Changes from plenary report to adopted text

Removed(c) the following paragraph 1a is added:

Removed‘1a. Institutions may recognise unfunded credit protection by using either the PD/LGD modelling approach, in accordance with this Article and subject to the requirement set out in paragraph 4, or the substitution of risk parameters approach under A-IRB as referred to in Article 236a and subject to the eligibility requirements of Chapter 4. Institutions should have clear policies for assessing the effects of unfunded credit protection on risk parameters. The policies of the institutions shall be consistent with their internal risk management practices and shall reflect the requirements of this Article. Those policies shall clearly specify which of the specific methods described in this subparagraph are used for each rating system, and institutions shall apply those policies consistently over time.’;

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

Removed‘4. Where institutions recognise unfunded credit protection by the PD/LGD modelling approach, they should reflect the risk-reducing effect of the unfunded credit protection for a given type of exposures through an adjustment of either the PD or the LGD estimate and the covered portion of the underlying exposure shall not be assigned a risk weight which would be lower than the protection-provider-RW-floor. For that purpose, the protection-provider-RW-floor shall be calculated using the same PD, the same LGD and the same risk weight function as the ones used applicable to comparable direct exposure to the protection provider as referred to in Article 236a.’;

Removed(e) paragraph 6 is deleted;

Removed(94) in Part Three, Title II, Chapter 3, Section 6, Sub-Section 4 is deleted;

Removed(95) in Article 192, the following points (5) to (8) are added:

Removed‘(5) ‘substitution of risk weight approach under SA’ means the substitution, ▌, of the risk weight of the underlying exposure with the risk weight applicable under the Standardised Approach to a comparable direct exposure to the protection provider in accordance with Article 235, when the guaranteed exposure is treated under the Standardised Approach and comparable direct exposures to the protection provider are treated under the Standardised Approach or IRB Approach;

Removed(6) ‘substitution of risk weight approach under IRB’ means the substitution,▌ of the risk weight of the underlying exposure with the risk weight applicable under the Standardised Approach to a comparable direct exposure to the protection provider in accordance with Article 235a, when the guaranteed exposure is treated under the IRB Approach and comparable direct exposures to the protection provider are treated under the Standardised Approach;

Removed(7) ‘substitution of risk parameters approach under F-IRB’ means the substitution, in accordance with Article 236, of both the PD and LGD risk parameters of the underlying exposure with the corresponding PD and LGD that would be assigned under the IRB approach without using own LGD estimates to a comparable direct exposures to the protection provider;

Removed(8) ‘substitution of risk parameters approach under A-IRB’ means the substitution, in accordance with Article 236a, of both the PD and LGD risk parameters of the underlying exposure with the corresponding PD and LGD that would be assigned under the IRB approach using own LGD estimates to a comparable direct exposure to the protection provider.’;

Removed(96) in Article 193,▌ paragraphs 7 and 7a are added:

Removed‘7. Collateral that satisfies all eligibility requirements set out in this Chapter can be recognised as such even for exposures associated with undrawn facilities. Where drawing under the facility is conditional on the prior or simultaneous purchase or reception of collateral to the extent of the institution’s interest in the collateral once the facility is drawn, such that the institution does not have any interest in the collateral to the extent the facility is not drawn, such collateral can be recognised for the exposure arising from the undrawn facility.

Removed7a. Where institutions calculate risk-weighted exposure amounts under the Standardised Approach or institutions calculate risk-weighted exposure amounts and expected loss amounts under the IRB Approach in accordance with the provisions laid down in this Chapter, they should factor in the ESG risks, to which the collateral is subject.

RemovedThe EBA shall, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines on what constitutes the materialisation of climate physical risk and how this risk should be reflected in institutions’ calculations of the risk-weighted amount of the exposure.’;

Removed(97) in Article 194, paragraph 10 is deleted;

Removed(98) in Article 197, paragraph 1 is amended as follows:

Removed(a) points (b) to (e) are replaced by the following:

Removed‘(b) debt securities satisfying all of the following conditions:

Removed(i) the debt securities are issued by central governments or central banks;

Removed(ii) the debt securities have a credit assessment carried out by an ECAI or export credit agency that satisfied all of the following conditions:

Removed– the ECAI or export credit agency has been recognised as being eligible for the purposes of Chapter 2;

Removed– the credit assessment has been determined by EBA to be associated with credit quality step 1, 2, 3 or 4 under the rules for the risk weighting of exposures to central governments and central banks under Chapter 2;

Removed(c) debt securities satisfying all of the following conditions:

Removed(i) those debt securities are issued by institutions;

Removed(ii) those debt securities have a credit assessment carried out by an ECAI that satisfy all of the following conditions:

Removed– the ECAI has been recognised as being eligible for the purposes of Chapter 2;

Removed– the credit assessment has been determined by EBA to be associated with credit quality step 1, 2 or 3 under the rules for the risk weighting of exposures to institutions under Chapter 2;

Removed(d) debt securities satisfying all of the following conditions:

Removed(i) those debt securities are issued by other entities;

Removed(ii) those debt securities have a credit assessment carried out by an ECAI that satisfies all of the following conditions:

Removed– the ECAI has been recognised as being eligible for the purposes of Chapter 2;

Removed– the credit assessment has been determined by EBA to be associated with credit quality step 1, 2 or 3 under the rules for the risk weighting of exposures to corporates under Chapter 2;

Removed(e) debt securities having a short-term credit assessment carried out by an ECAI that satisfies all of the following conditions:

Removed(i) the ECAI has been recognised as being eligible for the purposes of Chapter 2; and

Removed(ii) the credit assessment has been determined by EBA to be associated with credit quality step 1, 2 or 3 under the rules for the risk weighting of short-term exposures under Chapter 2;’;

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

Removed‘(g) gold bullion;’;

Removed(98a) in Article 197(6), subparagraph 1 is replaced by the following:

Removed‘For the purposes of paragraph 5, where a CIU (‘the original CIU’) or any of its underlying CIUs are not limited to investing in instruments that are eligible under paragraphs 1 and 4:

Removed- where the institutions can apply the look-through approach, they may use units or shares in that CIU as collateral up to the amount equal to the value of the instruments held by the CIU, that are eligible under paragraphs 1 and 4;

Removed- where institutions can apply the mandate-based approach, they may use units or shares in that CIU as collateral up to an amount equal to the value of the instruments held by that CIU that are eligible under paragraphs 1 and 4 under the assumption that that CIU or any of its underlying CIUs have invested in non-eligible instruments to the maximum extent allowed under their respective mandates.’;

Removed(98b) in Article 198, paragraph 2 is replaced by the following:

Removed‘2. Where the CIU or any underlying CIU are not limited to investing in instruments that are eligible for recognition under Article 197(1) and (4) and the items referred to in point (a) of paragraph 1 of this Article,

Removed– where institutions can apply the look-through approach, they may use units or shares in that CIU as collateral up to the amount equal to the value of the instruments held by the CIU, that are eligible under paragraphs 1 and 4 of Article 197 and the items referred to in point (a) of paragraph 1 of this Article;

Removed– where institutions can apply the mandate-based approach, they may use units or shares in that CIU as collateral up to an amount equal to the value of the instruments held by that CIU that are eligible under paragraphs 1 and 4 of Article 197 and the items referred to in point (a) of this Article under the assumption that that CIU or any of its underlying CIUs have invested in non-eligible instruments to the maximum extent allowed under their respective mandates.

RemovedWhere non-eligible instruments can have a negative value due to liabilities or contingent liabilities resulting from ownership, institutions shall do both of the following:

Removed(a) calculate the total value of the non-eligible instruments;

Removed(b) where the amount obtained under point (a) is negative, subtract the absolute value of that amount from the total value of the eligible instruments.’;

Removed(99) Article 199 is amended as follows:

Removed(a) paragraph 2 is replaced by the following:

Removed‘2. Unless otherwise specified under Article 124(7), 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 of the following conditions are met:

Removed(a) the value of the property does not materially depend upon the credit quality of the obligor;

Removed(b) 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.

RemovedFor the purposes of point (a), institutions may exclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower. ’;

Removed(b) in paragraph 3, point (a) is replaced by the following:

Removed‘(a) losses stemming from loans collateralised by residential property up to 55 % of the value determined in accordance with Article 229, unless otherwise provided under Article 124(7), do not exceed 0,3 % of the outstanding loans collateralised by residential property in any given year;’;

Removed(c) in paragraph 4, point (a) is replaced by the following:

Removed‘(a) losses stemming from loans collateralised by commercial property up to 55 % of the value determined in accordance with Article 229, unless otherwise provided under Article 124(7), do not exceed 0,3 % of the outstanding loans collateralised by commercial property in any given year;’;

Removed(d) in paragraph 5, the following subparagraph is added: