Changes from plenary report to adopted text

Removed‘(b) self-liquidating short-term trade finance transactions connected to the exchange of goods or services, ▌ as referred to in Article 4(1), point (80) and corporate purchased receivables, provided that the respective exposures have a residual maturity of up to one year;’;

Removed– the following point (e) is added:

Removed‘(e) issued as well as confirmed letters of credit that are short term, meaning they have a maturity below 1 year, and are self-liquidating.’;

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

Removed‘4. For exposures to corporates established in the Union which are not large corporates, institutions may choose to set for all such exposures M as set out in paragraph 1 instead of applying paragraph 2.’;

Removed(e) the following new paragraph 6 is added:

Removed‘6. For the purposes of expressing in years the minimum numbers of days referred to in paragraph 2, points (c) to (db), and paragraph 3, the minimum numbers of days shall be divided by 365,25.’;

Removed(76) Article 163 is amended as follows:

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

Removed‘1. For the sole purposes of calculating risk weighted exposure amounts and expected loss amounts of those exposures, and in particular for the purposes of Article 154, Article 157 and Article 158, paragraphs 1, 5 and 10, the PD for each retail exposure that is used in the input of the risk weight and expected loss formulas shall not be less than the one-year PD associated with the internal borrower grade to which the retail exposure is assigned and the following:

Removed(a) 0,1 % for QRRE revolvers;

Removed(b) 0,05 % for retail exposures which are not QRRE revolvers.’;

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

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

Removed(77) Article 164 is amended as follows:

Removed(a) paragraphs 1 and 2 are replaced by the following:

Removed‘1. Institutions shall provide own estimates of LGDs subject to the requirements specified in Section 6 of this Chapter and to permission of the competent authorities granted in accordance with Article 143. For dilution risk of purchased receivables, an LGD value of 100 % shall be used. Where an institution can decompose its expected loss estimates for dilution risk of purchased receivables into PDs and LGDs in a reliable manner, the institution may use its own LGD estimate.

Removed2. Institutions using own LGD estimates pursuant to Article 143 for direct comparable exposures to the protection provider may recognise the unfunded credit protection in the LGD in accordance with Article 183.’;

Removed(b) paragraph 3 is deleted;

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

Removed‘4. For the sole purpose of calculating risk weighted exposure amounts and expected loss amounts for retail exposures, and in particular pursuant to Article 154(1), Article 157, Article 158, paragraphs 1 and 10, the LGD for each exposure used as an input of the risk weight and expected loss formulas shall not be less than the LGD input floor values laid down in Table 2aa and in accordance with paragraphs 4a and 4b:

RemovedTable 2aa

Removed’;

Removed(d) the following paragraphs 4a and 4b are inserted:

Removed‘4a. For the purposes of paragraph 4, the following shall apply:

Removed(a) LGD input floors in paragraph 4, Table 2aa shall be applicable for exposures secured with FCP when the FCP is eligible pursuant to this Chapter;

Removed(b) except for retail exposures secured by residential property, the LGD input floors in paragraph 4, Table 2aa shall be applicable to exposures fully secured with FCP where the value of the FCP, after the application of the relevant volatility adjustments in accordance with Article 230, is equal to or exceeds the value of the underlying exposure;

Removed(c) except for retail exposures secured by residential property, the applicable LGD input floor for an exposure partially secured with FCP is calculated in accordance with the formula laid down in Article 161(5);

Removed(d) for retail exposures secured by residential property, the applicable LGD input floor shall be fixed at 5 % irrespective of the level of collateral provided by the residential property.

RemovedFor the purposes of point (b), the type of FCP "Other physical collateral" in Table 2aaa of Article 230 shall be understood as "Other physical and other eligible collateral".

Removed4b. 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.’;

Removed(78) Part Three, Title II, Chapter 3, Section 4, Sub-Section 3 is deleted.;

Removed(79) Article 166 is amended as follows:

Removed(a) paragraph 8 is replaced by the following:

Removed‘8. The exposure value of off-balance sheet items which are not contracts as listed in Annex II, shall be calculated by using either using IRB-CCF or SA-CCF, in accordance with paragraphs 8a and 8b and Article 151(8).

RemovedWhere only the drawn balances of revolving facilities have been securitised, institutions shall ensure that they continue to hold the required amount of own funds against the undrawn balances associated with the securitisation.

RemovedAn institution that has not received permission to use IRB-CCF ▌, shall calculate the exposure value as the committed but undrawn amount multiplied by the SA-CCF concerned.

RemovedAn institution that uses IRB-CCF, shall calculate the exposure value for undrawn commitments as the undrawn amount multiplied by an IRB-CCF.’;

Removed(b) the following paragraphs 8a, 8b and 8c are inserted:

Removed8a. For an exposure for which an institution has not received permission to use IRB-CCF▌, the applicable CCF shall be the SA-CCF as provided under Chapter 2 for the same types of items as laid down in Article 111. The amount to which the SA-CCF shall be applied shall be the lower of the value of the undrawn committed credit line, and the value that reflects any possible constraining of the availability of the facility, including the existence of an upper limit on the potential lending amount which is related to an obligor’s reported cash flow. Where a facility is constrained in that way, the institution shall have sufficient line monitoring and management procedures to support the existence of that constraining.

Removed8b. Subject to the permission of competent authorities, institutions that meet the requirements for the use of IRB-CCF as specified in Section 6 shall use IRB-CCF for exposures arising from undrawn revolving commitments treated under the IRB Approach provided that those exposures would not be subject to a SA-CCF of 100 % under the Standardised Approach. SA-CCF shall be used for:

Removed(a) all other off-balance sheet items, in particular undrawn non-revolving commitments;

Removed(b) exposures where the minimum requirements for calculating IRB-CCF as specified in Section 6 are not met by the institution or where the competent authority has not permitted the use of IRB-CCFs.

RemovedFor the purposes of this Article, a commitment shall be deemed ‘revolving’ where it lets an obligor obtain a loan where the obligor has the flexibility to decide how often to withdraw from the loan and at what time intervals, allowing the obligor to drawdown, repay and re-draw loans advanced to it. Contractual arrangements that allow prepayments and subsequent redraws of those prepayments shall be considered as revolving.

Removed8c. Where the IRB-CCF are used for the sole purposes of calculating risk-weighted exposure amounts and expected loss amounts of exposures arising from revolving commitments other than exposures assigned to the exposure class in accordance with Article 147(2), point (a), in particular pursuant to Article 153(1), Article 157, Article 158 paragraph 1, 5 and 10, the exposure value for each exposure used as input in the risk-weighted exposure amount and expected loss formulas shall not be less than the sum of:

Removed(a) the drawn amount of the revolving commitment;

Removed(b) 50 % of the off-balance exposure amount of the remaining undrawn part of the revolving commitment calculated using the applicable SA-CCF provided for in Article 111.

RemovedThe sum of points (a) and (b) shall be referred to as the ‘CCF input floor’.’;

Removed(c) paragraph 10 is deleted;

Removed(80) Article 167 is deleted;

Removed(81) in Article 169(3), the following subparagraph is added:

Removed‘EBA shall issue guidelines on how to apply in practice the requirements on model design, risk quantification, validation and application of risk parameters using continuous or very granular rating scales for each risk parameter. Those guidelines shall be adopted in accordance with Article 16 of Regulation (EU) No 1093/2010.’;

Removed(82) in Article 170(4), point (b) is replaced by the following:

Removed‘(b) transaction risk characteristics, including product and funded credit protection, recognised unfunded credit protection, loan to value measures, seasoning and seniority. Institutions shall explicitly address cases where several exposures benefit from the same funded or unfunded credit protection;’;

Removed(83) in Article 171, the following paragraph 3 is added:

Removed‘3. Although the time horizon used in PD estimation is one year, institutions shall use a longer time horizon in assigning ratings. A borrower rating must represent the institution’s assessment of the borrower’s ability and willingness to contractually perform independently from the adverse economic conditions or the occurrence of unexpected events. Rating systems shall be designed in such a way that idiosyncratic or industry-specific changes are a driver of migrations from one grade to another. In addition, business cycles effects shall be taken into account as a driver for migrations of obligors and facilities from one grade or pool to another.’;

Removed(84) in Article 172, paragraph 1 is amended as follows:

Removed(a) the introductory sentence is replaced by the following:

Removed‘For exposures to corporates, institutions and central governments and central banks, assignment of exposures shall be carried out in accordance with the following criteria:’;

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