Changes from report parliamentary committee draft to plenary report

Added(b) point (g) is replaced by the following:

Added‘(g) gold bullion;’;

Added(98a) in Article 197(6), subparagraph 1 is replaced by the following:

Added‘For the purposes of paragraph 5, where a CIU (‘the original CIU’) or any of its underlying CIUs are not limited to investing in instruments that are eligible under paragraphs 1 and 4:

Added- where the institutions can apply the look-through approach, they may use units or shares in that CIU as collateral up to the amount equal to the value of the instruments held by the CIU, that are eligible under paragraphs 1 and 4;

Added- where institutions can apply the mandate-based approach, they may use units or shares in that CIU as collateral up to an amount equal to the value of the instruments held by that CIU that are eligible under paragraphs 1 and 4 under the assumption that that CIU or any of its underlying CIUs have invested in non-eligible instruments to the maximum extent allowed under their respective mandates.’;

Added(98b) in Article 198, paragraph 2 is replaced by the following:

Added‘2. Where the CIU or any underlying CIU are not limited to investing in instruments that are eligible for recognition under Article 197(1) and (4) and the items referred to in point (a) of paragraph 1 of this Article,

Added– where institutions can apply the look-through approach, they may use units or shares in that CIU as collateral up to the amount equal to the value of the instruments held by the CIU, that are eligible under paragraphs 1 and 4 of Article 197 and the items referred to in point (a) of paragraph 1 of this Article;

Added– where institutions can apply the mandate-based approach, they may use units or shares in that CIU as collateral up to an amount equal to the value of the instruments held by that CIU that are eligible under paragraphs 1 and 4 of Article 197 and the items referred to in point (a) of this Article under the assumption that that CIU or any of its underlying CIUs have invested in non-eligible instruments to the maximum extent allowed under their respective mandates.

AddedWhere non-eligible instruments can have a negative value due to liabilities or contingent liabilities resulting from ownership, institutions shall do both of the following:

Added(a) calculate the total value of the non-eligible instruments;

Added(b) where the amount obtained under point (a) is negative, subtract the absolute value of that amount from the total value of the eligible instruments.’;

Added(99) Article 199 is amended as follows:

Added(a) paragraph 2 is replaced by the following:

Added‘2. Unless otherwise specified under Article 124(7), institutions may use as eligible collateral residential property which is or will be occupied or let by the owner, or the beneficial owner in the case of personal investment companies, and commercial immovable property, including offices and other commercial premises, where both of the following conditions are met:

Added(a) the value of the property does not materially depend upon the credit quality of the obligor;

Added(b) the risk of the borrower does not materially depend upon the performance of the underlying property or project, but on the underlying capacity of the borrower to repay the debt from other sources, and as a consequence the repayment of the facility does not materially depend on any cash flow generated by the underlying property serving as collateral.

AddedFor the purposes of point (a), institutions may exclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower. ’;

Added(b) in paragraph 3, point (a) is replaced by the following:

Added‘(a) losses stemming from loans collateralised by residential property up to 55 % of the value determined in accordance with Article 229, unless otherwise provided under Article 124(7), do not exceed 0,3 % of the outstanding loans collateralised by residential property in any given year;’;

Added(c) in paragraph 4, point (a) is replaced by the following:

Added‘(a) losses stemming from loans collateralised by commercial property up to 55 % of the value determined in accordance with Article 229, unless otherwise provided under Article 124(7), do not exceed 0,3 % of the outstanding loans collateralised by commercial property in any given year;’;

Added(d) in paragraph 5, the following subparagraph is added:

Added‘Where a public development credit institution as defined in Article 429a(2) issues a promotional loan as defined in Article 429a(3) to another institution, or to a financial institution that is authorised to perform activities as referred to in points 2 or 3 of Annex I to Directive 2013/36/EU and that meets the conditions pursuant to Article 119(5) of this Regulation, and where that other institution or financial institution passes through directly or indirectly that promotional loan to an ultimate obligor and cedes the receivable from the promotional loan as collateral to the public development credit institution, the public development credit institution may use the ceded receivable as eligible collateral, regardless of the original maturity of the ceded receivable.’;

Added(e) in paragraph 6, in the first subparagraph, point (d) is replaced by the following:

Added‘(d) the institution demonstrates that in at least 90 % of all liquidations for a given type of collateral the realised proceeds from the collateral are not below 70 % of the collateral value. Where there is material volatility in the market prices, the institution demonstrates to the satisfaction of the competent authorities that its valuation of the collateral is sufficiently conservative.’;

Added(100) Article 201 is amended as follows:

Added(a) paragraph 1 is amended as follows:

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

Added‘ (d) international organisations to which a 0 % risk weight is assigned in accordance with in Article 118;’;

Added(ii) the following point (fa) is inserted:

Added‘(fa) regulated financial sector entities;’;

Added(iii) point (g) is replaced by the following:

Added‘(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(iv) the following point (ga) is inserted:

Added‘(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;’;

Added(v) the following subparagraph is added:

Added‘For the purposes of point (fa), ‘regulated financial sector entity’ means a financial sector entity meeting the condition laid down in Article 142(1), point (4)(b).’;

Added(b) paragraph 2 is replaced by the following:

Added‘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.’;

Added(101) Article 202 is deleted;

Added(102) in Article 204, the following paragraph 3 is added:

Added‘3. First-to-default and all other nth-to-default credit derivatives shall not be eligible forms of unfunded credit protection under this Chapter.

Added▌’;

Added(103) Article 208 is amended as follows:

Added(a) paragraph 3 is amended as follows:

Added(i) in point (b), the following sentences are added:

Added‘In the case of a revaluation beyond the value at the time the loan was granted the value of the property shall not exceed the average value measured for that property or for a comparable property over the last four years in case of commercial immovable property, and over the last eight years in case of residential property. The value of the property can exceed this value in case modifications are made to the property that unequivocally increase its value, such as improvements of the energy performance or improvements to the resilience, protection and adaptation to physical risks of the building or housing unit▌.’;

Added(ii) the second subparagraph is deleted;

Added(b) the following paragraph 3a is inserted:

Added‘3a. In accordance with paragraph 3▌, 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 and subject to the fulfilment of the following conditions:

Added(a) the institutions set out, in their policies and procedures, the criteria for using models to▌ monitor the values of collateral and to identify the properties that should be revaluated. 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;

Added(b) the institutions ensure that the models used are:

Added(i) property and location specific at a sufficient level of granularity;

Added(ii) valid and accurate, and subject to robust and regular back-testing against the actual observed transaction prices;

Added(iii) based on a sufficiently large and representative sample, based on observed transaction prices;

Added(iv) based on up-to-date data of high quality;

Added(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 that is made using the models and the institutions understand the methodology, input data and assumptions of the models used;

Added(d) the institutions ensure that the documentation of the models is up to date;