Changes from report parliamentary committee draft to plenary report

Added(v) suspension of the voting rights of the shareholder or shareholders held responsible for the breaches referred to in paragraph 1.’;

Added(c) the following paragraphs 3 and 4 are added:

Added‘3. The total annual net turnover referred to in paragraph 2, points (a)(i) and (b)(i), of this Article shall be equal to the business indicator set out in Article 314 of Regulation (EU) No 575/2013. For the purpose of this Article, the business indicator shall be calculated on the basis of the most recent available yearly supervisory financial information, unless the result is zero or negative. If the result is zero or negative, the basis for the calculation shall be the most recent earlier yearly supervisory financial information, which produces an indicator above zero. Where the undertaking concerned is part of a group the relevant total annual net turnover shall be the total annual net turnover resulting from the consolidated account of the ultimate parent undertaking.

Added4. The average daily turnover referred to in paragraph (2), point (b)(i), shall be the total annual net turnover referred to in paragraph 3 divided by 365.’

Added(11) Article 70 is replaced by the following:

Added‘Article 70 Effective application of administrative penalties and exercise of powers to impose penalties by competent authorities

Added1. Member States shall ensure that, when determining the type and level of administrative penalties or other administrative measures, the competent authorities shall take into account all relevant circumstances, including where appropriate:

Added(a) the gravity and the duration of the breach;

Added(b) the degree of responsibility of the natural or legal person responsible for the breach;

Added(c) the financial strength of the natural or legal person responsible for the breach, as indicated, including by the total turnover of a legal person or the annual income of a natural person;

Added(d) the importance of profits gained or losses avoided by the natural or legal person responsible for the breach, insofar as they can be determined;

Added(e) the losses for third parties caused by the breach, insofar as they can be determined;

Added(f) the level of cooperation of the natural or legal person responsible for the breach with the competent authority;

Added(g) previous breaches by the natural or legal person responsible for the breach;

Added(h) any potential systemic consequences of the breach.

Added(i) previous application of criminal penalties to the same natural or legal person responsible for the same breach.

Added2. In the exercise of their powers to impose penalties, competent authorities shall cooperate closely to ensure that penalties produce the results pursued by this Directive. They shall also coordinate their actions to prevent accumulation and overlap when applying penalties and administrative measures to cross-border cases. Competent authorities shall cooperate closely with judicial authorities when dealing with same cases.

Added3. Competent authorities may apply penalties in relation to the same natural or legal person responsible for the same acts or omissions in the case of an accumulation of administrative and criminal proceedings and penalties is punishing the same breach. However, such accumulation of proceedings and penalties shall be strictly necessary and proportionate to pursue different and complementary objectives of general interest. The severity of all the penalties and other administrative measures imposed in case of accumulation of administrative and criminal proceedings shall be limited to what is necessary in the view of the seriousness of the breach concerned. Member States shall lay down clear and precise rules regarding the circumstances in which acts or and omissions may be subject to such accumulation of administrative and criminal proceedings and penalties.

Added4. Member States shall lay down rules providing for full cooperation between competent authorities and judicial authorities to ensure a sufficiently close connection in substance and time between administrative and criminal proceedings.

Added5. By 18 July 2029, EBA shall submit a report to the Commission on the cooperation between competent authorities and judicial authorities in the context of application of administrative penalties. In addition, EBA shall assess any divergences in the application of penalties between competent authorities in this respect. In particular, EBA shall assess:

Added(a) the level of cooperation between competent authorities and judicial authorities in the context of application of penalties;

Added(b) the level of cooperation between competent authorities in the context of penalties applicable to cross-border cases or in case of accumulation of administrative and criminal proceedings;

Added(c) the application and the level of protection of ne bis in idem principle with regards to administrative and criminal penalties by Member States;

Added(d) the application of the principle of proportionality when both penalties are imposed in case of accumulation of administrative and criminal proceedings;

Added(e) the exchange of information between competent authorities when dealing with cross border cases.’;

Added(12) in Article 73, the first subparagraph is replaced by the following:

Added‘Institutions shall have in place sound, effective and comprehensive strategies and processes to assess and maintain on an ongoing basis the amounts, types and distribution of internal capital that they consider adequate to cover the nature and level of the risks to which they are or might be exposed. For environmental, social and governance risks institutions shall explicitly take into account the short, medium and long term time horizon when assessing the possible materialisation of those risks.’;”

Added(13) in Article 74, paragraph 1 is replaced by the following:

Added‘1. Institutions shall have robust governance arrangements, which include:

Added(a) a clear organisational structure with well-defined, transparent and consistent lines of responsibility;

Added(b) effective processes to identify, manage, monitor and report the risks they are or might be exposed to in the short, medium and long term time horizon, including environmental, social and governance risks;

Added(c) adequate internal control mechanisms, including sound administration and accounting procedures;

Added(d) remuneration policies and practices that are consistent with and promote sound and effective risk management, including by taking into account the institution’s risk appetite in terms of environmental, social and governance risks.

AddedThe remuneration policies and practices referred to in the first subparagraph shall be gender neutral.’;

Added(14) Article 76 is amended as follows:

Added(a) paragraph 1 is replaced by the following:

Added‘1. Member States shall ensure that the management body approves and at least annually reviews the strategies and policies for taking up, managing, monitoring and mitigating the risks the institution is or might be exposed to, including those posed by the macroeconomic environment in which it operates in relation to the status of the business cycle, and those relating to impacts of environmental, social and governance factors.

AddedBy way of derogation from paragraph 1, the management body of small and non-complex institutions shall be subject to reviews every two years.’;

Added(b) in paragraph 2 the following subparagraphs are added:

Added‘Member States shall ensure that the management body develops specific plans, quantifiable targets and processes to monitor and address the risks arising from the short, medium and long-term ESG factors, including those arising from the transition and the process of adjustment to the applicable regulatory objectives towards a sustainable economy in relation to environmental, social and governance factors, in particular with the objective to achieve climate neutrality by 2050 as set out in Regulation (EU) 2021/1119.

AddedThe targets and measures to address the ESG risks included in the plans referred to in the first subparagraph shall take into account the latest reports and measures prescribed by the European Scientific Advisory Board on Climate Change, in particular in relation to the achievement of the climate targets of the Union. The plans shall adopt an holistic approach and cover all banks activities and clients. Where the institution discloses information on sustainability matters in accordance with Directive 2013/34/EU, the plans referred to in the first subparagraph shall be consistent with the plans referred to in Article 19a or Article 29a of that Directive. In particular, the plans referred to in the first subparagraph shall include actions with regards to the business model and strategy of the institution that are consistent across both plans.

AddedMember States shall ensure a proportionate application of the first and second subparagraphs for the management body of small and non-complex institutions, indicating in what areas a waiver or a simplified procedure may be applied.’;

Added(ba) in paragraph 4, the second subparagraph is replaced by the following:

Added‘The management body in its supervisory function and, where one has been established, the risk committee shall determine the nature, the amount, the format, and the frequency of the information on risk which it is to receive. In order to assist in the establishment of sound remuneration policies and practices, the risk committee shall, without prejudice to the tasks of the remuneration committee, examine whether incentives provided by the remuneration system take into consideration risk, including those resulting from impacts of environmental, social and governance factors, capital, liquidity and the likelihood and timing of earnings.’;

Added(c) paragraph 5 is replaced by the following:

Added‘5. Member States shall, in accordance with the proportionality requirement laid down in Article 7(2) of Commission Directive 2006/73/EC*11, ensure that institutions have internal control functions independent from the operational functions and which shall have sufficient authority, stature, resources and access to the management body.

AddedMember States shall ensure that the internal control functions ensure that all material risks are identified, measured and properly reported. They shall ensure that the internal control functions are actively involved in elaborating the institution's risk strategy and in all material risk management decisions and that the internal control functions can deliver a complete view of the whole range of risks of the institution.

AddedMember States shall ensure that the internal control function can report directly to the management body in its supervisory function, independent from members of the management body in its management function or senior management, and can raise concerns and warn that body, where appropriate, where specific risk developments affect or may affect the institution, without prejudice to the responsibilities of the management body pursuant to this Directive and Regulation (EU) No 575/2013.

AddedThe heads of internal control functions shall be independent senior managers with distinct responsibility for the risk management, compliance and internal audit functions. Where the nature, scale and complexity of the activities of the institution do not justify to appoint a specific person for each internal control functions, another senior person within the institution may combine the responsibilities for those functions, provided there is no conflict of interest.

AddedThe heads of the internal control functions shall not be removed without prior approval of the management body in its supervisory function▌.

Added________

Added*11 Commission Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (OJ L 241, 2.9.2006, p. 26).’;

Added(14a) in Article 77(4), the first subparagraph is replaced by the following:

Added‘EBA shall develop draft regulatory technical standards to define the notion 'exposures to specific market risk which are material in absolute terms' referred to in the first subparagraph of paragraph 3 and the thresholds for large numbers of material counterparties and positions in debt instruments of different issuers.’;

Added(15) Article 78 is amended as follows:

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

Added‘Supervisory benchmarking of approaches for calculating own funds requirements’;

Added(b) paragraph 1 is replaced by the following:

Added‘1. Competent authorities shall ensure all of the following:

Added(a) that institutions permitted to use internal approaches for the calculation of risk weighted exposure amounts or own funds requirements report the results of their calculations for their exposures or positions that are included in the benchmark portfolios;