Changes from report parliamentary committee draft to plenary report

Added= 1,4;

Added= 0,5;

Addedc = the index that denotes all the counterparties for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article;

AddedNS = the index that denotes all the netting sets with a given counterparty for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article;

Addedh = the index that denotes all the single-name instruments recognised as eligible hedges in accordance with Article 386 for a given counterparty for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article ;

Addedi = the index that denotes all the index instruments recognised as eligible hedges in accordance with Article 386 for all the counterparties for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article ;

Added= the risk weight applicable to counterparty ‘c’. Counterparty ‘c’ shall be mapped to one of the risk weights based on a combination of sector and credit quality and determined in accordance with Table 1.

Added= the effective maturity for the netting set NS with counterparty c;

AddedFor an institution using the methods set out in Title II, Chapter 6, Section 6, shall be calculated in accordance with Article 162(2), point(g). However, for that calculation, shall not be capped at five years, but at the longest contractual remaining maturity in the netting set.

AddedFor an institution not using the methods set out in Title II, Chapter 6, Section 6, shall be the average notional weighted maturity as referred to in Article 162(2), point (b). However, for that calculation, shall not be capped at five years, but at the longest contractual remaining maturity in the netting set.

Added= the counterparty credit risk exposure value of the netting set NS with counterparty c, including the effect of collateral in accordance with the methods set out in Title II, Chapter 6, Sections 3 to 6, as applicable to the calculation of the own funds requirements for counterparty credit risk referred to in Article 92(4), points (a) and (f);

Added= the supervisory discount factor for the netting set NS with counterparty c.

AddedFor an institution, using the methods set out in Title II, Chapter 6, Section 6, the supervisory discount factor shall be set at 1. In all other cases, the supervisory discount factor shall be calculated as follows:

Added= the supervisory correlation between the credit spread risk of counterparty c and the credit spread risk of a single-name instrument recognised as an eligible hedge h for counterparty c, determined in accordance with Table 2;

Added= the residual maturity of a single-name instrument recognised as an eligible hedge;

Added= the notional of a single name instrument recognised as an eligible hedge;

Added= the supervisory discount factor for a single name instrument recognised as an eligible hedge, calculated as follows:

Added= the supervisory risk weight of a single-name instrument recognised as an eligible hedge. Those risk weights shall be based on a combination of sector and credit quality of the reference credit spread of the hedging instrument and determined in accordance with Table 1;

Added= the residual maturity of one or more positions in the same index instrument recognised as an eligible hedge. In the case of more than one positions in the same index instrument, shall be the notional-weighted maturity of all those positions;

Added= the full notional of one or more positions in the same index instrument recognised as an eligible hedge. In the case of more than one positions in the same index instrument, shall be the notional-weighted maturity of all those positions;

Added= the supervisory discount factor for one or more positions in the same index instrument recognised as an eligible hedge, calculated as follows:

Added= the supervisory risk weight of an index instrument recognised as an eligible hedge. shall be based on a combination of sector and credit quality of all the index constituents, calculated as follows:

Added(a) where all the index constituents belong to the same sector and have the same credit quality, as determined in accordance with Table 1, shall be calculated as the relevant risk weight of Table 1 for that sector and credit quality multiplied by 0,7;

Added(b) where all the index constituents do not belong to the same sector or do not have the same credit quality , shall be calculated as a weighted average of the risk weights of all the index constituents, as determined in accordance with Table 1, multiplied by 0,7;

AddedTable 1

AddedTable 2

Added2. An institution that meets the condition referred in to paragraph 1, point (b), shall calculate the own funds requirements for CVA risk as follows:

Addedwhere all the terms are the ones set out in paragraph 2.

Added1. An institution that meets all the conditions set out in Article 273a(2), or has been permitted by its competent authorities in accordance with Article 273a(4) to apply the approach set out in Article 282, may calculate the own funds requirements for CVA risk as the risk-weighted exposure amounts for counterparty risk for non-trading book and trading book positions respectively, referred to in Article 92(3), points (a) and (f), divided by 12,5.

Added2. For the purposes of the calculation referred to in paragraph 1, the following requirements shall apply:

Added(a) only transactions subject to the own funds requirements for CVA risk laid down in Article 382 shall be subject to that calculation;

Added(b) credit derivatives that are recognised as internal hedges against counterparty risk exposures shall not be included in that calculation.

Added3. An institution that no longer meets one or more of the conditions set out in Article 273a(2) shall comply with the requirements set out in Article 273b.

Added1. Positions in hedging instruments shall be recognised as ‘eligible hedges’ for the calculation of own funds requirements for CVA risk in accordance with Articles 383 and 384 where those positions meet all of the following requirements:

Added(a) those positions are used for the purpose of mitigating CVA risk and are managed as such;

Added(b) those positions can be entered into with third parties or with the institution’s trading book as an internal hedge, in which case they shall comply with the requirement set out in Article 106(7);

Added(c) only positions in hedging instruments as referred to in paragraphs 2 and 3 can be recognised as eligible hedges for the calculation of own funds requirements for CVA risks in accordance with Articles 383 and 384 respectively;

Added(d) a given hedging instrument forms a single position in an eligible hedge and cannot be split into more than one position in more than one eligible hedge.

Added2. For the calculation of the own funds requirements for CVA risk in accordance with Article 383, only positions in the following hedging instruments shall be recognised as eligible hedges:

Added(a) instruments that hedge variability of the counterparty credit spread, with the exception of instruments referred in to Article 325(5);

Added(b) instruments that hedge variability of the exposure component of CVA risk, with the exception of the instruments referred in to Article 325(5).

Added3. For the calculation of own funds requirements for CVA risk in accordance with Article 384, only positions in the following hedging instruments shall be recognised as eligible hedges:

Added(a) single-name credit default swaps and single-name contingent-credit default swaps, referencing:

Added(i) the counterparty directly;

Added(ii) an entity legally related to the counterparty, where legally related refers to cases where the reference name and the counterparty are either a parent and its subsidiary or two subsidiaries of a common parent;

Added(iii) an entity that belongs to the same sector and region as the counterparty;

Added(b) index credit default swaps.

Added4. Positions in hedging instruments entered into with third parties that are recognised as eligible hedges in accordance with paragraphs 1, 2 and 3 and included in the calculation of the own funds requirements for CVA risk shall not be subject to the own funds requirements for market risk set out in Title IV.

Added5. Positions in hedging instruments that are not recognised as eligible hedges in accordance with this Article shall subject to the own funds requirements for market risk set out in Title IV.’;

Added(170a) the following Article 395a is inserted:

Added‘Article 395a

AddedAggregate limit on exposures to shadow banking entities

AddedBy 30 June 2023 the Commission shall, in close collaboration with the EBA, assess the appropriateness and the impact of imposing limits on exposures to shadow banking entities. The Commission shall submit the report to the European Parliament and the Council, together, if appropriate, with a legislative proposal on exposure limits to shadow banking entities.’;

Added(171) Article 402 is amended as follows:

Added(a) paragraph 1 is amended as follows:

Added(i) the first subparagraph is replaced by the following:

Added‘For the calculation of exposure values for the purposes of Article 395, institutions may, except where prohibited by applicable national law, reduce the value of an exposure or any part of an exposure that is secured by residential property in accordance with Article 125(1) by the pledged amount of the property value, but by not more than 55 % of the property value, provided that all the following conditions are met:’;

Added(ii) point (a) is replaced by the following:

Added‘(a) the competent authorities of the Member States have not set a risk weight higher than 20 % for exposures or parts of exposures secured by residential property in accordance with Article 124(7);’;

Added(b) paragraph 2 is amended as follows: