Banks and investment firms – prudential supervision

SUMMARY OF:

Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (capital requirements directive – CRD IV)

WHAT IS THE AIM OF THE DIRECTIVE?

• This capital requirements directive (CRD IV) governs the access to the activity of credit institutions.
• It also lays down rules on:
  • the prudential supervision of credit institutions by the relevant national authorities;
  • the supervisory powers and tools of those authorities for the prudential supervision of credit institutions; and
  • the publication requirements that those authorities must comply with related to the prudential regulation and supervision of credit institutions.
• It replaces the former capital requirements directives (2006/48/EC and 2006/49/EC) and covers aspects previously included in those directives, including:
  • access to the taking up and pursuit of the business of banks;
  • the conditions for freedom of establishment;
  • the freedom to provide services; and
  • the prudential supervision of banks and investment firms.
• Directive 2013/36/EU is part of a package of legislation that seeks to strengthen the resilience of the EU banking sector following the financial crisis in 2008. The package also includes Regulation (EU) No 575/2013, the capital requirements regulation (CRR) (see summary), which sets outs the supervisory requirements that banks need to meet.

KEY POINTS

Directive 2013/36/EU covers a number of new aspects in addition to those already covered by the previous capital requirements directives, including the following.

• Staff bonuses. To prevent credit institutions from giving their staff bonuses which encourage them to take excessive risks, the directive provides for a maximum ratio between fixed pay and bonuses for all relevant staff. The bonus cannot exceed the identified staff member’s annual fixed pay, although under certain conditions, shareholders may allow the granting of bonuses of up to twice the fixed pay. The new rules also include other requirements on bonuses that promote a long-term approach to risk-taking.
• Better governance and more transparency. The directive introduces rules to ensure that the risks stemming from credit institutions’ activities are subject to effective management and oversight by their management bodies. Rules are also introduced to make the board membership of credit institutions more diverse. From January 2015, credit institutions have to disclose certain information on a country-by-country basis, including their profits, taxes and public subsidies received.
• Additional capital to be held by credit institutions (Pillar 2 and capital buffers). The directive:
  • provides for more detailed requirements on the Pillar 2 framework, where relevant national authorities may require credit institutions to hold capital in addition to the minimum requirements laid down in the CRR;
  • lays down a framework on capital buffers, which aim to protect a credit institution’s solvency by setting safeguards and limits on the amount of dividend and bonus payments a credit institution can make. Depending on the extent to which a credit institution uses up its buffer, the limits become stricter, thus preventing the loss of its capital.
• Reduced reliance on external ratings. The directive reduces, where possible, financial institutions’ reliance on external credit ratings. For example, it requires that credit institutions base their investment decisions not only on external ratings but also on their own internal risk assessment.

Main amendments to Directive 2013/36/EU

• Amending Directive (EU) 2019/878 amends some of the existing rules of Directive 2013/36/EU and adds new ones concerning exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers, and capital conservation measures. Its purpose is to ensure the financial sector’s ability to withstand potential shocks.
• Amending Directive (EU) 2019/2034 is part of a new regulatory framework for investment firms which, until its adoption, had been subject to the same capital, liquidity and risk management rules as banks. It lays down prudential requirements and supervisory measures adapted to the risk profile and business model of investment firms while safeguarding financial stability.
• Amending Directive (EU) 2022/2556 aligns the provisions of the directive, and several other related directives, with the requirements on ICT risk for financial entities set out in the digital operational resilience of the financial sector (DORA) regulation, Regulation (EU) 2022/2554 (see summary).

Implementing and delegated acts

The CRD IV / CRR package allows for the adoption of delegated and implementing acts. These offer guidance on compliance with the package to the relevant national authorities, and banks and investment firms. The following delegated regulations supplement Directive 2013/36/EU regarding regulatory technical standards.

• Delegated Regulation (EU) No 530/2014 on further defining material exposures and thresholds for internal approaches to specific risk in the trading book.
• Delegated Regulation (EU) No 524/2014 on the information that competent authorities of home and host Member States supply to one another.
• Delegated Regulation (EU) No 527/2014 on the classes of instruments that adequately reflect the credit quality of an institution as a going concern and are appropriate to be used for the purposes of variable remuneration.
• Delegated Regulation (EU) No 1151/2014 on the information to be notified when exercising the right of establishment and the freedom to provide services, subsequently amended by Regulations (EU) 2022/192 and (EU) 2022/2403.
• Delegated Regulation (EU) No 1152/2014 on the identification of the geographical location of the relevant credit exposures for calculating institution-specific countercyclical capital buffer rates.
• Delegated Regulation (EU) No 1222/2014 on the methodology for the identification of global systemically important institutions and for the definition of subcategories of global systemically important institutions, subsequently amended by Regulations (EU) 2016/1608 and (EU) 2021/539.
• Delegated Regulation (EU) 2016/861 on qualitative and appropriate quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile.
• Delegated Regulation (EU) 2017/180 on benchmarking portfolio assessment standards and assessment-sharing procedures.
• Delegated Regulation (EU) 2021/923 on criteria to define managerial responsibility, control functions, material business units and a significant impact on a material business unit’s risk profile, and on criteria for identifying staff members or categories of staff whose professional activities have an impact on the institution’s risk profile that is comparably as material as that of staff members or categories of staff.
• Delegated Regulation (EU) 2022/2579 on regulatory technical standards specifying the information to be provided by an undertaking in the application for authorisation in accordance with Article 8(a) of Directive 2013/36/EU.
• Delegated Regulation (EU) 2022/2580 on regulatory technical standards specifying the information to be provided in the application for the authorisation as a credit institution, and specifying the obstacles which may prevent the effective exercise of supervisory functions of competent authorities.

The following implementing acts have been adopted.

• Implementing Regulation (EU) No 620/2014 on standards with regard to information exchange between competent authorities of home and host Member States.
• Implementing Regulation (EU) No 650/2014, subsequently amended by Regulation (EU) 2019/912, on standards with regard to the format, structure, contents list and annual publication date of the information to be disclosed by competent authorities.
• Implementing Regulation (EU) No 710/2014 on standards with regard to the conditions of application of the joint decision process for institution-specific prudential requirements.
• Implementing Regulation (EU) No 926/2014, subsequently amended by Regulation (EU) 2022/193, on standard forms, templates and procedures for notifications relating to the exercise of the right of establishment and the freedom to provide services.
• Implementing Regulation (EU) 2016/99 on determining the operational functioning of the colleges of supervisors.
• Implementing Regulation (EU) 2016/2070, subsequently amended by Regulations (EU) 2017/1486, (EU) 2018/688, (EU) 2019/439, (EU) 2021/1971, (EU) 2021/2017 and (EU) 2022/951, on templates, definitions and IT solutions to be used by institutions when reporting to the European Banking Authority and to competent authorities.
• Implementing Regulation (EU) 2017/461 on common procedures, forms and templates for the consultation process between the relevant competent authorities for proposed acquisitions of qualifying holdings in credit institutions.
• Implementing Regulation (EU) 2022/2581 on implementing technical standards for the application of Directive 2013/36/EU with regard to the provision of information in applications for authorisation of a credit institution.

FROM WHEN DO THE RULES APPLY?

• Directive 2013/36/EU had to be transposed into national law by 31 December 2013, and these rules have applied since 17 July 2013.
• Amending Directive (EU) 2019/878 had to be transposed by 28 December 2020, and the rules have applied since 29 December 2020.
• Amending Directive (EU) 2019/2034 had to transposed by 26 June 2021, and the rules have applied since 26 June 2021, except for those regarding providing services on the client’s initiative, which have applied from 26 March 2020.
• Amending Directive (EU) 2022/2556 has to be transposed by 17 January 2025 and will apply from the same date.

BACKGROUND

• For further information, see:
  • Prudential requirements (European Commission).

MAIN DOCUMENT

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, pp. 338–436).

Successive amendments and corrections to Directive 2013/36/EU have been incorporated into the basic text. This consolidated version is for reference only.

RELATED DOCUMENTS

Commission Implementing Regulation (EU) 2022/2581 of 20 June 2022 laying down implementing technical standards for the application of Directive 2013/36/EU of the European Parliament and of the Council with regard to provision of information in applications for authorisation of a credit institution (OJ L 335, 29.12.2022, pp. 86–102).

See consolidated version.

Commission Delegated Regulation (EU) 2022/2580 of 17 June 2022 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the information to be provided in the application for the authorisation as a credit institution, and specifying the obstacles which may prevent the effective exercise of supervisory functions of competent authorities (OJ L 335, 29.12.2022, pp. 64–85).

See consolidated version.

Commission Delegated Regulation (EU) 2022/2579 of 10 June 2022 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the information to be provided by an undertaking in the application for authorisation in accordance with Article 8a of that Directive (OJ L 335, 29.12.2022, pp. 61–63).

Directive (EU) 2022/2556 of the European Parliament and of the Council of 14 December 2022 amending Directives 2009/65/EC, 2009/138/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU, 2014/65/EU, (EU) 2015/2366 and (EU) 2016/2341 as regards digital operational resilience for the financial sector (OJ L 333, 27.12.2022, pp. 153–163).

Regulation (EU) 2022/2554 of the European Parliament and of the Council of 14 December 2022 on digital operational resilience for the financial sector and amending Regulations (EC) No 1060/2009, (EU) No 648/2012, (EU) No 600/2014, (EU) No 909/2014 and (EU) 2016/1011 (OJ L 333, 27.12.2022, pp. 1–79).

Commission Delegated Regulation (EU) 2021/923 of 25 March 2021 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards setting out the criteria to define managerial responsibility, control functions, material business units and a significant impact on a material business unit’s risk profile, and setting out criteria for identifying staff members or categories of staff whose professional activities have an impact on the institution’s risk profile that is comparably as material as that of staff members or categories of staff referred to in Article 92(3) of that Directive (OJ L 203, 9.6.2021, pp. 1–7).

Commission Implementing Regulation (EU) 2017/461 of 16 March 2017 laying down implementing technical standards with regard to common procedures, forms and templates for the consultation process between the relevant competent authorities for proposed acquisitions of qualifying holdings in credit institutions as referred to in Article 24 of Directive 2013/36/EU of the European Parliament and of the Council (OJ L 72, 17.3.2017, pp. 57–65).

Commission Delegated Regulation (EU) 2017/180 of 24 October 2016 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards for benchmarking portfolio assessment standards and assessment-sharing procedures (OJ L 29, 3.2.2017, pp. 1–9).

Commission Implementing Regulation (EU) 2016/2070 of 14 September 2016 laying down implementing technical standards for templates, definitions and IT-solutions to be used by institutions when reporting to the European Banking Authority and to competent authorities in accordance with Article 78(2) of Directive 2013/36/EU of the European Parliament and of the Council (OJ L 328, 2.12.2016, pp. 1–1422).

See consolidated version.

Commission Delegated Regulation (EU) 2016/861 of 18 February 2016 correcting Commission Delegated Regulation (EU) No 528/2014 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for non-delta risk of options in the standardised market risk approach and correcting Commission Delegated Regulation (EU) No 604/2014 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards with respect to qualitative and appropriate quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile (OJ L 144, 1.6.2016, pp. 21–23).

Commission Delegated Regulation (EU) 2016/98 of 16 October 2015 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards for specifying the general conditions for the functioning of colleges of supervisors (OJ L 21, 28.1.2016, pp. 2–20).

Commission Implementing Regulation (EU) 2016/99 of 16 October 2015 laying down implementing technical standards with regard to determining the operational functioning of the colleges of supervisors according to Directive 2013/36/EU of the European Parliament and of the Council (OJ L 21, 28.1.2016, pp. 21–44).

Commission Delegated Regulation (EU) No 1222/2014 of 8 October 2014 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards for the specification of the methodology for the identification of global systemically important institutions and for the definition of subcategories of global systemically important institutions (OJ L 330, 15.11.2014, pp. 27–36).

See consolidated version.

Commission Delegated Regulation (EU) No 1151/2014 of 4 June 2014 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards on the information to be notified when exercising the right of establishment and the freedom to provide services (OJ L 309, 30.10.2014, pp. 1–4).

See consolidated version.

Commission Delegated Regulation (EU) No 1152/2014 of 4 June 2014 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards on the identification of the geographical location of the relevant credit exposures for calculating institution-specific countercyclical capital buffer rates (OJ L 309, 30.10.2014, pp. 5–8).

Commission Implementing Regulation (EU) No 926/2014 of 27 August 2014 laying down implementing technical standards with regard to standard forms, templates and procedures for notifications relating to the exercise of the right of establishment and the freedom to provide services according to Directive 2013/36/EU of the European Parliament and of the Council (OJ L 254, 28.8.2014, pp. 2–21).

See consolidated version.

Commission Implementing Regulation (EU) No 710/2014 of 23 June 2014 laying down implementing technical standards with regard to conditions of application of the joint decision process for institution-specific prudential requirements according to Directive 2013/36/EU of the European Parliament and of the Council (OJ L 188, 27.6.2014, pp. 19–59).

Commission Implementing Regulation (EU) No 650/2014 of 4 June 2014 laying down implementing technical standards with regard to the format, structure, contents list and annual publication date of the information to be disclosed by competent authorities in accordance with Directive 2013/36/EU of the European Parliament and of the Council (OJ L 185, 25.6.2014, pp. 1–50).

See consolidated version.

Commission Implementing Regulation (EU) No 620/2014 of 4 June 2014 laying down implementing technical standards with regard to information exchange between competent authorities of home and host Member States, according to Directive 2013/36/EU of the European Parliament and of the Council (OJ L 172, 12.6.2014, pp. 1–25).

Commission Delegated Regulation (EU) No 527/2014 of 12 March 2014 supplementing Directive (EU) No 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the classes of instruments that adequately reflect the credit quality of an institution as a going concern and are appropriate to be used for the purposes of variable remuneration (OJ L 148, 20.5.2014, pp. 21–28).

Commission Delegated Regulation (EU) No 524/2014 of 12 March 2014 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the information that competent authorities of home and host Member States supply to one another (OJ L 148, 20.5.2014, pp. 6–14).

Commission Delegated Regulation (EU) No 530/2014 of 12 March 2014 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards further defining material exposures and thresholds for internal approaches to specific risk in the trading book (OJ L 148, 20.5.2014, pp. 50–51).

Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, pp. 1–337).

See consolidated version.

Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, pp. 1–59).

See consolidated version.

last update 20.06.2023