Changes from report parliamentary committee draft to plenary report

Added(156) Article 325bg is amended as follows:

Added(a) paragraphs 1 to 2 are replaced by the following:

Added‘1. An institution's trading desk meets the P&L attribution requirements where the theoretical changes in the value of that trading desk's portfolio, based on the institution's risk-measurement model, are either close or sufficiently close to the hypothetical changes in the value of that trading desk's portfolio, based on the institution's pricing model.

Added2. Notwithstanding paragraph 1, where the theoretical changes in the value of a trading desk's portfolio, based on the institution's risk-measurement model are sufficiently close to the hypothetical changes in the value of that trading desk's portfolio, based on the institution's pricing model, the institution shall calculate, for all the positions assigned to that trading desk, an additional own funds requirement to the own funds requirements referred to in Article 325ba, paragraphs 1 and 2.

Added▌;

Added(b) paragraph 4 is amended as follows:

Added(i) points (a) and (b) are replaced by the following:

Added‘(a) the criteria specifying whether the theoretical changes in the value of a trading desk's portfolio are either close or sufficiently close to the hypothetical changes in the value of a trading desk's portfolio for the purposes of paragraph 1, taking into account international regulatory developments;

Added(b) the additional own funds requirement referred to in paragraph 2;’;

Added(ii) point (e) is deleted;

Added(iii) the last two subparagraphs are replaced by the following:

AddedEBA shall submit those draft regulatory technical standards to the Commission by [9 months after the entry in force of this Regulation].

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.’;

Added(157) Article 325bh is amended as follows:

Added(a) in paragraph 1, the following point (i) is added:

Added‘(i) for positions in CIUs, institutions shall look through the underlying positions of the CIUs at least on a weekly basis to calculate their own funds requirements in accordance with this Chapter; if an institution looks through less regularly than daily, it shall identify, measure and monitor any risk occurring from its less than daily look through and avoid any significant risk underestimation; institutions that do not have adequate data inputs or information to calculate the own fund requirement for market risk of a CIU position in accordance with the look-through approach may rely on a third party to obtain those data inputs or information, provided that all the following conditions are met:

Added(i) the third party is one of the following:

Added– the depository institution or the depository financial institution of the CIU, provided that the CIU exclusively invests in securities and deposits all the securities at that depository institution or depository financial institution;

Added– for CIUs not covered by the first indent of this point(i), the CIU management company, provided that the CIU management company meets the criteria set out in Article 132(3), point (a);

Added– a third-party vendor on condition that the data, information or risk metrics are provided by or calculated from the third parties of subparagraphs (i) or (ii) or another such third-party vendor.

Added(ii) the third party provides the institution with the ▌data, information or risk metrics to calculate the own funds requirement for market risk of the CIU position in accordance with the approach referred to in the first subparagraph;

Added(iii) an external auditor of the institution has confirmed the adequacy of the third party's data, information or risk metrics referred to in point (ii) and the institution’s competent authority has unrestricted access to these data, information or risk metrics upon request.’;

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

Added‘2. An institution may use empirical correlations within broad categories of risk factors and, for the purpose of calculating the unconstrained expected shortfall measure UESt as referred to in Article 325bb(1) across broad categories of risk factors only where the institution's approach for measuring those correlations is sound, consistent with either the applicable liquidity horizons or, upon the satisfaction of the institution’s competent authority, with the base time horizon of 10 days set out in Article 325bc(1) and implemented with integrity.’;

Added(c) paragraph 3 is deleted;

Added(158) in Article 325bi(1), point (b) is amended as follows:

Added‘(b) an institution shall have a risk control unit that is independent from business trading units and that reports directly to senior management. That unit shall:

Added(i) be responsible for designing and implementing any internal risk-measurement model used in the alternative internal model approach for the purposes of this Chapter;

Added(ii) be responsible for the overall risk management system;

Added(iii) produce and analyse daily reports on the output of any internal model used to calculate capital requirements for market risks, and on the appropriateness of measures to be taken in terms of trading limits.

AddedA separate validation unit from the risk control unit shall conduct the initial and ongoing validation of any internal risk-measurement model used in the alternative internal model approach for the purposes of this Chapter.’;

Added(158a) in Article 325bl(1), the following subparagraph is added:

Added‘Long and short positions in institution’s own debt should be excluded from the calculation of own funds requirements for default risk.’;

Added(159) Article 325bp is amended as follows:

Added(a) paragraph 5 is amended as follows:

Added(-i) point (a) is replaced by the following:

Added‘(a) the default probabilities shall be floored at 0,01% for covered bond issuers and at 0,03 % for all other issuers; exposures that would receive a 0 % risk-weight under the Standardised Approach for credit risk in accordance with Chapter 2 of Title II shall not be floored;’;

Added(i) points (d) and (e) are replaced by the following:

Added‘(d) an institution that has been granted permission to estimate default probabilities in accordance with Title II, Chapter 3, Section 1 for the exposure class and the rating system corresponding to a given issuer shall use the methodology set out therein to calculate the default probabilities of that issuer, provided that data for such estimation are available;

Added(e) an institution that has not been granted permission to estimate default probabilities referred to in point (d) shall develop an internal methodology or use external sources to estimate these default probabilities consistently with the requirements applying to estimates of default probability under this Article.’;

Added(ii) the following subparagraph is added:

Added‘For the purposes of point (d), the data to perform the estimation of the default probabilities of a given issuer of a trading book position are available where, at the calculation date, the institution has a non-trading book position on the same obligor for which it estimates default probabilities in accordance with Title II, Chapter 3, Section 1 to calculate its own funds requirements set out in that Chapter.’;

Added(b) paragraph 6 is amended as follows:

Added(i) points (c) and (d) are replaced by the following:

Added‘(c) an institution that has been granted permission to estimate loss given default in accordance with Title II, Chapter 3, Section 1 for the exposure class and the rating system corresponding to a given exposure shall use the methodology set out therein to calculate loss given default estimates of that issuer, provided that data for such estimation are available;

Added(d) an institution that has not been granted permission to estimate loss given default referred to in point (c) shall develop an internal methodology or use external sources to estimate loss given default consistently with the requirements applying to estimates of loss given default under this Article.’;

Added(ii) the following subparagraph is added:

Added‘For the purposes of point (c), the data to perform the estimation of the loss given default a given issuer of a trading book position are available where, at the calculation date, the institution has a non-trading book position on the same exposure for which it estimates loss given default in accordance with Title II, Chapter 3, Section 1 to calculate its own funds requirements set out in that Chapter.’;

Added(160) in Article 337, paragraph 2 is replaced by the following:

Added‘2. When determining risk weights for the purposes of paragraph 1, institutions shall use exclusively the approach set out in Title II, Chapter 5, Section 3.’;

Added(161) in Article 338, paragraphs 1 and 2 are replaced by the following:

Added‘1. For the purposes of this Article, an institution shall determine its correlation trading portfolio in accordance with the provisions set out in Article 325, paragraphs 6, 7 and 8.

Added2. An institution shall determine the larger of the following amounts as the specific risk own funds requirement for the correlation trading portfolio:

Added(a) the total specific risk own funds requirement that would apply just to the net long positions of the correlation trading portfolio;

Added(b) the total specific risk own funds requirement that would apply just to the net short positions of the correlation trading portfolio.’;

Added(162) in Article 352, paragraph 2 is deleted;

Added(163) ▌Article 361 is amended as follows:

Added(a) point (c) is deleted;

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

Added‘Institutions shall notify the use they make of this Article to their competent authorities.’;