Changes from plenary report to adopted text

Removed‘Sub-Section 0 Exposures covered by guarantees provided by Member States’ central governments and central banks or the ECB

RemovedFor the purposes of Chapter 3, and in particular with regard to Articles 160(1), 161(4), 164(4) and 166(8c), where an exposure is covered by an eligible guarantee provided by a Member State’s central government or central bank or by the ECB, the PD, LGD and CCF input floors shall not apply to the part of the exposure covered by that guarantee. However, the part of the exposure that is not covered by that guarantee shall be subject to the PD, LGD and CCF input floors concerned.’;

Removed(73) Article 160 is amended as follows:

Removed(a) paragraph 1 is replaced by the following:

Removed‘1. For exposures assigned to the exposure class ‘exposures to institutions’ referred to in Article 147(2), point (b), or ‘exposures to corporates’ referred to in Article 147(2), point (c), for the sole purposes of calculating risk weighted exposure amounts and expected loss amounts of those exposures, in particular for the purposes of Article 153, Article 157, Article 158(1), Article 158(5) and Article 158(10), the PD for each exposure that is used in the input of the risk weights and expected loss formulas shall not be less than the following value: 0,05 % (‘PD input floor’).’;

Removed(aa) the following paragraph is inserted:

Removed1a. For exposures assigned to the exposure class ‘regional and local authorities and to public sector entities (‘RGLA-PSE’)’, referred to in Article 147(2), point (a1), for the sole purposes of calculating risk weighted exposure amounts and expected loss amounts of those exposures, the PD values used in the input of the risk weights and expected loss formulas shall not be less than the following value: 0,03% (‘PD input floor’).’;

Removed(b) paragraph 4 is replaced by the following:

Removed‘4. For an exposure covered by an UFCP, an institution using own LGD estimates under Article 143 for both the original exposure and for direct comparable exposures to the protection provider may recognise the unfunded credit protection in the PD in accordance with Article 183.’;

Removed(c) paragraph 5 is deleted;

Removed(d) paragraph 6 is replaced by the following:

Removed‘6. For dilution risk of purchased corporate receivables, PD shall be set equal to the EL estimate of the institution for dilution risk. An institution that has received permission from the competent authority pursuant to Article 143 to use own LGD estimates for corporate exposures that can decompose its EL estimates for dilution risk of 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 recognise unfunded credit protection in the PD in accordance with Chapter 4.’;

Removed(e) paragraph 7 is replaced by the following:

Removed‘7. 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).’;

Removed(74) Article 161 is amended as follows:

Removed(a) paragraph 1 is amended as follows:

Removed(i) point (a) is replaced by the following:

Removed‘(a) senior exposures without eligible FCP to central governments and central banks and financial sector entities: 45 %;’;

Removed(ii) the following point (aa) is inserted:

Removed‘(aa) senior exposures without eligible FCP, to corporates which are not financial sector entities: 40 %;’;

Removed(iii) point (c) is deleted;

Removed(iv) point (e) is replaced by the following:

Removed‘(e) for senior purchased corporate receivables exposures where an institution is not able to estimate PDs or where the institution's PD estimates do not meet the requirements set out in Section 6: 40 %;’;

Removed(v) point (g) is replaced by the following

Removed‘(g) for dilution risk of purchased corporate receivables: 100 %.’;

Removed(b) paragraph 3 and 4 are replaced by the following:

Removed‘3. For an exposure covered by an unfunded credit protection, an institution using own LGD estimates pursuant to Article 143 for both the original exposure and for direct comparable exposures to the protection provider may recognise the unfunded credit protection in the LGD in accordance with Article 183.

Removed4. For exposures assigned to the exposure class ‘corporate exposure class’ ▌for the sole purpose of calculating risk weighted exposure amounts and expected loss amounts of those exposures, and in particular for the purposes of Article 153(1), point (iii), Article 157, Article 158, paragraphs 1, 5 and 10, where own LGD estimates are used, the LGD for each exposure used as an input of the risk weight and expected loss formulas shall not be less than the following LGD input floor values, and calculated in accordance with paragraph 5:

RemovedTable 2a

Removed;’;

Removed(c) the following paragraphs are added:

Removed‘5. For the purposes of paragraph 4, the LGD input floors in Table 2a in that paragraph for exposures fully secured with FCP shall apply when the value of the FCP, after the application of the volatility adjustments Hc and Hfx concerned in accordance with Article 230, is equal to or exceeds the value of the underlying exposure. In addition, those values shall be applicable for FCP eligible pursuant to this Chapter. In that case, the type of FCP "Other physical collateral" in Table 2aaa of Article 230 shall be understood as "Other physical and other eligible collateral".

RemovedThe applicable LGD input floor (LGDfloor) for an exposure partially secured with FCP is calculated as the weighted average of LGDU-floor for the portion of the exposure without FCP and LGDS-floor for the fully secured portion, as follows:

Removedwhere:

RemovedLGDU-floor and LGDS-floor are the relevant floor values of Table 2a;

RemovedE , ES , EU and HE are determined as specified in Article 230.

Removed5a. To the extent that an institution recognises FCP under the IRB Approach, the institution may recognise the FCP in the calculation of the LGD input floor for secured exposures. Otherwise, the LGD input floor for unsecured exposures shall apply.

Removed6. Where an institution that uses own LGD estimates for a given type of corporate unsecured exposures is not able to take into account the effect of the FCP securing one of the exposures of that type of exposures in the own LGD estimates due to lack of data, the institution shall be permitted to apply the formula set out in Article 230, with the exception that the LGDU term in that formula shall be the institution’s own LGD estimate for unsecured exposures. In that case, the FCP shall be eligible in accordance with Chapter 4 and the institution’s own LGD estimate used as LGDU term shall be calculated based on underlying losses data excluding any recoveries arising from that FCP.

Removed6a. For exposures assigned to the exposure class ‘exposures to regional government and local authorities and to public sector entities (‘RGLA-PSE’), referred to in Article 147(2), point (a1), for the sole purpose of calculating risk weighted exposure amounts and expected loss amounts of those exposures, where own LGD estimates are used, the LGD values used as an input of the risk weight and expect loss formulas shall not be less than the following value: 5%.’;

Removed(75) Article 162 is amended as follows:

Removed(a) paragraph 1 is replaced by the following:

Removed‘1. For exposures for which an institution has not received permission of the competent authority to use own estimates of LGD, the maturity value (‘M’) shall either be set at 2,5 years, except for exposures arising from securities financing transactions, for which M shall be 0,5 years or, alternatively, calculated in accordance with paragraph 2.

Removed▌’;

Removed(b) paragraph 2 is amended as follows:

Removed(i) the introductory phrase in paragraph 2 is replaced by the following:

Removed‘For exposures for which an institution applies own estimates of LGD, the maturity value (‘M’) shall be calculated using periods of times expressed in years, as set out in this paragraph and subject to paragraphs 3 to 5 of this Article. M shall be no greater than 5 years, except in the cases specified in Article 384(2) where M as specified there shall be used. M shall be calculated as follows in each of the following cases:’;

Removed(ii) the following points (da) and (db) are inserted:

Removed‘(da) for secured 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 20 days. The notional amount of each transaction shall be used for weighting the maturity;

Removed(db) for a master netting agreement including more than one of the transaction types corresponding to points (c), (d) or (da), M shall be the weighted average remaining maturity of the transactions where M shall be at least the longest holding period (expressed in years) applicable to such transactions as provided in Article 224(2) (either 10 days or 20 days, depending on the cases). The notional amount of each transaction shall be used for weighting the maturity’;

Removed(iii) point (f) is replaced by the following:

Removed‘(f) 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 (principal, interest, and fees), where M shall be at least one year;’;

Removed(iv) point (i) is replaced by the following:

Removed‘(i) for institutions using the approaches referred to in Article 382a(1), points (a) or (b), to calculate own fund requirement for CVA risks of transactions with a given counterparty, M shall be no greater than 1 in the formula laid out in Article 153(1) for the purposes of calculating the risk weighted exposure amounts for counterparty risk for the same transactions, as referred to in Article 92(4), points (a) or (f), as applicable;’;

Removed(v) point (j) is replaced by the following:

Removed‘(j) For revolving exposures, M shall be determined using the maximum contractual termination date of the facility. Institutions shall not use the repayment date of the current drawing if this date is not the maximum contractual termination date of the facility.’;

Removed(c) paragraph 3 is amended as follows:

Removed(i) in the first subparagraph, the introductory sentence is replaced by the following:

Removed‘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 the weighted average remaining maturity of the transactions and M shall be at least one day:’;

Removed(ii) the second subparagraph is amended as follows:

Removed– point (b) is replaced by the following: