Changes from report parliamentary committee draft to plenary report

RemovedArticle 1 – paragraph 1 – point 79 – point b, Article 166 – paragraph 8a: 8a. For an exposure for which an institution has not received permission to use IRB-CCF, the applicable CCF shall be the SA-CCF as provided under Chapter 2 for the same types of items as laid down in Article 111. The amount to which the SA-CCF shall be applied shall be the lower of the value of the undrawn committed credit line, and the value that reflects any possible constraining of the availability of the facility, including the existence of an upper limit on the potential lending amount which is related to an obligor’s reported cash flow. Where a facility is constrained in that way, the institution shall have sufficient line monitoring and management procedures to support the existence of that constraining.

Added‘In addition to the liabilities referred to in paragraph 2 of this Article, the resolution authority may permit liabilities to qualify as eligible liabilities instruments up to an aggregate amount that does not exceed 3,5 % of the total risk exposure amount calculated in accordance with Article 92(3), provided that:’;

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Added(18) in Article 72i(1), in point (a), point (ii) is replaced by the following:

RemovedArticle 1 – paragraph 1 – point 79 – point b, Article 166 – paragraph 8c – subparagraph 1 – introductory part: 8c. Where IRB-CCF are used, for the sole purpose of calculating risk-weighted exposure amounts and expected loss amounts of exposures arising from revolving commitments other than exposures assigned to the exposure class in accordance with Article 147(2), point (a), in particular pursuant to Article 153(1), Article 157, Article 158(1), (5) and (10), the exposure value for each exposure used as input in the risk-weighted exposure amount and expect loss formulas shall not be less that then the sum of:

Added‘(ii) Article 36(1), points (a) to (g), points (k)(ii), (iii) and (k)(iv) and points (l), (m) and (n), excluding the amount to be deducted for deferred tax assets that rely on future profitability and arise from temporary differences;’;

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Added(19) in Article 84(1), point (a) is replaced by the following:

RemovedArticle 1 – paragraph 1 – point 82, Article 170 – paragraph 4 – point b: (b) transaction risk characteristics, including product and funded credit protection, recognised unfunded credit protection, loan to value measures, seasoning and seniority. Institutions shall explicitly address cases where several exposures benefit from the same funded or unfunded credit protection.;

Added‘(a) the Common Equity Tier 1 capital of the subsidiary minus the lower of the following:

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Added(i) the amount of Common Equity Tier 1 capital of that subsidiary required to meet the following:

RemovedArticle 1 – paragraph 1 – point 83, Article 171 – paragraph 3: 3. Although the time horizon used in PD estimation is one year, institutions shall use a longer time horizon in assigning ratings. A borrower rating must represent the institution's assessment of the borrower's ability and willingness to contractually perform despite adverse economic conditions or the occurrence of unexpected events. Rating systems shall be designed in such a way that idiosyncratic or industry-specific changes are a driver of migrations from one grade to another. In addition, business cycles effects shall be taken into account as a driver for migrations of obligors and facilities from one grade or pool to another.;

Added– where the subsidiary is an undertaking referred to in Article 81(1), points (a)(i) to (a)(iii) and point (a)(v), of this Regulation, the sum of the requirement laid down in Article 92(1), point (a), the requirements referred to in Articles 458 and 459 , the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, the combined buffer requirement defined in Article 128, point (6), of that Directive, or any local supervisory regulations in third countries insofar as those requirements are to be met by Common Equity Tier 1 capital, as applicable;

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Added– where the subsidiary is an investment firm or an intermediate investment holding company, the sum of the requirement laid down in Article 11 of Regulation (EU) 2019/2033, the specific own funds requirements referred to in Article 39(2), point (a), of Directive (EU) 2019/2034, or any local supervisory regulations in third countries, insofar as those requirements are to be met by Common Equity Tier 1 capital, as applicable;

RemovedArticle 1 – paragraph 1 – point 84 – point c, Article 172 – paragraph 1 – subparagraph 2: 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.

Added(ii) the amount of consolidated Common Equity Tier 1 capital that relates to that subsidiary that is required on a consolidated basis to meet the sum of the requirement laid down in Article 92(1), point (a), the requirements referred to in Articles 458 and 459, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU and the combined buffer requirement defined in Article 128, point (6), of that Directive;

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AddedBy way of derogation from this point (a), the competent authority may allow institutions to subtract either of the amounts referred to in point (i) or (ii) of this point;’

RemovedArticle 1 – paragraph 1 – point 86 – point a, Article 174 – introductory part: If an institutions uses statistical or other mathematical methods (‘models’) to assign exposures to obligors or facility grades or pools, the following requirements shall be met:’;

Added(20) in Article 85(1), point (a) is replaced by the following:

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Added‘(a) the Tier 1 capital of the subsidiary minus the lower of the following:

RemovedArticle 1 – paragraph 1 – point 87 – point b, Article 176 – paragraph 3: 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-CCF, 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).;

Added(i) the amount of Tier 1 capital of the subsidiary required to meet the following:

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Added– where the subsidiary is an undertaking referred to in Article 81(1), points (a)(i) to (a)(iii) and point (a)(v) of this Regulation, the sum of the requirement laid down in Article 92(1), point (b), the requirements referred to in Articles 458 and 459, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, the combined buffer requirement defined in Article 128, point (6), of that Directive, or any local supervisory regulations in third countries insofar as those requirements are to be met by Tier 1 Capital, as applicable;

RemovedArticle 1 – paragraph 1 – point 89 – point b, Article 178 – paragraph 1 – point b: (b) the obligor is more than 90 consecutive days past due on any material credit obligation to the institution, the parent undertaking or any of its subsidiaries.;

Added– where the subsidiary is an investment firm or an intermediate investment holding company, the sum of the requirement laid down in Article 11 of Regulation (EU) 2019/2033, the specific own funds requirements referred to in Article 39(2), point (a), of Directive (EU) 2019/2034, or any local supervisory regulations in third countries insofar as those requirements are to be met by Tier 1 capital, as applicable;

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Added(ii) the amount of consolidated Tier 1 capital that relates to the subsidiary that is required on a consolidated basis to meet the sum of the requirement laid down in Article 92(1), point (b), the requirements referred to in Articles 458 and 459, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU and the combined buffer requirement defined in Article 128, point (6), of that Directive;

RemovedArticle 1 – paragraph 1 – point 89 – point c a (new), Article 178 – paragraph 7: (ca) paragraph 7 is replaced by the following: / "7. EBA shall issue guidelines on the application of this Article and, in particular, to specify 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.”

AddedBy way of derogation from this point (a), the competent authority may allow institutions to subtract either of the amounts referred to in point (i) or (ii) of this point;’;

Removed(https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02013R0575-20230628&from=EN)

Added(20a) Article 87(1), point (a) is replaced by the following:

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Added‘(a) the own funds of the subsidiary minus the lower of the following:

RemovedArticle 1 – paragraph 1 – point 90 – point a – point iv, Article 180 – paragraph 1 – subparagraph 2: ‘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 representative of the likely range of variability of default rates 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.’;

Added(i) the amount of own funds of the subsidiary required to meet the following:

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Added– where the subsidiary is an undertaking referred to in Article 81(1), points (a)(i) to (a)(iii) and point (a)(v) of this Regulation, the sum of the requirement laid down in Article 92(1), point (c) of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, the combined buffer requirement defined in Article 128, point (6) of that Directive, or any local supervisory regulations in third countries insofar as those requirements are to be met by own funds, as applicable;

RemovedArticle 1 – paragraph 1 – point 90 – point b – point iii, Article 180 – paragraph 2 – subparagraph 3: 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 representative of the likely range of variability of default rates 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.;

Added– where the subsidiary is an investment firm or an intermediate investment company, the sum of the requirement laid down in Article 11 of Regulation (EU) 2019/2033, the specific own funds requirements referred to in Article 39(2), point (a), of Directive (EU) 2019/2034, or any local supervisory regulations in third countries insofar as those requirements are to be met by own funds, as applicable;

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Added(ii) the amount of own funds that relates to the subsidiary that is required on a consolidated basis to meet the sum of the requirement laid down in Article 92(1), point (c), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU and the combined buffer requirement defined in point (6) of Article 128 of that Directive;

RemovedArticle 1 – paragraph 1 – point 92 – point a – point i, Article 182 – paragraph 1 – subparagraph 1 – point c: (c) institutions’ IRB-CCF shall reflect the possibility of additional drawings by the obligor up to the time a default event is triggered.;

AddedBy way of derogation from this point (a), the competent authority may allow institutions to subtract either of the amounts referred to in point (i) or (ii) of this point.’;

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Added(21) the following Article 88b is inserted:

RemovedArticle 1 – paragraph 1 – point 92 – point a – point ii, Article 182 – paragraph 1 – subparagraph 1 – point g: (g) institutions’ IRB-CCF shall be estimated using a 12-month fixed-horizon approach;

Added‘Article 88b Undertakings in third countries

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AddedFor the purposes of this Title II, the terms ‘investment firm’ and ‘institution’ shall be understood to include also undertakings established in third countries, which, were they established in the Union, would fall under the definitions of those terms in Article 4(1), points (2) and (3).’;

RemovedArticle 1 – paragraph 1 – point 92 – point a – point iii, Article 182 – paragraph 1 – subparagraph 3: For the purposes of point (g), each default shall be linked to relevant obligor and facility characteristics at the fixed reference date defined as 12 months prior to the date of default.

Added(22) in Article 89, paragraph 1 is replaced by the following:

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Added‘1. A qualifying holding, the amount of which exceeds 15 % of the eligible capital of the institution, in an undertaking which is not a financial sector entity, shall be subject to the provisions laid down in paragraph 3.’;

RemovedArticle 1 – paragraph 1 – point 92 – point a – point iii, Article 182 – paragraph 1 – subparagraph 4 – introductory part: For the purposes of point (h), IRB-CCF applied to particular exposures shall not be based on data that comingle the effects of disparate characteristics or data from exposures that exhibit materially different risk characteristics. IRB-CCF shall be based on appropriately homogenous segments. For that purpose, the following practices shall not be allowed or would request a detailed scrutiny and justification:

Added(23) Article 92 is amended as follows: