Changes from report parliamentary committee draft to plenary report

RemovedArticle 1 – paragraph 1 – point 196, Article 465 – paragraph 4 – subparagraph 2: deleted

Added(a) the exposure is to an entity which was created specifically to finance or operate physical assets or is an exposure that is economically comparable to such an exposure;

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Added(b) the exposure is not ▌related to the financing of real estate and is within the definitions of object finance, project finance or commodities finance exposures laid down in paragraph 3;

RemovedArticle 1 – paragraph 1 – point 196, Article 465 – paragraph 5 – subparagraph 1 – introductory part: 5. By way of derogation from Article 92(5)(a), point (i), competent authorities may, allow parent institutions, parent financial holding companies or parent mixed financial holding companies, stand-alone institutions in the EU or stand-alone subsidiary institutions in Member States to assign the following risk weights provided that all the conditions in the second subparagraph are met:

Added(c) the contractual arrangements governing the obligation related to the exposure give the institution a substantial degree of control over the assets and the income that they generate;

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Added(d) the primary source of repayment of the obligation related to the exposure is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise.

RemovedArticle 1 – paragraph 1 – point 196, Article 465 – paragraph 5 – subparagraph 2 – point b a (new): (ba) the qualifying exposures are energy efficient, with an energy performance certificate of A+ or A in line with Directive 2010/31/EU;

Added2. Specialised lending exposures for which a directly applicable credit assessment by a nominated ECAI is available shall be assigned a risk weight in accordance with Table 6aa:

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AddedTable 6aa

RemovedArticle 1 – paragraph 1 – point 196, Article 465 – paragraph 5 – subparagraph 2 – point d: (d) the competent authority has verified that the conditions in points (a), (b), (ba) and (c) are met.

Added3. Specialised lending exposures for which a directly applicable credit assessment is not available shall be risk weighted as follows:

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Added(a) where the purpose of a specialised lending exposure is to finance the acquisition of physical assets, including ships, aircraft, satellites, railcars, and fleets, and the income to be generated by those assets comes in the form of cash flows generated by the specific physical assets that have been financed and pledged or assigned to the lender ▌(‘object finance exposures’), institutions shall apply the following risk weights:

RemovedArticle 1 – paragraph 1 – point 196, Article 465 – paragraph 5 – subparagraph 4: When the competent authority exercises that discretion, they shall notify EBA and substantiate their decision. Competent authorities shall notify the details of all the verifications referred to in the second subparagraph, point (d), to EBA.

Added(i) 80 % where the exposure is deemed to be high quality when taking into account all of the following criteria:

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Added– the obligor can meet its financial obligations even under severely stressed conditions due to the presence of all of the following features:

RemovedArticle 1 – paragraph 1 – point 196, Article 465 – paragraph 5 – subparagraph 5: deleted

Added adequate exposure-to-value of the exposure;

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Added conservative repayment profile of the exposure;

RemovedArticle 1 – paragraph 1 – point 196, Article 465 – paragraph 5 – subparagraph 6: deleted

Added commensurate remaining lifetime of the assets upon full pay-out of the exposure or alternatively recourse to a protection provider with high creditworthiness;

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Added low refinancing risk of the exposure by the obligor or that risk is adequately mitigated by a commensurate residual asset value or recourse to a protection provider with high creditworthiness;

RemovedArticle 1 – paragraph 1 – point 197, Article 494d – introductory part: By way of derogation from Article 149, paragraphs 1 and 3, an institution may from 1 January 2025 until 31 December 2027, revert to the Standardised Approach for one or more of the exposure classes provided for in Article 147(2), where all the following conditions are met:

Added the obligor has contractual restrictions over its activity and funding structure;

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Added the obligor uses derivatives only for risk-mitigation purposes;

RemovedArticle 1 – paragraph 1 – point 198, Article 495 – paragraph 1 – introductory part: 1. By way of derogation from Article 107(1), institutions that have received the permission to apply the Internal Ratings Based Approach to calculate the risk weighted exposure amount for equity exposures shall, until 31 December 2029 and without prejudice to Article 495a(3), calculate the risk weighted exposure amount for each equity exposure for which they have received the permission to apply the Internal Ratings Based Approach as the higher of the following:

Added material operating risks are properly managed;

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Added– the contractual arrangements on the assets provide lenders with a high degree of protection including the following features:

RemovedArticle 1 – paragraph 1 – point 198, Article 495 – paragraph 2: deleted / (deleted)

Added the lenders have a legally enforceable first-ranking right over the assets financed, and, where applicable, over the income that they generate;

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Added there are contractual restrictions on the ability of the obligor to change anything to the asset which would have a negative impact on its value;

RemovedArticle 1 – paragraph 1 – point 198, Article 495 – paragraph 3: 3. Institutions applying the treatment laid down in paragraph 1 shall calculate EL in accordance with Article 158, paragraphs 7, 8 or 9, as applicable, as those paragraphs stood on ... [day before the date of entry into force of this amending Regulation]. / Expected loss amounts calculated in accordance with Article 158(7), (8) or (9), as applicable, as those paragraphs stood on ... [day before the date of entry into force of this amending Regulation] shall be deducted from Common Equity Tier 1 items under Article 36(1), point (d).

Added where the asset is under construction, the lenders have a legally enforceable first-ranking right over the assets and the underlying construction contracts;

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Added– the assets being financed meet all of the following standards to operate in a sound and effective manner:

RemovedArticle 1 – paragraph 1 – point 199, Article 495a – paragraph 1 – introductory part: 1. By way of derogation from the treatment laid down in Article 133(3), equity exposures shall be assigned the higher of the risk weight applicable on ... [one day before the date of entry into force of this amending Regulation] and the following risk-weights:

Added the technology and design of the asset are tested;

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Added all necessary permits and authorisations for the operation of the assets have been obtained;

RemovedArticle 1 – paragraph 1 – point 199, Article 495a – paragraph 2 – introductory part: 2. By way of derogation from the treatment laid down in Article 133(4), equity exposures shall be assigned the higher of the risk weight applicable on ... [one day before the date of entry into force of this amending Regulation] and the following risk-weights:

Added where the asset is under construction, the obligor has adequate safeguards on the agreed specifications, budget and completion date of the asset, including strong completion guarantees or the involvement of an experienced constructor and adequate contract provisions for liquidated damages;

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Added(ii) 100 % where the exposure is not deemed to be high quality as referred to in point (i);

RemovedArticle 1 – paragraph 1 – point 199, Article 495a – paragraph 3: deleted

Added(b) where the purpose of a specialised lending exposure is to provide for short-term financing of reserves, inventories or receivables of exchange-traded commodities, including crude oil, metals, or crops, and the income to be generated by those reserves, inventories or receivables is to be the proceeds from the sale of the commodity (‘commodities finance exposures’), institutions shall apply a risk weight of 100 %;

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Added(c) where the purpose of a specialised lending exposure is to finance a single project, either in the form of construction of a new capital installation or refinancing of an existing installation, with or without improvements for the development or acquisition of large, complex and expensive installations, including power plants, chemical processing plants, mines, transportation infrastructure, environment, and telecommunications infrastructure, in which the lender looks primarily to the revenues generated by the financed project, both as the source of repayment and as security for the loan (‘project finance exposures’), institutions shall apply the following risk weights:

RemovedArticle 1 – paragraph 1 – point 199, Article 495b – paragraph 2: deleted / (deleted) / (deleted)

Added(i) 130 % where the project to which the exposure is related is in the pre-operational phase;

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Added(ii) provided that the adjustment to own funds requirements for credit risk referred to in Article 501a is not applied, 80 % where the project to which the exposure is related is in the operational phase and the exposure meets all of the following criteria: