notwithstanding the first sentence, the institution may elect to replace the notional value by the notional value plus the net market value change of the credit derivative since trade inception, a net downward change from the protection seller's perspective carrying a negative sign. For the purpose of calculating the specific risk charge, other than for total return swaps, the maturity of the credit derivative contract, rather than the maturity of the obligation, shall apply. Positions are determined as follows:
a total return swap creates a long position in the general risk of the reference obligation and a short position in the general risk of a government bond with a maturity equivalent to the period until the next interest fixing and which is assigned a 0 % risk weight under Title II, Chapter 2. It also creates a long position in the specific risk of the reference obligation;
a credit default swap does not create a position for general risk. For the purposes of specific risk, the institution shall record a synthetic long position in an obligation of the reference entity, unless the derivative is rated externally and meets the conditions for a qualifying debt item, in which case a long position in the derivative is recorded. If premium or interest payments are due under the product, these cash flows shall be represented as notional positions in government bonds;
a single name credit linked note creates a long position in the general risk of the note itself, as an interest rate product. For the purpose of specific risk, a synthetic long position is created in an obligation of the reference entity. An additional long position is created in the issuer of the note. Where the credit linked note has an external rating and meets the conditions for a qualifying debt item, a single long position with the specific risk of the note need only be recorded;
in addition to a long position in the specific risk of the issuer of the note, a multiple name credit linked note providing proportional protection creates a position in each reference entity, with the total notional amount of the contract assigned across the positions according to the proportion of the total notional amount that each exposure to a reference entity represents. Where more than one obligation of a reference entity can be selected, the obligation with the highest risk weighting determines the specific risk;
a first-asset-to-default credit derivative creates a position for the notional amount in an obligation of each reference entity. If the size of the maximum credit event payment is lower than the own funds requirement under the method in the first sentence of this point, the maximum payment amount may be taken as the own funds requirement for specific risk.
A -n-th-asset-to-default credit derivative creates a position for the notional amount in an obligation of each reference entity less the n-1 reference entities with the lowest specific risk own funds requirement. If the size of the maximum credit event payment is lower than the own funds requirement under the method in the first sentence of this point, this amount may be taken as the own funds requirement for specific risk.
Where an n-th-to-default credit derivative is externally rated, the protection seller shall calculate the specific risk own funds requirement using the rating of the derivative and apply the respective securitisation risk weights as applicable.
Article 333
Securities sold under a repurchase agreement or lent
The transferor of securities or guaranteed rights relating to title to securities in a repurchase agreement and the lender of securities in a securities lending shall include these securities in the calculation of its own funds requirement under this Chapter provided that such securities are trading book positions.
Section 2
Debt instruments
Article 334
Net positions in debt instruments
Net positions shall be classified according to the currency in which they are denominated and shall calculate the own funds requirement for general and specific risk in each individual currency separately.
Sub-Section 1
Specific risk
Article 335
Cap on the own funds requirement for a net position
The institution may cap the own funds requirement for specific risk of a net position in a debt instrument at the maximum possible default-risk related loss. For a short position, that limit may be calculated as a change in value due to the instrument or, where relevant, the underlying names immediately becoming default risk-free.
Article 336
Own funds requirement for non-securitisation debt instruments
The institution shall assign its net positions in the trading book in instruments that are not securitisation positions as calculated in accordance with Article 327 to the appropriate categories in Table 1 on the basis of their issuer or obligor, external or internal credit assessment, and residual maturity, and then multiply them by the weightings shown in that table. It shall sum its weighted positions resulting from the application of this Article regardless of whether they are long or short in order to calculate its own funds requirement against specific risk.
Table 1
Categories |
Specific risk own funds requirement |
Debt securities which would receive a 0 % risk weight under the Standardised Approach for credit risk. |
0 % |
Debt securities which would receive a 20 % or 50 % risk weight under the Standardised Approach for credit risk and other qualifying items as defined in paragraph 4. |
0,25 % (residual term to final maturity six months or less) 1,00 % (residual term to final maturity greater than six months and up to and including 24 months) 1,60 % (residual term to maturity exceeding 24 months) |
Debt securities which would receive a 100 % risk weight under the Standardised Approach for credit risk. |
8,00 % |
Debt which would receive a 150 % risk weight under the Standardised Approach for credit risk. |
12,00 % |
Other qualifying items are:
long and short positions in assets for which a credit assessment by a nominated ECAI is not available and which meet all of the following conditions:
they are considered by the institution concerned to be sufficiently liquid;
their investment quality is, according to the institution's own discretion, at least equivalent to that of the assets referred to under Table 1 second row;
they are listed on at least one regulated market in a Member State or on a stock exchange in a third country provided that the exchange is recognised by the competent authorities of the relevant Member State;
long and short positions in assets issued by institutions subject to the own funds requirements set out in this Regulation which are considered by the institution concerned to be sufficiently liquid and whose investment quality is, according to the institution's own discretion, at least equivalent to that of the assets referred to under Table 1 second row;
securities issued by institutions that are deemed to be of equivalent, or higher, credit quality than those associated with credit quality step 2 under the Standardised Approach for credit risk of exposures to institutions and that are subject to supervisory and regulatory arrangements comparable to those under this Regulation and Directive 2013/36/EU.
Institutions that make use of point (a) or (b) shall have a documented methodology in place to assess whether assets meet the requirements in those points and shall notify this methodology to the competent authorities.
Article 337
Own funds requirement for securitisation instruments
In accordance with Article 16 of Regulation (EU) No 1093/2010, the EBA shall issue guidelines on the use of estimates of PD and LGD as inputs when those estimates are based on an IRC model.
Where an originator institution of a synthetic securitisation does not meet the conditions for significant risk transfer set out in Article 245, the originator institution shall include the exposures underlying the securitisation in its calculation of own funds requirements as if those exposures had not been securitised and shall ignore the effect of the synthetic securitisation for credit protection purposes.
Article 338
Own funds requirement for the correlation trading portfolio
The correlation trading portfolio shall consist of securitisation positions and n-th-to-default credit derivatives that meet all of the following criteria:
the positions are neither re-securitisation positions, nor options on a securitisation tranche, nor any other derivatives of securitisation exposures that do not provide a pro-rata share in the proceeds of a securitisation tranche;
all reference instruments are either of the following:
single-name instruments, including single-name credit derivatives, for which a liquid two-way market exists;
commonly-traded indices based on those reference entities.
A two-way market is deemed to exist where there are independent bona fide offers to buy and sell so that a price reasonably related to the last sales price or current bona fide competitive bid and offer quotations can be determined within one day and settled at such price within a relatively short time conforming to trade custom.
Positions which reference any of the following shall not be part of the correlation trading portfolio:
an underlying that is capable of being assigned to the exposure class ‘retail exposures’ or to the exposure class ‘exposures secured by mortgages on immovable property’ under the Standardised Approach for credit risk in an institution's non-trading book;
a claim on a special purpose entity, collateralised, directly or indirectly, by a position that would itself not be eligible for inclusion in the correlation trading portfolio in accordance with paragraph 1 and this paragraph.
An institution shall determine the larger of the following amounts as the specific risk own funds requirement for the correlation trading portfolio:
the total specific risk own funds requirement that would apply just to the net long positions of the correlation trading portfolio;
the total specific risk own funds requirement that would apply just to the net short positions of the correlation trading portfolio.
Sub-Section 2
General risk
Article 339
Maturity-based calculation of general risk
The institution shall compute the totals of the unmatched weighted long positions for the bands included in each of the zones in Table 2 in order to derive the unmatched weighted long position for each zone. Similarly, the sum of the unmatched weighted short positions for each band in a particular zone shall be summed to compute the unmatched weighted short position for that zone. That part of the unmatched weighted long position for a given zone that is matched by the unmatched weighted short position for the same zone shall be the matched weighted position for that zone. That part of the unmatched weighted long or unmatched weighted short position for a zone that cannot be thus matched shall be the unmatched weighted position for that zone.
Table 2
Zone |
Maturity band |
Weighting (in %) |
Assumed interest rate change (in %) |
|
Coupon of 3 % or more |
Coupon of less than 3 % |
|||
One |
0 ≤ 1 month |
0 ≤ 1 month |
0,00 |
— |
> 1 ≤ 3 months |
> 1 ≤ 3 months |
0,20 |
1,00 |
|
> 3 ≤ 6 months |
> 3 ≤ 6 months |
0,40 |
1,00 |
|
> 6 ≤ 12 months |
> 6 ≤ 12 months |
0,70 |
1,00 |
|
Two |
> 1 ≤ 2 years |
> 1,0 ≤ 1,9 years |
1,25 |
0,90 |
> 2 ≤ 3 years |
> 1,9 ≤ 2,8 years |
1,75 |
0,80 |
|
> 3 ≤ 4 years |
> 2,8 ≤ 3,6 years |
2,25 |
0,75 |
|
Three |
> 4 ≤ 5 years |
> 3,6 ≤ 4,3 years |
2,75 |
0,75 |
> 5 ≤ 7 years |
> 4,3 ≤ 5,7 years |
3,25 |
0,70 |
|
> 7 ≤ 10 years |
> 5,7 ≤ 7,3 years |
3,75 |
0,65 |
|
> 10 ≤ 15 years |
> 7,3 ≤ 9,3 years |
4,50 |
0,60 |
|
> 15 ≤ 20 years |
> 9,3 ≤ 10,6 years |
5,25 |
0,60 |
|
> 20 years |
> 10,6 ≤ 12,0 years |
6,00 |
0,60 |
|
|
> 12,0 ≤ 20,0 years |
8,00 |
0,60 |
|
|
> 20 years |
12,50 |
0,60 |
The institution's own funds requirement shall be calculated as the sum of:
10 % of the sum of the matched weighted positions in all maturity bands;
40 % of the matched weighted position in zone one;
30 % of the matched weighted position in zone two;
30 % of the matched weighted position in zone three;
40 % of the matched weighted position between zones one and two and between zones two and three;
150 % of the matched weighted position between zones one and three;
100 % of the residual unmatched weighted positions.
Article 340
Duration-based calculation of general risk
The institution shall then calculate the modified duration of each debt instrument on the basis of the following formula:
where:
D |
= |
duration calculated according to the following formula:
where:
|
Correction shall be made to the calculation of the modified duration for debt instruments which are subject to prepayment risk. EBA shall, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines about how to apply such corrections.
The institution shall then allocate each debt instrument to the appropriate zone in Table 3. It shall do so on the basis of the modified duration of each instrument.
Table 3
Zone |
Modified duration (in years) |
Assumed interest (change in %) |
One |
> 0 ≤ 1,0 |
1,0 |
Two |
> 1,0 ≤ 3,6 |
0,85 |
Three |
> 3,6 |
0,7 |
The institution shall then calculate the unmatched duration-weighted positions for each zone. It shall then follow the procedures laid down for unmatched weighted positions in Article 339(5) to (8).
The institution's own funds requirement shall then be calculated as the sum of the following:
2 % of the matched duration-weighted position for each zone;
40 % of the matched duration-weighted positions between zones one and two and between zones two and three;
150 % of the matched duration-weighted position between zones one and three;
100 % of the residual unmatched duration-weighted positions.
Section 3
Equities
Article 341
Net positions in equity instruments
EBA shall submit those draft regulatory technical standards to the Commission by 31 January 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 342
Specific risk of equity instruments
The institution shall multiply its overall gross position by 8 % in order to calculate its own funds requirement against specific risk.
Article 343
General risk of equity instruments
The own funds requirement against general risk shall be the institution's overall net position multiplied by 8 %.
Article 344
Stock indices
EBA shall submit those draft implementing technical standards to the Commission by 1 January 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Section 4
Underwriting
Article 345
Reduction of net positions
In the case of the underwriting of debt and equity instruments, an institution may use the following procedure in calculating its own funds requirements. The institution shall first calculate the net positions by deducting the underwriting positions which are subscribed or sub-underwritten by third parties on the basis of formal agreements. The institution shall then reduce the net positions by the reduction factors in Table 4 and calculate its own funds requirements using the reduced underwriting positions.
Table 4
working day 0: |
100 % |
working day 1: |
90 % |
working days 2 to 3: |
75 % |
working day 4: |
50 % |
working day 5: |
25 % |
after working day 5: |
0 %. |
‘Working day zero’ shall be the working day on which the institution becomes unconditionally committed to accepting a known quantity of securities at an agreed price.
Section 5
Specific risk own funds requirements for positions hedged by credit derivatives
Article 346
Allowance for hedges by credit derivatives
Full allowance shall be given when the values of the two legs always move in the opposite direction and broadly to the same extent. This will be the case in the following situations:
the two legs consist of completely identical instruments;
a long cash position is hedged by a total rate of return swap (or vice versa) and there is an exact match between the reference obligation and the underlying exposure (i.e., the cash position). The maturity of the swap itself may be different from that of the underlying exposure.
In these situations, a specific risk own funds requirement shall not be applied to either side of the position.
Partial allowance shall be given, absent the situations in paragraphs 3 and 4, in the following situations:
the position falls under paragraph 3(b) but there is an asset mismatch between the reference obligation and the underlying exposure. However, the positions meet the following requirements:
the reference obligation ranks pari passu with or is junior to the underlying obligation;
the underlying obligation and reference obligation share the same obligor and have legally enforceable cross-default or cross-acceleration clauses;
the position falls under paragraph 3(a) or paragraph 4 but there is a currency or maturity mismatch between the credit protection and the underlying asset. Such currency mismatch shall be included in the own funds requirement for foreign exchange risk;
the position falls under paragraph 4 but there is an asset mismatch between the cash position and the credit derivative. However, the underlying asset is included in the (deliverable) obligations in the credit derivative documentation.
In order to give partial allowance, rather than adding the specific risk own funds requirements for each side of the transaction, only the higher of the two own funds requirements shall apply.
Article 347
Allowance for hedges by first and nth-to default credit derivatives
In the case of first-to-default credit derivatives and nth-to-default credit derivatives, the following treatment applies for the allowance to be given in accordance with Article 346:
where an institution obtains credit protection for a number of reference entities underlying a credit derivative under the terms that the first default among the assets shall trigger payment and that this credit event shall terminate the contract, the institution may offset specific risk for the reference entity to which the lowest specific risk percentage charge among the underlying reference entities applies in accordance with Table 1 in Article 336;
where the nth default among the exposures triggers payment under the credit protection, the protection buyer may only offset specific risk if protection has also been obtained for defaults 1 to n-1 or when n-1 defaults have already occurred. In such cases, the methodology set out in point (a) for first-to-default credit derivatives shall be followed appropriately amended for nth-to-default products.
Section 6
Own funds requirements for CIUs
Article 348
Own funds requirements for CIUs
Article 349
General criteria for CIUs
CIUs shall be eligible for the approach set out in Article 350, where all the following conditions are met:
the CIU's prospectus or equivalent document shall include all of the following:
the categories of assets in which the CIU is authorised to invest;
where investment limits apply, the relative limits and the methodologies to calculate them;
where leverage is allowed, the maximum level of leverage;
where concluding OTC financial derivatives transactions or repurchase transactions or securities borrowing or lending is allowed, a policy to limit counterparty risk arising from these transactions;
the business of the CIU shall be reported in half-yearly and annual reports to enable an assessment to be made of the assets and liabilities, income and operations over the reporting period;
the shares or units of the CIU shall be redeemable in cash, out of the undertaking's assets, on a daily basis at the request of the unit holder;
investments in the CIU shall be segregated from the assets of the CIU manager;
there shall be adequate risk assessment of the CIU, by the investing institution;
CIUs shall be managed by persons supervised in accordance with Directive 2009/65/EC or equivalent legislation.
Article 350
Specific methods for CIUs
Institutions may calculate the own funds requirements for position risk, comprising specific and general risk, for positions in CIUs by assuming positions representing those necessary to replicate the composition and performance of the externally generated index or fixed basket of equities or debt securities referred to in point (a), subject to the following conditions:
the purpose of the CIU's mandate is to replicate the composition and performance of an externally generated index or fixed basket of equities or debt securities;
a minimum correlation coefficient between daily returns on the CIU and the index or basket of equities or debt securities it tracks of 0,9 can be clearly established over a minimum period of six months.
Where the institution is not aware of the underlying investments of the CIU on a daily basis, the institution may calculate the own funds requirements for position risk, comprising specific and general risk, subject to the following conditions:
it will be assumed that the CIU first invests to the maximum extent allowed under its mandate in the asset classes attracting the highest own funds requirement for specific and general risk separately, and then continues making investments in descending order until the maximum total investment limit is reached. The position in the CIU will be treated as a direct holding in the assumed position;
institutions shall take account of the maximum indirect exposure that they could achieve by taking leveraged positions through the CIU when calculating their own funds requirement for specific and general risk separately, by proportionally increasing the position in the CIU up to the maximum exposure to the underlying investment items resulting from the mandate;
if the own funds requirement for specific and general risk together in accordance with this paragraph exceed that set out in Article 348(1) the own funds requirement shall be capped at that level.
Institutions may rely on the following third parties to calculate and report own funds requirements for position risk for positions in CIUs falling under paragraphs 1 to 4, in accordance with the methods set out in this Chapter:
the depository of the CIU provided that the CIU exclusively invests in securities and deposits all securities at this depository;
for other CIUs, the CIU management company, provided that the CIU management company meets the criteria set out in Article 132(3)(a).
The correctness of the calculation shall be confirmed by an external auditor.
CHAPTER 3
Own funds requirements for foreign-exchange risk
Article 351
De minimis and weighting for foreign exchange risk
If the sum of an institution's overall net foreign-exchange position and its net gold position, calculated in accordance with the procedure set out in Article 352, including for any foreign exchange and gold positions for which own funds requirements are calculated using an internal model, exceeds 2 % of its total own funds, the institution shall calculate an own funds requirement for foreign exchange risk. The own funds requirement for foreign exchange risk shall be the sum of its overall net foreign-exchange position and its net gold position in the reporting currency, multiplied by 8 %.
Article 352
Calculation of the overall net foreign exchange position
The institution's net open position in each currency (including the reporting currency) and in gold shall be calculated as the sum of the following elements (positive or negative):
the net spot position (i.e. all asset items less all liability items, including accrued interest, in the currency in question or, for gold, the net spot position in gold);
the net forward position, which are all amounts to be received less all amounts to be paid under forward exchange and gold transactions, including currency and gold futures and the principal on currency swaps not included in the spot position;
irrevocable guarantees and similar instruments that are certain to be called and likely to be irrecoverable;
the net delta, or delta-based, equivalent of the total book of foreign-currency and gold options;
the market value of other options.
The delta used for purposes of point (d) shall be that of the exchange concerned. For OTC options, or where delta is not available from the exchange concerned, the institution may calculate delta itself using an appropriate model, subject to permission by the competent authorities. Permission shall be granted if the model appropriately estimates the rate of change of the option's or warrant's value with respect to small changes in the market price of the underlying.
The institution may include net future income/expenses not yet accrued but already fully hedged if it does so consistently.
The institution may break down net positions in composite currencies into the component currencies in accordance with the quotas in force.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Before the entry into force of the technical standards referred to in the first subparagraph, competent authorities may continue to apply the existing national treatments, where the competent authorities have applied those treatments before 31 December 2013.
Article 353
Foreign exchange risk of CIUs
Institutions may rely on the following third parties' reporting of the foreign exchange positions in the CIU:
the depository institution of the CIU provided that the CIU exclusively invests in securities and deposits all securities at this depository institution;
for other CIUs, the CIU management company, provided that the CIU management company meets the criteria set out in point (a) of Article 132(3).
The correctness of the calculation shall be confirmed by an external auditor.
Article 354
Closely correlated currencies
EBA shall submit those draft implementing technical standards to the Commission by 1 January 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
CHAPTER 4
Own funds requirements for commodities risk
Article 355
Choice of method for commodities risk
Subject to Articles 356 to 358, institutions shall calculate the own funds requirement for commodities risk with one of the methods set out in Article 359, 360 or 361.
Article 356
Ancillary commodities business
Institutions with ancillary agricultural commodities business may determine the own funds requirements for their physical commodity stock at the end of each year for the following year where all of the following conditions are met:
at any time of the year it holds own funds for this risk which are not lower than the average own funds requirement for that risk estimated on a conservative basis for the coming year;
it estimates on a conservative basis the expected volatility for the figure calculated under point (a);
its average own funds requirement for this risk does not exceed 5 % of its own funds or EUR 1 million and, taking into account the volatility estimated in accordance with (b), the expected peak own funds requirements do not exceed 6,5 % of its own funds;
the institution monitors on an ongoing basis whether the estimates carried out under points (a) and (b) still reflect the reality.
Article 357
Positions in commodities
For the purposes of calculating a position in a commodity, the following positions shall be treated as positions in the same commodity:
positions in different sub-categories of commodities in cases where the sub-categories are deliverable against each other;
positions in similar commodities if they are close substitutes and where a minimum correlation of 0,9 between price movements can be clearly established over a minimum period of one year.
Article 358
Particular instruments
Institutions shall adequately reflect other risks associated with options, apart from the delta risk, in the own funds requirements.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Before the entry into force of the technical standards referred to in the first subparagraph, competent authorities may continue to apply the existing national treatments, where the competent authorities have applied those treatments before 31 December 2013.
Where an institution is either of the following, it shall include the commodities concerned in the calculation of its own funds requirement for commodities risk:
the transferor of commodities or guaranteed rights relating to title to commodities in a repurchase agreement;
the lender of commodities in a commodities lending agreement.
Article 359
Maturity ladder approach
The institution shall use a separate maturity ladder in line with Table 1 for each commodity. All positions in that commodity shall be assigned to the appropriate maturity bands. Physical stocks shall be assigned to the first maturity band between 0 and up to and including 1 month.
Table 1
Maturity band (1) |
Spread rate (in %) (2) |
0 ≤ 1 month |
1,50 |
> 1 ≤ 3 months |
1,50 |
> 3 ≤ 6 months |
1,50 |
> 6 ≤ 12 months |
1,50 |
> 1 ≤ 2 years |
1,50 |
> 2 ≤ 3 years |
1,50 |
> 3 years |
1,50 |
Positions in the same commodity may be offset and assigned to the appropriate maturity bands on a net basis for the following:
positions in contracts maturing on the same date;
positions in contracts maturing within 10 days of each other if the contracts are traded on markets which have daily delivery dates.
The institution's own funds requirement for each commodity shall be calculated on the basis of the relevant maturity ladder as the sum of the following:
the sum of the matched long and short positions, multiplied by the appropriate spread rate as indicated in the second column of Table 1 for each maturity band and by the spot price for the commodity;
the matched position between two maturity bands for each maturity band into which an unmatched position is carried forward, multiplied by 0,6 %, which is the carry rate and by the spot price for the commodity;
the residual unmatched positions, multiplied by 15 % which is the outright rate and by the spot price for the commodity.
Article 360
Simplified approach
The institution's own funds requirement for each commodity shall be calculated as the sum of the following:
15 % of the net position, long or short, multiplied by the spot price for the commodity;
3 % of the gross position, long plus short, multiplied by the spot price for the commodity.
Article 361
Extended maturity ladder approach
Institutions may use the minimum spread, carry and outright rates set out in the following Table 2 instead of those indicated in Article 359 provided that the institutions:
undertake significant commodities business;
have an appropriately diversified commodities portfolio;
are not yet in a position to use internal models for the purpose of calculating the own funds requirement for commodities risk.
Table 2
|
Precious metals (except gold) |
Base metals |
Agricultural products (softs) |
Other, including energy products |
Spread rate (%) |
1,0 |
1,2 |
1,5 |
1,5 |
Carry rate (%) |
0,3 |
0,5 |
0,6 |
0,6 |
Outright rate (%) |
8 |
10 |
12 |
15 |
Institutions shall notify the use they make of this Article to their competent authorities together with evidence of their efforts to implement an internal model for the purpose of calculating the own funds requirement for commodities risk.
CHAPTER 5
Use of internal models to calculate own funds requirements
Section 1
Permission and own funds requirements
Article 362
Specific and general risks
Position risk on a traded debt instrument or equity instrument or derivative thereof may be divided into two components for purposes of this Chapter. The first shall be its specific risk component and shall encompass the risk of a price change in the instrument concerned due to factors related to its issuer or, in the case of a derivative, the issuer of the underlying instrument. The general risk component shall encompass the risk of a price change in the instrument due in the case of a traded debt instrument or debt derivative to a change in the level of interest rates or in the case of an equity or equity derivative to a broad equity-market movement unrelated to any specific attributes of individual securities.
Article 363
Permission to use internal models
After having verified an institution's compliance with the requirements of Sections 2, 3 and 4 as relevant, competent authorities shall grant permission to institutions to calculate their own funds requirements for one or more of the following risk categories by using their internal models instead of or in combination with the methods in Chapters 2 to 4:
general risk of equity instruments;
specific risk of equity instruments;
general risk of debt instruments;
specific risk of debt instruments;
foreign-exchange risk;
commodities risk.
Institutions shall notify the competent authorities of all other extensions and changes to the use of those internal models that the institution has received permission to use.
EBA shall develop draft regulatory technical standards to specify the following:
the conditions for assessing materiality of extensions and changes to the use of internal models;
the assessment methodology under which competent authorities permit institutions to use internal models;
the conditions under which the share of positions covered by the internal model within a risk category shall be considered significant as referred to in paragraph 2.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 364
Own funds requirements when using internal models
Each institution using an internal model shall fulfil, in addition to own funds requirements calculated in accordance with Chapters 2, 3 and 4 for those risk categories for which permission to use an internal model has not been granted, an own funds requirement expressed as the sum of points (a) and (b):
the higher of the following values:
its previous day's value-at-risk number calculated in accordance with Article 365(1) (VaRt-1);
an average of the daily value-at-risk numbers calculated in accordance with Article 365(1) on each of the preceding sixty business days (VaRavg), multiplied by the multiplication factor (mc) in accordance with Article 366;
the higher of the following values:
its latest available stressed-value-at-risk number calculated in accordance with Article 365(2) (sVaRt-1); and
an average of the stressed value-at-risk numbers calculated in the manner and frequency specified in Article 365(2) during the preceding sixty business days (sVaRavg), multiplied by the multiplication factor (ms) in accordance with Article 366;
Institutions that use an internal model to calculate their own funds requirement for specific risk of debt instruments shall fulfil an additional own funds requirement expressed as the sum of the following points (a) and (b):
the own funds requirement calculated in accordance with Article 337 and 338 for the specific risk of securitisation positions and nth to default credit derivatives in the trading book with the exception of those incorporated in an own funds requirement for the specific risk of the correlation trading portfolio in accordance with Section 5 and, where applicable, the own funds requirement for specific risk in accordance with Chapter 2, Section 6, for those positions in CIUs for which neither the conditions in Article 350(1) nor Article 350(2) are fulfilled;
the higher of:
the most recent risk number for the incremental default and migration risk calculated in accordance with Section 3;
the average of this number over the preceding 12 weeks.
Institutions that have a correlation trading portfolio, which meets the requirements in Article 338(1) to (3), may fulfil an own funds requirement on the basis of Article 377 instead of Article 338(4), calculated as the higher of the following:
the most recent risk number for the correlation trading portfolio calculated in accordance with Section 5;
the average of this number over the preceding 12-weeks;
8 % of the own funds requirement that would, at the time of calculation of the most recent risk number referred to in point (a), be calculated in accordance with Article 338(4) for all those positions incorporated into the internal model for the correlation trading portfolio.
Section 2
General requirements
Article 365
VaR and stressed VaR Calculation
The calculation of the value-at-risk number referred to in Article 364 shall be subject to the following requirements:
daily calculation of the value-at-risk number;
a 99th percentile, one-tailed confidence interval;
a 10-day holding period;
an effective historical observation period of at least one year except where a shorter observation period is justified by a significant upsurge in price volatility;
at least monthly data set updates.
The institution may use value-at-risk numbers calculated according to shorter holding periods than 10 days scaled up to 10 days by an appropriate methodology that is reviewed periodically.
Article 366
Regulatory back testing and multiplication factors
Each of the multiplication factors (mc) and (ms) shall be the sum of at least 3 and an addend between 0 and 1 in accordance with Table 1. That addend shall depend on the number of overshootings for the most recent 250 business days as evidenced by the institution's back-testing of the value-at-risk number as set out in Article 365(1).
Table 1
Number of overshootings |
addend |
Fewer than 5 |
0,00 |
5 |
0,40 |
6 |
0,50 |
7 |
0,65 |
8 |
0,75 |
9 |
0,85 |
10 or more |
1,00 |
Back-testing on hypothetical changes in the portfolio's value shall be based on a comparison between the portfolio's end-of-day value and, assuming unchanged positions, its value at the end of the subsequent day.
Back-testing on actual changes in the portfolio's value shall be based on a comparison between the portfolio's end-of-day value and its actual value at the end of the subsequent day excluding fees, commissions, and net interest income.
Article 367
Requirements on risk measurement
Any internal model used to calculate capital requirements for position risk, foreign exchange risk, commodities risk and any internal model for correlation trading shall meet all of the following requirements:
the model shall capture accurately all material price risks;
the model shall capture a sufficient number of risk factors, depending on the level of activity of the institution in the respective markets. Where a risk factor is incorporated into the institution's pricing model but not into the risk-measurement model, the institution shall be able to justify such an omission to the satisfaction of the competent authority. The risk- measurement model shall capture nonlinearities for options and other products as well as correlation risk and basis risk. Where proxies for risk factors are used they shall show a good track record for the actual position held.
Any internal model used to calculate capital requirements for position risk, foreign exchange risk or commodities risk shall meet all of the following requirements:
the model shall incorporate a set of risk factors corresponding to the interest rates in each currency in which the institution has interest rate sensitive on- or off-balance sheet positions. The institution shall model the yield curves using one of the generally accepted approaches. For material exposures to interest-rate risk in the major currencies and markets, the yield curve shall be divided into a minimum of six maturity segments, to capture the variations of volatility of rates along the yield curve. The model shall also capture the risk of less than perfectly correlated movements between different yield curves;
the model shall incorporate risk factors corresponding to gold and to the individual foreign currencies in which the institution's positions are denominated. For CIUs the actual foreign exchange positions of the CIU shall be taken into account. Institutions may rely on third party reporting of the foreign exchange position of the CIU, where the correctness of that report is adequately ensured. If an institution is not aware of the foreign exchange positions of a CIU, this position shall be carved out and treated in accordance with Article 353(3);
the model shall use a separate risk factor at least for each of the equity markets in which the institution holds significant positions;
the model shall use a separate risk factor at least for each commodity in which the institution holds significant positions. The model shall also capture the risk of less than perfectly correlated movements between similar, but not identical, commodities and the exposure to changes in forward prices arising from maturity mismatches. It shall also take account of market characteristics, notably delivery dates and the scope provided to traders to close out positions;
the institution's internal model shall conservatively assess the risk arising from less liquid positions and positions with limited price transparency under realistic market scenarios. In addition, the internal model shall meet minimum data standards. Proxies shall be appropriately conservative and shall be used only where available data is insufficient or is not reflective of the true volatility of a position or portfolio.
Article 368
Qualitative requirements
Any internal model used for purposes of this Chapter shall be conceptually sound and implemented with integrity and, in particular, all of the following qualitative requirements shall be met:
any internal model used to calculate capital requirements for position risk, foreign exchange risk or commodities risk shall be closely integrated into the daily risk-management process of the institution and serve as the basis for reporting risk exposures to senior management;
the institution shall have a risk control unit that is independent from business trading units and reports directly to senior management. The unit shall be responsible for designing and implementing any internal model used for purposes of this Chapter. The unit shall conduct the initial and on-going validation of any internal model used for purposes of this Chapter, being responsible for the overall risk management system. The unit shall produce and analyse daily reports on the output of any internal model used for calculating capital requirements for position risk, foreign exchange risk and commodities risk, and on the appropriate measures to be taken in terms of trading limits;
the institution's management body and senior management shall be actively involved in the risk-control process and the daily reports produced by the risk-control unit are reviewed by a level of management with sufficient authority to enforce both reductions of positions taken by individual traders as well as in the institution's overall risk exposure;
the institution shall have sufficient numbers of staff skilled in the use of sophisticated internal models, and including those used for purposes of this Chapter, in the trading, risk-control, audit and back-office areas;
the institution shall have established procedures for monitoring and ensuring compliance with a documented set of internal policies and controls concerning the overall operation of its internal models, and including those used for purposes of this Chapter;
any internal model used for purposes of this Chapter shall have a proven track record of reasonable accuracy in measuring risks;
the institution shall frequently conduct a rigorous programme of stress testing, including reverse stress tests, which encompasses any internal model used for purposes of this Chapter and the results of these stress tests shall be reviewed by senior management and reflected in the policies and limits it sets. This process shall particularly address illiquidity of markets in stressed market conditions, concentration risk, one way markets, event and jump-to-default risks, non-linearity of products, deep out-of-the-money positions, positions subject to the gapping of prices and other risks that may not be captured appropriately in the internal models. The shocks applied shall reflect the nature of the portfolios and the time it could take to hedge out or manage risks under severe market conditions;
the institution shall conduct, as part of its regular internal auditing process, an independent review of its internal models, and including those used for purposes of this Chapter.
The review referred to in point (h) of paragraph 1 shall include both the activities of the business trading units and of the independent risk-control unit. At least once a year, the institution shall conduct a review of its overall risk-management process. The review shall consider the following:
the adequacy of the documentation of the risk-management system and process and the organisation of the risk-control unit;
the integration of risk measures into daily risk management and the integrity of the management information system;
the process the institution employs for approving risk-pricing models and valuation systems that are used by front and back-office personnel;
the scope of risks captured by the risk-measurement model and the validation of any significant changes in the risk-measurement process;
the accuracy and completeness of position data, the accuracy and appropriateness of volatility and correlation assumptions, and the accuracy of valuation and risk sensitivity calculations;
the verification process the institution employs to evaluate the consistency, timeliness and reliability of data sources used to run internal models, including the independence of such data sources;
the verification process the institution uses to evaluate back-testing that is conducted to assess the models' accuracy.
Article 369
Internal Validation
Institutions shall have processes in place to ensure that all their internal models used for purposes of this Chapter have been adequately validated by suitably qualified parties independent of the development process to ensure that they are conceptually sound and adequately capture all material risks. The validation shall be conducted when the internal model is initially developed and when any significant changes are made to the internal model. The validation shall also be conducted on a periodic basis but especially where there have been any significant structural changes in the market or changes to the composition of the portfolio which might lead to the internal model no longer being adequate. As techniques and best practices for internal validation evolve, institutions shall apply these advances. Internal model validation shall not be limited to back-testing, but shall, at a minimum, also include the following:
tests to demonstrate that any assumptions made within the internal model are appropriate and do not underestimate or overestimate the risk;
in addition to the regulatory back-testing programmes, institutions shall carry out their own internal model validation tests, including back-testing, in relation to the risks and structures of their portfolios;
the use of hypothetical portfolios to ensure that the internal model is able to account for particular structural features that may arise, for example material basis risks and concentration risk.
Section 3
Requirements particular to specific risk modelling
Article 370
Requirements for modelling specific risk
An internal model used for calculating own funds requirements for specific risk and an internal model for correlation trading shall meet the following additional requirements:
it explains the historical price variation in the portfolio;
it captures concentration in terms of magnitude and changes of composition of the portfolio;
it is robust to an adverse environment;
it is validated through back-testing aimed at assessing whether specific risk is being accurately captured. If the institution performs such back-testing on the basis of relevant sub-portfolios, these shall be chosen in a consistent manner;
it captures name-related basis risk and shall in particular be sensitive to material idiosyncratic differences between similar but not identical positions;
it captures event risk.
Article 371
Exclusions from specific risk models
Section 4
Internal model for incremental default and migration risk
Article 372
Requirement to have an internal IRC model
An institution that uses an internal model for calculating own funds requirements for specific risk of traded debt instruments shall also have an internal incremental default and migration risk (IRC) model in place to capture the default and migration risks of its trading book positions that are incremental to the risks captured by the value-at-risk measure as specified in Article 365(1). The institution shall demonstrate that its internal model meets the following standards under the assumption of a constant level of risk, and adjusted where appropriate to reflect the impact of liquidity, concentrations, hedging and optionality:
the internal model provides a meaningful differentiation of risk and accurate and consistent estimates of incremental default and migration risk;
the internal model's estimates for potential losses play an essential role in the risk management of the institution;
the market and position data used for the internal model are up-to-date and subject to an appropriate quality assessment;
the requirements in Article 367(3), Article 368, Article 369(1) and points (b), (c), (e) and (f) of Article 370 are met.
EBA shall issue guidelines on the requirements in Articles 373 to 376.
Article 373
Scope of the internal IRC model
The internal IRC model shall cover all positions subject to an own funds requirement for specific interest rate risk, including those subject to a 0 % specific risk capital charge under Article 336, but shall not cover securitisation positions and n-th-to-default credit derivatives.
The institution may, subject to permission by the competent authorities, choose to consistently include all listed equity positions and derivatives positions based on listed equities. The permission shall be granted if such inclusion is consistent with how the institution internally measures and manages risk.
Article 374
Parameters of the internal IRC model
Article 375
Recognition of hedges in the internal IRC model
For positions that are hedged via dynamic hedging strategies, a rebalancing of the hedge within the liquidity horizon of the hedged position may be recognised provided that the institution:
chooses to model rebalancing of the hedge consistently over the relevant set of trading book positions;
demonstrates that the inclusion of rebalancing results in a better risk measurement;
demonstrates that the markets for the instruments serving as hedges are liquid enough to allow for such rebalancing even during periods of stress. Any residual risks resulting from dynamic hedging strategies shall be reflected in the own funds requirement.
Article 376
Particular requirements for the internal IRC model
As part of the independent review and validation of their internal models used for purposes of this Chapter, inclusively for purposes of the risk measurement system, an institution shall in particular do all of the following:
validate that its modelling approach for correlations and price changes is appropriate for its portfolio, including the choice and weights of its systematic risk factors;
perform a variety of stress tests, including sensitivity analysis and scenario analysis, to assess the qualitative and quantitative reasonableness of the internal model, particularly with regard to the treatment of concentrations. Such tests shall not be limited to the range of events experienced historically;
apply appropriate quantitative validation including relevant internal modelling benchmarks.
Section 5
Internal model for correlation trading
Article 377
Requirements for an internal model for correlation trading
The following risks shall be adequately captured by the model referred to in paragraph 1:
the cumulative risk arising from multiple defaults, including different ordering of defaults, in tranched products;
credit spread risk, including the gamma and cross-gamma effects;
volatility of implied correlations, including the cross effect between spreads and correlations;
basis risk, including both of the following:
the basis between the spread of an index and those of its constituent single names;
the basis between the implied correlation of an index and that of bespoke portfolios;
recovery rate volatility, as it relates to the propensity for recovery rates to affect tranche prices;
to the extent the comprehensive risk measure incorporates benefits from dynamic hedging, the risk of hedge slippage and the potential costs of rebalancing such hedges;
any other material price risks of positions in the correlation trading portfolio.
The institution shall have appropriate policies and procedures in place in order to separate the positions for which it holds permission to incorporate them in the own funds requirement in accordance with this Article from other positions for which it does not hold such permission.
TITLE V
OWN FUNDS REQUIREMENTS FOR SETTLEMENT RISK
Article 378
Settlement/delivery risk
In the case of transactions in which debt instruments, equities, foreign currencies and commodities excluding repurchase transactions and securities or commodities lending and securities or commodities borrowing are unsettled after their due delivery dates, an institution shall calculate the price difference to which it is exposed.
The price difference is calculated as the difference between the agreed settlement price for the debt instrument, equity, foreign currency or commodity in question and its current market value, where the difference could involve a loss for the credit institution.
The institution shall multiply that price difference by the appropriate factor in the right column of the following Table 1 in order to calculate the institution's own funds requirement for settlement risk.
Table 1
Number of working days after due settlement date |
(%) |
5 — 15 |
8 |
16 — 30 |
50 |
31 — 45 |
75 |
46 or more |
100 |
Article 379
Free deliveries
An institution shall be required to hold own funds, as set out in Table 2, where the following occurs:
it has paid for securities, foreign currencies or commodities before receiving them or it has delivered securities, foreign currencies or commodities before receiving payment for them;
in the case of cross-border transactions, one day or more has elapsed since it made that payment or delivery.
Table 2
Capital treatment for free deliveries
Column 1 |
Column 2 |
Column 3 |
Column 4 |
Transaction Type |
Up to first contractual payment or delivery leg |
From first contractual payment or delivery leg up to four days after second contractual payment or delivery leg |
From 5 business days post second contractual payment or delivery leg until extinction of the transaction |
Free delivery |
No capital charge |
Treat as an exposure |
Treat as an exposure risk weighted at 1 250 % |
If the amount of positive exposure resulting from free delivery transactions is not material, institutions may apply a risk weight of 100 % to these exposures, except where a risk weight of 1 250 % in accordance with Column 4 of Table 2 in paragraph 1 is required.
Article 380
Waiver
Where a system wide failure of a settlement system, a clearing system or a CCP occurs, competent authorities may waive the own funds requirements calculated as set out in Articles 378 and 379 until the situation is rectified. In this case, the failure of a counterparty to settle a trade shall not be deemed a default for purposes of credit risk.
TITLE VI
OWN FUNDS REQUIREMENTS FOR CREDIT VALUATION ADJUSTMENT RISK
Article 381
Meaning of credit valuation adjustment
For the purposes of this Title and Chapter 6 of Title II, ‘credit valuation adjustment’ or ‘CVA’ means an adjustment to the mid-market valuation of the portfolio of transactions with a counterparty. That adjustment reflects the current market value of the credit risk of the counterparty to the institution, but does not reflect the current market value of the credit risk of the institution to the counterparty.
Article 382
Scope
The following transactions shall be excluded from the own funds requirements for CVA risk:
transactions with non-financial counterparties as defined in point (9) of Article 2 of Regulation (EU) No 648/2012, or with non-financial counterparties established in a third country, where those transactions do not exceed the clearing threshold as specified in Article 10(3) and (4) of that Regulation;
intragroup transactions as provided for in Article 3 of Regulation (EU) No 648/2012, unless Member States adopt national law requiring the structural separation within a banking group, in which case competent authorities may require those intragroup transactions between the structurally separated entities to be included in the own funds requirements;
transactions with counterparties referred to in point (10) of Article 2 of Regulation (EU) No 648/2012 and subject to the transitional provisions set out in Article 89(1) of that Regulation until those transitional provisions cease to apply;
transactions with counterparties referred to in Article 1(4) and (5) of Regulation (EU) No 648/2012 and transactions with counterparties for which Article 114(4) and Article 115(2) of this Regulation specifies a risk weight of 0 % for exposures to those counterparties.
The exemption from the CVA risk charge for those transactions referred to in point (c) of this paragraph) which are entered into during the transitional period laid down in Article 89(1) of Regulation (EU) No 648/2012 shall apply for the length of the contract of that transaction.
In regard to point (a), where an institution ceases to be exempt through crossing the exemption threshold or due to a change in the exemption threshold, outstanding contracts shall remain exempt until the date of their maturity.
EBA in cooperation with ESMA shall develop draft regulatory technical standards to specify the procedures for excluding transactions with non-financial counterparties established in a third country from the own funds requirement for CVA risk charge.
EBA shall submit those draft regulatory technical standards within six months of the date of the review referred to in the first subparagraph,
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the second subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 383
Advanced method
An institution shall use its internal model for determining the own funds requirements for the specific risk associated with traded debt positions and shall apply a 99 % confidence interval and a 10-day equivalent holding period. The internal model shall be used in such way that it simulates changes in the credit spreads of counterparties, but does not model the sensitivity of CVA to changes in other market factors, including changes in the value of the reference asset, commodity, currency or interest rate of a derivative.
The own funds requirements for CVA risk for each counterparty shall be calculated in accordance with the following formula:
where:
ti |
= |
the time of the i-th revaluation, starting from t0=0; |
tT |
= |
the longest contractual maturity across the netting sets with the counterparty; |
si |
= |
is the credit spread of the counterparty at tenor ti, used to calculate the CVA of the counterparty. Where the credit default swap spread of the counterparty is available, an institution shall use that spread. Where such a credit default swap spread is not available, an institution shall use a proxy spread that is appropriate having regard to the rating, industry and region of the counterparty; |
LGDMKT |
= |
the LGD of the counterparty that shall be based on the spread of a market instrument of the counterparty if a counterparty instrument is available. Where a counterparty instrument is not available, it shall be based on the proxy spread that is appropriate having regard to the rating, industry and region of the counterparty. |
The first factor within the sum represents an approximation of the market implied marginal probability of a default occurring between times ti-1 and ti;
EEi |
= |
the expected exposure to the counterparty at revaluation time ti, where exposures of different netting sets for such counterparty are added, and where the longest maturity of each netting set is given by the longest contractual maturity inside the netting set; An institution shall apply the treatment set out in paragraph 3 in the case of margined trading, if the institution uses the EPE measure referred to in point (a) or (b) of Article 285(1) for margined trades; |
Di |
= |
the default risk-free discount factor at time ti, where D0 =1. |
When calculating the own funds requirements for CVA risk for a counterparty, an institution shall base all inputs into its internal model for specific risk of debt instruments on the following formulae (whichever is appropriate):
where the model is based on full repricing, the formula in paragraph 1 shall be used directly;
where the model is based on credit spread sensitivities for specific tenors, an institution shall base each credit spread sensitivity ('Regulatory CS01') on the following formula:
For the final time bucket i=T, the corresponding formula is
where the model uses credit spread sensitivities to parallel shifts in credit spreads, an institution shall use the following formula:
where the model uses second-order sensitivities to shifts in credit spreads (spread gamma), the gammas shall be calculated based on the formula in paragraph 1.
An institution using the EPE measure for collateralised OTC derivatives referred to in point (a) or (b) of Article 285(1) shall, when determining the own funds requirements for CVA risk in accordance with paragraph 1, do both of the following:
assume a constant EE profile;
set EE equal to the effective expected exposure as calculated under Article 285(1)(b) for a maturity equal to the greater of the following:
half of the longest maturity occurring in the netting set;
the notional weighted average maturity of all transactions inside the netting set.
For the purposes of a calculation under the preceding subparagraph and where the IMM model does not produce an expected exposure profile, an institution shall do both of the following:
assume a constant EE profile;
set EE equal to the exposure value as computed under the methods set out in Section 3, Section 4 or Section 5 of Title II, Chapter 6, or IMM for a maturity equal to the greater of:
half of the longest maturity occurring in the netting set;
the notional weighted average maturity of all transactions inside the netting set.
An institution shall determine the own funds requirements for CVA risk in accordance with Article 364(1) and Articles 365 and 367 as the sum of non-stressed and stressed value-at-risk, which shall be calculated as follows:
for the non-stressed value-at-risk, current parameter calibrations for expected exposure as set out in the first subparagraph of Article 292(2), shall be used;
for the stressed value-at-risk, future counterparty EE profiles using a stressed calibration as set out in the second subparagraph of Article 292(2) shall be used. The period of stress for the credit spread parameters shall be the most severe one-year stress period contained within the three-year stress period used for the exposure parameters;
the three-times multiplication factor used in the calculation of own funds requirements based on a value-at-risk and a stressed value-at-risk in accordance with 364(1) will apply to these calculations. EBA shall monitor for consistency any supervisory discretion used to apply a higher multiplication factor than that three-times multiplication factor to the value-at-risk and stressed value-at-risk inputs to the CVA risk charge. Competent authorities applying a multiplication factor higher than three shall provide a written justification to EBA;
the calculation shall be carried out on at least a monthly basis and the EE that is used shall be calculated on the same frequency. If lower than a daily frequency is used, for the purpose of the calculation specified in points (a)(ii) and (b)(ii) of Article 364(1) institutions shall take the average over three months.
EBA shall develop draft regulatory technical standards to specify in greater detail:
how a proxy spread is to be determined by the institution's approved internal model for the specific risk of debt instruments for the purposes of identifying si and LGDMKT referred to in paragraph 1;
the number and size of portfolios that fulfil the criterion of a limited number of smaller portfolios referred to in paragraph 4.
EBA shall submit those draft regulatory technical standards to the Commission by 1 January 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 384
Standardised method
An institution which does not calculate the own funds requirements for CVA risk for its counterparties in accordance with Article 383 shall calculate a portfolio own funds requirements for CVA risk for each counterparty in accordance with the following formula, taking into account CVA hedges that are eligible in accordance with Article 386:
where:
h |
= |
the one-year risk horizon (in units of a year); h = 1; |
wi |
= |
the weight applicable to counterparty ‘i’. Counterparty ‘i’ shall be mapped to one of the six weights wi based on an external credit assessment by a nominated ECAI, as set out in Table 1. For a counterparty for which a credit assessment by a nominated ECAI is not available:
(a)
an institution using the approach in Title II, Chapter 3 shall map the internal rating of the counterparty to one of the external credit assessment;
(b)
an institution using the approach in Title II, Chapter 2 shall assign wi=1,0 % to this counterparty. However, if an institution uses Article 128 to risk weight counterparty credit risk exposures to this counterparty, wi=3,0 % shall be assigned; |
|
= |
the total counterparty credit risk exposure value of counterparty ‘i’ (summed across its netting sets) including the effect of collateral in accordance with the methods set out in Sections 3 to 6 of Chapter 6 of Title II as applicable to the calculation of the own funds requirements for counterparty credit risk for that counterparty. For an institution not using the method set out in Section 6 of Title II, Chapter 6, the exposure shall be discounted by applying the following factor:
|
Bi |
= |
the notional of purchased single name credit default swap hedges (summed if more than one position) referencing counterparty ‘i’ and used to hedge CVA risk. That notional amount shall be discounted by applying the following factor:
|
Bind |
= |
is the full notional of one or more index credit default swap of purchased protection used to hedge CVA risk. That notional amount shall be discounted by applying the following factor:
|
wind |
= |
is the weight applicable to index hedges. An institution shall determine wind by calculating a weighted average of wi that are applicable to the individual constituents of the index; |
Mi |
= |
the effective maturity of the transactions with counterparty i. For an institution using the method set out in Section 6 of Title II, Chapter 6, Mi shall be calculated in accordance with Article 162(2)(g). However, for that purpose, Mi shall not be capped at five years but at the longest contractual remaining maturity in the netting set. For an institution not using the method set out in Section 6 of Title II, Chapter 6, Mi is the average notional weighted maturity as referred to in point (b) of Article 162(2). However, for that purpose, Mi shall not be capped at five years but at the longest contractual remaining maturity in the netting set. |
|
= |
the maturity of the hedge instrument with notional Bi (the quantities |
Mind |
= |
the maturity of the index hedge. In the case of more than one index hedge position, Mind is the notional-weighted maturity. |
Where a counterparty is included in an index on which a credit default swap used for hedging counterparty credit risk is based, the institution may subtract the notional amount attributable to that counterparty in accordance with its reference entity weight from the index CDS notional amount and treat it as a single name hedge (Bi) of the individual counterparty with maturity based on the maturity of the index.
Table 1
Credit quality step |
Weight wi |
1 |
0,7 % |
2 |
0,8 % |
3 |
1,0 % |
4 |
2,0 % |
5 |
3,0 % |
6 |
10,0 % |
Article 385
Alternative to using CVA methods for calculating own funds requirements
As an alternative to Article 384, for instruments referred to in Article 382 and subject to the prior consent of the competent authority, institutions using the Original Exposure Method as laid down in Article 282 may apply a multiplication factor of 10 to the resulting risk-weighted exposure amounts for counterparty credit risk for those exposures instead of calculating the own funds requirements for CVA risk.
Article 386
Eligible hedges
Hedges shall be ‘eligible hedges’ for the purposes of the calculation of own funds requirements for CVA risk in accordance with Articles 383 and 384 only where they are used for the purpose of mitigating CVA risk and managed as such, and are one of the following:
single-name credit default swaps or other equivalent hedging instruments referencing the counterparty directly;
index credit default swaps, provided that the basis between any individual counterparty spread and the spreads of index credit default swap hedges is reflected, to the satisfaction of the competent authority, in the value-at-risk and the stressed value-at-risk.
The requirement in point (b) that the basis between any individual counterparty spread and the spreads of index credit default swap hedges is reflected in the value-at-risk and the stressed value-at-risk shall also apply to cases where a proxy is used for the spread of a counterparty.
For all counterparties for which a proxy is used, an institution shall use reasonable basis time series out of a representative group of similar names for which a spread is available.
If the basis between any individual counterparty spread and the spreads of index credit default swap hedges is not reflected to the satisfaction of the competent authority, then an institution shall reflect only 50 % of the notional amount of index hedges in the value-at-risk and the stressed value-at-risk.
Over-hedging of the exposures with single name credit default swaps under the method laid out in Article 383 is not allowed.
PART FOUR
LARGE EXPOSURES
Article 387
Subject matter
Institutions shall monitor and control their large exposures in accordance with this Part.
▼M9 —————
Article 389
Definition
For the purposes of this Part, ‘exposures’, means any asset or off-balance sheet item referred to in Part Three, Title II, Chapter 2, without applying the risk weights or degrees of risk.
Article 390
Calculation of the exposure value
For exposures in the trading book, institutions may:
offset their long positions and short positions in the same financial instruments issued by a given client, with the net position in each of the different instruments being calculated in accordance with the methods laid down in Chapter 2 of Title IV of Part Three;
offset their long positions and short positions in different financial instruments issued by a given client, but only where the financial instrument underlying the short position is junior to the financial instrument underlying the long position or where the underlying instruments are of the same seniority.
For the purposes of points (a) and (b), financial instruments may be allocated into buckets on the basis of different degrees of seniority in order to determine the relative seniority of positions.
When calculating the exposure value for the contracts referred to in the first subparagraph, where those contracts are allocated to the trading book, institutions shall also comply with the principles set out in Article 299.
By way of derogation from the first subparagraph, institutions with permission to use the methods referred to in Section 4 of Chapter 4 of Title II of Part Three and Section 6 of Chapter 6 of Title II of Part Three may use those methods for calculating the exposure value for securities financing transactions.
Exposures shall not include any of the following:
in the case of foreign exchange transactions, exposures incurred in the ordinary course of settlement during the two business days following payment;
in the case of transactions for the purchase or sale of securities, exposures incurred in the ordinary course of settlement during the five business days following payment or delivery of the securities, whichever is the earlier;
in the case of the provision of money transmission including the execution of payment services, clearing and settlement in any currency and correspondent banking or financial instruments clearing, settlement and custody services to clients, delayed receipts in funding and other exposures arising from client activity which do not last longer than the following business day;
in the case of the provision of money transmission including the execution of payment services, clearing and settlement in any currency and correspondent banking, intra-day exposures to institutions providing those services;
exposures deducted from Common Equity Tier 1 items or Additional Tier 1 items in accordance with Articles 36 and 56 or any other deduction from those items that reduces the solvency ratio.
EBA shall develop draft regulatory technical standards to specify:
the conditions and methodologies to be used to determine the overall exposure to a client or a group of connected clients for the types of exposures referred to in paragraph 7;
the conditions under which the structure of the transactions referred to in paragraph 7 do not constitute an additional exposure.
EBA shall submit those draft regulatory technical standards to the Commission by 1 January 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 391
Definition of an institution for large exposures purposes
For the purposes of calculating the value of exposures in accordance with this Part the term ‘institution’ shall include a private or public undertaking, including its branches, which, were it established in the Union, would fulfil the definition of the term ‘institution’ and has been authorised in a third country that applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union.
For the purposes of the first paragraph, the Commission may adopt, by means of implementing acts, and subject to the examination procedure referred to in Article 464(2), decisions as to whether a third country applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union.
Article 392
Definition of a large exposure
An institution's exposure to a client or a group of connected clients shall be considered a large exposure where the value of the exposure is equal to or exceeds 10 % of its Tier 1 capital.
Article 393
Capacity to identify and manage large exposures
An institution shall have sound administrative and accounting procedures and adequate internal control mechanisms for the purposes of identifying, managing, monitoring, reporting and recording all large exposures and subsequent changes to them, in accordance with this Regulation.
Article 394
Reporting requirements
Institutions shall report the following information to their competent authorities for each large exposure that they hold, including large exposures exempted from the application of Article 395(1):
the identity of the client or the group of connected clients to which the institution has a large exposure;
the exposure value before taking into account the effect of the credit risk mitigation, where applicable;
where used, the type of funded or unfunded credit protection;
the exposure value, after taking into account the effect of the credit risk mitigation calculated for the purposes of Article 395(1), where applicable.
Institutions that are subject to Chapter 3 of Title II of Part Three shall report their 20 largest exposures to their competent authorities on a consolidated basis, excluding the exposures exempted from the application of Article 395(1).
Institutions shall also report exposures of a value greater than or equal to EUR 300 million but less than 10 % of the institution's Tier 1 capital to their competent authorities on a consolidated basis.
In addition to the information referred to in paragraph 1 of this Article, institutions shall report the following information to their competent authorities in relation to their 10 largest exposures to institutions on a consolidated basis, as well as their 10 largest exposures to shadow banking entities which carry out banking activities outside the regulated framework on a consolidated basis, including large exposures exempted from the application of Article 395(1):
the identity of the client or the group of connected clients to which an institution has a large exposure;
the exposure value before taking into account the effect of the credit risk mitigation, where applicable;
where used, the type of funded or unfunded credit protection;
the exposure value after taking into account the effect of the credit risk mitigation calculated for the purposes of Article 395(1), where applicable.
In developing those draft regulatory technical standards, EBA shall take into account international developments and internationally agreed standards on shadow banking and shall consider whether:
the relation with an individual entity or a group of entities may carry risks to the institution's solvency or liquidity position;
entities that are subject to solvency or liquidity requirements similar to those imposed by this Regulation and Directive 2013/36/EU should be entirely or partially excluded from the obligation to be reported referred to in paragraph 2 on shadow banking entities.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2020.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 395
Limits to large exposures
Where the amount of EUR 150 million is higher than 25 % of the institution's Tier 1 capital, the value of the exposure, after having taken into account the effect of credit risk mitigation in accordance with Articles 399 to 403 of this Regulation, shall not exceed a reasonable limit in terms of that institution's Tier 1 capital. That limit shall be determined by the institution in accordance with the policies and procedures referred to in Article 81 of Directive 2013/36/EU in order to address and control concentration risk. That limit shall not exceed 100 % of the institution's Tier 1 capital.
Competent authorities may set a lower limit than EUR 150 million, in which case they shall inform EBA and the Commission thereof.
By way of derogation from the first subparagraph of this paragraph, a G-SII shall not incur an exposure to another G-SII or a non-EU G-SII, the value of which, after taking into account the effect of the credit risk mitigation in accordance with Articles 399 to 403, exceeds 15 % of its Tier 1 capital. A G-SII shall comply with such limit no later than 12 months from the date on which it came to be identified as a G-SII. Where the G-SII has an exposure to another institution or group which comes to be identified as a G-SII or as a non-EU G-SII, it shall comply with such limit no later than 12 months from the date on which that other institution or group came to be identified as a G-SII or as a non-EU G-SII.
In developing those guidelines, EBA shall consider whether the introduction of additional limits would have a material detrimental impact on the risk profile of institutions established in the Union, on the provision of credit to the real economy or on the stability and orderly functioning of financial markets.
By 31 December 2015 the Commission shall assess the appropriateness and the impact of imposing limits on exposures to shadow banking entities which carry out banking activities outside a regulated framework, taking into account Union and international developments in the area of shadow banking and large exposures as well as credit risk mitigation in accordance with Articles 399 to 403. The Commission shall submit the report to the European Parliament and the Council, together, if appropriate, with a legislative proposal on exposure limits to shadow banking entities which carry out banking activities outside a regulated framework.
The limits laid down in this Article may be exceeded for the exposures in the institution's trading book, provided that all the following conditions are met:
the exposure in the non-trading book to the client or group of connected clients in question does not exceed the limit laid down in paragraph 1, this limit being calculated with reference to Tier 1 capital, so that the excess arises entirely in the trading book;
the institution meets an additional own funds requirement on the part of the exposure in excess of the limit laid down in paragraph 1 of this Article which is calculated in accordance with Articles 397 and 398;
where 10 days or less have elapsed since the excess referred to in point (b) occurred, the trading-book exposure to the client or group of connected clients in question does not exceed 500 % of the institution's Tier 1 capital;
any excesses that have persisted for more than 10 days do not, in aggregate, exceed 600 % of the institution's Tier 1 capital.
Each time the limit has been exceeded, the institution shall report to the competent authorities without delay the amount of the excess and the name of the client concerned and, where applicable, the name of the group of connected clients concerned.
Notwithstanding paragraph 1 of this Article and Article 400(1)(f), where Member States adopt national laws requiring structural measures to be taken within a banking group, competent authorities may require the institutions of the banking group which hold deposits that are covered by a Deposit Guarantee Scheme in accordance with Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes ( 23 ) or an equivalent deposit guarantee scheme in a third country to apply a large exposure limit below 25 % but not lower than 15 % between 28 June 2013 and 30 June 2015, and than 10 % from 1 July 2015 on a sub-consolidated basis in accordance with Article 11(5) to intragroup exposures where these exposures consist of exposures to an entity that does not belong to the same subgroup as regards the structural measures.
For the purpose of this paragraph, the following conditions shall be met:
all entities belonging to a same subgroup as regards the structural measures are considered as one client or group of connected clients;
the competent authorities apply a uniform limit to the exposures referred to in the first subparagraph.
Applying this approach shall be without prejudice to effective supervision on a consolidated basis and shall not entail disproportionate adverse effects on the whole or parts of the financial system in other Member States or in the Union as a whole or form or create an obstacle to the functioning of the internal market.
Before adopting the specific structural measures as referred to in paragraph 6 relating to large exposures, the competent authorities shall notify the Council, the Commission, the competent authorities concerned and EBA at least two months prior to the publication of the decision to adopt the structural measures, and submit relevant quantitative or qualitative evidence of all of the following:
the scope of the activities that are subject to the structural measures;
an explanation as to why such draft measures are deemed to be suitable, effective and proportionate to protect depositors;
an assessment of the likely positive or negative impact of the measures on the internal market based on information which is available to the Member State.
Within one month of receiving the notification referred to in paragraph 7, EBA shall provide its opinion on the points mentioned in that paragraph to the Council, the Commission and the Member State concerned. Competent authorities concerned may also provide their opinions on the points mentioned in that paragraph to the Council, the Commission and the Member State concerned.
Taking utmost account of the opinions referred to in the second subparagraph and if there is robust and strong evidence that the measures have a negative impact on the internal market that outweighs the financial stability benefits, the Commission shall, within two months of receiving the notification, reject the proposed national measures. Otherwise, the Commission shall accept the proposed national measures for an initial period of 2 years and where appropriate the measures may be subject to amendment.
The Commission shall only reject the proposed national measures if it considers the proposed national measures entail disproportionate adverse effects on the whole or parts of the financial system in other Member States or in the Union as a whole, thus forming or creating an obstacle to the functioning of the internal market or to the free movement of capital in accordance with the provisions of the TFEU.
The assessment of the Commission shall take account of the opinion of EBA and shall take into account the evidence presented in accordance with paragraph 7.
Before the expiry of the measures, the competent authorities may propose new measures for the extension of the period of application for an additional period of 2 years each time. In this case, they shall notify the Commission, the Council, the competent authorities concerned and EBA. Approval of the new measures shall be subject to the process set out in this Article. This Article shall be without prejudice to Article 458.
Article 396
Compliance with large exposures requirements
Where the amount of EUR 150 million referred to in Article 395(1) is applicable, the competent authorities may allow the 100 % limit in terms of the institution's Tier 1 capital to be exceeded on a case-by-case basis.
Where, in the exceptional cases referred to in the first and second subparagraph of this paragraph, a competent authority allows an institution to exceed the limit set out in Article 395(1) for a period longer than three months, the institution shall present a plan for a timely return to compliance with that limit to the satisfaction of the competent authority and shall carry out that plan within the period agreed with the competent authority. The competent authority shall monitor the implementation of the plan and shall require a more rapid return to compliance if appropriate.
For the purposes of paragraph 1, EBA shall issue guidelines in accordance with Article 16 of Regulation (EU) No 1093/2010 to specify how the competent authorities may determine:
the exceptional cases referred to in paragraph 1 of this Article;
the time considered appropriate for returning to compliance;
the measures to be taken to ensure the timely return to compliance of the institution.
Article 397
Calculating additional own funds requirements for large exposures in the trading book
As from 10 days after the excess has occurred, the components of the excess, selected in accordance with paragraph 1, shall be allocated to the appropriate line in Column 1 of Table 1 in ascending order of specific-risk requirements in Part Three, Title IV, Chapter 2 and/or requirements in Article 299 and Part Three, Title V. The additional own funds requirement shall be equal to the sum of the specific-risk requirements in Part Three, Title IV, Chapter 2 and/or the Article 299 and Part Three, Title V requirements on these components, multiplied by the corresponding factor in Column 2 of Table 1.
Table 1
Column 1: Excess over the limits (on the basis of a percentage of ►M8 Tier 1 capital ◄ ) |
Column 2: Factors |
Up to 40 % |
200 % |
From 40 % to 60 % |
300 % |
From 60 % to 80 % |
400 % |
From 80 % to 100 % |
500 % |
From 100 % to 250 % |
600 % |
Over 250 % |
900 % |
Article 398
Procedures to prevent institutions from avoiding the additional own funds requirement
Institutions shall not deliberately avoid the additional own funds requirements set out in Article 397 that they would otherwise incur, on exposures exceeding the limit laid down in Article 395(1) once those exposures have been maintained for more than 10 days, by means of temporarily transferring the exposures in question to another company, whether within the same group or not, and/or by undertaking artificial transactions to close out the exposure during the 10-day period and create a new exposure.
Institutions shall maintain systems which ensure that any transfer which has the effect referred to in the first subparagraph is immediately reported to the competent authorities.
Article 399
Eligible credit mitigation techniques
For the purposes of Articles 400 to 403, the term ‘guarantee’ shall include credit derivatives recognised under Chapter 4 of Title II of Part Three other than credit linked notes.
Article 400
Exemptions
The following exposures shall be exempted from the application of Article 395(1):
asset items constituting claims on central governments, central banks or public sector entities which, unsecured, would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2;
asset items constituting claims on international organisations or multilateral development banks which, unsecured, would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2;
asset items constituting claims carrying the explicit guarantees of central governments, central banks, international organisations, multilateral development banks or public sector entities, where unsecured claims on the entity providing the guarantee would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2;
other exposures attributable to, or guaranteed by, central governments, central banks, international organisations, multilateral development banks or public sector entities, where unsecured claims on the entity to which the exposure is attributable or by which it is guaranteed would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2;
asset items constituting claims on regional governments or local authorities of Member States where those claims would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2 and other exposures to or guaranteed by those regional governments or local authorities, claims on which would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2;
exposures to counterparties referred to in Article 113(6) or (7) if they would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2. Exposures that do not meet those criteria, whether or not exempted from Article 395(1) shall be treated as exposures to a third party;
asset items and other exposures secured by collateral in the form of cash deposits placed with the lending institution or with an institution which is the parent undertaking or a subsidiary of the lending institution;
asset items and other exposures secured by collateral in the form of certificates of deposit issued by the lending institution or by an institution which is the parent undertaking or a subsidiary of the lending institution and lodged with either of them;
exposures arising from undrawn credit facilities that are classified as low-risk off-balance sheet items in Annex I and provided that an agreement has been concluded with the client or group of connected clients under which the facility may be drawn only if it has been ascertained that it will not cause the limit applicable under Article 395(1) to be exceeded;
clearing members' trade exposures and default fund contributions to qualified central counterparties;
exposures to deposit guarantee schemes under Directive 94/19/EC arising from the funding of those schemes, if the member institutions of the scheme have a legal or contractual obligation to fund the scheme;
clients' trade exposures referred to in Article 305(2) or (3);
holdings by resolution entities, or by their subsidiaries which are not themselves resolution entities, of own funds instruments and eligible liabilities referred to in Article 45f(2) of Directive 2014/59/EU that have been issued by any of the following entities:
in respect of resolution entities, other entities belonging to the same resolution group;
in respect of subsidiaries of a resolution entity that are not themselves resolution entities, the relevant subsidiary's subsidiaries belonging to the same resolution group;
exposures arising from a minimum value commitment that meets all the conditions set out in Article 132c(3).
Cash received under a credit linked note issued by the institution and loans and deposits of a counterparty to or with the institution which are subject to an on-balance sheet netting agreement recognised under Part Three, Title II, Chapter 4 shall be deemed to fall under point (g).
Competent authorities may fully or partially exempt the following exposures:
covered bonds falling within the terms of Article 129(1), (3) and (6);
asset items constituting claims on regional governments or local authorities of Member States where those claims would be assigned a 20 % risk weight under Part Three, Title II, Chapter 2 and other exposures to or guaranteed by those regional governments or local authorities, claims on which would be assigned a 20 % risk weight under Part Three, Title II, Chapter 2;
exposures incurred by an institution, including through participations or other kinds of holdings, to its parent undertaking, to other subsidiaries of that parent undertaking, or to its own subsidiaries and qualifying holdings, in so far as those undertakings are covered by the supervision on a consolidated basis to which the institution itself is subject, in accordance with this Regulation, Directive 2002/87/EC or with equivalent standards in force in a third country; exposures that do not meet those criteria, whether or not exempted from Article 395(1) of this Regulation, shall be treated as exposures to a third party;
asset items constituting claims on and other exposures, including participations or other kinds of holdings, to regional or central credit institutions with which the credit institution is associated in a network in accordance with legal or statutory provisions and which are responsible, under those provisions, for cash-clearing operations within the network;
asset items constituting claims on and other exposures to credit institutions incurred by credit institutions, one of which operates on a non-competitive basis and provides or guarantees loans under legislative programmes or its statutes, to promote specified sectors of the economy under some form of government oversight and restrictions on the use of the loans, provided that the respective exposures arise from such loans that are passed on to the beneficiaries via credit institutions or from the guarantees of these loans;
asset items constituting claims on and other exposures to institutions, provided that those exposures do not constitute such institutions' own funds, do not last longer than the following business day and are not denominated in a major trading currency;
asset items constituting claims on central banks in the form of required minimum reserves held at those central banks which are denominated in their national currencies;
asset items constituting claims on central governments in the form of statutory liquidity requirements held in government securities which are denominated and funded in their national currencies provided that, at the discretion of the competent authority, the credit assessment of those central governments assigned by a nominated ECAI is investment grade;
50 % of medium/low risk off-balance sheet documentary credits and of medium/low risk off-balance sheet undrawn credit facilities referred to in Annex I and subject to the competent authorities' agreement, 80 % of guarantees other than loan guarantees which have a legal or regulatory basis and are given for their members by mutual guarantee schemes possessing the status of credit institutions;
legally required guarantees used when a mortgage loan financed by issuing mortgage bonds is paid to the mortgage borrower before the final registration of the mortgage in the land register, provided that the guarantee is not used as reducing the risk in calculating the risk -weighted exposure amounts;
exposures in the form of a collateral or a guarantee for residential loans, provided by an eligible protection provider referred to in Article 201 qualifying for the credit rating which is at least the lower of the following:
credit quality step 2;
the credit quality step corresponding to the central government foreign currency rating of the Member State where the protection provider's headquarters are located;
exposures in the form of a guarantee for officially supported export credits, provided by an export credit agency qualifying for the credit rating which is at least the lower of the following:
credit quality step 2;
the credit quality step corresponding to the central government foreign currency rating of the Member State where the export credit agency's headquarters are located.
Competent authorities may only make use of the exemption provided for in paragraph 2 where the following conditions are met:
the specific nature of the exposure, the counterparty or the relationship between the institution and the counterparty eliminate or reduce the risk of the exposure; and
any remaining concentration risk can be addressed by other equally effective means such as the arrangements, processes and mechanisms provided for in Article 81 of Directive 2013/36/EU.
Competent authorities shall inform EBA of whether they intend to use any of the exemptions provided for in paragraph 2 in accordance with points (a) and (b) of this paragraph and provide EBA with the reasons substantiating the use of those exemptions.
Article 401
Calculating the effect of the use of credit risk mitigation techniques
By way of derogation from paragraph 1, institutions with permission to use the methods referred to in Section 4 of Chapter 4 of Title II of Part Three and Section 6 of Chapter 6 of Title II of Part Three, may use those methods for calculating the exposure value of securities financing transactions.
The periodic stress tests referred to in the first subparagraph shall address risks arising from potential changes in market conditions that could adversely impact the institutions' adequacy of own funds and risks arising from the realisation of collateral in stressed situations.
The stress tests carried out shall be adequate and appropriate for the assessment of those risks.
Institutions shall include the following in their strategies to address concentration risk:
policies and procedures to address risks arising from maturity mismatches between exposures and any credit protection on those exposures;
policies and procedures relating to concentration risk arising from the application of credit risk mitigation techniques, in particular from large indirect credit exposures, for example, exposures to a single issuer of securities taken as collateral.
Article 402
Exposures arising from mortgage lending
For the calculation of exposure values for the purposes of Article 395, institutions may, except where prohibited by applicable national law, reduce the value of an exposure or any part of an exposure that is fully secured by residential property in accordance with Article 125(1) by the pledged amount of the market value or mortgage lending value of the property concerned, but by not more than 50 % of the market value or 60 % of the mortgage lending value in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions, provided that all the following conditions are met:
the competent authorities of the Member States have not set a risk weight higher than 35 % for exposures or parts of exposures secured by residential property in accordance with Article 124(2);
the exposure or part of the exposure is fully secured by any of the following:
one or more mortgages on residential property; or
a residential property in a leasing transaction under which the lessor retains full ownership of the residential property and the lessee has not yet exercised his or her option to purchase;
the requirements laid down in Article 208 and Article 229(1) are met.
For the calculation of exposure values for the purposes of Article 395, an institution may, except where prohibited by applicable national law, reduce the value of an exposure or any part of an exposure that is fully secured by commercial immovable property in accordance with Article 126(1) by the pledged amount of the market value or mortgage lending value of the property concerned, but not by more than 50 % of the market value or 60 % of the mortgage lending value in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions, provided that all the following conditions are met:
the competent authorities of the Member States have not set a risk weight higher than 50 % for exposures or parts of exposures secured by commercial immovable property in accordance with Article 124(2);
the exposure is fully secured by any of the following:
one or more mortgages on offices or other commercial premises; or
one or more offices or other commercial premises and the exposures related to property leasing transactions;
the requirements in point (a) of Article 126(2) and in Article 208 and Article 229(1) are met;
the commercial immovable property is fully constructed.
An institution may treat an exposure to a counterparty that results from a reverse repurchase agreement under which the institution has purchased from the counterparty non-accessory independent mortgage liens on immovable property of third parties as a number of individual exposures to each of those third parties, provided that all of the following conditions are met:
the counterparty is an institution or an investment firm;
the exposure is fully secured by liens on the immovable property of those third parties that have been purchased by the institution and the institution is able to exercise those liens;
the institution has ensured that the requirements in Article 208 and Article 229(1) are met;
the institution becomes beneficiary of the claims that the counterparty has against the third parties in the event of default, insolvency or liquidation of the counterparty;
the institution reports to the competent authorities in accordance with Article 394 the total amount of exposures to each other institution or investment firm that are treated in accordance with this paragraph.
For these purposes, the institution shall assume that it has an exposure to each of those third parties for the amount of the claim that the counterparty has on the third party instead of the corresponding amount of the exposure to the counterparty. The remainder of the exposure to the counter party, if any, shall continue to be treated as an exposure to the counter party.
Article 403
Substitution approach
Where an exposure to a client is guaranteed by a third party or is secured by collateral issued by a third party, an institution shall:
treat the portion of the exposure which is guaranteed as exposure to the guarantor rather than to the client, provided that the unsecured exposure to the guarantor would be assigned a risk weight that is equal to or lower than the risk weight of the unsecured exposure to the client under Chapter 2 of Title II of Part Three;
treat the portion of the exposure collateralised by the market value of recognised collateral as exposure to the third party rather than to the client, provided that the exposure is secured by collateral and provided that the collateralised portion of the exposure would be assigned a risk weight that is equal to or lower than the risk weight of the unsecured exposure to the client under Chapter 2 of Title II of Part Three.
The approach referred to in point (b) of the first subparagraph shall not be used by an institution where there is a mismatch between the maturity of the exposure and the maturity of the protection.
For the purposes of this Part, an institution may use both the Financial Collateral Comprehensive Method and the treatment set out in point (b) of the first subparagraph of this paragraph only where it is permitted to use both the Financial Collateral Comprehensive Method and the Financial Collateral Simple Method for the purposes of Article 92.
Where an institution applies point (a) of paragraph 1, the institution:
where the guarantee is denominated in a currency different from that in which the exposure is denominated, shall calculate the amount of the exposure that is deemed to be covered in accordance with the provisions on the treatment of currency mismatch for unfunded credit protection set out in Part Three;
shall treat any mismatch between the maturity of the exposure and the maturity of the protection in accordance with the provisions on the treatment of maturity mismatch set out in Chapter 4 of Title II of Part Three;
may recognise partial coverage in accordance with the treatment set out in Chapter 4 of Title II of Part Three.
For the purposes of point (b) of paragraph 1, an institution may replace the amount in point (a) of this paragraph with the amount in point (b) of this paragraph, provided that the conditions set out in points (c), (d) and (e) of this paragraph are met:
the total amount of the institution's exposure to a collateral issuer due to tri-party repurchase agreements facilitated by a tri-party agent;
the full amount of the limits that the institution has instructed the tri-party agent referred to in point (a) to apply to the securities issued by the collateral issuer referred to in that point;
the institution has verified that the tri-party agent has in place appropriate safeguards to prevent breaches of the limits referred to in point (b);
the competent authority has not expressed to the institution any material concerns;
the sum of the amount of the limit referred to in point (b) of this paragraph and any other exposures of the institution to the collateral issuer does not exceed the limit set out in Article 395(1).
EBA shall publish those guidelines by 31 December 2019.
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PART SIX
LIQUIDITY
TITLE I
DEFINITIONS AND LIQUIDITY REQUIREMENTS
Article 411
Definitions
For the purposes of this Part, the following definitions apply:
‘financial customer’ means a customer, including a financial customer belonging to a non-financial corporate group, which performs one or more of the activities listed in Annex I to Directive 2013/36/EU as its main business, or which is one of the following:
a credit institution;
an investment firm;
a securitisation special purpose entity (SSPE);
a collective investment undertaking (CIU);
a non-open ended investment scheme;
an insurance undertaking;
a reinsurance undertaking;
a financial holding company or mixed-financial holding company;
a financial institution;
a pension scheme arrangement as defined in point (10) of Article 2 of Regulation (EU) No 648/2012;
‘retail deposit’ means a liability to a natural person or to a SME, where the SME would qualify for the retail exposure class under the standardised or IRB approaches for credit risk, or a liability to a company which is eligible for the treatment set out in Article 153(4), and where the aggregate deposits by that SME or company on a group basis do not exceed EUR 1 million;
‘personal investment company’ or ‘PIC’ means an undertaking or a trust, the owner or beneficial owner of which is either a natural person or a group of closely related natural persons which does not carry out any other commercial, industrial or professional activity and which was set up with the sole purpose of managing the wealth of the owner or owners, including ancillary activities such as segregating the owners' assets from corporate assets, facilitating the transmission of assets within a family or preventing a split of the assets after the death of a member of the family, provided that those ancillary activities are connected to the main purpose of managing the owners' wealth;
‘deposit broker’ means a natural person or an undertaking that places deposits from third parties, including retail deposits and corporate deposits but excluding deposits from financial customers, with credit institutions in exchange of a fee;
‘unencumbered assets’ means assets which are not subject to any legal, contractual, regulatory or other restriction preventing the institution from liquidating, selling, transferring, assigning or, generally, disposing of those assets via an outright sale or a repurchase agreement;
‘non-mandatory overcollateralisation’ means any amount of assets which the institution is not obliged to attach to a covered bond issuance by virtue of legal or regulatory requirements, contractual commitments or for reasons of market discipline, including in particular where the assets are provided in excess of the minimum legal, statutory or regulatory overcollateralisation requirement applicable to the covered bonds under the national law of a Member State or a third country;
‘asset coverage requirement’ means the ratio of assets to liabilities as determined in accordance with the national law of a Member State or a third country for credit enhancement purposes in relation to covered bonds;
‘margin loans’ means collateralised loans extended to customers for the purpose of taking leveraged trading positions;
‘derivative contracts’ means the derivative contracts listed in Annex II and credit derivatives;
‘stress’ means a sudden or severe deterioration in the solvency or liquidity position of an institution due to changes in market conditions or idiosyncratic factors as a result of which there is a significant risk that the institution becomes unable to meet its commitments as they become due within the next 30 days;
‘level 1 assets’ means assets of extremely high liquidity and credit quality as referred to in the second subparagraph of Article 416(1);
‘level 2 assets’ means assets of high liquidity and credit quality as referred to in the second subparagraph of Article 416(1) of this Regulation; level 2 assets are further subdivided into level 2A and 2B assets as set out in the delegated act referred to in Article 460(1);
‘liquidity buffer’ means the amount of level 1 and level 2 assets that an institution holds in accordance with the delegated act referred to in Article 460(1);
‘net liquidity outflows’ means the amount which results from deducting an institution's liquidity inflows from its liquidity outflows;
‘reporting currency’ means the currency of the Member State where the head office of the institution is located;
‘factoring’ means a contractual agreement between a business (the ‘assignor’) and a financial entity (the ‘factor’) in which the assignor assigns or sells its receivables to the factor in exchange for the factor providing the assignor with one or more of the following services with regard to the receivables assigned:
an advance of a percentage of the amount of the assigned receivables, generally short term, uncommitted and without automatic roll-over;
receivables management, collection and credit protection, whereby, in general, the factor administers the assignor's sales ledger and collects the receivables in the factor's own name;
for the purposes of Title IV, factoring shall be treated as trade finance;
‘committed credit or liquidity facility’ means a credit or liquidity facility that is irrevocable or conditionally revocable.
Article 412
Liquidity coverage requirement
Unless specified otherwise in the delegated act referred to in Article 460(1), where an item can be counted in more than one outflow category, it shall be counted in the outflow category that produces the greatest contractual outflow for that item.
Article 413
Stable funding requirement
Article 414
Compliance with liquidity requirements
An institution that does not meet, or does not expect to meet, the requirements set out in Article 412 or in Article 413(1), including during times of stress, shall immediately notify the competent authorities thereof and shall submit to the competent authorities without undue delay a plan for the timely restoration of compliance with the requirements set out in Article 412 or Article 413(1), as appropriate. Until compliance has been restored, the institution shall report the items referred to in Title III, in Title IV, in the implementing act referred to in Article 415(3) or (3a) or in the delegated act referred to in Article 460(1), as appropriate, daily by the end of each business day, unless the competent authority authorises a lower reporting frequency and a longer reporting delay. Competent authorities shall only grant such authorisations on the basis of the individual situation of the institution, taking into account the scale and complexity of the institution's activities. Competent authorities shall monitor the implementation of such restoration plan and shall require a more rapid restoration of compliance where appropriate.
TITLE II
LIQUIDITY REPORTING
Article 415
Reporting obligation and reporting format
The reporting frequency shall be at least monthly for items referred to in the delegated act referred to in Article 460(1) and at least quarterly for items referred to in Titles III and IV.
An institution shall report separately to the competent authorities the items referred to in the implementing technical standards referred to in paragraph 3 or 3a of this Article, in Title III until such time as the reporting obligation and the reporting format for the net stable funding ratio set out in Title IV have been specified and introduced in Union law, in Title IV and in the delegated act referred to in Article 460(1), as appropriate, in accordance with the following:
where items are denominated in a currency other than the reporting currency and the institution has aggregate liabilities denominated in such a currency which amount to or exceed 5 % of the institution's or the single liquidity sub-group's total liabilities, excluding own funds and off-balance-sheet items, reporting shall be done in the currency of denomination;
where items are denominated in the currency of a host Member State where the institution has a significant branch as referred to in Article 51 of Directive 2013/36/EU and that host Member State uses another currency than the reporting currency, the reporting shall be done in the currency of the Member State in which the significant branch is located;
where items are denominated in the reporting currency, and the aggregate amount of liabilities in other currencies than the reporting currency amounts to or exceeds 5 % of the institution's or the single liquidity subgroup's total liabilities, excluding own funds and off-balance-sheet items, the reporting shall be done in the reporting currency.
EBA shall develop draft implementing technical standards to specify the following:
uniform formats and IT solutions with associated instructions for frequencies and reference and remittance dates; the reporting formats and frequencies shall be proportionate to the nature, scale and complexity of the different activities of the institutions and shall comprise the reporting required in accordance with paragraphs 1 and 2;
additional liquidity monitoring metrics required, to allow competent authorities to obtain a comprehensive view of an institution's liquidity risk profile, proportionate to the nature, scale and complexity of an institution's activities.
EBA shall submit to the Commission those draft implementing technical standards for the items specified in point (a) by 28 July 2013 and for the items specified in point (b) by 1 January 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
EBA shall submit those draft implementing technical standards to the Commission by 28 June 2020.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Competent authorities that exercise supervision on a consolidated basis in accordance with Article 111 of Directive 2013/36/EU shall upon request provide in a timely manner and by electronic means the following authorities with all reporting submitted by the institution in accordance with the uniform reporting formats referred to in paragraph 3:
the competent authorities and the national central bank of the host Member States in which there are significant branches in accordance with Article 51 of Directive 2013/36/EU of the parent institution or institutions controlled by the same parent financial holding company;
the competent authorities that have authorised subsidiaries of the parent institution or institutions controlled by the same parent financial holding company and the central bank of the same Member State;
EBA;
ECB.
Article 416
Reporting on liquid assets
Institutions shall report the following as liquid assets unless excluded by paragraph 2 and only if the liquid assets fulfil the conditions in paragraph 3:
cash and exposures to central banks to the extent that these exposures can be withdrawn at any time in times of stress. As regards deposits held with central banks, the competent authority and the central bank shall aim at reaching a common understanding regarding the extent to which minimum reserves can be withdrawn in times of stress;
other transferable assets that are of extremely high liquidity and credit quality;
transferable assets representing claims on or guaranteed by:
the central government of a Member State, a region with fiscal autonomy to raise and collect taxes, or of a third country in the domestic currency of the central or regional government, if the institution incurs a liquidity risk in that Member State or third country that it covers by holding those liquid assets;
central banks and non-central government public sector entities in the domestic currency of the central bank and the public sector entity;
the Bank for International Settlements, the International Monetary Fund, the Commission and multilateral development banks;
the European Financial Stability Facility and the European Stability Mechanism;
transferable assets that are of high liquidity and credit quality;
standby credit facilities granted by central banks within the scope of monetary policy to the extent that these facilities are not collateralised by liquid assets and excluding emergency liquidity assistance;
if the credit institution belongs to a network in accordance with legal or statutory provisions, the legal or statutory minimum deposits with the central credit institution and other statutory or contractually available liquid funding from the central credit institution or institutions that are members of the network referred to in Article 113(7), or eligible for the waiver provided in Article 10, to the extent that this funding is not collateralised by liquid assets.
Pending specification of a uniform definition in accordance with Article 460 of high and extremely high liquidity and credit quality, institutions shall identify themselves in a given currency transferable assets that are respectively of high or extremely high liquidity and credit quality. Pending specification of a uniform definition, competent authorities may, taking into account the criteria listed in Article 509(3), (4) and (5) provide general guidance that institutions shall follow in identifying assets of high and extremely high liquidity and credit quality. In the absence of such guidance, institutions shall use transparent and objective criteria to this end, including some or all of the criteria listed in Article 509(3), (4) and (5).
The following shall not be considered liquid assets:
assets that are issued by a credit institution unless they fulfil one of the following conditions:
they are bonds eligible for the treatment set out in Article 129(4) or (5) or asset backed instruments if demonstrated to be of the highest credit quality as established by EBA pursuant to the criteria in Article 509 (3), (4) and (5);
they are covered bonds as defined in point (1) Article 3 of Directive (EU) 2019/2162 other than those referred to in point (i) of this point;
the credit institution has been set up by a Member State central or regional government and that government has an obligation to protect the economic basis of the institution and maintain its viability throughout its lifetime; or the asset is explicitly guaranteed by that government; or at least 90 % of the loans granted by the institution are directly or indirectly guaranteed by that government and the asset is predominantly used to fund promotional loans granted on a non-competitive, not for profit basis in order to promote that government's public policy objectives;
assets that are provided as collateral to the institution under reverse repo and securities financing transactions and that are held by the institution only as a credit risk mitigant and that are not legally and contractually available for use by the institution;
assets issued by any of the following:
an investment firm;
an insurance undertaking;
a financial holding company;
a mixed financial holding company;
any other entity that performs one or more of the activities listed in Annex I to Directive 2013/36/EU as its main business.
In accordance with paragraph 1, institutions shall report assets that fulfil the following conditions as liquid assets:
the assets are unencumbered or stand available within collateral pools to be used for obtaining additional funding under committed or, where the pool is operated by a central bank, uncommitted but not yet funded credit lines available to the institution;
the assets are not issued by the institution itself, by its parent or subsidiary institutions, or by another subsidiary of its parent institution or parent financial holding company;
the price of the assets is generally agreed upon by market participants and can easily be observed in the market or the price can be determined by a formula that is easy to calculate on the basis of publicly available inputs and that does not depend on strong assumptions, as is typically the case for structured or exotic products;
the assets are listed on a recognised exchange or they are tradable by an outright sale or via a simple repurchase agreement on repurchase markets; those criteria shall be assessed separately for each market.
The conditions referred to in points (c) and (d) of the first subparagraph shall not apply to the assets referred to in points (a), (e) and (f) of paragraph 1.
Notwithstanding the provisions of paragraphs 1, 2 and 3, pending the specification of a binding liquidity requirement in accordance with Article 460 and in accordance with the second subparagraph of paragraph 1 of this Article, institutions shall report on:
other non-central bank eligible but tradable assets such as equities and gold based on transparent and objective criteria, including some or all of the criteria listed in Article 509(3), (4) and (5);
other central bank eligible and tradable assets such as asset backed instruments of the highest credit quality as established by EBA pursuant to the criteria in Article 509(3), (4) and (5);
other central bank eligible but non-tradable assets such as credit claims as established by EBA pursuant to the criteria in Article 509(3), (4) and (5).
The use or potential use by a CIU of derivative instruments to hedge risks of permitted investments shall not prevent that CIU from being eligible for the treatment referred to in the first subparagraph of this paragraph. Where the value of the shares or units of the CIU is not regularly marked to market by the third parties referred to in points (a) and (b) of Article 418(4) and the competent authority is not satisfied that an institution has developed robust methodologies and processes for such valuation as referred to in Article 418(4), shares or units in that CIU shall not be treated as liquid assets.
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Article 417
Operational requirements for holdings of liquid assets
The institution shall only report as liquid assets those holdings of liquid assets that meet the following conditions:
they are appropriately diversified. Diversification is not required in terms of assets corresponding to points (a), (b) and (c) of Article 416(1);
they are legally and practically readily available at any time during the next 30 days to be liquidated via outright sale or via a simple repurchase agreement on approved repurchase markets in order to meet obligations coming due. Liquid assets referred to in point (c) of Article 416(1) which are held in third countries where there are transfer restrictions or which are denominated in non-convertible currencies shall be considered available only to the extent that they correspond to outflows in the third country or currency in question, unless the institution can demonstrate to the competent authorities that it has appropriately hedged the ensuing currency risk;
the liquid assets are controlled by a liquidity management function;
a portion of the liquid assets except those referred to in points (a), (c), (e) and (f) of Article 416(1) is periodically and at least annually liquidated via outright sale or via simple repurchase agreements on an approved repurchase market for the following purposes:
to test the access to the market for these assets;
to test the effectiveness of its processes for the liquidation of assets;
to test the usability of the assets;
to minimise the risk of negative signalling during a period of stress;
price risks associated with the assets may be hedged but the liquid assets are subject to appropriate internal arrangements that ensure that they are readily available to the treasury when needed and especially that they are not used in other ongoing operations, including:
hedging or other trading strategies;
providing credit enhancements in structured transactions;
covering operational costs.
the denomination of the liquid assets is consistent with the distribution by currency of liquidity outflows after the deduction of inflows.
Article 418
Valuation of liquid assets
Shares or units in CIUs as referred to in Article 416(6) shall be subject to haircuts, looking through to the underlying assets as follows:
0 % for the assets referred to in point (a) of Article 416(1);
5 % for the assets referred to in points (b) and (c) of Article 416(1);
20 % for the assets referred to in point (d) of Article 416(1).
The look-through approach referred to in paragraph 2 shall be applied as follows:
where the institution is aware of the underlying exposures of a CIU, it may look through to those underlying exposures in order to assign them to points (a) to (d) of Article 416(1);
where the institution is not aware of the underlying exposures of a CIU, it shall be assumed that the CIU invests, to the maximum extent allowed under its mandate, in descending order in the asset types referred to in points (a) to (d) of Article 416(1) until the maximum total investment limit is reached.
Institutions shall develop robust methodologies and processes to calculate and report the market value and haircuts for shares or units in CIUs. Only where they can demonstrate to the satisfaction of the competent authority that the materiality of the exposure does not justify the development of their own methodologies, institutions may rely on the following third parties to calculate and report the haircuts for shares or units in CIUs, in accordance with the methods set out in points (a) and (b) of paragraph 3:
the depository institution of the CIU provided that the CIU exclusively invests in securities and deposits all securities at this depository institution;
for other CIUs, the CIU management company, provided that the CIU management company meets the criteria set out in Article 132(3)(a).
The correctness of the calculations by the depository institution or the CIU management company shall be confirmed by an external auditor.
Article 419
Currencies with constraints on the availability of liquid assets
Where the justified needs for liquid assets in light of the requirement in Article 412 exceed the availability of those liquid assets in a currency, one or more of the following derogations shall apply:
by way of derogation from point (f) of Article 417, the denomination of the liquid assets may be inconsistent with the distribution by currency of liquidity outflows after the deduction of inflows;
for currencies of a Member State or third countries, required liquid assets may be substituted by credit lines from the central bank of that Member State or third country which are contractually irrevocably committed for the next 30 days and are fairly priced, independent of the amount currently drawn, provided that the competent authorities of that Member State or third country do the same and provided that that Member State or third country has comparable reporting requirements in place;
where there is a deficit of level 1 assets, additional level 2A assets may be held by the institution, subject to higher haircuts, and any cap applicable to those assets in accordance with the delegated act referred to in Article 460(1) may be amended.
EBA shall submit those draft implementing technical standards to the Commission by 31 March 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 420
Liquidity outflows
Pending the specification of a liquidity requirement in accordance with Article 460, liquidity outflows to be reported shall include:
the current amount outstanding for retail deposits as set out in Article 421;
the current amounts outstanding of other liabilities that come due, can be called for payout by the issuing institutions or by the provider of the funding or entail an implicit expectation of the provider of the funding that the institution would repay the liability during the next 30 days as set out in Article 422;
the additional outflows referred to in Article 423;
the maximum amount that can be drawn during the next 30 days from undrawn committed credit and liquidity facilities, as set out in Article 424;
the additional outflows identified in the assessment in accordance with paragraph 2.
For this assessment, institutions shall take particular account of material reputational damage that could result from not providing liquidity support to such products or services. Institutions shall report not less than annually to the competent authorities those products and services for which the likelihood and potential volume of the liquidity outflows referred to in the first subparagraph are material and the competent authorities shall determine the outflows to be assigned. The competent authorities may apply an outflow rate up to 5 % for trade finance off-balance sheet related products, as referred to in Article 429 and Annex I.
The competent authorities shall at least annually report to EBA the types of products or services for which they have determined outflows on the basis of the reports from institutions. They shall in that report also explain the methodology applied to determine the outflows.
Article 421
Outflows on retail deposits
Institutions shall separately report the amount of retail deposits covered by a Deposit Guarantee Scheme in accordance with Directive 94/19/EC or an equivalent deposit guarantee scheme in a third country, and multiply by at least 5 % where the deposit is either of the following:
part of an established relationship making withdrawal highly unlikely;
held in a transactional account, including accounts to which salaries are regularly credited.
Institutions may exclude from the calculation of outflows certain clearly circumscribed categories of retail deposits as long as in each and every instance the institution rigorously applies the following for the whole category of those deposits, unless in individually justified circumstances of hardship for the depositor:
within 30 days, the depositor is not allowed to withdraw the deposit; or
for early withdrawals within 30 days, the depositor has to pay a penalty that includes the loss of interest between the date of withdrawal and the contractual maturity date plus a material penalty that does not have to exceed the interest due for the time elapsed between the date of deposit and the date of withdrawal.
Article 422
Outflows on other liabilities
Institutions shall multiply liabilities resulting from secured lending and capital market-driven transactions as defined in point (3) of Article 192 by:
0 % up to the value of the liquid assets in accordance with Article 418 if they are collateralised by assets that would qualify as liquid assets in accordance with Article 416;
100 % over the value of the liquid assets in accordance with Article 418, if they are collateralized by assets that would qualify as liquid assets in accordance with Article 416;
100 % if they are collateralized by assets that would not qualify as liquid assets in accordance with Article 416, with the exception of transactions covered by points (d) and (e) of this paragraph;
25 % if they are collateralized by assets that would not qualify as liquid assets in accordance with Article 416 and the lender is the central government, a public sector entity of the Member State in which the credit institution has been authorised or has established a branch, or a multilateral development bank. Public sector entities that receive that treatment shall be limited to those that have a risk weight of 20 % or lower in accordance with Chapter 2, Title II of Part Three;
0 % if the lender is a central bank.
Institutions shall multiply liabilities resulting from deposits that have to be maintained:
by the depositor in order to obtain clearing, custody or cash management or other comparable services from the institution;
in the context of common task sharing within an institutional protection scheme meeting the requirements of Article 113(7) or as a legal or statutory minimum deposit by another entity being a Member of the same institutional protection scheme;
by the depositor in the context of an established operational relationship other than that mentioned in point (a);
by the depositor to obtain cash clearing and central credit institution services and where the credit institution belongs to a network in accordance with legal or statutory provisions;
by 5 % in the case of point (a) to the extent to which they are covered by a Deposit Guarantee Scheme in accordance with Directive 94/19/EC or an equivalent deposit guarantee scheme in a third country and by 25 % otherwise.
Deposits from credit institutions placed at central credit institutions that are considered as liquid assets in accordance with Article 416(1)(f) shall be multiplied by 100 % outflow rate.
Pending a uniform definition of an established operational relationship as referred to in point (c) of paragraph 3, institutions shall themselves establish the criteria for identifying an established operational relationship for which they have evidence that the client is unable to withdraw amounts legally due over a 30-day time horizon without compromising its operational functioning and shall report those criteria to the competent authorities. In the absence of a uniform definition, competent authorities may provide general guidance that institutions are to follow in identifying deposits maintained by the depositor in a context of an established operational relationship.
Competent authorities may grant the permission to apply a lower outflow percentage to the liabilities referred to in paragraph 7 on a case-by-case basis, provided that all the following conditions are met:
the counterparty is any of the following:
a parent or subsidiary institution of the institution, or a parent or subsidiary investment firm of the institution, or another subsidiary of the same parent institution or parent investment firm;
the counterparty is linked to the institution by a relationship within the meaning of Article 22(7) of Directive 2013/34/EU;
an institution falling within the same institutional protection scheme meeting the requirements of Article 113(7); or
the central institution or a member of a network compliant with point (d) of Article 400(2);
there are reasons to expect a lower outflow over the next 30 days even under a combined idiosyncratic and market-wide stress scenario;
a corresponding symmetric or more conservative inflow is applied by the counterparty by way of derogation from Article 425;
the institution and the counterparty are established in the same Member State.
EBA shall submit those draft regulatory technical standards to the Commission by 1 January 2015.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 423
Additional outflows
EBA shall develop draft regulatory technical standards to specify the conditions under which the notion of materiality may be applied and specifying methods for the measurement of the additional outflow.
EBA shall submit those draft regulatory technical standards to the Commission by 31 March 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the second subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
The institution shall add an additional outflow corresponding to:
the excess collateral the institution holds that can be contractually called at any time by the counterparty;
collateral that is due to be returned to a counterparty;
collateral that corresponds to assets that would qualify as liquid assets for the purposes of Article 416 that can be substituted for assets corresponding to assets that would not qualify as liquid assets for the purposes of Article 416 without the consent of the institution.
Article 424
Outflows from credit and liquidity facilities
The maximum amount that can be drawn of undrawn committed credit facilities and undrawn committed liquidity facilities within the next 30 days shall be multiplied by 10 % where they meet the following conditions:
they do not qualify for the retail exposure class under the Standardised or IRB approaches for credit risk;
they have been provided to clients that are not financial customers;
they have not been provided for the purpose of replacing funding of the client in situations where he is unable to obtain its funding requirements in the financial markets.
The institutions shall report the maximum amount that can be drawn of other undrawn committed credit facilities and undrawn committed liquidity facilities within the next 30 days. This applies in particular to the following:
liquidity facilities that the institution has granted to SSPEs other than those referred to in point (b) of paragraph 3;
arrangements under which the institution is required to buy or swap assets from an SSPE;
facilities extended to credit institutions;
facilities extended to financial institutions and investment firms.
Article 425
Inflows
Institutions shall report their liquidity inflows. Liquidity inflows shall be capped at 75 % of liquidity outflows. Institutions may exempt liquidity inflows from deposits placed with other institutions that qualify for the treatment set out in Article 113(6) or (7) of this Regulation from that cap.
Institutions may exempt liquidity inflows from monies due from borrowers and bond investors where those inflows are related to mortgage lending funded by bonds eligible for the treatment set out in Article 129(4), (5) or (6) of this Regulation or by covered bonds as defined in point (1) of Article 3 of Directive (EU) 2019/2162 from that cap. Institutions may exempt inflows from promotional loans that the institutions have passed through. Subject to the prior approval of the competent authority responsible for supervision on an individual basis, the institution may fully or partially exempt inflows where the liquidity provider is a parent or subsidiary institution of the institution, a parent or subsidiary investment firm of the institution or another subsidiary of the same parent institution or parent investment firm or is related to the institution as set out in Article 22(7) of Directive 2013/34/EU.
The liquidity inflows shall be measured over the next 30 days. They shall comprise only contractual inflows from exposures that are not past due and for which the institution has no reason to expect non-performance within the 30-day time horizon. Liquidity inflows shall be reported in full with the following inflows reported separately:
monies due from customers that are not financial customers for the purposes of principal payment shall be reduced by 50 % of their value or by the contractual commitments to those customers to extend funding, whichever is higher. This does not apply to monies due from secured lending and capital market-driven transactions as defined in point (3) of Article 192 that are collateralised by liquid assets in accordance with Article 416 as referred to in point (d) of this paragraph.
By way of derogation from the first subparagraph of this point, institutions that have received a commitment referred to in Article 424(6) in order for them to disburse a promotional loan to a final recipient may take an inflow into account up to the amount of the outflow they apply to the corresponding commitment to extend those promotional loans;
monies due from trade financing transactions referred to in point (b) of the second subparagraph of Article 162(3) with a residual maturity of up to 30 days, shall be taken into account in full as inflows;
loans with an undefined contractual end date shall be taken into account with a 20 % inflow, provided that the contract allows the institution to withdraw and request payment within 30 days;
monies due from secured lending and capital market-driven transactions as defined in point (3) of Article 192 if they are collateralised by liquid assets as referred to in Article 416(1), shall not be taken into account up to the value net of haircuts of the liquid assets and shall be taken into account in full for the remaining monies due;
monies due that the institution owing those monies treats in accordance with Article 422(3) and (4), shall be multiplied by a corresponding symmetrical inflow;
monies due from positions in major index equity instruments provided that there is no double counting with liquid assets;
any undrawn credit or liquidity facilities and any other commitments received shall not be taken into account.
By way of derogation from point (g) of paragraph 2, competent authorities may grant the permission to apply a higher inflow on a case by case basis for credit and liquidity facilities when all of the following conditions are fulfilled:
there are reasons to expect a higher inflow even under a combined market and idiosyncratic stress of the provider;
the counterparty is a parent or subsidiary institution of the institution or another subsidiary of the same parent institution or linked to the institution by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC or a member of the same institutional protection scheme referred to in Article 113(7) of this Regulation or the central institution or a member of a network that is subject to the waiver referred to in Article 10 of this Regulation;
a corresponding symmetric or more conservative outflow is applied by the counterparty by way of derogation from Articles 422, 423 and 424;
the institution and the counterparty are established in the same Member State.
EBA shall submit those draft regulatory technical standards to the Commission by 1 January 2015.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 426
Updating Future liquidity requirements
Following, the adoption by the Commission of a delegated act to specify the liquidity requirement in accordance with Article 460, EBA may develop draft implementing technical standards to specify the conditions set out in Article 421(1), Article 422, with the exception of paragraphs 8, 9 and 10 of that Article, and Article 424 to take account of standards agreed internationally.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first paragraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
TITLE III
REPORTING ON STABLE FUNDING
Article 427
Items providing stable funding
Institutions shall report to the competent authorities, in accordance with the reporting requirements set out in Article 415(1) and the uniform reporting formats referred to in Article 415(3), the following items and their components in order to allow an assessment of the availability of stable funding:
the following own funds, after deductions have been applied, where appropriate:
tier 1 capital instruments;
tier 2 capital instruments;
other preferred shares and capital instruments in excess of Tier 2 allowable amount having an effective maturity of one year or greater;
the following liabilities not included in point (a):
retail deposits that qualify for the treatment set out in Article 421(1);
retail deposits that qualify for the treatment set out in Article 421(2);
deposits that qualify for the treatment set out in Article 422 (3) and (4);
of the deposits referred to in point (iii), those that are subject to a deposit guarantee scheme in accordance with Directive 94/19/EC or an equivalent deposit guarantee scheme in a third country deposit guarantees within the terms of Article 421(1);
of the deposits referred to in point (iii), those that fall under point (b) of Article 422(3);
of the deposits referred to in point (iii), those that fall under point (d) of Article 422(3);
amounts deposited not falling under point (i), (ii) or (iii) if they are not deposited by financial customers;
all funding obtained from financial customers;
separately for amounts falling under points (vii) and (viii) respectively, funding from secured lending and capital market-driven transactions as defined in point (3) of Article 192:
liabilities resulting from securities issued that qualify for the treatment set out in Article 129(4) or (5) of this Regulation or from covered bonds as defined in point (1) of Article 3 of Directive (EU) 2019/2162;
the following other liabilities resulting from securities issued that do not fall under point (a):
any other liabilities.
Where applicable, all items shall be presented in the following five buckets according to the closest of their maturity date and the earliest date at which they can contractually be called:
within three months;
between three and six months;
between six and nine months;
between nine and 12 months;
after 12 months.
Article 428
Items requiring stable funding
Unless deducted from own funds, the following items shall be reported to competent authorities separately in order to allow an assessment of the needs for stable funding:
the assets that would qualify as liquid assets in accordance with Article 416, broken down by asset type;
the following securities and money market instruments not included in point (a):
assets qualifying for credit step 1 under Article 122;
assets qualifying for credit step 2 under Article 122;
other assets;
equity securities of non-financial entities listed on a major index in a recognised exchange;
other equity securities;
gold;
other precious metals;
non-renewable loans and receivables, and separately those non-renewable loans and receivables for which borrowers are:
natural persons other than commercial sole proprietors and partnerships;
SMEs that qualify for the retail exposure class under the Standardised or IRB approaches for credit risk or to a company which is eligible for the treatment set out in Article 153(4) and where the aggregate deposit placed by that client or group of connected clients is less than EUR 1 million;
sovereigns, central banks and public sector entities;
clients not referred to in points (i) and (ii) other than financial customers;
clients not referred to in points (i), (ii) and (iii) that are financial customers, and thereof separately those that are credit institutions and other financial customers;
non-renewable loans and receivables referred to in point (g), and thereof separately those that are:
collateralised by commercial immovable property (CRE);
collateralised by residential property (RRE);
match funded (pass‐through) via bonds eligible for the treatment set out in Article 129(4) or (5) of this Regulation or via covered bonds as defined in point (1) of Article 3 of Directive (EU) 2019/2162;
derivatives receivables;
any other assets;
undrawn committed credit facilities that qualify as ‘medium risk’ or ‘medium/low risk’ under Annex I.
TITLE IV
THE NET STABLE FUNDING RATIO
CHAPTER 1
The net stable funding ratio
Article 428a
Application on a consolidated basis
Where the net stable funding ratio set out in this Title applies on a consolidated basis in accordance with Article 11(4), the following provisions shall apply:
the assets and off-balance-sheet items of a subsidiary having its head office in a third country which are subject to required stable funding factors under the net stable funding requirement set out in the national law of that third country that are higher than those specified in Chapter 4 shall be subject to consolidation in accordance with the higher factors specified in the national law of that third country;
the liabilities and own funds of a subsidiary having its head office in a third country which are subject to available stable funding factors under the net stable funding requirement set out in the national law of that third country that are lower than those specified in Chapter 3 shall be subject to consolidation in accordance with the lower factors specified in the national law of that third country;
third-country assets which meet the requirements laid down in the delegated act referred to in Article 460(1) and which are held by a subsidiary having its head office in a third country shall not be recognised as liquid assets for consolidation purposes where they do not qualify as liquid assets under the national law of that third country which sets out the liquidity coverage requirement.
▼M9 —————
Article 428b
The net stable funding ratio
The net stable funding requirement laid down in Article 413(1) shall be equal to the ratio of the institution's available stable funding as referred to in Chapter 3 to the institution's required stable funding as referred to in Chapter 4, and shall be expressed as a percentage. Institutions shall calculate their net stable funding ratio in accordance with the following formula:
In determining the level of any restriction on currency mismatches that may be applied in accordance with this Article, competent authorities shall at least consider:
whether the institution has the ability to transfer available stable funding from one currency to another and across jurisdictions and legal entities within its group and the ability to swap currencies and raise funds in foreign currency markets over the one-year horizon of the net stable funding ratio;
the impact of adverse exchange rate movements on existing mismatched positions and on the effectiveness of any foreign currency exchange hedges that are in place.
Any restriction on currency mismatches imposed in accordance with this Article shall constitute a specific liquidity requirement as referred to in Article 105 of Directive 2013/36/EU.
CHAPTER 2
General rules for the calculation of the net stable funding ratio
Article 428c
Calculation of the net stable funding ratio
Unless otherwise specified in this Title, where an item can be allocated to more than one required stable funding category, it shall be allocated to the required stable funding category that produces the greatest contractual required stable funding for that item.
Article 428d
Derivative contracts
Competent authorities may decide, with the approval of the relevant central bank, to waive the impact of derivative contracts on the calculation of the net stable funding ratio, including through the determination of the required stable funding factors and of provisions and losses, provided that all the following conditions are met:
those contracts have a residual maturity of less than six months;
the counterparty is the ECB or the central bank of a Member State;
the derivative contracts serve the monetary policy of the ECB or the central bank of a Member State.
Where a subsidiary having its head office in a third country benefits from the waiver referred to in the first subparagraph under the national law of that third country which sets out the net stable funding requirement, that waiver as specified in the national law of the third country shall be taken into account for consolidation purposes.
Article 428e
Netting of secured lending transactions and capital market-driven transactions
Assets and liabilities resulting from securities financing transactions with a single counterparty shall be calculated on a net basis, provided that those assets and liabilities comply with the netting conditions set out in Article 429b(4).
Article 428f
Interdependent assets and liabilities
Subject to prior approval of the competent authorities, an institution may treat an asset and a liability as interdependent, provided that all the following conditions are met:
the institution acts solely as a pass-through unit to channel the funding from the liability into the corresponding interdependent asset;
the individual interdependent assets and liabilities are clearly identifiable and have the same principal amount;
the asset and interdependent liability have substantially matched maturities, with a maximum delay of 20 days between the maturity of the asset and the maturity of the liability;
the interdependent liability has been requested pursuant to a legal, regulatory or contractual commitment and is not used to fund other assets;
the principal payment flows from the asset are not used for other purposes than repaying the interdependent liability;
the counterparties for each pair of interdependent assets and liabilities are not the same.
Assets and liabilities shall be considered to meet the conditions set out in paragraph 1 and be considered as interdependent where they are directly linked to the following products or services:
centralised regulated savings, provided that institutions are legally required to transfer regulated deposits to a centralised fund which is set up and controlled by the central government of a Member State and which provides loans to promote public interest objectives, and provided that the transfer of deposits to the centralised fund occurs on at least a monthly basis;
promotional loans and credit and liquidity facilities that fulfil the criteria set out in the delegated act referred to in Article 460(1) for institutions acting as simple intermediaries that do not incur any funding risk;
covered bonds that meet all the following conditions:
they are bonds referred to in Article 52(4) of Directive 2009/65/EC or they meet the eligibility requirements for the treatment set out in Article 129(4) or (5) of this Regulation;
the underlying loans are fully match funded with the covered bonds that were issued or the covered bonds have non-discretionary extendable maturity triggers of one year or more until the term of the underlying loans in the event of refinancing failure at the maturity date of the covered bond;
derivative client clearing activities, provided that the institution does not provide to its clients guarantees of the performance of the CCP and, as a result, does not incur any funding risk.
Article 428g
Deposits in institutional protection schemes and cooperative networks
Where an institution belongs to an institutional protection scheme of the type referred to in Article 113(7), to a network that is eligible for the waiver provided for in Article 10, or to a cooperative network in a Member State, the sight deposits that the institution maintains with the central institution and that the depositing institution considers to be liquid assets pursuant to the delegated act referred to in Article 460(1) shall be subject to the following:
the depositing institution shall apply the required stable funding factor under Section 2 of Chapter 4, depending on the treatment of those sight deposits as level 1, level 2A or level 2B assets pursuant to the delegated act referred to in Article 460(1) and depending on the relevant haircut applied to those sight deposits for the calculation of the liquidity coverage ratio;
the central institution receiving the deposit shall apply the corresponding symmetric available stable funding factor.
Article 428h
Preferential treatment within a group or within an institutional protection scheme
By way of derogation from Chapters 3 and 4, where Article 428g does not apply, competent authorities may authorise institutions on a case-by-case basis to apply a higher available stable funding factor or a lower required stable funding factor to assets, liabilities and committed credit or liquidity facilities, provided that all the following conditions are met:
the counterparty is one of the following:
the parent or a subsidiary of the institution;
another subsidiary of the same parent;
an undertaking that is related to the institution within the meaning of Article 22(7) of Directive 2013/34/EU;
a member of the same institutional protection scheme referred to in Article 113(7) of this Regulation as the institution;
the central body or an affiliated credit institution of a network or a cooperative group as referred to in Article 10 of this Regulation;
there are reasons to expect that the liability or committed credit or liquidity facility received by the institution constitutes a more stable source of funding, or that the asset or committed credit or liquidity facility granted by the institution requires less stable funding over the one-year horizon of the net stable funding ratio than the same liability, asset or committed credit or liquidity facility received or granted by other counterparties;
the counterparty applies a required stable funding factor that is equal to or higher than the higher available stable funding factor or applies an available stable funding factor that is equal to or lower than the lower required stable funding factor;
the institution and the counterparty are established in the same Member State.
Where the institution and the counterparty are established in different Member States, competent authorities may waive the condition set out in point (d) of paragraph 1, provided that, in addition to the criteria set out in paragraph 1, the following criteria are met:
there are legally binding agreements and commitments between group entities regarding the liability, asset or committed credit or liquidity facility;
the funding provider presents a low funding risk profile;
the funding risk profile of the recipient of the funding has been adequately taken into account in the liquidity risk management of the funding provider.
The competent authorities shall consult each other in accordance with point (b) of Article 20(1) to determine whether the additional criteria set out in this paragraph are met.
CHAPTER 3
Available stable funding
Section 1
General provisions
Article 428i
Calculation of the amount of available stable funding
Unless otherwise specified in this Chapter, the amount of available stable funding shall be calculated by multiplying the accounting value of various categories or types of liabilities and own funds by the available stable funding factors to be applied under Section 2. The total amount of available stable funding shall be the sum of the weighted amounts of liabilities and own funds.
Bonds and other debt securities that are issued by the institution, sold exclusively in the retail market, and held in a retail account, may be treated as belonging to the appropriate retail deposit category. Limitations shall be in place, such that those instruments cannot be bought and held by parties other than retail customers.
Article 428j
Residual maturity of a liability or of own funds
Section 2
Available stable funding factors
Article 428k
0 % available stable funding factor
Unless otherwise specified in Articles 428l to 428o, all liabilities without a stated maturity, including short positions and open maturity positions, shall be subject to a 0 % available stable funding factor, with the exception of the following:
deferred tax liabilities, which shall be treated in accordance with the nearest possible date on which such liabilities could be realised;
minority interests, which shall be treated in accordance with the term of the instrument.
Deferred tax liabilities and minority interests as referred to in paragraph 1 shall be subject to one of the following factors:
0 %, where the effective residual maturity of the deferred tax liability or minority interest is less than six months;
50 %, where the effective residual maturity of the deferred tax liability or minority interest is a minimum of six months but less than one year;
100 %, where the effective residual maturity of the deferred tax liability or minority interest is one year or more.
The following liabilities and capital items or instruments shall be subject to a 0 % available stable funding factor:
trade date payables arising from purchases of financial instruments, of foreign currencies and of commodities, that are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transactions, or that have failed to settle but are nonetheless expected to settle;
liabilities that are categorised as being interdependent with assets in accordance with Article 428f;
liabilities with a residual maturity of less than six months provided by:
the ECB or the central bank of a Member State;
the central bank of a third country;
financial customers;
any other liabilities and capital items or instruments not referred to in Articles 428l to 428o.
The following rules shall apply to the calculation referred to in the first subparagraph:
variation margin received by institutions from their counterparties shall be deducted from the fair value of a netting set with positive fair value where the collateral received as variation margin qualifies as a level 1 asset pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified in that delegated act, and where institutions are legally entitled and operationally able to reuse that collateral;
all variation margin posted by institutions with their counterparties shall be deducted from the fair value of a netting set with negative fair value.
Article 428l
50 % available stable funding factor
The following liabilities and capital items or instruments shall be subject to a 50 % available stable funding factor:
deposits received that fulfil the criteria for operational deposits set out in the delegated act referred to in Article 460(1);
liabilities with a residual maturity of less than one year provided by:
the central government of a Member State or of a third country;
regional governments or local authorities of a Member State or of a third country;
public sector entities in a Member State or in a third country;
multilateral development banks referred to in Article 117(2) and international organisations referred to in Article 118;
non-financial corporate customers;
credit unions authorised by a competent authority, personal investment companies and clients that are deposit brokers to the extent that those liabilities do not fall under point (a) of this paragraph;
liabilities with a residual contractual maturity of a minimum of six months but less than one year that are provided by:
the ECB or the central bank of a Member State;
the central bank of a third country;
financial customers;
any other liabilities and capital items or instruments with a residual maturity of a minimum of six months but less than one year not referred to in Articles 428m, 428n and 428o.
Article 428m
90 % available stable funding factor
Sight retail deposits, retail deposits with a fixed notice period of less than one year and term retail deposits having a residual maturity of less than one year that fulfil the relevant criteria for other retail deposits set out in the delegated act referred to in Article 460(1) shall be subject to a 90 % available stable funding factor.
Article 428n
95 % available stable funding factor
Sight retail deposits, retail deposits with a fixed notice period of less than one year and term retail deposits having a residual maturity of less than one year that fulfil the relevant criteria for stable retail deposits set out in the delegated act referred to in Article 460(1) shall be subject to a 95 % available stable funding factor.
Article 428o
100 % available stable funding factor
The following liabilities and capital items and instruments shall be subject to a 100 % available stable funding factor:
the Common Equity Tier 1 items of the institution before the adjustments required pursuant to Articles 32 to 35, the deductions pursuant to Article 36 and the application of the exemptions and alternatives laid down in Articles 48, 49 and 79;
the Additional Tier 1 items of the institution before the deduction of the items referred to in Article 56 and before Article 79 has been applied thereto, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;
the Tier 2 items of the institution before the deductions referred to in Article 66 and before the application of Article 79, having a residual maturity of one year or more, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;
any other capital instruments of the institution with a residual maturity of one year or more, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;
any other secured and unsecured borrowings and liabilities with a residual maturity of one year or more, including term deposits, unless otherwise specified in Articles 428k to 428n.
CHAPTER 4
Required stable funding
Section 1
General provisions
Article 428p
Calculation of the amount of required stable funding
Assets that institutions have borrowed, including in securities financing transactions, shall be subject to the required stable funding factors to be applied under Section 2 where those assets are not accounted for on the balance sheet of the institution but the institution does have beneficial ownership of the assets.
Assets that have less than six months remaining in the encumbrance period shall be subject to the required stable funding factors to be applied under Section 2 to the same assets if they were held unencumbered.
The following assets shall be considered to be unencumbered:
assets included in a pool which are available for immediate use as collateral to obtain additional funding under committed or, where the pool is operated by a central bank, uncommitted but not yet funded, credit lines that are available to the institution; those assets shall include assets placed by a credit institution with a central institution in a cooperative network or institutional protection scheme; institutions shall assume that assets in the pool are encumbered in order of increasing liquidity on the basis of the liquidity classification pursuant to the delegated act referred to in Article 460(1), starting with assets ineligible for the liquidity buffer;
assets that the institution has received as collateral for credit risk mitigation purposes in secured lending, secured funding or collateral exchange transactions and that the institution may dispose of;
assets attached as non-mandatory overcollateralisation to a covered bond issuance.
In the case of non-standard, temporary operations conducted by the ECB or the central bank of a Member State or the central bank of a third country in order to fulfil its mandate in a period of market-wide financial stress or in exceptional macroeconomic circumstances, the following assets may receive a reduced required stable funding factor:
by way of derogation from point (f) of Article 428ad and from point (a) of Article 428ah(1), assets encumbered for the purposes of the operations referred to in this subparagraph;
by way of derogation from points (d)(i) and (d)(ii) of Article 428ad, from point (b) of Article 428af and from point (c) of Article 428ag, monies that result from the operations referred to in this subparagraph.
Competent authorities shall determine, in agreement with the central bank that is the counterparty to the transaction the required stable funding factor to be applied to the assets referred to in points (a) and (b) of the first subparagraph. For encumbered assets as referred to in point (a) of the first subparagraph, the required stable funding factor to be applied shall not be lower than the required stable funding factor that would apply under Section 2 to those assets if they were held unencumbered.
When applying a reduced required stable funding factor in accordance with the second subparagraph, competent authorities shall closely monitor the impact of that reduced factor on institutions' stable funding positions and shall take appropriate supervisory measures where necessary.
Competent authorities shall report the types of off-balance-sheet exposures for which they have determined the required stable funding factors to EBA at least once a year. They shall include an explanation of the methodology applied to determine those factors in that report.
Article 428q
Residual maturity of an asset
Section 2
Required stable funding factors
Article 428r
0 % required stable funding factor
The following assets shall be subject to a 0 % required stable funding factor:
unencumbered assets that are eligible as level 1 high quality liquid assets pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified in that delegated act, regardless of whether they comply with the operational requirements as set out in that delegated act;
unencumbered shares or units in CIUs that are eligible for a 0 % haircut for the calculation of the liquidity coverage ratio pursuant to the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer set out in that delegated act;
all reserves held by the institution in the ECB or in the central bank of a Member State or the central bank of a third country, including required reserves and excess reserves;
all claims on the ECB, the central bank of a Member State or the central bank of a third country that have a residual maturity of less than six months;
trade date receivables arising from sales of financial instruments, foreign currencies or commodities that are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transaction, or that have failed to settle but are nonetheless expected to settle;
assets that are categorised as being interdependent with liabilities in accordance with Article 428f;
monies due from securities financing transactions with financial customers, where those transactions have a residual maturity of less than six months, where those monies due are collateralised by assets that qualify as level 1 assets pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified therein, and where the institution would be legally entitled and operationally able to reuse those assets for the duration of the transaction.
Institutions shall take the monies due referred to in point (g) of the first subparagraph of this paragraph into account on a net basis where Article 428e applies.
For subsidiaries having their head office in a third country, where the required central bank reserves are subject to a higher required stable funding factor under the net stable funding requirement set out in the national law of that third country, that higher required stable funding factor shall be taken into account for consolidation purposes.
Article 428s
5 % required stable funding factor
The following assets and off-balance-sheet items shall be subject to a 5 % required stable funding factor:
unencumbered shares or units in CIUs that are eligible for a 5 % haircut for the calculation of the liquidity coverage ratio in accordance with the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act;
monies due from securities financing transactions with financial customers, where those transactions have a residual maturity of less than six months, other than those referred to in point (g) of Article 428r(1);
the undrawn portion of committed credit and liquidity facilities pursuant to the delegated act referred to in Article 460(1);
trade finance off-balance-sheet related products as referred to in Annex I with a residual maturity of less than six months.
Institutions shall take the monies due referred to in point (b) of the first subparagraph of this paragraph into account on a net basis where Article 428e applies.
Article 428t
7 % required stable funding factor
Unencumbered assets that are eligible as level 1 extremely high quality covered bonds pursuant to the delegated act referred to in Article 460(1) shall be subject to a 7 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.
Article 428u
7,5 % required stable funding factor
Trade finance off-balance-sheet related products as referred to in Annex I with a residual maturity of at least six months but less than one year shall be subject to a 7,5 % required stable funding factor.
Article 428v
10 % required stable funding factor
The following assets and off-balance-sheet items shall be subject to a 10 % required stable funding factor:
monies due from transactions with financial customers that have a residual maturity of less than six months other than those referred to in point (g) of Article 428r(1) and in point (b) of Article 428s(1);
trade finance on-balance-sheet related products with a residual maturity of less than six months;
trade finance off-balance-sheet related products as referred to in Annex I with a residual maturity of one year or more.
Article 428w
12 % required stable funding factor
Unencumbered shares or units in CIUs that are eligible for a 12 % haircut for the calculation of the liquidity coverage ratio in accordance with the delegated act referred to in Article 460(1) shall be subject to a 12 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.
Article 428x
15 % required stable funding factor
Unencumbered assets that are eligible as level 2A assets pursuant to the delegated act referred to in Article 460(1) shall be subject to a 15 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.
Article 428y
20 % required stable funding factor
Unencumbered shares or units in CIUs that are eligible for a 20 % haircut for the calculation of the liquidity coverage ratio in accordance with the delegated act referred to in Article 460(1) shall be subject to a 20 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.
Article 428z
25 % required stable funding factor
Unencumbered level 2B securitisations pursuant to the delegated act referred to in Article 460(1) shall be subject to a 25 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.
Article 428aa
30 % required stable funding factor
The following assets shall be subject to a 30 % required stable funding factor:
unencumbered high quality covered bonds pursuant to the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act;
unencumbered shares or units in CIUs that are eligible for a 30 % haircut for the calculation of the liquidity coverage ratio in accordance with the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.
Article 428ab
35 % required stable funding factor
The following assets shall be subject to a 35 % required stable funding factor:
unencumbered level 2B securitisations pursuant to the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act;
unencumbered shares or units in CIUs that are eligible for a 35 % haircut for the calculation of the liquidity coverage ratio pursuant to the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.
Article 428ac
40 % required stable funding factor
Unencumbered shares or units in CIUs that are eligible for a 40 % haircut for the calculation of the liquidity coverage ratio pursuant to the delegated act referred to in Article 460(1) shall be subject to a 40 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.
Article 428ad
50 % required stable funding factor
The following assets shall be subject to a 50 % required stable funding factor:
unencumbered assets that are eligible as level 2B assets pursuant to the delegated act referred to in Article 460(1), excluding level 2B securitisations and high quality covered bonds pursuant to that delegated act, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act;
deposits held by the institution in another financial institution that fulfil the criteria for operational deposits as set out in the delegated act referred to in Article 460(1);
monies due from transactions with a residual maturity of less than one year with:
the central government of a Member State or of a third country;
regional governments or local authorities in a Member State or in a third country;
public sector entities of a Member State or of a third country;
multilateral development banks referred to in Article 117(2) and international organisations referred to in Article 118;
non-financial corporates, retail customers and SMEs;
credit unions authorised by a competent authority, personal investment companies and clients that are deposit brokers to the extent that those assets do not fall under point (b) of this paragraph;
monies due from transactions with a residual maturity of at least six months but less than one year with:
the European Central Bank or the central bank of a Member State;
the central bank of a third country;
financial customers;
trade finance on-balance-sheet related products with a residual maturity of at least six months but less than one year;
assets encumbered for a residual maturity of at least six months but less than one year, except where those assets would be assigned a higher required stable funding factor in accordance with Articles 428ae to 428ah if they were held unencumbered, in which case the higher required stable funding factor that would apply to those assets if they were held unencumbered shall apply;
any other assets with a residual maturity of less than one year, unless otherwise specified in Articles 428r to 428ac.
Article 428ae
55 % required stable funding factor
Unencumbered shares or units in CIUs that are eligible for a 55 % haircut for the calculation of the liquidity coverage ratio in accordance with the delegated act referred to in Article 460(1) shall be subject to a 55 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.
Article 428af
65 % required stable funding factor
The following assets shall be subject to a 65 % required stable funding factor:
unencumbered loans secured by mortgages on residential property or unencumbered residential loans fully guaranteed by an eligible protection provider as referred to in point (e) of Article 129(1) with a residual maturity of one year or more, provided that those loans are assigned a risk weight of 35 % or less in accordance with Chapter 2 of Title II of Part Three;
unencumbered loans with a residual maturity of one year or more, excluding loans to financial customers and loans referred to in Articles 428r to 428ad, provided that those loans are assigned a risk weight of 35 % or less in accordance with Chapter 2 of Title II of Part Three.
Article 428ag
85 % required stable funding factor
The following assets and off-balance-sheet items shall be subject to a 85 % required stable funding factor:
any assets and off-balance-sheet items, including cash, posted as initial margin for derivative contracts, unless those assets would be assigned a higher required stable funding factor in accordance with Article 428ah if held unencumbered, in which case the higher required stable funding factor that would apply to those assets if they were held unencumbered shall apply;
any assets and off-balance-sheet items, including cash, posted as contribution to the default fund of a CCP, unless those would be assigned a higher required stable funding factor in accordance with Article 428ah if held unencumbered, in which case the higher required stable funding factor to be applied to the unencumbered asset shall apply;
unencumbered loans with a residual maturity of one year or more, excluding loans to financial customers and loans referred to in Articles 428r to 428af, which are not past due for more than 90 days and which are assigned a risk weight of more than 35 % in accordance with Chapter 2 of Title II of Part Three;
trade finance on-balance-sheet related products, with a residual maturity of one year or more;
unencumbered securities with a residual maturity of one year or more that are not in default in accordance with Article 178 and that are not eligible as liquid assets pursuant to the delegated act referred to in Article 460(1);
unencumbered exchange-traded equities that are not eligible as level 2B assets pursuant to the delegated act referred to in Article 460(1);
physically traded commodities, including gold but excluding commodity derivatives;
assets encumbered for a residual maturity of one year or more in a cover pool funded by covered bonds as referred to in Article 52(4) of Directive 2009/65/EC or covered bonds which meet the eligibility requirements for the treatment as set out in Article 129(4) or (5) of this Regulation.
Article 428ah
100 % required stable funding factor
The following assets shall be subject to a 100 % required stable funding factor:
unless otherwise specified in this Chapter, any assets encumbered for a residual maturity of one year or more;
any assets other than those referred to in Articles 428r to 428ag, including loans to financial customers having a residual contractual maturity of one year or more, non-performing exposures, items deducted from own funds, fixed assets, non-exchange-traded equities, retained interest, insurance assets, defaulted securities.
The following rules shall apply to the calculation referred to in the first subparagraph:
variation margin received by institutions from their counterparties shall be deducted from the fair value of a netting set with positive fair value where the collateral received as variation margin qualifies as a level 1 asset pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified in that delegated act, and where institutions are legally entitled and operationally able to reuse that collateral;
all variation margin posted by institutions with their counterparties shall be deducted from the fair value of a netting set with negative fair value.
CHAPTER 5
Derogation for small and non-complex institutions
Article 428ai
Derogation for small and non-complex institutions
By way of derogation from Chapters 3 and 4, small and non-complex institutions may choose, with the prior permission of their competent authority, to calculate the ratio between an institution's available stable funding as referred to in Chapter 6, and the institution's required stable funding as referred to in Chapter 7, expressed as a percentage.
A competent authority may require a small and non-complex institution to comply with the net stable funding requirement based on an institution's available stable funding as referred to in Chapter 3 and the required stable funding as referred to in Chapter 4 where it considers that the simplified methodology is not adequate to capture the funding risks of that institution.
CHAPTER 6
Available stable funding for the simplified calculation of the net stable funding ratio
Section 1
General provisions
Article 428aj
Simplified calculation of the amount of available stable funding
Article 428ak
Residual maturity of a liability or own funds
Section 2
Available stable funding factors
Article 428al
0 % available stable funding factor
Unless otherwise specified in this Section, all liabilities without a stated maturity, including short positions and open maturity positions, shall be subject to a 0 % available stable funding factor, with the exception of the following:
deferred tax liabilities, which shall be treated in accordance with the nearest possible date on which such liabilities could be realised;
minority interests, which shall be treated in accordance with the term of the instrument concerned.
Deferred tax liabilities and minority interests as referred to in paragraph 1 shall be subject to one of the following factors:
0 %, where the effective residual maturity of the deferred tax liability or minority interest is less than one year;
100 %, where the effective residual maturity of the deferred tax liability or minority interest is one year or more.
The following liabilities, and capital items or instruments shall be subject to a 0 % available stable funding factor:
trade date payables arising from purchases of financial instruments, of foreign currencies and of commodities, that are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transaction, or that have failed to settle but are nonetheless expected to settle;
liabilities that are categorised as being interdependent with assets in accordance with Article 428f;
liabilities with a residual maturity of less than one year provided by:
the ECB or the central bank of a Member State;
the central bank of a third country;
financial customers;
any other liabilities and capital items or instruments not referred to in this Article and Articles 428am to 428ap.
The following rules shall apply to the calculation referred to in the first subparagraph:
variation margin received by institutions from their counterparties shall be deducted from the fair value of a netting set with positive fair value where the collateral received as variation margin qualifies as a level 1 asset pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified in that delegated act, and where institutions are legally entitled and operationally able to reuse that collateral;
all variation margin posted by institutions with their counterparties shall be deducted from the fair value of a netting set with negative fair value.
Article 428am
50 % available stable funding factor
The following liabilities and capital items or instruments shall be subject to a 50 % available stable funding factor:
deposits received that fulfil the criteria for operational deposits set out in the delegated act referred to in Article 460(1);
liabilities and capital items or instruments with a residual maturity of less than one year provided by:
the central government of a Member State or of a third country;
regional governments or local authorities in a Member State or in a third country;
public sector entities of a Member State or of a third country;
multilateral development banks referred to in Article 117(2) and international organisations referred to in Article 118;
non-financial corporate customers;
credit unions authorised by a competent authority, personal investment companies and clients that are deposit brokers, with the exception of deposits received, that fulfil the criteria for operational deposits as set out in the delegated act referred to in Article 460(1).
Article 428an
90 % available stable funding factor
Sight retail deposits, retail deposits with a fixed notice period of less than one year and term retail deposits having a residual maturity of less than one year that fulfil the relevant criteria for other retail deposits set out in the delegated act referred to in Article 460(1) shall be subject to a 90 % available stable funding factor.
Article 428ao
95 % available stable funding factor
Sight retail deposits, retail deposits with a fixed notice period of less than one year and term retail deposits having a residual maturity of less than one year that fulfil the relevant criteria for stable retail deposits set out in the delegated act referred to in Article 460(1) shall be subject to a 95 % available stable funding factor.
Article 428ap
100 % available stable funding factor
The following liabilities and capital items and instruments shall be subject to a 100 % available stable funding factor:
the Common Equity Tier 1 items of the institution before the adjustments required pursuant to Articles 32 to 35, the deductions pursuant to Article 36 and the application of the exemptions and alternatives laid down in Articles 48, 49 and 79;
the Additional Tier 1 items of the institution before the deduction of the items referred to in Article 56 and before Article 79 has been applied thereto, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;
the Tier 2 items of the institution before the deductions referred to in Article 66 and before the application of Article 79, having a residual maturity of one year or more, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;
any other capital instruments of the institution with a residual maturity of one year or more, excluding any instruments with explicit or embedded options that, if exercised, would reduce the effective residual maturity to less than one year;
any other secured and unsecured borrowings and liabilities with a residual maturity of one year or more, including term deposits, unless otherwise specified in Articles 428al to 428ao.
CHAPTER 7
Required stable funding for the simplified calculation of the net stable funding ratio
Section 1
General provisions
Article 428aq
Simplified calculation of the amount of required stable funding
Assets that institutions have borrowed, including in securities financing transactions, that are not accounted for in their balance sheet but on which they have beneficial ownership shall be subject to the required stable funding factors to be applied under Section 2.
Assets that have less than six months remaining in the encumbrance period shall be subject to the required stable funding factors to be applied under Section 2 to the same assets if they were held unencumbered.
The following assets shall be considered to be unencumbered:
assets included in a pool which are available for immediate use as collateral to obtain additional funding under committed or, where the pool is operated by a central bank, uncommitted but not yet funded credit lines available to the institution, including assets placed by a credit institution with the central institution in a cooperative network or institutional protection scheme;
assets that the institution has received as collateral for credit risk mitigation purposes in secured lending, secured funding or collateral exchange transactions and that the institution may dispose of;
assets attached as non-mandatory over-collateralisation to a covered bond issuance.
For the purposes of point (a) of the first subparagraph of this paragraph, institutions shall assume that assets in the pool are encumbered in order of increasing liquidity on the basis of the liquidity classification set out in the delegated act referred to in Article 460(1), starting with assets ineligible for the liquidity buffer.
In the case of non-standard, temporary operations conducted by the ECB or the central bank of a Member State or the central bank of a third country in order to fulfil its mandate in a period of market-wide financial stress or exceptional macroeconomic circumstances, the following assets may receive a reduced required stable funding factor:
by way of derogation from Article 428aw and from point (a) of Article 428az(1), assets encumbered for the operations referred to in this subparagraph;
by way of derogation from Article 428aw and from point (b) of Article 428ay, monies resulting from the operations referred to in this subparagraph.
Competent authorities shall determine, in agreement with the central bank that is the counterparty to the transaction the required stable funding factor to be applied to the assets referred to in points (a) and (b) of the first subparagraph. For encumbered assets referred to in point (a) of the first subparagraph, the required stable funding factor to be applied shall not be lower than the required stable funding factor that would apply under Section 2 to those assets if they were held unencumbered.
When applying a reduced required stable funding factor in accordance with the second subparagraph, competent authorities shall closely monitor the impact of that reduced factor on institutions' stable funding positions and take appropriate supervisory measures where necessary.
Competent authorities shall report to EBA the types of off-balance-sheet exposures for which they have determined the required stable funding factors at least once a year. They shall include in that report an explanation of the methodology applied to determine those factors.
Article 428ar
Residual maturity of an asset
Section 2
Required stable funding factors
Article 428as
0 % required stable funding factor
The following assets shall be subject to a 0 % required stable funding factor:
unencumbered assets that are eligible as level 1 high quality liquid assets pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified in that delegated act, regardless of whether they comply with the operational requirements as set out in that delegated act;
all reserves held by the institution in the ECB or in the central bank of a Member State or the central bank of a third country, including required reserves and excess reserves;
all claims on the ECB, the central bank of a Member State or the central bank of a third country that have a residual maturity of less than six months;
assets that are categorised as being interdependent with liabilities in accordance with Article 428f.
For subsidiaries having their head office in a third country, where the required central bank reserves are subject to a higher required stable funding factor under the net stable funding requirement set out in the national law of that third country, that higher required stable funding factor shall be taken into account for consolidation purposes.
Article 428at
5 % required stable funding factor
Article 428au
10 % required stable funding factor
The following assets and off-balance-sheet items shall be subject to a 10 % required stable funding factor:
unencumbered assets that are eligible as level 1 extremely high quality covered bonds pursuant to the delegated act referred to in Article 460(1), regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act;
trade finance off-balance-sheet related products as referred to in Annex I.
Article 428av
20 % required stable funding factor
Unencumbered assets that are eligible as level 2A assets pursuant to the delegated act referred to in Article 460(1), and unencumbered shares or units in CIUs pursuant to that delegated act shall be subject to a 20 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act.
Article 428aw
50 % required stable funding factor
The following assets shall be subject to a 50 % required stable funding factor:
secured and unsecured loans with a residual maturity of less than one year and provided that they are encumbered less than one year;
any other assets with a residual maturity of less than one year, unless otherwise specified in Articles 428as to 428av;
assets encumbered for a residual maturity of at least six months but less than one year, except where those assets would be assigned a higher required stable funding factor in accordance with Articles 428ax, 428ay and 428az if they were held unencumbered, in which case the higher required stable funding factor that would apply to those assets if they were held unencumbered shall apply.
Article 428ax
55 % required stable funding factor
Assets that are eligible as level 2B assets pursuant to the delegated act referred to in Article 460(1), and shares or units in CIUs pursuant to that delegated act shall be subject to a 55 % required stable funding factor, regardless of whether they comply with the operational requirements and with the requirements on the composition of the liquidity buffer as set out in that delegated act, provided that they are encumbered less than one year.
Article 428ay
85 % required stable funding factor
The following assets and off-balance-sheet items shall be subject to a 85 % required stable funding factor:
any assets and off-balance-sheet items, including cash, posted as initial margin for derivative contracts or posted as contribution to the default fund of a CCP, unless those assets would be assigned a higher required stable funding factor in accordance with Article 428az if held unencumbered, in which case the higher required stable funding factor that would apply to those assets if they were held unencumbered shall apply;
unencumbered loans with a residual maturity of one year or more, excluding loans to financial customers, which are not past due for more than 90 days;
trade finance on-balance-sheet related products, with a residual maturity of one year or more;
unencumbered securities with a residual maturity of one year or more that are not in default in accordance with Article 178 and that are not eligible as liquid assets pursuant to the delegated act referred to in Article 460(1);
unencumbered exchange-traded equities that are not eligible as level 2B assets pursuant to the delegated act referred to in Article 460(1);
physically traded commodities, including gold but excluding commodity derivatives.
Article 428az
100 % required stable funding factor
The following assets shall be subject to a 100 % required stable funding factor:
any assets encumbered for a residual maturity of one year or more;
any assets other than those referred to in Articles 428as to 428ay, including loans to financial customers having a residual contractual maturity of one year or more, non-performing exposures, items deducted from own funds, fixed assets, non-exchange traded equities, retained interest, insurance assets, defaulted securities.
The following rules shall apply to the calculation referred to in the first subparagraph:
variation margin received by institutions from their counterparties shall be deducted from the fair value of a netting set with positive fair value where the collateral received as variation margin qualifies as a level 1 asset pursuant to the delegated act referred to in Article 460(1), excluding extremely high quality covered bonds specified in that delegated act, and where institutions are legally entitled and operationally able to reuse that collateral;
all variation margin posted by institutions with their counterparties shall be deducted from the fair value of a netting set with negative fair value.
PART SEVEN
LEVERAGE
Article 429
Calculation of the leverage ratio
Institutions shall calculate the leverage ratio at the reporting reference date.
For the purposes of paragraph 2, the total exposure measure shall be the sum of the exposure values of:
assets, excluding derivative contracts listed in Annex II, credit derivatives and the positions referred to in Article 429e, calculated in accordance with Article 429b(1);
derivative contracts listed in Annex II and credit derivatives, including those contracts and credit derivatives that are off-balance-sheet, calculated in accordance with Articles 429c and 429d;
add-ons for counterparty credit risk of securities financing transactions, including those that are off-balance-sheet, calculated in accordance with Article 429e;
off-balance-sheet items, excluding derivative contracts listed in Annex II, credit derivatives, securities financing transactions and positions referred to in Articles 429d and 429g, calculated in accordance with Article 429f;
regular-way purchases or sales awaiting settlement, calculated in accordance with Article 429g.
Institutions shall treat long settlement transactions in accordance with points (a) to (d) of the first subparagraph, as applicable.
Institutions may reduce the exposure values referred to in points (a) and (d) of the first subparagraph by the corresponding amount of general credit risk adjustments to on- and off-balance-sheet items, respectively, subject to a floor of 0 where the credit risk adjustments have reduced the Tier 1 capital.
By way of derogation from point (d) of paragraph 4, the following provisions shall apply:
an off-balance-sheet item in accordance with point (d) of paragraph 4 that is treated as a derivative in accordance with the applicable accounting framework shall be subject to the treatment set out in point (b) of that paragraph;
where a client of an institution acting as a clearing member enters directly into a derivative transaction with a CCP and the institution guarantees the performance of its client's trade exposures to the CCP arising from that transaction, the institution shall calculate its exposure resulting from the guarantee in accordance with point (b) of paragraph 4, as if that institution had entered directly into the transaction with the client, including with regard to the receipt or provision of cash variation margin.
The treatment set out in point (b) of the first subparagraph shall also apply to an institution acting as a higher-level client that guarantees the performance of its client's trade exposures.
For the purposes of point (b) of the first subparagraph and of the second subparagraph of this paragraph, institutions may consider an affiliated entity as a client only where that entity is outside the regulatory scope of consolidation at the level at which the requirement set out in point (d) of Article 92(3) is applied.
Unless otherwise expressly provided for in this Part, institutions shall calculate the total exposure measure in accordance with the following principles:
physical or financial collateral, guarantees or credit risk mitigation purchased shall not be used to reduce the total exposure measure;
assets shall not be netted with liabilities.
By way of derogation from point (b) of paragraph 7, institutions may reduce the exposure value of a pre-financing loan or an intermediate loan by the positive balance on the savings account of the debtor to which the loan was granted and only include the resulting amount in the total exposure measure, provided that all the following conditions are met:
the granting of the loan is conditional upon the opening of the savings account at the institution granting the loan and both the loan and the savings account are regulated by the same sectoral law;
the balance on the savings account cannot be withdrawn, in part or in full, by the debtor for the entire duration of the loan;
the institution can unconditionally and irrevocably use the balance on the savings account to settle any claim originating under the loan agreement in cases regulated by the sectoral law referred to in point (a), including the case of non-payment by or the insolvency of the debtor.
‘Pre-financing loan’ or ‘intermediate loan’ means a loan that is granted to the borrower for a limited period of time in order to bridge the borrower's financing gaps until the final loan is granted in accordance with the criteria laid down in the sectoral law regulating such transactions.
Article 429a
Exposures excluded from the total exposure measure
By way of derogation from Article 429(4), an institution may exclude any of the following exposures from its total exposure measure:
the amounts deducted from Common Equity Tier 1 items in accordance with point (d) of Article 36(1);
the assets deducted in the calculation of the capital measure referred to in Article 429(3);
exposures that are assigned a risk weight of 0 % in accordance with Article 113(6) or (7);
where the institution is a public development credit institution, the exposures arising from assets that constitute claims on central governments, regional governments, local authorities or public sector entities in relation to public sector investments, and promotional loans;
where the institution is not a public development credit institution, the parts of exposures arising from passing-through promotional loans to other credit institutions;
the guaranteed parts of exposures arising from export credits that meet both of the following conditions:
the guarantee is provided by an eligible provider of unfunded credit protection in accordance with Articles 201 and 202, including by export credit agencies or by central governments;
a 0 % risk weight applies to the guaranteed part of the exposure in accordance with Article 114(2) or (4) or Article 116(4);
where the institution is a clearing member of a QCCP, the trade exposures of that institution, provided that they are cleared with that QCCP and meet the conditions set out in point (c) of Article 306(1);
where the institution is a higher-level client within a multi-level client structure, the trade exposures to the clearing member or to an entity that serves as a higher-level client to that institution, provided that the conditions set out in Article 305(2) are met and provided that the institution is not obligated to reimburse its client for any losses suffered in the event of default of either the clearing member or the QCCP;
fiduciary assets which meet all the following conditions:
they are recognised on the institution's balance sheet by national generally accepted accounting principles, in accordance with Article 10 of Directive 86/635/EEC;
they meet the criteria for non-recognition set out in International Financial Reporting Standard (IFRS) 9, as applied in accordance with Regulation (EC) No 1606/2002;
they meet the criteria for non-consolidation set out in IFRS 10, as applied in accordance with Regulation (EC) No 1606/2002, where applicable;
exposures that meet all the following conditions:
they are exposures to a public sector entity;
they are treated in accordance with Article 116(4);
they arise from deposits that the institution is legally obliged to transfer to the public sector entity referred to in point (i) for the purpose of funding general interest investments;
the excess collateral deposited at tri-party agents that has not been lent out;
where under the applicable accounting framework an institution recognises the variation margin paid in cash to its counterparty as a receivable asset, the receivable asset, provided that the conditions set out in points (a) to (e) of Article 429c(3) are met;
the securitised exposures from traditional securitisations that meet the conditions for significant risk transfer set out in Article 244(2);
the following exposures to the institution’s central bank, subject to the conditions set out in paragraphs 5 and 6:
coins and banknotes constituting legal currency in the jurisdiction of the central bank;
assets representing claims on the central bank, including reserves held at the central bank;
where the institution is authorised in accordance with Article 16 and point (a) of Article 54(2) of Regulation (EU) No 909/2014, the institution's exposures due to banking-type ancillary services listed in point (a) of Section C of the Annex to that Regulation which are directly related to the core or ancillary services listed in Sections A and B of that Annex;
where the institution is designated in accordance with point (b) of Article 54(2) of Regulation (EU) No 909/2014, the institution's exposures due to banking-type ancillary services listed in point (a) of Section C of the Annex to that Regulation which are directly related to the core or ancillary services of a central securities depository, authorised in accordance with Article 16 of that Regulation, listed in Sections A and B of that Annex.
For the purposes of point (m) of the first subparagraph, institutions shall include any retained exposure in the total exposure measure.
For the purposes of points (d) and (e) of paragraph 1, ‘public development credit institution’ means a credit institution that meets all the following conditions:
it has been established by a Member State's central government, regional government or local authority;
its activity is limited to advancing specified objectives of financial, social or economic public policy in accordance with the laws and provisions governing that institution, including articles of association, on a non-competitive basis;
its goal is not to maximise profit or market share;
subject to Union State aid rules, the central government, regional government or local authority has an obligation to protect the credit institution's viability or directly or indirectly guarantees at least 90 % of the credit institution's own funds requirements, funding requirements or promotional loans granted;
it does not take covered deposits as defined in point (5) of Article 2(1) of Directive 2014/49/EU or in national law implementing that Directive that may be classified as fixed term or savings deposits from consumers as defined in point (a) of Article 3 of Directive 2008/48/EC of the European Parliament and of the Council ( 24 ).
For the purposes of point (b) of the first subparagraph, public policy objectives may include the provision of financing for promotional or development purposes to specified economic sectors or geographical areas of the relevant Member State.
►C7 For the purposes of points (d) and (e) of paragraph 1, and without prejudice to the Union State aid rules and ◄ the obligations of the Member States thereunder, competent authorities may, upon request of an institution, treat an organisationally, structurally and financially independent and autonomous unit of that institution as a public development credit institution, provided that the unit fulfils all the conditions listed in the first subparagraph and that such treatment does not affect the effectiveness of the supervision of that institution. Competent authorities shall without delay notify the Commission and EBA of any decision to treat, for the purposes of this subparagraph, a unit of an institution as a public development credit institution. The competent authority shall annually review such decision.
Institutions may exclude the exposures listed in point (n) of paragraph 1 where all of the following conditions are met:
the institution's competent authority has determined, after consultation with the relevant central bank, and publicly declared that exceptional circumstances exist that warrant the exclusion in order to facilitate the implementation of monetary policies;
the exemption is granted for a limited period of time not exceeding one year;
the institution’s competent authority has determined, after consultation with the relevant central bank, the date when the exceptional circumstances are deemed to have started and publicly announced that date; that date shall be set at the end of a quarter.
The exposures to be excluded under point (n) of paragraph 1 shall meet both of the following conditions:
they are denominated in the same currency as the deposits taken by the institution;
their average maturity does not significantly exceed the average maturity of the deposits taken by the institution.
By way of derogation from point (d) of Article 92(1), where an institution excludes the exposures referred to in point (n) of paragraph 1 of this Article, it shall at all times satisfy the following adjusted leverage ratio requirement for the duration of the exclusion:
where:
aLR |
= |
the adjusted leverage ratio; |
EMLR |
= |
the institution’s total exposure measure as calculated in accordance with Article 429(4), including the exposures excluded in accordance with point (n) of paragraph 1 of this Article, on the date referred to in point (c) of paragraph 5 of this Article; and |
CB |
= |
the daily average total value of the institution’s exposures to its central bank, calculated over the full reserve maintenance period of the central bank immediately preceding the date referred to in point (c) of paragraph 5, that are eligible to be excluded in accordance with point (n) of paragraph 1. |
Article 429b
Calculation of the exposure value of assets
Institutions shall calculate the exposure value of assets, excluding derivative contracts listed in Annex II, credit derivatives and the positions referred to in Article 429e in accordance with the following principles:
the exposure values of assets means an exposure value as referred to in the first sentence of Article 111(1);
securities financing transactions shall not be netted.
A cash pooling arrangement offered by an institution does not violate the condition set out in point (b) of Article 429(7) only where the arrangement meets both of the following conditions:
the institution offering the cash pooling arrangement transfers the credit and debit balances of several individual accounts of entities of a group included in the arrangement (‘original accounts’) into a separate, single account and thereby sets the balances of the original accounts to zero;
the institution carries out the actions referred to in point (a) of this subparagraph on a daily basis.
For the purposes of this paragraph and paragraph 3, cash pooling arrangement means an arrangement whereby the credit or debit balances of several individual accounts are combined for the purposes of cash or liquidity management.
By way of derogation from paragraph 2 of this Article, a cash pooling arrangement that does not meet the condition set out in point (b) of that paragraph, but meets the condition set out in point (a) of that paragraph, does not violate the condition set out in point (b) of Article 429(7), provided that the arrangement meets all the following conditions:
the institution has a legally enforceable right to set off the balances of the original accounts through the transfer into a single account at any point in time;
there are no maturity mismatches between the balances of the original accounts;
the institution charges or pays interest based on the combined balance of the original accounts;
the competent authority of the institution considers that the frequency by which the balances of all original accounts are transferred is adequate for the purpose of including only the combined balance of the cash pooling arrangement in the total exposure measure.
By way of derogation from point (b) of paragraph 1, institutions may calculate the exposure value of cash receivable and cash payable under securities financing transactions with the same counterparty on a net basis only where all the following conditions are met:
the transactions have the same explicit final settlement date;
the right to set off the amount owed to the counterparty with the amount owed by the counterparty is legally enforceable in the normal course of business and in the event of default, insolvency and bankruptcy;
the counterparties intend to settle on a net basis or to settle simultaneously, or the transactions are subject to a settlement mechanism that results in the functional equivalent of net settlement.
For the purposes of point (c) of paragraph 4, institutions may consider that a settlement mechanism results in the functional equivalent of net settlement only where, on the settlement date, the net result of the cash flows of the transactions under that mechanism is equal to the single net amount under net settlement and all the following conditions are met:
the transactions are settled through the same settlement system or settlement systems using a common settlement infrastructure;
the settlement arrangements are supported by cash or intraday credit facilities intended to ensure that the settlement of the transactions will occur by the end of the business day;
any issues arising from the securities legs of the securities financing transactions do not interfere with the completion of the net settlement of the cash receivables and payables.
The condition set out in point (c) of the first subparagraph is met only where the failure of any securities financing transaction in the settlement mechanism may delay settlement of only the matching cash leg or may create an obligation to the settlement mechanism, supported by an associated credit facility.
Where there is a failure of the securities leg of a securities financing transaction in the settlement mechanism at the end of the window for settlement in the settlement mechanism, institutions shall split out this transaction and its matching cash leg from the netting set and treat them on a gross basis.
Article 429c
Calculation of the exposure value of derivatives
When calculating the exposure value, institutions may take into account the effects of contracts for novation and other netting agreements in accordance with Article 295. Institutions shall not take into account cross-product netting, but may net within the product category as referred to in point (25)(c) of Article 272 and credit derivatives where they are subject to a contractual cross-product netting agreement as referred to in point (c) of Article 295.
Institutions shall include in the total exposure measure sold options even where their exposure value can be set to zero in accordance with the treatment laid down in Article 274(5).
For the purposes of paragraph 1 of this Article, institutions calculating the replacement cost of derivative contracts in accordance with Article 275 may recognise only collateral received in cash from their counterparties as the variation margin referred to in Article 275, where the applicable accounting framework has not already recognised the variation margin as a reduction of the exposure value and where all the following conditions are met:
for trades not cleared through a QCCP, the cash received by the recipient counterparty is not segregated;
the variation margin is calculated and exchanged at least daily based on a mark-to-market valuation of derivatives positions;
the variation margin received is in a currency specified in the derivative contract, governing master netting agreement, credit support annex to the qualifying master netting agreement or as defined by any netting agreement with a QCCP;
the variation margin received is the full amount that would be necessary to extinguish the mark-to-market exposure of the derivative contract subject to the threshold and minimum transfer amounts that are applicable to the counterparty;
the derivative contract and the variation margin between the institution and the counterparty to that contract are covered by a single netting agreement that the institution may treat as risk-reducing in accordance with Article 295.
Where an institution provides cash collateral to a counterparty and that collateral meets the conditions set out in points (a) to (e) of the first subparagraph, the institution shall consider that collateral as the variation margin posted with the counterparty and shall include it in the calculation of the replacement cost.
For the purposes of point (b) of the first subparagraph, an institution shall be considered to have met the condition set out therein where the variation margin is exchanged on the morning of the trading day following the trading day on which the derivative contract was stipulated, provided that the exchange is based on the value of the contract at the end of the trading day on which the contract was stipulated.
For the purposes of point (d) of the first subparagraph, where a margin dispute arises, institutions may recognise the amount of non-disputed collateral that has been exchanged.
Where institutions apply one of the methods referred to in the first subparagraph, they shall not reduce the total exposure measure by the amount of margin they have received.
Article 429d
Additional provisions on the calculation of the exposure value of written credit derivatives
Institutions shall calculate the effective notional amount of written credit derivatives by adjusting the notional amount of those derivatives to reflect the true exposure of the contracts that are leveraged or otherwise enhanced by the structure of the transaction.
Institutions may fully or partly reduce the exposure value calculated in accordance with paragraph 2 by the effective notional amount of purchased credit derivatives, provided that all the following conditions are met:
the remaining maturity of the purchased credit derivative is equal to or greater than the remaining maturity of the written credit derivative;
the purchased credit derivative is otherwise subject to the same or more conservative material terms as those in the corresponding written credit derivative;
the purchased credit derivative is not purchased from a counterparty that would expose the institution to Specific Wrong-Way risk, as defined in point (b) of Article 291(1);
where the effective notional amount of the written credit derivative is reduced by any negative change in fair value incorporated in the institution's Tier 1 capital, the effective notional amount of the purchased credit derivative is reduced by any positive fair value change that has been incorporated in Tier 1 capital;
the purchased credit derivative is not included in a transaction that has been cleared by the institution on behalf of a client or that has been cleared by the institution in its role as a higher-level client in a multi-level client structure and for which the effective notional amount referenced by the corresponding written credit derivative is excluded from the total exposure measure in accordance with point (g) or (h) of the first subparagraph of Article 429a(1), as applicable.
For the purpose of calculating the potential future exposure in accordance with Article 429c(1), institutions may exclude from the netting set the portion of a written credit derivative which is not offset in accordance with the first subparagraph of this paragraph and for which the effective notional amount is included in the total exposure measure.
Article 429e
Counterparty credit risk add-on for securities financing transactions
Institutions shall calculate the add-on for transactions with a counterparty that are not subject to a master netting agreement that meets the conditions set out in Article 206 on a transaction-by-transaction basis in accordance with the following formula:
where:
|
= |
the add-on; |
i |
= |
the index that denotes the transaction; |
Ei |
= |
the fair value of securities or cash lent to the counterparty under transaction i; and |
Ci |
= |
the fair value of securities or cash received from the counterparty under transaction i. |
Institutions may set
equal to zero where Ei is the cash lent to a counterparty and the associated cash receivable is not eligible for the netting treatment set out in Article 429b(4).
Institutions shall calculate the add-on for transactions with a counterparty that are subject to a master netting agreement that meets the conditions set out in Article 206 on an agreement-by-agreement basis in accordance with the following formula:
where:
|
= |
the add-on; |
i |
= |
the index that denotes the netting agreement; |
Ei |
= |
the fair value of securities or cash lent to the counterparty for the transactions that are subject to master netting agreement i; and |
Ci |
= |
the fair value of securities or cash received from the counterparty that is subject to master netting agreement i. |
Where an institution acts as an agent between two parties in a securities financing transaction, including an off-balance-sheet transaction, the following provisions shall apply to the calculation of the institution's total exposure measure:
where the institution provides an indemnity or guarantee to one of the parties in the securities financing transaction and the indemnity or guarantee is limited to any difference between the value of the security or cash the party has lent and the value of collateral the borrower has provided, the institution shall only include the add-on calculated in accordance with paragraph 2 or 3, as applicable, in the total exposure measure;
where the institution does not provide an indemnity or guarantee to any of the involved parties, the transaction shall not be included in the total exposure measure;
where the institution is economically exposed to the underlying security or the cash in the transaction to an amount greater than the exposure covered by the add-on, it shall include in the total exposure measure also the full amount of the security or the cash to which it is exposed;
where the institution acting as agent provides an indemnity or guarantee to both parties involved in a securities financing transaction, the institution shall calculate its total exposure measure in accordance with points (a), (b) and (c) separately for each party involved in the transaction.
Article 429f
Calculation of the exposure value of off-balance-sheet items
Where a commitment refers to the extension of another commitment, Article 166(9) shall apply.
Article 429g
Calculation of the exposure value of regular-way purchases and sales awaiting settlement
Institutions may offset the full nominal value of the commitments to pay related to regular-way purchases by the full nominal value of cash receivables related to regular-way sales awaiting settlement only where both of the following conditions are met:
both the regular-way purchases and sales are settled on a delivery-versus-payment basis;
the financial assets bought and sold that are associated with cash payables and receivables are fair valued through profit and loss and included in the institution's trading book.
PART SEVEN A
REPORTING REQUIREMENTS
Article 430
Reporting on prudential requirements and financial information
Institutions shall report to their competent authorities on:
own funds requirements, including the leverage ratio, as set out in Article 92 and Part Seven;
the requirements laid down in Articles 92a and 92b, for institutions that are subject to those requirements;
large exposures as set out in Article 394;
liquidity requirements as set out in Article 415;
the aggregate data for each national immovable property market as set out in Article 430a(1);
the requirements and guidance set out in Directive 2013/36/EU qualified for standardised reporting, except for any additional reporting requirement under point (j) of Article 104(1) of that Directive;
the level of asset encumbrance, including a breakdown by the type of asset encumbrance, such as repurchase agreements, securities lending, securitised exposures or loans.
Institutions exempted in accordance with Article 6(5) shall not be subject to the reporting requirement on the leverage ratio set out in point (a) of the first subparagraph of this paragraph on an individual basis.
In addition to the reporting on prudential requirements referred to in paragraph 1 of this Article, institutions shall report financial information to their competent authorities where they are one of the following:
an institution that is subject to Article 4 of Regulation (EC) No 1606/2002;
a credit institution that prepares its consolidated accounts in accordance with the international accounting standards pursuant to point (b) of Article 5 of Regulation (EC) No 1606/2002.
Any new reporting requirements set out in such implementing technical standards shall not be applicable earlier than six months from the date of their entry into force.
For the purposes of paragraph 2, the draft implementing technical standards shall specify which components of the leverage ratio shall be reported using day-end or month-end values. For that purpose, EBA shall take into account both of the following:
how susceptible a component is to significant temporary reductions in transaction volumes that could result in an underrepresentation of the risk of excessive leverage at the reporting reference date;
developments and findings at international level.
EBA shall submit to the Commission the draft implementing technical standards referred to in this paragraph by 28 June 2021, except in relation to the following:
the leverage ratio, which shall be submitted by 28 June 2020;
the obligations laid down in Articles 92a and 92b, which shall be submitted by 28 June 2020.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
EBA shall assess the costs and benefits of the reporting requirements laid down in Commission Implementing Regulation (EU) No 680/2014 ( 25 ) in accordance with this paragraph and report its findings to the Commission by 28 June 2020. That assessment shall be carried out in particular in relation to small and non-complex institutions. For those purposes, the report shall:
classify institutions into categories based on their size, complexity and the nature and level of risk of their activities;
measure the reporting costs incurred by each category of institutions during the relevant period to meet the reporting requirements set out in Implementing Regulation (EU) No 680/2014, taking into account the following principles:
the reporting costs shall be measured as the ratio of the reporting costs relative to the institution's total costs during the relevant period;
the reporting costs shall comprise all expenditure related to the implementation and operation on an on-going basis of the reporting systems, including expenditure on staff, IT systems, legal, accounting, auditing and consultancy services;
the relevant period shall refer to each annual period during which institutions have incurred reporting costs to prepare for the implementation of the reporting requirements laid down in Implementing Regulation (EU) No 680/2014 and to continue operating the reporting systems on an on-going basis;
assess whether the reporting costs incurred by each category of institutions were proportionate with regard to the benefits delivered by the reporting requirements for the purposes of prudential supervision;
assess the effects of a reduction of reporting requirement on costs and supervisory effectiveness; and
make recommendations on how to reduce reporting requirements at least for small and non-complex institutions, to which end EBA shall target an expected average cost reduction of at least 10 % but ideally a 20 % cost reduction. EBA shall, in particular, assess whether:
the reporting requirements referred to in point (g) of paragraph 1 could be waived for small and non-complex institutions where asset encumbrance was below a certain threshold;
the reporting frequency required in accordance with points (a), (c), and (g) of paragraph 1 could be reduced for small and non-complex institutions.
EBA shall accompany that report by draft implementing technical standards referred to in paragraph 7.
Competent authorities shall consult EBA on whether institutions, other than those referred to in paragraphs 3 and 4, should report on financial information on a consolidated basis in accordance with paragraph 3, provided that all the following conditions are met:
the relevant institutions are not already reporting on a consolidated basis;
the relevant institutions are subject to an accounting framework in accordance with Directive 86/635/EEC;
financial reporting is considered necessary to provide a comprehensive view of the risk profile of those institutions' activities and of the systemic risks they pose to the financial sector or the real economy as set out in Regulation (EU) No 1093/2010.
EBA shall develop draft implementing technical standards to specify the formats and templates that institutions referred to in the first subparagraph shall use for the purposes set out therein.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the second subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Competent authorities, resolution authorities and designated authorities shall make use of data exchange wherever possible to reduce reporting requirements. The provisions on the exchange of information and professional secrecy as laid down in Section II of Chapter I of Title VII of Directive 2013/36/EU shall apply.
Article 430a
Specific reporting obligations
Institutions shall report to their competent authorities on an annual basis the following aggregate data for each national immovable property market to which they are exposed:
losses stemming from exposures for which an institution has recognised residential property as collateral, up to the lower of the pledged amount and 80 % of the market value or 80 % of the mortgage lending value, unless otherwise decided under Article 124(2);
overall losses stemming from exposures for which an institution has recognised residential property as collateral, up to the part of the exposure treated as fully secured by residential property in accordance with Article 124(1);
the exposure value of all outstanding exposures for which an institution has recognised residential property as collateral limited to the part treated as fully secured by residential property in accordance with Article 124(1);
losses stemming from exposures for which an institution has recognised immovable commercial property as collateral, up to the lower of the pledged amount and 50 % of the market value or 60 % of the mortgage lending value, unless otherwise decided under Article 124(2);
overall losses stemming from exposures for which an institution has recognised immovable commercial property as collateral, up to the part of the exposure treated as fully secured by immovable commercial property in accordance with Article 124(1);
the exposure value of all outstanding exposures for which an institution has recognised immovable commercial property as collateral limited to the part treated as fully secured by immovable commercial property in accordance with Article 124(1).
Article 430b
Specific reporting requirements for market risk
Any new reporting requirements set out in such implementing technical standards shall not be applicable earlier than six months from the date of their entry into force.
EBA shall submit those draft implementing technical standards to the Commission by 30 June 2020.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Article 430c
Feasibility report on the integrated reporting system
When drafting the feasibility report, EBA shall involve competent authorities, as well as authorities that are responsible for deposit guarantee schemes, resolution and in particular the ESCB. The report shall take into account the previous work of the ESCB regarding integrated data collections and shall be based on an overall cost and benefit analysis including as a minimum:
an overview of the quantity and scope of the current data collected by the competent authorities in their jurisdiction and of its origins and granularity;
the establishment of a standard dictionary of the data to be collected, in order to increase the convergence of reporting requirements as regards regular reporting obligations, and to avoid unnecessary queries;
the establishment of a joint committee, including as a minimum EBA and the ESCB, for the development and implementation of the integrated reporting system;
the feasibility and possible design of a central data collection point for the integrated reporting system, including requirements to ensure strict confidentiality of the data collected, strong authentication and management of access rights to the system and cybersecurity, which:
contains a central data register with all statistical data, resolution data and prudential data in the necessary granularity and frequency for the particular institution and is updated at necessary intervals;
serves as a point of contact for the competent authorities, where they receive, process and pool all data queries, where queries can be matched with existing collected reported data and which allows the competent authorities quick access to the requested information;
provides additional support to the competent authorities for the transmission of data queries to the institutions and enters the requested data into the central data register;
holds a coordinating role for the exchange of information and data between competent authorities; and
takes into account the proceedings and processes of competent authorities and transfers them into a standardised system.
PART EIGHT
DISCLOSURE BY INSTITUTIONS
TITLE I
GENERAL PRINCIPLES
Article 431
Disclosure requirements and policies
Information to be disclosed in accordance with this Part shall be subject to the same level of internal verification as that applicable to the management report included in the institution's financial report.
Institutions shall also have policies in place to verify that their disclosures convey their risk profile comprehensively to market participants. Where institutions find that the disclosures required under this Part do not convey the risk profile comprehensively to market participants, they shall publicly disclose information in addition to the information required to be disclosed under this Part. Nonetheless, institutions shall only be required to disclose information that is material and not proprietary or confidential as referred to in Article 432.
Article 432
Non-material, proprietary or confidential information
Information in disclosures shall be regarded as material where its omission or misstatement could change or influence the assessment or decision of a user of that information relying on it for the purpose of making economic decisions.
EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, on how institutions have to apply materiality in relation to the disclosure requirements of Titles II and III.
Information shall be regarded as proprietary to institutions where disclosing it publicly would undermine their competitive position. Proprietary information may include information on products or systems that would render the investments of institutions therein less valuable, if shared with competitors.
Information shall be regarded as confidential where the institutions are obliged by customers or other counterparty relationships to keep that information confidential.
EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, on how institutions have to apply proprietary and confidentiality in relation to the disclosure requirements of Titles II and III.
Article 433
Frequency and scope of disclosures
Institutions shall publish the disclosures required under Titles II and III in the manner set out in Articles 433a, 433b and 433c.
Annual disclosures shall be published on the same date as the date on which institutions publish their financial statements or as soon as possible thereafter.
Semi-annual and quarterly disclosures shall be published on the same date as the date on which the institutions publish their financial reports for the corresponding period where applicable or as soon as possible thereafter.
Any delay between the date of publication of the disclosures required under this Part and the relevant financial statements shall be reasonable and, in any event, shall not exceed the timeframe set by competent authorities pursuant to Article 106 of Directive 2013/36/EU.
Article 433a
Disclosures by large institutions
Large institutions shall disclose the information outlined below with the following frequency:
all the information required under this Part on an annual basis;
on a semi-annual basis the information referred to in:
point (a) of Article 437;
point (e) of Article 438;
points (e) to (l) of Article 439;
Article 440;
points (c), (e), (f) and (g) of Article 442;
point (e) of Article 444;
Article 445;
point (a) and (b) of Article 448(1);
point (j) to (l) of Article 449;
points (a) and (b) of Article 451(1);
Article 451a(3);
point (g) of Article 452;
points (f) to (j) of Article 453;
points (d), (e) and (g) of Article 455;
on a quarterly basis the information referred to in:
points (d) and (h) of Article 438;
the key metrics referred to in Article 447;
Article 451a(2).
By way of derogation from paragraph 1, large institutions other than G-SIIs that are non-listed institutions shall disclose the information outlined below with the following frequency:
all the information required under this Part on an annual basis;
the key metrics referred to in Article 447 on a semi-annual basis.
Article 433b
Disclosures by small and non-complex institutions
Small and non-complex institutions shall disclose the information outlined below with the following frequency:
on an annual basis the information referred to in:
points (a), (e) and (f) of Article 435(1);
point (d) of Article 438;
points (a) to (d), (h), (i), (j) of Article 450(1);
on a semi-annual basis the key metrics referred to in Article 447.
Article 433c
Disclosures by other institutions
Institutions that are not subject to Article 433a or 433b shall disclose the information outlined below with the following frequency:
all the information required under this Part on an annual basis;
the key metrics referred to in Article 447 on a semi-annual basis.
By way of derogation from paragraph 1 of this Article, other institutions that are non-listed institutions shall disclose the following information on an annual basis:
points (a), (e) and (f) of Article 435(1);
points (a, (b) and (c) of Article 435(2);
point (a) of Article 437;
points (c) and (d) of Article 438;
the key metrics referred to in Article 447;
points (a) to (d), (h) to (k) of Article 450(1).
Article 434
Means of disclosures
Article 434a
Uniform disclosure formats
EBA shall develop draft implementing technical standards specifying uniform disclosure formats, and associated instructions in accordance with which the disclosures required under Titles II and III shall be made.
Those uniform disclosure formats shall convey sufficiently comprehensive and comparable information for users of that information to assess the risk profiles of institutions and their degree of compliance with the requirements laid down in Parts One to Seven. To facilitate the comparability of information, the implementing technical standards shall seek to maintain consistency of disclosure formats with international standards on disclosures.
Uniform disclosure formats shall be tabular where appropriate.
EBA shall submit those draft implementing technical standards to the Commission by 28 June 2020.
Power is conferred on the Commission to adopt those implementing technical standards in accordance with Article 15 of Regulation (EU) No 1093/2010.
TITLE II
TECHNICAL CRITERIA ON TRANSPARENCY AND DISCLOSURE
Article 435
Disclosure of risk management objectives and policies
Institutions shall disclose their risk management objectives and policies for each separate category of risk, including the risks referred to in this Title. Those disclosures shall include:
the strategies and processes to manage those categories of risks;
the structure and organisation of the relevant risk management function including information on the basis of its authority, its powers and accountability in accordance with the institution's incorporation and governing documents;
the scope and nature of risk reporting and measurement systems;
the policies for hedging and mitigating risk, and the strategies and processes for monitoring the continuing effectiveness of hedges and mitigants;
a declaration approved by the management body on the adequacy of the risk management arrangements of the relevant institution providing assurance that the risk management systems put in place are adequate with regard to the institution's profile and strategy;
a concise risk statement approved by the management body succinctly describing the relevant institution's overall risk profile associated with the business strategy; that statement shall include:
key ratios and figures providing external stakeholders a comprehensive view of the institution's management of risk, including how the risk profile of the institution interacts with the risk tolerance set by the management body;
information on intragroup transactions and transactions with related parties that may have a material impact of the risk profile of the consolidated group.
Institutions shall disclose the following information regarding governance arrangements:
the number of directorships held by members of the management body;
the recruitment policy for the selection of members of the management body and their actual knowledge, skills and expertise;
the policy on diversity with regard to selection of members of the management body, its objectives and any relevant targets set out in that policy, and the extent to which those objectives and targets have been achieved;
whether or not the institution has set up a separate risk committee and the number of times the risk committee has met;
the description of the information flow on risk to the management body.
Article 436
Disclosure of the scope of application
Institutions shall disclose the following information regarding the scope of application of this Regulation as follows:
the name of the institution to which this Regulation applies;
a reconciliation between the consolidated financial statements prepared in accordance with the applicable accounting framework and the consolidated financial statements prepared in accordance with the requirements on regulatory consolidation pursuant to Sections 2 and 3 of Title II of Part One; that reconciliation shall outline the differences between the accounting and regulatory scopes of consolidation and the legal entities included within the regulatory scope of consolidation where it differs from the accounting scope of consolidation; the outline of the legal entities included within the regulatory scope of consolidation shall describe the method of regulatory consolidation where it is different from the accounting consolidation method, whether those entities are fully or proportionally consolidated and whether the holdings in those legal entities are deducted from own funds;
a breakdown of assets and liabilities of the consolidated financial statements prepared in accordance with the requirements on regulatory consolidation pursuant to Sections 2 and 3 of Title II of Part One, broken down by type of risks as referred to under this Part;
a reconciliation identifying the main sources of differences between the carrying value amounts in the financial statements under the regulatory scope of consolidation as defined in Sections 2 and 3 of Title II of Part One, and the exposure amount used for regulatory purposes; that reconciliation shall be supplemented by qualitative information on those main sources of differences;
for exposures from the trading book and the non-trading book that are adjusted in accordance with Article 34 and Article 105, a breakdown of the amounts of the constituent elements of an institution's prudent valuation adjustment, by type of risks, and the total of constituent elements separately for the trading book and non-trading book positions;
any current or expected material practical or legal impediment to the prompt transfer of own funds or to the repayment of liabilities between the parent undertaking and its subsidiaries;
the aggregate amount by which the actual own funds are less than required in all subsidiaries that are not included in the consolidation, and the name or names of those subsidiaries;
where applicable, the circumstances under which use is made of the derogation referred to in Article 7 or the individual consolidation method laid down in Article 9.
Article 437
Disclosure of own funds
Institutions shall disclose the following information regarding their own funds:
a full reconciliation of Common Equity Tier 1 items, Additional Tier 1 items, Tier 2 items and the filters and deductions applied to own funds of the institution pursuant to Articles 32 to 36, 56, 66 and 79 with the balance sheet in the audited financial statements of the institution;
a description of the main features of the Common Equity Tier 1 and Additional Tier 1 instruments and Tier 2 instruments issued by the institution;
the full terms and conditions of all Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments;
a separate disclosure of the nature and amounts of the following:
each prudential filter applied pursuant to Articles 32 to 35;
items deducted pursuant to Articles 36, 56 and 66;
items not deducted pursuant to Articles 47, 48, 56, 66 and 79;
a description of all restrictions applied to the calculation of own funds in accordance with this Regulation and the instruments, prudential filters and deductions to which those restrictions apply;
a comprehensive explanation of the basis on which capital ratios are calculated where those capital ratios are calculated by using elements of own funds determined on a basis other than the basis laid down in this Regulation.
Article 437a
Disclosure of own funds and eligible liabilities
Institutions that are subject to Article 92a or 92b shall disclose the following information regarding their own funds and eligible liabilities:
the composition of their own funds and eligible liabilities, their maturity and their main features;
the ranking of eligible liabilities in the creditor hierarchy;
the total amount of each issuance of eligible liabilities instruments referred to in Article 72b and the amount of those issuances that is included in eligible liabilities items within the limits specified in Article 72b(3) and (4);
the total amount of excluded liabilities referred to in Article 72a(2).
Article 438
Disclosure of own funds requirements and risk-weighted exposure amounts
Institutions shall disclose the following information regarding their compliance with Article 92 of this Regulation and with the requirements laid down in Article 73 and in point (a) of Article 104(1) of Directive 2013/36/EU:
a summary of their approach to assessing the adequacy of their internal capital to support current and future activities;
the amount of the additional own funds requirements based on the supervisory review process as referred to in point (a) of Article 104(1) of Directive 2013/36/EU and its composition in terms of Common Equity Tier 1, additional Tier 1 and Tier 2 instruments;
upon demand from the relevant competent authority, the result of the institution's internal capital adequacy assessment process;
the total risk-weighted exposure amount and the corresponding total own funds requirement determined in accordance with Article 92, to be broken down by the different risk categories set out in Part Three and, where applicable, an explanation of the effect on the calculation of own funds and risk-weighted exposure amounts that results from applying capital floors and not deducting items from own funds;
the on- and off-balance-sheet exposures, the risk-weighted exposure amounts and associated expected losses for each category of specialised lending referred to in Table 1 of Article 153(5) and the on- and off-balance-sheet exposures and risk-weighted exposure amounts for the categories of equity exposures set out in Article 155(2);
the exposure value and the risk-weighted exposure amount of own funds instruments held in any insurance undertaking, reinsurance undertaking or insurance holding company that the institutions do not deduct from their own funds in accordance with Article 49 when calculating their capital requirements on an individual, sub-consolidated and consolidated basis;
the supplementary own funds requirement and the capital adequacy ratio of the financial conglomerate calculated in accordance with Article 6 of Directive 2002/87/EC and Annex I to that Directive where method 1 or 2 set out in that Annex is applied;
the variations in the risk-weighted exposure amounts of the current disclosure period compared to the immediately preceding disclosure period that result from the use of internal models, including an outline of the key drivers explaining those variations.
Article 439
Disclosure of exposures to counterparty credit risk
Institutions shall disclose the following information regarding their exposure to counterparty credit risk as referred to in Chapter 6 of Title II of Part Three:
a description of the methodology used to assign internal capital and credit limits for counterparty credit exposures, including the methods to assign those limits to exposures to central counterparties;
a description of policies related to guarantees and other credit risk mitigants, such as the policies for securing collateral and establishing credit reserves;
a description of policies with respect to General Wrong-Way risk and Specific Wrong-Way risk as defined in Article 291;
the amount of collateral the institution would have to provide if its credit rating was downgraded;
the amount of segregated and unsegregated collateral received and posted per type of collateral, further broken down between collateral used for derivatives and securities financing transactions;
for derivative transactions, the exposure values before and after the effect of the credit risk mitigation as determined under the methods set out in Sections 3 to 6 of Chapter 6 of Title II of Part Three, whichever method is applicable, and the associated risk exposure amounts broken down by applicable method;
for securities financing transactions, the exposure values before and after the effect of the credit risk mitigation as determined under the methods set out in Chapters 4 and 6 of Title II of Part Three, whichever method is used, and the associated risk exposure amounts broken down by applicable method;
the exposure values after credit risk mitigation effects and the associated risk exposures for credit valuation adjustment capital charge, separately for each method as set out in Title VI of Part Three;
the exposure value to central counterparties and the associated risk exposures within the scope of Section 9 of Chapter 6 of Title II of Part Three, separately for qualifying and non-qualifying central counterparties, and broken down by types of exposures;
the notional amounts and fair value of credit derivative transactions; credit derivative transactions shall be broken down by product type; within each product type, credit derivative transactions shall be broken down further by credit protection bought and credit protection sold;
the estimate of alpha where the institution has received the permission of the competent authorities to use its own estimate of alpha in accordance with Article 284(9);
separately, the disclosures included in point (e) of Article 444 and point (g) of Article 452;
for institutions using the methods set out in Sections 4 to 5 of Chapter 6 of Title II Part Three, the size of their on- and off-balance-sheet derivative business as calculated in accordance with Article 273a(1) or (2), as applicable.
Where the central bank of a Member State provides liquidity assistance in the form of collateral swap transactions, the competent authority may exempt institutions from the requirements in points (d) and (e) of the first subparagraph where that competent authority considers that the disclosure of the information referred to therein could reveal that emergency liquidity assistance has been provided. For those purposes, the competent authority shall set out appropriate thresholds and objective criteria.
Article 440
Disclosure of countercyclical capital buffers
Institutions shall disclose the following information in relation to their compliance with the requirement for a countercyclical capital buffer as referred to in Chapter 4 of Title VII of Directive 2013/36/EU:
the geographical distribution of the exposure amounts and risk-weighted exposure amounts of its credit exposures used as a basis for the calculation of their countercyclical capital buffer;
the amount of their institution-specific countercyclical capital buffer.
Article 441
Disclosure of indicators of global systemic importance
G-SIIs shall disclose, on an annual basis, the values of the indicators used for determining their score in accordance with the identification methodology referred to in Article 131 of Directive 2013/36/EU.
Article 442
Disclosure of exposures to credit risk and dilution risk
Institutions shall disclose the following information regarding their exposures to credit risk and dilution risk:
the scope and definitions that they use for accounting purposes of ‘past due’ and ‘impaired’ and the differences, if any, between the definitions of ‘past due’ and ‘default’ for accounting and regulatory purposes;
a description of the approaches and methods adopted for determining specific and general credit risk adjustments;
information on the amount and quality of performing, non-performing and forborne exposures for loans, debt securities and off-balance-sheet exposures, including their related accumulated impairment, provisions and negative fair value changes due to credit risk and amounts of collateral and financial guarantees received;
an ageing analysis of accounting past due exposures;
the gross carrying amounts of both defaulted and non-defaulted exposures, the accumulated specific and general credit risk adjustments, the accumulated write-offs taken against those exposures and the net carrying amounts and their distribution by geographical area and industry type and for loans, debt securities and off-balance-sheet exposures;
any changes in the gross amount of defaulted on- and off-balance-sheet exposures, including, as a minimum, information on the opening and closing balances of those exposures, the gross amount of any of those exposures reverted to non-defaulted status or subject to a write-off;
the breakdown of loans and debt securities by residual maturity.
Article 443
Disclosure of encumbered and unencumbered assets
Institutions shall disclose information concerning their encumbered and unencumbered assets. For those purposes, institutions shall use the carrying amount per exposure class broken down by asset quality and the total amount of the carrying amount that is encumbered and unencumbered. Disclosure of information on encumbered and unencumbered assets shall not reveal emergency liquidity assistance provided by central banks.
Article 444
Disclosure of the use of the Standardised Approach
Institutions calculating their risk-weighted exposure amounts in accordance with Chapter 2 of Title II of Part Three shall disclose the following information for each of the exposure classes set out in Article 112:
the names of the nominated ECAIs and ECAs and the reasons for any changes in those nominations over the disclosure period;
the exposure classes for which each ECAI or ECA is used;
a description of the process used to transfer the issuer and issue credit ratings onto items not included in the trading book;
the association of the external rating of each nominated ECAI or ECA with the risk weights that correspond to the credit quality steps as set out in Chapter 2 of Title II of Part Three, taking into account that it is not necessary to disclose that information where the institutions comply with the standard association published by EBA;
the exposure values and the exposure values after credit risk mitigation associated with each credit quality step as set out in Chapter 2 of Title II of Part Three, by exposure class, as well as the exposure values deducted from own funds.
Article 445
Disclosure of exposure to market risk
Institutions calculating their own funds requirements in accordance with points (b) and (c) of Article 92(3) shall disclose those requirements separately for each risk referred to in those points. In addition, own funds requirements for the specific interest rate risk of securitisation positions shall be disclosed separately.
Article 446
Disclosure of operational risk management
Institutions shall disclose the following information about their operational risk management:
the approaches for the assessment of own funds requirements for operation risk that the institution qualifies for;
where the institution makes use of it, a description of the methodology set out in Article 312(2), which shall include a discussion of the relevant internal and external factors being considered in the institution's advanced measurement approach;
in the case of partial use, the scope and coverage of the different methodologies used.
Article 447
Disclosure of key metrics
Institutions shall disclose the following key metrics in a tabular format:
the composition of their own funds and their own funds requirements as calculated in accordance with Article 92;
the total risk exposure amount as calculated in accordance with Article 92(3);
where applicable, the amount and composition of additional own funds which the institutions are required to hold in accordance with point (a) of Article 104(1) of Directive 2013/36/EU;
their combined buffer requirement which the institutions are required to hold in accordance with Chapter 4 of Title VII of Directive 2013/36/EU;
their leverage ratio and the total exposure measure as calculated in accordance with Article 429;
the following information in relation to their liquidity coverage ratio as calculated in accordance with the delegated act referred to in Article 460(1):
the average or averages, as applicable, of their liquidity coverage ratio based on end-of-the-month observations over the preceding 12 months for each quarter of the relevant disclosure period;
the average or averages, as applicable, of total liquid assets, after applying the relevant haircuts, included in the liquidity buffer pursuant to the delegated act referred to in Article 460(1), based on end-of-the-month observations over the preceding 12 months for each quarter of the relevant disclosure period;
the averages of their liquidity outflows, inflows and net liquidity outflows as calculated pursuant to the delegated act referred to in Article 460(1), based on end-of-the-month observations over the preceding 12 months for each quarter of the relevant disclosure period;
the following information in relation to their net stable funding requirement as calculated in accordance with Title IV of Part Six:
the net stable funding ratio at the end of each quarter of the relevant disclosure period;
the available stable funding at the end of each quarter of the relevant disclosure period;
the required stable funding at the end of each quarter of the relevant disclosure period;
their own funds and eligible liabilities ratios and their components, numerator and denominator, as calculated in accordance with Articles 92a and 92b and broken down at the level of each resolution group, where applicable.
Article 448
Disclosure of exposures to interest rate risk on positions not held in the trading book
As from 28 June 2021, institutions shall disclose the following quantitative and qualitative information on the risks arising from potential changes in interest rates that affect both the economic value of equity and the net interest income of their non-trading book activities referred to in Article 84 and Article 98(5) of Directive 2013/36/EU:
the changes in the economic value of equity calculated under the six supervisory shock scenarios referred to in Article 98(5) of Directive 2013/36/EU for the current and previous disclosure periods;
the changes in the net interest income calculated under the two supervisory shock scenarios referred to in Article 98(5) of Directive 2013/36/EU for the current and previous disclosure periods;
a description of key modelling and parametric assumptions, other than those referred to in points (b) and (c) of Article 98(5a) of Directive 2013/36/EU used to calculate changes in the economic value of equity and in the net interest income required under points (a) and (b) of this paragraph;
an explanation of the significance of the risk measures disclosed under points (a) and (b) of this paragraph and of any significant variations of those risk measures since the previous disclosure reference date;
the description of how institutions define, measure, mitigate and control the interest rate risk of their non-trading book activities for the purposes of the competent authorities' review in accordance with Article 84 of Directive 2013/36/EU, including:
a description of the specific risk measures that the institutions use to evaluate changes in their economic value of equity and in their net interest income;
a description of the key modelling and parametric assumptions used in the institutions' internal measurement systems that would differ from the common modelling and parametric assumptions referred to in Article 98(5a) of Directive 2013/36/EU for the purpose of calculating changes to the economic value of equity and to the net interest income, including the rationale for those differences;
a description of the interest rate shock scenarios that institutions use to estimate the interest rate risk;
the recognition of the effect of hedges against those interest rate risks, including internal hedges that meet the requirements laid down in Article 106(3);
an outline of how often the evaluation of the interest rate risk occurs;
the description of the overall risk management and mitigation strategies for those risks;
average and longest repricing maturity assigned to non-maturity deposits.
Article 449
Disclosure of exposures to securitisation positions
Institutions calculating risk-weighted exposure amounts in accordance with Chapter 5 of Title II of Part Three or own funds requirements in accordance with Article 337 or 338 shall disclose the following information separately for their trading book and non-trading book activities:
a description of their securitisation and re-securitisation activities, including their risk management and investment objectives in connection with those activities, their role in securitisation and re-securitisation transactions, whether they use the simple, transparent and standardised securitisation (STS) as defined in point (10) of Article 242, and the extent to which they use securitisation transactions to transfer the credit risk of the securitised exposures to third parties with, where applicable, a separate description of their synthetic securitisation risk transfer policy;
the type of risks they are exposed to in their securitisation and re-securitisation activities by level of seniority of the relevant securitisation positions providing a distinction between STS and non-STS positions and:
the risk retained in own-originated transactions;
the risk incurred in relation to transactions originated by third parties;
their approaches for calculating the risk-weighted exposure amounts that they apply to their securitisation activities, including the types of securitisation positions to which each approach applies and with a distinction between STS and non-STS positions;
a list of SSPEs falling into any of the following categories, with a description of their types of exposures to those SSPEs, including derivative contracts:
SSPEs which acquire exposures originated by the institutions;
SSPEs sponsored by the institutions;
SSPEs and other legal entities for which the institutions provide securitisation-related services, such as advisory, asset servicing or management services;
SSPEs included in the institutions' regulatory scope of consolidation;
a list of any legal entities in relation to which the institutions have disclosed that they have provided support in accordance with Chapter 5 of Title II of Part Three;
a list of legal entities affiliated with the institutions and that invest in securitisations originated by the institutions or in securitisation positions issued by SSPEs sponsored by the institutions;
a summary of their accounting policies for securitisation activity, including where relevant a distinction between securitisation and re-securitisation positions;
the names of the ECAIs used for securitisations and the types of exposure for which each agency is used;
where applicable, a description of the Internal Assessment Approach as set out in Chapter 5 of Title II of Part Three, including the structure of the internal assessment process and the relation between internal assessment and external ratings of the relevant ECAI disclosed in accordance with point (h), the control mechanisms for the internal assessment process including discussion of independence, accountability, and internal assessment process review, the exposure types to which the internal assessment process is applied and the stress factors used for determining credit enhancement levels;
separately for the trading book and the non-trading book, the carrying amount of securitisation exposures, including information on whether institutions have transferred significant credit risk in accordance with Articles 244 and 245, for which institutions act as originator, sponsor or investor, separately for traditional and synthetic securitisations, and for STS and non-STS transactions and broken down by type of securitisation exposures;
for the non-trading book activities, the following information:
the aggregate amount of securitisation positions where institutions act as originator or sponsor and the associated risk-weighted assets and capital requirements by regulatory approaches, including exposures deducted from own funds or risk weighted at 1 250 %, broken down between traditional and synthetic securitisations and between securitisation and re-securitisation exposures, separately for STS and non-STS positions, and further broken down into a meaningful number of risk-weight or capital requirement bands and by approach used to calculate the capital requirements;
the aggregate amount of securitisation positions where institutions act as investor and the associated risk-weighted assets and capital requirements by regulatory approaches, including exposures deducted from own funds or risk weighted at 1 250 %, broken down between traditional and synthetic securitisations, securitisation and re-securitisation positions, and STS and non-STS positions, and further broken down into a meaningful number of risk weight or capital requirement bands and by approach used to calculate the capital requirements;
for exposures securitised by the institution, the amount of exposures in default and the amount of the specific credit risk adjustments made by the institution during the current period, both broken down by exposure type.
Article 449a
Disclosure of environmental, social and governance risks (ESG risks)
From 28 June 2022, large institutions which have issued securities that are admitted to trading on a regulated market of any Member State, as defined in point (21) of Article 4(1) of Directive 2014/65/EU, shall disclose information on ESG risks, including physical risks and transition risks, as defined in the report referred to in Article 98(8) of Directive 2013/36/EU.
The information referred to in the first paragraph shall be disclosed on an annual basis for the first year and biannually thereafter.
Article 450
Disclosure of remuneration policy
Institutions shall disclose the following information regarding their remuneration policy and practices for those categories of staff whose professional activities have a material impact on the risk profile of the institutions:
information concerning the decision-making process used for determining the remuneration policy, as well as the number of meetings held by the main body overseeing remuneration during the financial year, including, where applicable, information about the composition and the mandate of a remuneration committee, the external consultant whose services have been used for the determination of the remuneration policy and the role of the relevant stakeholders;
information about the link between pay of the staff and their performance;
the most important design characteristics of the remuneration system, including information on the criteria used for performance measurement and risk adjustment, deferral policy and vesting criteria;
the ratios between fixed and variable remuneration set in accordance with point (g) of Article 94(1) of Directive 2013/36/EU;
information on the performance criteria on which the entitlement to shares, options or variable components of remuneration is based;
the main parameters and rationale for any variable component scheme and any other non-cash benefits;
aggregate quantitative information on remuneration, broken down by business area;
aggregate quantitative information on remuneration, broken down by senior management and members of staff whose professional activities have a material impact on the risk profile of the institutions, indicating the following:
the amounts of remuneration awarded for the financial year, split into fixed remuneration including a description of the fixed components, and variable remuneration, and the number of beneficiaries;
the amounts and forms of awarded variable remuneration, split into cash, shares, share-linked instruments and other types separately for the part paid upfront and the deferred part;
the amounts of deferred remuneration awarded for previous performance periods, split into the amount due to vest in the financial year and the amount due to vest in subsequent years;
the amount of deferred remuneration due to vest in the financial year that is paid out during the financial year, and that is reduced through performance adjustments;
the guaranteed variable remuneration awards during the financial year, and the number of beneficiaries of those awards;
the severance payments awarded in previous periods, that have been paid out during the financial year;
the amounts of severance payments awarded during the financial year, split into paid upfront and deferred, the number of beneficiaries of those payments and highest payment that has been awarded to a single person;
the number of individuals that have been remunerated EUR 1 million or more per financial year, with the remuneration between EUR 1 million and EUR 5 million broken down into pay bands of EUR 500 000 and with the remuneration of EUR 5 million and above broken down into pay bands of EUR 1 million;
upon demand from the relevant Member State or competent authority, the total remuneration for each member of the management body or senior management;
information on whether the institution benefits from a derogation laid down in Article 94(3) of Directive 2013/36/EU.
For the purposes of point (k) of the first subparagraph of this paragraph, institutions that benefit from such a derogation shall indicate whether they benefit from that derogation on the basis of point (a) or (b) of Article 94(3) of Directive 2013/36/EU. They shall also indicate for which of the remuneration principles they apply the derogation(s), the number of staff members that benefit from the derogation(s) and their total remuneration, split into fixed and variable remuneration.
Institutions shall comply with the requirements set out in this Article in a manner that is appropriate to their size, internal organisation and the nature, scope and complexity of their activities and without prejudice to Regulation (EU) 2016/679 of the European Parliament and of the Council ( 26 ).
Article 451
Disclosure of the leverage ratio
Institutions that are subject to Part Seven shall disclose the following information regarding their leverage ratio as calculated in accordance with Article 429 and their management of the risk of excessive leverage:
the leverage ratio and how the institutions apply Article 499(2);
a breakdown of the total exposure measure referred to in Article 429(4), as well as a reconciliation of the total exposure measure with the relevant information disclosed in published financial statements;
where applicable, the amount of exposures calculated in accordance with Articles 429(8) and 429a(1) and the adjusted leverage ratio calculated in accordance with Article 429a(7);
a description of the processes used to manage the risk of excessive leverage;
a description of the factors that had an impact on the leverage ratio during the period to which the disclosed leverage ratio refers.
Article 451a
Disclosure of liquidity requirements
Institutions shall disclose the following information in relation to their liquidity coverage ratio as calculated in accordance with the delegated act referred to in Article 460(1):
the average or averages, as applicable, of their liquidity coverage ratio based on end-of-the-month observations over the preceding 12 months for each quarter of the relevant disclosure period;
the average or averages, as applicable, of total liquid assets, after applying the relevant haircuts, included in the liquidity buffer pursuant to the delegated act referred to in Article 460(1), based on end-of-the-month observations over the preceding 12 months for each quarter of the relevant disclosure period, and a description of the composition of that liquidity buffer;
the averages of their liquidity outflows, inflows and net liquidity outflows as calculated in accordance with the delegated act referred to in Article 460(1), based on end-of-the-month observations over the preceding 12 months for each quarter of the relevant disclosure period and the description of their composition.
Institutions shall disclose the following information in relation to their net stable funding ratio as calculated in accordance with Title IV of Part Six:
quarter-end figures of their net stable funding ratio calculated in accordance with Chapter 2 of Title IV of Part Six for each quarter of the relevant disclosure period;
an overview of the amount of available stable funding calculated in accordance with Chapter 3 of Title IV of Part Six;
an overview of the amount of required stable funding calculated in accordance with Chapter 4 of Title IV of Part Six.
TITLE III
QUALIFYING REQUIREMENTS FOR THE USE OF PARTICULAR INSTRUMENTS OR METHODOLOGIES
Article 452
Disclosure of the use of the IRB Approach to credit risk
Institutions calculating the risk-weighted exposure amounts under the IRB Approach to credit risk shall disclose the following information:
the competent authority's permission of the approach or approved transition;
for each exposure class referred to in Article 147, the percentage of the total exposure value of each exposure class subject to the Standardised Approach laid down in Chapter 2 of Title II of Part Three or to the IRB Approach laid down in Chapter 3 of Title II of Part Three, as well as the part of each exposure class subject to a roll-out plan; where institutions have received permission to use own LGDs and conversion factors for the calculation of risk-weighted exposure amounts, they shall disclose separately the percentage of the total exposure value of each exposure class subject to that permission;
the control mechanisms for rating systems at the different stages of model development, controls and changes, which shall include information on:
the relationship between the risk management function and the internal audit function;
the rating system review;
the procedure to ensure the independence of the function in charge of reviewing the models from the functions responsible for the development of the models;
the procedure to ensure the accountability of the functions in charge of developing and reviewing the models;
the role of the functions involved in the development, approval and subsequent changes of the credit risk models;
the scope and main content of the reporting related to credit risk models;
a description of the internal ratings process by exposure class, including the number of key models used with respect to each portfolio and a brief discussion of the main differences between the models within the same portfolio, covering:
the definitions, methods and data for estimation and validation of PD, which shall include information on how PDs are estimated for low default portfolios, whether there are regulatory floors and the drivers for differences observed between PD and actual default rates at least for the last three periods;
where applicable, the definitions, methods and data for estimation and validation of LGD, such as methods to calculate downturn LGD, how LGDs are estimated for low default portfolio and the time lapse between the default event and the closure of the exposure;
where applicable, the definitions, methods and data for estimation and validation of conversion factors, including assumptions employed in the derivation of those variables;
as applicable, the following information in relation to each exposure class referred to in Article 147:
their gross on-balance-sheet exposure;
their off-balance-sheet exposure values prior to the relevant conversion factor;
their exposure after applying the relevant conversion factor and credit risk mitigation;
any model, parameter or input relevant for the understanding of the risk weighting and the resulting risk exposure amounts disclosed across a sufficient number of obligor grades (including default) to allow for a meaningful differentiation of credit risk;
separately for those exposure classes in relation to which institutions have received permission to use own LGDs and conversion factors for the calculation of risk-weighted exposure amounts, and for exposures for which the institutions do not use such estimates, the values referred to in points (i) to (iv) subject to that permission;
institutions' estimates of PDs against the actual default rate for each exposure class over a longer period, with separate disclosure of the PD range, the external rating equivalent, the weighted average and arithmetic average PD, the number of obligors at the end of the previous year and of the year under review, the number of defaulted obligors, including the new defaulted obligors, and the annual average historical default rate.
For the purposes of point (b) of this Article, institutions shall use the exposure value as defined in Article 166.
Article 453
Disclosure of the use of credit risk mitigation techniques
Institutions using credit risk mitigation techniques shall disclose the following information:
the core features of the policies and processes for on- and off-balance-sheet netting and an indication of the extent to which institutions make use of balance sheet netting;
the core features of the policies and processes for eligible collateral evaluation and management;
a description of the main types of collateral taken by the institution to mitigate credit risk;
for guarantees and credit derivatives used as credit protection, the main types of guarantor and credit derivative counterparty and their creditworthiness used for the purpose of reducing capital requirements, excluding those used as part of synthetic securitisation structures;
information about market or credit risk concentrations within the credit risk mitigation taken;
for institutions calculating risk-weighted exposure amounts under the Standardised Approach or the IRB Approach, the total exposure value not covered by any eligible credit protection and the total exposure value covered by eligible credit protection after applying volatility adjustments; the disclosure set out in this point shall be made separately for loans and debt securities and including a breakdown of defaulted exposures;
the corresponding conversion factor and the credit risk mitigation associated with the exposure and the incidence of credit risk mitigation techniques with and without substitution effect;
for institutions calculating risk-weighted exposure amounts under the Standardised Approach, the on- and off-balance-sheet exposure value by exposure class before and after the application of conversion factors and any associated credit risk mitigation;
for institutions calculating risk-weighted exposure amounts under the Standardised Approach, the risk-weighted exposure amount and the ratio between that risk-weighted exposure amount and the exposure value after applying the corresponding conversion factor and the credit risk mitigation associated with the exposure; the disclosure set out in this point shall be made separately for each exposure class;
for institutions calculating risk-weighted exposure amounts under the IRB Approach, the risk-weighted exposure amount before and after recognition of the credit risk mitigation impact of credit derivatives; where institutions have received permission to use own LGDs and conversion factors for the calculation of risk-weighted exposure amounts, they shall make the disclosure set out in this point separately for the exposure classes subject to that permission.
Article 454
Disclosure of the use of the Advanced Measurement Approaches to operational risk
The institutions using the Advanced Measurement Approaches set out in Articles 321 to 324 for the calculation of their own funds requirements for operational risk shall disclose a description of their use of insurance and other risk-transfer mechanisms for the purpose of mitigating that risk.
Article 455
Use of internal market risk models
Institutions calculating their capital requirements in accordance with Article 363 shall disclose the following information:
for each sub-portfolio covered:
the characteristics of the models used;
where applicable, for the internal models for incremental default and migration risk and for correlation trading, the methodologies used and the risks measured through the use of an internal model including a description of the approach used by the institution to determine liquidity horizons, the methodologies used to achieve a capital assessment that is consistent with the required soundness standard and the approaches used in the validation of the model;
a description of stress testing applied to the sub-portfolio;
a description of the approaches used for back-testing and validating the accuracy and consistency of the internal models and modelling processes;
the scope of permission by the competent authority;
a description of the extent and methodologies for compliance with the requirements set out in Articles 104 and 105;
the highest, the lowest and the mean of the following:
the daily value-at-risk measures over the reporting period and at the end of the reporting period;
the stressed value-at-risk measures over the reporting period and at the end of the reporting period;
the risk numbers for incremental default and migration risk and for the specific risk of the correlation trading portfolio over the reporting period and at the end of the reporting period;
the elements of the own funds requirement as specified in Article 364;
the weighted average liquidity horizon for each sub-portfolio covered by the internal models for incremental default and migration risk and for correlation trading;
a comparison of the daily end-of-day value-at-risk measures to the one-day changes of the portfolio's value by the end of the subsequent business day together with an analysis of any important overshooting during the reporting period.
PART NINE
DELEGATED AND IMPLEMENTING ACTS
Article 456
Delegated acts
The Commission shall be empowered to adopt delegated acts in accordance with Article 462, concerning the following matters:
clarification of the definitions set out in Articles 4, 5, 142, 153, 192, 242, 272, 300, 381 and 411 to ensure uniform application of this Regulation;
clarification of the definitions set out in Articles 4, 5, 142, 153, 192, 242, 272, 300, 381 and 411 in order to take account, in the application of this Regulation, of developments on financial markets;
amendment of the list of exposure classes in Articles 112 and 147 in order to take account of developments on financial markets;
the amount specified in point (c) of Article 123, Article 147(5)(a), Article 153(4) and Article 162(4), to take into account the effects of inflation;
the list and classification of the off-balance sheet items in Annexes I and II, in order to take account of developments on financial markets;
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amendment of the own funds requirements as set out in Articles 301 to 311 of this Regulation and Articles 50a to 50d of Regulation (EU) No 648/2012 to take account of developments or amendments of the international standards for exposures to a central counterparty;
clarification of the terms referred to in the exemptions provided for in Article 400;
amendment of the capital measure and the total exposure measure of the leverage ratio referred to in Article 429(2) in order to correct any shortcomings discovered on the basis of the reporting referred to in Article 430(1) before the leverage ratio has to be published by institutions as set out in Article 451(1)(a);
amendments to the disclosure requirements laid down in Titles II and III of Part Eight to take account of developments or amendments of the international standards on disclosure.
EBA shall monitor the own funds requirements for credit valuation adjustment risk and by 1 January 2015 submit a report to the Commission. In particular, the report shall assess:
the treatment of CVA risk as a stand-alone charge versus an integrated component of the market risk framework;
the scope of the CVA risk charge including the exemption in Article 482;
eligible hedges;
calculation of capital requirements of CVA risk.
On the basis of that report and where the findings are that such action is necessary the Commission shall also be empowered to adopt a delegated act in accordance with Article 462 to amend Article 381, Article 382(1) to (3) and Articles 383 to 386 concerning those items.
Article 457
Technical adjustments and corrections
The Commission shall be empowered to adopt delegated acts in accordance with Article 462, to make technical adjustment and corrections of non-essential elements in the following provisions in order to take account of developments in new financial products or activities, to make adjustments taking into account developments after the adoption of this Regulation in other legislative acts of the Union on financial services and accounting including accounting standards based on Regulation (EC) No 1606/2002:
the own funds requirements for credit risk laid down in Articles 111 to 134, and in Articles 143 to 191;
the effects of credit risk mitigation in accordance with Articles 193 to 241;
the own funds requirements for securitisation laid down in Articles 242 to 270a;
the own funds requirements for counterparty credit risks in accordance with Articles 272 to 311;
the own funds requirements for operational risk laid down in Articles 315 to 324;
the own funds requirements for market risk laid down in Articles 325 to 377;
the own funds requirements for settlement risk laid down in Articles 378 and 379;
the own funds requirements for credit valuation adjustment risk laid down in Articles 383, 384 and 386;
Part Two and Article 430 only as a result of developments in accounting standards or requirements which take account of Union legislative acts.
Article 458
Macroprudential or systemic risk identified at the level of a Member State
The notification shall be accompanied by the following documents and include, where appropriate, relevant quantitative or qualitative evidence on:
the changes in the intensity of macroprudential or systemic risk;
the reasons why such changes could pose a threat to financial stability at national level or to the real economy;
an explanation as to why the authority considers that the macroprudential tools set out in Articles 124 and 164 of this Regulation and Articles 133 and 136 of Directive 2013/36/EU would be less suitable and effective to deal with those risks than the draft national measures referred to in point (d) of this paragraph;
the draft national measures for domestically authorised institutions, or a subset of those institutions, intended to mitigate the changes in the intensity of risk and concerning:
the level of own funds laid down in Article 92;
the requirements for large exposures laid down in Article 392 and Articles 395 to 403;
liquidity requirements laid down in Part Six;
risk weights for targeting asset bubbles in the residential property and commercial immovable property sector;
the public disclosure requirements laid down in Part Eight;
the level of the capital conservation buffer laid down in Article 129 of Directive 2013/36/EU; or
intra-financial sector exposures;
an explanation as to why the draft measures are considered by the authority designated in accordance with paragraph 1 to be suitable, effective and proportionate to address the situation; and
an assessment of the likely positive or negative impact of the draft measures on the internal market based on information which is available to the Member State concerned.
Within one month of receipt of the notification referred to in paragraph 2, the ESRB and EBA shall provide their opinions on the matters referred to in points (a) to (f) of that paragraph to the Council, to the Commission and to the Member State concerned.
Taking utmost account of the opinions referred to in the second subparagraph and if there is robust, strong and detailed evidence that the measure will have a negative impact on the internal market that outweighs the financial stability benefits resulting in a reduction of the macroprudential or systemic risk identified, the Commission may, within one month, propose to the Council an implementing act to reject the draft national measures.
In the absence of a Commission proposal within that period of one month, the Member State concerned may immediately adopt the draft national measures for a period of up to two years or until the macroprudential or systemic risk ceases to exist if that occurs sooner.
The Council shall decide on the proposal by the Commission within one month after receipt of the proposal and state its reasons for rejecting or not rejecting the draft national measures.
The Council shall only reject the draft national measures if it considers that one or more of the following conditions are not met:
the changes in the intensity of macroprudential or systemic risk are of such nature as to pose risk to financial stability at national level;
the macroprudential tools set out in this Regulation and in Directive 2013/36/EU are less suitable or effective than the draft national measures to deal with the macroprudential or systemic risk identified;
the draft national measures do not entail disproportionate adverse effects on the whole or parts of the financial system in other Member States or in the Union as a whole, thus forming or creating an obstacle to the functioning of the internal market; and
the issue concerns only one Member State.
The assessment of the Council shall take into account the opinion of the ESRB and EBA and shall be based on the evidence presented in accordance with paragraph 2 by the authority designated in accordance with paragraph 1.
In the absence of a Council implementing act to reject the draft national measures within one month of receipt of the proposal by the Commission, the Member State concerned may adopt the measures and apply them for a period of up to two years or until the macroprudential or systemic risk ceases to exist if that occurs sooner.
Article 459
Prudential requirements
The Commission shall be empowered to adopt delegated acts in accordance with Article 462, to impose, for a period of one year, stricter prudential requirements for exposures where this is necessary to address changes in the intensity of microprudential and macroprudential risks which arise from market developments in the Union or outside the Union affecting all Member States, and where the instruments of this Regulation and Directive 2013/36/EU are not sufficient to address these risks, in particular upon the recommendation or opinion of the ESRB or EBA, concerning:
the level of own funds laid down in Article 92;
the requirements for large exposures laid down in Article 392 and Articles 395 to 403;
the public disclosure requirements laid down in Articles 431 to 455.
The Commission, assisted by the ESRB shall, at least on an annual basis, submit to the European Parliament and the Council, a report on market developments potentially requiring the use of this Article.
Article 460
Liquidity
In particular, the Commission is empowered to supplement this Regulation by adopting delegated acts specifying the detailed liquidity requirements for the purposes of the application of Article 8(3), Articles 411 to 416, 419, 422, 425, 428a, 428f, 428g, 428j to 428n, 428p, 428r, 428s, 428w, 428ae, 428ag, 428ah, 428ak and 451a.
The liquidity coverage requirement referred to in Article 412 shall be introduced in accordance with the following phasing-in:
60 % of the liquidity coverage requirement in 2015;
70 % as from 1 January 2016;
80 % as from 1 January 2017;
100 % as from 1 January 2018.
For this purpose the Commission shall take into account the reports referred to in Article 509(1), (2) and (3) and international standards developed by international fora as well as Union specificities.
The Commission shall adopt the delegated act referred to in paragraph 1 by 30 June 2014. It shall enter into force by 31 December 2014, but shall not apply before 1 January 2015.
The Commission shall adopt the delegated act referred to in the first subparagraph by 28 June 2024.
Article 461
Review of the phasing-in of the liquidity coverage requirement
EBA shall in its report assess in particular a deferred introduction of the 100 % minimum binding standard, until 1 January 2019. The report shall take into account the annual reports referred to in Article 509(1), relevant market data and the recommendations of all competent authorities.
For the purposes of assessing the necessity of deferral the Commission shall take into account the report and assessment referred to in paragraph 1.
A delegated act adopted in accordance with this Article shall not apply before 1 January 2018 and shall enter into force by 30 June 2017.
Article 461a
Alternative standardised approach for market risk
►C7 For the purposes of the reporting requirements set out in Article 430b(1), the Commission is empowered to adopt delegated acts in accordance with Article 462, to amend this Regulation by making technical adjustments to Articles 325e, 325g to 325j, 325p, 325q, 325ae, 325ai, 325ak, 325am, 325ap to 325at, 325av, 325ax, and specify ◄ the risk weight of bucket 11 of Table 4 in Article 325ah and the risk weights of covered bonds issued by credit institutions in third countries in accordance with Article 325ah, and the correlation of covered bonds issued by credit institutions in third countries in accordance with Article 325aj of the alternative standardised approach set out in Chapter 1a of Title IV of Part Three, taking into account developments in international regulatory standards.
The Commission shall adopt the delegated act referred to in paragraph 1 by 31 December 2019.
Article 462
Exercise of the delegation
The delegation of power referred to in Articles 244(6) and 245(6), in Articles 456, 457, 459, 460 and 461a may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of the delegated acts already in force.
Article 463
Objections to regulatory technical standards
Where the Commission adopts a regulatory technical standard pursuant to this Regulation which is the same as the draft regulatory technical standard submitted by EBA, the period during which the European Parliament and the Council may object to that regulatory technical standard shall be one month from the date of notification. At the initiative of the European Parliament or the Council that period shall be extended by one month. By way of derogation from the second subparagraph of Article 13(1) of Regulation (EU) No 1093/2010, the period during which the European Parliament or the Council may object to that regulatory technical standard may, where appropriate, be further extended by one month.
Article 464
European Banking Committee
PART TEN
TRANSITIONAL PROVISIONS, REPORTS, REVIEWS AND AMENDMENTS
TITLE I
TRANSITIONAL PROVISIONS
CHAPTER 1
Own funds requirements, unrealised gains and losses measured at fair value and deductions
Section 1
Own funds requirements
Article 465
Own funds requirements
By way of derogation from points (a) and (b) of Article 92(1) the following own funds requirements shall apply during the period from 1 January 2014 to 31 December 2014:
a Common Equity Tier 1 capital ratio of a level that falls within a range of 4 % to 4,5 %;
a Tier 1 capital ratio of a level that falls within a range of 5,5 % to 6 %.
Article 466
First time application of International Financial Reporting Standards
By way of derogation from Article 24(2), competent authorities shall grant institutions which are required to effect the valuation of assets and off-balance sheet items and the determination of own funds in accordance with the international accounting standards as applicable under Regulation (EC) No 1606/2002 for the first time a lead time of 24 months for the implementation of the necessary internal processes and technical requirements.
Section 2
Unrealised gains and losses measured at fair value
▼M11 —————
Article 468
Temporary treatment of unrealised gains and losses measured at fair value through other comprehensive income in view of the COVID-19 pandemic
By way of derogation from Article 35, during the period from 1 January 2020 to 31 December 2022 (the ‘period of temporary treatment’), institutions may remove from the calculation of their Common Equity Tier 1 items the amount A, determined in accordance with the following formula:
where:
a |
= |
the amount of unrealised gains and losses accumulated since 31 December 2019 accounted for as ‘fair value changes of debt instruments measured at fair value through other comprehensive income’ in the balance sheet, corresponding to exposures to central governments, to regional governments or to local authorities referred to in Article 115(2) of this Regulation and to public sector entities referred to in Article 116(4) of this Regulation, excluding those financial assets that are credit-impaired as defined in Appendix A to the Annex to Commission Regulation (EC) No 1126/2008 (‘Annex relating to IFRS 9’); and |
f |
= |
the factor applicable for each reporting year during the period of temporary treatment in accordance with paragraph 2. |
Institutions shall apply the following factors f to calculate the amount A referred in paragraph 1:
1 during the period from 1 January 2020 to 31 December 2020;
0,7 during the period from 1 January 2021 to 31 December 2021;
0,4 during the period from 1 January 2022 to 31 December 2022.
Where an institution removes an amount of unrealised losses from its Common Equity Tier 1 items in accordance with paragraph 1 of this Article, it shall recalculate all requirements laid down in this Regulation and in Directive 2013/36/EU that are calculated using any of the following items:
the amount of deferred tax assets that is deducted from Common Equity Tier 1 items in accordance with point (c) of Article 36(1) or risk weighted in accordance with Article 48(4);
the amount of specific credit risk adjustments.
When recalculating the relevant requirement, the institution shall not take into account the effects that the expected credit loss provisions relating to exposures to central governments, to regional governments or to local authorities referred to in Article 115(2) of this Regulation and to public sector entities referred to in Article 116(4) of this Regulation, excluding those financial assets that are credit-impaired as defined in Appendix A to the Annex relating to IFRS 9, have on those items.
Section 3
Deductions
Sub-Section 1
Deductions from Common Equity Tier 1 items
Article 469
Deductions from Common Equity Tier 1 items
By way of derogation from Article 36(1), during the period from 1 January 2014 to 31 December 2017, the following shall apply:
institutions shall deduct from Common Equity Tier 1 items the applicable percentage specified in Article 478 of the amounts required to be deducted pursuant to points (a) to (h) of Article 36(1), excluding deferred tax assets that rely on future profitability and arise from temporary differences;
institutions shall apply the relevant provisions laid down in Article 472 to the residual amounts of items required to be deducted pursuant to points (a) to (h) of Article 36(1), excluding deferred tax assets that rely on future profitability and arise from temporary differences;
institutions shall deduct from Common Equity Tier 1 items the applicable percentage specified in Article 478 of the total amount required to be deducted pursuant to points (c) and (i) of Article 36(1) after applying Article 470;
institutions shall apply the requirements laid down in Article 472(5) or (11), as applicable, to the total residual amount of items required to be deducted pursuant to points (c) and (i) of Article 36(1) after applying Article 470.
Institutions shall determine the portion of the total residual amount referred to in point (d) of paragraph 1, that is subject to Article 472(5), by dividing the amount specified in point (a) of this paragraph by the amount specified in point (b) of this paragraph:
the amount of deferred tax assets that are dependent on future profitability and arise from temporary differences referred to in point (a) of Article 470(2);
the sum of the amounts referred to in points (a) and (b) of Article 470(2).
Institutions shall determine the portion of the total residual amount referred to point (d) of paragraph 1 that is subject to Article 472(11) by dividing the amount specified in point (a) of this paragraph by the amount specified in point (b) of this paragraph:
the amount of direct and indirect holdings of the Common Equity Tier 1 instruments referred to in point (b) of Article 470(2);
the sum of the amounts referred to in points (a) and (b) of Article 470(2).
Article 469a
Derogation from deductions from Common Equity Tier 1 items for non-performing exposures
By way of derogation from point (m) Article 36(1), institutions shall not deduct from Common Equity Tier 1 items the applicable amount of insufficient coverage for non-performing exposures where the exposure was originated prior to 26 April 2019.
Where the terms and conditions of an exposure which was originated prior to 26 April 2019 are modified by the institution in a way that increases the institution's exposure to the obligor, the exposure shall be considered as having been originated on the date when the modification applies and shall cease to be subject to the derogation provided for in the first subparagraph.
Article 470
Exemption from deduction from Common Equity Tier 1 items
By way of derogation from Article 48(1), during the period from 1 January 2014 to 31 December 2017, institutions shall not deduct the items listed in points (a) and (b) of this paragraph which in aggregate are equal to or less than 15 % of relevant Common Equity Tier 1 items of the institution:
deferred tax assets that are dependent on future profitability and arise from temporary differences and in aggregate are equal to or less than 10 % of relevant Common Equity Tier 1 items;
where an institution has a significant investment in a financial sector entity, the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1 instruments of that entity that in aggregate are equal to or less than 10 % of relevant Common Equity Tier 1 items.
Article 471
Exemption from Deduction of Equity Holdings in Insurance Companies from Common Equity Tier 1 Items
By way of derogation from Article 49(1), during the period from 31 December 2018 to 31 December 2024, institutions may choose not to deduct equity holdings in insurance undertakings, reinsurance undertakings and insurance holding companies where the following conditions are met:
the conditions set out in points (a), and (e) of Article 49(1);
the competent authorities are satisfied with the level of risk control and financial analysis procedures specifically adopted by the institution in order to supervise the investment in the undertaking or holding company;
the equity holdings of the institution in the insurance undertaking, reinsurance undertaking or insurance holding company do not exceed 15 % of the Common Equity Tier 1 instruments issued by that insurance entity as at 31 December 2012 and during the period from 1 January 2013 to 31 December 2024;
the amount of the equity holding which is not deducted does not exceed the amount held in the Common Equity Tier 1 instruments in the insurance undertaking, reinsurance undertaking or insurance holding company as at 31 December 2012.
Article 472
Items not deducted from Common Equity Tier 1
Institutions shall apply the following to the residual amount of losses of the current financial year referred to in point (a) of Article 36(1):
losses that are material are deducted from Tier 1 items;
losses that are not material are not deducted.
Institutions shall apply the following to the residual amount of holdings of own Common Equity Tier 1 instruments referred to in point (f) of Article 36(1):
the amount of direct holdings is deducted from Tier 1 items;
the amount of indirect and synthetic holdings, including own Common Equity Tier 1 instruments that an institution could be obliged to purchase by virtue of an existing or contingent contractual obligation, is not deducted and is subject to a risk weight in accordance with Chapter 2 or 3 of Title II of Part Three and to the requirements laid down in Title IV of Part Three, as applicable.
Institutions shall apply the following to the residual amount of holdings of Common Equity Tier 1 instruments of a financial sector entity where the institution has reciprocal cross holdings with that entity referred to in point (g) of Article 36(1):
where an institution does not have a significant investment in that financial sector entity, the amount of its holding of the Common Equity Tier 1 instruments of that entity is treated as falling under point (h) of Article 36(1);
where an institution has a significant investment in that financial sector entity, the amount of its holdings of Common Equity Tier 1 instruments of that entity is treated as falling under point (i) of Article 36(1).
Institutions shall apply the following to the residual amounts of items referred to in point (h) of Article 36(1):
the amounts required to be deducted that relate to direct holdings are deducted half from Tier 1 items and half from Tier 2 items;
the amounts that relate to indirect and synthetic holdings are not deducted and are subject to a risk weights in accordance with Chapter 2 or 3 of Title II of Part Three and to the requirements laid down in Title IV of Part Three, as applicable.
Institutions shall apply the following to the residual amounts of the items referred to in point (i) of Article 36(1):
the amounts required to be deducted that relate to direct holdings are deducted half from Tier 1 items and half from Tier 2 items;
the amounts that relate to indirect and synthetic holdings are not deducted and are subject to risk weights in accordance with Chapter 2 or 3 of Title II of Part Three and to the requirements laid down in Title IV of Part Three, as applicable.
Article 473
Introduction of amendments to IAS 19
The applicable amount shall be calculated by deducting from the sum derived in accordance with point (a) the sum derived in accordance with point (b):
institutions shall determine the values of the assets of their defined benefit pension funds or plans, as applicable, in accordance with Regulation (EC) No 1126/2008 ( 28 ) as amended by Regulation (EU) No 1205/2011 ( 29 ). Institutions shall then deduct from the values of these assets the values of the obligations under the same funds or plans determined according to the same accounting rules;
institutions shall determine the values of the assets of their defined pension funds or plans, as applicable, in accordance with the rules set out in Regulation (EC) No 1126/2008. Institutions shall then deduct from the values of those assets, the values of the obligations under the same funds or plans determined in accordance with the same accounting rules.
The following factors apply:
1 in the period from 1 January 2014 to 31 December 2014;
0,8 in the period from 1 January 2015 to 31 December 2015;
0,6 in the period from 1 January 2016 to 31 December 2016;
0,4 in the period from 1 January 2017 to 31 December 2017;
0,2 in the period from 1 January 2018 to 31 December 2018.
Article 473a
Introduction of IFRS 9
By way of derogation from Article 50 and until the end of the transitional periods set out in paragraphs 6 and 6a of this Article, the following may include in their Common Equity Tier 1 capital the amount calculated in accordance with this paragraph:
institutions that prepare their accounts in conformity with the international accounting standards adopted in accordance with the procedure laid down in Article 6(2) of Regulation (EC) No 1606/2002;
institutions that, pursuant to Article 24(2) of this Regulation, effect the valuation of assets and off-balance sheet items and the determination of own funds in conformity with the international accounting standards adopted in accordance with the procedure laid down in Article 6(2) of Regulation (EC) No 1606/2002;
institutions that effect the valuation of assets and off-balance sheet items in conformity with accounting standards under Directive 86/635/EEC and that use an expected credit loss model that is the same as the one used in international accounting standards adopted in accordance with the procedure laid down in Article 6(2) of Regulation (EC) No 1606/2002.
The amount referred to in the first subparagraph shall be calculated as the sum of the following:
for exposures which are subject to risk weighting in accordance with Chapter 2 of Title II of Part Three, the amount (ABSA) calculated in accordance with the following formula:
where:
A2,SA |
= |
the amount calculated in accordance with paragraph 2; |
A4,SA |
= |
the amount calculated in accordance with paragraph 4 based on the amounts calculated in accordance with paragraph 3; |
;
|
= |
the sum of the 12-month expected credit losses determined in accordance with paragraph 5.5.5 of the Annex relating to IFRS 9 and the amount of the loss allowance for lifetime expected credit losses determined in accordance with paragraph 5.5.3 of the Annex relating to IFRS 9, excluding the loss allowance for lifetime expected credit losses for financial assets that are credit-impaired as defined in Appendix A to the Annex relating to IFRS 9, on 1 January 2020; |
|
= |
the sum of the 12-month expected credit losses determined in accordance with paragraph 5.5.5 of the Annex relating to IFRS 9 and the amount of the loss allowance for lifetime expected credit losses determined in accordance with paragraph 5.5.3 of the Annex relating to IFRS 9, excluding the loss allowance for lifetime expected credit losses for financial assets that are credit-impaired as defined in Appendix A to the Annex relating to IFRS 9, on 1 January 2018 or on the date of the initial application of IFRS 9, whichever is later; |
f1 |
= |
the applicable factor laid down in paragraph 6; |
f2 |
= |
the applicable factor laid down in paragraph 6a; |
t1 |
= |
the increase of Common Equity Tier 1 capital that is due to tax deductibility of the amount A2,SA; |
t2 |
= |
the increase of Common Equity Tier 1 capital that is due to tax deductibility of the amount A4,SA; |
t3 |
= |
the increase of Common Equity Tier 1 capital that is due to tax deductibility of the amount |
for exposures which are subject to risk weighting in accordance with Chapter 3 of Title II of Part Three, the amount (ABIRB) calculated in accordance with the following formula:
where:
A2,IRB |
= |
the amount calculated in accordance with paragraph 2 which is adjusted in accordance with point (a) of paragraph 5; |
A4,IRB |
= |
the amount calculated in accordance with paragraph 4 based on the amounts calculated in accordance with paragraph 3 which are adjusted in accordance with points (b) and (c) of paragraph 5; |
;
|
= |
the sum of the 12-month expected credit losses determined in accordance with paragraph 5.5.5 of the Annex relating to IFRS 9 and the amount of the loss allowance for lifetime expected credit losses determined in accordance with paragraph 5.5.3 of the Annex relating to IFRS 9, excluding the loss allowance for lifetime expected credit losses for financial assets that are credit-impaired, as defined in Appendix A to the Annex relating to IFRS 9, reduced by the sum of related expected loss amounts for the same exposures calculated in accordance with Article 158(5), (6) and (10) of this Regulation, on 1 January 2020. Where the calculation results in a negative number, the institution shall set the value of |
|
= |
the sum of the 12-month expected credit losses determined in accordance with paragraph 5.5.5 of the Annex relating to IFRS 9 and the amount of the loss allowance for lifetime expected credit losses determined in accordance with paragraph 5.5.3 of the Annex relating to IFRS 9, excluding the loss allowance for lifetime expected credit losses for financial assets that are credit-impaired, as defined in Appendix A to the Annex relating to IFRS 9, on 1 January 2018 or on the date of the initial application of IFRS 9, whichever is later, reduced by the sum of related expected loss amounts for the same exposures calculated in accordance with Article 158(5), (6) and (10) of this Regulation. Where the calculation results in a negative number, the institution shall set the value of |
f1 |
= |
the applicable factor laid down in paragraph 6; |
f2 |
= |
the applicable factor laid down in paragraph 6a; |
t1 |
= |
the increase of Common Equity Tier 1 capital that is due to tax deductibility of the amount A2,IRB; |
t2 |
= |
the increase of Common Equity Tier 1 capital that is due to tax deductibility of the amount A4,IRB; |
t3 |
= |
the increase of Common Equity Tier 1 capital that is due to tax deductibility of the amount |
Institutions shall calculate the amounts A2,SA and A2,IRB referred to, respectively, in points (a) and (b) of the second subparagraph of paragraph 1 as the greater of the amounts referred to in points (a) and (b) of this paragraph separately for their exposures which are subject to risk weighting in accordance with Chapter 2 of Title II of Part Three and for their exposures which are subject to risk weighting in accordance with Chapter 3 of Title II of Part Three:
zero;
the amount calculated in accordance with point (i) reduced by the amount calculated in accordance with point (ii):
the sum of the 12-month expected credit losses determined in accordance with paragraph 5.5.5 of IFRS 9 as set out in the Annex to Commission Regulation (EC) No 1126/2008 (‘Annex relating to IFRS 9’) and the amount of the loss allowance for lifetime expected credit losses determined in accordance with paragraph 5.5.3 of the Annex relating to IFRS 9 as of 1 January 2018 or on the date of initial application of IFRS 9;
the total amount of impairment losses on financial assets classified as loans and receivables, held-to-maturity investments and available-for-sale financial assets, as defined in paragraph 9 of IAS 39, other than equity instruments and units or shares in collective investment undertakings, determined in accordance with paragraphs 63, 64, 65, 67, 68 and 70 of IAS 39 as set out in the Annex to Regulation (EC) No 1126/2008 as of 31 December 2017 or the day before the date of initial application of IFRS 9.
Institutions shall calculate the amount by which the amount referred to in point (a) exceeds the amount referred to in point (b) separately for their exposures which are subject to risk weighting in accordance with Chapter 2 of Title II of Part Three and for their exposures which are subject to risk weighting in accordance with Chapter 3 of Title II of Part Three:
the sum of the 12-month expected credit losses determined in accordance with paragraph 5.5.5 of the Annex relating to IFRS 9 and the amount of the loss allowance for lifetime expected credit losses determined in accordance with paragraph 5.5.3 of the Annex relating to IFRS 9, excluding the loss allowance for lifetime expected credit losses for financial assets that are credit-impaired as defined in Appendix A to the Annex relating to IFRS 9, on the reporting date and, where Article 468 of this Regulation applies, excluding expected credit losses determined for exposures measured at fair value through other comprehensive income in accordance with paragraph 4.1.2 A of the Annex relating to IFRS 9;
the sum of the 12-month expected credit losses determined in accordance with paragraph 5.5.5 of the Annex relating to IFRS 9 and the amount of the loss allowance for lifetime expected credit losses determined in accordance with paragraph 5.5.3 of the Annex relating to IFRS 9, excluding the loss allowance for lifetime expected credit losses for financial assets that are credit-impaired as defined in Appendix A to the Annex relating to IFRS 9 and, where Article 468 of this Regulation applies, excluding expected credit losses determined for exposures measured at fair value through other comprehensive income in accordance with paragraph 4.1.2 A of the Annex relating to IFRS 9, on 1 January 2020 or on the date of the initial application of IFRS 9, whichever is later.
For exposures which are subject to risk weighting in accordance with Chapter 3 of Title II of Part Three, where the amount specified in accordance with point (a) of paragraph 3, after applying point (b) of paragraph 5, exceeds the amount for these exposures as specified in point (b) of paragraph 3, after applying point (c) of paragraph 5, institutions shall set A4,IRB as equal to the difference between those amounts, otherwise they shall set A4,IRB as equal to zero.
For exposures which are subject to risk weighting in accordance with Chapter 3 of Title II of Part Three, institutions shall apply paragraphs 2 to 4 as follows:
for the calculation of A2,IRB institutions shall reduce each of the amounts calculated in accordance with points (b)(i) and (ii) of paragraph 2 of this Article by the sum of expected loss amounts calculated in accordance with Article 158(5), (6) and (10) as of 31 December 2017 or the day before the date of initial application of IFRS 9. Where for the amount referred to in point (b)(i) of paragraph 2 of this Article the calculation results in a negative number, the institution shall set the value of that amount as equal to zero. Where for the amount referred to in point (b)(ii) of paragraph 2 of this Article the calculation results in a negative number, the institution shall set the value of that amount as equal to zero;
institutions shall replace the amount calculated in accordance with point (a) of paragraph 3 of this Article with the sum of the 12-month expected credit losses determined in accordance with paragraph 5.5.5 of the Annex relating to IFRS 9 and the amount of the loss allowance for lifetime expected credit losses determined in accordance with paragraph 5.5.3 of the Annex relating to IFRS 9, excluding the loss allowance for lifetime expected credit losses for financial assets that are credit-impaired, as defined in Appendix A to the Annex relating to IFRS 9, and, where Article 468 of this Regulation applies, excluding expected credit losses determined for exposures measured at fair value through other comprehensive income in accordance with paragraph 4.1.2 A of the Annex relating to IFRS 9, reduced by the sum of related expected loss amounts for the same exposures calculated in accordance with Article 158(5), (6) and (10) of this Regulation on the reporting date. Where the calculation results in a negative number, the institution shall set the value of the amount referred to in point (a) of paragraph 3 of this Article as equal to zero;
institutions shall replace the amount calculated in accordance with point (b) of paragraph 3 of this Article with the sum of the 12-month expected credit losses determined in accordance with paragraph 5.5.5 of the Annex relating to IFRS 9 and the amount of the loss allowance for lifetime expected credit losses determined in accordance with paragraph 5.5.3 of the Annex relating to IFRS 9, excluding the loss allowance for lifetime expected credit losses for financial assets that are credit-impaired, as defined in Appendix A to the Annex relating to IFRS 9, and, where Article 468 of this Regulation applies, excluding expected credit losses determined for exposures measured at fair value through other comprehensive income in accordance with paragraph 4.1.2 A of the Annex relating to IFRS 9, on 1 January 2020 or on the date of the initial application of IFRS 9, whichever is later, reduced by the sum of related expected loss amounts for the same exposures calculated in accordance with Article 158(5), (6) and (10) of this Regulation on 1 January 2020 or on the date of the initial application of IFRS 9, whichever is later. Where the calculation results in a negative number, the institution shall set the value of the amount referred to in point (b) of paragraph 3 of this Article as equal to zero.
Institutions shall apply the following factors f1 to calculate the amounts ABSA and ABIRB referred to in points (a) and (b) of the second subparagraph of paragraph 1 respectively:
0,7 during the period from 1 January 2020 to 31 December 2020;
0,5 during the period from 1 January 2021 to 31 December 2021;
0,25 during the period from 1 January 2022 to 31 December 2022;
0 during the period from 1 January 2023 to 31 December 2024.
Institutions whose financial year commences after 1 January 2020 but before 1 January 2021 shall adjust the dates in points (a) to (d) of the first subparagraph so that they correspond to their financial year, shall report the adjusted dates to their competent authority and shall publicly disclose them.
Institutions which start to apply accounting standards as referred to in paragraph 1 on or after 1 January 2021 shall apply the relevant factors in accordance with points (b) to (d) of the first subparagraph starting with the factor corresponding to the year of the first application of those accounting standards.
Institutions shall apply the following factors f2 to calculate the amounts ABSA and ABIRB referred to in points (a) and (b) of the second subparagraph of paragraph 1 respectively:
1 during the period from 1 January 2020 to 31 December 2020;
1 during the period from 1 January 2021 to 31 December 2021;
0,75 during the period from 1 January 2022 to 31 December 2022;
0,5 during the period from 1 January 2023 to 31 December 2023;
0,25 during the period from 1 January 2024 to 31 December 2024.
Institutions whose financial year commences after 1 January 2020 but before 1 January 2021 shall adjust the dates in points (a) to (e) of the first subparagraph so that they correspond to their financial year, shall report the adjusted dates to their competent authority and shall publicly disclose them.
Institutions which start to apply accounting standards as referred to in paragraph 1 on or after 1 January 2021 shall apply the relevant factors in accordance with points (b) to (e) of the first subparagraph starting with the factor corresponding to the year of the first application of those accounting standards.
Where an institution includes in its Common Equity Tier 1 capital an amount in accordance with paragraph 1 of this Article, it shall recalculate all requirements laid down in this Regulation and in Directive 2013/36/EU that use any of the following items by not taking into account the effects that the expected credit loss provisions that it included in its Common Equity Tier 1 capital have on those items:
the amount of deferred tax assets that is deducted from Common Equity Tier 1 capital in accordance with point (c) of Article 36(1) or risk weighted in accordance with Article 48(4);
the exposure value as determined in accordance with Article 111(1) whereby the specific credit risk adjustments by which the exposure value shall be reduced shall be multiplied by the following scaling factor (sf):
where:
ABSA = the amount calculated in accordance with point (a) of the second subparagraph of paragraph 1;
RASA = the total amount of specific credit risk adjustments;
the amount of Tier 2 items calculated in accordance with point (d) of Article 62.
Institutions may choose only once whether to use the calculation set out in point (b) of paragraph 7 or the calculation set out in the first subparagraph of this paragraph. Institutions shall disclose their decision.
An institution that has decided to apply the transitional arrangements set out in this Article may decide not to apply paragraph 4 in which case it shall inform the competent authority of its decision by 1 February 2018. In such a case, the institution shall set A4,SA, A4,IRB, ,
, t2 and t3 referred to in paragraph 1 as equal to zero. Where an institution has received the prior permission of the competent authority, it may reverse its decision during the transitional period. Institutions shall publicly disclose any decision taken in accordance with this subparagraph.
An institution that has decided to apply the transitional arrangements set out in this Article may decide not to apply paragraph 2 in which case it shall inform the competent authority of its decision without delay. In such a case, the institution shall set A2,SA, A2,IRB and t1 referred to in paragraph 1 as equal to zero. An institution may reverse its decision during the transitional period provided it has received the prior permission of the competent authority.
Competent authorities shall notify EBA at least on an annual basis of the application of this Article by institutions under their supervision.
Sub-Section 2
Deductions from Additional Tier 1 items
Article 474
Deductions from Additional Tier 1 items
By way of derogation from Article 56, during the period from 1 January 2014 to 31 December 2017, the following shall apply:
institutions shall deduct from Additional Tier 1 items the applicable percentage specified in Article 478 of the amounts required to be deducted pursuant to Article 56;
institutions shall apply the requirements laid down in Article 475 to the residual amounts of the items required to be deducted pursuant to Article 56.
Article 475
Items not deducted from Additional Tier 1 items
Institutions shall apply the following to the residual amount of the items referred to in point (a) of Article 56:
direct holdings of own Additional Tier 1 instruments are deducted at book value from Tier 1 items;
indirect and synthetic holdings of own Additional Tier 1 instruments, including own Additional Tier 1 instruments that an institution could be obliged to purchase by virtue of an existing or contingent contractual obligation, are not deducted and are risk weighted in accordance with Chapter 2 or 3 of Title II of Part Three and subject to the requirements of Title IV of Part Three, as applicable.
Institutions shall apply the following to the residual amount of the items referred to in point (b) of Article 56:
where an institution does not have a significant investment in a financial sector entity with which it has reciprocal cross holdings, the amount of its direct, indirect and synthetic holdings of those Additional Tier 1 instruments of that entity is treated as falling within point (c) of Article 56;
where the institution has a significant investment in a financial sector entity with which it has reciprocal cross holdings, the amount of its direct, indirect and synthetic holdings of those Additional Tier 1 instruments of that entity is treated as falling within point (d) of Article 56.
Institutions shall apply the following to the residual amount of the items referred to in points (c) and (d) of Article 56:
the amount relating to direct holdings required to be deducted in accordance with points (c) and (d) of Article 56 are deducted half from Tier 1 items and half from Tier 2 items;
the amount relating to indirect and synthetic holdings required to be deducted in accordance with points (c) and (d) of Article 56 shall not be deducted and shall be subject to a risk weight in accordance with Chapter 2 or 3 of Title II of Part Three and to the requirements of Title IV of Part Three, as applicable.
Sub-Section 3
Deductions from Tier 2 items
Article 476
Deductions from Tier 2 items
By way of derogation from Article 66, during the period from 1 January 2014 to 31 December 2017, the following shall apply:
institutions shall deduct from Tier 2 items the applicable percentage specified in Article 478 of the amounts required to be deducted pursuant to Article 66;
institutions shall apply the requirements laid down in Article 477 to the residual amounts required to be deducted pursuant to Article 66.
Article 477
Deductions from Tier 2 items
Institutions shall apply the following to the residual amount of items referred to in point (a) of Article 66:
direct holdings of own Tier 2 instruments are deducted at book value from Tier 2 items;
indirect and synthetic holdings of own Tier 2 instruments, including own Tier 2 instruments that an institution could be obliged to purchase by virtue of an existing or contingent contractual obligation are not deducted and are risk weighted in accordance with Chapter 2 or 3 of Title II of Part Three and subject to the requirements of Title IV of Part Three, as applicable.
Institutions shall apply the following to the residual amount of the items referred to in point (b) of Article 66:
where an institution does not have a significant investment in a financial sector entity with which it has reciprocal cross holdings, the amount of its direct, indirect and synthetic holdings of the Tier 2 instruments of that entity is treated as falling within point (c) of Article 66;
where the institution has a significant investment in a financial sector entity with which it has reciprocal cross holdings, the amount of direct, indirect and synthetic holdings of the Tier 2 instruments of that financial sector entity are treated as falling within point (d) of Article 66.
Institutions shall apply the following to the residual amount of the items referred to in points (c) and (d) of Article 66:
the amount relating to direct holdings that is required to be deducted in accordance with points (c) and (d) of Article 66 is deducted half from Tier 1 items and half from Tier 2 items;
the amount relating to indirect and synthetic holdings that is required to be deducted in accordance with points (c) and (d) of Article 66 is not be deducted and is subject to a risk weight under Chapter 2 or 3 of Title II of Part Three and the requirements laid down in Title IV of Part Three, as applicable.
Article 477a
Deductions from eligible liabilities items
By way of derogation from Article 72e(4) and until 31 December 2024, the resolution authority of a parent institution, after duly considering the opinion of the resolution authorities or relevant third-country authorities of any subsidiaries concerned, may permit that the adjusted amount mi be calculated by using the following definition of ri, and wi:
ri |
= |
the total risk-based capital requirement applicable to subsidiary i in the third country where it has its head office, insofar as that requirement is met with instruments that would be considered own funds under this Regulation; |
wi |
= |
the total non-risk-based Tier 1 capital requirement applicable to subsidiary i in the third country where it has its head office, insofar as that requirement is met with instruments that would be considered Tier 1 capital under this Regulation. |
The resolution authority may grant the permission referred to in paragraph 1 where the subsidiary is established in a third country that does not yet have in place an applicable local resolution regime if at least one of the following conditions is met:
there is no current or foreseen material practical or legal impediment to the prompt transfer of assets from the subsidiary to the parent institution;
the relevant third-country authority of the subsidiary has provided an opinion to the resolution authority of the parent institution that assets equal to the amount to be deducted by the subsidiary in accordance with Article 72e(4), second subparagraph, could be transferred from the subsidiary to the parent institution.
Sub-Section 4
Applicable percentages for deduction
Article 478
Applicable percentages for deduction from Common Equity Tier 1, Additional Tier 1 and Tier 2 items
The applicable percentage for the purposes of Article 468(4), points (a) and (c) of Article 469(1), point (a) of Article 474 and point (a) of Article 476 shall fall within the following ranges:
20 % to 100 % for the period from 1 January 2014 to 31 December 2014;
40 % to 100 % for the period from 1 January 2015 to 31 December 2015;
60 % to 100 % for the period from 1 January 2016 to 31 December 2016;
80 % to 100 % for the period from 1 January 2017 to 31 December 2017.
By way of derogation from paragraph 1, for the items referred in point (c) of Article 36(1) that existed prior to 1 January 2014, the applicable percentage for the purpose of point (c) of Article 469(1) shall fall within the following ranges:
0 % to 100 % for the period from 1 January 2014 to 31 December 2014;
10 % to 100 % for the period from 1 January 2015 to 31 December 2015;
20 % to 100 % for the period from 1 January 2016 to 31 December 2016;
30 % to 100 % for the period from 1 January 2017 to 31 December 2017;
40 % to 100 % for the period from 1 January 2018 to 31 December 2018;
50 % to 100 % for the period from 1 January 2019 to 31 December 2019;
60 % to 100 % for the period from 1 January 2020 to 31 December 2020;
70 % to 100 % for the period from 1 January 2021 to 31 December 2021;
80 % to 100 % for the period from 1 January 2022 to 31 December 2022;
90 % to 100 % for the period from 1 January 2023 to 31 December 2023.
Competent authorities shall determine and publish an applicable percentage in the ranges specified in paragraphs 1 and 2 for each of the following deductions:
the individual deductions required pursuant to points (a) to (h) of Article 36(1), excluding deferred tax assets that rely on future profitability and arise from temporary differences;
the aggregate amount of deferred tax assets that rely on future profitability and arise from temporary differences and the items referred to in point (i) of Article 36(1) that is required to be deducted pursuant to Article 48;
each deduction required pursuant to points (b) to (d) of Article 56;
each deduction required pursuant to points (b) to (d) of Article 66.
Section 4
minority interest and additional Tier 1 and Tier 2 instruments issued by subsidiaries
Article 479
Recognition in consolidated Common Equity Tier 1 capital of instruments and items that do not qualify as minority interests
By way of derogation from Title II of Part Two, during the period from 1 January 2014 to 31 December 2017, recognition in consolidated own funds of the items that would qualify as consolidated reserves in accordance with national transposition measures for Article 65 of Directive 2006/48/EC that do not qualify as consolidated Common Equity Tier 1 capital for any of the following reasons shall be determined by the competent authorities in accordance with paragraphs 2 and 3 of this Article:
the instrument does not qualify as a Common Equity Tier 1 instrument, and the related retained earnings and share premium accounts consequently do not qualify as consolidated Common Equity Tier 1 items;
the items do not qualify as a result of Article 81(2);
the items do not qualify because the subsidiary is not an institution or an entity that is subject by virtue of applicable national law to the requirements of this Regulation and Directive 2013/36/EU;
the items do not qualify because the subsidiary is not included fully in the consolidation pursuant to Chapter 2 of Title II of Part One.
For the purposes of paragraph 2, the applicable percentages shall fall within the following ranges:
0 % to 80 % for the period from 1 January 2014 to 31 December 2014;
0 % to 60 % for the period from 1 January 2015 to 31 December 2015;
0 % to 40 % for the period from 1 January 2016 to 31 December 2016;
0 % to 20 % for the period from 1 January 2017 to 31 December 2017.
Article 480
Recognition in consolidated own funds of minority interests and qualifying Additional Tier 1 and Tier 2 capital
For the purposes of paragraph 1, the applicable factor shall fall within the following ranges:
0,2 to 1 in the period from 1 January 2014 to 31 December 2014;
0,4 to 1 in the period from 1 January 2015 to 31 December 2015;
0,6 to 1 in the period from 1 January 2016 to 31 December 2016; and
0,8 to 1 in the period from 1 January 2017 to 31 December 2017.
Section 5
Additional filters and deductions
Article 481
Additional filters and deductions
For the purposes of paragraph 1, the applicable percentage shall fall within the following ranges:
0 % to 80 % for the period from 1 January 2014 to 31 December 2014;
0 % to 60 % for the period from 1 January 2015 to 31 December 2015;
0 % to 40 % for the period from 1 January 2016 to 31 December 2016;
0 % to 20 % for the period from 1 January 2017 to 31 December 2017.
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 482
Scope of application for derivatives transactions with pension funds
In respect of those transactions referred to in Article 89 of Regulation (EU) No 648/2012 and entered into with a pension scheme arrangement as defined in Article 2 of that Regulation, institutions shall not calculate own funds requirements for CVA risk as provided for in Article 382(4)(c) of this Regulation.
CHAPTER 2
Grandfathering of capital instruments
Section 1
Instruments constituting State aid
Article 483
Grandfathering of State aid instruments
By way of derogation from Articles 26 to 29, 51, 52, 62 and 63, during the period from 1 January 2014 to 31 December 2017 this Article applies to capital instruments and items where the following conditions are met:
the instruments were issued prior to 1 January 2014;
the instruments were issued within the context of recapitalisation measures pursuant to State aid rules. Insofar as part of the instruments are privately subscribed, they must be issued prior to 30 June 2012 and in conjunction with those parts that are subscribed by the Member State;
the instruments were considered compatible with the internal market by the Commission under Article 107 TFEU.
Where the instruments are subscribed by both the Member State and private investors and there is a partial redemption of the instruments subscribed by the Member State, a corresponding share of the privately subscribed part of the instruments shall be grandfathered in accordance with Article 484. When all the instruments subscribed by the Member State have been redeemed, the remaining instruments subscribed by private investors shall be grandfathered in accordance with Article 484.
Instruments that qualified in accordance with the national transposition measures for point (a) of Article 57 of Directive 2006/48/EC shall qualify as Common Equity Tier 1 instruments notwithstanding either of the following:
the conditions laid down in Article 28 of this Regulation are not met;
the instruments were issued by an undertaking referred to in Article 27 of this Regulation and the conditions laid down in Article 28 of this Regulation or, where applicable, Article 29 of this Regulation are not met.
Instruments that qualify as Common Equity Tier 1 pursuant to the first subparagraph shall not qualify as Additional Tier 1 instruments or Tier 2 instruments under paragraph 5 or 7.
Instruments that qualify as Additional Tier 1 instruments pursuant to the first subparagraph shall not qualify as Common Equity Tier 1 instruments or Tier 2 instruments under paragraph 3 or 7.
Instruments that qualify as Tier 2 instruments pursuant to the first subparagraph shall not qualify as Common Equity Tier 1 instruments or Additional Tier 1 instruments under paragraph 3 or 5.
Section 2
Instruments not constituting State aid
Sub-Section 1
Grandfathering eligibility and limits
Article 484
Eligibility for grandfathering of items that qualified as own funds under national transposition measures for Directive 2006/48/EC
Article 485
Eligibility for inclusion in the Common Equity Tier 1 of share premium accounts related to items that qualified as own funds under national transposition measures for Directive 2006/48/EC
Article 486
Limits for grandfathering of items within Common Equity Tier 1, Additional Tier 1 and Tier 2 items
The amount of items referred to in Article 484(3) that shall qualify as Common Equity Tier 1 items is limited to the applicable percentage of the sum of the amounts specified in points (a) and (b) of this paragraph:
the nominal amount of capital referred to in Article 484(3) that were in issue on 31 December 2012;
the share premium accounts related to the items referred to in point (a).
The amount of items referred to in Article 484(4) that shall qualify as Additional Tier 1 items is limited to the applicable percentage multiplied by the result of subtracting from the sum of the amounts specified in points (a) and (b) of this paragraph the sum of the amounts specified in points (c) to (f) of this paragraph:
the nominal amount of instruments referred to in Article 484(4), that remained in issue on 31 December 2012;
the share premium accounts related to the instruments referred to in point (a);
the amount of instruments referred to in Article 484(4) which on 31 December 2012 exceeded the limits specified in the national transposition measures for point (a) of Article 66(1) and Article 66(1a) of Directive 2006/48/EC;
the share premium accounts related to the instruments referred to in point (c);
the nominal amount of instruments referred to Article 484(4) that were in issue on 31 December 2012 but do not qualify as Additional Tier 1 instruments pursuant to Article 489(4);
the share premium accounts related to the instruments referred to in point (e).
The amount of items referred to in Article 484(5) that shall qualify as Tier 2 items is limited to the applicable percentage of the result of subtracting from the sum of the amounts specified in points (a) to (d) of this paragraph the sum of amounts specified in points (e) to (h) of this paragraph:
the nominal amount of instruments referred to in Article 484(5) that remained in issue on 31 December 2012;
the share premium accounts related to the instruments referred to in point (a);
the nominal amount of subordinated loan capital that remained in issue on 31 December 2012, reduced by the amount required pursuant to national transposition measures for point (c) of Article 64(3) of Directive 2006/48/EC;
the nominal amount of items referred to in Article 484(5), other than the instruments and subordinated loan capital referred to in points (a) and (c) of this paragraph, that were in issue on 31 December 2012;
the nominal amount of instruments and items referred to in Article 484(5) that were in issue on 31 December 2012 that exceeded the limits specified in the national transposition measures for point (a) of Article 66(1) of Directive 2006/48/EC;
the share premium accounts related to the instruments referred to in point (e);
the nominal amount of instruments referred to in Article 484(5) that were in issue on 31 December 2012 that do not qualify as Tier 2 items pursuant to Article 490(4);
the share premium accounts related to the instruments referred to in point (g).
For the purposes of this Article, the applicable percentages referred to in paragraphs 2 to 4 shall fall within the following ranges:
60 % to 80 % during the period from 1 January 2014 to 31 December 2014;
40 % to 70 % during the period from 1 January 2015 to 31 December 2015;
20 % to 60 % during the period from 1 January 2016 to 31 December 2016;
0 % to 50 % during the period from 1 January 2017 to 31 December 2017;
0 % to 40 % during the period from 1 January 2018 to 31 December 2018;
0 % to 30 % during the period from 1 January 2019 to 31 December 2019;
0 % to 20 % during the period from 1 January 2020 to 31 December 2020;
0 % to 10 % during the period from 1 January 2021 to 31 December 2021.
Article 487
Items excluded from grandfathering in Common Equity Tier 1 or Additional Tier 1 items in other elements of own funds
From 1 January 2014 to 31 December 2021, institutions may, by way of derogation from Articles 51, 52, 62 and 63, treat the following as items referred to in Article 484(5), to the extent that their inclusion does not exceed the applicable percentage limit referred to in Article 486(4):
capital, and the related share premium accounts, referred to in Article 484(3) that are excluded from Common Equity Tier 1 items because they exceed the applicable percentage specified in Article 486(2);
instruments, and the related share premium accounts, referred to in Article 484(4) that exceed the applicable percentage referred to in Article 486(3).
EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
Article 488
Amortisation of items grandfathered as Tier 2 items
The items referred to in Article 484(5) that qualify as Tier 2 items referred to in Article 484(5) or Article 486(4) shall be subject to the requirements laid down in Article 64.
Sub-Section 2
Inclusion of instruments with a call and incentive to redeem in additional Tier 1 and Tier 2 items
Article 489
Hybrid instruments with a call and incentive to redeem
The instruments shall qualify as Additional Tier 1 instruments provided that the following conditions are met:
the institution was able to exercise a call with an incentive to redeem only prior to 1 January 2013;
the institution did not exercise the call;
the conditions laid down in Article 52 are met from 1 January 2013.
The instruments shall qualify as Additional Tier 1 instruments with their recognition reduced in accordance with Article 484(4) until the date of their effective maturity and thereafter shall qualify as Additional Tier 1 items without limit provided that:
the institution was able to exercise a call with an incentive to redeem only on or after 1 January 2013;
the institution did not exercise the call on the date of the effective maturity of the instruments;
the conditions laid down in Article 52 are met from the date of the effective maturity of the instruments.
The instruments shall not qualify as Additional Tier 1 instruments, and shall not be subject to Article 484(4), from 1 January 2014 where the following conditions are met:
the institution was able to exercise a call with an incentive to redeem between 31 December 2011 and 1 January 2013;
the institution did not exercise the call on the date of the effective maturity of the instruments;
the conditions laid down in Article 52 are not met from the date of the effective maturity of the instruments.
The instruments shall qualify as Additional Tier 1 instruments with their recognition reduced in accordance with Article 484(4) until the date of their effective maturity, and shall not qualify as Additional Tier 1 instruments thereafter, where the following conditions are met:
the institution was able to exercise a call with an incentive to redeem on or after 1 January 2013;
the institution did not exercise the call on the date of the effective maturity of the instruments;
the conditions laid down in Article 52 are not met from the date of the effective maturity of the instruments.
The instruments shall qualify as Additional Tier 1 instruments in accordance with Article 484(4) where the following conditions are met:
the institution was able to exercise a call with an incentive to redeem only prior to or on 31 December 2011;
the institution did not exercise the call on the date of the effective maturity of the instruments;
the conditions laid down in Article 52 were not met from the date of the effective maturity of the instruments.
Article 490
Tier 2 items with an incentive to redeem
The items shall qualify as Tier 2 instruments provided that:
the institution was able to exercise a call with an incentive to redeem only prior to 1 January 2013;
the institution did not exercise the call;
from 1 January 2013 the conditions laid down in Article 63 are met.
The items shall qualify as Tier 2 items in accordance with Article 484(5) until the date of their effective maturity, and shall qualify thereafter as Tier 2 items without limit, provided that the following conditions are met:
the institution was able to exercise a call with an incentive to redeem only on or after 1 January 2013;
the institution did not exercise the call on the date of the effective maturity of the items;
the conditions laid down in Article 63 are met from the date of the effective maturity of the items.
The items shall not qualify as Tier 2 items from 1 January 2014 where the following conditions are met:
the institution was able to exercise a call with an incentive to redeem only between 31 December 2011 and 1 January 2013;
the institution did not exercise the call on the date of the effective maturity of the items;
the conditions laid down in Article 63 are not met from the date of the effective maturity of the items.
The items shall qualify as Tier 2 items with their recognition reduced in accordance with Article 484(5) until the date of their effective maturity, and shall not qualify as Tier 2 items thereafter, where:
the institution was able to exercise a call with an incentive to redeem on or after 1 January 2013;
the institution did not exercise the call on the date of their effective maturity;
the conditions set out in Article 63 are not met from the date of effective maturity of the items.
The items shall qualify as Tier 2 items in accordance with Article 484(5) where:
the institution was able to exercise a call with an incentive to redeem only prior to or on 31 December 2011;
the institution did not exercise the call on the date of the effective maturity of the items;
the conditions laid down in Article 63 are not met from the date of the effective maturity of the items.
Article 491
Effective maturity
For the purposes of Articles 489 and 490, effective maturity shall be determined as follows:
for the items referred to in paragraphs 3 and 5 of those Articles, the date of the first call with an incentive to redeem occurring on or after 1 January 2013;
for the items referred to in paragraph 4 of those Articles, the date of the first call with an incentive to redeem occurring between 31 December 2011 and 1 January 2013;
for the items referred to in paragraph 6 of those Articles, the date of the first call with an incentive to redeem prior to 31 December 2011.
CHAPTER 3
Transitional provisions for disclosure of own funds
Article 492
Disclosure of own funds
From 1 January 2014 to 31 December 2017, institutions shall disclose the following additional information about their own funds:
the nature and effect on Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital and own funds of the individual filters and deductions applied in accordance with Articles 467 to 470, 474, 476 and 479;
the amounts of minority interests and Additional Tier 1 and Tier 2 instruments, and related retained earnings and share premium accounts, issued by subsidiaries that are included in consolidated Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital and own funds in accordance with 4 of Chapter 1;
the effect on Common Equity Tier 1 capital, Additional Tier 1 capital, Tier 2 capital and own funds of the individual filters and deductions applied in accordance with Article 481;
the nature and amount of items that qualify as Common Equity Tier 1 items, Tier 1 items and Tier 2 items by virtue of applying the derogations specified in Section 2 of Chapter 2.
EBA shall submit those draft implementing technical standards to the Commission by 28 July 2013.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
CHAPTER 4
Large exposures, own funds requirements, leverage and the Basel I Floor
Article 493
Transitional provisions for large exposures
▼M9 —————
By way of derogation from Article 400(2) and (3), Member States may, for a transitional period until the entry into force of any legal act following the review in accordance with Article 507, but not after 31 December 2028, fully or partially exempt the following exposures from the application of Article 395(1):
covered bonds falling within Article 129(1), (3) and (6);
asset items constituting claims on regional governments or local authorities of Member States where those claims would be assigned a 20 % risk weight under Part Three, Title II, Chapter 2 and other exposures to or guaranteed by those regional governments or local authorities, claims on which would be assigned a 20 % risk weight under Part Three, Title II, Chapter 2;
exposures, including participations or other kinds of holdings, incurred by an institution to its parent undertaking, to other subsidiaries of that parent undertaking or to its own subsidiaries and qualifying holdings, in so far as those undertakings are covered by the supervision on a consolidated basis to which the institution itself is subject, in accordance with this Regulation, Directive 2002/87/EC or with equivalent standards in force in a third country; exposures that do not meet those criteria, whether or not exempted from Article 395(1) of this Regulation, shall be treated as exposures to a third party;
asset items constituting claims on and other exposures, including participations or other kinds of holdings, to regional or central credit institutions with which the credit institution belongs to a network in accordance with legal or statutory provisions and which are responsible, under those provisions, for cash-clearing operations within the network;
asset items constituting claims on and other exposures to credit institutions incurred by credit institutions, one of which operates on a non-competitive basis and provides or guarantees loans under legislative programmes or its statutes, to promote specified sectors of the economy under some form of government oversight and restrictions on the use of the loans, provided that the respective exposures arise from such loans that are passed on to the beneficiaries via credit institutions or from the guarantees of these loans;
asset items constituting claims on and other exposures to institutions, provided that those exposures do not constitute such institutions' own funds, do not last longer than the following business day and are not denominated in a major trading currency;
asset items constituting claims on central banks in the form of required minimum reserves held at those central banks which are denominated in their national currencies;
asset items constituting claims on central governments in the form of statutory liquidity requirements held in government securities which are denominated and funded in their national currencies provided that, at the discretion of the competent authority, the credit assessment of those central governments assigned by a nominated ECAI is investment grade;
50 % of medium/low risk off-balance sheet documentary credits and of medium/low risk off-balance sheet undrawn credit facilities referred to in Annex I and subject to the competent authorities' agreement, 80 % of guarantees other than loan guarantees which have a legal or regulatory basis and are given for their members by mutual guarantee schemes possessing the status of credit institutions;
legally required guarantees used when a mortgage loan financed by issuing mortgage bonds is paid to the mortgage borrower before the final registration of the mortgage in the land register, provided that the guarantee is not used as reducing the risk in calculating the risk- weighted exposure amounts;
assets items constituting claims on and other exposures to recognised exchanges.
By way of derogation from Article 395(1), competent authorities may allow institutions to incur any of the exposures provided for in paragraph 5 of this Article meeting the conditions set out in paragraph 6 of this Article, up to the following limits:
100 % of the institution’s Tier 1 capital until 31 December 2018;
75 % of the institution’s Tier 1 capital until 31 December 2019;
50 % of the institution’s Tier 1 capital until 31 December 2020.
The limits referred to in points (a), (b) and (c) of the first subparagraph shall apply to exposure values after taking into account the effect of the credit risk mitigation in accordance with Articles 399 to 403.
The transitional arrangements set out in paragraph 4 shall apply to the following exposures:
asset items constituting claims on central governments, central banks, or public sector entities of Member States;
asset items constituting claims expressly guaranteed by central governments, central banks, or public sector entities of Member States;
other exposures to, or guaranteed by, central governments, central banks, or public sector entities of Member States;
asset items constituting claims on regional governments or local authorities of Member States treated as exposures to a central government in accordance with Article 115(2);
other exposures to, or guaranteed by, regional governments or local authorities of Member States treated as exposures to a central government in accordance with Article 115(2).
For the purposes of points (a), (b) and (c) of the first subparagraph, the transitional arrangements set out in paragraph 4 of this Article shall apply only to asset items and other exposures to, or guaranteed by, public sector entities which are treated as exposures to a central government, a regional government or a local authority in accordance with Article 116(4). Where asset items and other exposures to, or guaranteed by, public sector entities are treated as exposures to a regional government or a local authority in accordance with Article 116(4), the transitional arrangements set out in paragraph 4 of this Article shall apply only where exposures to that regional government or local authority are treated as exposures to a central government in accordance with Article 115(2).
The transitional arrangements set out in paragraph 4 of this Article shall apply only where an exposure referred to in paragraph 5 of this Article meets all of the following conditions:
the exposure would be assigned a risk weight of 0 % in accordance with the version of Article 495(2) in force on 31 December 2017;
the exposure was incurred on or after 12 December 2017.
Article 494
Transitional provisions concerning the requirement for own funds and eligible liabilities
By way of derogation from Article 92a, as from 27 June 2019 until 31 December 2021, institutions identified as resolution entities that are G-SII entities shall at all times satisfy the following requirements for own funds and eligible liabilities:
a risk-based ratio of 16 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total risk exposure amount calculated in accordance with Article 92(3) and (4);
a non-risk-based ratio of 6 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total exposure measure referred to in Article 429(4).
Article 494a
Grandfathering of issuances through special purpose entities
By way of derogation from Article 52, capital instruments not issued directly by an institution shall qualify as Additional Tier 1 instruments until 31 December 2021 only where all the following conditions are met:
the conditions set out in Article 52(1), except for the condition requiring that the instruments are directly issued by the institution;
the instruments are issued through an entity within the consolidation pursuant to Chapter 2 of Title II of Part One;
the proceeds are immediately available to the institution without limitation and in a form that satisfies the conditions set out in this paragraph.
By way of derogation from Article 63, capital instruments not issued directly by an institution shall qualify as Tier 2 instruments until 31 December 2021 only where all the following conditions are met:
the conditions set out in Article 63, except for the condition requiring that the instruments are directly issued by the institution;
the instruments are issued through an entity within the consolidation pursuant to Chapter 2 of Title II of Part One;
the proceeds are immediately available to the institution without limitation and in a form that satisfies the conditions set out in this paragraph.
Article 494b
Grandfathering of own funds instruments and eligible liabilities instruments
Article 494c
Grandfathering of senior securitisation positions
By way of derogation from Article 270, an originator institution may calculate the risk-weighted exposure amounts of a senior securitisation position in accordance with Article 260, 262 or 264 where both the following conditions are met:
the securitisation was issued before 9 April 2021;
the securitisation met, on 8 April 2021, the conditions laid down in Article 270 as applicable at that date.
Article 495
Treatment of equity exposures under the IRB Approach
The exempted position shall be measured as the number of shares as at 31 December 2007 and any additional share arising directly as a result of owning those holdings, provided that they do not increase the proportional share of ownership in a portfolio company.
If an acquisition increases the proportional share of ownership in a specific holding the part of the holding which constitutes the excess shall not be subject to the exemption. Nor shall the exemption apply to holdings that were originally subject to the exemption, but have been sold and then bought back.
Equity exposures subject to this provision shall be subject to the capital requirements calculated in accordance with the Standardised Approach under Part Three, Title II, Chapter 2 and the requirements set out in Title IV of Part Three, as applicable.
Competent authorities shall notify the Commission and EBA of the implementation of this paragraph.
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EBA shall submit those draft regulatory technical standards to the Commission by 30 June 2014.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
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Article 497
Own funds requirements for exposures to CCPs
Where a third-country CCP applies for recognition in accordance with Article 25 of Regulation (EU) No 648/2012, institutions may consider that CCP as a QCCP from the date on which it submitted its application for recognition to ESMA and until one of the following dates:
where the Commission has already adopted an implementing act referred to in Article 25(6) of Regulation (EU) No 648/2012 in relation to the third country in which the CCP is established and that implementing act has entered into force, two years after the date of submission of the application;
where the Commission has not yet adopted an implementing act referred to in Article 25(6) of Regulation (EU) No 648/2012 in relation to the third country in which the CCP is established or where that implementing act has not yet entered into force, the earlier of the following dates:
two years after the date of entry into force of the implementing act;
for CCPs that submitted the application after 27 June 2019, two years after the date of submission of the application;
for those CCPs that submitted the application before 27 June 2019, 28 June 2021.
Until the expiration of the deadline referred to in paragraph 1 of this Article, where a CCP referred to in that paragraph does not have a default fund and does not have in place a binding arrangement with its clearing members that allows it to use all or part of the initial margin received from its clearing members as if they were pre-funded contributions, the institution shall substitute the formula for calculating the own funds requirement in Article 308(2) with the following one:
where:
|
= |
the own funds requirement; |
KCCP |
= |
the hypothetical capital of the QCCP communicated to the institution by the QCCP in accordance with Article 50c of Regulation (EU) No 648/2012; |
DFCCP |
= |
the pre-funded financial resources of the CCP communicated to the institution by the CCP in accordance with Article 50c of Regulation (EU) No 648/2012; |
i |
= |
the index denoting the clearing member; |
IMi |
= |
the initial margin posted with the CCP by clearing member i; and |
IM |
= |
the total amount of initial margin communicated to the institution by the CCP in accordance with Article 89(5a) of Regulation (EU) No 648/2012. |
Article 498
Exemption for Commodities dealers
Until 26 June 2021, the provisions on own funds requirements as set out in this Regulation shall not apply to investment firms the main business of which consists exclusively of the provision of investment services or activities in relation to the financial instruments set out in points (5), (6), (7), (9), (10) and (11) of Section C of Annex I to Directive 2014/65/EU and to which Directive 2004/39/EC did not apply on 31 December 2006.
Article 499
Leverage
By way of derogation from Articles 429 and 430, during the period between 1 January 2014 and 31 December 2021, institutions shall calculate and report the leverage ratio by using both of the following as the capital measure:
Tier 1 capital;
Tier 1 capital, subject to the derogations laid down in Chapters 1 and 2 of this Title.
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Article 500
Adjustment for massive disposals
By way of derogation from point (a) of Article 181(1), an institution may adjust its LGD estimates by partly or fully offsetting the effect of massive disposals of defaulted exposures on realised LGDs up to the difference between the average estimated LGDs for comparable exposures in default that have not been finally liquidated and the average realised LGDs including on the basis of the losses realised due to massive disposals, as soon as all the following conditions are met:
the institution has notified the competent authority of a plan providing the scale, composition and the dates of the disposals of defaulted exposures;
the dates of the disposals of defaulted exposures are after 23 November 2016 but not later than 28 June 2022;
the cumulative amount of defaulted exposures disposed of since the date of the first disposal in accordance with the plan referred to in point (a) has surpassed 20 % of the outstanding amount of all defaulted exposures as of the date of the first disposal referred to in points (a) and (b).
The adjustment referred to in the first subparagraph may only be carried out until 28 June 2022 and its effects may last for as long as the corresponding exposures are included in the institution's own LGD estimates.
Article 500a
Temporary treatment of public debt issued in the currency of another Member State
By way of derogation from Article 114(2), until 31 December 2024, for exposures to the central governments and central banks of Member States, where those exposures are denominated and funded in the domestic currency of another Member State, the following apply:
until 31 December 2022, the risk weight applied to the exposure values shall be 0 % of the risk weight assigned to those exposures in accordance with Article 114(2);
in 2023, the risk weight applied to the exposure values shall be 20 % of the risk weight assigned to those exposures in accordance with Article 114(2);
in 2024, the risk weight applied to the exposure values shall be 50 % of the risk weight assigned to those exposures in accordance with Article 114(2).
By way of derogation from Articles 395(1) and 493(4), competent authorities may allow institutions to incur exposures referred to in paragraph 1 of this Article, up to the following limits:
100 % of the institution’s Tier 1 capital until 31 December 2023;
75 % of the institution’s Tier 1 capital between 1 January and 31 December 2024;
50 % of the institution’s Tier 1 capital between 1 January and 31 December 2025.
The limits referred to in points (a), (b) and (c) of the first subparagraph of this paragraph shall apply to exposure values after taking into account the effect of the credit risk mitigation in accordance with Articles 399 to 403.
Article 500b
Temporary exclusion of certain exposures to central banks from the total exposure measure in view of the COVID-19 pandemic
By way of derogation from Article 429(4), until 27 June 2021, an institution may exclude from its total exposure measure the following exposures to the institution’s central bank, subject to the conditions set out in paragraphs 2 and 3 of this Article:
coins and banknotes constituting legal currency in the jurisdiction of the central bank;
assets representing claims on the central bank, including reserves held at the central bank.
The amount excluded by the institution shall not exceed the daily average amount of the exposures listed in points (a) and (b) of the first subparagraph over the most recent full reserve maintenance period of the institution’s central bank.
An institution may exclude the exposures listed in paragraph 1 where the institution’s competent authority has determined, after consultation with the relevant central bank, and publicly declared that exceptional circumstances exist that warrant the exclusion in order to facilitate the implementation of monetary policies.
The exposures to be excluded under paragraph 1 shall meet both of the following conditions:
they are denominated in the same currency as the deposits taken by the institution;
their average maturity does not significantly exceed the average maturity of the deposits taken by the institution.
An institution that excludes exposures to its central bank from its total exposure measure in accordance with paragraph 1 shall also disclose the leverage ratio it would have if it did not exclude those exposures.
Article 500c
Exclusion of overshootings from the calculation of the back-testing addend in view of the COVID-19 pandemic
By way of derogation from Article 366(3), competent authorities may, in exceptional circumstances and in individual cases, permit institutions to exclude the overshootings evidenced by the institution’s back-testing on hypothetical or actual changes from the calculation of the addend set out in Article 366(3), provided that those overshootings do not result from deficiencies in the internal model and provided that they occurred between 1 January 2020 and 31 December 2021.
Article 500d
Temporary calculation of the exposure value of regular-way purchases and sales awaiting settlement in view of the COVID-19 pandemic
Institutions that, in accordance with the applicable accounting framework, apply settlement date accounting to regular-way purchases and sales which are awaiting settlement shall include in the total exposure measure the full nominal value of commitments to pay related to regular-way purchases.
Institutions may offset the full nominal value of commitments to pay related to regular-way purchases by the full nominal value of cash receivables related to regular-way sales awaiting settlement only where both of the following conditions are met:
both the regular-way purchases and sales are settled on a delivery-versus-payment basis;
the financial assets bought and sold that are associated with cash payables and receivables are measured at fair value through profit or loss and included in the institution’s trading book.
Article 501
Adjustment of risk-weighted non-defaulted SME exposures
Institutions shall adjust the risk-weighted exposure amounts for non-defaulted exposures to an SME (RWEA), which are calculated in accordance with Chapter 2 or 3 of Title II of Part Three, as applicable, in accordance with the following formula:
where:
RWEA* |
= |
the RWEA adjusted by an SME supporting factor; and |
E* is either of the following: |
= |
(a)
the total amount owed to the institution, its subsidiaries, its parent undertakings and other subsidiaries of those parent undertakings, including any exposure in default, but excluding claims or contingent claims secured on residential property collateral, by the SME or the group of connected clients of the SME;
(b)
where the total amount referred to in point (a) is equal to 0, the amount of claims or contingent claims against the SME or the group of connected clients of the SME that are secured on residential property collateral and that are excluded from the calculation of the total amount referred to in that point. |
For the purposes of this Article:
the exposure to an SME shall be included either in the retail or in the corporates or secured by mortgages on immovable property classes;
an SME is defined in accordance with Commission Recommendation 2003/361/EC ( 31 ); among the criteria listed in Article 2 of the Annex to that Recommendation only the annual turnover shall be taken into account;
institutions shall take reasonable steps to correctly determine E* and obtain the information required under point (b).
Article 501a
Adjustment to own funds requirements for credit risk for exposures to entities that operate or finance physical structures or facilities, systems and networks that provide or support essential public services
Own funds requirements for credit risk calculated in accordance with Title II of Part III shall be multiplied by a factor of 0,75, provided that the exposure complies with all the following criteria:
the exposure is included either in the corporate exposure class or in the specialised lending exposures class, with the exclusion of exposures in default;
the exposure is to an entity which was created specifically to finance or operate physical structures or facilities, systems and networks that provide or support essential public services;
the source of repayment of the obligation is represented for not less than two thirds of its amount by the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise, or by subsidies, grants or funding provided by one or more of the entities listed in points (b)(i) and (b)(ii) of paragraph 2;
the obligor can meet its financial obligations even under severely stressed conditions that are relevant for the risk of the project;
the cash flows that the obligor generates are predictable and cover all future loan repayments during the duration of the loan;
the re-financing risk of the exposure is low or adequately mitigated, taking into account any subsidies, grants or funding provided by one or more of the entities listed in points (b)(i) and (b)(ii) of paragraph 2;
the contractual arrangements provide lenders with a high degree of protection including the following:
where the revenues of the obligor are not funded by payments from a large number of users, the contractual arrangements shall include provisions that effectively protect lenders against losses resulting from the termination of the project by the party which agrees to purchase the goods or services provided by the obligor;
the obligor has sufficient reserve funds fully funded in cash or other financial arrangements with highly rated guarantors to cover the contingency funding and working capital requirements over the lifetime of the assets referred to in point (b) of this paragraph;
the lenders have a substantial degree of control over the assets and the income generated by the obligor;
the lenders have the benefit of security to the extent permitted by applicable law in assets and contracts critical to the infrastructure business or have alternative mechanisms in place to secure their position;
equity is pledged to lenders such that they are able to take control of the entity upon default;
the use of net operating cash flows after mandatory payments from the project for purposes other than servicing debt obligations is restricted;
there are contractual restrictions on the ability of the obligor to perform activities that may be detrimental to lenders, including the restriction that new debt cannot be issued without the consent of existing debt providers;
the obligation is senior to all other claims other than statutory claims and claims from derivatives counterparties;
where the obligor is in the construction phase, the following criteria shall be fulfilled by the equity investor, or where there is more than one equity investor, the following criteria shall be fulfilled by a group of equity investors as a whole:
the equity investors have a history of successfully overseeing infrastructure projects, the financial strength and the relevant expertise;
the equity investors have a low risk of default, or there is a low risk of material losses for the obligor as a result of their default;
there are adequate mechanisms in place to align the interest of the equity investors with the interests of lenders;
the obligor has adequate safeguards to ensure completion of the project according to the agreed specification, budget or completion date; including strong completion guarantees or the involvement of an experienced constructor and adequate contract provisions for liquidated damages;
where operating risks are material, they are properly managed;
the obligor uses tested technology and design;
all necessary permits and authorisations have been obtained;
the obligor uses derivatives only for risk-mitigation purposes;
the obligor has carried out an assessment whether the assets being financed contribute to the following environmental objectives:
climate change mitigation;
climate change adaptation;
sustainable use and protection of water and marine resources;
transition to a circular economy, waste prevention and recycling;
pollution prevention and control;
protection of healthy ecosystems.
For the purposes of point (e) of paragraph 1, the cash flows generated shall not be considered predictable unless a substantial part of the revenues satisfies the following conditions:
one of the following criteria is met:
the revenues are availability-based;
the revenues are subject to a rate-of-return regulation;
the revenues are subject to a take-or-pay contract;
the level of output or the usage and the price shall independently meet one of the following criteria:
where the revenues of the obligor are not funded by payments from a large number of users, the party which agrees to purchase the goods or services provided by the obligor shall be one of the following:
a central bank, a central government, a regional government or a local authority, provided that they are assigned a risk weight of 0 % in accordance with Articles 114 and 115 or are assigned an ECAI rating with a credit quality step of at least 3;
a public sector entity, provided that it is assigned a risk weight of 20 % or below in accordance with Article 116 or is assigned an ECAI rating with a credit quality step of at least 3;
a multilateral development bank referred to in Article 117(2);
an international organisation referred to in Article 118;
a corporate entity which has been assigned an ECAI rating with a credit quality step of at least 3;
an entity that is replaceable without a significant change in the level and timing of revenues.
For the purposes of paragraph 4, EBA shall report on the following to the Commission:
an analysis of the evolution of the trends and conditions in markets for infrastructure lending and project finance over the period referred to in paragraph 4;
an analysis of the effective riskiness of entities referred to in point (b) of paragraph 1 over a full economic cycle;
the consistency of own funds requirements laid down in this Regulation with the outcomes of the analysis under points (a) and (b) of this paragraph.
Article 501b
Derogation from reporting requirements
By way of derogation from Article 430, during the period between the date of application of the relevant provisions of this Regulation and the date of the first remittance of reports specified in the implementing technical standards referred to in that Article, a competent authority may waive the requirement to report information in the format specified in the templates contained in the implementing act referred to in Article 430(7) where those templates have not been updated to reflect the provisions of this Regulation.
TITLE II
REPORTS AND REVIEWS
Article 501c
Prudential treatment of exposures related to environmental and/or social objectives
EBA, after consulting the ESRB, shall, on the basis of available data and the findings of the Commission High-Level Expert Group on Sustainable Finance, assess whether a dedicated prudential treatment of exposures related to assets, including securitisations, or activities associated substantially with environmental and/or social objectives would be justified. In particular, EBA shall assess:
methodologies for the assessment of the effective riskiness of exposures related to assets and activities associated substantially with environmental and/or social objectives compared to the riskiness of other exposure;
the development of appropriate criteria for the assessment of physical risks and transition risks, including the risks related to the depreciation of assets due to regulatory changes;
the potential effects of a dedicated prudential treatment of exposures related to assets and activities which are associated substantially with environmental and/or social objectives on financial stability and bank lending in the Union.
EBA shall submit a report on its findings to the European Parliament, to the Council and to the Commission by 28 June 2025.
On the basis of that report, the Commission shall, if appropriate, submit to the European Parliament and to the Council a legislative proposal.
Article 502
Cyclicality of capital requirements
The Commission, in cooperation with EBA, ESRB and the Member States, and taking into account the opinion of the ECB, shall periodically monitor whether this Regulation taken as a whole, together with Directive 2013/36/EU, has significant effects on the economic cycle and, in the light of that examination, shall consider whether any remedial measures are justified.
By 31 December 2013, EBA shall report to the Commission on whether, and if so how, methodologies of institutions under the IRB Approach should converge with a view to more comparable capital requirements while mitigating pro-cyclicality.
Based on that analysis and taking into account the opinion of the ECB, the Commission shall draw up a biennial report and submit it to the European Parliament and to the Council, together with any appropriate proposals. Contributions from credit taking and credit lending parties shall be adequately acknowledged when the report is drawn up.
By 31 December 2014, the Commission shall review, and report on, the application of Article 33(1)(c) and shall submit that report to the European Parliament and the Council, together with a legislative proposal, if appropriate.
With respect to the potential deletion of Article 33(1)(c) and its potential application at the Union level, the review shall in particular ensure that sufficient safeguards are in place to ensure financial stability in all Member States.
Article 503
Own funds requirements for exposures in the form of covered bonds
The report and the proposals referred to in paragraph 1 shall take into account:
the extent to which the current regulatory capital requirements applicable to covered bonds adequately differentiate between variances in the credit quality of covered bonds and the collateral against which they are secured, including the extent of variations across Member States;
the transparency of the covered bond market and the extent to which this facilitates comprehensive internal analysis by investors in respect of the credit risk of covered bonds and the collateral against which they are secured and the asset segregation in case of the issuer's insolvency, including the mitigating effects of the underlying strict national legal framework in accordance with Article 129 of this Regulation and Article 52(4) of Directive 2009/65/EC on the overall credit quality of a covered bond and its implications on the level of transparency needed by investors; and
the extent to which covered bond issuance by a credit institution impacts on the credit risk to which other creditors of the issuing institution are exposed.
Article 504
Capital instruments subscribed by public authorities in emergency situations
The Commission shall, by 31 December 2016, after consulting EBA, report to the European Parliament and the Council, together with any appropriate proposals, whether the treatment set out in Article 31 needs to be amended or deleted.
Article 504a
Holdings of eligible liabilities instruments
By 28 June 2022, EBA shall report to the Commission on the amounts and distribution of holdings of eligible liabilities instruments among institutions identified as G-SIIs or O-SIIs and on potential impediments to resolution and the risk of contagion in relation to those holdings.
Based on the report by EBA the Commission shall, by 28 June 2023, report to the European Parliament and to the Council on the appropriate treatment of such holdings, accompanied by a legislative proposal, where appropriate.
Article 505
Review of long-term financing
By 31 December 2014, the Commission shall report to the European Parliament and to the Council, together with any appropriate proposals, about the appropriateness of the requirements of this Regulation in light of the need to ensure adequate levels of funding for all forms of long-term financing for the economy, including critical infrastructure projects in the Union in the field of transport, energy and communications.
Article 506
Credit risk — definition of default
EBA shall, by 31 December 2017, report to the Commission on how replacing 90 days by 180 days past due, as provided in point (b) of Article 178(1), impacts risk-weighted exposure amounts and the appropriateness of the continued application of that provision after 31 December 2019.
On the basis of that report, the Commission may submit a legislative proposal to amend this Regulation.
Article 506a
CIUs with an underlying portfolio of euro area sovereign bonds
In close cooperation with the ESRB and EBA, the Commission shall publish a report by 31 December 2021 in which it shall assess whether changes to the regulatory framework are needed to promote the market for, and bank purchases of, exposures in the form of units or shares in CIUs with an underlying portfolio consisting exclusively of sovereign bonds of Member States whose currency is the euro, where the relative weight of each Member States’ sovereign bonds in the total portfolio of the CIU is equal to the relative weight of each Member States’ capital contribution to the ECB.
Article 506b
NPE securitisations
Article 507
Large exposures
EBA shall monitor the use of exemptions set out in point (b) of Article 390(6), points (f) to (m) of Article 400(1), point (a) and points (c) to (g), (i), (j) and (k) of Article 400(2) and by 28 June 2021 submit a report to the Commission assessing the quantitative impact that the removal of those exemptions or the setting of a limit on their use would have. That report shall assess, in particular, for each exemption provided for in those Articles:
the number of large exposures exempted in each Member State;
the number of institutions that make use of the exemption in each Member State;
the aggregate amount of exposures exempted in each Member State.
Article 508
Level of application
▼M9 —————
Article 509
Liquidity requirements
The report referred to in the first subparagraph shall take due account of markets and international regulatory developments as well as of the interactions of the liquidity coverage requirement with other prudential requirements under this Regulation such as the risk-based capital ratios as set out in Article 92 and the leverage ratio.
The European Parliament and the Council shall be given the opportunity to state their views on the report referred to in the first subparagraph.
EBA shall, in the report referred to in paragraph 1, assess the following, in particular:
the provision of mechanisms restricting the value of liquidity inflows, in particular with a view to determining an appropriate inflow cap and the conditions for its application, taking into account different business models including pass through financing, factoring, leasing, covered bonds, mortgages, issuance of covered bonds, and the extent to which that cap should be amended or removed to cater for the specificities of specialised financing;
the calibration of inflows and outflows referred to in Part Six, Title II, in particular under Article 422(7) and Article 425(2);
the provision of mechanisms restricting the coverage of liquidity requirements by certain categories of liquid assets, in particular assessing the appropriate minimum percentage for liquid assets referred to in points (a), (b) and (c) of Article 416(1) to the total of liquid assets, testing a threshold of 60 % and taking into account international regulatory developments. Assets owed and due or callable within 30 calendar days should not count towards the limit unless the assets have been obtained against collateral that also qualifies under points (a), (b) and (c) of Article 416(1);
the provision of specific lower outflow and/or higher inflow rates for intragroup flows, specifying under which conditions such specific in- or outflow rates would be justified from a prudential point of view and setting out the high level outline of a methodology using objective criteria and parameters in order to determine specific levels of inflows and outflows between the institution and the counterparty when they are not established in the same Member State;
the calibration of the draw-down rates applicable to the undrawn committed credit and liquidity facilities that fall under Article 424(3) and (5). In particular, EBA shall test a draw-down rate of 100 %;
the definition of retail deposit in point (2) of Article 411, in particular the appropriateness of introducing a threshold on deposits of natural persons;
the need to introduce a new retail deposit category with a lower outflow in the light of the specific characteristics of such deposits that could justify a lower outflow rate and taking into account international developments;
derogations from requirements on the composition of the liquid assets institutions will be required to hold, where in a given currency the institutions' collective justified needs for liquid assets are exceeding the availability of those liquid assets and conditions to which such derogations should be subject;
the definition of Shari'ah-compliant financial products as an alternative to assets that would qualify as liquid assets for the purposes of Article 416, for the use of Shari'ah-compliant banks;
the definition of circumstances of stress, including principles for the use of the stock of liquid assets and the necessary supervisory reactions under which institutions would be able to use their liquid assets to meet liquidity outflows and how to address non-compliance;
the definition of an established operational relationship for non-financial customer as referred to in Article 422(3)(c);
the calibration of the outflow rate applicable to correspondent banking and prime brokerage services as referred to in the first subparagraph of Article 422(4);
mechanisms for the grandfathering of government guaranteed bonds issued to credit institutions as part of government support measures with Union State aid approval, such as bonds issued by the National Asset Management Agency (NAMA) in Ireland and by the Spanish Asset Management Company in Spain, designed to remove problem assets from the balance sheets of credit institutions, as assets of extremely high liquidity and credit quality until at least December 2023.
The European Parliament and the Council shall be given the opportunity to state their views on that report.
The report referred to in the first subparagraph shall also consider:
other categories of assets, in particular residential mortgage-backed securities of high liquidity and credit quality;
other categories of central bank eligible securities or loans, such as local government bonds and commercial paper; and
other non-central bank eligible but tradable assets, such as equities listed on a recognised exchange, gold, major index linked equity instruments, guaranteed bonds, covered bonds, corporate bonds and funds based on those assets.
EBA shall in particular test the adequacy of the following criteria and the appropriate levels for such definitions:
minimum trade volume of the assets;
minimum outstanding volume of the assets;
transparent pricing and post-trade information;
credit quality steps referred to in Part Three, Title II, Chapter 2;
proven record of price stability;
average volume traded and average trade size;
maximum bid/ask spread;
remaining time to maturity;
minimum turnover ratio.
By 31 January 2014, EBA shall also report on the following:
uniform definitions of high and extremely high liquidity and credit quality;
the possible unintended consequences of the definition of liquid assets on the conduct of monetary policy operation and the extent to which:
a list of liquid assets that is disconnected from the list of central bank eligible assets may incentivise institutions to submit eligible assets which are not included in the definition of liquid assets in refinancing operations;
regulation of liquidity may disincentivise institutions from lending or borrowing on the unsecured money market and whether this may lead to question the targeting of EONIA in monetary policy implementation;
the introduction of the liquidity coverage requirement may make it more difficult for central banks to ensure price stability by using the existing monetary policy framework and instruments;
the operational requirements for the holdings of liquid assets, as referred in points (b) to (f) of Article 417, in line with international regulatory developments.
Article 510
Net Stable Funding Requirements
By 31 December 2015, EBA shall also report to the Commission, on the basis of the items to be reported in accordance with Part Six, Title III and, in accordance with the uniform reporting formats referred to in point (a) of Article 415(3) and after consulting the ESRB, on methodologies for determining the amount of stable funding available to and required by institutions and on appropriate uniform definitions for calculating such a net stable funding requirement, examining in particular the following:
the categories and weightings applied to sources of stable funding in Article 427(1);
the categories and weightings applied to determine the requirement for stable funding in Article 428(1);
methodologies shall provide incentives and disincentives as appropriate to encourage a more stable longer term funding of assets, business activities, investment and funding of institutions;
the need to develop different methodologies for different types of institutions.
EBA shall monitor the amount of required stable funding covering the funding risk linked to the derivative contracts listed in Annex II and credit derivatives over the one-year horizon of the net stable funding ratio, in particular the future funding risk for those derivative contracts set out in Articles 428s(2) and 428at(2), and report to the Commission on the opportunity to adopt a higher required stable funding factor or a more risk-sensitive measure by 28 June 2024. That report shall at least assess:
the opportunity to distinguish between margined and unmargined derivative contracts;
the opportunity to remove, increase or replace the requirement set out in Articles 428s(2) and 428at(2);
the opportunity to change more broadly the treatment of derivative contracts in the calculation of the net stable funding ratio, as set out in Article 428d, Articles 428k(4) and 428s(2), points (a) and (b) of Article 428ag, Articles 428ah(2), 428al(4) and 428at(2), points (a) and (b) of Article 428ay and Article 428az(2), to better capture the funding risk linked to those contracts over the one-year horizon of the net stable funding ratio;
the impact of the proposed changes on the amount of stable funding required for institutions' derivative contracts.
EBA shall monitor the amount of stable funding required to cover the funding risk linked to securities financing transactions, including to the assets received or given in those transactions, and to unsecured transactions with a residual maturity of less than six months with financial customers and report to the Commission on the appropriateness of that treatment by 28 June 2023. That report shall at least assess:
the opportunity to apply higher or lower stable funding factors to securities financing transactions with financial customers and to unsecured transactions with a residual maturity of less than six months with financial customers to take better account of their funding risk over the one-year horizon of the net stable funding ratio and of the possible contagion effects between financial customers;
the opportunity to apply the treatment set out in point (g) of Article 428r(1) to securities financing transactions collateralised by other types of assets;
the opportunity to apply stable funding factors to off-balance-sheet items used in securities financing transactions as an alternative to the treatment set out in Article 428p(5);
the adequacy of the asymmetric treatment between liabilities with a residual maturity of less than six months provided by financial customers that are subject to a 0 % available stable funding factor in accordance with point (c) of Article 428k(3) and assets resulting from transactions with a residual maturity of less than six months with financial customers that are subject to a 0 %, 5 % or 10 % required stable funding factor in accordance with point (g) of Article 428r(1), point (c) of Article 428s(1) and point (b) of Article 428v;
the impact of the introduction of higher or lower required stable funding factors for securities financing transactions, in particular with a residual maturity of less than six months with financial customers, on the market liquidity of assets received as collateral in those transactions, in particular of sovereign and corporate bonds;
the impact of the proposed changes on the amount of stable funding required for those institutions' transactions, in particular for securities financing transactions with a residual maturity of less than six months with financial customers where sovereign bonds are received as collateral in those transactions.
EBA shall monitor the amount of stable funding required to cover the funding risk linked to institutions' holdings of securities to hedge derivative contracts. EBA shall report on the appropriateness of the treatment by 28 June 2023. That report shall at least assess:
the possible impact of the treatment on investors' ability to gain exposure to assets and the impact of the treatment on credit supply in the capital markets union;
the opportunity to apply adjusted stable funding requirements to securities that are held to hedge derivatives which are funded by initial margin, either wholly or in part;
the opportunity to apply adjusted stable funding requirements to securities that are held to hedge derivatives which are not funded by initial margin.
Article 511
Leverage
The Commission shall by 31 December 2020 submit a report to the European Parliament and to the Council on whether:
it is appropriate to introduce a leverage ratio surcharge for O-SIIs; and
the definition and calculation of the total exposure measure referred to in Article 429(4), including the treatment of central bank reserves, is appropriate.
Article 512
Exposures to transferred credit risk
By 31 December 2014, the Commission shall report to the European Parliament and the Council on the application and effectiveness of the provisions of Part Five in the light of international market developments.
Article 513
Macroprudential rules
By 30 June 2022, and every five years thereafter, the Commission shall, after consulting the ESRB and EBA, review whether the macroprudential rules contained in this Regulation and in Directive 2013/36/EU are sufficient to mitigate systemic risks in sectors, regions and Member States including assessing:
whether the current macroprudential tools in this Regulation and in Directive 2013/36/EU are effective, efficient and transparent;
whether the coverage and the possible degrees of overlap between different macroprudential tools for targeting similar risks in this Regulation and in Directive 2013/36/EU are adequate and, if appropriate, propose new macroprudential rules;
how internationally agreed standards for systemic institutions interact with the provisions in this Regulation and in Directive 2013/36/EU and, if appropriate, propose new rules taking into account those internationally agreed standards;
whether other types of instruments, such as borrower-based instruments, should be added to the macroprudential tools provided for in this Regulation and in Directive 2013/36/EU to complement capital-based instruments and to allow for the harmonised use of the instruments in the internal market; taking into account whether harmonised definitions of those instruments and the reporting of respective data at Union level are a prerequisite for the introduction of such instruments;
whether the leverage ratio buffer requirement as referred to in Article 92(1a) should be extended to systemically important institutions other than G-SIIs, whether its calibration should be different from the calibration for G-SIIs, and whether its calibration should depend on the level of systemic importance of the institution;
whether the current voluntary reciprocity of macroprudnetial measures should be turned into mandatory reciprocity and whether the current ESRB framework for voluntary reciprocity is an appropriate basis for that;
how relevant Union and national macroprudential authorities can be mandated with tools to address new emerging systemic risks arising from credit institutions exposures to the non-banking sector, in particular from derivatives and securities financing transactions markets, the asset management sector and the insurance sector.
Article 514
Method for the calculation of the exposure value of derivative transactions
Article 515
Monitoring and evaluation
Article 516
Long-term financing
By 31 December 2015, the Commission shall report on the impact of this Regulation on the encouragement of long-term investments in growth promoting infrastructure.
Article 517
Definition of eligible capital
By 31 December 2014, the Commission shall review, and report on, the appropriateness of the definition of eligible capital being applied for the purposes of Title III of Part Two and Part Four and shall submit that report to the European Parliament and the Council, and, if appropriate, a legislative proposal.
Article 518
Review of capital instruments which may be written down or converted at the point of non-viability
By 31 December 2015, the Commission shall review, and report on, whether this Regulation should contain a requirement that Additional Tier 1 or Tier 2 capital instruments are to be written down in the event of a determination that an institution is no longer viable. The Commission shall submit that report to the European Parliament and the Council, together with a legislative proposal, if appropriate.
Article 518a
Review of cross-default provisions
By 28 June 2022, the Commission shall review and assess whether it is appropriate to require that eligible liabilities may be bailed-in without triggering cross-default clauses in other contracts, with a view to reinforcing as much as possible the effectiveness of the bail-in tool and to assessing whether a no-cross-default provision referring to eligible liabilities should be included in the terms or contracts governing other liabilities. Where appropriate, that review and assessment shall be accompanied by a legislative proposal.
Article 518b
Report on overshootings and supervisory powers to limit distributions
By 31 December 2021, the Commission shall report to the European Parliament and to the Council on whether exceptional circumstances that trigger serious economic disturbance in the orderly functioning and integrity of financial markets justify:
during such periods, permitting competent authorities to exclude from institutions’ market risk internal models overshootings that do not result from deficiencies in those models;
during such periods, granting additional binding powers to competent authorities to impose restrictions on distributions by institutions.
The Commission shall consider further measures, if appropriate.
Article 519
Deduction of defined benefit pension fund assets from Common Equity Tier 1 items
By 30 June 2014, EBA shall prepare a report on whether the revised IAS 19 in conjunction with the deduction of net pension assets as set out in Article 36(1)(e) and changes in the net pension liabilities lead to undue volatility of institutions' own funds.
Taking into account the EBA report, the Commission shall by, 31 December 2014 prepare a report for the European Parliament and the Council on the issue referred to in the first paragraph, together with a legislative proposal, if appropriate, to introduce a treatment which adjusts defined net benefit pension fund assets or liabilities for the calculation of own funds.
Article 519a
Reporting and review
By 1 January 2022, the Commission shall report to the European Parliament and the Council on the application of the provisions in Chapter 5 of Title II of Part Three in the light of developments in securitisation markets, including from a macroprudential and economic perspective. That report shall, if appropriate, be accompanied by a legislative proposal and shall, in particular, assess the following points:
the impact of the hierarchy of methods set out in Article 254 and of the calculation of the risk-weighted exposure amounts of securitisation positions set out in Articles 258 to 266 on issuance and investment activity by institutions in securitisation markets in the Union;
the effects on the financial stability of the Union and Member States, with a particular focus on potential immovable property market speculation and increased interconnection between financial institutions;
what measures would be warranted to reduce and counter any negative effects of securitisation on financial stability while preserving its positive effect on financing, including the possible introduction of a maximum limit on exposure to securitisations; and
the effects on the ability of financial institutions to provide a sustainable and stable funding channel to the real economy, with particular attention to SMEs; and
how environmental sustainability criteria could be integrated into the securitisation framework, including for exposures to NPE securitisations.
The report shall also take into account regulatory developments in international fora, in particular those relating to international standards on securitisation.
Article 519b
Own funds requirements for market risk
TITLE IIA
IMPLEMENTATION OF RULES
Article 519c
Compliance tool
The tool referred to in paragraph 1 shall at least enable each institution to:
rapidly identify the relevant provisions to comply with in relation to the institution's size and business model;
follow the changes made in legislative acts and in the related implementing provisions, guidelines and templates.
TITLE III
AMENDMENTS
Article 520
Amendment of Regulation (EU) No 648/2012
Regulation (EU) No 648/2012 is amended as follows:
the following Chapter is added in Title IV:
‘CHAPTER 4
Calculations and reporting for the purposes of Regulation (EU) No 575/2013
Article 50a
Calculation of KCCP
A CCP shall calculate the hypothetical capital (KCCP) as follows:
where:
EBRMi |
= |
exposure value before risk mitigation that is equal to the exposure value of the CCP to clearing member i arising from all the contracts and transactions with that clearing member, calculated without taking into account the collateral posted by that clearing member; |
IMi |
= |
the initial margin posted to the CCP by clearing member i; |
DFi |
= |
the pre-funded contribution of clearing member i; |
RW |
= |
a risk weight of 20 %; |
capital ratio |
= |
8 %. |
All values in the formula in the first subparagraph shall relate to the valuation at the end of the day before the margin called on the final margin call of that day is exchanged.
For the purpose of paragraph 3, EBA shall develop draft implementing technical standards to specify the following:
the frequency and dates of the calculation laid down in paragraph 2;
the situations in which the competent authority of an institution acting as a clearing member may require higher frequencies of calculation and reporting than those referred to in point (a).
EBA shall submit those draft implementing technical standards to the Commission by 1 January 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Article 50b
General rules for the calculation of KCCP
For the purposes of the calculation laid down in Article 50a(2), the following shall apply:
a CCP shall calculate the value of the exposures it has to its clearing members as follows:
for exposures arising from contracts and transactions listed in Article 301(1)(a) and (d) of Regulation (EU) No 575/2013 it shall calculate them in accordance with the mark-to-market method laid down in Article 274 thereof;
for exposures arising from contracts and transactions listed in Article 301(1)(b), (c) and (e) of Regulation (EU) No 575/2013 it shall calculate them in accordance with the Financial Collateral Comprehensive Method specified in Article 223 of that Regulation with supervisory volatility adjustments, specified in Articles 223 and 224 of that Regulation. The exception set out in point (a) of Article 285(3) of that Regulation, shall not apply;
for exposures arising from transactions not listed in Article 301(1) of Regulation (EU) No 575/2013 and which entails settlement risk only it shall calculate them in accordance with Part Three, Title V of that Regulation;
for institutions that fall under the scope of Regulation (EU) No 575/2013 the netting sets are the same as those defined in Part Three, Title II of that Regulation;
when calculating the values referred to in point (a), the CCP shall subtract from its exposures the collateral posted by its clearing members, appropriately reduced by the supervisory volatility adjustments in accordance with the Financial Collateral Comprehensive Method specified in Article 224 of Regulation (EU) No 575/2013;
where a CCP has exposures to one or more CCPs it shall treat any such exposures as if they were exposures to clearing members and include any margin or pre-funded contributions received from those CCPs in the calculation of KCCP;
where a CCP has in place a binding contractual arrangement with its clearing members that allows it to use all or part of the initial margin received from its clearing members as if they were pre-funded contributions, the CCP shall consider that initial margin as prefunded contributions for the purposes of the calculation in paragraph 1 and not as initial margin;
when applying the Mark-to-Market Method as set out in Article 274 of Regulation (EU) No 575/2013, a CCP shall replace the formula in point (c)(ii) of Article 298(1) of that Regulation with the following:
where the numerator of NGR is calculated in accordance with Article 274(1) of that Regulation and just before the variation margin is actually exchanged at the end of the settlement period, and the denominator is gross replacement cost;
where a CCP cannot calculate the value of NGR as set out in point (c)(ii) of Article 298(1) of Regulation (EU) No 575/2013, it shall:
notify those of its clearing members which are institutions and their competent authorities about its inability to calculate NGR and the reasons why it is unable to carry out the calculation;
for a period of three months, it may use a value of NGR of 0,3 to perform the calculation of PCEred specified in point (h) of this Article;
where, at the end of the period specified in point (ii) of point (i), the CCP would still be unable to calculate the value of NGR, it shall do the following:
stop calculating KCCP;
notify those of its clearing members which are institutions and their competent authorities that it has stopped calculating KCCP;
where a CCP has more than one default fund, it shall carry out the calculation laid down in Article 50a(2) for each default fund separately.
Article 50c
Reporting of information
For the purposes of Article 308 of Regulation (EU) No 575/2013, a CCP shall report the following information to those of its clearing members which are institutions and to their competent authorities:
the hypothetical capital (KCCP);
the sum of pre-funded contributions (DFCM);
the amount of its pre-funded financial resources that it is required to use — by law or due to a contractual agreement with its clearing members — to cover its losses following the default of one or more of its clearing members before using the default fund contributions of the remaining clearing members (DFCCP);
the total number of its clearing members (N);
the concentration factor (β), as set out in Article 50d.
Where the CCP has more than one default fund, it shall report the information in the first subparagraph for each default fund separately.
EBA shall develop draft implementing technical standards to specify the following:
the uniform template for the purpose of the reporting specified in paragraph 1;
the frequency and dates of the reporting specified in paragraph 2;
the situations in which the competent authority of an institution acting as a clearing member may require higher frequencies of reporting than those referred to in point (b).
EBA shall submit those draft implementing technical standards to the Commission by 1 January 2014.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
Article 50d
Calculation of specific items to be reported by the CCP
For the purposes of Article 50c, the following shall apply:
where the rules of a CCP provide that it use part or all of its financial resources in parallel to the pre-funded contributions of its clearing members in a manner that makes those resources equivalent to pre-funded contributions of a clearing member in terms of how they absorb the losses incurred by the CCP in the case of the default or insolvency of one or more of its clearing members, the CCP shall add the corresponding amount of those resources to DFCM;
a CCP shall calculate the concentration factor (β) in accordance with the following formula:
where:
PCEred,i |
= |
the reduced figure for potential future credit exposure for all contracts and transaction of a CCP with clearing member i; |
PCEred,1 |
= |
the reduced figure for potential future credit exposure for all contracts and transaction of a CCP with the clearing member that has the largest PCEred value; |
PCEred,2 |
= |
the reduced figure for potential future credit exposure for all contracts and transaction of a CCP with the clearing member that has the second largest PCEred value. |
in Article 11(15), point (b) is deleted;
in Article 89, the following paragraph is inserted:
Until 15 months after the date of entry into force of the latest of the regulatory technical standards referred to in Articles 16, 26, 29, 34, 41, 42, 44, 45, 47 and 49, or until a decision is made under Article 25 on the recognition of the CCP, whichever is earlier, that CCP shall apply the treatment specified in the third subparagraph of this paragraph.
Until the deadlines defined in the first two subparagraphs of this paragraph, and subject to the fourth subparagraph of this paragraph, where a CCP neither has a default fund nor has in place a binding arrangement with its clearing members that allows it to use all or part of the initial margin received from its clearing members as if they were pre-funded contributions, the information it is to report in accordance with Article 50c(1) shall include the total amount of initial margin it has received from its clearing members.
The deadlines referred to in the first and second subparagraphs of this paragraph may be extended by six months in accordance with a Commission implementing act adopted pursuant to Article 497(3) of Regulation (EU) No 575/2013.’ .
PART ELEVEN
FINAL PROVISIONS
Article 521
Entry into force and date of application
This Regulation shall apply from 1 January 2014, with the exception of:
Article 8(3), Article 21 and Article 451(1), which shall apply from 1 January 2015;
Article 413(1), which shall apply from 1 January 2016;
the provisions of this Regulation that require the ESAs to submit to the Commission draft technical standards and the provisions of this Regulation that empower the Commission to adopt delegated acts or implementing acts, which shall apply from 28 June 2013.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
ANNEX I
Classification of off-balance sheet items
1. Full risk:
guarantees having the character of credit substitutes, (e.g. guarantees for the good payment of credit facilities);
credit derivatives;
acceptances;
endorsements on bills not bearing the name of another institution or investment firm;
transactions with recourse (e.g. factoring, invoice discount facilities);
irrevocable standby letters of credit having the character of credit substitutes;
assets purchased under outright forward purchase agreements;
forward deposits;
the unpaid portion of partly-paid shares and securities;
asset sale and repurchase agreements as referred to in Article 12(3) and (5) of Directive 86/635/EEC;
other items also carrying full risk.
2. Medium risk:
trade finance off-balance sheet items, namely documentary credits issued or confirmed (see also ‘Medium/low risk’);
other off-balance sheet items:
shipping guarantees, customs and tax bonds;
undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of more than one year;
note issuance facilities (NIFs) and revolving underwriting facilities (RUFs);
other items also carrying medium risk and as communicated to EBA.
3. Medium/low risk:
trade finance off-balance sheet items:
documentary credits in which underlying shipment acts as collateral and other self-liquidating transactions;
warranties (including tender and performance bonds and associated advance payment and retention guarantees) and guarantees not having the character of credit substitutes;
irrevocable standby letters of credit not having the character of credit substitutes;
other off-balance sheet items:
undrawn credit facilities which comprise agreements to lend, purchase securities, provide guarantees or acceptance facilities with an original maturity of up to and including one year which may not be cancelled unconditionally at any time without notice or that do not effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness;
other items also carrying medium/low risk and as communicated to EBA.
4. Low risk:
undrawn credit facilities comprising agreements to lend, purchase securities, provide guarantees or acceptance facilities which may be cancelled unconditionally at any time without notice, or that do effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness. Retail credit lines may be considered as unconditionally cancellable if the terms permit the institution to cancel them to the full extent allowable under consumer protection and related legislation;
undrawn credit facilities for tender and performance guarantees which may be cancelled unconditionally at any time without notice, or that do effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness; and
other items also carrying low risk and as communicated to EBA.
ANNEX II
Types of derivatives
1. Interest-rate contracts:
single-currency interest rate swaps;
basis-swaps;
forward rate agreements;
interest-rate futures;
interest-rate options;
other contracts of similar nature.
2. Foreign-exchange contracts and contracts concerning gold:
cross-currency interest-rate swaps;
forward foreign-exchange contracts;
currency futures;
currency options;
other contracts of a similar nature;
contracts of a nature similar to (a) to (e) concerning gold.
3. Contracts of a nature similar to those in points 1(a) to (e) and 2(a) to (d) of this Annex concerning other reference items or indices. This includes as a minimum all instruments specified in points (4) to (7), (9), (10) and (11) of Section C of Annex I to Directive 2014/65/EU not otherwise included in point 1 or 2 of this Annex.
ANNEX III
Items subject to supplementary reporting of liquid assets
1. Cash.
2. Central bank exposures, to the extent that these exposures can be drawn down in times of stress.
3. Transferable securities representing claims on or claims guaranteed by sovereigns, central banks, non-central government public sector entities, regions with fiscal autonomy to raise and collect taxes and local authorities, the Bank for International Settlements, the International Monetary Fund, the European Union, the European Financial Stability Facility, the European Stability Mechanism or multilateral development banks and satisfying all of the following conditions:
they are assigned a 0 % risk-weight under Chapter 2, Title II of Part Three;
they are not an obligation of an institution or investment firm or any of its affiliated entities.
4. Transferable securities other than those referred to in point 3 representing claims on or claims guaranteed by sovereigns or central banks issued in domestic currencies by the sovereign or central bank in the currency and country in which the liquidity risk is being taken or issued in foreign currencies, to the extent that holding of such debt matches the liquidity needs of the bank's operations in that third country.
5. Transferable securities representing claims on or claims guaranteed by sovereigns, central banks, non-central government public sector entities, regions with fiscal autonomy to raise and collect taxes and local authorities, or multilateral development banks and satisfying all of the following conditions:
they are assigned a 20 % risk-weight under Chapter 2, Title II of Part Three;
they are not an obligation of an institution or investment firm or any of its affiliated entities.
6. Transferable securities other than those referred to in points 3, 4 and 5 that qualify for a 20 % or better risk weight under Chapter 2, Title II of Part Three or are internally rated as having an equivalent credit quality, and fulfil any of the following conditions:
they do not represent a claim on an SSPE, an institution or investment firm or any of its affiliated entities;
they are bonds eligible for the treatment set out in Article 129(4) or (5);
they are covered bonds as defined in point (1) of Article 3 of Directive (EU) 2019/2162 other than those referred to in point (b) of this point.
7. Transferable securities other than those referred to in points 3 to 6 that qualify for a 50 % or better risk weight under Chapter 2 of Title II of Part Three or are internally rated as having an equivalent credit quality, and do not represent a claim on an SSPE, an institution or investment firm or any of its affiliated entities.
8. Transferable securities other than those referred to in points 3 to 7 that are collateralised by assets that qualify for a 35 % or better risk weight under Chapter 2, Title II of Part Three or are internally rated as having an equivalent credit quality, and are fully and completely secured by mortgages on residential property in accordance with Article 125.
9. Standby credit facilities granted by central banks within the scope of monetary policy to the extent that these facilities are not collateralised by liquid assets and excluding emergency liquidity assistance.
10. Legal or statutory minimum deposits with the central credit institution and other statutory or contractually available liquid funding from the central credit institution or institutions that are members of the network referred to in Article 113(7), or eligible for the waiver provided in Article 10, to the extent that this funding is not collateralised by liquid assets, if the credit institution belongs to a network in accordance with legal or statutory provisions.
11. Exchange traded, centrally cleared common equity shares that are a constituent of a major stock index, denominated in the domestic currency of the Member State and not issued by an institution or investment firm or any of its affiliates.
12. Gold listed on a recognised exchange, held on an allocated basis.
All items with the exception of those referred to in points 1, 2 and 9 must satisfy all of the following conditions:
they are traded in simple repurchase agreements or cash markets characterised by a low level of concentration;
they have a proven record as a reliable source of liquidity by either repurchase agreement or sale even during stressed market conditions;
they are unencumbered.
ANNEX IV
Correlation table
This Regulation |
Directive 2006/48/EC |
Directive 2006/49/EC |
Article 1 |
|
|
Article 2 |
|
|
Article 3 |
|
|
Point (1) of Article 4(1) |
Article 4 (1) |
|
Point (2) of Article 4(1) |
|
Article 3(1)b |
Point (3) of Article 4(1) |
|
Article 3(1)c |
Point (4) of Article 4(1) |
|
Article 3(1)p |
Points (5)-(7) of Article 4(1) |
|
|
Point (8) of Article 4(1) |
Article 4(18) |
|
Points (9)-(12) of Article 4(1) |
|
|
Point (13) of Article 4(1) |
Article 4(41) |
|
Point (14) of Article 4(1) |
Article 4(42) |
|
Point (15) of Article 4(1) |
Article 4(12) |
|
Point (16) of Article 4(1) |
Article 4(13) |
|
Point (17) of Article 4(1) |
Article 4(3) |
|
Point (18) of Article 4(1) |
Article 4(21) |
|
Point (19) of Article 4(1) |
|
|
Point (20) of Article 4(1) |
Article 4(19) |
|
Point (21) of Article 4(1) |
|
|
Point (22) of Article 4(1) |
Article 4(20) |
|
Point (23) of Article 4(1) |
|
|
Point (24) of Article 4(1) |
|
|
Point (25) of Article 4(1) |
|
Article 3(1)c |
Point (26) of Article 4(1) |
Article 4(5) |
|
Point (27) of Article 4(1) |
|
|
Point (28) of Article 4(1) |
Article 4(14) |
|
Point (29) of Article 4(1) |
Article 4(16) |
|
Point (30) of Article 4(1) |
Article 4(15) |
|
Point (31) of Article 4(1) |
Article 4(17) |
|
Points (32)-(34) of Article 4(1) |
|
|
Point (35) of Article 4(1) |
Article 4(10) |
|
Point (36) of Article 4(1) |
|
|
Point (37) of Article 4(1) |
Article 4(9) |
|
Point (38) of Article 4(1) |
Article 4(46) |
|
Point (39) of Article 4(1) |
Article 4(45) |
|
Point (40) of Article 4(1) |
Article 4(4) |
|
Point (41) of Article 4(1) |
Article 4(48) |
|
Point (42) of Article 4(1) |
Article 4(2) |
|
Point (43) of Article 4(1) |
Article 4(7) |
|
Point (44) of Article 4(1) |
Article 4(8) |
|
Point (45) of Article 4(1) |
|
|
Point (46) of Article 4(1) |
Article 4(23) |
|
Points (47)-(49) of Article 4(1) |
|
|
Point (50) of Article 4(1) |
|
Article 3(1)e |
Point (51) of Article 4(1) |
|
|
Point (52) of Article 4(1) |
Article 4(22) |
|
Point (53) of Article 4(1) |
Article 4(24) |
|
Point (54) of Article 4(1) |
Article 4(25) |
|
Point (55) of Article 4(1) |
Article 4(27) |
|
Point (56) of Article 4(1) |
Article 4(28) |
|
Point (57) of Article 4(1) |
Article 4(30) |
|
Point (58) of Article 4(1) |
Article 4(31) |
|
Point (59) of Article 4(1) |
Article 4(32) |
|
Point (60) of Article 4(1) |
Article 4(35) |
|
Point (61) of Article 4(1) |
Article 4(36) |
|
Point (62) of Article 4(1) |
Article 4(40) |
|
Point (63) of Article 4(1) |
Article 4(40a) |
|
Point (64) of Article 4(1) |
Article 4(40b) |
|
Point (65) of Article 4(1) |
Article 4(43) |
|
Point (66) of Article 4(1) |
Article 4(44) |
|
Point (67) of Article 4(1) |
Article 4(39) |
|
Points (68)-(71) of Article 4(1) |
|
|
Point (72) of Article 4(1) |
Article 4(47) |
|
Point (73) of Article 4(1) |
Article 4(49) |
|
Points (74)-(81) of Article 4(1) |
|
|
Point (82) of Article 4(1) |
|
Article 3(1)m |
Point (83) of Article 4(1) |
Article 4(33) |
|
Points (84)-(91) of Article 4(1) |
|
|
Point (92) of Article 4(1) |
|
Article 3(1)i |
Points (93)-(117) of Article 4(1) |
|
|
Point (118) of Article 4(1) |
|
Article 3(1)r |
Points (119)-(128) of Article 4(1) |
|
|
Article 4(2) |
|
|
Article 4(3) |
|
|
Article 6(1) |
Article 68(1) |
|
Article 6(2) |
Article 68(2) |
|
Article 6(3) |
Article 68(3) |
|
Article 6(4) |
|
|
Article 6(5) |
|
|
Article 7(1) |
Article 69(1) |
|
Article 7(2) |
Article 69(2) |
|
Article 7(3) |
Article 69(3) |
|
Article 8(1) |
|
|
Article 8(2) |
|
|
Article 8(3) |
|
|
Article 9(1) |
Article 70(1) |
|
Article 9(2) |
Article 70(2) |
|
Article 9(3) |
Article 70(3) |
|
Article 10(1) |
Article 3(1) |
|
Article 10(2) |
|
|
Article 11(1) |
Article 71(1) |
|
Article 11(2) |
Article 71(2) |
|
Article 11(3) |
|
|
Article 11(4) |
Article 3(2) |
|
Article 11(5) |
|
|
Article 12 |
|
|
Article 13(1) |
Article 72(1) |
|
Article 13(2) |
Article 72(2) |
|
Article 13(3) |
Article 72(3) |
|
Article 13(4) |
|
|
Article 14(1) |
Article 73(3) |
|
Article 14(2) |
|
|
Article 14(3) |
|
|
Article 15 |
|
Article 22 |
Article 16 |
|
|
Article 17(1) |
|
Article 23 |
Article 17(2) |
|
|
Article 17(3) |
|
|
Article 18(1) |
Article 133(1) subparagraph 1 |
|
Article 18(2) |
Article 133(1) subparagraph 2 |
|
Article 18(3) |
Article 133(1) subparagraph 3 |
|
Article 18(4) |
Article 133(2) |
|
Article 18(5) |
Article 133(3) |
|
Article 18(6) |
Article 134(1) |
|
Article 18(7) |
|
|
Article 18(8) |
Article 134(2) |
|
Article 19(1) |
Article 73(1) (b) |
|
Article 19(2) |
Article 73(1) |
|
Article 19(3) |
Article 73(1) subparagraph 2 |
|
Article 20(1) |
Article 105(3) Article 129(2) and Annex X, Part 3, points 30 and 31 |
|
Article 20(2) |
Article 129(2) subparagraph 3 |
|
Article 20(3) |
Article 129(2) subparagraph 4 |
|
Article 20(4) |
Article 129(2) subparagraph 5 |
|
Article 20(5) |
|
|
Article 20(6) |
Article 84(2) |
|
Article 20(7) |
Article 129(2) subparagraph 6 |
|
Article 20(8) |
Article 129(2) subparagraphs 7 and 8 |
|
Article 21(1) |
|
|
Article 21(2) |
|
|
Article 21(3) |
|
|
Article 21(4) |
|
|
Article 22 |
Article 73(2) |
|
Article 23 |
|
Article 3(1) 2. Subparagraph |
Article 24 |
Article 74 (1) |
|
Article 25 |
|
|
Article 26 (1) |
Article 57(a) |
|
Article 26 (1)(a) |
Article 57(a) |
|
Article 26 (1)(b) |
Article 57(a) |
|
Article 26 (1)(c) |
Article 57(b) |
|
Article 26 (1)(d) |
|
|
Article 26 (1)(e) |
Article 57(b) |
|
Article 26 (1)(f) |
Article 57(c) |
|
Article 26 (1) first subparagraph 1 |
Article 61 subparagraph 2 |
|
Article 26 (2)(a) |
Article 57 subparagraphs 2, 3 and 4 |
|
Article 26 (2)(b) |
Article 57 subparagraphs 2, 3 and 4 |
|
Article 26 (3) |
|
|
Article 26 (4) |
|
|
Article 27 |
|
|
Article 28(1)(a) |
|
|
Article 28(1)(b) |
Article 57(a) |
|
Article 28(1)(c) |
Article 57(a) |
|
Article 28(1)(d) |
|
|
Article 28(1)(e) |
|
|
Article 28(1)(f) |
|
|
Article 28(1)(g) |
|
|
Article 28(1)(h) |
|
|
Article 28(1)(i) |
Article 57(a) |
|
Article 28(1)(j) |
Article 57(a) |
|
Article 28(1)(k) |
|
|
Article 28(1)(l) |
|
|
Article 28(1)(m) |
|
|
Article 28(2) |
|
|
Article 28(3) |
|
|
Article 28(4) |
|
|
Article 28(5) |
|
|
Article 29 |
|
|
Article 30 |
|
|
Article 31 |
|
|
Article 32(1)(a) |
|
|
Article 32(1)(b) |
Article 57 subparagraph 4 |
|
Article 32(2) |
|
|
Article 33(1)(a) |
Article 64(4) |
|
Article 33(1)(b) |
Article 64(4) |
|
Article 33(1)(c) |
|
|
Article 33(2) |
|
|
Article 33(3)(a) |
|
|
Article 33(3)(b) |
|
|
Article 33(3)(c) |
|
|
Article 33(3)(d) |
|
|
Article 33(4) |
|
|
Article 34 |
Article 64(5) |
|
Article 35 |
|
|
Article 36(1)(a) |
Article 57(k) |
|
Article 36(1)(b) |
Article 57(j) |
|
Article 36(1)(c) |
|
|
Article 36(1)(d) |
Article 57(q) |
|
Article 36(1)(e) |
|
|
Article 36(1)(f) |
Article 57(i) |
|
Article 36(1)(g) |
|
|
Article 36(1)(h) |
Article 57(n) |
|
Article 36(1)(i) |
Article 57(m) |
|
Article 36(1)(j) |
Article 66(2) |
|
Article 36(1)(k)(i) |
|
|
Article 36(1)(k)(ii) |
Article 57(r) |
|
Article 36(1)(k)(iii) |
|
|
Article 36(1)(k)(iv) |
|
|
Article 36(1)(k)(v) |
|
|
Article 36(1)(l) |
Article 61 subparagraph 2 |
|
Article 36(2) |
|
|
Article 36(3) |
|
|
Article 37 |
|
|
Article 38 |
|
|
Article 39 |
|
|
Article 40 |
|
|
Article 41 |
|
|
Article 42 |
|
|
Article 43 |
|
|
Article 44 |
|
|
Article 45 |
|
|
Article 46 |
|
|
Article 47 |
|
|
Article 48 |
|
|
Article 49(1) |
Article 59 |
|
Article 49(2) |
Article 60 |
|
Article 49(3) |
|
|
Article 49(4) |
|
|
Article 49(5) |
|
|
Article 49(6) |
|
|
Article 50 |
Article 66, Article 57(ca), Article 63a |
|
Article 51 |
Article 66, Article 57(ca), Article 63a |
|
Article 52 |
Article 63a |
|
Article 53 |
|
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Article 54 |
|
|
Article 55 |
|
|
Article 56 |
|
|
Article 57 |
|
|
Article 58 |
|
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Article 59 |
|
|
Article 60 |
|
|
Article 61 |
Article 66, Article 57(ca), Article 63a |
|
Article 62(a) |
Article 64(3) |
|
Article 62(b) |
|
|
Article 62(c) |
|
|
Article 62(d) |
Article 63(3) |
|
Article 63 |
Article 63(1), Article 63(2), Article 64(3) |
|
Article 64 |
Article 64 (3) (c) |
|
Article 65 |
|
|
Article 66 |
Article 57, Article 66(2) |
|
Article 67 |
Article 57, Article 66(2) |
|
Article 68 |
|
|
Article 69 |
Article 57, Article 66(2) |
|
Article 70 |
Article 57, Article 66(2) |
|
Article 71 |
Article 66, Article 57(ca), Article 63a |
|
Article 72 |
Article 57, Article 66 |
|
Article 73 |
|
|
Article 74 |
|
|
Article 75 |
|
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Article 76 |
|
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Article 77 |
Article 63a(2) |
|
Article 78(1) |
Article 63a(2) |
|
Article 78(2) |
|
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Article 78(3) |
|
|
Article 78(4) |
Article 63a(2) subparagraph 4 |
|
Article 78(5) |
|
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Article 79 |
Article 58 |
|
Article 80 |
|
|
Article 81 |
Article 65 |
|
Article 82 |
Article 65 |
|
Article 83 |
|
|
Article 84 |
Article 65 |
|
Article 85 |
Article 65 |
|
Article 86 |
Article 65 |
|
Article 87 |
Article 65 |
|
Article 88 |
Article 65 |
|
Article 89 |
Article 120 |
|
Article 90 |
Article 122 |
|
Article 91 |
Article 121 |
|
Article 92 |
Article 66, Article 75 |
|
Article 93(1)-(4) |
Article 10(1)-(4) |
|
Article 93(5) |
|
|
Article 94 |
|
Article 18(2)-(4) |
Article 95 |
|
|
Article 96 |
|
|
Article 97 |
|
|
Article 98 |
|
Article 24 |
Article 99(1) |
Article 74(2) |
|
Article 99(2) |
|
|
Article 100 |
|
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Article 101(1) |
|
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Article 101(2) |
|
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Article 101(3) |
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Article 102(1) |
|
Article 11(1) |
Article 102(2) |
|
Article 11(3) |
Article 102(3) |
|
Article 11(4) |
Article 102(4) |
|
Annex VII, Part C, point 1 |
Article 103 |
|
Annex VII, Part A, point 1 |
Article 104(1) |
|
Annex VII, Part D, point 1 |
Article 104(2) |
|
Annex VII, Part D, point 2 |
Article 105(1) |
|
Article 33(1) |
Article 105(2)-(10) |
|
Annex VII, Part B, points 1-9 |
Article 105(11)-(13) |
|
Annex VII, Part B, points 11-13 |
Article 106 |
|
Annex VII, Part C, points 1-3 |
Article 107 |
Article 76, Article 78(4) and Annex III, Part 2, point 6 |
|
Article 108(1) |
Article 91 |
|
Article 108(2) |
|
|
Article 109 |
Article 94 |
|
Article 110 |
|
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Article 111 |
Article 78(1)-(3) |
|
Article 112 |
Article 79(1) |
|
Article 113(1) |
Article 80(1) |
|
Article 113(2) |
Article 80(2) |
|
Article 113(3) |
Article 80(4) |
|
Article 113(4) |
Article 80(5) |
|
Article 113(5) |
Article 80(6) |
|
Article 113(6) |
Article 80(7) |
|
Article 113(7) |
Article 80(8) |
|
Article 114 |
Annex VI, Part I, points 1-5 |
|
Article 115(1) (4) |
Annex VI, Part I, points 8-11 |
|
Article 115(5) |
|
|
Article 116(1) |
Annex VI, Part I, point 14 |
|
Article 116(2) |
Annex VI, Part I, point 14 |
|
Article 116(3) |
|
|
Article 116(4) |
Annex VI, Part I, point 15 |
|
Article 116(5) |
Annex VI, Part I, point 17 |
|
Article 116(6) |
Annex VI, Part I, point 17 |
|
Article 117(1) |
Annex VI, Part I, point 18 and 19 |
|
Article 117(2) |
Annex VI, Part I, point 20 |
|
Article 117(3) |
Annex VI, Part I, point 21 |
|
Article 118 |
Annex VI, Part I, point 22 |
|
Article 119(1) |
|
|
Article 119(2) |
Annex VI, Part I, points 37 and 38 |
|
Article 119(3) |
Annex VI, Part I, point 40 |
|
Article 119(4) |
|
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Article 119(5) |
|
|
Article 120(1) |
Annex VI, Part I, point 29 |
|
Article 120(2) |
Annex VI, Part I, point 31 |
|
Article 120(3) |
Annex VI, Part I, points 33-36 |
|
Article 121(1) |
Annex VI, Part I, point 26 |
|
Article 121(2) |
Annex VI, Part I, point 25 |
|
Article 121(3) |
Annex VI, Part I, point 27 |
|
Article 122 |
Annex VI, Part I, points 41 and 42 |
|
Article 123 |
Article 79(2), 79(3) and Annex VI, Part I, point 43 |
|
Article 124(1) |
Annex VI, Part I, point 44 |
|
Article 124(2) |
|
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Article 124(3) |
|
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Article 125(1)-(3) |
Annex VI, Part I, points 45-49 |
|
Article 125(4) |
|
|
Article 126(1) and (2) |
Annex VI, Part I, points 51-55 |
|
Article 126(3) and (4) |
Annex VI, Part I, points 58 and 59 |
|
Article 127(1) and (2) |
Annex VI, Part I, points 61 and 62 |
|
Article 127(3) and (4) |
Annex VI, Part I, points 64 and 65 |
|
Article 128(1) |
Annex VI, Part I, points 66 and 76 |
|
Article 128(2) |
Annex VI, Part I, point 66 |
|
Article 128(3) |
|
|
Article 129(1) |
Annex VI, Part I, point 68, paragraphs 1 and 2 |
|
Article 129(2) |
Annex VI, Part I, point 69 |
|
Article 129(3) |
Annex VI, Part I, point 71 |
|
Article 129(4) |
Annex VI, Part I, point 70 |
|
Article 129(5) |
|
|
Article 130 |
Annex VI, Part I, point 72 |
|
Article 131 |
Annex VI, Part I, point 73 |
|
Article 132(1) |
Annex VI, Part I, point 74 |
|
Article 132(2) |
Annex VI, Part I, point 75 |
|
Article 132(3) |
Annex VI, Part I, points 77 and 78 |
|
Article 132(4) |
Annex VI, Part I, point 79 |
|
Article 132(5) |
Annex VI, Part I, point 80 and point 81 |
|
Article 133(1) |
Annex VI, Part I, point 86 |
|
Article 133(2) |
|
|
Article 133(3) |
|
|
Article 134(1)-(3) |
Annex VI, Part I, points 82-84 |
|
Article 134(4)-(7) |
Annex VI, Part I, points 87-90 |
|
Article 135 |
Article 81(1), (2) and (4) |
|
Article 136(1) |
Article 82(1) |
|
Article 136(2) |
Annex VI, Part 2, points 12-16 |
|
Article 136(3) |
Article 150(3) |
|
Article 137(1) |
Annex VI, Part I, point 6 |
|
Article 137(2) |
Annex VI, Part I, point 7 |
|
Article 137(3) |
|
|
Article 138 |
Annex VI, Part III, points 1-7 |
|
Article 139 |
Annex VI, Part III, points 8-17 |
|
Article 140(1) |
|
|
Article 140(2) |
|
|
Article 141 |
|
|
Article 142(1) |
|
|
Article 142(2) |
|
|
Article 143(1) |
Article 84 (1) and Annex VII, Part 4, point 1 |
|
Article 143(1) |
Article 84(2) |
|
Article 143(1) |
Article 84(3) |
|
Article 143(1) |
Article 84(4) |
|
Article 143(1) |
|
|
Article 144 |
|
|
Article 145 |
|
|
Article 146 |
|
|
Article 147(1) |
Article 86(9) |
|
Article 147(2)-(9) |
Article 86(1)-(8) |
|
Article 148(1) |
Article 85(1) |
|
Article 148(2) |
Article 85(2) |
|
Article 148(3) |
|
|
Article 148(4) |
Article 85(3) |
|
Article 148(5) |
|
|
Article 148(1) |
|
|
Article 149 |
Article 85(4) and (5) |
|
Article 150(1) |
Article 89(1) |
|
Article 150(2) |
Article 89(2) |
|
Article 150(3) |
|
|
Article 150(4) |
|
|
Article 151 |
Article 87(1)-(10) |
|
Article 152(1) and (2) |
Article 87(11) |
|
Article 152(3) and (4) |
Article 87(12) |
|
Article 152(5) |
|
|
Article 153(1) |
Annex VII, Part I, point 3 |
|
Article 153(2) |
|
|
Article 153(3)-(8) |
Annex VII, Part I, points 4-9 |
|
Article 153(9) |
|
|
Article 154 |
Annex VII, Part I, points 10-16 |
|
Article 155(1) |
Annex VII, Part I, points 17 and 18 |
|
Article 155(2) |
Annex VII, Part I, points 19 to 21 |
|
Article 155(3) |
Annex VII, Part I, points 22 to 24 |
|
Article 155(4) |
Annex VII, Part I, points 25 to 26 |
|
Article 156 |
|
|
Article 156 |
Annex VII, Part I, point 27 |
|
Article 157(1) |
Annex VII, Part I, point 28 |
|
Article 157(2)-(5) |
|
|
Article 158(1) |
Article 88(2) |
|
Article 158(2) |
Article 88(3) |
|
Article 158(3) |
Article 88(4) |
|
Article 158(4) |
Article 88(6) |
|
Article 158(5) |
Annex VII, Part I, point 30 |
|
Article 158(6) |
Annex VII, Part I, point 31 |
|
Article 158(7) |
Annex VII, Part I, point 32 |
|
Article 158(8) |
Annex VII, Part I, point 33 |
|
Article 158(9) |
Annex VII, Part I, point 34 |
|
Article 158(10) |
Annex VII, Part I, point 35 |
|
Article 158(11) |
|
|
Article 159 |
Annex VII, Part I, point 36 |
|
Article 160(1) |
Annex VII, Part II, point 2 |
|
Article 160(2) |
Annex VII, Part II, point 3 |
|
Article 160(3) |
Annex VII, Part II, point 4 |
|
Article 160(4) |
Annex VII, Part II, point 5 |
|
Article 160(5) |
Annex VII, Part II, point 6 |
|
Article 160 (6) |
Annex VII, Part II, point 7 |
|
Article 160(7) |
Annex VII, Part II, point 7 |
|
Article 161(1) |
Annex VII, Part II, point 8 |
|
Article 161(2) |
Annex VII, Part II, point 9 |
|
Article 161(3) |
Annex VII, Part II, point 10 |
|
Article 161(4) |
Annex VII, Part II, point 11 |
|
Article 162(1) |
Annex VII, Part II, point 12 |
|
Article 162(2) |
Annex VII, Part II, point 13 |
|
Article 162(3) |
Annex VII, Part II, point 14 |
|
Article 162(4) |
Annex VII, Part II, point 15 |
|
Article 162(5) |
Annex VII, Part II, point 16 |
|
Article 163(1) |
Annex VII, Part II, point 17 |
|
Article 163(2) |
Annex VII, Part II, point 18 |
|
Article 163(3) |
Annex VII, Part II, point 19 |
|
Article 163(4) |
Annex VII, Part II, point 20 |
|
Article 164(1) |
Annex VII, Part II, point 21 |
|
Article 164(2) |
Annex VII, Part II, point 22 |
|
Article 164(3) |
Annex VII, Part II, point 23 |
|
Article 164(4) |
|
|
Article 165(1) |
Annex VII, Part II, point 24 |
|
Article 165(2) |
Annex VII, Part II, point 25 and 26 |
|
Article 165(3) |
Annex VII, Part II, point 27 |
|
Article 166(1) |
Annex VII, Part III, point 1 |
|
Article 166(2) |
Annex VII, Part III, point 2 |
|
Article 166(3) |
Annex VII, Part III, point 3 |
|
Article 166(4) |
Annex VII, Part III, point 4 |
|
Article 166(5) |
Annex VII, Part III, point 5 |
|
Article 166(6) |
Annex VII, Part III, point 6 |
|
Article 166(7) |
Annex VII, Part III, point 7 |
|
Article 166(8) |
Annex VII, Part III, point 9 |
|
Article 166(9) |
Annex VII, Part III, point 10 |
|
Article 166(10) |
Annex VII, Part III, point 11 |
|
Article 167(1) |
Annex VII, Part III, point 12 |
|
Article 167(2) |
|
|
Article 168 |
Annex VII, Part III, point 13 |
|
Article 169(1) |
Annex VII, Part IV, point 2 |
|
Article 169(2) |
Annex VII, Part IV, point 3 |
|
Article 169(3) |
Annex VII, Part IV, point 4 |
|
Article 170(1) |
Annex VII, Part IV, point 5-11 |
|
Article 170(2) |
Annex VII, Part IV, point 12 |
|
Article 170(3) |
Annex VII, Part IV, points 13-15 |
|
Article 170(4) |
Annex VII, Part IV, point 16 |
|
Article 171(1) |
Annex VII, Part IV, point 17 |
|
Article 171(2) |
Annex VII, Part IV, point 18 |
|
Article 172(1) |
Annex VII, Part IV, point 19-23 |
|
Article 172(2) |
Annex VII, Part IV, point 24 |
|
Article 172(3) |
Annex VII, Part IV, point 25 |
|
Article 173(1) |
Annex VII, Part IV, points 26-28 |
|
Article 173(2) |
Annex VII, Part IV, point 29 |
|
Article 173(3) |
|
|
Article 174 |
Annex VII, Part IV, point 30 |
|
Article 175(1) |
Annex VII, Part IV, point 31 |
|
Article 175(2) |
Annex VII, Part IV, point 32 |
|
Article 175(3) |
Annex VII, Part IV, point 33 |
|
Article 175(4) |
Annex VII, Part IV, point 34 |
|
Article 175(5) |
Annex VII, Part IV, point 35 |
|
Article 176(1) |
Annex VII, Part IV, point 36 |
|
Article 176(2) |
Annex VII, Part IV, point 37 first subparagraph |
|
Article 176(3) |
Annex VII, Part IV, point 37 second subparagraph |
|
Article 176(4) |
Annex VII, Part IV, point 38 |
|
Article 176(5) |
Annex VII, Part IV, point 39 |
|
Article 177(1) |
Annex VII, Part IV, point 40 |
|
Article 177(2) |
Annex VII, Part IV, point 41 |
|
Article 177(3) |
Annex VII, Part IV, point 42 |
|
Article 178(1) |
Annex VII, Part IV, point 44 |
|
Article 178(2) |
Annex VII, Part IV, point 44 |
|
Article 178(3) |
Annex VII, Part IV, point 45 |
|
Article 178(4) |
Annex VII, Part IV, point 46 |
|
Article 178(5) |
Annex VII, Part IV, point 47 |
|
Article 178(6) |
|
|
Article 178(7) |
|
|
Article 179(1) |
Annex VII, Part IV, points 43 and 49-56 |
|
Article 179(2) |
Annex VII, Part IV, point 57 |
|
Article 180(1) |
Annex VII, Part IV, points 59-66 |
|
Article 180(2) |
Annex VII, Part IV, points 67-72 |
|
Article 180(3) |
|
|
Article 181(1) |
Annex VII, Part IV, points 73-81 |
|
Article 181(2) |
Annex VII, Part IV, point 82 |
|
Article 181(3) |
|
|
Article 182(1) |
Annex VII, Part IV, points 87-92 |
|
Article 182(2) |
Annex VII, Part IV, point 93 |
|
Article 182(3) |
Annex VII, Part IV, points 94 and 95 |
|
Article 182(4) |
|
|
Article 183(1) |
Annex VII, Part IV, points 98-100 |
|
Article 183(2) |
Annex VII, Part IV, points 101 and 102 |
|
Article 183(3) |
Annex VII, Part IV, point 103 and point 104 |
|
Article 183(4) |
Annex VII, Part IV, point 96 |
|
Article 183(5) |
Annex VII, Part IV, point 97 |
|
Article 183(6) |
|
|
Article 184(1) |
|
|
Article 184(2) |
Annex VII, Part IV, point 105 |
|
Article 184(3) |
Annex VII, Part IV, point 106 |
|
Article 184(4) |
Annex VII, Part IV, point 107 |
|
Article 184(5) |
Annex VII, Part IV, point 108 |
|
Article 184(6) |
Annex VII, Part IV, point 109 |
|
Article 185 |
Annex VII, Part IV, points 110-114 |
|
Article 186 |
Annex VII, Part IV, point 115 |
|
Article 187 |
Annex VII, Part IV, point 116 |
|
Article 188 |
Annex VII, Part IV, points 117-123 |
|
Article 189(1) |
Annex VII, Part IV, point 124 |
|
Article 189(2) |
Annex VII, Part IV, points 125 and 126 |
|
Article 189(3) |
Annex VII, Part IV, point 127 |
|
Article 190(1) |
Annex VII, Part IV, point 128 |
|
Article 190(2) |
Annex VII, Part IV, point 129 |
|
Article 190(3) (4) |
Annex VII, Part IV, point 130 |
|
Article 191 |
Annex VII, Part IV, point 131 |
|
Article 192 |
Article 90 and Annex VIII, Part 1, point 2 |
|
Article 193(1) |
Article 93 (2) |
|
Article 193(2) |
Article 93 (3) |
|
Article 193(3) |
Article 93(1) and Annex VIII, Part 3, point 1 |
|
Article 193(4) |
Annex VIII, Part 3, point 2 |
|
Article 193(5) |
Annex VIII, Part 5, point 1 |
|
Article 193(6) |
Annex VIII, Part 5, point 2 |
|
Article 194(1) |
Article 92(1) |
|
Article 194(2) |
Article 92(2) |
|
Article 194(3) |
Article 92(3) |
|
Article 194(4) |
Article 92(4) |
|
Article 194(5) |
Article 92(5) |
|
Article 194(6) |
Article 92(5) |
|
Article 194(7) |
Article 92(6) |
|
Article 194(8) |
Annex VIII, Part 2, point 1 |
|
Article 194(9) |
Annex VIII, Part 2, point 2 |
|
Article 194(10) |
|
|
Article 195 |
Annex VIII, Part 1, points 3 and 4 |
|
Article 196 |
Annex VIII, Part 1, point 5 |
|
Article 197(1) |
Annex VIII, Part 1, point 7 |
|
Article 197(2) |
Annex VIII, Part 1, point 7 |
|
Article 197(3) |
Annex VIII, Part 1, point 7 |
|
Article 197(4) |
Annex VIII, Part 1, point 8 |
|
Article 197(5) |
Annex VIII, Part 1, point 9 |
|
Article 197(6) |
Annex VIII, Part 1, point 9 |
|
Article 197(7) |
Annex VIII, Part 1, point 10 |
|
Article 197(8) |
|
|
Article 198(1) |
Annex VIII, Part 1, point 11 |
|
Article 198(2) |
Annex VIII, Part 1, point 11 |
|
Article 199(1) |
Annex VIII, Part 1, point 12 |
|
Article 199(2) |
Annex VIII, Part 1, point 13 |
|
Article 199(3) |
Annex VIII, Part 1, point 16 |
|
Article 199(4) |
Annex VIII, Part 1, points 17 and 18 |
|
Article 199(5) |
Annex VIII, Part 1, point 20 |
|
Article 199(6) |
Annex VIII, Part 1, point 21 |
|
Article 199(7) |
Annex VIII, Part 1, point 22 |
|
Article 199(8) |
|
|
Article 200 |
Annex VIII, Part 1, points 23 to 25 |
|
Article 201(1) |
Annex VIII, Part 1, points 26 and 28 |
|
Article 201(2) |
Annex VIII, Part 1, point 27 |
|
Article 202 |
Annex VIII, Part 1, point 29 |
|
Article 203 |
|
|
Article 204(1) |
Annex VIII, Part 1, point 30 and point 31 |
|
Article 204(2) |
Annex VIII, Part 1, point 32 |
|
Article 205 |
Annex VIII, Part 2, point 3 |
|
Article 206 |
Annex VIII, Part 2, points 4 to 5 |
|
Article 207(1) |
Annex VIII, Part 2, point 6 |
|
Article 207(2) |
Annex VIII, Part 2, point 6(a) |
|
Article 207(3) |
Annex VIII, Part 2, point 6(b) |
|
Article 207(4) |
Annex VIII, Part 2, point 6(c) |
|
Article 207(5) |
Annex VIII, Part 2, point 7 |
|
Article 208(1) |
Annex VIII, Part 2, point 8 |
|
Article 208(2) |
Annex VIII, Part 2, point 8(a) |
|
Article 208(3) |
Annex VIII, Part 2, point 8(b) |
|
Article 208(4) |
Annex VIII, Part 2, point 8(c) |
|
Article 208(5) |
Annex VIII, Part 2, point 8(d) |
|
Article 209(1) |
Annex VIII, Part 2, point 9 |
|
Article 209(2) |
Annex VIII, Part 2, point 9(a) |
|
Article 209(3) |
Annex VIII, Part 2, point 9(b) |
|
Article 210 |
Annex VIII, Part 2, point 10 |
|
Article 211 |
Annex VIII, Part 2, point 11 |
|
Article 212(1) |
Annex VIII, Part 2, point 12 |
|
Article 212(2) |
Annex VIII, Part 2, point 13 |
|
Article 213 (1) |
Annex VIII, Part 2, point 14 |
|
Article 213(2) |
Annex VIII, Part 2, point 15 |
|
Article 213(3) |
|
|
Article 214(1) |
Annex VIII, Part 2, point 16(a) to (c) |
|
Article 214(2) |
Annex VIII, Part 2, point 16 |
|
Article 214(3) |
Annex VIII, Part 2, point 17 |
|
Article 215(1) |
Annex VIII, Part 2, point 18 |
|
Article 215(2) |
Annex VIII, Part 2, point 19 |
|
Article 216(1) |
Annex VIII, Part 2, point 20 |
|
Article 216(2) |
Annex VIII, Part 2, point 21 |
|
Article 217(1) |
Annex VIII, Part 2, point 22 |
|
Article 217(2) |
Annex VIII, Part 2, point 22(c) |
|
Article 217(3) |
Annex VIII, Part 2, point 22(c) |
|
Article 218 |
Annex VIII, Part 3, point 3 |
|
Article 219 |
Annex VIII, Part 3, point 4 |
|
Article 220(1) |
Annex VIII, Part 3, point 5 |
|
Article 220(2) |
Annex VIII, Part 3, points 6, 8 to 10 |
|
Article 220(3) |
Annex VIII, Part 3, point 11 |
|
Article 220(4) |
Annex VIII, Part 3, points 22 and 23 |
|
Article 220(5) |
Annex VIII, Part 3, point 9 |
|
Article 221(1) |
Annex VIII, Part 3, point 12 |
|
Article 221(2) |
Annex VIII, Part 3, point 12 |
|
Article 221(3) |
Annex VIII, Part 3, points 13 to 15 |
|
Article 221(4) |
Annex VIII, Part 3, point16 |
|
Article 221(5) |
Annex VIII, Part 3, points 18 and 19 |
|
Article 221(6) |
Annex VIII, Part 3, points 20 and 21 |
|
Article 221(7) |
Annex VIII, Part 3, point 17 |
|
Article 221(8) |
Annex VIII, Part 3, points 22 and 23 |
|
Article 221(9) |
|
|
Article 222(1) |
Annex VIII, Part 3, point 24 |
|
Article 222(2) |
Annex VIII, Part 3, point 25 |
|
Article 222(3) |
Annex VIII, Part 3, point 26 |
|
Article 222(4) |
Annex VIII, Part 3, point 27 |
|
Article 222(5) |
Annex VIII, Part 3, point 28 |
|
Article 222(6) |
Annex VIII, Part 3, point 29 |
|
Article 222(7) |
Annex VIII, Part 3, points 28 and 29 |
|
Article 223(1) |
Annex VIII, Part 3, points 30 to 32 |
|
Article 223(2) |
Annex VIII, Part 3, point 33 |
|
Article 223(3) |
Annex VIII, Part 3, point 33 |
|
Article 223(4) |
Annex VIII, Part 3, point 33 |
|
Article 223(5) |
Annex VIII, Part 3, point 33 |
|
Article 223(6) |
Annex VIII, Part 3, points 34 and 35 |
|
Article 223(7) |
Annex VIII, Part 3, point 35 |
|
Article 224(1) |
Annex VIII, Part 3, point 36 |
|
Article 224(2) |
Annex VIII, Part 3, point 37 |
|
Article 224(3) |
Annex VIII, Part 3, point 38 |
|
Article 224(4) |
Annex VIII, Part 3, point 39 |
|
Article 224(5) |
Annex VIII, Part 3, point 40 |
|
Article 224(6) |
Annex VIII, Part 3, point 41 |
|
Article 225(1) |
Annex VIII, Part 3, points 42 to 46 |
|
Article 225(2) |
Annex VIII, Part 3, points 47 to 52 |
|
Article 225(3) |
Annex VIII, Part 3, points 53 to 56 |
|
Article 226 |
Annex VIII, Part 3, point 57 |
|
Article 227(1) |
Annex VIII, Part 3, point 58 |
|
Article 227(2) |
Annex VIII, Part 3, point 58(a) to (h) |
|
Article 227(3) |
Annex VIII, Part 3, point 58(h) |
|
Article 228(1) |
Annex VIII, Part 3, point 60 |
|
Article 228(2) |
Annex VIII, Part 3, point 61 |
|
Article 229(1) |
Annex VIII, Part 3, points 62 to 65 |
|
Article 229(2) |
Annex VIII, Part 3, point 66 |
|
Article 229(3) |
Annex VIII, Part 3, points 63 and 67 |
|
Article 230(1) |
Annex VIII, Part 3, points 68 to 71 |
|
Article 230(2) |
Annex VIII, Part 3, point 72 |
|
Article 230(3) |
Annex VIII, Part 3, points 73 and 74 |
|
Article 231(1) |
Annex VIII, Part 3, point 76 |
|
Article 231(2) |
Annex VIII, Part 3, point 77 |
|
Article 231(3) |
Annex VIII, Part 3, point 78 |
|
Article 231(1) |
Annex VIII, Part 3, point 79 |
|
Article 231(2) |
Annex VIII, Part 3, point 80 |
|
Article 231(3) |
Annex VIII, Part 3, point 80a |
|
Article 231(4) |
Annex VIII, Part 3, points 81 to 82 |
|
Article 232(1) |
Annex VIII, Part 3, point 83 |
|
Article 232(2) |
Annex VIII, Part 3, point 83 |
|
Article 232(3) |
Annex VIII, Part 3, point 84 |
|
Article 232(4) |
Annex VIII, Part 3, point 85 |
|
Article 234 |
Annex VIII, Part 3, point 86 |
|
Article 235(1) |
Annex VIII, Part 3, point 87 |
|
Article 235(2) |
Annex VIII, Part 3, point 88 |
|
Article 235(3) |
Annex VIII, Part 3, point 89 |
|
Article 236(1) |
Annex VIII, Part 3, point 90 |
|
Article 236(2) |
Annex VIII, Part 3, point 91 |
|
Article 236(3) |
Annex VIII, Part 3, point 92 |
|
Article 237(1) |
Annex VIII, Part 4, point 1 |
|
Article 237(2) |
Annex VIII, Part 4, point 2 |
|
Article 238(1) |
Annex VIII, Part 4, point 3 |
|
Article 238(2) |
Annex VIII, Part 4, point 4 |
|
Article 238(3) |
Annex VIII, Part 4, point 5 |
|
Article 239(1) |
Annex VIII, Part 4, point 6 |
|
Article 239(2) |
Annex VIII, Part 4, point 7 |
|
Article 239(3) |
Annex VIII, Part 4, point 8 |
|
Article 240 |
Annex VIII, Part 6, point 1 |
|
Article 241 |
Annex VIII, Part 6, point 2 |
|
Article 242(1) to (9) |
Annex IX, Part I, point 1 |
|
Article 242(10) |
Article 4 point 37 |
|
Article 242(11) |
Article 4 point 38 |
|
Article 242(12) |
|
|
Article 242(13) |
|
|
Article 242(14) |
|
|
Article 242(15) |
|
|
Article 243(1) |
Annex IX, Part II, point 1 |
|
Article 243(2) |
Annex IX, Part II, point 1a |
|
Article 243(3) |
Annex IX, Part II, point 1b |
|
Article 243(4) |
Annex IX, Part II, point 1c |
|
Article 243(5) |
Annex IX, Part II, point 1d |
|
Article 243(6) |
|
|
Article 244(1) |
Annex IX, Part II, point 2 |
|
Article 244(2) |
Annex IX, Part II, point 2a |
|
Article 244(3) |
Annex IX, Part II, point 2b |
|
Article 244(4) |
Annex IX, Part II, point 2c |
|
Article 244(5) |
Annex IX, Part II, point 2d |
|
Article 244(6) |
|
|
Article 245(1) |
Article 95(1) |
|
Article 245(2) |
Article 95(2) |
|
Article 245(3) |
Article 96(2) |
|
Article 245(4) |
Article 96(4) |
|
Article 245(5) |
|
|
Article 245(6) |
|
|
Article 246(1) |
Annex IX, Part IV, points 2 and 3 |
|
Article 246(2) |
Annex IX, Part IV, point 5 |
|
Article 246(3) |
Annex IX, Part IV, point 5 |
|
Article 247(1) |
Article 96(3), Annex IX, Part IV, point 60 |
|
Article 247(2) |
Annex IX, Part IV, point 61 |
|
Article 247(3) |
|
|
Article 247(4) |
|
|
Article 248(1) |
Article 101(1) |
|
Article 248(2) |
|
|
Article 248(3) |
Article 101(2) |
|
Article 249 |
Annex IX, Part II, points 3 and 4 |
|
Article 250 |
Annex IX, Part II, points 5-7 |
|
Article 251 |
Annex IX, Part IV, point 6-7 |
|
Article 252 |
Annex IX, Part IV, point 8 |
|
Article 253(1) |
Annex IX, Part IV, point 9 |
|
Article 253(2) |
Annex IX, Part IV, point 10 |
|
Article 254 |
Annex IX, Part IV, point 11-12 |
|
Article 255(1) |
Annex IX, Part IV, point 13 |
|
Article 255(2) |
Annex IX, Part IV, point 15 |
|
Article 256(1) |
Article 100(1) |
|
Article 256(2) |
Annex IX, Part IV, point 17-20 |
|
Article 256(3) |
Annex IX, Part IV, point 21 |
|
Article 256(4) |
Annex IX, Part IV, points 22-23 |
|
Article 256(5) |
Annex IX, Part IV, point 24-25 |
|
Article 256(6) |
Annex IX, Part IV, point 26-29 |
|
Article 256(7) |
Annex IX, Part IV, point 30 |
|
Article 256(8) |
Annex IX, Part IV, point 32 |
|
Article 256(9) |
Annex IX, Part IV, point 33 |
|
Article 257 |
Annex IX, Part IV, point 34 |
|
Article 258 |
Annex IX, Part IV, point 35-36 |
|
Article 259(1) |
Annex IX, Part IV, points 38-41 |
|
Article 259(2) |
Annex IX, Part IV, point 42 |
|
Article 259(3) |
Annex IX, Part IV, point 43 |
|
Article 259(4) |
Annex IX, Part IV, point 44 |
|
Article 259(5) |
|
|
Article 260 |
Annex IX, Part IV, point 45 |
|
Article 261(1) |
Annex IX, Part IV, point 46-47, 49 |
|
Article 261(2) |
Annex IX, Part IV, point 51 |
|
Article 262(1) |
Annex IX, Part IV, point 52, 53 |
|
Article 262(2) |
Annex IX, Part IV, point 53 |
|
Article 262(3) |
|
|
Article 262(4) |
Annex IX, Part IV, point 54 |
|
Article 263(1) |
Annex IX, Part IV, point 57 |
|
Article 263(2) |
Annex IX, Part IV, point 58 |
|
Article 263(3) |
Annex IX, Part IV, point 59 |
|
Article 264(1) |
Annex IX, Part IV, point 62 |
|
Article 264(2) |
Annex IX, Part IV, points 63-65 |
|
Article 264(3) |
Annex IX, Part IV, points 66 and 67 |
|
Article 264(4) |
|
|
Article 265(1) |
Annex IX, Part IV, point 68 |
|
Article 265(2) |
Annex IX, Part IV, point 70 |
|
Article 265(3) |
Annex IX, Part IV, point 71 |
|
Article 266(1) |
Annex IX, Part IV, point 72 |
|
Article 266(2) |
Annex IX, Part IV, point 73 |
|
Article 266(3) |
Annex IX, Part IV, point 74-75 |
|
Article 266(4) |
Annex IX, Part IV, point 76 |
|
Article 267(1) |
Article 97(1) |
|
Article 267(3) |
Article 97(3) |
|
Article 268 |
Annex IX, Part III, point 1 |
|
Article 269 |
Annex IX, Part III, point 2-7 |
|
Article 270 |
Article 98 (1) and Annex IX, Part III, points 8 and 9 |
|
Article 271(1) |
Annex III, Part II, point 1 Annex VII, Part III, point 5 |
|
Article 271(2) |
Annex VII, Part III, point 7 |
|
Article 272(1) |
Annex III, Part I, point 1 |
|
Article 272(2) |
Annex III, Part I, point 3 |
|
Article 272(3) |
Annex III, Part I, point 4 |
|
Article 272 (4) |
Annex III, Part I, point 5 |
|
Article 272(5) |
Annex III, Part I, point 6 |
|
Article 272(6) |
Annex III, Part I, point 7 |
|
Article 272(7) |
Annex III, Part I, point 8 |
|
Article 272(8) |
Annex III, Part I, point 9 |
|
Article 272(9) |
Annex III, Part I, point 10 |
|
Article 272(10) |
Annex III, Part I, point 11 |
|
Article 272(11) |
Annex III, Part I, point 12 |
|
Article 272(12) |
Annex III, Part I, point 13 |
|
Article 272(13) |
Annex III, Part I, point 14 |
|
Article 272(14) |
Annex III, Part I, point 15 |
|
Article 272(15) |
Annex III, Part I, point 16 |
|
Article 272(16) |
Annex III, Part I, point 17 |
|
Article 272(17) |
Annex III, Part I, point 18 |
|
Article 272(18) |
Annex III, Part I, point 19 |
|
Article 272(19) |
Annex III, Part I, point 20 |
|
Article 272(20) |
Annex III, Part I, point 21 |
|
Article 272(21) |
Annex III, Part I, point 22 |
|
Article 272(22) |
Annex III, Part I, point 23 |
|
Article 272(23) |
Annex III, Part I, point 26 |
|
Article 272(24) |
Annex III, Part VII, point a) |
|
Article 272(25) |
Annex III, Part VII, point a) |
|
Article 272(26) |
Annex III; Part V, point 2 |
|
Article 273(1) |
Annex III, Part II, point 1 |
|
Article 273(2) |
Annex III, Part II, point 2 |
|
Article 273(3) |
Annex III, Part II, point 3 first and second subparagraph |
|
Article 273(4) |
Annex III, Part II, point 3 third subparagraph |
|
Article 273(5) |
Annex III, Part II, point 4 |
|
Article 273(6) |
Annex III, Part II, point 5 |
|
Article 273(7) |
Annex III, Part II, point 7 |
|
Article 273(8) |
Annex III, Part II, point 8 |
|
Article 274(1) |
Annex III, Part III |
|
Article 274(2) |
Annex III, Part III |
|
Article 274(3) |
Annex III, Part III |
|
Article 274(4) |
Annex III, Part III |
|
Article 275(1) |
Annex III, Part IV |
|
Article 275(2) |
Annex III, Part IV |
|
Article 276(1) |
Annex III, Part V, point 1 |
|
Article 276(2) |
Annex III, Part V, point 1 |
|
Article 276(3) |
Annex III, Part V, points 1-2 |
|
Article 277(1) |
Annex III, Part V, point 3-4 |
|
Article 277(2) |
Annex III, Part V, point 5 |
|
Article 277(3) |
Annex III, Part V, point 6 |
|
Article 277(4) |
Annex III, Part V, point 7 |
|
Article 278(1) |
|
|
Article 278(2) |
Annex III, Part V, point 8 |
|
Article 278(3) |
Annex III, Part V, point 9 |
|
Article 279 |
Annex III, Part V, point 10 |
|
Article 280(1) |
Annex III, Part V, point 11 |
|
Article 280(2) |
Annex III, Part V, point 12 |
|
Article 281(1) |
|
|
Article 281(2) |
Annex III, Part V, point 13 |
|
Article 281(3) |
Annex III, Part V, point 14 |
|
Article 282(1) |
|
|
Article 282(2) |
Annex III, Part V, point 15 |
|
Article 282(3) |
Annex III, Part V, point 16 |
|
Article 282(4) |
Annex III, Part V, point 17 |
|
Article 282(5) |
Annex III, Part V, point 18 |
|
Article 282(6) |
Annex III, Part V, point 19 |
|
Article 282(7) |
Annex III, Part V, point 20 |
|
Article 282(8) |
Annex III, Part V, point 21 |
|
Article 283(1) |
Annex III, Part VI, point 1 |
|
Article 283(2) |
Annex III, Part VI, point 2 |
|
Article 283(3) |
Annex III, Part VI, point 2 |
|
Article 283(4) |
Annex III, Part VI, point 3 |
|
Article 283(5) |
Annex III, Part VI, point 4 |
|
Article 283(6) |
Annex III, Part VI, point 4 |
|
Article 284(1) |
Annex III, Part VI, point 5 |
|
Article 284(2) |
Annex III, Part VI, point 6 |
|
Article 284(3) |
|
|
Article 284(4) |
Annex III, Part VI, point 7 |
|
Article 284(5) |
Annex III, Part VI, point 8 |
|
Article 284(6) |
Annex III, Part VI, point 9 |
|
Article 284(7) |
Annex III, Part VI, point 10 |
|
Article 284(8) |
Annex III, Part VI, point 11 |
|
Article 284(9) |
Annex III, Part VI, point 12 |
|
Article 284(10) |
Annex III, Part VI, point 13 |
|
Article 284(11) |
Annex III, Part VI, point 9 |
|
Article 284(12) |
|
|
Article 284(13) |
Annex III, Part VI, point 14 |
|
Article 285(1) |
Annex III, Part VI, point 15 |
|
Article 285(2)-(8) |
|
|
Article 286(1) |
Annex III, Part VI, points 18 and 25 |
|
Article 286(2) |
Annex III, Part VI, point 19 |
|
Article 286(3) |
|
|
Article 286(4) |
Annex III, Part VI, point 20 |
|
Article 286(5) |
Annex III, Part VI, point 21 |
|
Article 286(6) |
Annex III, Part VI, point 22 |
|
Article 286(7) |
Annex III, Part VI, point 23 |
|
Article 286(8) |
Annex III, Part VI, point 24 |
|
Article 287(1) |
Annex III, Part VI, point 17 |
|
Article 287(2) |
Annex III, Part VI, point 17 |
|
Article 287(3) |
|
|
Article 287(4) |
|
|
Article 288 |
Annex III, Part VI, point 26 |
|
Article 289(1) |
Annex III, Part VI, point 27 |
|
Article 289(2) |
Annex III, Part VI, point 28 |
|
Article 289(3) |
Annex III, Part VI, point 29 |
|
Article 289(4) |
Annex III, Part VI, point 29 |
|
Article 289(5) |
Annex III, Part VI, point 30 |
|
Article 289(6) |
Annex III, Part VI, point 31 |
|
Article 290(1) |
Annex III, Part VI, point 32 |
|
Article 290(2) |
Annex III, Part VI, point 32 |
|
Article 290(3)-(10) |
|
|
Article 291(1) |
Annex I, Part I, points 27-28 |
|
Article 291(2) |
Annex III, Part VI, point 34 |
|
Article 291(3) |
|
|
Article 291(4) |
Annex III, Part VI, point 35 |
|
Article 291(5) |
|
|
Article 291(6) |
|
|
Article 292(1) |
Annex III, Part VI, point 36 |
|
Article 292(2) |
Annex III, Part VI, point 37 |
|
Article 292(3) |
|
|
Article 292(4) |
|
|
Article 292(5) |
|
|
Article 292(6) |
Annex III, Part VI, point 38 |
|
Article 292(7) |
Annex III, Part VI, point 39 |
|
Article 292(8) |
Annex III, Part VI, point 40 |
|
Article 292(9) |
Annex III, Part VI, point 41 |
|
Article 292(10) |
|
|
Article 293(1) |
Annex III, Part VI, point 42 |
|
Article 293(2)-(6) |
|
|
Article 294(1) |
Annex III, Part VI, point 42 |
|
Article 294(2) |
|
|
Article 294(3) |
Annex III, Part VI, point 42 |
|
Article 295 |
Annex III, Part VII, point a) |
|
Article 296(1) |
Annex III, Part VII, point b) |
|
Article 296(2) |
Annex III, Part VII, point b) |
|
Article 296(3) |
Annex III, Part VII, point b) |
|
Article 297(1) |
Annex III, Part VII, point b) |
|
Article 297(2) |
Annex III, Part VII, point b) |
|
Article 297(3) |
Annex III, Part VII, point b) |
|
Article 297(4) |
Annex III, Part VII, point b) |
|
Article 298(1) |
Annex III, Part VII, point c) |
|
Article 298(2) |
Annex III, Part VII, point c) |
|
Article 298(3) |
Annex III, Part VII, point c) |
|
Article 298(4) |
Annex III, Part VII, point c) |
|
Article 299(1) |
|
Annex II, point 7 |
Article 299(2) |
|
Annex II, points 7-11 |
Article 300 |
|
|
Article 301 |
Annex III, Part 2, point 6 |
|
Article 302 |
|
|
Article 303 |
|
|
Article 304 |
|
|
Article 305 |
|
|
Article 306 |
|
|
Article 307 |
|
|
Article 308 |
|
|
Article 309 |
|
|
Article 310 |
|
|
Article 311 |
|
|
Article 312(1) |
Article 104(3) and (6) and Annex X, Part 2, points 2, 5 and 8 |
|
Article 312(2) |
Article 105(1) and 105(2) and Annex X, Part 3, point 1 |
|
Article 312(3) |
|
|
Article 312(4) |
Article 105(1) |
|
Article 313(1) |
Article 102(2) |
|
Article 313(2) |
Article 102(3) |
|
Article 313(3) |
|
|
Article 314(1) |
Article 102(4) |
|
Article 314(2) |
Annex X, Part 4, point 1 |
|
Article 314(3) |
Annex X, Part 4, point 2 |
|
Article 314(4) |
Annex X, Part 4, points 3 and 4 |
|
Article 314(5) |
|
|
Article 315(1) |
Article 103 and Annex X, Part 1, points 1 to 3 |
|
Article 315(2) |
|
|
Article 315(3) |
|
|
Article 315(4) |
Annex X, Part 1, point 4 |
|
Article 316(1) |
Annex X, Part 1, points 5 to 8 |
|
Article 316(2) |
Annex X, Part 1, point 9 |
|
Article 316(3) |
|
|
Article 317(1) |
Article 104 (1) |
|
Article 317(2) |
Article 104(2) and (4) and Annex X, Part 2, point 1 |
|
Article 317(3) |
Annex X, Part 2, point 1 |
|
Article 317(4) |
Annex X, Part 2, point 2 |
|
Article 318(1) |
Annex X, Part 2, point 4 |
|
Article 318(2) |
Annex X, Part 2, point 4 |
|
Article 318(3) |
|
|
Article 319(1) |
Annex X, Part 2, points 6 to 7 |
|
Article 319(2) |
Annex X, Part 2, points 10 and 11 |
|
Article 320 |
Annex X, Part 2, points 9 and 12 |
|
Article 321 |
Annex X, Part 3, points 2 to 7 |
|
Article 322(1) |
|
|
Article 322(2) |
Annex X, Part 3, points 8 to 12 |
|
Article 322(3) |
Annex X, Part 3, points 13 to 18 |
|
Article 322(4) |
Annex X, Part 3, point 19 |
|
Article 322(5) |
Annex X, Part 3, point 20 |
|
Article 322(6) |
Annex X, Part 3, points 21 to 24 |
|
Article 323(1) |
Annex X, Part 3, point 25 |
|
Article 323(2) |
Annex X, Part 3, point 26 |
|
Article 323(3) |
Annex X, Part 3, point 27 |
|
Article 323(4) |
Annex X, Part 3, point 28 |
|
Article 323(5) |
Annex X, Part 3, point 29 |
|
Article 324 |
Annex X, Part 5 |
|
Article 325(1) |
|
Article 26 |
Article 325(2) |
|
Article 26 |
Article 325(3) |
|
|
Article 326 |
|
|
Article 327(1) |
|
Annex I point 1 |
Article 327(2) |
|
Annex I point 2 |
Article 327(3) |
|
Annex I point 3 |
Article 328(1) |
|
Annex I point 4 |
Article 328(2) |
|
|
Article 329(1) |
|
Annex I point 5 |
Article 329(2) |
|
|
Article 330 |
|
Annex I point 7 |
Article 331(1) |
|
Annex I point 9 |
Article 331(2) |
|
Annex I point 10 |
Article 332(1) |
|
Annex I point 8 |
Article 332(2) |
|
Annex I point 8 |
Article 333 |
|
Annex I point 11 |
Article 334 |
|
Annex I point 13 |
Article 335 |
|
Annex I point 14 |
Article 336(1) |
|
Annex I point 14 |
Article 336(2) |
|
Annex I point 14 |
Article 336(3) |
|
Annex I point 14 |
Article 336(4) |
|
Article 19(1) |
Article 337(1) |
|
Annex I point 16a |
Article 337(2) |
|
Annex I point 16a |
Article 337(3) |
|
Annex I point 16a |
Article 337(4) |
|
Annex I point 16a |
Article 337(4) |
|
Annex I point 16a |
Article 338(1) |
|
Annex I point 14a |
Article 338(2) |
|
Annex I point 14b |
Article 338(3) |
|
Annex I point 14c |
Article 338(4) |
|
Annex I point 14a |
Article 339(1) |
|
Annex I point 17 |
Article 339(2) |
|
Annex I point 18 |
Article 339(3) |
|
Annex I point 19 |
Article 339(4) |
|
Annex I point 20 |
Article 339(5) |
|
Annex I point 21 |
Article 339(6) |
|
Annex I point 22 |
Article 339(7) |
|
Annex I point 23 |
Article 339(8) |
|
Annex I point 24 |
Article 339(9) |
|
Annex I point 25 |
Article 340(1) |
|
Annex I point 26 |
Article 340(2) |
|
Annex I point 27 |
Article 340(3) |
|
Annex I point 28 |
Article 340(4) |
|
Annex I point 29 |
Article 340(5) |
|
Annex I point 30 |
Article 340(6) |
|
Annex I point 31 |
Article 340(7) |
|
Annex I point 32 |
Article 341(1) |
|
Annex I point 33 |
Article 341(2) |
|
Annex I point 33 |
Article 341(3) |
|
|
Article 342 |
|
Annex I point 34 |
Article 343 |
|
Annex I point 36 |
Article 344(1) |
|
|
Article 344(2) |
|
Annex I point 37 |
Article 344(3) |
|
Annex I point 38 |
Article 345(1) |
|
Annex I point 41 |
Article 345(2) |
|
Annex I point 41 |
Article 346(1) |
|
Annex I point 42 |
Article 346(2) |
|
|
Article 346(3) |
|
Annex I point 43 |
Article 346(4) |
|
Annex I point 44 |
Article 346(5) |
|
Annex I point 45 |
Article 346(6) |
|
Annex I point 46 |
Article 347 |
|
Annex I point 8 |
Article 348(1) |
|
Annex I points 48-49 |
Article 348(2) |
|
Annex I point 50 |
Article 349 |
|
Annex I point 51 |
Article 350(1) |
|
Annex I point 53 |
Article 350(2) |
|
Annex I point 54 |
Article 350(3) |
|
Annex I point 55 |
Article 350(4) |
|
Annex I point 56 |
Article 351 |
|
Annex III point 1 |
Article 352(1) |
|
Annex III point 2(1) |
Article 352(2) |
|
Annex III point 2(1) |
Article 352(3) |
|
Annex III point 2(1) |
Article 352(4) |
|
Annex III point 2(2) |
Article 352(5) |
|
|
Article 353(1) |
|
Annex III point 2(1) |
Article 353(2) |
|
Annex III point 2(1) |
Article 353(3) |
|
Annex III point 2(1) |
Article 354(1) |
|
Annex III point 3(1) |
Article 354(2) |
|
Annex III point 3(2) |
Article 354(3) |
|
Annex III point 3(2) |
Article 354(4) |
|
|
Article 355 |
|
|
Article 356 |
|
|
Article 357(1) |
|
Annex IV point 1 |
Article 357(2) |
|
Annex IV point 2 |
Article 357(3) |
|
Annex IV point 3 |
Article 357(4) |
|
Annex IV point 4 |
Article 357(5) |
|
Annex IV point 6 |
Article 358(1) |
|
Annex IV point 8 |
Article 358(2) |
|
Annex IV point 9 |
Article 358(3) |
|
Annex IV point 10 |
Article 358(4) |
|
Annex IV point 12 |
Article 359(1) |
|
Annex IV point 13 |
Article 359(2) |
|
Annex IV point 14 |
Article 359(3) |
|
Annex IV point 15 |
Article 359(4) |
|
Annex IV point 16 |
Article 359(5) |
|
Annex IV point 17 |
Article 359(6) |
|
Annex IV point 18 |
Article 360(1) |
|
Annex IV point 19 |
Article 360(2) |
|
Annex IV point 20 |
Article 361 |
|
Annex IV point 21 |
Article 362 |
|
|
Article 363(1) |
|
Annex V point 1 |
Article 363(2) |
|
|
Article 363(3) |
|
|
Article 364(1) |
|
Annex V point 10b |
Article 364(2) |
|
|
Article 364(3) |
|
|
Article 365(1) |
|
Annex V point 10 |
Article 365(2) |
|
Annex V point 10a |
Article 366(1) |
|
Annex V point 7 |
Article 366(2) |
|
Annex V point 8 |
Article 366(3) |
|
Annex V point 9 |
Article 366(4) |
|
Annex V point 10 |
Article 366(5) |
|
Annex V point 8 |
Article 367(1) |
|
Annex V point 11 |
Article 367(2) |
|
Annex V point 12 |
Article 367(3) |
|
Annex V point 12 |
Article 368(1) |
|
Annex V point 2 |
Article 368(2) |
|
Annex V point 2 |
Article 368(3) |
|
Annex V point 5 |
Article 368(4) |
|
|
Article 369(1) |
|
Annex V point 3 |
Article 369(2) |
|
|
Article 370(1) |
|
Annex V point 5 |
Article 371(1) |
|
Annex V point 5 |
Article 371(2) |
|
|
Article 372 |
|
Annex V point 5a |
Article 373 |
|
Annex V point 5b |
Article 374(1) |
|
Annex V point 5c |
Article 374(2) |
|
Annex V point 5d |
Article 374(3) |
|
Annex V point 5d |
Article 374(4) |
|
Annex V point 5d |
Article 374(5) |
|
Annex V point 5d |
Article 374(6) |
|
Annex V point 5d |
Article 374(7) |
|
|
Article 375(1) |
|
Annex V point 5a |
Article 375(2) |
|
Annex V point 5e |
Article 376(1) |
|
Annex V point 5f |
Article 376(2) |
|
Annex V point 5g |
Article 376(3) |
|
Annex V point 5h |
Article 376(4) |
|
Annex V point 5h |
Article 376(5) |
|
Annex V point 5i |
Article 376(6) |
|
Annex V point 5 |
Article 377 |
|
Annex V point 5l |
Article 378 |
|
Annex II point 1 |
Article 379(1) |
|
Annex II point 2 |
Article 379(2) |
|
Annex II point 3 |
Article 379(3) |
|
Annex II point 2 |
Article 380 |
|
Annex II point 4 |
Article 381 |
|
|
Article 382 |
|
|
Article 383 |
|
|
Article 384 |
|
|
Article 385 |
|
|
Article 386 |
|
|
Article 387 |
|
Article 28(1) |
Article 388 |
|
|
Article 389 |
Article 106 (1) subparagraph 1 |
|
Article 390(1) |
Article 106(1) subparagraph 2 |
|
Article 390(2) |
|
|
Article 390(3) |
|
Article 29(1) |
Article 390(4) |
|
Article 30(1) |
Article 390(5) |
|
Article 29(2) |
Article 390(6) |
Article 106(2) subparagraph 1 |
|
Article 390(7) |
Article 106(3) |
|
Article 390(8) |
Article 106(2) subparagraphs 2 and 3 |
|
Article 391 |
Article 107 |
|
Article 392 |
Article 108 |
|
Article 393 |
Article 109 |
|
Article 394(1) |
Article 110(1) |
|
Article 394(2) |
Article 110(1) |
|
Article 394(3) and (4) |
Article 110 (2) |
|
Article 394(4) |
Article 110 (2) |
|
Article 395(1) |
Article 111(1) |
|
Article 395(2) |
|
|
Article 395(3) |
Article 111 (4) subparagraph 1 |
|
Article 395(4) |
|
Article 30 (4) |
Article 395(5) |
|
Article 31 |
Article 395(6) |
|
|
Article 395(7) |
|
|
Article 395(8) |
|
|
Article 396(1) |
Article 111 (4) subparagraphs 1 and 2 |
|
Article 396 (2) |
|
|
Article 397(1) |
|
Annex VI, point 1 |
Article 397(2) |
|
Annex VI, point 2 |
Article 397(3) |
|
Annex VI, point 3 |
Article 398 |
|
Article 32(1) |
Article 399(1) |
Article 112(1) |
|
Article 399(2) |
Article 112(2) |
|
Article 399(3) |
Article 112(3) |
|
Article 399(4) |
Article 110 (3) |
|
Article 400(1) |
Article 113(3) |
|
Article 400(2) |
Article 113(4) |
|
Article 400(3) |
|
|
Article 401(1) |
Article 114(1) |
|
Article 401(2) |
Article 114(2) |
|
Article 401(3) |
Article 114(3) |
|
Article 402(1) |
Article 115(1) |
|
Article 402(2) |
Article 115(2) |
|
Article 402(3) |
|
|
Article 403(1) |
Article 117(1) |
|
Article 403(2) |
Article 117(2) |
|
Article 404 |
Article 122a(8) |
|
Article 405(1) |
Article 122a(1) |
|
Article 405(2) |
Article 122a(2) |
|
Article 405(3) |
Article 122a(3) subparagraph 1 |
|
Article 405(4) |
Article 122a(3) subparagraph 1 |
|
Article 406(1) |
Article 122a(4) and Article 122a (5) subparagraph 2 |
|
Article 406(2) |
Article 122a(5) subparagraph 1 and Article 122a(6) subparagraph 1 |
|
Article 407 |
Article 122a(5) subparagraph 1 |
|
Article 408 |
Article 122a(6) subparagraphs 1 and 2 |
|
Article 409 |
Article 122a(7) |
|
Article 410 |
Article 122a(10) |
|
Article 411 |
|
|
Article 412 |
|
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Article 413 |
|
|
Article 414 |
|
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Article 415 |
|
|
Article 416 |
|
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Article 417 |
|
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Article 418 |
|
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Article 419 |
|
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Article 420 |
|
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Article 421 |
|
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Article 422 |
|
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Article 423 |
|
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Article 424 |
|
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Article 425 |
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Article 426 |
|
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Article 427 |
|
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Article 428 |
|
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Article 429 |
|
|
Article 430 |
|
|
Article 431(1) |
Article 145(1) |
|
Article 431(2) |
Article 145(2) |
|
Article 431(3) |
Article 145(3) |
|
Article 431(4) |
Article 145(4) |
|
Article 432(1) |
Annex XII, Part I, point 1 and Article 146(1) |
|
Article 432(2) |
Article 146(2) and Annex XII, Part I, points 2 and 3 |
|
Article 432(3) |
Article 146(3) |
|
Article 433 |
Article 147 and Annex XII, Part I, point 4 |
|
Article 434(1) |
Article 148 |
|
Article 434(2) |
|
|
Article 435(1) |
Annex XII, Part II, point 1 |
|
Article 435(2) |
|
|
Article 436 |
Annex XII, Part II, point 2 |
|
Article 437 |
|
|
Article 438 |
Annex XII, Part II, points 4, 8 |
|
Article 439 |
Annex XII, Part II, point 5 |
|
Article 440 |
|
|
Article 441 |
|
|
Article 442 |
Annex XII, Part II, point 6 |
|
Article 443 |
|
|
Article 444 |
Annex XII, Part II, point 7 |
|
Article 445 |
Annex XII, Part II, point 9 |
|
Article 446 |
Annex XII, Part II, point 11 |
|
Article 447 |
Annex XII, Part II, point 12 |
|
Article 448 |
Annex XII, Part II, point 13 |
|
Article 449 |
Annex XII, Part II, point 14 |
|
Article 450 |
Annex XII, Part II, point 15 |
|
Article 451 |
|
|
Article 452 |
Annex XII, Part III, point 1 |
|
Article 453 |
Annex XII, Part III, point 2 |
|
Article 454 |
Annex XII, Part III, point 3 |
|
Article 455 |
|
|
Article 456, subparagraph 1 |
Article 150(1) |
Article 41 |
Article 456, subparagraph 2 |
|
|
Article 457 |
|
|
Article 458 |
|
|
Article 459 |
|
|
Article 460 |
|
|
Article 461 |
|
|
Article 462(1) |
Article 151a |
|
Article 462(2) |
Article 151a |
|
Article 462(3) |
Article 151a |
|
Article 462(4) |
|
|
Article 462(5) |
|
|
Article 463 |
|
|
Article 464 |
|
|
Article 465 |
|
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Article 466 |
|
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Article 467 |
|
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Article 468 |
|
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Article 469 |
|
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Article 470 |
|
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Article 471 |
|
|
Article 472 |
|
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Article 473 |
|
|
Article 474 |
|
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Article 475 |
|
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Article 476 |
|
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Article 477 |
|
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Article 478 |
|
|
Article 479 |
|
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Article 480 |
|
|
Article 481 |
|
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Article 482 |
|
|
Article 483 |
|
|
Article 484 |
|
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Article 485 |
|
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Article 486 |
|
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Article 487 |
|
|
Article 488 |
|
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Article 489 |
|
|
Article 490 |
|
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Article 491 |
|
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Article 492 |
|
|
Article 493(1) |
|
|
Article 493 (2) |
|
|
Article 494 |
|
|
Article 495 |
|
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Article 496 |
|
|
Article 497 |
|
|
Article 498 |
|
|
Article 499 |
|
|
Article 500 |
|
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Article 501 |
|
|
Article 502 |
|
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Article 503 |
|
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Article 504 |
|
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Article 505 |
|
|
Article 506 |
|
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Article 507 |
|
|
Article 508 |
|
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Article 509 |
|
|
Article 510 |
|
|
Article 511 |
|
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Article 512 |
|
|
Article 513 |
|
|
Article 514 |
|
|
Article 515 |
|
|
Article 516 |
|
|
Article 517 |
|
|
Article 518 |
|
|
Article 519 |
|
|
Article 520 |
|
|
Article 521 |
|
|
Annex I |
Annex II |
|
Annex II |
Annex IV |
|
Annex III |
|
|
( 1 ) Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190).
( 2 ) Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ L 225, 30.7.2014, p. 1).
( 3 ) Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63).
( 4 ) Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (OJ L 314, 5.12.2019, p. 1).
( 5 ) Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU (OJ L 314, 5.12.2019, p. 64).
( 6 ) Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173, 12.6.2014, p. 349).
( 7 ) OJ L 335, 17.12.2009, p. 1.
( 8 ) Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32).
( 9 ) Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, p. 1).
( 10 ) Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation, and amending Directives 2009/65/EC, 2009/138/EC, 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012 (OJ L 347, 28.12.2017, p. 35).
( 11 ) Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ L 337, 23.12.2015, p. 35).
( 12 ) OJ L 222, 14.8.1978, p. 11.
( 13 ) OJ L 302, 17.11.2009, p. 1.
( 14 ) Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).
( 15 ) Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, p. 38).
( 16 ) Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1).
( 17 ) OJ L 331, 15.12.2010, p. 48.
( 18 ) OJ L 331, 15.12.2010, p. 84.
( 19 ) Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (OJ L 173, 12.6.2014, p. 149).
( 20 ) Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (OJ L 166, 11.6.1998, p. 45).
( 21 ) OJ L 250, 2.10.2003, p. 10.
►M10 ( 22 ) Directive (EU) 2019/2162 of the European Parliament and of the Council of 27 November 2019 on the issue of covered bonds and covered bond public supervision and amending Directives 2009/65/EC and 2014/59/EU (OJ L 328, 18.12.2019, p. 29). ◄
( 23 ) OJ L 135, 31.5.1994, p. 5.
( 24 ) Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC (OJ L 133, 22.5.2008, p. 66).
( 25 ) Commission Implementing Regulation (EU) No 680/2014 of 16 April 2014 laying down implementing technical standards with regard to supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the European Parliament and of the Council (OJ L 191, 28.6.2014, p. 1).
( 26 ) Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1).
( 27 ) OJ L 3, 7.1.2004, p. 36.
( 28 ) Commission Regulation (EC) No 1126/2008 of 3 November 2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council (OJ L 320, 29.11.2008, p. 1).
( 29 ) Commission Regulation (EU) No 1205/2011 of 22 November 2011 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard (IFRS) 7 (OJ L 305, 23.11.2011, p. 16).
( 30 ) Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (OJ L 145, 30.4.2004, p. 1).
( 31 ) Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (OJ L 124, 20.5.2003, p. 36).
( *1 ) OJ L 176, 27.6.2013, p. 1.’;