Changes from report parliamentary committee draft to plenary report

Added(a) setting floors or caps to realised CCF or realised exposure values ▌

Added(b) the use of obligor-level estimates that do not fully cover the relevant product transformation options or inappropriately combine products with very different characteristics,

Added(c) adjusting only material observations affected by product transformation,

Added(d) excluding observations affected by product profile transformation.’;

Added(aa) the following paragraphs are inserted:

Added‘1a. Institutions shall ensure that their CCF estimates are effectively quarantined from the potential effects of region of instability caused by a facility being close to being fully drawn at reference date.

Added1b. Reference data must not be capped at the principal amount outstanding of a facility or the available facility limit. Accrued interest, other due payments and drawings in excess of facility limits must be included in the reference data.’;

Added▌

Added(c) the following paragraph 5 is added:

Added‘5. EBA shall, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines to specify the methodology institutions shall apply to estimate IRB-CCF.

AddedEBA shall submit those draft regulatory technical standards to the Commission by 31 December 2026.

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

Added(93) Article 183 is amended as follows

Added(a) the title is replaced by the following:

Added‘Requirements for assessing the effect of unfunded credit protection for exposures to corporates, central governments and central banks where own estimates of LGD are used and for retail exposures’;

Added(b) paragraph 1 is amended as follows:

Added(i) point (c) is replaced by the following:

Added‘(c) the guarantee shall be evidenced in writing, non-cancellable and non-changeable on the part of the guarantor, in force until the obligation is satisfied in full, to the extent of the amount and tenor of the guarantee, and legally enforceable against the guarantor in a jurisdiction where the guarantor has assets to attach and enforce a judgement;

Added(ii) the following points (d) and (e) are added:

Added‘(d) the guarantee shall be unconditional.

Added(e) first-to-default credit derivatives may be recognised as eligible unfunded credit protection, but second-to-default or more generally nth-to-default credit derivatives shall not be recognised as eligible unfunded credit protection.’;

Added(iii) the following subparagraph is added:

Added▌

Added‘Guarantees where the payment by the guarantor is subject to the lending institution first having to pursue the obligor and that only cover losses remaining after the institutions has completed the workout process shall be considered as unconditional.’;

Added(c) the following paragraph 1a is added:

Added‘1a. Institutions may recognise unfunded credit protection by using either the PD/LGD modelling approach, in accordance with this Article and subject to the requirement set out in paragraph 4, or the substitution of risk parameters approach under A-IRB as referred to in Article 236a and subject to the eligibility requirements of Chapter 4. Institutions should have clear policies for assessing the effects of unfunded credit protection on risk parameters. The policies of the institutions shall be consistent with their internal risk management practices and shall reflect the requirements of this Article. Those policies shall clearly specify which of the specific methods described in this subparagraph are used for each rating system, and institutions shall apply those policies consistently over time.’;

Added(d) paragraph 4 is replaced by the following:

Added‘4. Where institutions recognise unfunded credit protection by the PD/LGD modelling approach, they should reflect the risk-reducing effect of the unfunded credit protection for a given type of exposures through an adjustment of either the PD or the LGD estimate and the covered portion of the underlying exposure shall not be assigned a risk weight which would be lower than the protection-provider-RW-floor. For that purpose, the protection-provider-RW-floor shall be calculated using the same PD, the same LGD and the same risk weight function as the ones used applicable to comparable direct exposure to the protection provider as referred to in Article 236a.’;

Added(e) paragraph 6 is deleted;

Added(94) in Part Three, Title II, Chapter 3, Section 6, Sub-Section 4 is deleted;

Added(95) in Article 192, the following points (5) to (8) are added:

Added‘(5) ‘substitution of risk weight approach under SA’ means the substitution, ▌, of the risk weight of the underlying exposure with the risk weight applicable under the Standardised Approach to a comparable direct exposure to the protection provider in accordance with Article 235, when the guaranteed exposure is treated under the Standardised Approach and comparable direct exposures to the protection provider are treated under the Standardised Approach or IRB Approach;

Added(6) ‘substitution of risk weight approach under IRB’ means the substitution,▌ of the risk weight of the underlying exposure with the risk weight applicable under the Standardised Approach to a comparable direct exposure to the protection provider in accordance with Article 235a, when the guaranteed exposure is treated under the IRB Approach and comparable direct exposures to the protection provider are treated under the Standardised Approach;

Added(7) ‘substitution of risk parameters approach under F-IRB’ means the substitution, in accordance with Article 236, of both the PD and LGD risk parameters of the underlying exposure with the corresponding PD and LGD that would be assigned under the IRB approach without using own LGD estimates to a comparable direct exposures to the protection provider;

Added(8) ‘substitution of risk parameters approach under A-IRB’ means the substitution, in accordance with Article 236a, of both the PD and LGD risk parameters of the underlying exposure with the corresponding PD and LGD that would be assigned under the IRB approach using own LGD estimates to a comparable direct exposure to the protection provider.’;

Added(96) in Article 193,▌ paragraphs 7 and 7a are added:

Added‘7. Collateral that satisfies all eligibility requirements set out in this Chapter can be recognised as such even for exposures associated with undrawn facilities. Where drawing under the facility is conditional on the prior or simultaneous purchase or reception of collateral to the extent of the institution’s interest in the collateral once the facility is drawn, such that the institution does not have any interest in the collateral to the extent the facility is not drawn, such collateral can be recognised for the exposure arising from the undrawn facility.

Added7a. Where institutions calculate risk-weighted exposure amounts under the Standardised Approach or institutions calculate risk-weighted exposure amounts and expected loss amounts under the IRB Approach in accordance with the provisions laid down in this Chapter, they should factor in the ESG risks, to which the collateral is subject.

AddedThe EBA shall, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines on what constitutes the materialisation of climate physical risk and how this risk should be reflected in institutions’ calculations of the risk-weighted amount of the exposure.’;

Added(97) in Article 194, paragraph 10 is deleted;

Added(98) in Article 197, paragraph 1 is amended as follows:

Added(a) points (b) to (e) are replaced by the following:

Added‘(b) debt securities satisfying all of the following conditions:

Added(i) the debt securities are issued by central governments or central banks;

Added(ii) the debt securities have a credit assessment carried out by an ECAI or export credit agency that satisfied all of the following conditions:

Added– the ECAI or export credit agency has been recognised as being eligible for the purposes of Chapter 2;

Added– the credit assessment has been determined by EBA to be associated with credit quality step 1, 2, 3 or 4 under the rules for the risk weighting of exposures to central governments and central banks under Chapter 2;

Added(c) debt securities satisfying all of the following conditions:

Added(i) those debt securities are issued by institutions;

Added(ii) those debt securities have a credit assessment carried out by an ECAI that satisfy all of the following conditions:

Added– the ECAI has been recognised as being eligible for the purposes of Chapter 2;

Added– 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 institutions under Chapter 2;

Added(d) debt securities satisfying all of the following conditions:

Added(i) those debt securities are issued by other entities;

Added(ii) those debt securities have a credit assessment carried out by an ECAI that satisfies all of the following conditions:

Added– the ECAI has been recognised as being eligible for the purposes of Chapter 2;

Added– 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(e) debt securities having a short-term credit assessment carried out by an ECAI that satisfies all of the following conditions:

Added(i) the ECAI has been recognised as being eligible for the purposes of Chapter 2; and

Added(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;’;