Changes from plenary report to adopted text

Removed(106) Article 215 is amended as follows:

Removed(a) paragraph 1 is amended as follows:

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

Removed‘(a) on the qualifying default of or non-payment by the obligor, the lending institution has the right to pursue, in a timely manner, the guarantor for any monies due under the claim in respect of which the protection is provided.’;

Removed(ii) the following subparagraphs are added:

Removed‘The payment by the guarantor shall not be subject to the lending institution first having to pursue the obligor.

RemovedIn the case of unfunded credit protection covering residential mortgage loans, the requirements in Article 213(1), point (c)(iii), and in the first subparagraph of this point, shall only have to be satisfied within 24 months.’;

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

Removed‘2. In the case of guarantees provided in the context of mutual guarantee schemes or provided by or counter-guaranteed by entities as listed in Article 214(2), the requirements in paragraph 1, point (a), of this Article and in Article 213(1), point (c)(iii) shall be considered to be satisfied where either of the following conditions is met:

Removed(a) pursuant to the default of the obligor or to the event that the original obligor fails to make any payments due, the lending institution has the right to obtain in a timely manner a provisional payment by the guarantor that meets both the following conditions:

Removed(i) the provisional payment represents a robust estimate of the amount of the loss that the lending institution is likely to incur, including losses resulting from the non-payment of interest and other types of payment which the borrower is obliged to make;

Removed(ii) the provisional payment is proportional to the coverage of the guarantee;

Removed(b) the lending institution can demonstrate to the satisfaction of the competent authorities that the effects of the guarantee, which shall also cover losses resulting from the non-payment of interest and other types of payments which the borrower is obliged to make, justify such treatment.’;

Removed(107) in Article 216, the following paragraph 3 is added:

Removed‘3. By way of derogation from paragraph 1, for a corporate exposure covered by a credit derivative, the credit event referred to in point (a)(iii) of that paragraph shall not need to be specified in the derivative contract provided that all of the following conditions are met:

Removed(a) a 100 % vote is needed to amend the maturity, principal, coupon, currency or seniority status of the underlying corporate exposure;

Removed(b) the legal domicile in which the corporate exposure is governed has a well-established bankruptcy code that allows for a company to reorganise and restructure, and provides for an orderly settlement of creditor claims.

RemovedWhere the conditions laid down in point (a) and (b) are not met, the credit protection may nonetheless be eligible subject to a reduction in the value as specified in Article 233(2).’;

Removed(108) Article 217 is deleted;

Removed(109) Article 219 is replaced by the following:

Removed‘Article 219 On-balance sheet netting

RemovedLoans to and deposits with the lending institution subject to on-balance sheet netting shall be treated by that institution as cash collateral for the purposes of calculating the effect of funded credit protection for those loans and deposits of the lending institution subject to on-balance sheet netting.’;

Removed(110) Article 220 is amended as follows:

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

Removed‘Using the Supervisory Volatility Adjustments Approach for master netting agreements’;

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

Removed‘1. Institutions that calculate the ‘fully adjusted exposure value’ (E*) for the exposures subject to an eligible master netting agreement covering securities financing transactions or other capital market-driven transactions shall calculate the volatility adjustments that they need to apply by using the Supervisory Volatility Adjustments Approach set out in Articles 223 to 227 for the Financial Collateral Comprehensive Method.’;

Removed(c) in paragraph 2, point (c) is replaced by the following:

Removed‘(c) apply the value of the volatility adjustment, or, where relevant, the absolute value volatility adjustment appropriate for a given group of securities or for a given type of commodities, to the absolute value of the positive or negative net position in the securities in that group of securities, or to the commodities from that type of commodities;’;

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

Removed‘3. Institutions shall calculate E* in accordance with the following formula:

Removedwhere:

Removedi = the index that denotes all separate securities, commodities or cash positions under the agreement, that are either lent, sold with an agreement to repurchase, or posted by the institution to the counterparty;

Removedj = the index that denotes all separate securities, commodities or cash positions under the agreement that are either borrowed, purchased with an agreement to resell, or held by the institution;

Removedk = the index that denotes all separate currencies in which any securities, commodities or cash positions under the agreement are denominated;

Removed= the exposure value of a given security commodity or cash position i, that is either lent, sold with an agreement to repurchase, or posted to the counterparty under the agreement that would apply in the absence of credit protection, where institutions calculate the risk weighted exposure amounts in accordance with Chapter 2 or Chapter 3, as applicable;

Removed= the value of a given security, commodity or cash position j that is either borrowed, purchased with an agreement to resell, or held by the institution under the agreement;

Removed= the net position (positive or negative) in a given currency k other than the settlement currency of the agreement as calculated in accordance with paragraph 2, point (b);

Removed= the foreign exchange volatility adjustment for currency k;

Removed= the net exposure of the agreement, calculated as follows:

Removedwhere:

Removedl = the index that denotes all distinct groups of the same securities and all distinct types of the same commodities under the agreement;

Removed= the net position (positive or negative) in a given group of securities l, or a given type of commodities l, under the agreement, calculated in accordance with paragraph 2, point (a);

Removed= the volatility adjustment appropriate to a given group of securities l, or a given type of commodities l, determined in accordance with paragraph 2, point (c). The sign of shall be determined as follows:

Removed(a) it shall have a positive sign where the group of securities l is lent, sold with an agreement to repurchase, or transacted in a manner similar to either securities lending or a repurchase agreement;

Removed(b) it shall have a negative sign where group of securities l is borrowed, purchased with an agreement to resell, or transacted in a manner similar to either a securities borrowing or reverse repurchase agreement;

RemovedN = the total number of distinct groups of the same securities and distinct types of the same commodities under the agreement; for the purposes of this calculation, those groups and types for which is less than shall not be counted;

Removed= the gross exposure of the agreement, calculated as follows:

Removed.’;

Removed(111) Article 221 is amended as follows:

Removed(a) paragraphs 1, 2 and 3 are replaced by the following:

Removed‘1. For the purposes of calculating risk-weighted exposure amounts and expected loss amounts for securities financing transactions or other capital market-driven transactions other than derivative transactions covered by an eligible master netting agreement that meets the requirements set out in Chapter 6, Section 7, an institution may calculate the fully adjusted exposure value (E*) of the agreement using the internal models approach, provided that the institution meets the conditions set out in paragraph 2.’;

Removed2. An institution may use the internal models approach where all of the following conditions are met:

Removed(a) the institution uses that approach only for exposures for which the risk weighted exposures amounts are calculated under the IRB Approach set out in Chapter 3;

Removed(b) the institution is granted the permission to use that approach by its competent authorities’;

Removed3. An institution that uses an internal models approach shall do so for all counterparties and securities, with the exception of immaterial portfolios for which it may use the Supervisory Volatility Adjustments Approach laid down in Article 220’;

Removed(b) paragraph 8 is deleted.

Removed(111a) in Article 222, paragraph1 is replaced by the following:

Removed‘1. Institutions may use the Financial Collateral Simple Method where they calculate risk-weighted exposure amounts under the Standardised Approach. Institution shall not use both the Financial Collateral Simple Method and the Financial Collateral Comprehensive Method, except for the purposes of Articles 148(1) and 150(1). Institutions shall not use this exception selectively with the purpose of achieving reduced own funds requirements or with the purpose of conducting regulatory arbitrage.’;

Removed(112) Article 223 is amended as follows