Changes from report parliamentary committee draft to plenary report

RemovedRegulation (EU) No 575/2013

AddedFor 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▌.

RemovedArticle 1 – paragraph 1 – point 124, Article 235a – paragraph 1 – subparagraph 4: r = 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;

Added3. Institutions shall not assign positions in the following instruments to the trading book:

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Added(a) instruments designated for securitisation warehousing;

RemovedArticle 1 – paragraph 1 – point 124, Article 235a – paragraph 1 – subparagraph 5: g = the risk weight applicable for a direct exposure to the protection provider as specified in Chapter 2.

Added(b) real estate holdings-related instruments;

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Added(c) unlisted equities;

RemovedArticle 1 – paragraph 1 – point 125 – point a, Article 236 – title: Calculating risk-weighted exposure amounts and expected loss amounts under the substitution approach when the guaranteed exposure is treated under the IRB Approach without the use of own estimates of LGD and a comparable direct exposure to the protection provider is treated under the IRB Approach

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

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

RemovedArticle 1 – paragraph 1 – point 125 – point b, Article 236 – paragraph 1: 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).

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

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

RemovedArticle 1 – paragraph 1 – point 125 – point c, Article 236 – paragraph 1a: 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 but without using own estimates of LGD 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 commitment in accordance with this Chapter.

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

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Added4. 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.

RemovedArticle 1 – paragraph 1 – point 126, Article 236a – paragraph 1: 1. 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.

Added5. 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.

RemovedRegulation (EU) No 575/2013

Added6. 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.

RemovedArticle 1 – paragraph 1 – point 130a (new), Article 291 – paragraph 5 – point f: (131 a) in Article 291(5), point (f) is replaced by the following: / "(f) to the extent that this uses existing market risk calculations for own funds requirements for default risk as set out in Title IV, Chapter 1a, Section 4 or 5 or for default risk using an internal default risk model as set out in Title IV, Chapter 1b, Section 3 that already contain an LGD assumption, the LGD in the formula used shall be 100%.”

Added7. 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(https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32013R0575&from=EN)

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

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Added(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.

RemovedArticle 1 – paragraph 1 – point 131, Article 314 – paragraph 2 – subparagraph 3: IC = the interest component, which is the institution’s interest income from all financial assets and other interest income, including finance income from financial leases and income from operating leases and profits from leased assets, minus the institution’s interest expenses from all financial liabilities and other interest expenses, including interest expense from financial and operating leases, depreciation and impairment of, and losses from, operating leased assets, calculated as the annual average of the absolute values of the differences over the previous three financial years;

Added8. 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).

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AddedEBA 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].

RemovedArticle 1 – paragraph 1 – point 131, Article 314 – paragraph 3 – subparagraph 4: OE = the other operating expenses, which is the annual average over the previous three financial years of the institution’s expenses and losses from ordinary banking operations not included in other items of the business indicator but of similar nature, and from operational risk events;

AddedPower 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.’;

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

RemovedArticle 1 – paragraph 1 – point 131, Article 314 – paragraph 5 – point e: (e) expenses of premises and fixed assets, except where those expenses result from operational risk events;

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

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Added‘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.’;

RemovedArticle 1 – paragraph 1 – point 131, Article 314 – paragraph 5 – point g: (g) provisions and reversal of provisions, except where those provisions relate to operational risk events;

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

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

RemovedArticle 1 – paragraph 1 – point 131, Article 314 – paragraph 7 – subparagraph 2: EBA shall submit those draft implementing technical standards to the Commission by [18 months after entry into force of this Regulation].

Added(c) the following paragraph 6 is added:

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Added‘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.’;

RemovedArticle 1 – paragraph 1 – point 131, Article 317 – paragraph 7: 7. An institution shall upon request from the competent authority be able to map its historical internal loss data to the event type.

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

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

RemovedArticle 1 – paragraph 1 – point 131, Article 317 – paragraph 9 – subparagraph 1: 9. For the purposes of paragraph 7 of this Article, EBA is mandated to develop draft regulatory technical standards establishing a risk taxonomy on operational risk and a methodology to classify, based on that risk taxonomy on operational risk, the loss events included in the loss data set.

Added‘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.’;

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