Changes from plenary report to adopted text

RemovedUpon the receipt of the notification, the notifying competent authority and the consolidating supervisor shall endeavour to make a joint decision on the application of the output floor at the level of the subsidiary credit institution or a joint decision on any other distribution mechanism that would ensure the appropriate distribution of capital requirements. Where the authorities do not reach a joint decision within three months, the EBA shall have a legally binding mediation role to resolve disputes between competent authorities in accordance with the procedure set out in Article 19 of Regulation (EU) No 1093/2010.’;

Removed(24) in Article 92a(1), point (a) is replaced by the following:

Removed‘(a) a risk-based ratio of 18 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total risk exposure amount calculated in accordance with Article 92(3);’;

Removed(25) in Article 102, paragraph 4 is replaced by the following:

Removed‘4. For the purposes of calculating the own fund requirements for market risk in accordance with the approach referred to in Article 325(1), point (b), trading book positions shall be assigned to trading desks established in accordance with Article 104b.’;

Removed(26) Article 104 is replaced by the following:

Removed‘Article 104 Inclusion in the trading book

Removed1. An institution shall have in place clearly defined policies and procedures for determining which positions to include in the trading book to calculate its own fund requirements, in accordance with Article 102 and this Article, taking into account the institution's risk management capabilities and practices. The institution shall fully document its compliance with those policies and procedures, shall subject them to an internal audit on at least a yearly basis and shall make the results of that audit available to the competent authorities.

RemovedAn institution shall have in place independent risk control which evaluates on a continuous basis the instruments in and outside the trading book and assess whether its instruments are being properly designated as trading or non-trading instruments.

Removed2. Institutions shall assign positions in the following instruments to the trading book:

Removed(a) instruments that meet the criteria, set out in Article 325, paragraphs 6, 7 and 8, for the inclusion in the alternative correlation trading portfolio ('ACTP');

Removed(b) instruments that would give rise to a net short credit or equity position in the non-trading book, with the exception of the own liabilities of the institution, unless such positions meet the criteria referred to in paragraph 2, point (e);

Removed(c) instruments resulting from securities underwriting commitments, where those underwriting commitments relate only to securities that are expected to be actually purchased by the institution on the settlement date;

Removed(d) instruments classified unambiguously as having a trading purpose under the accounting framework applicable to the institution;

Removed(e) instruments resulting from market-making activities;

Removed(f) collective investment undertakings held with trading intent, provided that those collective investment undertakings meet at least one of the conditions specified in paragraph 7;

Removed(g) listed equities;

Removed(h) trading-related securities financing transactions;

Removed(i) options, or other derivatives, embedded in the own liabilities of the institution▌ in the non-trading book that relate to credit or equity risk.

RemovedFor the purposes of point (b), an institution shall have a net short equity position where a decrease in the equity’s price results in a profit for the institution. An institution shall have a net short credit position where the credit spread increase or deterioration in the creditworthiness of the issuer or group of issuers results in a profit for the institution. Institutions shall continuously monitor where instruments give rise to a net short credit or equity position in the non-trading book.

RemovedFor the purposes of point (i), an institution shall split the embedded option from its own liability ▌in the non-trading book that relate to credit or equity risk. It shall assign the embedded option to the trading book and shall leave the own liability in the non-trading book▌.

Removed3. Institutions shall not assign positions in the following instruments to the trading book:

Removed(a) instruments designated for securitisation warehousing;

Removed(b) real estate holdings-related instruments;

Removed(c) unlisted equities;

Removed(d) retail and SME credit-related instruments;

Removed(e) other collective investment undertakings than the ones specified in paragraph 2, point (f);

Removed(f) derivative contracts and collective investment undertakings with one or more of the underlying instruments referred to in points (a) to (d);

Removed(g) instruments held for hedging a particular risk of one or more positions in an instrument referred to in points (a) to (f);

Removed(h) own liabilities of the institution, unless such instruments meet the criteria referred to in paragraph 2, point (e).

Removed4. By way of derogation from paragraph 2, an institution may assign to the non-trading book a position in an instrument referred to in points (d) to (i) of that paragraph, subject to the approval from its competent authority. The competent authority shall give its approval where the institution has proven to the authority’s satisfaction that the position is not held with trading intent or does not hedge positions held with trading intent.

Removed5. Where an institution has assigned to the trading book a position in an instrument other than the instruments referred to in paragraph 2, points (a), (b) or (c), the institution’s competent authority may ask the institution to provide evidence to justify such assignment. Where the institution fails to provide suitable evidence, its competent authority may require the institution to reallocate that position to the non-trading book.

Removed6. Where an institution has assigned to the non-trading book a position in an instrument other than the instruments referred to in paragraph 3, the institution’s competent authority may ask the institution to provide evidence to justify such assignment. Where the institution fails to provide suitable evidence, its competent authority may require the institution to reallocate that position to the trading book.

Removed7. An institution shall assign to the trading book a position in a collective investment undertaking that is not referred to in point (f) of paragraph 3 of this Article, that is held with trading intent and where the institution meets one of the following conditions:

Removed(a) the institution is able to obtain sufficient information about the individual underlying exposures of the CIU;

Removed(b) the institution is not able to obtain sufficient information about the individual underlying exposures of the CIU, but the institution has knowledge of the content of the mandate of the CIU and is able to obtain daily price quotes for the CIU.

Removed8. EBA shall develop draft regulatory technical standards to further specify the process that institutions shall use to calculate and monitor net short credit or equity positions in the non-trading book referred to in the paragraph 2, point (b).

RemovedEBA shall submit those draft regulatory technical standards to the Commission by [OP please insert date = 24 months after the entry into force of this Regulation].

RemovedPower is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.’;

Removed(27) Article 104a is amended as follows:

Removed(a) in paragraph 1, the second subparagraph is replaced by the following:

Removed‘EBA shall monitor the range of supervisory practices and shall issue by 28 June 2024 guidelines on what exceptional circumstances entail for the purposes of the first subparagraph and of paragraph 5. Those guidelines shall be adopted in accordance with Article 16 of Regulation (EU) No 1093/2010. Until EBA issues those guidelines, competent authorities shall notify EBA of, and shall provide a rationale for, their decisions on whether or not to permit an institution to reclassify a position as referred to in paragraph 2 of this Article.’;

Removed(b) paragraph 5 is replaced by the following:

Removed‘5. The reclassification of a position in accordance with this Article shall be irrevocable, except in the exceptional circumstances referred to in paragraph 1.’;

Removed(c) the following paragraph 6 is added:

Removed‘6. By way of derogation from paragraph 1, an institution may reclassify a non-trading book position as a trading book position in accordance with Article 104(2), point (d), without seeking permission from its competent authority. In such case, the requirements laid down in paragraphs 3 and 4 shall continue to apply to the institution. The institution shall immediately notify its competent authority where such reclassification has occurred.’;

Removed(28) Article 104b is amended as follows:

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

Removed‘1. For the purposes of calculating the own funds requirements for market risk in accordance with the approach referred to in Article 325(1), point (b), institutions shall establish trading desks and shall assign each of their trading book positions and their non-trading book positions referred to in paragraphs 5 and 6 to one of those trading desks. Trading book positions shall be attributed to the same trading desk only where those positions are in compliance with the agreed business strategy for that trading desk and are consistently managed and monitored in accordance with paragraph 2 of this Article.’;

Removed(b) the following paragraphs 5 and 6 are added:

Removed‘5. To calculate their own funds requirements for market risk, institutions shall assign each of their non-trading book positions that are subject to foreign exchange risk or commodity risk to trading desks established in accordance with paragraph 1 that manage risks that are similar to those positions.

Removed6. By way of derogation from paragraph 5, institutions may, when calculating their own funds requirements for market risk, establish one or more trading desks to which they assign exclusively non-trading book positions subject to foreign exchange risk or commodity risk. Those trading desks shall not be subject to the requirements set out in paragraphs 1, 2 and 3.’;

Removed(29) the following Article 104c is inserted:

Removed‘Article 104c Treatment of foreign exchange risk hedges of capital ratios

Removed1. An institution which has deliberately taken a risk position in order to hedge, at least partially, against adverse movements in foreign exchange rates on any of its capital ratios as referred to in Article 92(1), points (a), (b) and (c), may, subject to permission of the competent authorities, exclude that risk position from the own funds requirements for foreign exchange risk set out in Article 325(1), provided that all of the following conditions are met:

Removed(a) the maximum amount of the risk position that is excluded from the own funds requirements for market risk is limited to the amount of the risk position that neutralises the sensitivity of any of the capital ratios to the adverse movements in foreign exchange rates;

Removed(b) the risk position is excluded from the own funds requirements for market risk for at least 6 months;

Removed(c) the institution has established an appropriate risk management framework for hedging the adverse movements in foreign exchange rates on any of its capital ratios, including a clear hedging strategy and governance structure;

Removed(d) the institution has provided to the competent authorities a justification for excluding a risk position from the own funds requirements for market risk, the details of that risk position and the amount to be excluded from the own funds requirements for market risk.

Removed2. Any exclusion of risk positions from the own funds requirements for market risk in accordance with paragraph 1 shall be applied consistently.