Changes from report parliamentary committee draft to plenary report

RemovedRegulation (EU) No 575/2013

Added(b) the own funds requirements for market risk for the trading book business referred to in paragraph 3, point (b)(i), and for all its business activities that are subject to foreign exchange risk or commodity risk referred to in point (c) of that paragraph shall be calculated without using the alternative internal model approach set out in Part Three, Title IV, Chapter 1b.

RemovedArticle 1 – paragraph 1 – point 98 – point a, Article 197 – paragraph 1 – point d – point ii – indent 2: — 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;

Added▌

RemovedRegulation (EU) No 575/2013

Added7. The following provisions shall apply to the calculations of the total un-floored risk exposure amount referred to in paragraph 4 and of the standardised risk exposure amount referred to in paragraph 5:

RemovedArticle 1 – paragraph 1 – point 98 – point a, Article 197 – paragraph 1 – point e – point ii: (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;;

Added(a) the own funds requirements referred to in paragraph 4, points (c), (ca), (d) and (e), shall include those arising from all the business activities of an institution;

RemovedRegulation (EU) No 575/2013

Added(b) institutions shall multiply the own funds requirements set out in paragraph 4, points (b) to (e), by 12,5.’;

RemovedArticle 1 – paragraph 1 – point 100 – point a – point iii, Article 201 – paragraph 1 – point g: (g) where the credit protection is not provided to a securitisation exposure, other undertakings, that have a credit assessment by a nominated ECAI, including parent undertakings, subsidiaries or affiliated entities of the obligor where a direct exposure to those parent undertakings, subsidiaries or affiliated entities has a lower risk weight than the exposure to the obligor;

Added(23a) the following Article is inserted:

RemovedRegulation (EU) No 575/2013

Added‘Article 92-a

RemovedArticle 1 – paragraph 1 – point 100 – point a – point iv, Article 201 – paragraph 1 – point ga: (ga) where the credit protection is provided to a securitisation exposure, other undertakings, that have a credit assessment by a nominated ECAI of credit quality step 1, 2 or 3 and that had a credit assessment of credit quality step 1 or 2 at the time the credit protection was provided, including parent undertakings, subsidiaries and affiliated entities of the obligor where a direct exposure to those parent undertakings, subsidiaries or affiliated entities has a lower risk weight than that of the securitisation exposure;

AddedLevel of application of the output floor

RemovedRegulation (EU) No 575/2013

Added1. Institutions shall calculate the total risk-weighted exposure amount referred to in Article 92(3) on a consolidated basis in accordance with Part One, Title II, Chapter 2 of this Regulation.

RemovedArticle 1 – paragraph 1 – point 100 – point b, Article 201 – paragraph 2: 2. In addition to the protection providers listed in paragraph 1, corporate entities that are internally rated by the institution in accordance with Chapter 3, Section 6, shall be eligible protection providers of unfunded credit protection where the institution uses the IRB approach for exposures to those corporate entities.;

Added2. Without prejudice to paragraph 1, where the competent authority responsible for the supervision of a subsidiary credit institution of an EU parent institution or an EU parent financial holding company or EU parent mixed financial holding company in a Member State deems that the application of Article 92(3) of this Regulation would lead to an inappropriate distribution of capital among the group entities, that competent authority may submit a capital redistribution proposal to the consolidating supervisor.

RemovedRegulation (EU) No 575/2013

AddedUpon 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.’;

RemovedArticle 1 – paragraph 1 – point 102, Article 204 – paragraph 3 – subparagraph 2: deleted

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

RemovedRegulation (EU) No 575/2013

Added‘(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);’;

RemovedArticle 1 – paragraph 1 – point 102, Article 204 – paragraph 3 – subparagraph 3: deleted

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

RemovedRegulation (EU) No 575/2013

Added‘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.’;

RemovedArticle 1 – paragraph 1 – point 103 – point a – point i, Article 208 – paragraph 3 – point b – third and fourth sentence: The property value used for an exposure secured by an immovable property shall not exceed the property value of this immovable property measured when the institution entered that exposure. Modifications made to the property that improve the energy efficiency of the building or housing unit shall be considered as unequivocally increasing its value.;

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

RemovedRegulation (EU) No 575/2013

Added‘Article 104 Inclusion in the trading book

RemovedArticle 1 – paragraph 1 – point 103 – point b, Article 208 – paragraph 3a – introductory part: 3a. In accordance with paragraph 3 and subject to the approval of the competent authorities, institutions may carry out the monitoring of the property value and the identification of immovable property in need of revaluation by means of advanced statistical or other mathematical methods (‘models’), developed independently from the credit decision process, subject to the fulfilment of the following conditions:

Added1. 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.

RemovedRegulation (EU) No 575/2013

AddedAn 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.

RemovedArticle 1 – paragraph 1 – point 103 – point b, Article 208 – paragraph 3a – point a: (a) the institutions set out, in their policies and procedures, the criteria for using models to monitor the values of collateral and to identify immovable property in need of revaluation. Those policies and procedures shall account for such models’ proven track record, property-specific variables considered, the use of minimum available and accurate information, and the models’ uncertainty;

Added2. Institutions shall assign positions in the following instruments to the trading book:

RemovedRegulation (EU) No 575/2013

Added(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');

RemovedArticle 1 – paragraph 1 – point 103 – point b, Article 208 – paragraph 3a – point c: (c) the institutions are ultimately responsible for the appropriateness and performance of the models, the valuer referred to in paragraph 3, point (b), is responsible for the valuation of immovable property for which the need for revaluation has been identified using the models and the institutions understand the methodology, input data and assumptions of the models used;

Added(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);

RemovedRegulation (EU) No 575/2013

Added(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;

RemovedArticle 1 – paragraph 1 – point 103 – point b, Article 208 – paragraph 3a – point e: (e) the institutions have in place adequate IT processes, systems and capabilities and have sufficient and accurate data for any model-based monitoring of the value of immovable property collateral and identification of immovable properties in need of revaluation;

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

RemovedRegulation (EU) No 575/2013

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

RemovedArticle 1 – paragraph 1 – point 103 – point b a (new), Article 208 – paragraph 3b (new): (b a) the following paragraph 3b is inserted: / 3b. The valuation criteria set out in Article 229(1) shall be taken into account for the purpose of monitoring and revaluation of the property value as set out in this Article.

Added(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;

RemovedRegulation (EU) No 575/2013

Added(g) listed equities;

RemovedArticle 1 – paragraph 1 – point 105, Article 213 – paragraph 1 – subparagraph 2: For the purposes of point (c), a clause in the credit protection contract providing that faulty due diligence or fraud by the lending institution or by the debtor cancels or diminishes the extent of the credit protection offered by the guarantor, shall not disqualify that credit protection from being eligible.

Added(h) trading-related securities financing transactions;

RemovedRegulation (EU) No 575/2013

Added(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.

RemovedArticle 1 – paragraph 1 – point 123 – point b, Article 235 – paragraph 1 – subparagraph 5: g = the risk weight applicable for a direct exposure to the protection provider as specified in Chapter 2.

AddedFor 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.