Changes from report parliamentary committee draft to plenary report

RemovedRegulation (EU) No 575/2013

Added(e) pollution prevention and control;

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 2 – introductory part: 2. A non-ADC exposure secured by an immovable property, where all the conditions laid down in paragraph 3 are met, shall be treated as follows:

Added(f) the protection and restoration of biodiversity and ecosystems;

RemovedRegulation (EU) No 575/2013

AddedEnvironmental risk includes both physical risk and transition risk.

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 2 – point a – introductory part: (a) where the exposure is secured by a residential property, the exposure shall be treated in accordance with Article 125(1) where the exposure meets any of the following conditions:

Added(52f) ‘physical risk’, as part of the overall environmental risk, means the risk of ▌any negative financial impact on the institution stemming from the current or prospective impacts of the physical effects of environmental factors on the institution’s counterparties or invested assets;

RemovedRegulation (EU) No 575/2013

Added(52g) ‘transition risk’, as part of the overall environmental risk, means the risk of ▌any negative financial impact on the institution stemming from the current or prospective impacts of the transition ▌to an environmentally sustainable economy on the institution’s counterparties or invested assets;

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 2 – point a – point i: (i) the income-producing immovable property securing the exposure is the obligor’s primary residence, either where the immovable property as a whole constitutes a single housing unit or where the immovable property securing the exposure is a housing unit that is a separated part within an immovable property;

Added(52h) ‘social risk’ means the risk of ▌any negative financial impact on the institution stemming from the current or prospective impacts of social factors on its counterparties or invested assets;

RemovedRegulation (EU) No 575/2013

Added(52i) ‘governance risk’ means the risk of ▌any negative financial impact on the institution stemming from the current or prospective impacts of governance factors on the institution’s counterparties or invested assets;’;

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 2 – point a – point iii: (iii) the exposure secured by an income-producing residential property is to associations or cooperatives of individuals that are regulated by law and solely exist to grant their members the use of a primary residence in the property securing the loans;

Added(m) points (54), (55) and (56) are replaced by the following:

RemovedRegulation (EU) No 575/2013

Added‘(54) ‘probability of default’ or ‘PD’ means the probability of default of an obligor over a one-year period, and, in the context of dilution risk, the probability of dilution over a one-year period;

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 2 – point a – point iv: (iv) the exposure is secured by an income-producing residential property to public housing companies or not-for-profit associations that are regulated by law and exist to serve social purposes and to offer tenants long-term housing;

Added(55) ‘loss given default’ or ‘LGD’ means the ▌ratio of the loss on an exposure related to a single facility due to the default of an obligor or facility to the amount outstanding at default, and, in the context of dilution risk, the loss given dilution meaning the ▌ ratio of the loss on an exposure related to a purchased receivable due to dilution, to the amount outstanding of the purchased receivable;

RemovedRegulation (EU) No 575/2013

Added(56) ‘conversion factor’ or ‘credit conversion factor’ or ‘CCF’ means the ▌ratio of the currently undrawn amount of a commitment from a single facility that could be drawn from a single facility before default and that would therefore be outstanding at default to the currently undrawn amount of the commitment from that facility, the extent of the commitment being determined by the advised limit, unless the unadvised limit is higher;’;

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 2 – point a – point iv a (new): (iva) the exposure is a non-IPRE exposure;

Added(n) the following point (56a) is inserted:

RemovedRegulation (EU) No 575/2013

Added‘(56a) ‘realised CCF’ means the ratio of the drawn amount of a commitment from a single facility, that was undrawn at a given reference date prior to default, and that is therefore outstanding at default, to the undrawn amount of the commitment from that facility at that reference date;’;

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 2 – point b: (b) where the exposure is secured by residential property and the exposure does not meet any of the conditions laid down in point (a), points (i) to (iva), the exposure shall be treated in accordance with Article 125(2);

Added(o) points (58), (59) and 60 are replaced by the following:

RemovedRegulation (EU) No 575/2013

Added‘(58) ‘funded credit protection’ or ‘FCP’ means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of an institution is derived from the right of that institution, in the event of the default of the obligor or on the occurrence of other specified credit events relating to the obligor, to liquidate, or to obtain transfer or appropriation of, or to retain certain assets or amounts, or to reduce the amount of the exposure to, or to replace it with, the amount of the difference between the amount of the exposure and the amount of a claim on the institution;

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 3 – introductory part: 3. In order to be eligible for the treatment laid down in Article 125(1), point (a), or Article 126(1), point (a), an exposure secured by an immovable property shall fulfil all of the following conditions:

Added(59) ‘unfunded credit protection’ or ‘UFCP’ means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of an institution is derived from the obligation of a third party to pay an amount in the event of the default of the obligor or the occurrence of other specified credit events;

RemovedRegulation (EU) N0 575/2013

Added(60) ‘cash assimilated instrument’ means a certificate of deposit, a bond, including a covered bond, or any other non-subordinated instrument, which has been issued by the lending institution, for which the lending institution has already received full payment and which shall be unconditionally reimbursed by the lending institution at its nominal value;’;

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 3 – point a – point iii – introductory part: (iii) the lending is to an individual and the immovable property is either residential property under construction or it is land upon which a residential property is planned to be constructed where that plan has been legally approved by all relevant authorities, as applicable, and where any of the following conditions is met:

Added(p) the following point (60a) is inserted:

RemovedRegulation (EU) No 575/2013

Added‘(60a) ‘gold bullion’ means gold in the form of a commodity, including gold bars, ingots and coins, commonly accepted by the bullion market, where liquid markets for bullion exist, and the value of which is determined by the value of the gold content, defined by purity and mass, rather than by its interest to numismatists;’;

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 5 – subparagraph 1 – point b: (b) the gross exposure amount shall be calculated without taking into account credit risk adjustments in accordance with Article 110, additional value adjustments in accordance with Article 34 related to the non-trading book business of the institution, amounts deducted in accordance with Article 36(1), point (m), and other own funds reductions related to the exposure or any form of funded or unfunded credit protection, except for pledged deposits accounts with the lending institution that meet all requirements for on-balance sheet netting, either under master netting agreements in accordance with Articles 196 and 206 or under other on-balance sheet netting agreements in accordance with Articles 195 and 205 and have been unconditionally and irrevocably pledged for the sole purposes of fulfilling the credit obligation related to the exposure secured by the immovable property;

Added(q) the following point (74a) is inserted :

RemovedRegulation (EU) No 575/2013

Added‘(74a) ‘property value’ means the value of an immovable property determined in accordance with Article 229(1);’;

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 7 – subparagraph 4: For the purposes of the second subparagraph of this paragraph, the authority designated in accordance with paragraph 6 may increase the risk weights laid down in Article 125(1), point (a), the first subparagraph of Article 125(2), Article 126(1), point (a), or the first sub-paragraph of Article 126(2), or impose stricter criteria than those set out in paragraph 3 of this Article for exposures to one or more property segments secured by mortgages on residential property located in one or more parts of the jurisdiction of the Member States. The authority shall not increase those to more than 150 %. / When increasing the risk weights set out in the first subparagraph of Article 125(2) or 126(2), the designated authority shall move the whole LTV-risk weight ladder laid down in table 6aaa in Article 125(2) or in table 6c in Article 126(2) accordingly.

Added(r) point (75) is replaced by the following:

RemovedRegulation (EU) No 575/2013

Added‘(75) ‘residential property’ means any of the following:

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 8: 8. Where the authority designated in accordance with paragraph 6 sets higher risk weights or stricter criteria pursuant to paragraph 7, institutions shall have a six-month transitional period to apply them.

Added(a) an immovable property which has the nature of a dwelling and satisfies all applicable laws and regulations enabling the property to be occupied for housing purposes;

RemovedRegulation (EU) No 575/2013

Added(b) an immovable property which has the nature of a dwelling and is still under construction, provided that there is the expectation that the property will satisfy all applicable laws and regulations enabling the property to be occupied for housing purposes;

RemovedArticle 1 – paragraph 1 – point 44, Article 124 – paragraph 10 – introductory part: 10. The ESRB shall, by means of recommendations in accordance with Article 16 of Regulation (EU) No 1092/2010, and in close cooperation with EBA, give guidance to authorities designated in accordance with paragraph 6 of this Article on both of the following:

Added(c) the right to inhabit an apartment in housing cooperatives located in Sweden

RemovedRegulation (EU) No 575/2013

Added(d) land accessory to a property referred to in points (a), (b) or (c);’;

RemovedArticle 1 – paragraph 1 – point 45, Article 125 – paragraph 1 – introductary part: 1. An exposure secured by a residential property that complies with any of the conditions laid down in Article 124(2), point (a), points (i) to (iva), shall be treated as follows:

Added(s) the following points (75a) to (75g) are inserted:

RemovedRegulation (EU) No 575/2013

Added‘(75a) ‘commercial immovable property’ means any immovable property that is not residential property▌;

RemovedArticle 1 – paragraph 1 – point 45, Article 125 – paragraph 1 – point b: (b) the remaining part of the exposure, if any, shall be treated as an exposure that is not secured by residential property, in the exposure class applicable to the counterparty.

Added(75b) ‘income producing real estate exposure’ or IPRE exposure means an exposure secured by one or more residential or commercial immovable properties where the fulfilment of the credit obligations related to the exposure materially depends on the cash flows generated by those immovable properties securing that exposure, rather than on the capacity of the obligor to fulfil the credit obligations from other sources; the primary source of such cash flows would be lease or rental payments, or proceeds from the sale of the residential property or commercial immovable property;