Changes from plenary report to adopted text

Removed(122) in Article 233, paragraph 4 is replaced by the following:

Removed‘4. Institutions shall base the volatility adjustments for any currency mismatch on a 10 business day liquidation period, assuming daily revaluation, and shall calculate those adjustments based on the Supervisory Volatility Adjustments as set out in Articles 224. Institutions shall scale up the volatility adjustments in accordance with Article 226.’;

Removed(123) Article 235 is amended as follows:

Removed(a) the title is amended as follows:

Removed‘Calculating risk-weighted exposure amounts under the substitution approach when the guaranteed exposure is under the Standardised Approach’;

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

Removed‘1. For the purposes of Article 113(3), institutions shall calculate the risk-weighted exposure amounts for exposures with unfunded credit protection to which those institutions apply the Standardised Approach, irrespective of the treatment of comparable direct exposure to the protection provider, in accordance with the following formula:

Removedmax · r + GA · g

Removedwhere:

RemovedE = the exposure value calculated in accordance with Article 111. For that purpose, the exposure value of an off-balance sheet item listed in Annex I shall be 100 % of its value rather than the exposure value indicated in Article 111(1);

RemovedGA = the amount of credit risk protection as calculated under Article 233(3) (G*) further adjusted for any maturity mismatch as laid down in Section 5;

Removedr = the risk weight of exposures to the obligor as specified in Chapter 2;

Removedg = the risk weight applicable for a direct exposure to the protection provider as specified in Chapter 2.’

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

Removed‘3. Institutions may extend the preferential treatment set out in Article 114, paragraphs 4 and 7, to exposures or parts of exposures guaranteed by the central government or the central bank as if those exposures were direct exposures to the central government or the central bank, provided that the conditions in Article 114, paragraphs 4 or 7, as applicable, are met for such direct exposures.’;

Removed(124) the following Article 235a is inserted:

Removed‘Article 235a Calculating risk-weighted exposure and expected loss amounts under the substitution approach when the guaranteed exposure is treated under the IRB Approach and comparable direct exposures to the protection provider are treated under the Standardised Approach

Removed1. For exposures with unfunded credit protection to which an institution applies the IRB Approach referred to in Chapter 3 and where comparable direct exposures to the protection provider are treated under the Standardised Approach, institutions shall calculate the risk-weighted exposure amounts in accordance with the following formula:

Removedmax · r + GA · g

Removedwhere:

RemovedE = the exposure value determined in accordance with Chapter 3, Section 5. For that purpose, institutions shall calculate the exposure value for off-balance sheet items other than derivatives treated under the IRB Approach using CCFs of 100 % instead of the SA-CCFs or IRB-CCFs provided for in Article 166, paragraphs 8, 8a and 8b;

RemovedGA = the amount of credit risk protection as calculated in accordance with Article 233(3)

Removed(G*) further adjusted for any maturity mismatch as laid down in Chapter 3, Section 5;

Removedr = the risk weight ▌as specified in Chapter 3 by using the PD of the obligor and the LGD of the exposure to the obligor without taking into account the unfunded credit protection;

Removedg = the risk weight applicable for a direct exposure to the protection provider as specified in Chapter 2.

Removed2. Where the protected amount (GA) is less than the exposure (E), institutions may apply the formula specified in paragraph 1 only where the protected and unprotected parts of the exposure are of equal seniority.

Removed3. Institutions may extend the preferential treatment set out in Article 114, paragraphs 4 and 7, to exposures or parts of exposures guaranteed by the central government or the central bank as if those exposures were direct exposures to the central government or the central bank, provided that the conditions in Article 114, paragraphs 4 or 7, as applicable, are met for such direct exposures.

Removed4. The expected loss amount for the covered portion of the exposure value shall be zero.

Removed5. For any uncovered portion of the exposure value (E) the institution shall use the risk weight and the expected loss corresponding to the underlying exposure. For the calculation laid down in Article 159, institutions shall assign any general or specific credit risk adjustments or additional value adjustments in accordance with Articles 34 related to the non-trading book business of the institution or other own funds reductions related to the exposure, to the uncovered portion of the exposure value.’;

Removed(125) Article 236 is amended as follows:

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

Removed‘Calculating risk-weighted exposure amounts and expected loss amounts under the substitution approach when the guaranteed exposure is treated under the IRB Approach and a comparable direct exposure to the protection provider is treated under the IRB Approach’;

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

Removed‘1. For an exposure with unfunded credit protection to which an institution applies the IRB Approach referred to in Chapter 3, but without using its own estimates of loss given default (LGD), and where comparable direct exposures to the protection provider are treated under the IRB Approach set out in Chapter 3, institutions shall determine the covered portion of the exposure as the lower of the exposure value E and the adjusted value of the unfunded credit protection GA calculated in accordance with Article 235a(1);’

Removed(c) the following paragraphs 1a to 1d are inserted:

Removed‘1a. An institution that applies to comparable direct exposures to the protection provider the IRB Approach using own estimates of PD shall calculate the risk-weighted exposure amount and the expected loss amount for the covered portion of the exposure value by using the PD of the protection provider and the LGD applicable for a comparable direct exposure to the protection provider as referred to in Article 161(1), in accordance with paragraph 1b. For subordinated exposures and non-subordinated unfunded credit protection, the LGD to be applied by institutions to the covered portion of the exposure value is the LGD associated with senior claims and▌ may account for any funded credit protection securing the unfunded credit protection in accordance with this Chapter.

Removed1b. Institutions shall calculate the risk weight and expected loss applicable to the covered portion of the underlying exposure using the PD, the LGD specified in paragraph 1a, and the same risk weight function as the ones used for a comparable direct exposure to the protection provider, and shall, where applicable, use the maturity M related to the underlying exposure, calculated in accordance with Article 162.

Removed1c. Institutions that apply to comparable direct exposures to the protection provider the IRB Approach using the method provided for in Article 153(5), shall use the risk weight and expected loss applicable to the covered portion of the exposure that correspond to the ones provided for in Articles 153(5) and 158(6).

Removed1d. Notwithstanding paragraph 1c, institutions that apply to guaranteed exposures the IRB Approach using the method provided for in Article 153(5) shall calculate the risk weight and expected loss applicable to the covered portion of the exposure using the PD, the LGD applicable for a comparable direct exposure to the protection provider as referred to in Article 161(1), in accordance with paragraph 1b, and the same risk weight function as the ones used for a comparable direct exposure to the protection provider, and shall, where applicable, use the maturity M related to the underlying exposure, calculated in accordance with Article 162. For subordinated exposures and non-subordinated unfunded credit protection, the LGD to be applied by institutions to the covered portion of the exposure value is the LGD associated with senior claims and that may account for any collateralisation of the underlying exposure in accordance with this Chapter.’;

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

Removed‘2. For any uncovered portion of the exposure value (E), institutions shall use the risk weight and the expected loss corresponding to the underlying exposure. For the calculation laid down in Article 159, institutions shall assign any general and specific credit risk adjustments, additional value adjustments related to the non-trading book business of the institution as referred to in Article 34 and other own funds reductions related to the exposure other than the deductions made in accordance with Article 36(1), point (m), to the uncovered portion of the exposure value.’;

Removed(126) the following Article 236a is inserted:

Removed‘Article 236a Calculating risk-weighted exposure amounts and expected loss amounts under the substitution approach when the guaranteed exposure is treated under the IRB Approach using own estimates of loss given default (LGD) and a comparable direct exposure to the protection provider is treated under the IRB Approach

Removed1. For an exposure with unfunded credit protection to which an institution applies the IRB Approach referred to in Chapter 3 using its own estimates of loss given default (LGD) and where comparable direct exposures to the protection provider are treated under the IRB Approach referred to in Chapter 3, without the use of own estimates of LGD, institutions shall determine the covered portion of the exposure as the lower of the exposure value E and the adjusted value of the unfunded credit protection GA calculated in accordance with Article 235a(1). The risk-weighted exposure amount and the expected loss amount for the covered portion of the exposure value shall be calculated by using the PD, the LGD and the same risk weight function as the ones used for a comparable direct exposure to the protection provider, and shall, where applicable, use the maturity M related to the underlying exposure, calculated in accordance with Article 162.

Removed2. Institution that apply the IRB Approach referred to in Chapter 3 but without using their own estimates of loss given default (LGD) to comparable direct exposures to the protection provider, shall determine the LGD in accordance with Article 161. For subordinated exposures and non-subordinated unfunded credit protection, the LGD to be applied by institutions to the covered portion of the exposure value is the LGD associated with senior claims and that may account for any collateralisation of the underlying exposure in accordance with this Chapter.

Removed3. Institutions that apply the IRB Approach referred to in Chapter 3 using their own estimates of LGD to comparable direct exposures to the protection provider, shall calculate the risk weight and the expected loss applicable to the covered portion of the underlying exposure using the PD, the LGD and the same risk weight function as the ones used for such a comparable direct exposure to the protection provider, and shall use the maturity M related to the underlying exposure, calculated, where applicable, in accordance with Article 162.

Removed4. Institution that apply to comparable direct exposures to the protection provider the IRB Approach using the method provided for in Article 153(5), shall apply the risk weight and expected loss applicable to the covered portion of the exposure that correspond to the ones provided in Articles 153(5) and 158(6).

Removed5. For any uncovered portion of the exposure value (E), institutions shall use the risk weight and the expected loss corresponding to the underlying exposure. For the calculation laid down in Article 159, institutions shall assign any general and specific credit risk adjustments, additional value adjustments related to the non-trading book business of the institution as referred to in Article 34 and other own funds reductions related to the exposure other than the deductions made in accordance with Article 36(1), point (m), to the uncovered portion of the exposure value.’;

Removed(127) in Part three, Title II, Chapter 4, Section 6 is deleted;

Removed(128) in Article 273(3), point (b) is replaced by the following:

Removed‘(b) in accordance with Article 183, where permission has been granted in accordance with Article 143.’

Removed(129) Article 273b is amended as follows:

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

Removed‘Article 273b Non-compliance with the conditions for using simplified methods for calculating the exposure value of derivatives and the simplified approach for calculating the own funds requirement for CVA risk’;

Removed(b) in paragraph 2, the introductory wording is replaced by the following:

Removed‘Institutions shall cease to calculate the exposure values of its derivative positions in accordance with Section 4 or 5 and to calculate the own funds requirement for CVA risk in accordance with Article 385, as applicable, within three months of one of the following occurring:’;

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

Removed‘3. Institutions that have ceased to calculate the exposure values of its derivative positions in accordance with Section 4 or 5 and to calculate the own funds requirement for CVA risk in accordance with Article 385, as applicable, shall only be permitted to resume calculating the exposure value of their derivative positions as set out in Section 4 or 5 and the own funds requirement for CVA risk in accordance with Article 385 where they demonstrate to the competent authority that all the conditions set out in Article 273a, paragraphs 1 or 2, have been met for an uninterrupted period of one year.’;

Removed(130) Article 274 is amended as follows:

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