Changes from plenary report to adopted text

Removed‘(d) each separate legal entity to which the institution is exposed shall be separately rated;’;

Removed(c) the following subparagraph is added:

Removed‘For the purposes of point (d), an institution shall have appropriate policies for the treatment of individual obligor clients and groups of connected clients. Those policies shall contain a process for the identification of specific wrong way risk for each legal entity to which the institution is exposed. For the purposes of Chapter 6, transactions with counterparties where specific wrong way risk has been identified shall be treated differently when calculating their exposure value For the purposes of Chapter 3, transactions with counterparties where specific wrong way risk has been identified shall be treated differently when calculating their loss given default.’;

Removed(85) Article 173 is amended as follows:

Removed(a) in paragraph 1, the introductory sentence is replaced by the following:

Removed‘For exposures to corporates, institutions and central governments and central banks, assignment process shall meet the following requirements:’;

Removed(b) paragraph 3 is replaced by the following:

Removed‘3. EBA shall develop draft regulatory technical standards setting out the methodologies of the competent authorities to assess the integrity of the assignment process and the regular and independent assessment of risks.

RemovedEBA shall submit those draft regulatory technical standards to the Commission by 31 December 2025.

RemovedPower 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.’;

Removed(86) Article 174 is amended as follows:

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

Removed‘If an institution uses statistical or other mathematical methods (‘models’) to assign exposures to obligors or facility grades or pools, ▌the following requirements shall be met:’;

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

Removed‘(a) the model shall have good predictive power and capital requirements shall not be distorted as a result of its use;’;

Removed(c) the following subparagraph is added:

Removed‘For the purposes of point (a), the input variables shall form a reasonable and effective basis for the resulting predictions. The model shall not have material biases. There shall be a functional link between the inputs and the outputs of the model, which may be determined through expert judgement where appropriate.’;

Removed(87) Article 176 is amended as follows:

Removed(a) in paragraph 2, the introductory sentence is replaced by the following:

Removed‘For exposures to corporates, institutions and central governments and central banks, institutions shall collect and store:’;

Removed(b) paragraph 3 is replaced by the following:

Removed‘3. For exposures for which this Chapter allows the use of own estimates of LGDs or the use of IRB-CCFs but for which institutions do not use own estimates of LGDs or IRB-CCFs, institutions shall collect and store data on comparisons between realised LGDs and the values as set out in Article 161(1), and between realised CCFs and SA-CCFs as set out in Article 166(8a).’;

Removed(88) ▌Article 177 is amended as follows:

Removed(a) the following paragraph is inserted:

Removed‘2a. The scenarios used under paragraph 2 must also include ESG risk factors, in particular physical and transition risks stemming from climate change.

RemovedEBA shall issue guidelines on the application of paragraph 2a of this Article. Those guidelines shall be adopted in accordance with Article 16 of Regulation (EU) No 1093/2010.’;

Removed(b) paragraph 3 is deleted.

Removed(89) Article 178 is amended as follows:

Removed(a) the title is replaced by the following:

Removed‘Default of an obligor or facility’

Removed(b) in paragraph 1, point (b) is replaced by the following:

Removed‘(b) 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.’;

Removed(c) in paragraph 3, point (d) is replaced by the following:

Removed‘(d) the institution consents to a distressed restructuring of the credit obligation where such restructuring is likely to result in a diminished financial obligation due to the material forgiveness, or postponement, of principal, interest or, where relevant, fees. A distressed restructuring shall be considered to have occurred when forbearance measures as referred to in Article 47b have been extended toward the obligor;’;

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

Removed‘7. By 30 June 2024 EBA shall issue updated guidelines on the application of this Article and, in particular, what constitutes a material ‘diminished financial obligation’ in case of distressed restructuring for the purposes of point (d) of paragraph 3. Those guidelines shall be adopted in accordance with Article 16 of Regulation (EU) No 1093/2010.’;

Removed(90) Article 180 is amended as follows:

Removed(a) paragraph 1 is amended as follows:

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

Removed‘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:’;

Removed(ii) point (h) is replaced by the following:

Removed‘(h) 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.’;

Removed(iii) the following point (i) is added:

Removed‘(i) irrespective of the method used to estimate PD, institutions shall estimate a PD for each rating grade based on the observed historical average one-year default rate that is a simple average based on number of obligors (count weighted) and other approaches, including exposure-weighted averages, shall not be permitted.’;

Removed(iv) the following subparagraph is added:

Removed‘For the purposes of point (h), where the available observation period spans a longer period for any source, and this data is relevant, this longer period shall be used. The data shall be a representative mix of good and bad years relevant for the type of exposures. 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 to use IRB-CCF, 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.’;

Removed(b) paragraph 2 is amended as follows:

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

Removed‘(a) institutions shall estimate PDs by obligor or facility grade or pool from long run averages of one-year default rates, and default rates shall be calculated at facility level only where the definition of default is applied at individual credit facility level pursuant to Article 178(1), second subparagraph;’

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

Removed‘(e) 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.’;

Removed(iii) the following subparagraph is added:

Removed‘For the purposes of point (e), where the available observation spans a longer period for any source, and where those data are relevant, such longer period shall be used. The data shall be a representative mix of good and bad years of the economic cycle relevant for the type of exposures. The PD, for each rating grade, shall be based on the observed historical average one-year default rate that is a simple average based on the number of obligors (count weighted), or based on the number of facilities only where the definition of default is applied at individual credit facility level pursuant to Article 178(1), second subparagraph, and other approaches, including exposure-weighted averages, shall not be permitted. 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.’;

Removed(c) paragraph 3 is replaced by the following:

Removed‘EBA shall develop draft regulatory technical standards to specify the methodologies in accordance with which competent authorities shall assess the methodology of an institution for estimating PD pursuant to Article 143.

RemovedEBA shall submit those draft regulatory technical standards to the Commission by 31 December 2025.

RemovedPower 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.’;

Removed(91) Article 181 is amended as follows:

Removed(a) paragraph 1 is amended as follows:

Removed(i) points (c) to (g) are replaced by the following: